26
Jan

set your teens up for credit success

Establishing credit is in many ways as much a teenage rite of passage as driving or dating. It starts with your first credit card, your first car loan, financial aid for college — things that many teenagers are given access to, but don’t know the proper ways to manage.

That’s why it’s never too early to have the “good credit” talk with your teen. Here’s how to help set your teens up for credit success:

  1. Ask them what they already know, then fill in the gaps

Ask your teen to explain what they know about credit — how it’s built, why it’s important, what a credit report and credit score are, etc. You may be surprised to hear what they already know — and what they have serious misconceptions about. Make sure to correct any erroneous beliefs, explain the importance of establishing and maintaining a good credit score, what someone can do with good credit vs. bad credit, and how good credit is built. Then answer any questions they have.

  1. Ask about their financial goals

Many teens think about the future in an abstract sense. Asking them about their specific financial goals will help get them thinking more literally about their financial future. Do they want a car? To own a home? To travel? To have financial security? Explain how establishing good credit benefits their specific financial goal.

  1. Have them write out a budget

If your teen gets an allowance or has a job, have them write out a budget using their existing income, and take the opportunity to explain needs (like gas or a car payment) vs. wants (like that new video game). Have them prioritize their needs, as well as a portion to be deposited into a savings account. If your child doesn’t have an income, then use your own income and explain your budget requirements — like groceries, gas, mortgage, etc. In addition to teaching them about budgeting, it may also allow them to appreciate exactly where your money goes.

  1. Let them make mistakes — and don’t bail them out

We all make mistakes, and teens trying to straddle the line between childhood and adulthood are in many ways especially prone to them. So if your child has a credit card he maxed out, or he got into a fender bender and has a big repair bill, don’t bail him out. It’ll prove a valuable life lesson about not spending beyond your means, having an emergency fund saved up, taking responsibility for your own financial decisions, and much more.

  1. Ask yourself if your teen is ready to handle credit responsibility

No two teenagers mature at the same rate, and that includes their ability to handle credit. Don’t help your teenager acquire a credit card if she’s not ready. Is she asking you for extra money at every opportunity? Is she spending more than she can afford? Is she impulsive? These are all signs your teen may not be ready to handle the responsibility of a credit card.

If you’re unsure of how to discuss credit with your teen, consider setting up a credit consultation with a credit repair expert. They can explain the importance of good credit, how it’s established, and how poor decisions can lead to poor credit health and complicated credit repair processes. Your teen may make his fair share of mistakes on the way to adulthood, but you don’t have to let poor credit be one of them.

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Posted in Credit