Summer is almost over and teenagers are all getting ready to go back to school. As other teens who recently graduated from High School enter a new phase in their lives, a new set of responsibilities set in. It is imminent for adolescents to handle their own finances and start to build credit under their names. Educating teenagers about the important lessons in credit and financial management is a task that parents should assume to ensure that children are not misguided.
Credit cards are a financial privilege that can put most teens into a financial quagmire if expenses are not handled properly. To teach teenagers about money should be part of every parent’s lesson plan when educating their offspring about the realities and practicalities of life. To have the financial freedom of being able to purchase and acquire things on their own can be an exhilarating feeling. But swiping their own credit cards or to be granted loans for the very first time can also put them in a situation which can hurt them in the long run. So we’ve listed pointers for parents who need help in teaching their teens to be financially responsible.
- Help your child develop a firm sense of responsibility.
Parents should help their child to develop the ability of handling big responsibilities before letting them take on real financial obligations. As parents, it is important to help a young’un understand how money management works. To know if a teen is mentally ready to build their own credit should be a factor worth considering before a parent allows their child to apply for credit cards and loans. Discuss the highs and lows of credit and the repercussions involved when it is dealt with poorly and irresponsibly. Importantly, parents must teach their children the value of money and how difficult it is to earn it in these tough times. Sharpening a teenager’s financial management skills won’t be too difficult if they have the right virtues embedded in them from the onset. Training them to be responsible in handling their expenses, be it in a minor way like budgeting their allowance, can ultimately help them to be successful in keeping their credit standing and history flawless in the future. - Teach your teen how to properly budget
In line with developing a solid sense of responsibility, teens who know how to budget wisely will surely have an easier time building an outstanding credit record. Financial responsibility comes with knowing how to allocate money properly. Teenagers can start handling financial obligations by signing up for services under their own name. Maintaining utility credit such as mobile or internet service plans is a good way to jump-start your offspring’s teen money management skills. It is also a less complicated way to establish one’s payment history if your child feels that he or she is not yet ready to assume loans and credit cards in building his or her own credit. - Credit Card 101 for teenagers
Credit cards have been considered a necessity for decades. It has enabled consumers to conveniently transact and purchase services and goods sans the hassle that comes with having no ready cash available. Most teens are eager to have their own credit cards but they must be informed of the basics and how credit cards work. Teenagers must understand the concept of annual percentage rates, credit limit and how settling of account balances on time determines a person’s credit standing. There are countless creditors and different types of credit cards. Hence, inexperienced borrowers must know the difference and be equipped to discern what they primarily need vs. what they just want so they won’t amass excessive credit and avoidable debts. It is also vital for your child to understand the importance of monitoring their credit card transactions each month. How to teach teenagers about money should also include lessons on how they should be vigilant and watchful of their transactions and what regularly goes on with their accounts. Encourage your child to sign up for his or her financial institutions online banking feature so he or she can check credit card activities and transactions regularly. - Make sure your teen understands what a credit score is all about
Educate your teen about credit reports and scores and how they will affect his/her life in the near future. The credit score is the numerical mark that gauges an individuals credibility and financial standing. The credit report is a record of all credit related activity accompanied with identifying details of the record holder. Based on an article released by MSN Money , a consumer’s credit score is determined through a set of factors. Mainly, it based on the following: 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit and 10% types of credit used. Recognizing what decides our credit score puts us all in check and gives young credit holders a better perspective of how their credit score is calculated. Importantly, teenagers also have to keep in mind that credit reports and scores are used by most organizations and companies in evaluating a person’s integrity. Employers check potential employees’ credit files, creditors who offer student loans, mortgages and car loans rely on a borrower’s credit history and standing before they approve loan applications. - Influence your teen with healthy financial habits
Monitoring one’s credit report regularly is a healthy financial habit that should be practiced by consumers, young and old. Teenagers should be informed about the helpful financial practices that will surely keep them from the perils of identity theft and credit card fraud. A parent should advise his or her adolescent child that it always helps to review your credit score and to check credit reports habitually from the three credit bureaus: Equifax, Experian and Trans Union. By doing so, it reinforces credit protection and also molds your teenager to become a wise and responsible credit holder.
Financial responsibility can start early as long as a parent is willing to prepare and educate his or her own child. Teenagers who are ready to take on this major accountability will not be fazed as long as they are equipped with the guidance and proper information provided by people who love and care for them.
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