Helping Your Freshman Kid to Become Credit Wise

By ccflyers on February 19, 2008

When your kid graduates high school, when you see him or her in that graduation cap and gown, you realize that your baby-boy of girl grew so big. And you get that mixed feeling of melancholy and pride for your child. Going to college is the next important step in your kid’s life. And that is the reason for most parents’ concern.
And it is not only your child’s tuition, safety, and health you should worry about. As soon as your son or daughter turns eighteen, they become eligible to get credit cards. And if your kid starts using his or her first credit card without the necessary knowledge and out of your control, your newly-fledged credit card holder can get into big troubles.
When your child finally gets a chance to qualify for a credit card, and since you no longer have to be his or her co-signer, your precious offspring can make a deal behind your back. They will not bother to send you a two-week’s notice. So, you are to keep your eyes wide open.
Student often become a bonanza for credit card issuers. Most young people have no credit history. So, they do not have to go through numerous formal banking procedures to get approved for a student credit card. A student is a potential bad debtor for a credit card company. This means that such a credit consumer can get accrued penalty fees and default rate, and, as a result, become a source of some extra revenues for a lender. Though default rates for students are lower than for other credit card holders, young people stand more chances to make a financial misstep due to the lack of experience in credit card management.
The statistics shows that about just 20% of grad students manage to pay off their monthly balances in full. About 92% of graduate students have at least one plastic. Over 90% of graduate-level students pay for education related expenses with their credit card. About 30% of students pay for a part of their tuition using plastics. And what does all this lead to? Graduate students end up owing a considerable amount of money to creditors. The average credit card debt for a graduate student amounts to $ 8,216. The figures speak louder than words.
So, if you do not want your child to damage his or her credit history by the graduation and start their professional carrier with thousands of dollars worth debt, you should teach your freshman kid the basics and intricacies of credit card management.
Teaching Your Child Money Management
Credit experts consider the age of 4-5 years to be high time to start your child’s financial education. Piggy banks will perfectly serve this purpose. When he or she turns 12-13, the next step to teaching your kid money management skills can be introducing a credit system. You can play the role of a bank and issue your child some certain amount of money with a commitment on his or her part to pay off the money borrowed.
This period is also perfect to explain your kid the credit card related basic notions. Tell them about credit limit, APR, fees, credit card categories, identity theft, credit score, credit report, credit history. At this age your child is smart enough to make him or her an authorized user. So, if you manage to capture the moment when it is time to give your child financial background, by his or her freshman year your kid will have nearly no chances to make a mistake in credit card use.
However, if you are still not quite sure in your student-kid’s credit card wisdom, persuade him or her to get a secured credit card first.
And there are 4 golden rules for student credit card holders to keep in mind.
1. Students should charge only the amount of money that they can afford to pay off at the end of a month.
2. Students are to make payments on time.
3. Students should pay more than the minimum payments.
4. Students should better pay for big-ticket items, tuition, for instance, taking student loans that have lower rates and milder repayment terms.
If you consider all of the above-mentioned points and use this guide to enrich your child’s financial knowledge, you can feel safe about his or her financial future.

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4 Responses to “Helping Your Freshman Kid to Become Credit Wise”

  1. Cdan said:

    Yep. Teaching finance management is very important. We need to send our kids into the real world prepared!

  2. N_Dorothy said:

    Children should know that accumulating debt could affect more than just their credit score. Employers are also checking their credit rating and it will be difficult to find a job if credit history is poor.

  3. evvy said:

    I hope my children will be able to make well-considered finance decisions when they pass from college to work.

  4. evvy said:

    I guess there is a lack of preventive financial education for kids. I think that credit literacy programs should become a part of modern education

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