August 8, 2014
To parents with a freshman entering college this fall: You're probably expecting to shell out major bucks for tuition, room and board and a million other necessities over the next few years. But before you send your kid off, make sure you share one gift likely to steer him or her along the road to financial security – a sound understanding of how credit works.
You probably learned the hard way yourself that young adults encounter many unfamiliar expenses – and temptations – upon entering college or the workforce. So it's important to help your kids avoid early financial missteps that could damage their credit for years to come.
The first step in managing personal finances is mastering the basic checking account and debit card. A few tips you can pass along:
A good way to build sound credit is to demonstrate responsible credit card use. But people under age 21 must have a parent or other responsible adult cosign credit card accounts unless they can prove sufficient income to repay the debt. So how can parents help their kids begin building a credit history if they can't open their own account? A couple of alternatives:
If your kids haven't yet demonstrated financial maturity they may not be ready for an unsecured credit card or loan. Other alternatives include:
If you need help educating your kids about personal financial management, a good resource is What's My Score (www.whatsmyscore.org), a financial literacy program for young adults run by Visa Inc. It features a comprehensive workbook called Money 101: A Crash Course in Better Money Management, which can be downloaded for free.
Bottom line: Getting your kids off on the right foot, credit-wise, can make all the difference to their future financial health.
Recent Practical Money Matters
This article is intended to provide general information and should not be considered health, legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.