Three Reasons To Talk To Your Teen About Credit
Talking to your kids about credit is probably a conversation you’re not looking forward to. It can be difficult to know where to start and maybe you’re not as comfortable with the subject as you’d like to be. We’ve found that an early conversation about the importance of credit and how credit history can impact future financial plans will give your teen a head-start in understanding this sometimes difficult topic.
Here are 3 reasons why talking to your teen about credit early can help make a difference in their financial future.
Develop Positive Payment Habits
When it comes to credit scores, over a third of the calculation is made up by our payment history. Missing even a single payment on a credit card or loan can negatively impact our credit. Making sure your teen understands the importance of paying their bills on-time can prevent damaging repercussions later and lead to development of healthier habits around managing their finances early while they’re still young.
Credit-based Offers & The Power of “No”
Stop me if you’ve heard this one… you’re checking out at your favorite retail store and the cashier offers big savings off your purchase if apply for their store card right then and there. We’ve all been there, right? Now imagine the customer is your teenager… how do you think that scenario will play out? It’s important to teach kids how and why these offers are made and how impulsive credit-based decisions can impact their overall credit history. The ability to quickly assess the pros and cons of an offer and, in most cases, politely decline will be a tremendous asset for your teen to have in financial (and non-financial) matters.
The Role of Credit in Achieving Financial Goals
By the end of high school, teens have already grappled with major decisions that will help determine their future. From whether and where to go to college, what jobs to apply for, and more, our teens have a lot to consider as they navigate their way to young adulthood. Make sure they go out into the world with an understanding of how building a strong credit history impacts their future as much, if not more, than where they go to school or work. Buying a home and getting favorable interest rates on loans are obviously tied to good credit, but many top employers will also take a job seekers credit history into consideration. Talking about credit early helps establish a financial foundation that they’ll build on through each stage of their life as they pursue their goals and dreams.
We know we cannot be with our kids at each crossroad they face, but instilling early guidance can stay with our teens even when we’re not around. Talking about the impacts of credit early in life, and how it affects our financial future can prepare your child to make educated financial decisions.
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