If you have a teenager, now is the time to discuss with your teen the importance of maintaining good financial standing. Building credit is critical for most people today, but many teens make small, or larger, mistakes when they are young and inexperienced. This leads to years of turmoil and negative credit results. You can overcome this, though, through proper financial education.
By taking a few steps now to teach your teen to manage his or her finances properly, you can help your child to avoid financial strain later on. Keep the following in mind:
- Work with your teen to learn about credit, including what it is and how to use it.
- Help your teen to establish a checking or savings account. Work with them to build up savings, such as through a job.
- Teach your teen how to balance a checkbook. Teach your teen how to create a budget that allows for free spending, savings and fixed expenses, such as car payments.
Building credit is important, even at a young age. Due to the Credit Card Act of 2009, people up to the age of 21 must have a cosigner to obtain a credit card, or must be able to show financial independence. This may seem to limit the availability of credit to the user, but that does not mean he or she cannot work to build it.
One of the best ways to do this is through prepaid credit cards. These cards allow the user to secure the credit limit with a deposit. The amount of money you deposit is the amount of money you can borrow against each month. Look for prepaid cards that report to the credit bureaus. This feature allows the user to build up his or her credit without actually having to borrow money.
Maintaining a healthy financial life is important to even teens. No matter what your teen’s experience with finances is, now is the time to educate.