As parents, I believe that we are supposed to raise our children to grow up and become contributing members of society. If you ask any of my four wonderful kids, they will attest to that statement being announced to them regularly, usually as a response to the ever-popular statement heard around the world of “that’s not fair.”
Life is not fair, the game is rigged and the sooner we let go of the notion that fairness is on our side, the quicker we can move forward. You need to know that no one is going to help your children understand credit and the value of protecting it, except you.
You taught them to walk and talk, hopefully, the value of hard work and forgiveness and if you genuinely want to help them move out on their own one day, you will teach them about how to handle money, what credit is and how to leverage it for their benefit.
I can’t say that I haven’t made mistakes, but I can say that I have done everything possible to lead mine in the right direction by encouraging them to not make the same mistakes I have made in the past. I think all parents want to see their children live lives that excel beyond our own achievements. If you are the parent who will cut your kids off at 18 and think they should fend for themselves like you had to, stop reading. My advice won’t help you in any way.
I’m a professional in real estate, so take the following advice from a mother of four adult children, who has to determine the credit worthiness of 100 percent of my clients before I can help them meet their real estate goals. In an effort to help you support your next generation of descendants, I have three tips you can use to ensure your kids get the right start with their credit. (Your children will have to be at least 18 to apply any of the following tips.)
1. Building good credit generally takes time and there is a level of risk involved when young people are trying to navigate it with no help. One thing you can do, if you have good credit, is make them an authorized user on one of your credit cards.
You don’t have to give them access to this account, but they can reap the benefits of your good standing without anyone having to actually spend anything. When you do this, you should talk to your kids and explain how credit works.
2. Help them get a secured credit card. This is a credit card that is established at a bank with your own money. It reports like a credit card, but instead of your kid using borrowed money, they use their own money. Locally, SRP does them.
Then talk about how credit works, and why you should pay your balance in full each month to avoid interest. What better way is there to learn about wasting money than having to pay interest on your own money? Talk about unfair things!!
3. This one will not be a favorite of a lot of parents. I understand and I ask that you reserve your judgment towards me. This is what I did, and as I said before, I did what I could to help my kids succeed financially, I am always going to help them.
I made sure my kids had reliable transportation when they were old enough to drive on their own and shoulder the responsibility of owning a car. I have personally bought cars for my kids. If I financed them, I included their names on the loans. For me, this is not the same as cosigning a loan for your kids. I bought the cars, gave them to my children, paid the payments and we talked about why I did it and how credit works.
Once they were older and wanted something else, they had the freedom to trade that car in and buy what they wanted. Additionally, they have the credit history to do it and do not have to get a payday loan at 15 percent interest to establish credit.
Hopefully, you can find some value in part or all of this information. If you are not in a financial position to help your kids out like this, I sympathize with you. I know that if you could help them, you would.
So take this last piece of advice that is a recurring theme here and doesn’t cost a dime: Talk to your children about credit and money. Be honest and vulnerable with them. Apologize to them for the mistakes you have made that affected them and learn together how to do new things to improve your family’s financial outlook today!
