Building Credit 101: 5 Smart Financial Conversations to Have with Your Teenagers
Children are notoriously bad with money. That’s since they don’t understand how hard it is to work every day just to have all of the fruits of the labor go to bills and raising children. Since they don’t understand, they may make some poor financial decisions as teens and young adults help educate your teen. Here are 5 smart financial conversations to have with your teenager.
Being responsible for student loans
Your teenager is getting ready to go off to college. When they do, you need to ensure that they understand student loans and how they work.
They should also be told not to take out more than they need. Otherwise, they will regret it later when they have to pay it back.
The importance of communication and action
Emphasize the importance of paying bills on time. If they can’t, it’s even more important to communicate with the debtor.
In many cases, you can make an arrangement. When this is done, it won’t negatively affect your credit.
Not communicating will force the institution to report the late payment to the credit bureaus.
Opening a checking account and helping them pay their own bills, even if they are in your family plans and you pay them, will help teach them the skills necessary to build their own credit.
If they want big buys like a new laptop or car then help them understand how to get qualified for an auto loan and how they can open up their own Best Buy credit card once they go off to college.
Having numbers and the reality of these responsibilities be concrete in their minds before they obtain them will help them realize the importance of a good job and education.
Otherwise, they may think credit is just free money and will learn the realities of fiscal responsibility the hard way.
Building a savings account
Being young, your teen probably doesn’t have much of an opportunity to make a lot of money.
Even with limited resources, you should emphasize the importance of putting some money away for when they need it.
Tell them a couple of easy ways to save money, such as not eating out as much and making coffee at home.
Medical expenses
One thing many teenagers don’t remember is that they will need to spend money on their health.
This includes doctor visits, prescriptions, and any procedures they might need to be done.
Assist them with anything you can do as their parent before they are on their own.
They should also understand that they can only stay on your insurance for a limited amount of time.
Get a job with a 401k
Your teens are going to start getting jobs. While most prospects for teens won’t offer a 401k, they should learn what it is for when they do get a new job.
They should also be told how it works when it takes effect, and what to do when they switch jobs.
If your teen knows how to protect themselves, they will make better decisions.
Following these tips can help with financial conversations. They hopefully will know enough to avoid problems and stay financially stable.
Category: Family Finances
