It’s always a tricky decision to decide when to start talking with your children about credit, as waiting too long can allow time for bad habits regarding money to develop, and not waiting long enough can either confuse a child or bore him or her to tears. In general, a good time to talk with your kids about credit is right when they’re starting high school. As you might be aware, a credit report doesn’t officially start until a potential borrower is eighteen, as this is when individuals are legally able to enter into contracts of their own volition. It’s a good idea to talk with your kids about credit beforehand, though, so that when the credit card offers start appearing on your doorstep for your child, they’ll know more about how to handle credit and what, exactly, they’re getting into when they ride the American Express.
To this end, be sure that your child understands that having a credit card does not mean that he or she has inherited a magical piece of plastic that will gain them items with no cost. Explain that a credit card has interest attached, meaning that if they use a credit card for a large purchase, they will likely end up paying more money on the product due to the interest attached to the credit card, and often it’s more intelligent to wait a few more weeks before purchasing something big so that he or she can pay it off right away. Another thing to make your kids aware of is the cost of letting credit card debt get out of hand.
Creditors might hound them – in addition, repeated ignoring of collectors can even lead to criminal charges. When young people get in credit card debt, it’s not usually because they’re stupid – it’s just that there were literally hundreds of credit card applications at their door and they didn’t know what they were getting into when they signed on the dotted line. Don’t let your kids get in financial trouble due to ignorance! Consider talking with your kids about credit today.