Most Michigan parents may recall that the time they went to college was the first time they had their own credit card. They may also remember how they had to learn through their mistakes and how long it took to build up a good credit score in order to be regarded as credit worthy when they wanted to buy a car or rent an apartment. Some feel that it would be better if we taught our children how to manage credit card debt and start building their credit score while they are much younger so they can be ready for financial responsibility during and after college.
One good way to start achieving that goal is by using everyday situations to explain the way credit cards work, not omitting what the consequences of nonpayment are. The next step could be to add the child to a parent’s credit card as an authorized user. This is where the parent needs to make very strict rules and not hesitate to confiscate the card when rules are broken. This can be their first step on the child’s path to building a good credit score.
To make sure the child is prepared for financial responsibility, the best way may be to put him or her in charge of his or her own secured card. A parent may wish to have them use money saved from babysitting, odd jobs and gifts to secure the card. The parent can let them be in complete control and teach them how to check their credit score. The parent must remain an active advisor through this whole process in order to reach the objective of sending a financially responsible young adult to college who has a well-maintained credit score.
Once the child has a good credit score, it is time to teach him or her how to maintain it. Explain the importance of avoiding paying only the minimum amount due on the credit card. Parents should try to be realistic and also make sure the child is informed about the legal options available in Michigan for those who do not manage to maintain and control their credit card debt. This can include explaining the legalities of bankruptcy protection and how it can help people with overwhelming debt to start over and rebuild a stable financial future.
Source: Yahoo Finance, How to Give Your Kid a Good Credit Score, Gerry Detweiler, March 10, 2014