When I was growing up, I never had any instruction on how to handle my finances. I was on the learn as you go method; so I was determined to change that with my daughters. They all have a bank account. The older ones have a checking account with a Visa debit card that they can use when they are out with their friends or away at camp. I have tried to teach them how to budget their money and check their balances, and balance their checkbooks. With two of them getting ready to go to college, I talk to them about the temptations of credit cards which are practically given away to college students.
I got in trouble early on with my credit card. After all, who wouldn’t be tempted? Hey, I figured, I can afford the $15 a month payment! No one told me that was just the minimum payment required. Nobody told me how fast your balance can go up when you’re buying what you want at the department store and eating out all the time. No one told me that you should have a job so you can pay off your credit card balance.
The credit card pit is one fall I can keep my daughters from so we’re starting early. I’m also glad to find out that some of the lessons are sinking in and that they are relating it to what they’re learning in school too. My daughter wrote the following:
This year as a high school sophomore I took a required course called “Civics and Economics.” The course studies civics for the first part of the semester, studying basic American history and government as well as the foreign influences of such. The second part of the semester studies economics. Overall the class educated us on the basics of living in America, things many people may surprisingly be ignorant to. Things we learned were at times simple facts, “the vice president succeeds the president in case of death, and the speaker of the house may succeed him.” Other things had to be memorized in order to pass the tests and understand our laws, “the supreme court case Korematsu v. United States gives the US government permission to withdraw certain constitutional rights and even force its citizens into internment camps in cases of national security.” Other things were slightly more complex, or required more teaching. One question I had answered, that I was glad we did for I had been wondering about it for sometime, was “what is a credit report or a credit score?
A credit score is a rank that is assigned to each person based on their credit history and is used by creditors to determine a person’s credit worthiness. They look at how you paid back your previous loans. Did you pay them on time, how many credit cards do you have and is the total amount of what you owe in a good ratio to the amount of money you earn?
Federal law states that everyone is entitled to a free credit report every 12 months. You can even get a credit rating online. A credit report tells the history of your previous loans, credit card payments etc. A credit score is used mainly by lenders such as banks in order to find potential risks in lending to certain consumers. People starting out with no credit history should start to build a strong one by using a student credit card of some sort and paying the bills on time and in full. Learn more about credit reports and credit scores. It is often found to be important down the road when one looks to take out a loan of some sort.