This weekend I stopped by my friend Kathleen's house. She was helping her daughter, Kerry, pack for her freshman year in college. It is such an exciting time! As we sat around her room with my 16-year-old, Cassandra, sitting next to me, I thought about how we used to go over for play dates. They had so much fun playing together, and I so enjoyed chatting it up with Kathleen. It suddenly hit me that Kerry was grown-up enough to leave the house and start living in a dorm without her family. Believe me, I know she is already independent. She worked hard after school at the local ice cream shop and even bought her own used car at 16! She has been paying for her own insurance and gas ever since. I know she learned to save money because she has a little nest egg for school. But does she know about credit cards? She has been paying cash or using her ATM for two years.
If you haven't taught your kids about healthy credit, now is the time. While they are in college taking classes to help them obtain a career, what about also helping them build some credit history? With the credit laws changing, it is not as easy to get a credit card on campus as it was in the past. It is essential to show income to get a credit card at 18, but kids can get a joint account on a new card with their parents. This account does go onto their credit report as if they pay it without your help, but since you are also joined, if you have good credit they should get approved. But because you can be joined in this way, it is necessary to monitor and be on top of this.
You can help them beyond just getting the card: begin teaching them how it works.!
I suggest that you have the bill delivered to your home, not the college dorm. This way, you can ensure that the bill gets paid on time. Even with your child paying it, you can still monitor. Or if they pay it online, have them give you the log-in information and monitor it that way! You have control over seeing it, because it is yours.
Have a conversation with them and explain that the card is to help them understand how credit works. These kinds of conversations can help them understand how a quick purchase can add up to high amounts when the bill comes in -- and that they still have to pay it! They will truly begin to understand revolving debt and hopefully be able to resist the urge to go wild with a card like so many of us have back in the day when no one was there to watch or guide us.
Many parents tell me that they really do not think their kids should be carrying credit cards around and building up debt, so they do not want them to have credit cards until they land a job after college. I understand that perspective, but think about this: we do need our credit for certain jobs, so why not have a head start with a higher FICO score? When it is time to rent a home, if your child already has a good history for four years, you might not need to co-sign for their first place.
It is all about having healthy credit, and the only way to obtain it is to learn more about it.
I am going to write more this month about building credit, so please stay tuned! If you have a credit question, email me at Jeanne.Kelly@TheCreditOwl.com.