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Helping Kids Master
Credit Cards
Send your kids out into the world without the
skills to handle credit cards and you've dropped the
ball as a parent. And if you think you don't
have to worry because your kid doesn't have a credit
card, think again. Colleges irresponsibly let credit
card issuers set up tables on campus, where they offer
cards without properly teaching young people how they
work. Even if your kids bypass college, trust me,
there's no 18-year-old out there who can't get a
credit card.
Here's what every parent can do:
Set a good example.
You, no doubt, spend plenty of time imparting all your
moral and ethical wisdom, but do you realize your kids
are also learning the financial ropes by watching your
spending habits? If you handle credit responsibly,
chances are they will, too.
Start them off with a card tied to your
account.
When your child is 15 or 16, consider adding them to
your account. There are multiple advantages to this.
They inherit your credit rating. Assuming your FICO
score is good, you are setting up your kids to have
great scores by the time they want to apply for their
own cards when they're older. Plus, you'll see all the
charges. And it's up to you to set the rules: They can
spend X dollars a month for specific charges you're
willing to cover, but everything else must be paid out
of their own pockets. Schedule a time each month to
sit down and go over the bill together. If they don't
have the cash to cover their charges, then you have a
great opportunity to teach them about the cost of
running a balance.
If you don't want to add them to your card,
start them out with a secured credit card.
It looks and feels like a card, but it is secured by
money already paid to the card issuer to cover the
bills, so there's no way they can spend more than they
have.
Get your kids credit cards before they leave home.
That way there's no need for them to be tempted by all
the card offers they will encounter at college.
Request that the credit limit be kept very low, say
$500 or $1,000, so there's less chance of any big
problems. If you choose to cosign the application,
make sure you can receive a copy of the monthly bill.
But beware: You'll also be financially responsible if
your child does run up a balance.
By Suze Orman
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