Guide to Securing Your Child's Credit Future
College students don’t always have a healthy relationship with credit. For instance, Stephen Swift (managing attorney for Southern Colorado Bankruptcy Law Firm) relates that bankruptcy attorneys are “seeing younger and younger clients who are seeking bankruptcy protection because they got in over their heads with credit cards.” Unfortunately, credit cards aren’t the only concern for students – in 2015, the average college student graduated with $30,100 in student loan debt; in 2016, 11.2 percent of student loan debt was in default or delinquent by 90+ days. Even more, the student loan situation is getting worse, not better. In 2005, the average student loan payment was $227 (when adjusted for inflation) – 10 years later, the average payment was 50 percent higher ($351).
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A recent study conducted by Sallie Mae also highlighted some concerning statistics regarding the behavior and understanding of college students as it relates to credit cards.
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35 percent of students use their credit cards “sometimes” or “regularly” to make purchases that they don’t have the money to pay off.
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Older students (21 to 24 year-olds) have an average balance of over $1,000 on their credit cards.
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Only 31% of college students demonstrated that they have a working knowledge of basic credit-related concepts. Only a slim percentage could answer all three questions that relate to interest accumulation, the effect that payment behavior has on the cost of credit, and the effect that the repayment term has on the cost of credit.
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The study mentioned above also highlights a problem that stems from an overreaction to the abuse of credit – 44 percent of college students don’t use credit cards. When students stay away from credit all together, it leads to a general lack of credit history after graduation which is a big problem when it comes time to buy a house or a car. A lack of credit history can also magnify the impact of credit blunders on students’ credit scores.
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Check out this great guide from The Simple Dollar!
Guide to Credit Literacy
It’s no secret that the American culture has money problems, but more specifically – credit problems. Consider the following statistics: every three months, 250,000 new families enter into foreclosure, and the average family has $16,000 in credit card debt. One reason American’s poor relationship with credit may be that many states’ educational systems aren’t great at producing financially literate graduates. That’s why we created this guide – to empower parents with a helpful step by step process that will provide them the tools they need to ensure that their children develop a healthy relationship with credit, and understand financial literacy by the time they graduate.
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While this guide is a great resource for everyone, it can be particularly useful for parents who don’t feel qualified to teach their children credit-related concepts – whether that feeling comes from personal struggles with debt, a lack of aptitude for grasping difficult financial concepts, or a simple lack of education on these subjects. Regardless of a parent’s relationship with credit, there’s a lot they can and should teach their children.
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Just because children aren’t going to be directly interacting with personal credit or financial products until they graduate high school, doesn’t mean that parents have to wait until then to prepare for their child’s credit future. Young children can be helped to form sound financial habits, and as they get older, they can be educated about increasingly complex credit-related concepts.
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This guide will help parents understand how to promote positive credit awareness and responsible financial habits throughout a child’s development. Important concepts and behaviors will be highlighted, and examples of activities and additional resources will be given to use in four critical stages of development.
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Check out this great guide from The Simple Dollar!