Today’s Practical Planning Tip we will continue our discussion on Money Advice Every Parent Should Give Their Children.
Today’s piece of advice is to teach your kids the importance of Understanding how credit cards work: Many sophisticated people don’t understand how credit cards work. Credit cards exist to ease transactional burdens and allow people to shop without carrying wads of cash. The added benefit is to build your credit score. A good credit score impacts many areas, including allowing one to get lower rates on borrowed money (like to buy a house or start a business), makes getting approval to rent a house or apartment easier, and potentially lowers auto insurance rates. Building your credit score is as simple as paying off your full credit card balance, on time, every month. The credit card issuer reports each monthly payment to the credit reporting agencies. This will help increase your credit score because it shows lenders that you can manage credit responsibly.
As I tell all my clients, credit card debt is the CANCER of personal finance. It will grow quickly and exponentially to the point where it will derail your financial life. Credit card debt should be avoided and credit cards need to be handled RESPONSIBLY.