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Help your kids avoid costly financial mistakes once they turn 18 – NBC 7 San Diego
Do you think your kids will be ready to make the right financial decision once they turn 18? Will they know how to avoid getting buried under a mountain of credit card debt that may take years to pay off?
Chase Peckham from the San Diego Financial Literacy Center sure hopes so.
Chase Peckham, San Diego Financial Literacy Center, teaches teens how to be “smart” with their money.
The center’s director of community outreach and education creates fun social media videos to teach teenagers how to be financially literate before graduating from high school.
“The ultimate goal is to teach them to be the best adults they can be,” Peckham said while sharing some of the videos he’s created.
He knows firsthand the consequences of not being prepared to take on a sudden surge of purchasing power as a young adult.
“I [had] almost $30,000 worth of credit card debt in my mid-20s, and it took forever to get myself out of it,” he said, shaking his head.
It’s a situation that 7th-grader Daniel Herrera Jr. would like to avoid once he starts managing his own money and credit cards.
“For sure, I want to save money when I’m older, you know, I don’t want to be a big spender. I mean, I want to have money in my bank account at all times,” he said with a smile.
However, he admitted it usually takes him about a day to spend any money he gets from his parents or on his birthday.
“I think once I turn 15, 16 or 17, I think that’s when I should start saving for college, and for a car, and for fun, and stuff like that,” he said.
Daniel Herrera, 13, does not want to be a “big spender” after high school. He fears the temptation of using credit cards.
Alright, mom and dad. Here’s what to do with your kids to strengthen their financial literacy.
Value of saving
Start by teaching your kids the value of saving and how to do it. Have them earn a few bucks by doing chores. Then, give them a few dollars more if they hold on to the money and do not spend it in two weeks.
Stretch the length of time periodically and add some incentives to save for a longer time.
You can adopt this lesson earlier than you might think.
“Kids actually start understanding money, concepts of money, and those kinds of things at very early ages,” Peckham said.
Manage a budget
Next, teach them how to budget. Don’t tell them. Show them!
You can open up your books to teach them how you break down your income to cover daily, weekly, and monthly expenses. You can also explain why you chose to use a credit card over a debit card in certain transactions.
“It doesn’t grab right away. All you can do is also practice what you preach, meaning they are going to watch you. They’re going to see how you spend your money,” Peckham said.
Establish their credit
Once they’re about 13 years old, it might be time to get their credit going. Add them as an authorized user to one of your credit cards.
You might look at your kid and think, “Oh boy, this is risky,” but keep an eye on the account and check monthly statements together. The lessons here are crucial.
“Being able to understand that, yes, you can get yourself into credit debt, but you also need to build credit,” Peckham said.
Remember, it’s better if they make mistakes now, under your guidance, than when they’re out on their own.
“I would love to tell you I got a hidden get right up my sleeve, but as we all know, every child, every person is so uniquely different,” Peckham said.
Co-sign a loan or lease
Level up by co-signing on a loan, maybe their auto loan. This will build up their credit score even more by the time they’re 18. Plus, it may lock in a lower interest rate that will save them money in the short and long term.
“Because for so many things we do, whether it’s to buy a car someday or we want to save and then buy a home, they’re going to look up your credit,” Peckham said.
If lenders find a good score, their financial options moving forward will be that much better.
