One in three Americans are carrying a monthly credit card balance, and the average person with credit card debt carries more than $7,500 per card. 1 Charges delinquent over 90 days are most prevalent among younger Americans, at slightly over 2% for those under age 30. These figures underscore the importance of teaching kids about credit — an important skill set for life. 2
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Building Good Habits From the Ground Up
The biggest argument in favor of teaching kids about credit at a young age is to help instill good credit behaviors from day one. It’s much easier to learn good habits from the beginning than it is to unlearn bad credit habits acquired over time.
Referring back to the statistics above, young people are potentially the most likely to default on their credit accounts, in part, because they may not have had proper instruction on how to use credit cards and loans.
Teaching kids about credit empowers them to build their credit history on a solid foundation from the first day they start using credit, rather than trying to fix youthful mistakes as they enter their 30s.
Early Mistakes Have Lasting Impact
Most people know that missed payments can last as long as seven years on a credit report.
Teaching kids how their actions translate into financial impacts can help them understand that small mistakes can have lasting consequences for their credit history. It’s also much easier to build a solid credit history from the start than it is to try and repair damaged credit.
It could also help them avoid making common and simple mistakes (such as late payments) that can impact a credit score.
The Consequences of Bad Credit
A credit report impacts much more than just someone’s ability to get approved for credit. Guidance on the topic should always cover the extended consequences of less-than-perfect credit.
For example, in a recent CareerBuilder survey, 72% of respondents reported checking the credit of prospective employees. 3 Poor credit scores could also make it difficult to find an apartment, particularly in competitive housing markets.
Helping kids understand the consequences of not using credit responsibly early on allows them to make credit decisions with a long view.
The Abstraction of Credit
Credit is an abstract concept. Even for adults, it can be common to see credit as a sort of income — rather than debt — laying in wait.
Orient a kid’s experience with credit toward viewing it in its proper place. This, in turn, can help them to use credit responsibly and avoid youthful mistakes that will come back to haunt them later in life.
Of course, most grade schoolers won’t understand the finer points of credit and debt management. However, high school students and even middle schoolers can get the picture with some simple explanations.
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Age-appropriate credit education establishes the kind of footing that a young person can benefit from when it comes to establishing and maintaining solid credit throughout their life.