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Ask Susan Responses
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Family Issues: Kids & Money |
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More Ask Susan |
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I’ve read conflicting information about giving your child an allowance. All of my son’s friends get an allowance, but I am not sure if it is the right thing to do or not. -Meghan |
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Meghan,
I don’t think there is a “right” or “wrong” answer. Regardless of what everyone else is doing, you should do what is right for your family. I do believe that it is very important to communicate openly with young kids about money, in simple terms that they can comprehend. If you do choose to give your child an allowance, I recommend you let him be in charge of spending it. This is a great way to teach the relationship between their actions and the positive or negative consequences that follow.
The Advice Team |
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My “babies” are headed for college in a few years. I am worried about their access to credit cards. Is there any way I can prevent them from getting into debt? They have good intenions, but with so much freedom, I still worry. -Maggie |
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It’s unfortunate that young adults are now entering a world where they don’t have time to learn financial skills gradually. Often they become victims of poor credit and debt practices before they realize how it even happened.
This first and most important step is to examine your own attitudes about money. This is extremely important because your children learn more from what they see you do than from what you tell them.
Also, I recommend sitting down and having a frank discussion with you children about money. Many students don't realize that their credit can effect more than their ability to get more credit card. It can also directly impact their ability to get a job, apartment, car, and insurance. Once they are on their own, be sure to keep the lines of communication open.
Good luck,
The Advice Team |
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My father wants to help me out and cosign a car loan for me but he is afraid that if I was to miss payments his credit would be ruined. Can you let me know if this is true or false? -Tim |
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I am so glad you asked. It is absolutely true. Tim,
If you are not confident that you can handle this financial responsibility, it might be best to wait until you can qualify on your own. Saving money for a down payment would be a great place to start. For more information, see the section on cosigned loans.
The Advice Team |
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My husband and I disagree about how much information our six-year-old son should have about our family’s finances. I don’t think he needs to know specifics. What’s your vote? -Sharon |
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Sharon,
While a young child won’t understand investing at the complex level of an adult, a savings account in his name will help him understand the basic benefits of saving money and watching it grow. Also, consider taking your child shopping with you. Explain to him why you make the decisions you make while shopping. By showing him the details you take into consideration, you’ll be teaching him how to be a wise consumer. Raising him to be money smart is a priceless gift.
The Advice Team |
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My son is going off to college next month for his first semester. How to your recommend he handle his expenses, credit card, debt card, and checking account? He needs to learn how to control expenses without getting out of control. -Emily |
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Dear Emily,
This is the perfect opportunity to start your son's higher education. Before you do anything, sit down with your son. Talk to him about your expectations and make sure that you are on the same page. Make sure that he knows the value of good credit and the ramifications of being in debt. If you have not already done so, show him a sample spending plan and discuss successful money management techniques. Once all of this is established, you can start to talk about a credit or debit card.
The benefit of your son obtaining a debit card versus a credit card is that he must have the money in an account before he can make a purchase. This makes the very popular debit card less risky. If you choose this route, you son will have to open his own checking account and needs to understand that keeping accurate records is imperative. "Bounced" checks and overdraft charges can be costly.
On the other hand, a secured card credit or a card with a low limit, might help your son establish good credit habits and a good credit history. The risks are obvious, so please be sure that your son is ready for this level of responsibility. In addition, if you plan to co-sign for his account, please know that you re basically responsible for the debt. This means if your son does not pay his bills, you are responsible. If he makes late payments, your credit report suffers. And these examples are only the tip of the iceberg.
With a little communication and planning, I am sure James will do just fine. I applaud your involvement and wish you both the best.
The Advice Team |
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