We were both 21. Monica had worked fulltime for a couple of years. I had just graduated from college. Neither of us had any credit card, big or little.
Sears to the Rescue!
It was sometime later that Sears allowed us to establish credit. We bought a lot at Sears. We ended up owing Sears a lot. We spent a long time paying off Sears.
But and here’s one of the real advantages of Way Back When our Sears card was good only at Sears. Not the grocery store. Not the movie theater. Not the local Chinese restaurant.
I have no doubt that if it had been, then, well, we would have ended up in as much financial trouble as many young adults are today. My own children now young adults are members of the first generation to face this problem, this temptation. And the companies that issue credit cards are taking every possible advantage of it.
My Generation
In defense of my own generation, I have to say we never saw it coming. Never imagined it would come. Based on my own experience, I was 21, married and a college graduate (OK, no real job in sight) but no credit card company was about to look seriously at me. Ditto with Monica, even though she had a strong work history.
So when, maybe 15 years later, a mom mentioned to me that her daughter then in her early 20s was deeply (thousands and thousands of dollars) in credit-card debt, I was mystified. All right, I was judgmental. What kind of a young person would…?
The real question, the one I didn’t ask myself, was how could a young person get credit. The answer, I know now, is easily. Too easily.
As do all parents, I worked hard not just at protecting my children but at helping them learn how to protect themselves. Crossing the street, talking to strangers, drugs, gangs, driving… The whole deal.
But what I didn’t talk about was credit. I my generation of parents ended up being blindsided on that one. And so our kids, by and large, are easy pickin’s.
This is my warning to moms and dads with kids high-school age and younger: Add “credit cards” to your list of talks. By the time your children are in their late teens, they will begin to receive invitations to apply for credit. A lot of invitations.
They will be offered pre-approved credit lines. A lot of credit lines. Several every month. Really. Their college campuses will be papered with them. Recruiters will hand over FREE! gifts to those who sign up.
In countless ways, countless times, they will be offered what appears to be a golden egg without understanding that, if they accept it, their goose may well be cooked. For a long, long time.
Seven Useful Suggestions
1. Explain interest and compound interest. Help your children realize that credit card companies are in the business of getting people in debt and keeping them there. Why? Because that’s how they make money. And they make a lot of it.
Your kids need to realize that making minimum payments is for suckers. They need to understand that, of course, the company bumps up a credit line. It’s much better for them if you’re $1,000 in debt rather than $500.
2. Point out the often misleading come-ons. “Only x percent interest…” For a few months. And then? Whammo! Prime plus y percent. Until a missed payment. Then prime plus z percent.
Companies that offer true low rates aren’t likely to dangle cards in front of 18-year-olds. Why not? Because an 18-year-old has little or no credit history and an 18-year-old is a credit risk. What about the companies that do? Then they are making so much from high interest rates they still come out ahead even with a hefty percentage of their clients defaulting on that debt.
3. Bankruptcy is not to be taken lightly or chosen quickly.
4. Reducing credit-card debt may well mean working a lot of overtime or getting a second job.
5. It’s hard to have a card in your wallet and really only use it for emergencies. Unless you begin defining emergency as “But I really wanted a pizza.”
6. There is a big, big difference between “want” and “need.” Fulfilling one’s wants one’s whims is very, very expensive.
7. You need to set a good example. Even if they don’t follow it. Why? Because it’s one more way for you to drive the message home. Personal finance personal debt is serious business. Money doesn’t…
Well, it doesn’t grow on trees. You’ve probably said this to your kids. Just as your parents said it to you. Then you got older and wiser and realized they spoke the truth.
A cold, hard, unchangeable truth.
Here’s another one: When it comes to young adults and credit cards, all too soon the honeymoon is over.
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