Help Your Child Manage Credit – A Contrarian View
Today CNNMoney.com published a story telling parents how they can help their children manage credit. The author is apparently very concerned that all hell is going to break loose in the credit world this February. Why? Because credit card companies won’t be able to issue credit cards to folks under 21 unless: (a) there is an older adult co-signer or (b) there is proof that the young adult card-holder has the means to make payments on the card.
What makes this tough-credit future for our young ones even more difficult to accept is that their older brothers and sisters were not constrained by such harshness. According to the article, 84% of current college students have at least one card and 50% of them enjoy the pleasures of four or more cards. Our 2008 graduates left school with an average card balance of $4100. They had some serious spending fun. Today’s teens want a piece of that action.
No wonder CNNMoney is so eager to help. It’s just not right that the next crop of college freshmen will have a harder time running up credit card debt. Now is the time for parents to take aggressive action to remove these unreasonable credit barriers for their dear children.
So let’s review the “advice” offered in the article:
1. Start with a Debit Card. The author says do this so that “your kid will get the hang of using plastic.” This sounds harmless enough. But there is that research that proves that people who use plastic spend more in total and spend more on individual products and services compared to people who use cash. So, an accurate interpretation of this recommendation is that parents should help their kids “get the hang” of spending too much.
2. Share Your Card. Apparently it is not enough that parents provide financial support for their children. Now we are supposed to share our ability to spend more than we make. If the child is a bad girl with credit, says the author, you can “remove her from the account.” The problems of someone having to pay for the teen’s excessive charges and perhaps both of you having damaged credit are for you to figure out.
3. Co-sign Your Child’s Card. Sure. Make their bed, cook their breakfast, and write their term papers while you’re at it.
Why does this author think that credit is a “gift” that we should provide to our children? Credit is the gift that keeps on taking. The gift that Mrs. ToughMoneyLove and I wanted to give our children is to enter full adulthood with a college education, no debt, and a responsibly negative attitude about the use of credit. So far we have succeeded.
By now all the credit score worshippers who are reading this are ready to tell me off. Let me save you the trouble:
“Everyone needs a good credit score.”
“The way to get a good credit score is to use credit responsibly.”
“College students need a good credit score when they graduate.”
Blah blah blah. I’ve heard it all many times. I am not persuaded. The hard truth data on college student credit card debt is more powerful than your tiresome, brainwashed arguments. Most of the personal finance bloggers that I read started their financial journey from a credit mess.
Yes, I understand that you are only going with the flow and doing what you have been told by FICO. I don’t want to do what FICO tells me. I hate FICO.
The FICO score is designed for the singular purpose of encouraging the use of consumer credit. That’s why net worth and income are ignored when calculating a FICO score.
Visa and MasterCard aren’t looking out for my kids. They descend on college campuses like locusts, because we aren’t there to intervene. Why do you think that Congress changed the credit card rules for teens? Go back to the credit usage data cited in the article. That’s why.
Let’s help break the cycle of debt-driven consumption that has plagued us for too long. Let’s start by not being enablers of credit card usage by our teenage children.