When your youngster begins college next month outfitted with a first credit card, it could be the first step on the road to bankruptcy court.
That’s because millions of American teenagers — like most of the rest of the American population, including many of their parents — tend to know little about personal finance.
“We offer sex ed in high school. We offer driver’s ed. We rarely offer financial education,” said Charles Tran, the founder of CreditDonkey.com. “We are doing very badly understanding money in comparison to young people in other countries.”
Indeed, in its most recent survey of 15-year-olds’ financial literacy, the Organization for Economic Cooperation and Development (OECD) found American youngsters scored an average of 492, vs. the international average of 500.
How can American students catch up?
Advisers and credit-card experts say it can begin with establishing good spending practices when they start college. As a parent, you can help your offspring by taking these steps:
Have your kids piggyback on your credit rating
“For students with little or no credit history, we recommend they apply with a qualified co-signer to increase the chances of being approved, as well potentially help them secure a lower interest rate on a loan,” says Brendan Coughlin, head of education finance at Citizens Financial Group.
Then have the youngster “use a card wisely and pay it on time.”
Have your youngster open a checking account
Two of the better ones, says WalletHub.com, are the AmericaNet Rewards Checking and Evantage Bank Rewards Checking.
Both accounts, WalletHub notes, charge no monthly fee.
Use student loans
Most students will graduate with some amount of student loan and it is important for students to familiarize themselves with the details of their loan — know what their payments are going to be after they leave school and when they will come due.