Good Credit & Even Better Values: What You Need To Know To Set Your Kids Up For Financial Success
by Charles Satterfield | Staff Writer
As they often remind us, teens believe they know everything, including about money. A recent national survey revealed that 87% of 12 to 17-year-olds think they have at least a fair understanding of financial management. However, the same study indicated that 24% believe a debit card is a means to borrow money. Additionally, another survey found that less than one-third of teens comprehend how credit card interest functions, and 40% struggle with budgeting. This raises the question: Are parents helping or hindering their children’s financial literacy by limiting money talks to, “How much do you need?”
“The more financial knowledge you impart to your kids before they become independent, the better equipped they’ll be,” notes Chuck Cowell, CEO of Preston State Bank. Here’s his perspective on why the ability to establish a solid credit profile is one of the most crucial lessons parents can teach their children.
What is a credit profile?
A credit profile is a record that outlines an individual’s credit history. Lenders and other organizations use credit profiles to assess a person’s creditworthiness. A strong credit profile facilitates access to credit, while a poor one can pose significant challenges. It is a lifelong record—distinct from a credit score, which represents a snapshot of the profile at a specific time.
Why is a credit profile important?
Your credit profile serves as your financial reputation. Every time you borrow, you contribute to your credit history, creating a financial record.
How can parents benefit from your expertise?
Many parents with teenage children tend to be preoccupied with their daily responsibilities related to work and family, often overlooking the future when their kids need a strong credit profile for purposes like renting an apartment, securing a car loan, or qualifying for credit cards with lower interest rates. Employers might also examine one’s credit profile when assessing job applications. We take pride in assisting parents and their teenagers in understanding the importance of thinking ahead.
How do we get started?
Simply reach out to us and arrange a time to apply for a loan under your child’s name. For instance, if your teen is working over the summer, they can present their anticipated summer income along with a budget and borrow a portion of those expected earnings. Part of the funds can be allocated to certificates of deposit (CDs) maturing at Christmas, some can be reserved for spring break or prom, and the remainder can be saved until the following summer. A repayment plan will be created, teaching essential financial principles such as budgeting, expense planning, debt repayment, and the advantages of long-term savings. This loan will be reported to credit bureaus, establishing your child’s credit profile. Repeating this process over a few summers will undoubtedly foster good financial habits and create a robust credit profile.
“We aim to build a lasting relationship with you and your children. We will guide you in teaching your child how to prepare an income statement, budget effectively, and create a repayment schedule, enabling them to build a strong credit profile for their future.”
– Chuck Cowell, CEO, Preston State Bank
For more info on banking, go to prestonstatebank.com or email info@prestonstatebank.com
