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 Citzens Financial Group.
Then have the youngster “use a card wisely and pay it on time.”