The short and honest truth is that I grew up pretty much financially irresponsible. I doubt many grew up any different but might have proved more responsible than me in their formative years. Well, I was not!
Don't get the impression I am mad at my parents. I am grateful to them for way too many things. But, they did not instill much in the form of good habits related to finances. They tried where they actually, I remember opened a checking account under my name but made sure all materials related to it were under their safe keeping so that nothing was lost nor mismanaged. Hindsight being what it is I wish they gave it to me so I can learn more from it.
This might shock many people but I had my first alcohol drink before I was 10. I to this day remember the buzz I got from it. And my parents gave it to me. It was important to them that I learned to properly handle my alcohol intake. I did have my brief undergrad and thereafter heavy drinking days but once I got to my mid to late 20s, those days were over. I was taught at a young age that past 25, most bad habits including smoking and drinking would end up affecting our body significantly where the damage could be irreversible. I had been told this so many times since I was very young that I today go around preaching this same choir.
Going back to the core issue, what I wish is that they gave me the same sense of responsibility about money considering both my parents are pretty responsible about finances. At least my mother is; my father is suspect; I am thinking I got those genes from him.
If and when I have kids, here is what I intend to do (it is so easy to make statements like this when one does not have any children):
- Own checking account with on-line management: Kids need to understand ideally as young as possible (no, I am not a qualified child expert!) proper money management. Of course, if the parent is not an individual taking good care of own finances, it will be rather hard for the kid to pick up desired good habits. And parents are busy and hence might not feel the time to invest in this. But think of it this way. Do you want to be stuck with kids who can’t afford to move out well into their 20s?
- Proper budgeting and handling of expenses: I am guessing parents are laughing out loud at this point. Consider this. Each kid knows the complete set of things he/she wants (not need). But, rarely do kids consider how much they each cost as they home the parents will solve the cost problem. I did not say don’t buy it, but don’t you want to teach them how much it costs? Looking back, I think the root of most of my problems was that I did not think my “wants” will really cost that much and I was willing to invest time into anything but doing the bills.
- Own credit card: Note this is not a debit card. And no bank is going to agree to give a kid a credit card. Hence, it has to be with the parents as the guarantee. As for my reasons on why this is a good idea, I have a few of them:
- They do not need the credit: My little rule on FICO is that if you are going to do something to mess it up, do it when you do not need any credit. By the time you need the credit, make sure it is clean. A 12 year old kid does need credit. Even if the kid messes it up, the lessons on how long it takes to fix it I think will be well worth it. Many parents (as did mine) co-sign their kid's first auto loans. Don't you think the kid needs to understand why the loan under the parent's FICO is cheaper than under his/her own FICO? The kid did not need the credit at 12 but probably will by 16 or 17.
- It takes time to fix FICO problems: To get rid of most of my FICO messes, it took 7 years. I am guessing no kid will declare bankruptcy as that might take 10 years to clear. Would you rather they found out they messed up their credit when they are about to enter their 30s (as I did) or when they are in early teens and realize the cost of a bad FICO is going to be worse as times goes on?
- Need to build credit history: I got my first credit card while studying for my undergrad. I had no credit history before that point. And even that I messed it up nicely. There is a saying that there is no such thing as bad publicity. Today, even my bad credit history is to my benefit. As much as I hated that credit card that has me 30-day, or 60-day late on payments, that bad information is now all gone and what remains is history that goes back a long time. Imagine racking up history since you are a kid? By the time a kid gets to early-20s, he/she already has over 10 years of credit history! At that time, my credit history was barely 2 years old.
- Preemptive strike against stupid moves: Not that having a credit card in hand will necessarily prevent such moves, but when I got my first credit card, as you might have guessed by now the one I got was the easiest to get which was a department store charge card. Technically, that is not a credit card. I wish there is a way I can go back and reverse this moment but that that is now stored under lessons learned. I will write later about all the wrong with these cards.
Last but not least, if you found this to be a waste of time in reading, my apologies to you. It is just an opinion.
