One of my friends (who shall remain anonymous) told me the story of her trouble with credit cards. Back when she was 18 she got a credit card. Like most of us, she just planned to use it responsibly and build her credit. Then she got a few store credit cards (can't resist that 10% off your first purchase). Then a few more.
After a year or so she had seven credit cards and had racked up about $4,000 in debt.
That doesn't sound like a lot. But when you're 19, have a part-time babysitting job while you're in school, and no experience with money, it's pretty scary. My friend told me one day she spread out all her bills on her bed and burst into tears, not knowing what she would do. She walked out into her living room and in tears told her dad what had happened.
Her dad listened and told her it would be okay. He asked her to bring in all the bills and all the cards. He took all the cards from her, created a spreadsheet of her debts and then wrote her a check to pay off the cards.
He didn't let her off the hook. She is paying him back for the debt-that's what the spreadsheet was for. But, he got her out of the cycle of paying interest and of using those cards. Part of the deal was that she wasn't allowed to get another credit card while she owed him the money.
To me, this is a great example of wise parenting. He was obviously generous and in a position to help her out. She is incredibly thankful for it, and has worked hard to pay him back (it's a work in progress). After a year or so he gave her the lowest interest card to keep in her wallet, but she hasn't abused it and keeps it for emergencies.
I think a lot of young adults make these kinds of mistakes with credit cards. I know I did. I started off well, but got carried away and made some questionable credit card choices. I always got myself out of it and am proud of doing that on my own. But I also think that it's still okay for parents to help out their young adult children and make it a teachable moment.
My Freshman year of college I overdrew on my checking account. I freaked out! I wasn't getting paid for another week and needed $25 to cover the overdraw. I called my mom in tears and she gave me the money. She didn't say much to me except to remind me that I needed to balance my checkbook and asked if I needed help. I was mortified that she even had to help me, and it didn't happen again (well, not when I needed her help. I think it happened one more time, but I took care of it).
Being 18 and allowed financial freedom is a big responsibility. I know this can reach a point where it's enabling, but I liked hearing my friend's story because she learned from it and in some ways it brought her closer to her dad.
To those of you with kids, do you agree? Or am I off-base?
I am so happy I never got into this situation, I was 19 when I got my first credit card, and my parents were with me as I went to a meeting with their bank manager. Thoughtfully my limit was set at $500.00 which would cover a flight home in emergency and I always paid it back each month. Parents support while you transition through early adulthood is really important and I am blessed that my parents are always there for me with lots of supportive advice.
ReplyDeleteLOVE this story. What seems particularly awesome to me:
ReplyDelete1. That your friend felt free to come to her dad for help. He must have done some things prior to this that made her feel like she could talk to him.
2. That he didn't just bail her out - but helped her learn how to do things herself.
I don't have kids - but my dad was pretty proactive about teaching finances with us...gave us allowances and budget ledgers when we were young, we had checking/investment accounts and clothing budgets in high school, and we had lots of instruction on credit. That doesn't always guarantee that the instruction sticks - but I was thankful for his intentionality in teaching us about it. Jess, are you thinking about what you're going to do with your kids? =)
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ReplyDeleteI love this story. What a great father. Instead of not helping out when he could, he taught her how to be better with her money. I never accrued any credit card debt, but if I did, I would hope that my dad would've done this for me as well.
ReplyDeleteI think that is a terrific story and I agree. When i was growing up, no one talked about money. I knew nothing about money management and made some mistakes once I was out on my own. My sons are now 22 and 20 and are excellent with money. I think because we have been able to keep the emotion out of the financial matters, they don't spend what they don't have. Also, when they were young I added them as users on our credit card that is always paid in full, this has given them both terrific credit scores and when they use it to buy something, they pay me back right away. My oldest son graduated from college and moved out west for his career, I gave him all his banking info, answered questions and he took it over from there, setting up accounts, a roth ira and a budget. I'm quite proud of how I have taught them!
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