Despite the myriad of available financial literacy and credit resources, millions of Americans continue to be woefully uneducated about these crucial issues. This month, the American Bankers Association is working to change that in schools across the nation.
Today is Get Smart About Credit Day, and the American Bankers Association reports that more than 2,300 bankers in 450 communities around the country will reach out to more than 130,000 young adults this month to teach them about “building good credit habits that last a lifetime.”
“Bankers across the country are influencing the lives of countless young adults by teaching them that the financial decisions they make now can impact their ability to get loans, or even a job, in the future,” Frank Keating, ABA president and CEO, said in press release. “Few young people have access to financial education through their school, which makes banker volunteer efforts and Get Smart about Credit Day more important than ever.”
Community outreach education topics include recognizing overspending, budgeting, credit card management, reading a credit report, and protecting yourself from identity theft. The ABA Education Foundation has designed a number of educational resources for financial professionals to share with students of all ages and adults.
Building good credit and making smart financial decisions is a lifelong journey, the ABA says, so they offered a “road map” of tips to help consumers in various stages of life:
- Get your feet wet with a credit card. Credit cards are usually your first form of a loan. They enable young adults to build a credit history and learn how to manage money wisely, and they also provide an emergency resource. However, a credit card is only valuable if managed correctly. Remember, just get your feet wet. You don’t want to start your credit life drowning in debt.
- Coast into the next stage with a car loan. Save as much as possible to make sure you have enough to make a good down payment. A strong down payment shows that you have discipline when it comes to saving. The more money you put into your down payment, the more attractive you will look to lenders in the future.
- Build on your existing foundation with a home loan. Make sure you know how much you can afford. Make a budget of your current expenses – car payments, credit card debt, etc. – and potential mortgage payments, taxes, and homeowner’s insurance, aiming to keep all debt payments below 40 percent of your monthly income.
- Help your kids navigate the complexities of credit. Some parents choose to co-sign for credit for their children. Before making that commitment, you should be aware that while co-signing establishes a credit history for your child it also puts your credit score on the line. Make sure your child will be able to manage his or her payments to avoid getting in debt. If you feel unsure about a credit card, consider a prepaid card that can be linked to your bank account, allowing you to transfer funds if needed.
- Take it easy. Later in life you won’t need as much credit so start thinking about what you can manage. Make things simple for yourself by paying down existing debt and thinking twice before opening a new line of credit.