The level of debt amongst teenagers is alarming governments. The dangers of not teaching teenagers how to cope with money can lead to unmanageable debts. Most teenagers are vulnerable to debt because they lack a clear understanding of debt management and how credit works. The wide availability of credit and mobile phone debt are the main contributors to those debts.
Parents often expect their children to make the leap from a childhood savings account to managing a credit card. Learning the difference between “good debt” and “bad debt” is crucial to wealth building and debt management. Building a line of credit is vital in today’s society. However, accumulating credit card debt, paying bills late or avoiding paying bills altogether can negatively affect your children’s credit score as well as their future. It is paramount for parents to help teens understand the value in having a good credit score. If necessary, show them your credit reports so they see what type of information the reports contain.
Here are some basic tips to help your teenage children be debt free:
- Move gradually to a credit card account: help your children manage cash through their own checking accounts before adding a debit card and later, a credit card.
- Set limits: a good way for your children to be debt free is to limit their use of credit (use lay-by as an alternative to credit, use prepaid cards for mobile phones etc.)
- Encourage them to maintain good payment habits: putting together a budget, making their payments on time, making more than the minimum payment, keeping the balance low
- Help them identify savings goals and encourage them to save regularly to achieve them.
Financial habits are taught, not assumed. Many adults that have spending problems or excessive credit card debt may never have learned how to handle money. The habits that are taught as a teenager and cultivated as an adult can have life changing implications for your teenager. Australian Financial Solutions provides financial solutions to people in debt. Contact Australian Financial Solutions today to obtain a free and confidential financial assessment.
August 2, 2010
It is extremely easy to get a credit card and just as easy to get into credit card debt. With the current card rates increasing, paying off credit card debt has become an impossible mission.
Purchase and cash advance rates on some credit cards, particularly some low rate credit cards, have gone up by more than the official cash rate this year. Card issuers have also been changing their low-rate or zero-rate balance-transfer deals, shortening the periods for which the low rates apply. Many cards have purchase rates over 20 per cent now, with cash advance rates even higher!
The current high interest rates make it difficult for people to manage debt — especially if only making the minimum payment. In fact, just making minimum payments can make even the smallest balance over a decade to pay off and thousands of dollars in finance charges. It’s no wonder debt reduction seems so hard. Here are a few basic steps that should help you pay off your debt sooner, with less interest, and improve your credit score in the process.
- List all your credit cards and include the outstanding balance, interest rate and minimum payment
- Order the cards on the list so that the credit card with the highest interest rate is at the top, and the lowest is at the bottom.
- Total the minimum payments: this total will be your absolute lowest monthly payment. But you should pay more than the minimum in order to repay the debt quickly.
- As your payments come due, pay the minimum on each card except for the one at the top of your list. That one has the highest interest rate and is costing you the most money. Whatever additional money you can pay, apply it to that card.
- Continue this process until the first card is paid off. Repeat this process until all cards are paid off.
If you are struggling to manage paying off multiple credit debts from numerous providers then you might consider Debt Consolidation. It is one way to consolidate all your debts into one easy to manage repayment. Australian Financial Solutions can assist by you by providing an independent assessment of your financial position to determine whether debt consolidation is right for you. Contact us now!
June 30, 2010
Many people cope with the burden of debt at levels that have become difficult to manage. A good way to gain back control over your debt is to find out what started it. We’ve listed 5 common bad habits that lead to debt disaster and bad credit score. A little discipline and behaviour changes should help you pay off your debt.
Watch out for these bad habits and be deft free.
1. Not making a budget
Budgeting is the most effective way to gain back control over your finances. Not only will it give you an idea about how much you spend and for what, it will also help you find out which expense you can trim to free some cash. It might as well slow down your compulsive spending habits and help reduce your debt. Check out our Budget Planner Debt Help Tool.
2. Paying bills with no particular order
By paying off the balances of your credit cards first, you could put yourself in deeper trouble. You should prioritise your expenses and debts and make a list of the amounts you owe by interest rate rather than by balance. After paying for your living expenses (house or rent payment), groceries and medical care should top the priority list. Next comes the car payment and secured loans. Working out a bill payment schedule and setting aside money for each pay cheque should help you manage your debt more smoothly.
3. Not checking your credit file
The information contained in a credit file can be used in determining a person’s credit-worthiness. Request a copy of your credit file today to ensure your credit history is accurate and up-to-date. There might be some errors. Just an example, payment marked late that came in on time could raise your interest rates, lower your credit score and affect your ability to obtain credit in the future.
4. Using multiple store credit cards
It might be tempting to get a store credit card in exchange for a 10% discount. But in the grand scheme of your credit history, these cards are not very beneficial. They might carry a highest interest rate you’ll be forced to deal with if you don’t pay off your balance each month. They can also negatively influence your credit score: just the act of applying for the credit card will put a small dent in your credit score. We recommend limiting the total number of credit cards you have to just two, if you can: one you can pay off each month and one with a low interest rate for those large purchases you’ll pay back over time.
5. Making credit payment late
Making a late credit card payment may not seem too big a deal. But it can end up being really costly and effect on your credit score, especially if you have a history of late payment. A payment that arrives at least one month due can throw your account into default and triple your interest rate. Your creditor will charge a late fee but might also notify the credit bureaus. In the end, late payment can have significant effect on your score, affecting your ability to get new credit in the future.
May 4, 2010
