Monday, 13 January 2014

Credit Literacy for a Young Person You Love

Generally our focus is on commercial debt and commercial transactions; however in this issue we will be discussing credit and financial literacy for high school students.  Take this home and have a discussion with your own children or someone you care about.

Some of our community involvement activities centre on personal credit issues. We provide a credit seminar to local high schools. It is part of the Career and Life Management program (CALM).  There is only a paragraph dedicated to credit and its use in the textbooks. As older consumers will attest, there is much more to be learned about the subject and it would be great if it didn’t have to be learned the hard way!
Here is the seminar outline that we use:

Credit is defined as: confidence in a purchasers ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment.

Examples of credit: cell phones, gym memberships, library cards, student loans, Visa, MasterCard, store credit cards, utilities.

How do you get credit? 1) Capacity – Cash Flow (job)
                                       2) Character – Attitude
                                       3) Credit worthiness – Payment habits
                                       4) Conditions – Layoffs (bad economy)

Cost of Credit:

Examples of common credit issues: roommates, cellphone bill, gym membership

How long do I have to fix the problem? Generally 90 days to pay all arrears.

Collection Agencies – What happens if I don’t pay?

Bankruptcy – A Credit “Mulligan”

Budgeting - Importance

Q & A

It has been our experience that gym memberships, cell phones, and roommates are the most common reasons a young person will have credit troubles. Have this conversation with the young person and explain to them the responsible use of credit and how it will either help or hinder them in the not too distant future. A great credit rating opens up many possibilities whereas a poor one can hold you back for a long time

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