Most of the lessons I have learned about credit came from my parents, but the fact is the credit advice they gave me really only sunk in years afterward.
One day I can clearly remember looking at my credit card statement and seeing just how much of my payment was going toward interest on my balance.
Suddenly my father’s words came rushing back to me, “Paying interest is like a mortgage on your future.” I had never understood until that moment.
Depending on their age, kids typically fall somewhere between polite disregard for their parents’ credit advice and outright rebellion against it.
Let’s take a look at why that may be a bad idea and why listening to a parent’s credit advice makes a lot of sense.
Here are some other pieces of credit advice from my parents I wish I had listened to earlier:
1. When you use a credit card, you’re spending future earnings.
This is one of those pieces of advice that is almost too obvious. Because of that, I never really put a lot of thought into what it meant.
The fact is by paying for something on credit now, I will have less money in the future when I have to make my credit card payment. That means I can immediately deduct however much I put on a card from my future earnings every time I use it.
2. Any loan should never be taken lightly.
At the time, this is advice I took lightly. Now I understand what he meant. Use your credit card for specific purposes and always have a clear plan on how to pay it back. Never use a line of credit to manage daily cash flow.
If you find yourself relying on your credit card to make bill payments, that is a sign you are not managing your money responsibly.
“Stop at once and take a
close look at your finances.”
3. Consumer interest is financial corrosion.
There are things about credit, specifically the corrosive effects of consumer interest, that only become clear over time. It is money you never get back.
It goes straight to the bank’s bottom line rather than to your long-term savings. It makes whatever you buy cost more – sometimes a lot more. As my father would say, “Is it worth it?”
4. Your credit score counts for more than you think.
When I got my first credit card and began building a credit history and credit score, I was pretty diligent about maintaining a good score. Then I lost my job and got behind on my payments.
I figured I’d be OK once I got a new job and was able to start paying again. That’s when I found out how much my credit score actually counted for.
I was turned down for a job because of my credit and have had to work hard to rebuild it. You can bet my father’s words came back to me during that time.
Our parents may not have all the answers, but when it comes to credit advice, they have the advantage of having had more financial experience.
The lessons they try to teach us are usually hard earned and are meant to help us avoid costly mistakes. That is a great reason to listen to them.
Photo source: missingsecrettoparenting.com