Build Credit. Fix Credit. Start Saving.

I’m sure this comes of no surprise to all of you, there are two personalities when it comes to money: Spenders and Savers. If there was a race, the savers would clearly be in the lead. Sometimes I wonder if all teenagers are born spenders (and grow into one category or the other).

We all know the “spenders”… covered in labels from international designers, driving the super sports car with a wallet bursting with showy credit cards. It’s a lifestyle that teens see in music videos and movies. But it’s not real, not smart and the consequences can be life changing. Today’s economy has presented a perfect opportunity for teens and young adults to learn from the mistakes of overspending. As I say it: “Spenders survive, Savers thrive”.

Build Credit. Fix Credit.
Establishing good credit is the message, but sometimes that requires a few fixes along the way. No one likes to suffer the consequences of doing something you didn’t know was wrong (or you did know but were too young to understand). Life catches up with all of us, especially when it comes to credit.

Sometimes our teens or college-aged kids sway from their fiscal responsibilities, so share with them the basic 5-step process for improving their credit. Perhaps if they have to do the work to fix their credit, they’ll get back on track and stay there!

• Step 1: Get your credit report. Everyone is entitled to one free credit report a year. Visit www.AnnualCreditReport.com and order one from Equifax, Experian, or TransUnion.

• Step 2: Categorize the negative items. Create two categories: items that are legitimate and those that are mistakes. It’s reported that 80% of credit histories have at least one error.

• Step 3: Deal with the mistakes. With identity theft on the rise, your teen may find accounts they never opened and charges they never made. Contact the credit reporting agencies; it may be a hassle but it’s worth the pain in rebuilding credit.

• Step 4: Try overturning legitimately bad items. Skip the credit repair companies; your teen can do this on their own. They made mistakes and got behind, so now it’s time to ask for forgiveness. In some cases a creditor may be willing to waive or remove a negative item for those who been an otherwise excellent customer.

• Step 5: Think beyond FICO. There are alternative credit scores out there where they can build credit by paying their rent on time and doing other responsible things that aren’t included in traditional credit scores. While the alternative credit scores won’t make a huge impact on the overall score, they can give a more accurate picture of a borrower.
Start Saving.

First ask your teens and college kids, “What are you saving for?” Independence? A computer? A car? Or even better, “A luxurious lifestyle?” Dreams are the first step in establishing goals. Once you have them, you need to draw a clear path on what it will take to accomplish them.

Sit with your kids and help them evaluate their own income whether they have a part time job or an allowance. From there, simply make note of all the large to small expenses they are responsible for. Do the math, set aside some fun spending money and portion for savings. If they train themselves early to save a fixed portion of each paycheck, your teen will find that spending is more controlled. This is a money saving habit I like to call “out of sight, out of mine (and mind)”.

I read about a 12 year old that bought a used lawn mower for $10. In one summer he saved $10,000 from his profits! He later turned his lawn mowing business into a successful landscaping business and now makes more than a six figure income.
A six figure income can translate to a lot of fun like vacations, cars, computers… what else did your teens have on their list? Here you can see how saving creates stability, less worry and more purchasing ability. What a great concept!

Visit www.U224U.com to learn more about GTE Federal Credit Union’s U22 checking account for 12 to 22 year olds. “Because learning about money is important, no matter what your age!”