MUNISING - Young people learning about credit and how to use it could benefit from some reminders and tips from educators at Michigan State University Extension.
Alger County MSUE Educator Joan Vinette in Munising said teaching youth about some of the basic terminology involved is important. She suggests explaining that "credit is buying something or using a service now, by promising to pay for it later."
"The consumer promises to pay back the cost of items purchased by making monthly payments to a creditor," Vinette said. "The creditor makes money by charging interest and other fees, which are the costs of borrowing money."
Vinette said young people should understand be taught that buying today, paying later, usually costs more than paying with cash.
"Youthful consumers are usually introduced to credit purchases through purchase of their first vehicle, signing a phone contract, when they get a credit card application in the mail, or when they incur a large debt to attend school through a financial aid source at a college or trade school," Vinette said.
A good habit for new users of credit to establish while they are young is to track their credit purchases systematically. Compare your own records with credit card statements, to check for errors.
"There are charts available to make this easy to do. There are computer programs and smart phone apps available," Vinette said. "Some people have gotten in the habit of carrying a separate checkbook register to record their credit purchases at the time the transaction is made. Choose your method for your lifestyle, but find a way to keep your own record, so it can be compared with the credit card statement received monthly."
Other things young people should be taught about credit include:
- The cost of an item purchased with credit can include interest, finance fees and other charges. These charges are what it costs to use a creditor's money.
- Making only the minimum payment per month increases the cost of the money that was borrowed.
- Mis-use of credit includes spending more with credit cards than there is money available to pay the monthly bill.
Vinette said some preventiive actions recommended for youth include comparing all offers for credit before signing any application. Read the fine print of the application. Ask yourself some questions. Does it tell about annual fees, start up fees, late fees and other consequences of making a late payment? What is the interest rate per month? Under what circumstances will that rate change?
There are several good places Vinette recommended for more information that parents and youth can discover on credit and other money matters, including the MiMoneyHealth website found at: www.mimoneyhealth.org. That website is a resource provided by Michigan State University Extension which provides answers to financial situation questions.
Another website Vinette recommended checking out is located at: www.NEFE. org.
At that website, the National Endowment for Financial Education provides a commercial free, and research based source for managing your finances.
Two programs they offer that are beneficial for youth are:
- The High School Financial Planning Program: Offers resources online and is also available in a workbook format. Some high school teachers use the curriculum materials from this organization to teach personal finance to their students.
- The Cash Course: A program resource directed to helping youth make the transition from high school to college or work. It includes helps that are planned for college students living and paying for college.
For more information, or to talk directly with someone locally who can help find the most appropriate resources for your current situation, call Vinette, at MSU Extension, 387-2530, or email her at: firstname.lastname@example.org
John Pepin can be reached at 906-228-2500, ext. 206.