young adult child financial responsibility

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BsmartSM
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Joined: Mon Jan 09, 2017 7:25 pm

young adult child financial responsibility

Post by BsmartSM »

Age 20, lives at home, has PT job, pays some of her expenses.
Should she get a beginner/student credit card? Start to establish credit?
Start a ROTH that she could not w/d from (what does she need to earn?), with some "matching" by parent and/or grandparent?
Are there any good android smartphone budget apps for beginners?
Thanks!
mhalley
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Joined: Tue Nov 20, 2007 6:02 am

Re: young adult child financial responsibility

Post by mhalley »

Establishing credit is a good idea, but she needs to be responsible and pay it off each month and not be tempted to go into debt. Probably the best way is to look for a local credit union with a fresh start program. If she is in college, She can't get a student cc until she is 21.
She can put as much as $5500 a year into a Roth, as long as she earns that much. If she only earns $3000, she can only put in $3000. She can contribute for 2016 up until tax day. Anyone can give someone up to 14 k a year with no tax consequences.
Mint is a good budget program.
https://www.mint.com/
Some cc tips:

https://www.nfcc.org/tools-and-educatio ... -students/
The main advantage of getting a cc while still in college is that you are more likely to be approved than if you wait till you graduate.
Last edited by mhalley on Sun Jan 22, 2017 12:26 am, edited 3 times in total.
dboeger1
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Re: young adult child financial responsibility

Post by dboeger1 »

This is based off of my personal experience, so other people may have different views, but I feel mine at least makes some sense.

I don't really believe in using credit at all. I mean sure, I use a credit card for 1.5% cash back, but I pay off my balance weekly, and I don't go on crazy shopping sprees. Some people might argue that credit can be used as leverage to get ahead financially. However, that seems like a really poor justification for getting your college student a credit card. It's not like they're going to use their first student credit card to fund a profitable startup business. It'll more likely end up causing them to overspend on drinks and movies and whatnot. The only somewhat justifiable form of consumer debt is the home mortgage, and quite frankly, people are too quick to jump into those too.

I'm 25. I graduated with a bachelor's degree in 2013 and started my first real job immediately after. My first credit card was from a major bank that my dad took me to in order to open a checking account in high school. They offered a credit card, and my dad saw no reason for me to turn it down. Then when I got to college, my dad helped me open up an account with my school's credit union, because he didn't understand that the credit union was a separate institution from the financial aid and tuition office. He thought I needed the credit union account to pay the school or accept financial aid. That was completely false. I never used either credit card for myself. Instead, my dad borrowed my first credit card to pay for some business expenses, and he promised to make the payments. He never did because his business failed, and I got dinged with months of fees and a bad credit score. I paid it off with my tuition money and took out student loans to cover the difference, and the bank closed my credit card without warning.

Later, when I joined an exchange program to go to a university abroad, I had to buy a plane ticket and get it reimbursed by the school later. I was broke and needed to pay for it with credit. So I applied for dozens of credit cards, assuming I'd be able to cover the cost with multiple cards. I didn't know at the time that submitting multiple credit applications at one time would lower my credit score and result in many denials. In the end, I only needed 1 card to pay for the flight anyway.

After graduating, I had very little student loan debt
I paid it off very quickly and began saving aggressively. My now-wife (girlfriend at the time) whom I met abroad continued studying and working in her home country, so I had to pay out of pocket for my trips to visit her. I ended up applying for a different credit card and switching banks to avoid foreign transaction fees and get better rewards. I've also signed up for several other credit cards for the initial bonuses. Some were alright. The biggest bonus was from an airline credit card, but that card was also a nightmare because they made it so hard to redeem the miles, and I had to cancel it to avoid an annual fee. The credit cards I've regretted the least are the simplest ones which fit my typical usage patterns, not necessarily those with the biggest bonuses. And there is another card which I really want because it's specific to a hobby of mine (video games) and the rewards program blows every other card out of the water by like a factor of 10. But I haven't applied for it because I now have dozens of cards which I don't use and I have yet to cancel because it would affect my stupid credit score.

There have been 2 major expenses which you could say might be affected by credit. 1) my car. I bought a brand new car in 2014. It cost as much as all of my savings at that point. I wanted it and could afford it in cash, but it would have made me flat broke. I decided to finance it at 0%, losing the $1k factory incentive, which I calculated to be equivalent to a very low interest rate, which I more than made up in market investments since that time. They initially told me I didn't qualify for 0% financing, but when they realized it was that or I shop elsewhere, they approved me anyway. 2) I pay a lot of rent. Even with my sketchy credit history, my score was way better than it needed to be to qualify. My dad has a horrific credit score, and he wasn't able to open bank accounts for years because of my mom's medical bills from when she passed away when I was in middle school. But he never had problems qualifying to rent apartments. You almost have to be an axe murderer to not rent in many places.

Now, at age 25, despite all my mistakes, I have $150k of savings, and of only about $15k of car debt left to pay, and my credit score has never been a barrier to renting or buying a car I really shouldn't have bought. My point is, in the grand scheme of things, getting a credit card in college to build credit is probably the #1 most ridiculously overrated financial advice in America today. So many people tell themselves college students need credit cards to build credit, but most of them don't really have a good grip of their finances yet, and they need to learn proper personal finance before borrowing. Had I not had credit in college, I would've been better off today, with cards that fit my situation better and could be more easily tracked, plus a higher credit score. Learning to save and invest will put your child in a far better financial position than applying for credit.
btenny
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Re: young adult child financial responsibility

Post by btenny »

IMO kids need to learn how to handle credit at a early age. Banks and other other stores will give them a CC even if you or they do not ask. So they need to know how to handle credit and not blow up. Is she going to college? If yes then the college most likely has a branded credit card. These cards usually offer $500 or so credit limits and OK terms. The admission office has info on these cards. Go there first as it is usually easy. They are used to working with kids with no/limited credit. If not then I suggest you go to your local bank where you do business and talk to them. They will most likely issue your kid a low limit credit card that may or may not need you to co-sign. Take her with to apply and make sure she signs. Either way your kid needs to understand how the cards work and how the balance must be payed off each month. And she needs to understand how she will be penalized if she over charges more than the card limit. She also needs to understand how penalties work if they do not pay on time and so forth. You need to establish some sort of regular meeting with your kid to go over the statement and teach her how to check the charges and to make sure the bill is paid regularly.

Do she have a budget? Or does a budget need to be setup? Are you paying most stuff? Or do you want her to start doing some bill paying on her own? I like the idea of asking a kid to pay her own bills and budget stuff at that age. So meet with her and talk about how to do this. I bet she knows more than you expect. The issue is to get them to be responsible and follow through. So you just need to get in the loop and help her learn to live up to her budget. Again maybe monthly meetings to go over here budget and charges and expenses.

Until she is doing a lot of this budget and CC stuff on her own I do not see the need to talk about anything beyond saving money. She should already know she needs to save a little money from each paycheck for future needs. Make sure she understands this is for unexpected stuff that you will NOT help her pay. Then try to stick to the budget and saving plan. If you do this I think this is enough this year.

Good Luck
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Phineas J. Whoopee
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Re: young adult child financial responsibility

Post by Phineas J. Whoopee »

Self-zapped.
PJW
Last edited by Phineas J. Whoopee on Sun Jan 22, 2017 1:17 am, edited 1 time in total.
*3!4!/5!
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Re: young adult child financial responsibility

Post by *3!4!/5! »

Some background for context.
viewtopic.php?f=11&t=208786
*3!4!/5!
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Re: young adult child financial responsibility

Post by *3!4!/5! »

Phineas J. Whoopee wrote:What's an adult child?
One's immediate descendant aged 18+.
Mudpuppy
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Re: young adult child financial responsibility

Post by Mudpuppy »

BsmartSM, the moderators locked your identical (but more detailed thread) about this yesterday, which has already been linked to by *3!4!/5!. Did you get their approval to repost the topic? If not, please review the forum rules: rules
simmias
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Re: young adult child financial responsibility

Post by simmias »

*3!4!/5! wrote:Some background for context.
viewtopic.php?f=11&t=208786
That's a shame. I was hoping we'd find out what LRT means.
student
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Re: young adult child financial responsibility

Post by student »

Mudpuppy wrote:BsmartSM, the moderators locked your identical (but more detailed thread) about this yesterday, which has already been linked to by *3!4!/5!. Did you get their approval to repost the topic? If not, please review the forum rules: rules
I noticed this earlier as well. However, it seems that this post is specific to questions such as should she get a credit card. IMO, this does not violate forum rules.
Ron
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Re: young adult child financial responsibility

Post by Ron »

*3!4!/5! wrote:
Phineas J. Whoopee wrote:What's an adult child?
One's immediate descendant aged 18+.
Depends on your time of reference.

When I was a young adult it was 21.
Then it was changed to 18.
Now (according to ACA) it's 26.

:oops:

- Ron
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LadyGeek
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Re: young adult child financial responsibility

Post by LadyGeek »

Thread locked for moderator review.

This thread is now in the Personal Finance (Not Investing) forum (financial responsibility).

BsmartSM - Please check your PMs. Look for the link in the upper-right corner of the page with "Private messages".
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LadyGeek
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Re: young adult child financial responsibility

Post by LadyGeek »

After receiving a PM, this thread is now unlocked to discuss the OP's questions:
BsmartSM wrote:Age 20, lives at home, has PT job, pays some of her expenses.
Should she get a beginner/student credit card? Start to establish credit?
Start a ROTH that she could not w/d from (what does she need to earn?), with some "matching" by parent and/or grandparent?
Are there any good android smartphone budget apps for beginners?
Thanks!
To avoid going down the path from the previously locked thread (relationship issue), the original thread has been removed so we can focus on the questions here.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
PFInterest
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Re: young adult child financial responsibility

Post by PFInterest »

Yes CC. Yes Roth. She can figure out the app situation.
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