Talk Wealth to Me

#103 How Do I Help My Children Establish Credit?

September 24, 2021 Felipe Arevalo, Chase Peckham Season 5 Episode 1
Talk Wealth to Me
#103 How Do I Help My Children Establish Credit?
Show Notes Transcript

In the first episode of season five we take on one of the most common question we get from parents. "How can I help my daughter and or son establish credit?"

Is there a one size fits all answer? Are there benefits to one method over the other? The guys share some tips, stories and some of the dangers of not having credit or getting credit too soon. 

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Intro:

Welcome to Talk Wealth to me, a safe space podcast, where we chat about anything and everything related to personal finance. The information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting , legal tax or other professional advice.

Chase Peckham:

Yeah , because it is, that's something that it's so not thought about when you're young, right.?

Felipe Arevalo:

Right.

Chase Peckham:

When until you go to buy your car. I was talking to a young woman , uh, the other day , uh , last week, I guess. And she was just saying, you know, I went , uh, kinda went overseas and worked for awhile and she came back and she tried to buy a car. She's young, she's 23, 24 graduate from college. And she , uh , could not get financing for a car without her parents helping her parents were like, well , we're not going to co-sign for a car.

Felipe Arevalo:

We tell people not to co-sign all the time

Chase Peckham:

We do. So here it , and she's like, I , you know, I never got into debt. I did things. Right. You know, how , why is this so difficult? And she ended up getting , uh , a car, but it was a big down payment. And because she could afford it if she did the big down payment, but her interest rate was not favorable. It was like 7%. And in this day and age,

Felipe Arevalo:

That's bad on a car.

Chase Peckham:

that's not a good interest rate on your car. Uh , so she's kind of starting from behind, but she was always like told, I , I , I don't want to go into debt. And that I think is the biggest misconception when building credit is that you have to go into debt,

Felipe Arevalo:

Right.

Chase Peckham:

but that's, you know, getting a credit card and applying for a credit card is there's , there's danger in that,

Felipe Arevalo:

right. Yeah. It's something where, and it's so individualized too . If you think, you know, we mentioned that a bunch of times it's personal finances. It's going to be different for each individual, but that starting point, that first credit card, that first car loan, that first it's tough. And you're sitting there as a young person. Maybe not even understanding how the whole system works, looking at it saying this is a bad catch 22. You mean you won't give me credit because I don't have any credit. And then the only way to build credit is to get credit. Well, what do I do now?

Chase Peckham:

Right. Yeah, exactly. Because you're telling that person that it takes time to establish credit and you need the car or you need, you want a home or you want something like that now. And then it doesn't works that way.

Felipe Arevalo:

It's almost like the lender is saying, yeah, we want you to build your credit with someone else in case you mess up, it's not, doesn't affect me. Go build your credit with someone else and then come back and I'll give you a loan.

Chase Peckham:

Yeah. Get a little history under your belt, which is exactly what it is. Right. We talked to when we're talking to younger kids about this scenario, the whole idea is that you wouldn't just loan money to somebody you don't know.

Felipe Arevalo:

Right.

Chase Peckham:

You're not going to say somebody walks up to you and you know, you just met at school and they're like, gosh, I'm in a bad way. Can you spot me 50 bucks? Are you just going to hand that to somebody you don't know?

Felipe Arevalo:

No.

Chase Peckham:

Of course not.

Felipe Arevalo:

I asked a class this morning. I was doing a presentation, a virtual one for, for a personal development course up at Mesa College, our friends over at Mesa. Um, and , and it was, I asked the students like, if you didn't know me and I was trying to borrow a hundred bucks, would you just out of nowhere, Venmo me a hundred dollars right now as a loan. And then me telling you that I'm going to pay you back. Here's my Venmo cash app.

Chase Peckham:

Honest to goodness scouts honor.

Felipe Arevalo:

Like yeah. And they're like, no, well , I wouldn't send a random person, Venmo money. I mean, that's kind of how the creditors doing it is they're taking a chance that you might spend the money and they may never see it again.

Chase Peckham:

Right.

Felipe Arevalo:

And if there's no history there, you're just the stranger asking for money. And I have no way of going back and looking and saying, oh, well, you know, he pays other people back. You know, it's something where it's just a stranger asking you for cash.

Chase Peckham:

Right. And I think that that's a difficult thing because I there's conversation after I had that with that young lady, not too long ago, I had a conversation with , uh , parents and kids around my son's age , he's 13. Uh , and we have really good friends whose kids are just about to turn 16. Uh they're you know , tossing around buying a used car versus a new car, or, you know, do they let the kid put, you know, does he put his own money into it or her own money into it? And if so, you know it, and if they do have make them put their own money into it, they got skin in the game. Right.

Felipe Arevalo:

Right.

Chase Peckham:

That's kind of, the idea is giving them responsibility now, but there's no way for them at 16 years old to buy a car because you can't , first of all, you can't.

Felipe Arevalo:

Right.

Chase Peckham:

And so the conversation became, we have to buy it or , um, or the kid just borrows a car for us or something like that. So it's a tough situation to be in, but that got into the conversation more about, they started asking me, well, when should we start establishing the credit? And under the age of 18, can parents do something to help give their kids a footprint, so to speak? And the answer is yes, you can. And a lot of times parents think, well, I'll just co-sign for a loan or I, you know, and unfortunately they have to be 18 to even be on a loan.

Felipe Arevalo:

Right.

Chase Peckham:

And they could co-sign, but there's dangers in that, right? Because you , the kid says I'm going to pay for it, but, you know,

Felipe Arevalo:

You have to be ready to take on that responsibility.

Chase Peckham:

Unless, unless you're like, you remember, these are kids still, and they're not used to this responsibility and they could screw it up. And if they miss a couple of a payment or two that's on your credit, that that goes to your personal finance credit and your going to get hit.

Felipe Arevalo:

It seems easy, you know , and as a young person, I think it seems easy to say, oh, you know, it might be a smaller car payment and like, oh, $250 because it's used car $250 car payment a month. I can do that as a young kid, you're sitting there. Like, even if you're just working part time , it just seems like, yeah. Especially if we just started getting paid and all of a sudden you're seeing these large quote-unquote large amounts of money that you've never seen before. I can do that. But you know, kids don't take into account that, you know , if they're working part-time and let's say retail or restaurant hours vary, they may not have that same income, you know, after their training period, or there might be some, you know, I worked retail for a little bit there a long, long time ago, some weeks you just were like, oh, well, at least I'm on the schedule still. I got one shift and it was something where that paycheck was going to come in smaller. And you know that 250,

Chase Peckham:

And do a account , not just the money, just the fact that a lot of kids just, aren't very responsible and they're not used to making payments every month. And that, that could sneak up on them and they'll go, oh, I've got two weeks to pay it. I'll pay it. And then it's just out of sight, out of mind.

Felipe Arevalo:

Right. You know, we walk we're in classrooms all the time in regular times. How many times do we hear the students tell the teachers or professors, oh, that was due today? Oh, I thought it was next week. Can I bring it to your office hours?

Chase Peckham:

Student's don't have any excuse now with their online platforms.

Felipe Arevalo:

Oh I know.

Chase Peckham:

Because, and I don't mean, I mean, they've got, what is that called? It's um, uh,

Felipe Arevalo:

Like a canvas. Blackboard,

Chase Peckham:

Blackboard, Blackboard, Blackboard, whatever it's called. Yeah. I mean, so they can just go in at any time and see when stuff's due, back in our day, we had to actually write down notes and actually write ,

Felipe Arevalo:

Or we had like a syllabus piece of paper that you have to

Chase Peckham:

That's right you have to hold on to it. That's right.

Felipe Arevalo:

Exactly.

Chase Peckham:

Yeah.

Felipe Arevalo:

By the middle of the semester. Yeah. By the the middle of the semester you're looking for, and you're like, oh , that's gone for a long time.

Chase Peckham:

But at least kids these days, they're going to get used to online banking and they should get used to that. So they will get reminders to their texts or their, or emails or whatever it might be. And it's so much easier than just giving you a.

Felipe Arevalo:

Push notifications.

Chase Peckham:

in the mail and opening it up and saying, oh, I'll just, I got time. And they put it down and it's out of sight out of mind. Right. Yeah. Which is what we used to run into all the time. Uh , but so parents were asking that very thing, like, what do I do? And I honestly said, look, you can, what you should do as a parent, if you want to start building or start giving that kid a footprint, so to speak, and it's not going to build it to like outstanding credit, but it will give them a, when they turn 18 and they go to apply for stuff is make them an authorized user on your own, on an existing credit card that you have. And they will be now a part of that account. So it's like giving them a footprint yet. They're not going to have any responsibility.

Felipe Arevalo:

You don't have to give them a card.

Chase Peckham:

and you don't even have to give them a card there . Basically. It's kind of piggybacking off of your credit history. And by the way, if you have bad credit, don't put your kids stuff on that because you're all of a sudden going to start them off on the wrong foot. But if you're there good.

Felipe Arevalo:

They get your credit, good or bad.

Chase Peckham:

That's correct. And so that is one way to start it. They don't ever even have to use the card , uh , because it is off of you off of your spending your, the way you pay back your bills and that kind of thing on that specific card. But that can give you a start at a young age. Uh , and then when they turn 18, if you've got those kids in the , in , in banking , um, show them to look up , uh , there's different types of credit cards you can get, what's called a secured credit card through your bank, which is a great one because that'll typically, you're basically putting down a down payment, Your collateral. Collateral, right.

Felipe Arevalo:

Cash collateral.

Chase Peckham:

And this is what a lot of people will do to rebuild credit. If they've they've really made mistakes, they crushed their credit. They can't get credit cards, they can't get loans. Uh, the secured credit cards were created for that to help people reestablish themselves . And in this case for younger individuals , uh , young adults, they can then start to build their credit that way. But there's also, if your kid's a student, there's lots of different types of student credit cards out there that will give you a decent interest rate, but it'll just have a very low limit.

Felipe Arevalo:

So it might be 250 bucks.

Chase Peckham:

$500 maybe. And that will then limit it's like on training wheels. Right ?

Felipe Arevalo:

Right.

Chase Peckham:

It's like super training wheels. It's like , uh , the , the little bike that the kids nowadays will learn how to ride their bike on without pedals . And , and, and they can learn balance.

Felipe Arevalo:

They can walk.

Chase Peckham:

That's like that . That's like being the authorized user and then training wheels is like the secured credit card or the student credit card. So you can't get in too much trouble, but you can skin your knee. Right. You can fall down.

Felipe Arevalo:

You can fall,

Chase Peckham:

it's hard, it's hard to fall down. Right. So because of the limits so low, you can, you can't get into a serious trouble.

Felipe Arevalo:

Right.

Chase Peckham:

And it usually will take anywhere. It typically, from the time you open up a card, use it every month , uh, at least once a month , uh , it takes usually about six months to establish, to get kind of actually get a score , uh , to where there's some kind of history that if you were to go in and let's say, apply for a car now, a used car or whatever, and it's old and you want to get a loan at a credit union or whatever it might be , uh , for them to generate a score , uh , that , that.

Felipe Arevalo:

Something to start with,

Chase Peckham:

It's something to start with. And it's not going to be great. It be mid tier, but it's not going to be bad credit. Uh , it's better than not having any,

Felipe Arevalo:

And for some types of loans to get good interest rates, you don't necessarily need, if you want a good car loan, you don't need an 800, 850.

Chase Peckham:

No. We're not buying home here.

Felipe Arevalo:

It's usually a couple tiers down ,

Chase Peckham:

Right.

Felipe Arevalo:

Where you can get the best rate, which may not be a good rate on a used car

Chase Peckham:

Yeah in the high six hundreds. Low 700s

Felipe Arevalo:

Right. Yeah. You don't need perfect credit to go get the quote, unquote, best student credit card out there.

Chase Peckham:

And I don't think I recommend going and buying a new car on your own at 18 years old either. And I'm right. And we see that a lot with young , uh , people. And we don't want to throw them all into one group, but we really see it heavily with young people that go into the service. So if they're going into the Marines and w you know where we are in San Diego, there's very heavy , uh, Marine Corps here and Navy. Yes. We get a lot of those couple of Navy bases. We've got a couple Marine bases. The , one of the largest Marine bases , uh , on the west coast is right here in camp Pendleton. And it's all typically it's training grounds. So it's young, 18 to 20 something year olds. And they get a check for the first time they go out and they buy a truck

Felipe Arevalo:

And they just finished training where they didn't pay for anything, but they were getting paid.

Chase Peckham:

Right.

Felipe Arevalo:

While they were in training. So they get like that big lump sum right off the top. And all of a sudden they're guaranteed this income.

Chase Peckham:

Absolutely. And they get the car for, at a ridiculous interest rate because they don't really have any credit, but there are lots of places right outside the base that cater to that young crew. And they're looking for them to come on in and sell them a car at a ridiculous interest rate.

Felipe Arevalo:

And it's not like you're a little Honda civic. Like, you know , it's those big trucks, it's Ford Mustang.

Chase Peckham:

Yeah. Man I'll tell you what I'm jealous of them.

Felipe Arevalo:

You do some of those events on base . And when they drive up to it and you're like, wow , um, you know, that's not, my Honda Civic. These are nice cars.

Chase Peckham:

Absolutely.

Felipe Arevalo:

You realize that they're , you know , E1 E2, and you can kind of have an idea of how much money they make. And you're sitting there, like, that's taken up a big percentage of your, of your income there. Um,

Chase Peckham:

And that's a whole different podcast. We can talk about that as well.

Felipe Arevalo:

It's whether you should, or you shouldn't, but that's a whole nother podcast , but it's something where it's something where oftentimes with young people, that's their big, first big purchase. Um, those, those cars, okay .

Chase Peckham:

That's typically where those young people find out whether they have just creditor , checkered , credit, they're sitting in there doing the financing part of a new car, and they're all caught up in the moment. You know, we've talked about that plenty of times. And then they find out they have no credit. And they're like, oh, we've been through this two hour rigmarole for nothing. The salesperson's going oh geez.

Felipe Arevalo:

Yeah. The salesperson doesn't like, oh man, you just wasted it . I can't even sell you a car if I wanted to.

Chase Peckham:

So they're asking do you, have somebody that can co-sign

Felipe Arevalo:

Exactly. Isn't , they're going to say during our presentation, we always tell about the dangers of co-signing, especially co-signing at a young age for like a significant other, you know , it's going to be together forever. And then six months later, no longer together. And , and they don't want the car because it reminds them of you. I gave the example today, this morning when I was doing the credit presentation and someone said, oh, it sounds like a really good Taylor Swift song heartbreak. Um , so I told them, I told them I'm in a tweet Taylor Swift today. So at @ SDFLC, I'm going to tweet Taylor Swift today and ask her if she could write a song about it. I don't think she'll even interact with it, but it's worth a try.

Chase Peckham:

Absolutely not maybe her marketing people will see it

Felipe Arevalo:

Maybe. But I told the person, I was like, follow us. That tweets going out today, don't expect anything special out of it, but the tweet is coming out . But you know , it's something we hear about it. And we hear about it from time to time. It's not a story random story that we've made up. It's a story we hear all the time where they did cosign.

Chase Peckham:

We totally do.

Felipe Arevalo:

And it's something where that could be avoided, you know, look over at that significant other and say, Hey , um , you know, maybe this isn't the car for you. Maybe you, you should buy a car that better lines up with your financial situation at this point in time. And don't take on a car payment.

Chase Peckham:

A hundred percent.

Felipe Arevalo:

It's good financial advice. I don't know if it's good dating advice. You might get dumped at the dealership, but at least your credit will be intact.

Chase Peckham:

Yeah. Yeah, no, right. Yeah . That'll be a lot more long-term pain than.

Felipe Arevalo:

Right.

Chase Peckham:

Financially anyway, but that's something that parents need to think about if they want to give their kids a head start and at least talk with them about it. It's not that I'm saying that it's the parent's responsibility to build their kids' credit. I don't know if it is or isn't, but it is something that parents, at least that we're talking to are aware of and asking to do it. And there are good ways to do it. And unfortunately, you know, you're scared you don't want your kid to get a credit card. Cause you're , we're all thinking about what we did right.

Felipe Arevalo:

Oh yeah exactly.

Chase Peckham:

When we got our credit cards when we were young. Cause my parents, as much as my dad says, he talked to me about it and my mom taught, no, they didn't. They really didn't. They just said, no, don't go ,

Felipe Arevalo:

Don't get one.

Chase Peckham:

Don't live on credit. And you know, well , okay. But I watched them use their gas card or whatever it was, but yeah, that was, I made mistakes in college. And as a young , uh, professional getting out of college and got myself into a lot of debt, but you don't have to do that to build your credit. You can use it once you can get this low balance credit card, use it once, pay it off every month and that's all you really need to do.

Felipe Arevalo:

Right.

Chase Peckham:

And in this day and age, if you're paying for your own cell phone, you could just automatically put that on your credit card, pay it off every month. And there you go, you've done it. You're killing two birds with one stone. You're paying for your cell phone bill on time every month and you're building your credit.

Felipe Arevalo:

Yeah. And you don't have to go to the store.

Chase Peckham:

Well, it doesn't build up because that's what happens. Oh, I'll use the card instead of, and then all of a sudden you've got $300 on there and you're like, Ooh, I don't have $300 to pay back this month. So I'll just pay a little bit this month. And then that little bit carries over. And then you have interest rates.

Felipe Arevalo:

Now you're getting finance charges.

Chase Peckham:

Getting finance charges. Oh. And by the way, you made a couple of other purchases that added to the debt and the fact that they, you can make a minimum payment for like only $20 at the time. That sounds great because it's not dinging , your you're not taking a ton out of your bank account. And next thing you know, your credit card is doubled quadrupled, you know, and you're going, oh no,

Felipe Arevalo:

You know, it was the worst financial thing I figured out when I was in college, it was, you can have good credit and carry around a lot of debt.

Chase Peckham:

For sure. You can.

Felipe Arevalo:

And I figured that out in college, and that was a bad thing because it allowed me to carry around along a lot of carry around a lot of debt without feeling too guilty about it because my credit score is still going up. So I'll be all right , I'll pay it back eventually. And that's part of the reason that I got myself into so much credit card debt is because I figured out kinda sorta figured out how the system worked and the fact that you can have okay credit and have a bunch of debt, as long as you keep making your payments, keep your credit limits down.

Chase Peckham:

Making your payments on time.

Felipe Arevalo:

And you know, don't use up too much of a percentage of it,

Chase Peckham:

Right.

Felipe Arevalo:

That's a huge bulk of it right there. But that doesn't mean that you're in a good financial situation.

Chase Peckham:

Right.

Felipe Arevalo:

When you look at the total debt load.

Chase Peckham:

Absolutely not. And that, and the fact that people will say, we'll leave a little bit of a balance on there, on your credit card, because that'll help your score even more and believe it or not, that's a bunch of, I mean, it probably does help a little bit, but it's a bunch of phooey. Cause.

Felipe Arevalo:

It's insignificant.

Chase Peckham:

In my opinion, it's insignificant. It's not that much better deal. It's better to not have any debt and not pay interest.

Felipe Arevalo:

Right.

Chase Peckham:

Then getting.

Felipe Arevalo:

A couple points?

Chase Peckham:

Right. Yeah.

Felipe Arevalo:

Out of.

Chase Peckham:

it doesn't matter.

Felipe Arevalo:

hundreds.

Chase Peckham:

Right. It's all a tier system anyway. So it doesn't matter whether you, if you have 751, it doesn't matter if you have 751 or you have 850, it's right . You're getting the same loan

Felipe Arevalo:

As long as you're not like right on the borderline of a tear, those couple points don't matter.

Chase Peckham:

It really doesn't.

:

It doesn't

Speaker 4:

Depends on what you're shopping for or depends on what you're trying to get alone for. Like you mentioned earlier, the car loan is a much different deal than if you were to get financing for a home.

Felipe Arevalo:

Oh, that percentage point, if you're looking at like 0.25% on a car loan difference, not a big deal 0.25% on a mortgage loan , that's a big deal.

Chase Peckham:

Big deal. Yeah, absolutely.

Felipe Arevalo:

Because you're talking hundreds of thousands of dollars for 15, 30 years. That 0.25 is a big deal. You're like, oh, you got your interest rate down. . 25. Well, thank you very much because that it was very helpful and that can make a big difference

Chase Peckham:

A hundred percent. It absolutely can . And, and I told these parents before about not just the structure of how to build the credit, but just by having the conversation with the kids of this is credit is show them your credit card bill,

Felipe Arevalo:

Oh that knowledge.

Chase Peckham:

Show them how it goes, shown that you pay it every month. It's easy to put it, bring it up online. You don't have to necessarily show them how much debt you have or whatever you can log, you know, hide that or whatever, but show them that this is what we do. This, this doesn't just go away. This isn't a debit card that comes right out of the bank account. We have to pay this every month.

Felipe Arevalo:

Right.

Chase Peckham:

And that's something that if you start doing that, and just the fact that they're aware that that's there, that credit is a thing that they're going to need it someday to rent an apartment, to , to buy a car, to what you name it, that they're , you're going to be offered to finance things. Um, and whether financing a computer or financing, you know , uh , current furniture, a mattress is a good idea. Or not that individually, I would say probably not, but for a lot of people, if you're trying to furnish a home and you, you know, you can't, there's no hand-me-downs

Felipe Arevalo:

Desperately need it and you don't have another option.

Chase Peckham:

And if you can get an interest free loan for 18, 24 months or something,

Felipe Arevalo:

Right, Yeah,

Chase Peckham:

Exactly.

Felipe Arevalo:

Yeah. It's something where that might be, how you build your credit and not cost you any extra money. You gotta be careful with them with those promos though, because if it's 18 months and you go into 19, that promo promotional APR, all that you've been saving usually will get tacked on right at the end, like you never had the promotion, you might be $50 from paying it off.

Chase Peckham:

Right.

Felipe Arevalo:

All of a sudden have an extra four or $500 that you owe.

Chase Peckham:

Retroactively.

Felipe Arevalo:

For the last two years of finance charges that you weren't paying.

Chase Peckham:

A hundred percent.

Felipe Arevalo:

So be on top of that and don't cut it close and don't be sitting there, oh, this payment's due tomorrow. Or I'm going to owe you an extra $400, pay that thing off early and be careful.

Chase Peckham:

Right. Uh , exactly. And that's what, you know , my son and my daughter already trying to figure out which Kerrie's in my cars, they're going to get a , if they're going to be handing them down or we're going to, you know, so that's Kerrie and I have to decide on how we're going to do that. Um, and whether they get the little used Honda Civic or, you know, get our cars, but man, for me,

Felipe Arevalo:

How far are you? Generally.

Chase Peckham:

We've done our kids. From your oldest having his driver's license? Two and a half years away.

Felipe Arevalo:

Oh yeah, that's right around the corner.

Chase Peckham:

If he gets on it and does all this stuff he's supposed to do, but this generation, they seem to be waiting. I mean, when I was a kid, everybody, we all wanted our driver's license.

Felipe Arevalo:

Oh I wanted it as possible.

Chase Peckham:

On my 16th birthday. Nowadays, these kids kind of seem like, eh, well, I don't know. I don't really matter.

Felipe Arevalo:

They have the technology that we didn't have, where if they really need a ride, they could pick up their phone as long as they have the money and order up a ride real quick.

Chase Peckham:

Right.

Felipe Arevalo:

Um , you know, we had to, he wanted a ride. You better ask someone or call up a cab, but that was going to take 20 to 30 minutes just for them to get there. And that was going to cost a lot. And you didn't really have the option to order an Uber or Lyft or something like that. Um, so yeah, I was like, let's get it. Let's go get this driver's license ASAP.

Chase Peckham:

Absolutely. The New York times wrote a pretty good little article , uh, about that very thing and young people building their credit , uh, which was really a pretty good story. Uh, but they talked about the same kind of thing. These young people that all of a sudden don't they go to be an adult now they can't really be an adult because they don't have the tools and they weren't taught .

Felipe Arevalo:

Right.

Chase Peckham:

So it is something the best thing. And we talk about this all the time. That knowledge is power and that is a cliche. I know, but it's absolutely a hundred percent true that if to obtain credit, you have to have credit, right. Or to get alone , you have to have credit. So you might as well start building it as a younger person before a , and you're going to be so much farther ahead of the game when it comes time for you to really being on your own. And we, as parents need to give our kids the tools to do that. And that's by being knowledge and if they screw up and if they get themselves into debt, well, I mean,

Felipe Arevalo:

Let them figure it out.

Chase Peckham:

They'll well, we did, right. I mean, it took me a long time to pay back that debt

Felipe Arevalo:

I had to figure it out the hard way, but you know what, that's my learning style. It was probably the only way I was going to actually learn the darn thing.

Chase Peckham:

Yeah, right.

Felipe Arevalo:

Yeah. That's how I had to learn it so that it actually stuck.

Chase Peckham:

yeah that was a painful lesson.

Felipe Arevalo:

Your right exactly that painful lesson that took years to pay off. Um, and it's something where it's for some kids and remember each kid is going to be different. You know, you might, you have to know your kid.

Chase Peckham:

Yes.

Felipe Arevalo:

And understand because there , there might be some kids where you're looking at it thinking you can't get a credit card right now because you need to figure some stuff out before you get yourself in trouble.

Chase Peckham:

For sure And you go . And exactly. And if, excuse me, if you know that your child is a sh you know, my, my daughter is a spender and that's going to burn a hole in her pocket. Well, then you've got to think twice, but you've got to also understand that you can't open up a credit card and just think, okay, we're going to open up a credit card for them, or they're going to get one. And we just won't use it. We'll put it away. Eventually, if it's not being used, if it's not being like , let's say you're working out, you can buy a Peloton, but if you don't actually use it, you're not doing anything for your body. It's the same thing. As a credit card, you can have it and you open it up and that's great. But if it's not being used and it's not, they're not seeing a payment history on it, it's not doing you any good and they'll end up closing it anyway. Right.

Both:

So you Don't need to have them Learn. Right. [inaudible]

Chase Peckham:

They've got to learn how to use it.

Felipe Arevalo:

Yeah. Because just opening the card itself is not going to teach them a thing. It's just going to teach him how to go open a card, which today's day and age, any kid can go online and open a card. It doesn't take, you know, they're all tech savvy. It doesn't really, it's not difficult to actually apply maybe difficult to get one. But the application process itself is pretty easy. Assuming they know social security number , uh, which some kids might not, but you know, it's something where they've gotta be able to learn, take it with them and try it out, take it for a test drive and see how they do with their credit cards. And that's why you mentioned earlier with the small student ones, that could be a really good experience. Like the bikes where you don't.

Chase Peckham:

Right.

Felipe Arevalo:

It's harder to fall off. And if you fall off, you're not going as fast.

Chase Peckham:

That's right .

Felipe Arevalo:

Right . Yeah . Like my, my three-year-old, he's all about trying to learn to ride his bike. He's got one, a little walkie training ones and he's got a little tricycle and he took a tumble the other day and he.

Chase Peckham:

Dusted himself off and got right back on.

Felipe Arevalo:

back on it. Right now, my oldest, when he was trying to learn as little training wheel bikes, he hit , uh , he , he picked up too much speed, hit a , hit a fence . And he just has no interest in.

Chase Peckham:

Getting on a bike again?

Felipe Arevalo:

He just now started like, okay, I can try it again. Um, you know , take a pretty big tumble.

Chase Peckham:

I guess so.

Felipe Arevalo:

It came with a little urgent care visit, but he was okay. Long run. Um, he had some bruises and stuff and it just kind of scared them a little so slowly .

Chase Peckham:

Well of course it's going to scare him a little.

Felipe Arevalo:

Yeah.

Chase Peckham:

Totally understandable. Yeah.

Felipe Arevalo:

And the doctor told him to stay off the bike for a little bit while you heal. And then it was, it just became a very prolonged thing. Like, nah, I'm all right.

Chase Peckham:

Gotcha.

Felipe Arevalo:

I don't want to go, I'll learn later. So those little bumps are important because that's how you learn .

Chase Peckham:

That's right. So just to recap, I think it is, I think our responsibility as parents to do the best we can to give our kids the knowledge and know-how so put it off, making them an authorized user on your credit card doesn't mean you have to give it to them, but it does give them a footprint when they get on their own and they can open up a card and they're 18 years old, they can get a secured credit card or a student credit card if they're a student. And that's a great idea at a lower limit, learn how to use it. It's like, again, the training wheels , uh, explanation that you just , uh , that you just told us about. And if they do run into a fence you know, it's not going to be, they probably won't have to go to the ER, maybe urgent care, but not the ER.

Felipe Arevalo:

Exactly.

Chase Peckham:

Um, so that those are the things that you can do, but more than anything is show them how this works.

Felipe Arevalo:

Give them the knowledge.

Chase Peckham:

Showing you pay it every month, but it's that show him what interest is. Show them that, look, this, this loan is not free. The cost of that car. When you make a monthly payment, isn't the cost of the car. That's not on top of blah, blah, blah. Right? On top of the interest rate that they're charging you to give you the loan, so, the lower, the interest rate the better. So all the more they learn about that, the better. And unfortunately, most of us learned that the hard way

Felipe Arevalo:

It's that knowledge, that knowledge is, is , is so, and just opening up and showing them sometimes can be for some, sometimes that could be enough for others, a hundred percent going to learn it their way.

Chase Peckham:

Absolutely. So get your, get on your computer, show your kids what this is all about. And they might just shake their head, but someday they're going to appreciate it.

Speaker 1:

[inaudible] .