If you’re the parent of a teenager (or any child you want to understand money matters), you probably know that you should teach them about money matters. But knowing you should discuss money and knowing what specific issues to hit are two different things.

Here’s a look at some suggestions (adapted in part from this post at WiseBread.com) of what topics to be sure you address when talking finance with your offspring.

• Debit vs. credit: If your child is interested in getting a credit card for the convenience factor (particularly if she likes shopping online), let her know that a debit card would serve her needs. The difference is that a debit card deducts money from a checking account, while a credit card is essentially a loan you must pay back at a later date – with interest!
• Get a job: In fact, when the Credit CARD Act of 2009 takes effect this month, those under 21 must prove that they have a job (and/or get a parent’s or guardian’s signature) in order to qualify for a card. Plus, having a job will mean your child has a way to pay for purchases he wants to make.
• Remove temptation: Call 1-888-5-OPTOUT, which allows you to eliminate your name from mailing lists for “free” credit card offers. The “out of sight, out of mind” rule may be the best defense against aggressive vendors.
• Limit yourself: Suggest your child to limit herself to two cards total – and, if she chooses to open a credit card account, make sure she understands the importance of paying her balance in full each month.
• Stay informed: Show your child how to check his credit report by visiting www.annualcreditreport.com, and encourage him to check it annually and review it for errors.

Unveil the Beast

Credit cards can be scary, but usually only after they’ve gotten you into serious debt. Help your child avoid getting there by explaining all the fees and costs associated with having a credit card.

• Annual fee: Yearly cost of holding a card
• Finance charge: Also known as the “interest rate,” it’s assessed on any part of your bill you don’t pay in a given month
• Late payment fee: Charged when you fall behind and could be accompanied by an increase to the interest rate
• Over limit fee: Charged every time you make a transaction that sends you over your limit for that card
• Cash advance fee: Really, the interest charged to take out this kind of loan

Additional Resources

Credit CARD Act of 2009 (PDF)

You know your credit matters–especially in today’s economy–but do you know how your credit is scored?

Check it out ~ The formula for calculating FICO credit scores can be complex; but, roughly, it’s determined by:

• 35 percent = Payment history (on-time payment is best)
• 30 percent = Utilization of credit (using less than you can is best)
• 15 percent = Length of credit history (the longer the better, assuming positive action)
• 10 percent = Diversity of credit used (more is better)
• 10 percent = Recent inquiries into credit (more inquiries are worse)

Get Your Credit Information

Credit Karma (creditkarma.com) has new tools for helping consumers keep track of their credit information.

The site is fairly easy to navigate and offers a variety of tools and helpful information for interpreting the information on your credit report.

How Accurate is the Credit Score Offered?

Credit Karma calculates credit scores based on the information in your TransUnion credit report. Sound confusing? Let’s back up a few steps:

• Credit Report: This is a document compiled by three major companies in the United States, Experian, Equifax and TransUnion. You are entitled to one free report each year from each of the three companies – this report is available at www.annualcreditreport.com.
• Credit Score: This is a number derived from the information in credit reports. Lenders use these numbers to gauge a borrower’s creditworthiness before lending money. Currently, the most widely accepted credit report in this country is the FICO score, calculated by the Fair Isaac Corp. FICO scores range between 300 and 850. You are not entitled to see your FICO score for free, but you can pay to view it.

The “credit score” offered at Credit Karma, though, is based only on your TransUnion credit report and doesn’t take into account information on the other two (from Experian and Equifax).

The score you’ll receive will likely offer you a ballpark range for where you fall, but don’t assume it’s 100 percent correct.

Other Perks the Site Offers

The site may still be a useful tool, though.

It’s BBB-accredited and makes money from advertisements rather than payments from those who visit the site.

If you’re looking for loan offers or trying to compare credit cards before opening a new account, Credit Karma may be a good starting point.

It also offers a credit “report card” section, which breaks down the information you’re likely to find in a credit report.

This is useful for consumers who are interested in staying on top of their credit health but unsure how to navigate credit reports.

If your credit score is hurting because of overwhelming credit card debt, you may want to see if filing bankruptcy might be able to eliminate your credit card bills.

Here’s what I love about the Fair and Accurate Credit Transactions Act (FACTA) of 2003: it allows us to stay on top of our finances free of charge. Now here’s what I don’t love so much: too many Americans don’t know how important checking their credit report is!

What is a credit report?

Basically, it’s a record of your life as a borrower and includes information on your credit card accounts, car loans, home loans and more. Lenders of all sorts report information about you as a borrower to the three major Credit Reporting Bureaus (Equifax, Experian and TransUnion) and those bureaus compile a report for every citizen.

Reports include information like age of accounts, late payments, interest rates, etc. Many lenders calculate your credit score largely based on the information in your report.

Beware the Scams

FACTA outlines that every American is entitled to one completely free credit report each year from each of the three bureaus (which means three reports per year). The only Web site where you can take advantage of this is www.annualcreditreport.com. Other sites with catchy names offer “free” reports, but come with hidden subscriptions and costs that you don’t need.

How to Get the Facts on Your Credit

• First, either visit the site above, call 877-322-8228 or send away for a report by writing to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. This Fair Trade Commission site has more details.

• Choose to view one of your three credit reports (from Equifax, Experian or TransUnion). I like to look at a different one every four months – that way, I have an idea throughout the year of where my credit stands.

• Check all the information on the report against your records. If you see any inconsistencies, follow the directions on the Web site or the forms to file a complaint.

Staying on Top of Your Credit Report

Mistakes on your credit report can harm you – inaccuracies can lead lenders to charge you higher interest rates or even deny you loans you would otherwise qualify for. Plus, checking your report regularly is one of the only ways you’ll know if someone has tried to steal your identity.

It’s especially important to keep up with your report after you file bankruptcy. Make sure that creditors aren’t still dinging your report for debts that were cleared long ago.

Checking your credit is fast and free, so click on over to annualcreditreport.com and find out what your credit looks like.

Hopefully, you check your credit report regularly at annualcreditreport.com to make sure no one has stolen your identity and your lenders are reporting your information correctly.

But have you and your spouse both maintained individual credit activity since you’ve been married?

The Myth of Joint Credit Reports

If you and your spouse have joint accounts, actions from those accounts (both positive and negative) will appear on both of your credit reports – but there’s no such thing as a “joint” credit report.

That means that, unless you both have some individual accounts as well, problems could arise.

Why you need your own credit: When you try to open a new credit card, take out a loan, or even rent an apartment, lenders check your credit report. If you haven’t used any of your accounts in six months or so, your report will be empty and creditors will have no way to assess your risk as a borrower (which means they’re unlikely to lend to you).

Be prepared for the worst case scenario: In the unfortunate event of death or divorce, you could find yourself without an active credit history, which could translate to an inability to borrow money, rent a home, etc.

Avoid the headache: Untangling joint credit accounts after a divorce or separation can be enormously unpleasant – to tide yourself over until the loose ends are sorted, make sure you have some credit of your own.

Maintaining Active Accounts

Luckily, keeping your credit report active is fairly easy.

All you have to do is hang on to a credit card or two in your own name after you marry, and every few months charge small amounts on those cards.

Reports suggest that an account can go inactive in as little as six months, which isn’t much time considering how long it can take to build a strong credit history.

Then, when the bills arrive, pay them fully. This will ensure that you have consistent, positive actions on your credit report and, should you ever need to open a line of credit solo, you should be able to.

And, it’s important to remember to keep checking your credit score even if you are filing bankruptcy. Your credit may fully recover – or even go higher – in as few as two years.

Having your taxes prepared? Make sure you the dangers of “refund anticipation” offers – they can end up costing you big time!

What’s a Refund Anticipation Loan?

A RAL is a short-term cash advance that some tax preparers offer.

It’s similar in function to a payday loan.

If you’re in a position to receive a refund from the government, your tax preparer may offer you the money early through a RAL.

How Does an RAL Work?

Once your tax preparer has determined what refund you can expect, they may offer you a check within a couple days.

This check comes from a bank – the preparer acts as an intermediary between the bank and you.

Why are RALs so Costly?

Naturally, for the service of getting your money to you earlier than the government would, the tax preparer charges you a fee, which often depends on the size of the return you expect to receive.

If you want your money right away, you’re usually charged additional fees.

What Happens When I Don’t Choose an RAL?

If you decline the refund anticipation loan and have your taxes filed electronically, any refund you’re set to receive should be deposited into your account within about two to three weeks.

How Much do Refund Anticipation Loans Cost Americans?

In 2007, RALs cost American taxpayers an estimated $833 million in fees and interest.

The Bottom Line

It’s this simple: If you opt for such a loan, you essentially pay to get your own money.

Holding out for the IRS to deliver your check means more money in your pocket.

Going Broke from a RAL or Payday Loan Gone Bad?

If you’re trying to make payments on a RAL or payday loan, but you just can’t catch up, filing bankruptcy may be an option for you.

At the core of American’s principles lies the ability for her to adapt to change. [Think industrial revolution.]

And we may just be on the brink of another revolution—a revolution where consumers are acutely aware of the dangers of credit reliance.

A revolution where sensibility rules and consumer gluttony becomes a thing of the past.

A revolution where credit card agencies’ predatory practices fall flat and consumers are protected and looking out for their best interests.

What Could a Consumer Revolution Look Like?

The consumer revolution would focus on each person being actively aware and responsible for their “consumerism” practices. It’s basis simple—people will reduce spending to save money.

For example, people could decide that it makes fiscal sense to carpool to work, thus saving gas and reducing their carbon footprint.

Adults may consider finding roommates or doubling-up with extended family to share living costs.

People may opt out of buying a car and turn to using public transportation (or turn to using that old-school idea of human transportation — walking or riding bikes).

There may also begin a trend of more people working from home to save on transportation costs.

Companies may also prefer people working from home so it saves on overhead and turn to hiring freelancers for projects instead of hiring full-time staff, thus cutting back on benefit expenses.

In the end, the consumer revolution could help American’s retool their spending habits and rebuild their financial futures.

…And it will have appositive effect on the environment—the best a win-win situation we could hope for.

Are you in debt looking for your own revolution ? Check out this information on filing bankruptcy.

It’s no surprise that we’ve gotten into the habit of purchasing items with credit cards.

I mean, we’re bombarded with advertisements trying to convince us that it’s sophisticated to spend credit (“become a silver cardholder and climb the social ladder”) and that we will live the good life if we use credit (“you’ll experience priceless moments because you bought this item”).

The reality is that for decades the credit card agencies have aggressively attacked our way of life to convince us that we should spend, spend, spend—even if we don’t have the savings to back up those purchases.

Just take a look at this recent Chicago Tribune article which shows how aggressively they’re trying to recruit us (more than 445 credit card offers were mailed to a family in one year—including 35 pre-approved offers for their 8 and 10-year old kids[!])

Their tactics are working for them—the more often we can’t pay off our monthly balances, the more interest and late fees they collect. Cha-ching.

You Must Look Out For Your Best Interest

It’s time to stand up to those credit card agencies and say “No, I won’t keep handing you over hundreds or thousands of dollars of my hard-earned money.”

Decide for yourself what’s really best for you, your family and your future.

It takes a little “brain re-training,” however, once you get in the routine of asking yourself whether you can really afford something, it easily becomes a healthy habit.

Credit Card Spending Isn’t All Bad, It’s Just Best in Moderation

I’m certainly not trying to say that we shouldn’t use credit cards—responsible credit card use can boost your credit score and a good credit rating is a necessary part of our financial health—but I am saying that we should retool our spending habits so we can create a solid financial future.

Check out this funny Saturday Night Live Skit about some not-so-ideal spending thought patterns.

–Are high credit card bills keeping you down? Learn about the filing bankruptcy option.