Author: Philip Tirone

Since it’s back-to-school time, I want to share this great story I heard on NPR …
You can listen to the whole thing here, but the gist of it is this:
A mother of three (who is also an astrophysics graduate) wants to promote a cultural-makeover when it comes to math.
“You hear educated adults say, ‘I’m just not that good at math’ or ‘I’m kind of afraid of math.’ And that’s a totally acceptable thing for a well-educated person to say,” said Laura Overdeck in the interview.
“But you never hear them way, ‘Well, you know, I’m just not that good at reading.’”
She also said that the more parents talk about numbers, the better students perform in math.
This got me thinking about MONEY!
If parents talked more at home about money, the cost of things, their savings’ goals, and their investments, would kids be more money-savvy?
Probably. After all, you are your child’s first teacher. The culture you establish at home (or the culture you fail to establish at home) will have the largest impact on your child’s habits as an adult.
So why not start telling bedtime money stories? Or, if you are worried this will keep your kids up, how about giving them snack-time money stories?
Let me know what you think below!
Be sure to listen to the whole interview and subscribe to Laura’s blog.
Philip Tirone

Last week, I sent part one of my back-to-school credit tip.
I told you my “crazy plan” for helping your children build a great credit score.
Part two of this plan include an educational platform whereby your children learn about, budgeting, savings, interest rates, and credit scoring.
Last week, I reminded you that no one else will teach this information to your children—not the schools, not their future employers.
The responsibility lies with the parent.
So after making your children an authorized user, start talking to them about credit scores, interest rates, budgeting, and the like.
Then, establish something I call the “Bank of Mom and Dad.”
If your daughter wants to buy something, lend her the money and then sit down with her to create a weekly or monthly payment plan whereby you budget the payments, which should include interest, just like a credit card company would do.
If your child is late with any single payment, assess a late payment, just like a credit card company would do.
Expect your children to make mistakes, and use these mistakes as teachable moments. Don’t berate them, but make sure they understand the consequences of being late with a payment.
Once your child demonstrates continued financial responsibility with the “Bank of Mom and Dad,” consider providing an actual credit card to your teenager.
If you are worried that your children will be irresponsible with the credit card, my suggestion is this: Allow your child access to the card only if you are present and only long enough to hand it to a cashier. This way, the child will not be able to memorize the credit card number, nor will he have prolonged access to your account.
Then have your child repay you directly for the purchase. Because you are the primary cardholder, you can preserve your credit by making payments on the account regardless of whether your children are paying you.
The purchase can be small or large, depending on your budget and your comfort level. Make sure it is not so big that you will be unable to pay your credit card debt should your child default on payments to you.
Just like with the “Bank of Mom and Dad,” make your children pay interest on their credit card purchases. If they exceed the prearranged limit or fail to make a payment by the due date, you should access an over-the-limit fine or late payment penalty.
When the credit card statements arrive, sit down with your children and explain the statements. Discuss your annual percentage rate, annual fees, late penalties, over-the-limit fines. Ask your children to verbalize their plans for paying their loans in a timely manner.
Expect your children to make mistakes, and help them create plans for correcting their mistakes. If they splurge and end up owing more than they can afford, perhaps they can do extra housework in exchange for an increased allowance. And, of course, teaching children about credit means that you call their cell phones—perhaps at 8 on a Saturday morning—to inquire about any late payments!
Teaching your children about finances and credit is like teaching your children manners. It won’t happen over night. Your children will make mistakes. But it’s far better that you teach them—in the safety of your home—than allow them to enter adulthood without a shred of knowledge about credit scoring and finances!
Okay, that concludes my back-to-school lessons.
P.S. Do you still think my plan is totally crazy? Leave a comment below!

Pop quiz!
If you had to raise your FICO score quickly, and you had a choice—either pay off your charge cards or pay off your mortgage—which would you choose?
Most people say they would pay off their mortgage to increase their credit score the fastest.
But when it comes to FICO scores, eliminating charge card debt is far more powerful than eliminating mortgages or car loans.
And if you think about it, it makes sense. When assigning a credit score, the scoring bureaus assess risk by asking a question: How likely will this borrower default in the next two years?
Most people prioritize their mortgage payments; they would rather skip a few meals than lose their home. So having a balance on your mortgage isn’t really that risky.
But people aren’t quite as responsible with their Visas and MasterCards. In fact, even the most financially responsible people make a few bad decisions when it comes to the allure of credit card spending.
So keeping a low balance (or no balance at all) on your credit cards is a far better indicator of your financial situation, and your ability to pay upcoming bills.
The moral of the story: If you want to increase your FICO score, get your credit card balances under control!
Philip Tirone
P.S. If you want a few ideas on increasing your credit score by lowering your credit card balance, here are a few articles you should read:
The Dirty Little Secret
Do-it-Yourself Tricks
A Penny-Pinching Tip

I’ve been saying it for years, and I stand by it!
I think you should add your children as an authorized user to one of your credit card accounts.
I know you probably think I’m nuts, so let me back up …
A couple of weeks ago, I sent an email encouraging parents to use family meetings as an opportunity to teach children about certain values (like financial responsibility). Otherwise, they might be influenced by peers, credit card companies, or banks … and the results might be ugly.
After all, schools don’t teach this to our children, and banks prey on people who are financially vulnerable.
So if you have children, you would be wise to start teaching them now about credit, money, and financial responsibility.
Teaching children about credit, as well as how to manage credit, will help you raise financially responsible adults, and it will open doors for your children down the line.
Okay, so why do I think you should add your children as authorized users? Let me explain a four-part plan:
1. Add your child as an authorized user but do not give her/him a card! Here’s the important part: Add your child to a credit card that is in good standing. This will allow your child to “borrow” your good credit score, which means his or her credit score will begin to increase.
2. Use family meetings as an educational platform where your children learn about interest rates, budgeting, savings, and credit scoring.
3. Once your children begin demonstrating that they understand the value of money and are financially responsible, you might want to provide children with credit.
You can do this by establishing something that I call “Bank of Mom” or “Bank of Dad.” If your daughter wants to buy something for $30, lend her the money (assuming you can afford it), and create a weekly or monthly payment plan.
Then insist on timely payments, and tell your daughter that she will pay interest if she is unable to pay within a specified time frame. If your daughter is late making a payment, assess a late payment fee as part of your strategy for teaching children about credit.
The goal is to replicate the credit card companies as closely as possible.
4. Once your children prove themselves by continuously repaying debts, you might want to give them actual credit cards. Now, I know this sounds crazy, so let me explain …
I suggest that you allow your child access to the card only long enough to hand it to a cashier, and only if you are present. This way, your child will not be able to memorize the credit card number, nor will he or she have prolonged access to your account.
Then, make sure that your children pay their debt to the credit card company. I suggest that your children pay you instead of the company; this way, you can preserve your credit by making payments on the account regardless of whether your children are paying you.
Then, when the credit card statement arrives in the mail, sit down and go over it with your child. Explain the annual percentage rate, fees, late penalties, over-the-limit fines, and minimum payments. Then ask your children to verbalize their plans for paying their loans in a timely manner.
Expect your children to make mistakes, and help them create plans for correcting their mistakes. If they splurge and end up owing more than they can afford, perhaps they can do extra housework in exchange for an increased allowance. And, of course, teaching children about credit means that you call their cell phones—perhaps at 8 on a Saturday morning—to inquire about any late payments!
What do you think? Do you like this plan?
Do you think I’m crazy? Do you love this plan? Leave me a comment below and let me know!
Philip Tirone

Sometimes, I hear from people who are drowning in debt. They just don’t know what to do to get themselves out of their financial holes…
One of my readers, John, recently left such a comment on my blog, and I wanted to take this opportunity to answer it. Here is a summary of his comment:
I recently filed bankruptcy, and I know I need to open three new credit cards, but I cannot get the secured cards that you recommend because I have no extra money. Please help me. I’m drowning.
Okay, I have several pieces of advice…
First, if you have been through a bankruptcy, it is important to open three new credit cards after the bankruptcy has been discharged.
I recommend secured cards, which require you to pay a deposit. But if secured cards are not an option, then I recommend becoming an authorized user on someone else’s credit cards (in good standing).
If neither of these options are available, then and only then should you apply for subprime credit cards.
I dislike subprime credit cards because they usually come with high fees and high interest rates. You can’t do anything about the high fee charged to you upfront (or annually), but you can avoid the interest by charging only small amounts on your credit card to keep it active, and then paying the balance in full.
That said, I have another concern about John’s message: “Please help me. I’m drowning …”
This is my advice: Do not use credit cards as a method of paying for day-to-day life, especially post bankruptcy, unless you have a long-term budget that shows you can repay the debt.
If your budget does not prove that you can repay the credit card debt you plan on incurring to pay off your other bills, you will find yourself even deeper underwater in the months and years to come.
Yes, credit cards are a great tool for getting yourself out of a financial jam, but only when you know you have the means to pay your bills down the road.
You must—must, must, must—create a budget, take a hard look at your finances, and know exactly and when you can pay off those credit cards.
Sincerely,
Philip X. Tirone
P.S. As always, leave your comments and concerns below!