Thoughts on savings?

[Mackenzie Click-Mickelson]

Well I have 2 Disney Visa cards, one I use and the other I got to put trips on for the 6 mos same as cash when they changed how they applied payments. Since that 2nd card is hardly used I made my kids authorized users on that one. They very rarely charged, maybe if I needed something from the store or they were going out last minute for a bite with friends. No problem adding any of them at 16. Maybe a bank card is different??

Are they authorized users or are they on their with their credit being affected? For example I am an authorized user on my husband's SWA CC (I even have my own CC with my name on it same account number as him) however none of my information like SSN beyond my name was used. Therefore it is not affecting my credit.

 

[kymom99]

Are they authorized users or are they on their with their credit being affected? For example I am an authorized user on my husband's SWA CC (I even have my own CC with my name on it same account number as him) however none of my information like SSN beyond my name was used. Therefore it is not affecting my credit.

Once my son turned 18 we went back and opened a card for him but its really mine. He is an authorized user. However, they told us he will be able to build credit with it.

 

[runwad]

Are they authorized users or are they on their with their credit being affected? For example I am an authorized user on my husband's SWA CC (I even have my own CC with my name on it same account number as him) however none of my information like SSN beyond my name was used. Therefore it is not affecting my credit.

At 16 they are authorized users, on my card. The information is relayed to the 3 credit bureaus because it is on their own credit report. Honestly I don't know if they had a credit score then but they had a credit report with the visa card listed and I also have them authorized users on my Kohls card, and that was on their individual credit report also.

My DDs are 21 & 19 and they each have a discover card in their name only in addition to still being an authorized user on one of my cards. They have Student Discover cards, but no problem getting one once they both had income and a W2(got them at age 18). And these are college students so their income is no more than 3k/year.

DS16 is just an authorized user on my card, no credit of his own yet.

But I liked having a 2nd card that I didn't use so that i knew what they were charging. I think it's important to teach kids how to use credit right. We taught them not to charge unless they already have the money for something, it's more of a convenience to use credit (not carrying cash) and accumulating rewards.

Now that the girls have their own Discovers, as soon as they charge something, they come home and pay the charge off online, you can pay every 3 days. I monitored that for a while and now that they got the hang of it I will just periodically sign in to their Discover account and look around. That was one of the pre-req that I had access to their user name and password to make sure they weren't getting in any trouble. Oldest DD had $100 in cash back rewards and just used it to treat herself. It adds up fast when you're charging gas and college text books.

 

[Mackenzie Click-Mickelson]

At 16 they are authorized users, on my card. The information is relayed to the 3 credit bureaus because it is on their own credit report. Honestly I don't know if they had a credit score then but they had a credit report with the visa card listed and I also have them authorized users on my Kohls card, and that was on their individual credit report also.

My DDs are 21 & 19 and they each have a discover card in their name only in addition to still being an authorized user on one of my cards. They have Student Discover cards, but no problem getting one once they both had income and a W2(got them at age 18). And these are college students so their income is no more than 3k/year.

DS16 is just an authorized user on my card, no credit of his own yet.

But I liked having a 2nd card that I didn't use so that i knew what they were charging. I think it's important to teach kids how to use credit right. We taught them not to charge unless they already have the money for something, it's more of a convenience to use credit (not carrying cash) and accumulating rewards.

Now that the girls have their own Discovers, as soon as they charge something, they come home and pay the charge off online, you can pay every 3 days. I monitored that for a while and now that they got the hang of it I will just periodically sign in to their Discover account and look around. That was one of the pre-req that I had access to their user name and password to make sure they weren't getting in any trouble. Oldest DD had $100 in cash back rewards and just used it to treat herself. It adds up fast when you're charging gas and college text books.

Oh believe me I think it's important as well (honestly I have a better habit than my mom when it comes to the credit card). I've had a credit card (and thus credit) since just about a month after I turned 18 (so for over 11 years). I've seen what delaying getting credit has done to the people around me (issues with getting a car loan, home loan,even cell phones, etc).

 

[Jen and Ashwin]

That could be. We bank at 5/3. I was surprised when she told us that. I would think if it's my card and I pay on time I could put my cat's name on it if I wanted to.

I add my bird as an authorized user to some cards because they offer a sign up bonus for adding an AU. I can't imagine that you wouldn't be able to add your 16 yo child.

 

[Jen and Ashwin]

Are they authorized users or are they on their with their credit being affected? For example I am an authorized user on my husband's SWA CC (I even have my own CC with my name on it same account number as him) however none of my information like SSN beyond my name was used. Therefore it is not affecting my credit.

These cards can still be reported to the credit bureaus. My husband is an AU on some of my Chase cards. They never asked for his SS # when I added him, but it still gets reported to the bureaus monthly and affects his credit score.

 

[Jen and Ashwin]

To OP:

From the savings, I would have your DD keep 6 months of expenses as an emergency fund. I would then have her determine her long term goals. Does she want a car, does she want to have a house down payment, etc.? Once she has a job, she can plan out how she will allocate her income. She should focus first on savings enough money to get any kind of employer retirement match. Then she should account for actual monthly expenses, including minimum payments on all of her debts. Then, she should allocate her extra money each month towards her long term goals, which includes paying down student loan debt, saving for a car and saving for a house downpayment.

Getting into the habit of good financial spending is really important, especially as she starts to tackle big expenses like student loans, car payments and a mortgage. I highly recommend using some kind of budgeting software. We use youneedabudget.com and it is awesome. There are other programs out there too, so finding something that works well for her will really help her make progress towards her goals.

 

[Mackenzie Click-Mickelson]

These cards can still be reported to the credit bureaus. My husband is an AU on some of my Chase cards. They never asked for his SS # when I added him, but it still gets reported to the bureaus monthly and affects his credit score.

Ah. Well at least in my case I know ours hasn't as we've seen my credit report this year and last year and the CC isn't on my credit report. So then I suppose it depends on the actual CC itself (i.e. what type it is, who it is through, etc).

 

[DisMommyTX]

Are they authorized users or are they on their with their credit being affected? For example I am an authorized user on my husband's SWA CC (I even have my own CC with my name on it same account number as him) however none of my information like SSN beyond my name was used. Therefore it is not affecting my credit.

This is no longer true. When I applied for a new Chase card earlier this year, they included 3 of my husband's cards for which I was an authorized user as part of the 'max 5 cards in 24 months' denial. Two of the cards were 23 months old, so a couple months later I applied and had no problem getting approved. Chase is most definitely including cards on which you are an Authorized Users as part of your credit profile.

To the OP. Pay as much as she can toward the loans. Save the 'savings', but don't worry about adding to it right now--just put everything extra towards paying loans off early. I actually preferred not consolidating as paying off them off in smaller chunks made me feel like I was accomplishing something. It felt good each time one was paid off and motivated me to keep scrimping to pay extra on the next one.

 

[Mackenzie Click-Mickelson]

This is no longer true. When I applied for a new Chase card earlier this year, they included 3 of my husband's cards for which I was an authorized user as part of the 'max 5 cards in 24 months' denial. Two of the cards were 23 months old, so a couple months later I applied and had no problem getting approved. Chase is most definitely including cards on which you are an Authorized Users as part of your credit profile.

I still think it depends honestly not an across the board this is the rule and how all companies are. I assure you my credit card that I have through my bank (which does affect my credit) was never a determining factor for approval for my husband. My credit information was never a consideration for approval for my husband. Just his information. My actual credit report from the 3 bureaus does not have his SWA CC on it at all.

Now what I think you are thinking about is slightly different than affecting your credit score. If Chase has a rule about X # of Credit Cards specifically with them I can def. see them adding up how many cards are in the household (including authorized users) and using that for eligibility purposes. I was talking about affecting your credit score with the 3 bureaus.

ETA: I did dig a bit more into this. So the 5/24 rule is the following and this is specific to Chase (I'm sure other credit card companies have their own rules):
"Chase has an unpublished rule that applies to most of the credit cards they offer. The rule is an apparent attempt to limit people that sign up for credit cards for the rewards. It’s as follows: You will not be approved for this card if you have opened 5 or more bank cards in the past 24 months."

Now for your case in particular regarding authorized users I did find this information (have no idea if it works just thought I'd throw out what I saw): "If you have five cards reporting as a new account within the past two years and ONE of them is an authorized user account then it’s possible to call reconsideration and plead your case. They have the ability to approve you if this is the case, but it’s still up to the credit analyst to make the call."

 

[marcyleecorgan]

My first instinct is to tell you that those student loans are a fairly low rate of interest and can be paid off bit by bit.

However if you have money in excess of $20k then it sounds like you need to investigate how to invest a portion of that, to gain further interest. And then portion out the rest in a payment plan for the student loans that works best for her. These loans will stick around for years to come so you don't want them looming at a vulnerable time. If you can knock them down substantially, that is great, but don't leave her with ZERO savings and some amount still owed on the loan!

Have her use her current car as long as she can maintain it.

I wouldn't start on the credit route yet unless she is already good at budgeting and is used to logging into her bank and dealing with payments on a regular basis. If you've already been supporting her through that, then awesome! But don't start her on all the rewards type cards and such yet if there is any chance she might go on a spend-spree at Ebay or something.

Sounds like she is off to a good start!

 

[mousehockey37]

So a lot of what I said earlier in the thread is actually mentioned in an article that I saw today:

http://money.cnn.com/2017/09/06/pf/college/paying-off-student-loans/index.html

 

[runwad]

So a lot of what I said earlier in the thread is actually mentioned in an article that I saw today:

http://money.cnn.com/2017/09/06/pf/college/paying-off-student-loans/index.html

Honestly, I think everyone has to make their own decision about what is good for them. But one thing to be aware of, because I think the misconception is out there, that after 25 years your loans are forgiven. In most cases the forgiven amount will be added to your taxable income and you'll then owe the IRS:
https://thecollegeinvestor.com/11856/secret-student-loan-forgiveness/
Tax Consequences From Student Loan Forgiveness
It's important to note that while these “secret” student loan forgiveness options could be helpful to some borrowers, for others they may result in tax consequences (see taxes and student loan forgiveness). Under current IRS rules, you may be required to pay income tax on any amount that is forgiven if you still have a remaining balance at the end of your repayment period for any of these plans.

What happens is the forgiven amount of the student loan is added to the borrowers taxable income for the year. So, if you had $50,000 in student loans forgiven under these repayment plans, it is considered income. If you made $35,000 working, your total income for the year would now be $85,000. The result? A higher tax bill.

 

[jen7233]

This is a hard choice, I'm sure. I think I'd lean towards not getting a newer car at the moment, keep the money in savings except maybe for down payment and first month's rent, and then tackle that debt once confident with a new job and pay after a few months on the job. She sounds like a hard worker.

 

[starry_solo]

I was told I couldn't do that till my son was 18. A bank manager told us that.

I got my first credit card at 14 or 16. My dad or mom helped me with the calls, etc. But it had a low limit ($500) and still has the low limit (I've never called to have it increased). It wasn't an authorized user card either.

 

[Shelly F - Ohio]

What is a PM? Project Manager?

PM is private message

 

[MKCP5]

I am a bit confused why someone with 20,000 in savings would have 25,000 in student loan debt. I took out student loans because I did not have the money to pay my tuition bills. I would pay the loans off at an accelerated rate, but not put all the savings toward them at once.

None of my kids ever had loans or car payments and their credit is good. They were authorized users on one of our cards through college (one which gave them each their own account number so we would not have to cancel ours if they lost it). It's funny, my DH and I occasionally have credit score reviews which say our only negative is the fact that we have no debt! Fine by me! I am not looking to apply for loans at this stage of my life.

I can understand your confusion. We do not pay for our kids college. We believe they need to earn it. They work part time while they go to school full time. We pay for their cell phones, car insurance, healthcare, books and supplies, and help with various other financial issues. Each of them files a FAFSA each year and are sometimes able to get some scholarship based on grades, etc and are offered loans each year. She never knows year to year what she will or won't receive for money from the school until July before school starts. DD has taken the loans, not knowing what her summer income would be that would help pay for school each year. She was blessed with some amazing opportunities the past couple of summers and has worked 70 plus hours per week may-aug to build her savings in case no loans or scholarships come through. Now she is nearing the end of her school tenure and has been diligent in saving and needs to decide the best way to invest or pay off things with the $$ she has worked so very hard for.

 

[STLDisney_Freak]

If it was me...I pay half to the student loans and keep half. Get the loans paid off asap.

 

[MKCP5]

To OP:

From the savings, I would have your DD keep 6 months of expenses as an emergency fund. I would then have her determine her long term goals. Does she want a car, does she want to have a house down payment, etc.? Once she has a job, she can plan out how she will allocate her income. She should focus first on savings enough money to get any kind of employer retirement match. Then she should account for actual monthly expenses, including minimum payments on all of her debts. Then, she should allocate her extra money each month towards her long term goals, which includes paying down student loan debt, saving for a car and saving for a house downpayment.

Getting into the habit of good financial spending is really important, especially as she starts to tackle big expenses like student loans, car payments and a mortgage. I highly recommend using some kind of budgeting software. We use youneedabudget.com and it is awesome. There are other programs out there too, so finding something that works well for her will really help her make progress towards her goals.

This is what I am working towards with her. I started out with bad financial habits when I was young and paid the price for that. I'm working hard for my kids to be more informed and better prepared for life. I'll check out that site. Thank you!

My first instinct is to tell you that those student loans are a fairly low rate of interest and can be paid off bit by bit.

However if you have money in excess of $20k then it sounds like you need to investigate how to invest a portion of that, to gain further interest. And then portion out the rest in a payment plan for the student loans that works best for her. These loans will stick around for years to come so you don't want them looming at a vulnerable time. If you can knock them down substantially, that is great, but don't leave her with ZERO savings and some amount still owed on the loan!

Have her use her current car as long as she can maintain it.

She will drive "stanley" til he drops!

I wouldn't start on the credit route yet unless she is already good at budgeting and is used to logging into her bank and dealing with payments on a regular basis. If you've already been supporting her through that, then awesome! But don't start her on all the rewards type cards and such yet if there is any chance she might go on a spend-spree at Ebay or something.

Sounds like she is off to a good start!

Thanks for your thoughts. Good advice!

This is a hard choice, I'm sure. I think I'd lean towards not getting a newer car at the moment, keep the money in savings except maybe for down payment and first month's rent, and then tackle that debt once confident with a new job and pay after a few months on the job. She sounds like a hard worker.

She's a super hard worker and I am so very proud of her. I want her to start off on the right foot to keep good financial habits for life. Thanks for your thoughts!

 

[Anthony1971]

some things to consider:
everyone is different........so what you do in the end is up to you.
Credit scores are based on many things and paying your student loan off fast or slow will have little impact and in most cases faster will be better.
A credit score will include a max suggest credit a person should have so if you have a 40,000 credit line and 25,000 in outstanding loans you will now only have a 15,000 credit line...you may get a credit card with 0 interest and decide to buy something big and pat over time now you have 5,000 open credit.... making you nearly maxed out on your max credit and this will have a negative impact on your credit score as it seems you can not pay your debt.
buying a house and using your savings as a down payment... if she has 25,000 in debt and 30,000 in savings both are disclosed and the back sees at as 5,000 in assets... so paying it or off or not has little impact in assets but not having it and showing it was paid off at a faster rate will have a positive impact.
I would not wipe out her savings but use most of it to pay the loan...
I am not a believer in debt.... while there are arguments to having it and I am fine with them... to me House mortgage being good debt????? they say this because you gat a write off on your taxes ok... so you pay 20,000 in interest on your loan you get a tax write off of 6,000 -lets not forget you forgo your standard deduction to itemize which is more of a loss- at best 14,000 of you money is gone do not see how saving more than you need to pay these loans is a good thing....that is so long as you are stable in your job(s)... most people today continue pay the min. on their mortgage as they earn more buy a more expensive car and live a nicer lifestyle instead of getting what they need but don't really see the true cost of doing so before getting rid of all debt.