Co-signing – For Your Children – A Bad Idea

You may argue that you need to cosign a loan for an offspring so that he / she can establish good credit.  While it does seem admirable for a parent to help their children get established, think about what your potential action is saying to them. 


If you are cosigning so they can get their first credit card, you are sending the message that it’s okay to buy things on credit that you could not afford to purchase with cash.  You are telling them that when they have no sufficient means to save the money first, then go ahead and plunge into debt. 


You are sending the message that impulse buying is okay.  You are authorizing them to buy now, pay later; pay interest through debt servicing instead of gain interest through savings and investments.


Young adults should understand that it is not wise to go into debt for things that often depreciate rapidly and do not retain their initial value.  They should be taught to save first and plan for their spending at a later date. 


Young people do not appreciate the value of a dollar, nor have they had the exposure and experience to make wise money decisions.  They need to learn and practice the habit of financial discipline.  If you offer to cosign for them, they may only learn financial smarts by graduating from the school of hard knocks – and you, as the parent, may learn a hard lesson also.



Your thoughts on this subject?  Your comments appreciated!


Content © Rich Brott, 2011

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