I remember when I opened my first checking account. I must have been about 15 and only had lawn-mowing money to deposit, but it made me feel like I was really becoming an adult.
I also remember the first time I overdrew my account and that sinking feeling when I opened the letter that said I had insufficient funds and would be assessed a penalty.
I grew up in a small town in eastern Oregon and I knew most of the people who worked at the bank. The overdraft was an embarrassing mistake and I remember the teller, who also happened to be my cousin, looking a bit disappointed in me.
But the experience left an impression on me — keeping your finances in order took work and attention. Little things like balancing your checkbook and keeping track of your accounts are important. I was lucky to learn such lessons at such a young age. Many people aren’t as fortunate.
Karen Smith, executive director of Montana Credit Unions for Community Development, is passionate about financial education, which she says is a key component of keeping people out of financial problems.
Financial education can be as complex as learning about the stock market or as simple as balancing your checkbook. But for many people, the most important thing to learn and understand is how to manage their credit score and their debt load.
Most people don’t know that three companies track your credit score and these companies must provide you with one free credit check a year, Smith said.
Tracking your credit score is important for a variety of reasons. Sometimes companies you do business with can make a mistake on a bill, which can end up on your credit score. If you’re a victim of identity theft, this will often show up on a credit score as strange past due balances or addresses for credit cards you didn’t know were in your name.
It is best to know what your credit score is prior to applying for a home or car loan. That way any discrepancies can be sorted out before you’re in desperate need of a loan.
It is also important to keep a handle on your debt. The rule of thumb is to avoid getting into a situation where you have to skimp on life’s necessities to make debt payments. If you’ve done things right you should have money each month to put into savings, Smith said.
If you need help with financial planning of any kind, your bank or credit union is a good place to start. Many have advising and education services to help you figure things out. It may be a painful lesson to learn, but one that’s important to get and then pass on to the next generation.