Having good credit and being wise with money is something for which everyone should strive. Of course, the earlier in life you learn about credit, the more savvy you will be once you have your own credit card. This can help you to be wise with your money and maintain good credit later on. As a parent, you can ensure that your kids can be financially smart by stressing the importance of good credit. Here are some tips.
Talk to your kids about money and about credit cards. Explain to them that it’s important to save and invest your money and that everything you have in your home cost money to get. Tell your children that in order to be able to pay for your various bills so that you can have TV, internet, a cell phone and more is because you have a budget and pay for everything on time every month. Invite them to ask any questions they may have, even if it’s just for definitions for money related things.
Let your kids have some responsibility of their own by giving them money. If you are like most parents, you probably already give your children an allowance. Pay them for doing chores around the house or even for their own little ventures, such as selling lemonade outside your home. When they have their own money, kids can learn a valuable lesson that can give them a good start in their financial life.
When you talk to your kids about credit cards specifically, it’s important to tell them that credit is not money but a loan. Unfortunately, it’s far too easy for many people to fall into a trap when they have a credit card by spending past their means. Tell your children that when you buy something using a credit card, you should never go over your credit limit, which is the maximum amount you are allowed to spend at any given time. Explain that you have to be smart when you use a credit card and that you have to pay back whatever amount of money you spend on it every month and on time so that you don’t get in trouble. Tell your children that a credit card also has something called interest, an extra amount of money, because it is a loan and not cash.
Explain to your family that it is important to have good credit when you have a credit card and what that means. As your kids get older, they will better understand and you will be able to use different language when discussing financial matters.
David Milberg is a financial analyst in NYC with nearly 3 decades of experience in the finance industry. He is a long-time owner of Milberg Factors, a factoring and finance company with locations in New York, California, and North Carolina.