How To Teach Children About Credit
Kid-friendly credit card information can be hard to come by. While the Internet provides a wealth of information on innumerable subjects, good, sound advice about how best to teach youngsters about the pros and cons of carrying a credit card is often times elusive. That is why our financial experts here at BestCreditOffers have put their heads together to come up with some valuable tips for anyone who wishes to begin educating a child about credit and credit cards. Even if the young’un in your life will not need a credit card now or in the immediate future, it is never too early to talking to him or her about credit cards. This is to ensure that when they are old enough to have a card of their own, they will be far more likely to use it responsibly if they already possess knowledge of how credit cards work and are familiar with what it means to have good spending habits.
Where To Begin
In teaching your child about credit cards, what you are actually teaching them about is money. Kids like money for the very same reason adults like money – it allows them to buy things that they want. In the simplest terms, what you will be doing is teaching your young pupil the right way to pay for purchases they make.
Therefore, the first step is to be certain that your child has a basic grasp of money management. See to it that he or she receives a reasonable allowance and sit down with them to create a budget. Encourage them to establish a monthly savings goal and, if possible, allow them to work with cash as it will enable them to have the physical sensation of money coming and going. That is an invaluable way to drive home the concepts of saving and spending. If your child is old enough, help them set up their own bank account.
Credit Cards: What To Cover
There are several basics that you should be sure to touch upon when you explain credit cards to your child. One good way to go about things is to use your own card as an example and go over the entire process – from using it to pay for something at the store, to receiving the bill in the mail, to sending in your payment.
Be sure that your child understands that credit cards are not free money. Tell them that what a credit card does is allow you to delay paying for something for a little bit of time by borrowing money from the bank. The money borrowed will have to be repaid, so stress how important it is to not charge anything that you don’t already have the money for.
Let them know that with a credit card, the longer you take to pay back the money you borrow, the more money you will have to pay in the end. One way to make this stick for a child is to use an example – give them the option to buy a toy and pay $1 right now or $5 for it later. If they opt to pay a dollar now, you know that what you are trying to teach them is sinking in.
Be sure you explain that not all debt is bad. The reason why some people use credit is to afford important things they wouldn’t be able to otherwise – like a house or a car or a college education. But point out that people need to be really careful with credit because having a whole lot of debt is bad.
In a nutshell, what your child needs to comprehend in order to be on the right track to becoming a financially savvy grown up is to live within a budget and pay all bills on time.
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