Simple Techniques for your Kids to Master Credit
April 27, 2018
Teaching Your Children to Master Credit
If you want your children to grow up understanding how to manage their credit, it's never too soon to teach them the importance of maintaining a positive credit score. From starting a career to finding a place to live, your children's credit score will impact them in many ways that they might not think about unless you guide them.
Having poor credit can make life much more challenging, and it's easy to go overboard if you are not careful with your budget and spending habits. Showing your children how to manage credit responsibly can seem like a difficult and challenging task, but you can simplify the process if you keep a few tips in mind.
Keep Your Children Involved With Your Finances
Getting your children involved with your finances is a vital step when you are trying to teach them how to master credit. Sit down with them when you get home and go over your career and the things you do at work, and you will be on the right track.
You can explain to them how much money you earn and what steps you had to take to get where you are in life, but you should also show them the bills you need to pay each month. Go slow and ensure that they understand the concepts you want to reveal if you wish to get the most from your effort, and you will go far. If you would like to get the best results possible, take it slow and encourage them to ask questions the second they feel confused.
Show Them How Credit Works
Telling your children how credit works can bore them, so you don't want to take that path if your goal is to keep their attention. What most teachers and parents fail to understand is that children learn the best when they are having fun, so making it into a game will help. Children love to pretend they are working in different careers, and you can use that fact to your advantage.
Get toy money from the store and let your children earn it from the roles they play while you spend time with them, and you will be impressed when you see the difference this approach can make. You can encourage them to buy things with their money, but set the price of some items higher than what they earn. Let them know they can still purchase the items if they use credit, but remind them that they will need to pay it back in the future. You can even play trivia games and reward your children for making smart decisions.
Teach Them to Use Self-Discipline
When it comes to mastering credit, self-discipline is an essential part of the puzzle you can’t afford to overlook. People who lack it will feel compelled to spend money they don't have, and it will come back to haunt them in more ways than they think. A great way to teach your children self-discipline is going to the store and buying them something they want to have.
However, give them a choice; they can get one toy now, or they can wait and get two toys in a few days. You can encourage them to make the smart move, but you must let them choose if you want it to work. Most people don't intuitively understand that long-term rewards are better than short-term gratification, so you have to teach them.
Let Them Earn Money
You could teach children about mastering credit for years, but giving them real-world experience is always the best option. They will learn what it takes to earn and manage money, but they can also discover what happens when they make poor choices. Give your children tasks to do around the house and yard and pay them when they get the job done.
You can let them buy things they want with the money they have earned. If they would like to get something they can't afford, you can let them borrow some of your money to cover the cost. Explain that they will need to repay a little more than they borrow to make up for the interest. You can then take a portion of the money they earn each week to pay back the debt, and doing so gives your children real experience with money, credit and the lending process.
Give Them a Credit Card
When your children get a little older, consider getting them a credit card. Some lenders have credit cards geared toward children, and they let the parents monitor the activity of the cards. If you get the right credit card, you can add money and pause the account from an application on your smartphone.
If your children go overboard and get more debt than they can comfortably afford, let them work hard to repay it. Take most of their allowance so that they will know what happens if they make bad choices and allow their balance to get out of control. Don't forget to praise them when they make smart decisions and manage their credit cards the right way.
Teach Them the Importance of Having Good Credit
Show your children how important having a positive credit score is if you want them to choose the correct path. Have them join you while you go online to check your credit report, and tell them what it means. Explain that many employers and all lenders review credit scores before making a decision.
Give your children examples of how a poor credit rating could negatively impact someone's life over the long run. If you have ever had bad credit, tell your children about it and what you learned from the experience. Rather than only doing this once, sit down with your children to discuss your credit score on a regular basis.
Most schools don't teach children about credit or how to master it, so it is in your hands to guide them down the correct path. Even though learning about credit can be tedious, you can find ways to make it fun so that your children pay attention to what you say.
Letting them work around the house to earn money gets them moving in the right direction, but lending them money and making them repay you will give them a complete picture of how credit works. Using words and terms to which they can relate, reveal the ways that people's credit ratings affect their lives. If you set and commit to the plan, your children will learn to master credit before they go off to live on their own.
Polaris Greystone Financial Group, LLC is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Advisory services are only offered to clients or prospective clients where Polaris Greystone Financial Group, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Polaris Greystone Financial Group, LLC unless a client service agreement is in place.
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