One of the basic goals of every parent is to teach their child the lessons they need to know to be able to make it on their own when they become adults. Of all those lessons, one of the best that you can teach to your kids is how to handle credit. The reason is simply that, as with anything in life, if they know about it from a relatively young age they will have more of a chance to be able to deal with it correctly and not make a mess of it later in their life. Our blog today will give you plenty of tips and advice on how to explain credit to your kids and help them to handle it well when they finally get to the point that they can use it. Enjoy.
Most parents realize that the Credit Card Accountability Responsibility and Disclosure Act (CARD) limits the access that teenagers have to credit. Knowing that however a parent can still authorize their child to use their credit card and start building their own credit line. Once you’ve done this, the next four lessons will give any teenager or young adult a definite head start on how to use credit in the future.
First, let them know that credit affects almost everything in their life. The simple fact is that today’s teens don’t have the experience that we did in the 60s, 70s and 80s and probably don’t realize just how important credit will be for them in the future. If they want to lease and apartment, purchase new car, eventually buy a house and even get a job, having excellent credit is a must. These days, even relationships are started (and ended) based on a person’s credit history. Letting your children know this and teaching them that having excellent credit is important is one of the best things you can do for them.
Let them know that their credit is built on the habits that they make. The average teen (and for that matter, many adults) don’t realize that credit scores are calculated based on a number of different factors. If you teach your children that their ever-growing credit history affects their scores and that said scores can be positively influenced by excellent credit habits like paying on time and keeping their debt to credit ratio low, you’ll be doing them a huge favor. Knowing that the decisions they make as young adults will have long-lasting effects on their life is a very valuable lesson.
Teaching your kids that maintaining a healthy credit score is much easier than fixing a bad one is also important. If they know that one or two bad choices or mistakes can take years to fix it, they will be less likely to make those bad choices and more likely to make good ones that will help keep their credit score high in their ability to get credit high as well.
Finally, teaching your children that monitoring their credit is important will help them just as much as the first three lessons. If they know how to check for errors, protect their financial information and avoid identity theft, they will have far fewer problems as adults with keeping their credit sterling and their credit problems to a minimum.
Educating your child about credit will allow them to (hopefully) live the American dream and enjoy their lives to the fullest. If you have questions about personal finance, credit or anything to do with money, please let us know and we’ll get back to you with answers, advice and options ASAP.