Teaching your children about finances

Summary:

• Enabling your child to become a certified user of your charge card can be a easy way start teaching your son or daughter about credit.


• Explain why make payment on minimum monthly amount of a sizable balance owed might take years to pay off.


• Teach your son or daughter to simply finance things of lasting value like a car, home, business or education.

One of my earliest financial lessons actually came from watching Full House (see, you can learn things from TV shows!). It was the episode where DJ was trying to buy a sweater in the mall, but she couldn't afford it. Wanting to help, DJ's sister Stephanie noticed a sign in front of the store having said that, “Buy now, pay later.” She believed that meant she could leave with the shirt and are available back later to cover it when they had the money. Well, she was partially right. When I asked my parents what was so bad by what she did, that's when I discovered credit.

When it comes to teaching finances to your child, it's important to start early. Shoplifting a sweater like Stephanie Tanner might be a serious example, but like with any important life skill, you need to build a strong foundation at a early age. Here are some steps you can take to assist teach your kids about finances and credit now. 

Make your child a certified user on a credit card

One easy way help them learn would be to incorperate your child as an authorized user on your card.  This enables you to keep close track of what your son or daughter is charging. Additionally, it enables them to begin to build credit according to your credit report. So you can help set them up for achievement along with a better credit rating when they are trying to get their first auto loan or apartment. 

Let your children assist you to pay bills

When the charge card statement is available in, evaluate it with your child and show the way you pay it.  Demonstrate to them your interest rates and show them how finance charges accumulate over time.  Have your son or daughter sit as you pay other bills too.  Show them the important components of your credit card, auto loan and/or mortgage statements.

Most credit card statements incorporate a section that shows you how long it will require to repay balance if you only make the minimum monthly payment – this can be a great illustrative tool. Your child will probably be shocked whenever you explain that certain visit to the grocery store or restaurant could take 10+ years to repay and would cost much more than it's worth because of the interest fees.

Pass on helpful tips

Don't hesitate to tell your child concerning the mistakes that you've produced in the past.  We've all built them into, and it is vital that you learn from them. Here are a few other helpful tips to mention:

• Strive to simply finance things of lasting value. This could include a car, a house, a business or instruction. 


• Avoid financing a sizable purchase having a credit card, unless there is useful using the credit card's usage (like travel points). If something may be worth financing, there's likely a lesser cost financing option than a charge card. 


• Making a small extra payment each month on your loan can dramatically shorten the time of your time it requires to repay financing.


• The unexpected can, and will, happen. Before you take on any debt, make sure you have an emergency fund.

It's important too to talk to your child about credit scores and the way to check them.  You should check your credit rating free of charge at Credit Sesame, and show your children the different factors that make up your score and just how you can improve your score.