November 27th, 2008
Educating Children on The Importance of Credit Scores
There are a lot of things that you need to educate your children about as they grow. Teaching them about money, and more importantly, the value of their credit score, is an important part of preparing them for their adult life. This is one of the most important lessons that we could ever pass on to our children, yet it is a lesson that is often neglected. If we teach our children about credit and money, we can help them to build responsible habits and behaviors for spending that will last them a lifetime and keep them from falling into debt before they ever have a chance to build a good credit history. Here are five tips for educating children on the importance of credit scores, credit reports and good spending habits.
1 – Start small by teaching young children about money management through their interactions with you.
Teach them by utilizing daily errand activities as small impromptu lessons about money and budgeting. Give your children pretend money, encouraging them to play store games. There are also numerous books that you can buy that are designed to teach children about money very early.
2 – Give a weekly allowance as a way to teach your children about spending responsibly and budgeting.
Pick a reasonable amount of money and give it to them in small denominations like $1 and $5 bills rather than a $20 dollar bill. Encourage your children to save a portion of their allowance every week by calculating the amount that could be saved in a month or in a year. Older children can benefit from opening a savings account which will educate them about deposits and withdrawals.
3 – Explain the difference to your children between wants and needs.
Encouraging your children to save and earn for something that they really want is a good way to teach healthy spending based on delayed gratification. Help your child keep accurate track of their money by giving them a chart and piggy bank incentives like $5 for every $20 that they save.
4 – When your child grows into a teen, you may consider giving them a prepaid credit card or access to a parent’s credit card.
This is a convenient way for you to introduce them to credit, but it might end up leading to startling monthly bills if your teenager is not careful. You should sit down with your teenager every month and show them how their spending is affecting your credit score so that they will understand how theirs would be affected.
5 – Students who have credit cards in college can find it difficult to handle their money because of the pressure that they have to spend on a limited income.
You need to teach your children early about responsible credit card use, debt and late payments and fines. Check their balances with them to help make sure that they stay on budget and take the time to go over their credit score and reports often to help them stay on track at all times even while away at college.
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