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Early Credit Lessons
Introducing and applying credit lessons early and reinforcing good habits can add to the foundation of skills that can be incorporated throughout life. If you’re thinking of preparing your children for a future of responsible credit habits, now’s a good time to start. Here are some money and credit topics to think about when it comes to credit education at an early age.
BEGINNING LESSONS
- Introduce the concept of money early. It’s easy for a child to think that money “grows on trees.” Use easy-to-understand examples or find some children’s books from a local library that address money and budgeting.
- The difference between need vs. want. Demonstrate the difference between the two and encourage children to save money for things they really want.
- Set up an allowance. Start with a small denomination each week and increase it as your children’s responsibilities grow. Consider volunteering your “banking” services by holding their allowance and adding in some additional money as “interest earned” as an incentive for saving. If they borrow money, teach them the concept of debt.
INTERMEDIATE LESSONS
- Set up a bank account. Check out your local bank for programs they may offer for kids. Show your child how to make deposits and withdrawals, and to keep a record of these transactions. When you receive the bank statement, go over it together and see how it measures up with what was personally recorded.
- Making decisions. Include your children in more of the family budgeting plans such as family vacations, or clothes shopping. Real world situations can help them decide whether it’s more important to buy that one expensive outfit or have enough clothes to last the entire school year.
- Part-time job . By the time your children reach high school, they might want to consider getting a part-time job. This is also a good time to go over taxes and other deductions with them, especially after their shock at seeing what’s left of their first paycheck.
ADVANCED LESSONS
- Practice with credit. If you feel your children are ready to start carrying a credit card, start by obtaining an authorized user’s card for them on your credit account (remember to set balance limits).
- Long-term goals. Work together to create a strategy for meeting long-term goals, such as saving for a car or a school trip.
- Establish and build credit history. Show them how to treat their credit with care. Explain how credit works and the impact of responsible credit management.
Children naturally seek new information and challenges. Different factors can affect their learning potential, level of persistence, and determination to succeed. And at an early age, guiding a child’s knowledge of finance can play an important role in their future. However, credit education can start at any age when it comes to learning responsible credit behavior and managing credit for all of life’s events.
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