When is it a good time to start teaching your children about finances? I run across too many clients that make great money but just have a lot of debt. Somewhere along the way we either learn our finances on our own or we had parents who taught us the value of money and the importance of budgeting.
I came across a good article “5 ways to teach your children about credit cards”. It explains the importance of teaching children at an early age. Showing children how we use credit cards and explaining that this is NOT money, and that we don’t use this in place of money. It is NOT magical money. Then it explains that when your child is a teenager it is good to make them an authorized user on a credit card with you. Letting them use it only for emergencies, then once showing better responsibility letting them use it with a limit and then collecting the money at the end of the month to pay what they have used. Making them responsible for their payment is key and teaching to pay the bill on time and complete balance, rather than only paying the minimum.
Another factor is paying bills together. Showing your children how bills are paid. Laying them out on the table and showing them what is earned and where it goes. This way they see how you spend your money and understand the value of money. Finances shouldn’t be a big secret from your children, they learn how to spend from you. You are the best teacher they can have when it comes to money.
Then the article explains that when the time comes you should open an account of their own. Take them to the bank and show them how this is done, do it together! And manage it together. Whether it’s their first checking, savings or credit card, you should partner with them. Now that everything is done online do online banking with them.
Now the 5th step the article states in teaching your children about credit cards, I disagree with. They recommend or tell you to consider getting a “prepaid” credit card for their first credit card. Prepaid credit cards seem like they would be a good option BUT the downside is they don’t reflect on your credit. So they are not helping build your child’s credit history. A better way to do this is to get a “secured” credit card instead. These can be done with your bank and it protects you and your child against any chance of the card going into default.
To read the full article from Money Talks News, click here.
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Summit Home Mortgage
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