Start ’Em Early — Teaching Your Kids About Credit

Being a father of 3 kids ranging in age from 2 to 14 in this day and economy I've been thinking about their future. The news is full nightly with problems our banking system is having and how our country is saving and spending. I am working with my kids to teach them about credit and spending and hope you will think about it too. Consider this.

Many parents have learned how to build and manage their credit and money through trial and error. As a result, in many cases, their credit has either been damaged or not optimized in the process. Parents can find a number of easy ways to get educated on more effective ways to manage their money and credit. Here are some important, age-specific tips that parents can use to help their children learn the value of money and, consequently, credit from ApprovalGuard.com:

1. Start Young—Young children are sponges for new information and can learn valuable money management lessons through their interaction and activities with parents. Use daily errand activities like going to the supermarket or bank to teach kids lessons about budgeting and money. Consider having them “pay” for rent, food, and other things with toy money for a week. Let them learn on their own at first and then go back and help them make a budget. Once your children are ready, consider a weekly allowance that is tied to household responsibilities and some form of budgeting and saving. Additionally, explain the difference between “wants” and “needs” to your children.

2. The Teen Years—Teen spending makes up a great deal of the economy and, if you are not careful, it can inadvertently cost you a good portion of your salary as well. Work with your teenagers to teach them the importance balance between spending and saving as well as budgeting. Help prepare them to appropriately begin building their own credit.

3. College Bound—Many young adults will begin receiving offers for credit cards (although this will soon change with the new Credit Card Act of 2009) and quickly find themselves with debt they cannot pay. College can be treacherous for students with credit cards. If you haven’t built the foundation of educating your children on effective credit management by the time they’ve entered college, it is not too late. It is critically important to start educating them on the best practices noted above and lead them by example through effectively managing your own credit. The key is to not procrastinate any longer. Various educational resources exist as referenced in this column to help minimize any anxiety you may have regarding your own subject matter expertise.

The road to good credit doesn’t have to be a rocky one. Educating our children about money and credit from an early age will help them build a positive future. For more tips on credit, please e-mail me, I can point you in the right direction. I look forward to hearing from you... and your kids in the future.