CREDITBUDGETING

Teaching the Next Generation About Credit

Preparing for your future starts way earlier than you think. For parents of young children, it can start when you talk to your kids about what they might like to do when they get older. As soon as you have teenagers, it becomes a more serious conversation. To prepare them for adult life, parents may start sharing advice about money including how to budget, why save, and — more importantly — why credit is so crucial.

Budgeting Lesson

Teaching kids about money is important and there are many ways to do it. As long as you talk to them about it, you’re doing something right. Some children learn from doing. Let the children in your life watch as you budget for the bills for a week and show them how the money is split to pay bills and save. This will also help them appreciate all that you are doing and spending on everyday items. You can also have them create the grocery list on a budget. Tell them what you will need and see if they can find the best deals for what you are looking for. This not only creates ways for them to learn how to budget, but it also generates appreciation for the food that is regularly purchased.

Authorized Users

When it comes to credit, there are a few ways to teach about why it’s important and how to build good credit. One way to help with this could be adding a teenager to a credit card as an authorized signer. When they are on a card that is handled properly, it helps show a credit history for them prior to them getting a credit score. While credit history may not have a huge impact on a score, it’s a building block and starts them on the right foot. Talk to them about why that is important. Once they understand how credit cards work, allow them to have access to use the card with the understanding that it is best to pay the charges back in full to avoid interest, and hold them accountable for the payment.

With credit affecting so much more than loans, it is important to give kids proper exposure to and preparation for credit as they approach adulthood. Preparing them for what’s to come is essential for their future.

Sources:

https://www.nerdwallet.com/article/credit-cards/credit-card-authorized-users