7 Important Lessons for Teaching Kids About Credit:
There are a lot of financial lessons that parents should teach their kids, such as how important it is to save and the value of a dollar. However, one lesson that is often forgotten or pushed to the side is none other than credit.
Credit is one of the most crucial parts of a person’s financial footprint with a significant impact on life in more ways than one. Learning how to be a responsible borrower is something that should be taught at an early age. Keep reading for getting 7 important lessons for teaching kids about credit.
Why Teach Your Children about Credit?
When you are a parent, it just makes sense that you would want to ensure that your kids can stay away from money mistakes and be more accountable in handling their finances. Through teaching your kids how delicate and important credit it, you are actually taking the necessary steps that will prepare and gear them up for adulthood. Of course, part of their journey to learning about credit is watching the way you manage and handle your own money so be sure you are also a good role model for them.
Credit Lessons to Teach Your Kids
It doesn’t matter how old your children might be because it is important for them to have a good understanding of the following:
- Establish credit as early as possible.
The length of credit history is among the key factors that are used to calculate credit score. This means that it is much better to start building credit at a younger age.
- Build up credit history.
Just because someone is already more than 18 years old doesn’t automatically mean that they already have a credit report. There are people who stay credit invisible for quite some time during childhood.
But, as far as buying a house or accessing certain types of credit is concerned, whether it is in-store finance, personal loans, or car loans, a healthy credit history is imperative. It can be made possible through opting for a credit card with low limit and paying off the balance every month.
- Maintain a healthy payment history.
Missed or late payments can remain on a credit report for a maximum of two years. This is why it is important to pay off bills in full and on time to prevent those black marks that can drag down your credit score.
- It is not their money.
Just the mere thought of easily swiping a credit card is enough to get people in some serious financial troubles. Your kids should know and remember that whenever they swipe their card, they are actually borrowing money from a creditor that they need to pay back with interest most of the time.
- Credit always comes with fees and interest.
This is another crucial thing that kids should know. Teaching them how annual fees and interest work can prevent them from being caught off guard with surprise extra costs.
- The difference of bad credit and good credit.
See to it that your children know with every credit contract come great responsibility. Teach them debt defaults or late payments can impact their ability of getting approved for a 7-year credit. Good credit listings are made through making on time payments to help them maintain a clean credit report with higher credit score.
- Different credit products also work differently.
Knowing about the differences of credit products such as credit cards, store finance deals, personal loans, and car loans can guide them in making more responsible decisions with positive effects on their credit report.
There are several apps that can help you in improving credit score 7 of them are following.