This post is brought to you by Amara Etter.
It’s never too early to start teaching your children good habits. This is definitely true when it comes to finances. These are some things to think about when teaching your children about credit.
Set a Good Example
There’s an old saying in writing that says you should show and not tell. It’s a lot more effective to give an example through action than to just say X is Y because of Z. However, there’s another saying that goes like this: “Do as I say, not as I do.” It’s essential you avoid falling into this pitfall when teaching your children about credit.
Kids are like sponges. When they see or hear something, they’re going to repeat it because they don’t know any better. This can work to your advantage if you’re consistently setting a good example with your actions and words. But it can have negative consequences if you’re not doing that.
Even if you’ve made some mistakes with your own credit in the past, you can use it as a teaching opportunity for your kids. Tell them why what you did was a mistake and what you’re doing now to make it better.
Don’t Scare Them
Shy away from getting too intense with your children when teaching them about credit. This is particularly important if you’re currently having some tight financial times.
Children are prone to putting blame on themselves for issues. If you go into too much detail of how you’re having to spend so much money and now have debt, they may start to think it’s their fault.
If you’re currently experiencing some debt issues, instead of freaking out your children, show them there are options for getting out of debt. Telling them about debt relief might bring them some peace of mind, since this is a way people can recover from even extreme amounts of debt. You might even want to show them some Freedom Debt Relief reviews, which tell a tale of countless people being thankful for a fresh opportunity.
It’s probably wise to shy away from too much bankruptcy talk, as that can be a pretty scary topic for kids. Teach them good habits first, while reminding them there are mechanisms in place should they ever need help with their debt.
Use It as a Learning Opportunity for Yourself
Of course, the primary reason for teaching your children about credit is so they can start understanding what it takes to have a healthy financial life. But this process doesn’t only have to be about them. Use it as a learning opportunity for yourself as well.
Try to do a bit of digging to find some things that you weren’t super knowledgeable about before. Maybe you could do some research on how some kinds of debt are considered good, while others are generally bad.
Many children might automatically assume that all debt is bad in all situations. But debt is often essential for larger purchases such as a house, car, or education. Explaining to them how certain things are worth debt, while others aren’t, is one of the most important lessons to learn early on.
If your kids see you using a credit card often, you’ll definitely want to address that. Tell them that credit and credit cards do not mean free money. Younger people are particularly susceptible to the dangers of credit card debt. You don’t know how hard it is to pay off credit cards until you experience it for yourself.
This is a great time to explain interest to them—both in terms of how it can be a good and bad thing. Interest on credit cards can keep you in debt for far longer than a child might be able to understand on their own. At the same time, interest on an investment can help build financial stability. It’s good to explain the concept of interest, and why it exists.