Teaching Your Teens About Credit
Your teen is probably like many others. He or she expects you to buy the latest fashions as soon as they hit the racks at the stores. Teens are often disinterested in the clothing that can be purchased at sale prices. They want the best and they want it now. They are quick to tell you to put it on your credit card. However, they often don’t understand the ramifications of credit. This is why teaching your teens about credit is essential for their adult lives.
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Things You Need to Teach Them
Some people think that teaching kids about credit is very much like teaching them good manners. You absolutely must have it. And, like good manners it’s a hard concept to explain. Kids need to learn about money. These are the things you have to teach them:
- The meaning of credit– This is a tricky explanation no matter what age you attempt to begin your teaching. So, make sure that your teen understands earning, paying money, and borrowing. If that is understood then credit training can be a lot easier to do. Make sure to explain the import of never taking out loans on more than can be afforded. Read more.
- The effects of credit on life– Credit affects your lifestyle and this is an important aspect of any type of credit training. Explain that the clothes they wear, the cars they drive, and the places they live can all impact their credit scores. They must see credit as a tool and not a crutch.
- The methods of monitoring credit scores– Include your teen in your typical monetary transactions. They are going to learn what they see. So, you must model responsible spending and credit usage. Explain that checking their credit score quarterly can help them ensure that they are staying at an acceptable credit level. You can even go so far as to explain the loan to value difference and how credit scores are based on the available credit on your cards. Learn more.
- The important of protecting their private information- One of the fastest growing crimes in the world, today, is identity theft. And, having to clean up the damage done by these thieves can take years to do. Start teaching them to protect their personal information early on.
- The fact that not all your debts show up on your credit report– We all know that not all debts get reported. Agencies can choose whether or not to provide that information to the credit reporting entities. Teach them that it takes at least 7 years for a debt to fall off your credit report, but that some creditors, depending on the laws, can still come after you in court to ensure you pay them back.
Credit is a serious responsibility that teens must learn about before they get themselves into astronomical debt simply because they want things now. We must be good fiscal examples for them. You can learn more about that here.