Kids And Credit: You Need To Reach Them Before Credit Card Companies Do!
George Boelcke FCI
April 11, 2007
It’s very sad, but true: 85% of teenagers never take a class on finance or credit. No wonder they don’t have the knowledge or tools to function in a world where the perception (and reality for lots) is that credit is part of their income these days. Nothing could be further from the truth, but the hard lessons of big debt loads and killer payments don’t usually hit home until it’s too late.
So, when do you start teaching kids about money and credit? It’s probably way earlier than you’d think, since there are now board games using credit cards, targeted to four and five year olds. That makes it critical for you to reach them before advertisers do.
By the time your kids are about 10 or 12 years old, they’ve likely formed their impressions and mindset of money. So don’t start too late. And a great way is to start with an allowance. But it’s certainly OK to have them earn it – just like they’ll have to do in real life. Then, the next trip to the store, when the nagging starts about something you just have to buy for them, it’s a good time to start asking if they want to use their own money to buy it. Your kids will quickly start finding their own priorities for the limited amount of money they do have.
Let’s face it, if you don’t teach kids about money, spending and financial priorities advertisers are more than glad to do it for you. So think of their allowance as an investment in their education, instead of a gift or waste of money.
By the time you kid becomes a teenager, it’s not too late to give them a family credit card. Let them have a make-belief credit card to use or abuse as they see fit. Give them a piece of paper with their name, a limit and an interest rate. Make the rate one percent per month so it’s easy for you to calculate.
Continue to let them have their allowance like normal and allow them to “charge” on their credit card with you. Don’t harp on what they owe in the middle of the month or write it down for them - just keep track of it yourself. At the end of the month, give them a note with the balance from the previous month, the new charges, add on the one percent interest and take a minimum payment of 10% right off their next allowance. Tell them that they can certainly pay extra, but the minimum has to be paid.
Take it as far as you’d like, but there are at least a dozen important life, credit, priorities and debt lessons in this exercise. Soon, your son or daughter may be at their limit, they’ll have payments, and the interest keeps being added. They may not be making any extra payments, they can’t go in arrears, their allowance is being eaten up by something they spent months ago and there may be some painful lifestyle adjustments.
Or perhaps your son or daughter quickly realizes the convenience AND the danger of credit cards. But take it seriously, and don’t give in to the first whining that your teenager is now broke, and it’s your fault. After all, in a few years this game will become very real - very quickly, and involve creditors who don’t care about your son or daughter at all, as long as they’re paid.
Almost two-thirds of kids get their money management tools, lessons and priorities from their parents. So you’re it. What you do today, is what they’ll likely adopt for the rest of their life.
So, when do you start teaching kids about money and credit? It’s probably way earlier than you’d think, since there are now board games using credit cards, targeted to four and five year olds. That makes it critical for you to reach them before advertisers do.
By the time your kids are about 10 or 12 years old, they’ve likely formed their impressions and mindset of money. So don’t start too late. And a great way is to start with an allowance. But it’s certainly OK to have them earn it – just like they’ll have to do in real life. Then, the next trip to the store, when the nagging starts about something you just have to buy for them, it’s a good time to start asking if they want to use their own money to buy it. Your kids will quickly start finding their own priorities for the limited amount of money they do have.
Let’s face it, if you don’t teach kids about money, spending and financial priorities advertisers are more than glad to do it for you. So think of their allowance as an investment in their education, instead of a gift or waste of money.
By the time you kid becomes a teenager, it’s not too late to give them a family credit card. Let them have a make-belief credit card to use or abuse as they see fit. Give them a piece of paper with their name, a limit and an interest rate. Make the rate one percent per month so it’s easy for you to calculate.
Continue to let them have their allowance like normal and allow them to “charge” on their credit card with you. Don’t harp on what they owe in the middle of the month or write it down for them - just keep track of it yourself. At the end of the month, give them a note with the balance from the previous month, the new charges, add on the one percent interest and take a minimum payment of 10% right off their next allowance. Tell them that they can certainly pay extra, but the minimum has to be paid.
Take it as far as you’d like, but there are at least a dozen important life, credit, priorities and debt lessons in this exercise. Soon, your son or daughter may be at their limit, they’ll have payments, and the interest keeps being added. They may not be making any extra payments, they can’t go in arrears, their allowance is being eaten up by something they spent months ago and there may be some painful lifestyle adjustments.
Or perhaps your son or daughter quickly realizes the convenience AND the danger of credit cards. But take it seriously, and don’t give in to the first whining that your teenager is now broke, and it’s your fault. After all, in a few years this game will become very real - very quickly, and involve creditors who don’t care about your son or daughter at all, as long as they’re paid.
Almost two-thirds of kids get their money management tools, lessons and priorities from their parents. So you’re it. What you do today, is what they’ll likely adopt for the rest of their life.
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