Equipping Kids with Credit Card Basics
Managing personal finances is a life skill that can be honed as early as childhood. Teaching kids about the value of money and how to use it responsibly can hopefully prevent them from getting into debt problems in their adulthood. However, parents should also take into consideration that credit cards are also becoming a popular tool for purchase. In fact, a lot of people use their credit cards for shopping instead of paying in cash. It is but logical to include the mechanics of credit card in your child’s finance education. In this manner, they will be more likely to use it responsibly when they get old enough to have one.
Some adults get into serious debt troubles because of their credit cards. The first thing that parents should do before introducing credit cards to their kids is to ensure that they have a strong grasp of money management. Start working with actual cash and savings so they can have concrete images of money being spent or saved. One of the dangers of using credit card or cashless transaction is that some people only realize that they are short on cash when the bill arrives. And when one doesn’t pay in full, they incur interest that accumulates until the full balance is paid in full. This means that they end up paying more that what their purchases are worth. Kids need to understand that using the credit card is just like spending their own money. They should only buy what they can afford to pay with their available funds. One way to do this is to show them how you use your own credit card. For instance, get them involved on your credit card usage for the month. You may limit the spending on household or food expenses so that the kids won’t be too overwhelmed with it. This means setting a budget on your purchases, keeping track of the charges, and paying off the full amount on or before the due date. Going through the process together makes it easier to understand.
Children with a good understanding of how the credit card works are more likely to take advantage of the benefits that they offer rather than splurge on it and get into financial trouble. But even though your child is already equipped to handle his or her own credit card, parents should still be there to watch over their spending and provide guidance if necessary at least until they are old enough to earn a living.