Money Management -Teaching Kids About Credit Cards

Parents that teach their kids responsibility with money are training them to become pennywise adults. Kids that grow up with an allowance and working for special items, tend to be more cautious with their spending and utilize savings accounts. One of the best things you can do as a parent to ensure your kids become financially savvy adults is to teach them to manage their money properly.

This principle applies to the use of credit as well. If they are taught to view credit as something precious to be saved for “a rainy day” or special purchase like a car or their first home, they will use it wisely and responsibly.

Teaching your child to manage money and use credit cards is a valuable life skill. However, there are rules and regulations for their use and if you abuse them it can cost you money and your creditworthiness (reputation) as an adult. Here are a few suggestions for teaching children to use credit cards wisely.

Kids and teens may have the wrong idea about credit cards based on what they see on television commercials and shopping channels. How can you make sure to educate your children on the proper use of credit cards? A misstep in their teens or college years could haunt them for life.

Help them learn to use credit cards responsibly:

1. Replace their weekly cash allowance with a credit card. Teach them about using money wisely and not going over their budget amount by putting their cash on a card. They will need to know what their limit is and be careful not to go over it. This way they learn they can have money and not be tempted to spend it all at once.

2. Consider starting with a secured credit card or one with a limited balance.  Another good way to encourage responsibility is to have your teenager save up some money until it reaches a certain amount, like $200.00. When they have enough, take them to the bank to apply for a card. This would also work with a prepaid Visa or Mastercard purchased at any number of grocery or convenience stores. You purchase the card for a small fee and load the funds onto it. They would use it the same as any other card.

3. Ask how they plan to earn money when they are no longer getting an allowance. Helping them to plan for the future means creating an opportunity for them to learn valuable lessons. Explain that as they get older they will get a job and have to figure out a way to pay their bills without mom and dad’s help.

4. Teach them how to stretch a dollar. Teach them to make their funds last the whole month, even if they paid for the card with their own money. You want them to learn some frugal habits that will help them later in life.

Teaching your child about managing money and using credit wisely is a challenge, to be sure. The good news is that if you start when your kids are younger and teach them how to earn, spend, and money, they’ll come to understand these concepts and be happier, financially stable adults.