4 ways to teach children about credit

By UK CreditCards.com

Teaching children about credit and managing their money can be tough. Many of you may have already seen your child's eyes glaze over when you broached the subject of money.

financial-literacy

However, making sure that your kids have a money education is vitally important. And, it doesn't have to be boring. Here are four easy ways for you to teach your child about credit and credit card debt.

Help them balance their budget
When your child is old enough, it is useful to help them learn how to budget. There are many excellent financial and money education workbooks on the market (such as these) which help your child keep track of their spending and learn how to manage their finances.

Show them the whole process
One of the best ways to teach children about managing credit responsibly is to involve them in the whole credit process. When they see you buying an item in a shop with your credit card, they may assume that it is ‘free money'. So, explain why you are paying by card, keep your receipt and when your bill arrives, show your child the payment.

Then, your child can help you write a cheque to pay the credit card debt and, if they are really young, they will enjoy posting the cheque to your card provider.

Teach them in terms they will understand
Credit cards involve borrowing money to pay for something now and then paying that money back at a later date. So, why not teach your child in terms they will understand? 

If they want to buy an item that costs more than their pocket money, explain that they can have it now, but that they won't receive any pocket money until the item is paid for.

Make sure they understand the repercussions of non payment
It is also crucial that children understand that there are consequences if you do not pay your credit commitments. If they overspend, it's important that, however harsh it may be, they go without a day out with friends or the latest download or console game if they haven't planned their budget correctly.

 See related: Children should learn about how to handle credit, money early; Credit card spending warning issued to students

Published: 24 February 2011