How to Set a Good Example for Your Kids with Your Credit

The current credit crunch is a good reminder that too many people these days don't really know how to handle their money. Even if you're pretty good with your money the current economy can send you for quite a downward spiral.

It's a tough time to set a good example.

But that makes it all the more important to set that good example for your kids. If you can teach them that even in bad times there are things they can do to use their credit wisely, they have a better chance of staying ahead of the game as adults.

That's not to say teaching your kids to use credit wisely guarantees that they will do so, or that their lives won't take a downward turn that ruins their credit despite careful use. Life is unpredictable. All you can do is give them the best tools you can.

The example should start early. Just talk to your kids about how you spend your money. Tell them why you aren't going to buy everything they ask for. Help them to develop a general sense of what money is. Make them work for things as appropriate.

Most especially, don't give them everything they ask for.

As they go into late high school or go to college, consider allowing a credit card. One. With a low limit, and it's their responsibility to pay off the entire balance every month. Explain why you want them to do this.

Now, you don't have to let your child have a credit card to help him or her learn about wise money management. You can have them learn to save up for every purchase. But I can tell you from my own college experience that there were times I needed a credit card - especially when it came to buying books.

If your child does have to carry the occasional balance, make sure you know why and encourage it to be paid off as soon as possible. Also have them track how much is being paid in interest; it's a good education into how much more it makes things cost.

A credit card makes it easier to track spending. Take advantage of this and go over what was spent every month. It's a great way to see how fast frivolous purchases add up. Saving receipts so that individual items can be reviewed really helps here.

By helping your child learn about money management and credit from early on, you can limit the pitfalls that may be hit later on. Having the knowledge of what credit can do to your finances and knowing the benefits of sticking to a budget are skills that can last a lifetime.

---

Previous:Educating to Prevent Student Credit Card Debt
Next:Taking Back Control Of Your Debt