Teaching your kids about finances

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  • Enabling your child to be an authorized user of your credit card can be a good way to start teaching your child about credit.
  • Explain why paying the minimum monthly amount of a large balance owed could take years to pay off.
  • Teach your child to only finance things of lasting value such as a car, home, business or education.

One of my earliest financial lessons actually came from watching Full House (see, you can learn things from TV shows!). It was the episode where DJ was trying to buy a sweater from the mall, but she couldn’t afford it. Wanting to help, DJ’s sister Stephanie noticed a sign at the front of the store that said, “Buy now, pay later.” She thought that meant she could leave with the shirt and come back later to pay for it when they had the money. Well, she was partially right. When I asked my parents what was so bad about what she did, that’s when I learned about credit.

When it comes to teaching finances to your child, it’s important to start early. Shoplifting a sweater like Stephanie Tanner may be an extreme example, but like with any important life skill, it’s important to build a strong foundation at a young age. Here are some things you can do to help teach your kids about finances and credit now. 

Make your child an authorized user on a credit card

One good way to teach them is to add your child as an authorized user on your card.  This enables you to keep an eye on what your child is charging. It also allows them to start building credit based on your credit history. So you can help set them up for success and a better credit score when they are applying for their first car loan or apartment. 

Let your kids help you pay bills

When the credit card statement comes in, review it with your child and show how you pay it.  Show them your interest rates and explain to them how finance charges accumulate over time.  Have your child sit with you as you pay other bills as well.  Explain to them the important components of your credit card, car loan and/or mortgage statements.

Most credit card statements include a section that shows you how long it will take to pay off your balance if you only make the minimum monthly payment – this can be a great illustrative tool. Your child will likely be shocked when you explain that one trip to the grocery store or restaurant could take 10+ years to pay off and would cost much more than it’s worth due to the interest charges.

Pass on helpful tips

Don’t be afraid to tell your child about the mistakes that you’ve made in the past.  We’ve all made them, and it’s important to learn from them. Here are a few other helpful tips to mention:

  • Strive to only finance things of lasting value. This could include a car, a home, a business or an education. 
  • Avoid financing a large purchase with a credit card, unless there is value added with the credit card’s usage (like travel points). If something is worth financing, there is likely a lower cost financing option than a credit card. 
  • Making even a small extra payment every month on your loan can dramatically shorten the period of time it takes to repay a loan.
  • The unexpected can, and will, happen. Before you take on any debt, make sure you have an emergency fund.

It’s also important to talk to your child about credit scores and how to check them.  You can check your credit score for free at Credit Sesame, and show your kids the different factors that make up your score and how you can improve your score. 


This article is for informational purposes only and should not be relied on as financial advice.

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