4 Credit Lessons Every Kid Should Learn

4 Credit Lessons Every Kid Should Learn

Your child—regardless of if they’re age 5, 10, or 20—has some valuable lessons they should learn early on about money. For example, how to save, establish a budget, maintain good credit, and so forth are essential lessons learned for any youngster’s lifelong financial success.

Here are the following four credit lessons that every kid should learn…

1. Financial loss happens

Losing money is a part of life that your child will most definitely encounter. However, when it happens and how it happens will be impacted by how they’ve been taught to handle financial money lost. For example, your child may lose $10 dollars from their pocket on the way to the corner store or have their holiday money stolen at the mall, but how you teach them to handle loss will affect how they view money for the rest of his or her life.

Nothing much can be done about money loss once it occurs, however, you can teach them simple lessons to proactively prevent theft and act responsibility for their finances. Take for example a part time job after school or on weekends. This will teach your child the value of money earned and the impact of hard earned money lost.

2. The importance of saving for a rainy day

Saving doesn’t really come up until it’s needed. For example, a child may not understand the value of saving a dollar a month until he or she is hit by a surprise financial emergency—such as an illness, a theft, or an unexpected repair. This is why not all money should be spent, but instead teach them the importance of putting aside a portion of birthday or holiday money or allowances in a savings account.

3. Budgeting smarts

How to budget or rather how to honor financial obligations—such as a personal loan, or even a cell phone bill is vital for kids to learn at a young age. Learning simple budgeting early on will help kids stay out of debt later in life when they have more bills and financial burdens to manage.

For example, start small with budgeting lessons that teach kids about money flow (or ingoing and outgoing funds). This will help them budget for larger purchases—such as a vehicle or even for school if they have rent, food, utilities, books, and transportation to manage while away from home.

4. Establishing good credit

Most college students are offered a credit card (or more than one) before they ever understand how to manage credit. This can be disastrous for falling into debt if they rack up thousands of dollars on credit cards while away at school.

With a credit card comes responsibility that your son or daughter should understand, and it’s important that they understand the responsibility of applying for just one credit card and the financial liabilities that come with things like paying bills, interest rates, how credit cards help one build credit, and how credit history will impact their financial future.

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