It’s proven that children learn money habits from their parents, so why not establish a firm foundation by having the credit conversation with your kids! If your children understand the importance of keeping a promise, then they will be able to understand the basics of credit and a credit history.

Elementary Students

The next time your children see you swipe your credit card, perform the following:

  1. Ask your kids if they know where the money comes from when a person swipes a credit card! Listen to the various responses.
  2. Ask them about the last promise that they made and to explain why the promise was made.
  3. Next, ask did they keep their promise. Now explain that when adults use credit cards, the money is being borrowed from the bank. Adults are making a promise to the bank that the money will be paid back every time the credit card is swiped. Explain that if an adult is not good at keeping the financial promise made to the bank, the bank will take the credit card away.

This simple conversation should be held regularly. The concept of credit scores, credit history, and credit reporting will be much easier to digest as they mature.

Middle School and High School Students

Students at this age should understand that adults have credit scores and that credit scores determine how much one will pay for big-ticket items. Click here for a quick exercise. Focus on the difference in monthly and total cost of the car between the various credit score categories. There is no need to go into extreme detail about how credit scores are calculated. Instead, highlight the largest factor of having a high credit score is making payments on time for all bills that are received.

Setting the right examples and staying transparent about how credit works will give your child a great financial head start whenever you decide it’s the right time for your child to start building credit. Remember, you’re planting one seed related to credit scores. There are plenty more that will be planted in the future. 

Your Turn

Share with us the outcome of talking to your kids about credit by tweeting us at @FG_garden or connecting with us on Facebook.

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