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Teach Your Kids How to Pay Bills & Have Good Credit

You aren’t the only one who should know how to budget your finances. Your children are also watching, and one day they too will have finances of their own to manage. You’ll probably feel much better knowing you’ve sent them off into the world with good financial management skills under their belt, especially considering many young people even graduate from college not knowing the basics of personal finance. It should start at home, and here’s some steps you can take to help your children learn good money management.

Take Them Step By Step At Each Stage Of Life

You should start teaching your children how saving and spending money works at an early age, and finance and debt expert Dave Ramsey even mentions that by the time they’re in kindergarten, they ought to have a savings jar to keep their money in. If you have them buy small things at a young age and hand cash to the cashier, they will start learning right away about how things cost money and about living within their means. By the time they turn to teenagers, they should already be looking for work and hopefully getting experience in the workplace. Children often get a better understanding and appreciation for earning money if you help them along the way.

Watch Your Own Credit Card Usage

Even if you’ve come to master credit card use without driving yourself in debt, your children are watching every time you take your card out and swipe it. Doing so can give them the idea that a credit card is a carte blanche to spend money at will, and that can be very detrimental to their learning about the dangers of debt. By the time they start nearing 18 and you realize they’ll own a credit card soon, you’ll have a living example to show them of how minimal credit card usage is always the best policy. Pay in cash as much as possible.

Show Them What A Credit Score Is

There are always situations where the term “credit score” comes up such as during family TV show times. You should use that as a teaching moment to instruct your children on how paying bills on time and completely, as well as not overdrawing from bank accounts has a positive effect on your credit score. You should emphasize that good credit scores are important if they hope to buy a home one day.

Teach Them About Life Insurance

It can be an unpleasant subject to discuss because nobody wants to think about the prospect of a parent passing away. But your child should know that if anything does happen to you, life insurance can protect them and the remaining parent, and you should help them understand that when they become an adult, they should have life insurance as well. You can also help them understand how selling their life insurance policy can work in their favor if things change and they don’t need their current policy, though this may be more appropriate for when they actually begin purchasing insurance. You can take pride knowing they are one of the 40% who do show interest in life insurance.

Your children learn a lot not just by verbal instruction, but by your example of how money is managed and how to pay bills. It’s never too early to answer their questions of what credit cards are, how homes are bought and many other things. When they’re faced with the financial challenges of life, they will likely thank when they get through them.

Tim Esterdahl

Tim Esterdahl is the editor of IFCS blog. He is a married father of three and enjoys golf in his spare time.

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