One of the ways some of us get into credit card debt
trouble comes out of nothing more than lack of awareness of how credit
cards can sneak up on us. The first time you maxed out a card and faced
the overwhelming task of paying down a credit card and getting yourself
back on firm financial footing, it can be a sobering experience. And if
you have gone through this experience, the school of hard knocks taught
you well that it’s easier to prevent credit card debt than to recover
from it.
Maybe the best thing about getting hard won
knowledge is that you can pass it along to your kids. So how can you go
about helping your children establish a good relationship with credit
and learn how to use it responsibly so they don’t have to learn about
credit card debt and credit card abuse the hard way? Just like
everything else in life, they depend on you to teach them how to
function as adults. So we should take this responsibility seriously.
First of all, teaching kids to use credit
effectively is not about keeping them from having credit. If anything,
the opposite is true. A credit card is as essential a tool for modern
living as a car and a cell phone. We would even make the bold statement
that to send a child out to fend for himself or for herself without a
working credit card in her pocket, a respectable credit rating already
building up and the training in how to use credit is nothing less than
irresponsible parenting by adults. It is equivalent of sending your
child into a battle with no weapons. Credit is essential and smart use
of credit is even more essential.
You can help your kids begin to understand the
basics of getting good credit by getting them a credit card in high
school or college. You can pay the bills but this is a good way for them
to pay for what they need and you can keep track of their spending from
that monthly bill you get. But make sure that credit card is in your
child’s name so as you pay it off each month, they build up the good
credit rating from what you are doing. Consider it another one of the
many legacies you are passing along to your kids.
But don’t just let your kids go hog wild with their
credit card. In fact, you can work with a credit card company to
establish a credit limit and not allow it to go up. In that way, you can
set a limit on the amount of credit they have each month. And if they
go over it and suddenly cannot buy lunch because they abused their
credit, that afternoon of going hungry will teach them more than two
days of lecture about fiscal responsibility can do.
Make sure your kids are aware that you paying their
bills is a privilege and that they are very lucky to be able to start
their adult lives with a sponsor like this. Then give them three jobs
they must complete to show they are worthy of this privilege. (!) They
must save all receipts of every purchase they make. If they buy
something and don’t get a receipt, they must make one. (2) They must
maintain a ledger of spending. This is similar to a check book ledger
but it must be complete with every purchase they made and a running
total and it must be maintained daily. If an expenditure shows up that
is not on that ledger, they will be required to pay that back to you or
risk losing their credit card. (3) They must sit you once a week to
review the credit card bill and explain item by item what each entry on
there is. This will do a lot to keep them from using the credit card
frivolously.
These simple habits if done over a period of months
will teach your children how to track, monitor and be aware of their
spending and their use of credit. In that way, when you cut the apron
strings entirely, they will not only have the credit they need to have a
good adult life, they will be wise in how they use it. And there is no
better gift you can give to a child than that.
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