The first time most kids learn about credit is when they go off to university and credit card companies start throwing plastic at them. With no experience and very little understanding of the long-term negative ramifications, kids start to charge. And they charge, charge, charge until they’re in a hole.
Have you taken the time when you were using your credit card to buy gas or pay for a new pair of shoes to explain how credit cards work? Have you explained that you’re only putting on the card what you can afford to pay for when the bill arrives?
Discussing the importance of a good credit history and how a bad one can get in the way of future borrowing, whether they need to buy a car, rent an apartment or get a mortgage for a house, is an important part of helping kids understand money. Even something as simple as being late – or worse, defaulting – on a cell phone bill can wreck a credit history. Most teenagers (and some young adults) don’t realize that since cell phone companies report to the credit bureau, how they handle their cell phone bills can totally bugger up their ability to borrow in the future. Don’t pass up those opportunities that naturally present themselves to talk about money, the various ways we can use it (cheques, debit cards, credit cards, and cash), and the pros and cons of each.
Credit cards can be useful tools, but they should never be used to eliminate the need to plan spending. Many people complain about the “see it, want it, gotta have it now” attitude displayed by the younger generation. And yet lots of parents are happy to demonstrate that very attitude for their kids. So is it really any wonder kids learn this lesson so well? Even if you are a planner, if you haven’t taken the time to explain your planning to your kids, all they see is “what Mommy wants, Mommy gets!”
Next time your young’un expresses an interest in buying a new doll or yet another Lego kit, make a chart to help him or her see how long they have to set aside some of their allowance to get the money for the item:
- Find a picture that represents the item your child wishes to buy and paste it at the top of the chart.
- Draw boxes for the number of weeks they will have to save. So if the item costs $10 and they will set aside $2 from their allowance each week, you’ll draw five boxes.
- Staple an envelope to the chart.
- Each week when they get their allowance, they’ll put $2 into the envelope and mark off one of the boxes. This will teach them that sometimes it takes time to accumulate the money we need for the things we want. It’ll also help to reinforce the getting there.
People – kids and adults alike — exhaust themselves trying to maintain lifestyles they can’t afford. Whether it is the social pressure to conform or a sense of entitlement, so many people are willing to put their futures at risk so they can make the right impression. One way to help a child gain some perspective is to talk about what it is they really want in life. I often talk to my teenagers about how important it is to live a worthwhile life: a life that brings challenge and love, that allows you to share, to laugh, and to be happy.
What makes your life worthwhile? And what are the things that your child thinks will make his or her life worthwhile? Teaching about the details of how to manage money is an important part of your job as a parent. But helping kids how to put money into perspective is just as important. Whether we realize it or not, we are teaching our children our money skills and values (or lack thereof) every moment they are with us. We can let it happen randomly, or we can take some responsibility for the messages we deliver.
Or we can give up the responsibility to our education system, our financial services system, or our government. But you’ll be sorry! Don’t say I didn’t warn you.