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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
Children are like sponges, so take advantage of their willingness to learn and start to teach them about how credit works while they are young. How to Teach Kids About Credit By Britt Erica Tunick When it comes to learning, children are like sponges, so there’s no better time to begin teaching them about how credit works than when they are young and willing to learn. While it is no secret to most children that there are ways to pay for things other than cash, it is important to explain to them what credit actually is. Take the time to explain that credit is merely borrowed money that has to be paid back by a pre-determined date and that failing to repay it by that time not only means you have to pay extra money, but it can also hurt your ability to borrow money in the future. Though your kids don’t necessarily need to know the ins and outs of a FICO score, they should know that such scores exist and that they are essentially the equivalent of grades on a report card that will determine how willing creditors will be to loan you money much in the same way that the grades on a report card will determine what college a child will ultimately be able to get in to. One way of teaching young children about credit is by giving them the opportunity to take a loan from you for something they are interested in purchasing that they don’t yet have enough money to buy. Explain that they can have the money now, but that they must repay you by a certain date that you will write down on the calendar or they will have to pay a penalty fee as well as interest on the amount they still owe. |
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