Kids, Money, and Credit

It’s never to early to start teaching children about money. Little kids for instance have no real concept about money they just understand that they get what they want. They have absolutely no idea that money is acquired through earning.

Starting youngsters out with weekly chores and an allowance or “pay day” at the end of the week for the chores that they have completed will help teach the realities of money. The lesson hits home on those weeks when the child did not complete his/her weekly duties and his pay is docked. This requires parents to hang tough and be strong when the child protests over the reduced pay.

Once your child learns how money works you will notice how he/she will instinctively begin to collect or hoard money. They will begin to save their money for large items that they want like bicycles and expensive tennis shoes. Kids that never get the lesson are more likely to spend every dime they get as soon as they get it on candy and junk.

I think it’s a very good idea to start kids out young with a savings account. This teaches children the importance of having and saving money for the future but it also makes it easier to get going later on when it’s time for them to start establishing themselves as adults in the credit world.

Many banks offer special Christmas club accounts for children. These accounts are a terrific way to teach children the rewards of saving their money. Have the child put a portion of their allowance each week away for his/her Christmas club account. Many parents offer to match whatever the child decides to deposit to help them along. Allow them to withdraw the funds in November and believe me they will enjoy the feeling of pride when they purchase your Christmas gift with their very own money. The best lessons are learned from positive feel good moments like this.

Teenagers should be encouraged to open a checking account as soon as they are of age to be held to a contract (18) and provided that they have their own money to put into the account. One of the biggest disservices that we do to our children is to not teach them how to handle money and not prepare them for the real world. Handling a checking account and being responsible for a monthly bill or two such as automobile insurance or his/her internet bill are a great way to break into the real world of earning and paying. It is very important that students are taught the basics of how to handle money and being responsible with their funds before they enter college.

College students are a little bit like sitting ducks when it comes to easy credit temptations. As a credit counselor I have worked with hundreds of twenty somethings that got in way over their heads with credit cards while away at school. These kids are bombarded with offers from major credit cards from the moment they enroll. It appears to me that all a kid needs to do is put student on a application and they’ll get credit. It’s not unusual for a kid to graduate from college with thousands of dollars in credit card debt as well as thousands of dollars in student loans. What kind of message are we sending to our kids and what a way to start your life. Kids in this country start out in debt and they struggle. Bankruptcy for adults under 30 is at an all time high.

Teaching kids early in life about the importance of respecting and handling money is imperative. Start out while they are young and I promise you that they will thank you later.