Teaching Your Kids About Credit Card Debt

Teaching kids about debt can be a difficult thing. It’s confusing to us adults. But, if you don’t teach your kids about debt who is going to? Back when I was in school we didn’t have any financial training classes, not credit card education or debt settlement clubs. I knew absolutely nothing about credit and debt, which is one of the reasons I got myself in a bunch of debt at an early age. And it’s the same reason my younger brother has followed the same path.

Teaching your kids about debt and credit cards is extremely important, and now, during these rough economic times, is the perfect backdrop to explain to your kids what debt is all about. According to Sallie May, the average credit card debt in 2008 for a college student was just over $4,000. If you don’t want your child to end up financially ruined by the time they graduate college, like most of us, start teaching them about debt now.

There are many ways to teach your child about debt and savings, and the simplest way is to give them a piggy bank and allowance. By teaching your child to save money, and the importance of saving money, you’ll be setting them on the right path. And, thanks to modern technology, there are some very cool piggy banks out there. Look around and get one that help kids count their savings and see where their money is going.

Giving your child an allowance allows them to understand the importance of working for their money and not getting money for free. By working for their money, and receiving it at the end of the week, much like a paycheck, your child learns the importance of setting a budget for what they might want, and for working extra for money they might be short of. This is a great way to get your child in the habit of budgeting and working for the things they need.

As they grow older, have a joint credit card that you allow them to use as you supervise. Or, have a prepaid or secured credit card where your child is only allowed to spend a certain amount. This way they will not go over their budget and will learn the importance of keeping track of their finances. Try to find a secured credit card where you can put a low balance on it, doesn’t have large yearly or monthly fees, and has a low interest rate.

Pick out a credit card together. This is a great way to teach your child about interest rates, which I have to admit I don’t even fully understand at times, and the extra costs of having a credit card. By choosing a card together you’ll get to spend time together, and it will be a wonderful learning experience probably for the both of you.

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