There is no better time to introduce your child to the basics of finances than the teenage years. They are responsible enough to come to terms with their finances, but you still have enough control of their lives to steer them in the right direction.
But what’s involved in turning your teen into a financial mastermind?
1. Gaining an Understanding of Debt
The foundation of understanding credit cards is understanding debt — knowledge that many teens seem to be short of. Sit down and tell your teen about debt, discuss it with them by making it as simple as possible.
Tell them that debt is likely to affect your credit score if it is not paid off each month. With a good grasp of debt, your teen can start learning how to manage finances effectively.
2.Go Through The Benefits Of Using Credit Cards
Your teens should always have the motivation to actually learn about the use of credit cards. For this reason, running through the advantages of using a credit card is always essential. Mention that it provides the possibility of earning more — due to the rewards up for grab.
Building a great credit history can lead to multiple benefits, fraud protection, an organized system with which to manage your financial endeavours effectively. Remember to bring into light the opposite of these benefits — if your balance isn’t paid off every month, there could be a load of disadvantages that outweigh the benefits.
3. Mastering the Terminology
Credit card terminology is a big part of understanding the use of credit cards. This way, teens can start putting a name to financial concepts, having the means to organize the whole idea more effectively. Go over terms repeatedly. Does your teen know what an intro period is? Interest rates? Credit limits?
4. Use Your Own Credit History to Teach Them
Use your own credit history to teach your teen the ‘ins’ and ‘outs’ of credit. You will have received a number of reports from the different bureaus each year. Sit down with your son or daughter and go over the report together, go through your credit history and teach your teen that being responsible with your credit will improve your credit score and lead to a myriad of benefits — make sure that your credit history is good, so that you can teach by example.
5. Present Them With Their Own Card
This might be the final tip when it comes to making sure your teen understands credit card use. Student credit cards work as a way to show that you trust them to manage their own finances. By supplying your teens with their own credit card, you are providing them with the chance to put their knowledge into action, and nothing works as a better way to learn. A prepaid debit card is a good idea because it can teach them about responsible usage of a credit card without the dangers of going into debt.
Courtesy of CreditCardShoppe
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