Comments on: Teach Your Child About Responsible Credit Use

By: Miranda

Miranda — Tue, 20 Oct 2009 16:42:44 +0000

I agree, Jacob, that it is important to teach kids about saving and investing. But it doesn’t have to be mutually exclusive. My parents set us all up with funds when we were younger, and required us to invest. I’ve set my son up with a college fund, and I will encourage him to open an IRA when he turns 16 and gets a job. And we sometimes look at companies and talk about individual investments. Of course investing and saving is the path to financial independence. But that doesn’t mean that credit cards won’t be involved. And I’d rather my son learn about responsible card use from me, than from trial and error. In the end, kids need guidance, and they need to know what’s out there. If all you do is say “credit cards are bad” and don’t give them guidelines, many kids will be more than happy to experiment…

By: Hank

Hank — Mon, 19 Oct 2009 00:29:58 +0000

I like everything you said except #3. I think that never getting into debt with credit cards to start with would be a much better option. I wish that was the lesson that my parents had taught me instead of the horrible example I saw through the abuse of credit cards. Never starting out with credit cards is a better option any day!

By: Jacob Marta

Jacob Marta — Thu, 15 Oct 2009 16:34:31 +0000

Miranda, I respectfully disagree with some of your advice. Yes, parents need to teach their children what these types of financial tools are, how they work, and who should use them. However, I strongly disagree that you should set your child up with the financial psychology of needing or wanting to use short term financing (credit cards, auto loans, student loans) to finance their life expenses.

If you had no debt, no auto loan, no student loan, no credit card debt, and instead had 100k in your investment account at the age of 30 would you feel secure? Financially free? Is this not the situation you hope to put your children in? Children are a clean slate with no debt, what a wonderful opportunity to teach them to keep it that way.

It is not just abuse that causes financial distress. The simple use of high interest short term loans means that consumers are paying 3x the price of every purchase they make. This means that instead of saving and investing in themselves, they are paying somebody else. This is poor financial advice. Regardless if you are an on time payer or not.

Credit Scores. Ask yourself who set up credit scores? Bankers and Insurance companies. Why? To charge you higher interest rates on your loans. Whens the last time you though, wow the credit rating company really did me a favor and scored me fairly. NOT. They always find a way to ding you and charge you more. It is a well thought out algorithm to ensure the highest return on loan and insurance products.

I suggest that parents at this early age show their children how to invest in themselves. The true path to wealth is to save and invest until you reach the point where your investments pay for your basic monthly expenses. The more you use credit the longer it will be until you reach financial independence, if ever.

I humbly suggest that parents teach their kids to REJECT the use of credit cards. Teach them about how to live on a cash basis only, learn about basic investing and the huge advantage they have just for being young and investing early.

By: Michael Wagner

Michael Wagner — Tue, 13 Oct 2009 16:59:04 +0000

Great article! The one thing that this article addresses that is SO relevant is – parental advice/guidance. I know a lot of people comment on the lack of parents that actually know how, but parent-teen interaction is critical. It is all about education, education, education. I think starting early is the best method. I realize there is all this discussion about the CARD Act, but parental involvement and interaction can outweigh what the CARD Act is designed to do. I believe budgeting is very important, living within your means, understanding the basics of bank accounts, both savings and checking, and learning to save for retirement. I champion these and other personal finance tips in my recently published book, Your Money Day One: How to Start Right and End Rich. It is a personal finance book for young adults ages 15-23. It is available through amazon.com or as an MP3 download on audible.com or iTunes. Please feel free to visit my website, http://www.michaeljwagner.net.

By: Miranda

Miranda — Tue, 13 Oct 2009 12:49:57 +0000

While your advice is good for teaching children about responsible finance in general, this post is, as mentioned, about teaching children to use credit wisely. It’s a nice thought to think that they will never, ever get credit cards or use credit, but the truth is that, at some point, they most likely will. And, truth to tell, responsible credit card use can be a great tool. I get a free ticket to see my husband’s family in New York every year — without having to pay one single cent in interest. Using my rewards card responsibly saves me around $486 a year.

By: Matt Kelly

Matt Kelly — Mon, 12 Oct 2009 20:55:20 +0000

Hi, say your post come across Twitter and decided to weight in. I like what you wrote in your personal finance habits post – I’d start with paying off the smallest debt first.

In this post how about teaching children to be responsible with their personal finances instead of worrying about credit. My 3 would be:
1) Begin with a budget – that includes managing the money you give them for clothing and other basics.
2) Have your teenager start saving for something that is really important to them that will take them about 6 months to save for so they learn about delayed gratification.
3) Never encourage your child to get a credit card.

Thanks for posting,

Matt