Many of us never learn the importance of credit until it’s too late. More often than not, we learn about credit as we come to rent or buy a property for the first time through checks and mortgage applications, or when we go to apply for our first credit card.
Having good credit makes things easier to do such as borrowing money, getting car insurance rates, getting a car loan and renting or buying a house. But if we don’t learn about these when we are in our teens, could it affect our chances of getting any of the above when we need them later on in life?
Educate your children about the importance of money early on
Children and teenagers are like sponges, the more information we give them early on, the more likely they are to soak it all up. Teaching them how to manage their money responsibly could set them up for life.
What are the ways in which you can help?
Why not see if your credit card provider will add your child or teenager as an authorized user? As dangerous as it may seem, this may give your son or daughter a greater insight and a first-hand experience on how having a credit card works and how it can affect your credit score.
Talk about the interest rate, monthly and minimum payments and how a missed payment can affect their future chances of borrowing money.
Another great way to help teach your child or teen about spending is to get them a pre-paid card. This gives them the freedom to spend and manage their money, without the risk of them becoming overdrawn or in debt. Once the money is gone, it’s gone!
What about getting your teen their own credit building card? These cards are designed for people with poor or limited credit history so they can show the lender they are responsible when it comes to credit.
These come with relatively low limits which are great to prevent your teen from racking up thousands of pounds of debt. If they have a part-time, weekend or full-time job, it’s a great way for them to learn first-hand about spending and repaying responsibly.
Whichever way you decide to welcome your child or teen into the world of credit scores and credit cards, the sooner you do it, the better. It will give them a greater chance of becoming a better budgeter and increase their chances of a good credit score in the future.