Kids and Credit: Easy Ways to Teach Your Kids About Finances

Although teaching finances to kids can be challenging, it is extremely necessary to have a positive relationship with money early on. Teaching them at a young age will encourage healthy money habits, allowing them to be more responsible and mindful about managing their finances as they grow older. 

A good money topic to teach your little ones is credit and how good credit takes time to build. With this in mind, they'll be able to integrate their learnings and be an effective practice in making more significant purchases as they grow older. 

If you're interested in credit score education for kids, keep reading. Our team has listed some of the best ways to teach your kids about credit so you can set them up for financial security and wellness. Let's take a look!

Tip #1: Explain How to Use a Credit Card and How to Build Credit

Many older people had nightmarish experiences with credit cards, but this is only because they weren't aware of how to use a credit card; that's why it's important to teach your kids this even at a young age. Let them know that a credit card isn't a piece of plastic you can use to buy whatever you want—be clear about the consequences they could face if they aren't able to make payments on time and in full. 

By teaching your kids how to spend within their means and make payments on time, they won't have to worry about dealing with fees and high-interest rates, which could give them more financial issues.

Tip #2: Explain to Them What Makes Up a Credit Score

A credit score is determined by one's payment history, how much you owe the bank, the length of credit history, the type of credit you owe, and the number of accounts you have opened. 

The most important out of all of these factors is payment history, which makes up to 35 to 40 percent of your credit score. With that being said, it's crucial to tell your kids that paying their bills on time can help improve their credit score, even if it's only paying the minimum balance. 

Tip #3: Lend Your Kid a Small Amount of Money and Have Them Pay You Back

So your children understand the concept of managing debt and loans, it's helpful to lend your kids a small amount of money and have them pay you back until a certain deadline. When you come up with a feasible plan with your kid, they'll be able to pay you on time, and you can then increase the amount of money they can borrow since they have a "good credit score."

Tip #4: Add Your Child to Your Credit Card as an Authorized User

When you feel like your kid is ready to handle "real" money, add them as an authorized user to one of your cards. With this, you can help them build good credit through your credit history and familiarize themselves with using a credit card. 

If you're not keen on adding them to your credit card as an authorized user, you can start with a prepaid card, minus the worry of them reaching your credit limit. 

The Bottom Line: Teaching Credit at a Young Age Will Help Your Kids Make Smarter Financial Decisions When They Grow Older

Finances can be a taboo topic for most people, but the truth is, that shouldn't be the case, especially when your finances have a huge hold on your buying and borrowing powers. When you teach money management to your kids and incorporate credit knowledge, they'll be able to form responsible money habits that they can carry over as they grow older. 

How Can We Help You?

If you're looking for tools for money management for kids, you should try Kiddie Kredit.

Kiddie Kredit is a mobile application designed to teach kids about the credit system. Starting them young and teaching them everything they need to know about money can be extremely beneficial for their development. 

Try our mobile app today!

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John D Saunders

John D. Saunders is a Web Designer and Founder at 5Four Digital, CMO at Kiddie Kredit and an Automation Expert with a decade of experience building brands online. He's worked with clients including Audi, NAACP and Apps Without Code.