Teaching Kids About Mortgages and Building A Good Credit Score

Your children pick up on many of your views and attitudes as parents. As a result, if you are irresponsible with your money or misuse credit, your children may follow your lead. If you're careful with your money, your children are more likely to be.

Children monitor and imitate their parents' conduct, so what you do with money can affect their future decisions. If you and your partner have financial disagreements or are visibly anxious when paying bills, your children may develop similar attitudes.

It does not appear that obtaining a mortgage is a difficult undertaking. A mortgage down payment is necessary to reduce the lender's risk; the lender is exposed to risk due to chance, and some borrowers are less diligent than others. If the importance of financial literacy is taught correctly, even very young children may understand this.

Teach Your Children About Money Management

Your child will need to save a deposit if they want to buy their property. Teaching your child to budget from an early age will assist them in learning to save money.

For example, keep two money boxes, one for 'spend now' and one for 'save for later.' Converse with your youngster about how they would like to divide gifts or pocket money and how they might be able to buy a more expensive item (a phone, game console, pet, etc.)

Apply the same logic to products your kids might want but can't afford to show how a mortgage works. Your child, for example, may desire a brand-new game for their console or concert tickets to see the latest band.

Ask your children to put down a deposit—just like they would if they were buying a property—and make weekly payments (say £1 per week from their pocket money) until the loan is paid off. Charge a penalty of 50p each time they skip a payment.

You can demonstrate why going into debt is sometimes a good idea and stress that debts must be paid according to rules. They'll also realize that default has consequences and that they'll need to budget in the following weeks to pay you back according to your agreed-upon schedule.

If your children are older, you might do the same thing but with a vacation with their pals or perhaps their first automobile.

Teach Your Children About Debt

Even if your children have developed a saving habit, there are some things they may want to enjoy before they can afford to pay for them. Two common examples are a house and a university education.

We occasionally have to go into debt to obtain these goods, and it is at this point that you must explain to your children that borrowing money for 'good debts' is OK. Good debt is an investment in itself. Your university education will benefit you in the employment market, as graduates are paid more.

And while a house provides necessary shelter, you're also purchasing an asset that has the potential to appreciate and become your most valuable investment.

'Bad debts' usually do nothing but drain your finances. Borrowing money to pay for vacations, vehicles, or pricey electronics has minimal impact on your net worth because you rarely have a useful asset.

Educate your children on the distinction between good and bad debts and how taking on too much debt can threaten their long-term goals.

Assist Your Children In Comprehending Credit Obligations

One of the most significant hurdles for anyone seeking a mortgage is maintaining an excellent credit score.

Teaching your child about the techniques that lenders use when making underwriting judgments is one way you can assist them in comprehending mortgages. You don't have to go into much depth about credit ratings, but you can explain how paying off your monthly charges shows lenders that you're a 'good risk.' 


It would also help clarify that all debts, including mortgages, come with hazards. If your circumstances change—you lose your job, receive an unexpected expense, or become unwell—it may become tough to keep up with your payments.

Teach your children how to save for an emergency fund if something goes wrong and how significant it is to keep up with your mortgage payments. You may even discuss the consequences of failing on a mortgage as part of their financial education.

Kiddie Kredit can aid you in establishing credit for your children. Our software includes all of the necessary tools to help children comprehend the importance of financial literacy and to demystify complex financial concepts. To get started, download our app now! 

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.