Inculcate good credit card habits in your youngsters

Teen bad habits are not born overnight. So if you want a money-wise teen, training needs to start form pre-teen years. It’s never late though. We are going to look at a common parental fear today – that of teens and tweens misusing credit cards – and figure out how to educate teens on proper usage.

Start financial education at pre-teen stage
Taking kids to the daily market trips is one of the easiest but best ways of making them financially aware. The mall and bazaar provide a wealth of lessons: understanding unit prices, how reward programs and discounts work, brand name vs. unbranded goods, how commodities are inter-related, and how prices fluctuate. This will familiarise them with plastic money in the real world. That’s a better introduction than virtual transactions, as they can see the results of card usage immediately.

Explain plastic and virtual currency
Kids aged 10 and more are ready to understand plastic currency. Tell them what a debit card is, a credit card, what is UPI, and a digital wallet, and how they are all different. Also explain net banking and using cards online. Explain how charges are levied against transactions by banks, and failing to pay charges may result in penalty.

Explain what credit and credit balance are
A child may think credit card is a sort of free money. Explain that a credit card represents a loan. The money in the card is actually of the card issuer. There’s a limit to how much can be borrowed, and a deadline within which the loan is to be paid back. Teens and young adults understand that interest is an extra charge for borrowing money, and has to be repaid.

Introduce kids to credit card and interest calculators
There are many virtual credit card and interest calculators available with banking and finance sites. That will help teens keep tab on where they are with spends and interest on a regular basis.

Supervise teens on their first transactions
Keep an eye on teens as they start using credit cards for the first time. Don’t start with games, the first few transactions should be commodity shopping or getting a service. Once they are familiar, they can expand the type of transactions.