Teaching your kids about money

April 10, 2009 5:42:24 PM PDT
From savings to credit cards, how to help your kids understand money.

Credit Karma, a site that provides consumers free access to their credit scores, can give advice to parents on how to establish good credit habits with their children and prepare them for a healthy financial life. Below are practical tips for educating on the importance of credit scores, credit reports and good spending habits:

Start small by teaching young children about money management through their interactions with you.

  • Teach them by utilizing daily errand activities as small impromptu lessons about money and budgeting.

    Give a weekly allowance as a way to teach your children about spending responsibly and budgeting.

  • Pick a reasonable amount of money and give it to them in small denominations like $1 and $5 bills rather than a $20 dollar bill. Encourage your children to save a portion of their allowance every week by calculating the amount that could be saved in a month or in a year. Older children can benefit from opening a savings account which will educate them about deposits and withdrawals.

    Explain the difference to your children between wants and needs.

  • Encouraging your children to save and earn for something that they really want is a good way to teach healthy spending based on delayed gratification. Help your child keep accurate track of their money by giving them a chart and piggy bank incentives like $5 for every $20 that they save.

    When your child grows into a teen, you may consider giving them a prepaid credit card or access to a parent's credit card.

  • This is a convenient way for you to introduce them to credit, but it might end up leading to startling monthly bills if your teenager is not careful. You should sit down with your teenager every month and show them how their spending is affecting your credit score so that they will understand how theirs would be affected.

    Help your child choose the right credit card.

  • Users tend to be very loyal to their first credit card, so helping your child compare annual fees and interest rates is important to establish the right long-term credit relationship.

    Students who have credit cards in college can find it difficult to handle their money because of the pressure that they have to spend on a limited income.

  • You need to teach your children early about responsible credit card use, debt and late payments and fines. Check their balances with them to help make sure that they stay on budget and take the time to go over their credit score and reports often to help them stay on track at all times even while away at college.

    About Kenneth Lin
    CEO and Founder, Credit Karma

    Ken Lin is the CEO and Founder of Credit Karma, a pro-consumer credit score company dedicated to helping consumers better understand the power of their credit. For a over decade, Ken has leveraged his analytic background in the financial services and internet marketing sectors. Prior to Credit Karma, Ken founded Multilytics Marketing, a data driven marketing agency that actively manages more than $40 million a year in online marketing dollars with clients such as Wells Fargo, Liberty Mutual, and eBay.

    Ken's credit and financial services experience stems primarily from E-LOAN and Partners First. At E-LOAN, he was the Director of Analytics and Research responsible for consumer marketing, conversion optimization, and data mining and targeting. With Partners First, Ken built predictive targeting models based on credit data and profitability metrics. At the time, Partners First was a top 25 Credit Issuer, had a $2 Billion portfolio, and sent over 50MM mail pieces annually. Partners First was purchased by Wachovia.

    Prior to his time at E-LOAN, Ken lead a marketing team at Upromise, a loyalty company based in Boston. That experience in conjunction with E-LOAN proved that a viable business model could be built on a pro-consumer stance. This is a belief that Ken affirms in the vision for Credit Karma.

    Ken holds a B.A. in Mathematics and Economics from Boston University.


  • Load Comments