Parenting Blessings

My 5 years old is just observing us very closely. She learns everything that we say and we do. Just this evening, we were down at the shopping mall buying our groceries, she took one of the name card from the counter and was playing around with it. All of a sudden, she said, ” Mummy, this is my credit card. I put on the machine and do this. ” She imitated the actions of the cashier as she swapped the card through the credit card machine. My husband and I were surprised that she knew about credit cards. She told us that credit card can buy things. We told her credit card is linked to a bank. So we still have to pay to buy things and we need to have money in the bank before we can buy things.  On the way back, she was still trying to imagine she is the cashier and sometimes the buyer. We reminded her that in future she has to earn her income to have a credit card. She has to save in order to buy something she wants and cannot borrow from credit cards company (Spend in advance and think later)

We wanted to teach our child right on the finances. Our family value is based on the fact we do not borrow to buy items especially if we cannot afford to pay off. (with exception of our housing loan which is on the way to be paid off soon) Even our church and pastors have been teaching the church,the youth and children no READY CREDIT , NO CREDIT LINE, DO NOT RUN INTO DEBTS.

I am beginning to plan that it is the right time to teach my girl about financial planning and right value towards money saving and usage.  Her perceptions that credit cards is the wonder card that buy things from shopping centres and malls were from us who had recently been shopping and paying by credit cards. She must have observed on the freqency we use our credit cards. However, she has not seen us paying our bills online or through cheques to the banks and credit card companies every month. We wanted to raise responsible children who can take care of themselves also financially and know how to manage and grow their investment. Prudent spending is the key.

Well, till then I have not drafted my plan on how to teach children on credit cards. I would definitely like her to apply for her own credit card instead of I give her a supplementary card.

There is this article from the web which I would like to share with those parents who already have given a credit card to your college going child. I believe it is beneficial to you to implement some of these advices for the benefits of your child and yourselves.

Here’s what you can do:

• Set a good example of how you handle credit. Your child will learn from you. Use credit cards responsibly and pay on time.

• Owing money to credit card companies is not a fun thing to do due to high interest rates. Educate your child that it’s important to pay bills in full.

• When apply for a credit card, advice your child what key features to look for: low interest rates charges (also known as APR or “annual percentage rate”), zero or low annual fees, grace period before interest rates are charged, gift redemption, etc.

• If you think normal credit cards are too risky, consider using prepaid credit cards. These cards are issued by major retailers and the child can use the card anywhere Mastercard or Visa is accepted. At least by using prepaid credit cards, you can control how much your child spends because you can only spend what you have in the account.

• Lay down the rules, such as setting a limit of how much your child can spend in total. Any excess will be born by him.

• At the beginning, you can start off with a credit card tied to your account. You can see the charges and jump in if there’s a red flag.

• Tell your kid that the use of credit cards is limited by how much your have in cash. If you can’t afford to make a purchase in cash, don’t spend it on credit. Charge only what you can afford to pay back.

• Immediately report to card issuer when the card is missing or stolen.

• Go through each transaction with your child when credit card statement is received. Call the issuer to verify if you see suspicious items.
• Keep transaction slips to prevent them from getting into the wrong hands (read: thieves). Also for future reference.

Share This

Filed under: Personal Stories. | Subscribe | Comment | Trackback