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Teaching your kids about good and bad credit is not difficult, but it is important that you cover all the basics or you’ll create an incomplete picture. This checklist is meant as a point of reference, not a step-by-step guide. Trying to cram this information into a single sit-down session with your kid isn’t going to work, but when you’re unsure, this list is a good place to start.

The checklist is going to include what information you should share with your kids and mention when a good time to share these types of things may arise. With this and a little bit of vigilance, your good credit and good spending behaviors are sure to be passed down.

1. Credit and Financing

Credit is the amount of money you are able to borrow. This figure is determined largely by the amount of money you’ve borrowed and successfully paid back in the past. Everyone starts with zero credit. When you finance a car, home, or use a credit card, you’re paying with credit. Treat your credit right, and you can have more. Treat it wrong, and you’ll find yourself with much less options in life.

When making a major purchase or financing anything, explain to your kids that while you do own it, you still owe on it. For the next so many months, you’ll be paying a certain amount, and if you don’t, you could lose the property and damage future opportunities as well.

2. Good vs. Bad Credit

Which brings us to good credit versus bad credit. Good credit means someone has borrowed money or financed something and made payments on time. Good credit opens the doors to more credit, larger budgets, and sometimes more responsibility. It can also be the difference in being the potential candidate for a job that gets hired or the one that gets rented the ideal apartment.

On the other hand, bad credit happens when someone borrows or finances but doesn’t manage to pay on time or at all. These scores are going to be easily accessed, and when potential sellers, lenders, landlords, and employers see that you aren’t good with your finances and responsibility, you can easily be pushed aside. They want their money, and on paper, it looks like you aren’t good for it!

A good time to teach this type of thing to your kid is when you’re going through it yourself, even if that means admitting you don’t have the money to pay for things you’ve already bought. Explain that you made a terrible mistake. This not only lets them realize the reality of money, but it also keeps you a little more accountable for your actions.

3. Paying on Time

This brings us to paying on time. This lesson is crucial. If you’re working on the bills, tell your kids that you’re working on the bills, trying to make sure everything gets paid on time so your credit is going well. If you do a good mentioning this several times, they’ll become instilled with the sense that anything less than paying on time is bad.

4. Credit Cards

The big lesson with credit cards are that they aren’t money. In fact, if you don’t pay the bill off at the end of the month, they are going to cost you money. While they are useful for many things and good during an emergency, they are a huge responsibility and not paying them can be a lot of headache later on. Explain to your children that even though you swipe the card whenever you’re buying food, the only reason you’re able to do that is because you stay current on the bill by the end of the month. Otherwise, you’re paying more for something that costs less, which should only be done in time of need.

5. What you Have Vs. What’s Available

Likewise, we’re brought to the largest point. Just because you have good credit and companies are willing to give you a bunch of money doesn’t mean you can actually afford these things. In fact, often times those with good credit are offered more than they can actually afford because these companies assume they’ll get paid. Reminding your kids to stay within spending limits and means is important. The next time they ask for an expensive toy or piece of clothing, explain that even though you could find a way to pay for it, you can’t simply spend extra money every time you want to. They may not like this now, but they’ll certainly respect this thought when they’re dealing with their own money later.

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