Teaching Our Teens The Danger Of Paying Only The Minimum Payment
Knowing how to handle credit is extremely important but it’s not a lesson that your kids are likely to learn in school so it’s crucial that we as parents educate them on the dangers of paying only the minimum monthly payments on credit cards.
Money management is best taught hands on. Your teen may be at that point in their life where they’re working and receiving a paycheque. This is a great time to help your teen open a chequing account which will teach them how to write cheques and learn about bank fees. Once your teen has a hold of managing their account, then it’s time to introduce the credit card.
A credit card is instant financial gratification, especially for a teen, which makes it extremely easy to spend more on their credit card a month than their income. The majority of people who get into this habit tend to make only the minimum monthly payments, which is never a good idea unless you’re the bank who is making a lot of interest off your balance owing.
We need to show our children that making only the minimum monthly payments is simply just paying down the accruing interest which results in the balance never decreasing. Our teen needs to understand that their balance will always remain and will only increase with future purchases,which will lead to a debt so great that can only end in financial disaster. In order to avoid this, we must pay more than the requested minimum payments.
A good way to start your children on credit cards is to apply for a pre paid credit card which will allow parents to set the spending limits and monitor where your children are spending money so you can have discussions with them about their habits.
Stressing the importance of savings and living within your means is one of the great lessons you can give your child to enhance their lives.
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