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Children learn from our examples. Even before we have opportunities to talk to our kids about money, they need to experience how we as adults react to our finances.

Without even realizing it, we teach our children through our lifestyles about credit. Teaching our children about credit should be a life-long lesson. Beginning at an early age with concepts they can grasp leading to more advanced concepts as they learn, grow and mature.

Concept 1: What is Credit?

Credit is very tricky and therefore, teaching credit to a young person can be tricky as well. Credit is more than just a 3 digit number that shows your score. Once your child is old enough to understand earnings, borrowing and paying, they are old enough to understand the

concept of what credit is. Take this time to slowly introduce your child to credit. Don’t worry about explaining the difference between good versus bad credit at this stage, simply focus on the borrowing and the payment aspects of credit.

Concept 2: How Does Credit Affect Our Lives?

Credit affects our everyday lives. We can use our house, our job, and our car to explain to our children just how credit affects our lives in major ways. Credit is a tool we use that can either give us strength, stability and increased cash flow if used correctly, or it can cause weakness, stress and decreased cash flow if used incorrectly.

Concept 3: Monitoring Your Credit Score

Teaching credit happens in everyday situations. There are lessons that can be learned at the credit union, the grocery store, even as you are sitting down to pay bills. Be careful not to exclude your children from these situations, but rather use these times as teachable moments. You will be amazed at what they learn simply by watching you! Monitoring our credit scores and reports should be a practice that we do often, at least once a year. You can review your credit report once a year by visiting www.annualcreditreport.com. There, you will have access to each of the three major credit reporting agencies.

Concept 4: Protect Your Identity!

We all know identity theft is one of the fastest growing crimes in today’s world. Protecting our personal information is more important today than ever before. Identity theft can have negative effects on our credit reports and scores and take years to recover. Teaching your kids about keeping their address, phone number and eventually their social security number private can prevent thieves from gaining access to their information in the future.

Concept 5: What is On My Credit Report?

Creditors can choose if they report your debt to a credit reporting agency and which one. This means one agency may have the debt recorded and another may not. In most cases, debt falls off a credit report after seven years with the exception of bankruptcies and other types of negative debt, which can take longer. It is important to remember just because a negative debt has fallen off your credit report, it does not mean necessarily that the debt is forgiven. Creditors may still seek repayment through the courts if the debt has not been paid. Using your credit report as a guide, you can talk to your kids about paying debts, even letting the older kids figure out how long it would take to pay off debts. This is also a perfect opportunity to talk about good versus bad credit and what it takes to be approved for a car loan or mortgage with a good interest rate!

Be sure to check out our animated video that will help you find different ways to talk to your kids about each of these 5 concepts.