Financial Education Begins at Home

Many people are not fully aware of how certain actions affect their financial status or their overall credit standing. Of the ones that are aware of these things many still do not take the proper measures to protect their credit rating. This is how many individuals become so overwhelmed in debt so quickly and often find themselves filing bankruptcy because they can see no other alternative.

Financial planning and education are essential components in helping a person to keep their credit rating intact. The more a person understands about the function of a credit report and how the credit score works the better equipped they will be to keep their credit score good.

Financial education begins at home and should be initiated at an early age. Not only does this teach children how to manage their financial obligations but it also helps to teach them the importance of not over using their credit for frivolous things.

Credit is something that should be used only when absolutely necessary such as purchasing a home or an automobile. A person should not use their credit to maintain monthly obligations except in cases of emergency. Unfortunately many people do not understand this and use their credit for almost everything. This often results in credit cards being maxed out as well as obtaining unnecessary loans.

One way that many parents choose to begin teaching their children the inner workings of credit are through the use of prepaid credit cards. These cards work in much the same way as regular credit cards with one minor difference. Prepaid credit cards can only be used for the amount which is actually on the card. Once this amount is depleted the card will no longer be of use until more money has been added. This allows children to learn that a credit card is not a free pass and does have limits and these limits have to be adhered to or serious consequences will result. This also teaches them that credit cards should only be used when the need arises and not for every little thing.

Teaching your children to manage their finances at an early age will go a long way in helping them to learn the importance of managing their finances as well as their credit when they are older. Many parents begin this practice with their children as early as the age of ten. Remember it is never too soon to start instilling good values and practices in our children and the earlier the better because then it becomes a way of life for them and will stick with them as they become older.