CHICAGO, IL -- (Marketwire) -- 02/21/13 -- As part of BMO Harris Bank's ongoing commitment to financial literacy and Making Money Make Sense, BMO Harris is providing weekly financial tips. This week's tip offers tips on how to teach your children about credit.
With many things in life, the earlier you start, the better. For example, eating healthy, having good manners, and saving money are all skills that are developed over time. The same principle applies to using credit -- and learning to use it responsibly should start earlier than you think.
Teaching your kids about credit can help them avoid having to overcome bad habits later. With your help, they can learn the benefits of having good credit and how it can help them throughout life.
Don't underestimate your kids -- as soon as they are mature enough to understand money basics, you can start teaching them about credit. Consider the following ideas:
Set a good example. When you use credit, explain why you are using it. You can also explain when it makes sense to use different types of credit. While paying for home improvements with a credit card may not be a good idea, a home equity line of credit makes sense. That's because generally home equity lines of credit offer lower interest rates than credit cards, plus the interest is usually tax deductible.
Explain interest rates. For many kids it's difficult to understand that purchases made with credit may cost more. With today's double digit interest rates, it's especially important that you help them understand the consequences of not paying off their balances each month.
Stress the importance of saving. Along with teaching your kids about responsible credit use, it's smart to help them understand the importance of saving. In today's economic climate, they need to have at least three months living expenses in savings. Having this available can help them avoid having to use credit in an emergency and potentially save money in interest.
Getting your teen a credit card. You may also consider helping your teen or college student get a credit card to begin establishing their credit history. Review the bill together every month and work with your child to establish a reasonable payment plan.
Put yourself in a comfortable place and get started with helpful steps.
The Learning Center is brought to you by BMO Harris Bank, WGN, CLTV, WGN AM 1070, Chicago Tribune, RedEye and Hoy.
About BMO Harris Bank
Based in Chicago, BMO Harris Bank N.A. provides a broad range of personal banking products and solutions through over 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. Deposit and loan products and services provided by BMO Harris Bank N.A. Member FDIC. BMO Harris BankSM is a trade name used by BMO Harris Bank N.A. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion.
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