Instruction for the New Generation: Making Credit Count

Money management is one of the most important skills a person can learn in their lifetime. It allows you to evaluate your debits and credits, create a budget, and establish lines of credit. Financial planners, consultants and analysts routinely offer their expert advice to clients at a premium. We would like to provide you with a value-added, complimentary service to teach the next generation about money management. Believe it or not, the apple doesn’t fall far from the tree when it comes to money management. Parents inculcate their kids with a ‘spenders’ or a ‘savers’ mindset – the efficacy of your instruction will determine the success of your children’s money management prospects.

Tips for Effective Money Management

Money management is a diverse topic covering a multitude of factors. Incomes, expenses, lifestyle choices, lines of credit, and fiscal responsibility are among many issues that need to be considered. For starters, why is money-management so important? As a parent, you understand the importance of a budget. Most families are on fixed income streams in the form of wages or salaries. Expenses include rent or mortgage costs, utility bills, food, entertainment, education, vehicle maintenance etc. By allocating a budget to each category, you can clearly estimate how much will be available at the end of the month for savings purposes, retirement planning, and disposable income.

A budget is a blueprint of all financial activity. The best way to teach kids about a budget is through a stipend (allowance). The stipend should be allocated for good behaviour, attaining academic or sporting targets, performing household chores etc. The reward element of money needs to be taught from an early age so that kids don’t have an expectation of receiving money for nothing. That is the first step in creating an awareness of the value of money.

A fine line needs to be walked when teaching kids about money and scarcity. A prosperity consciousness is better than a poverty consciousness. While money supply is limited, a person’s ability to enjoy everything that money can achieve is unlimited. Therefore, an appreciation of the value of money should not curtail an individual’s creative and imaginative flair to reach for their dreams. In other words: If you work hard and smart, there is no limit to what you can achieve!

More often than not, we will reach a critical juncture in our lives when the acquisitions we seek fall beyond our available means. In other words, we need to establish lines of credit with banks, credit corporations, non-bank entities etc. These lines of credit will help us throughout our lifetime as we seek to acquire assets such as real estate, vehicles, and education etc. Credit cards are the first step in this process.

According to CreditLoan.com, an authority on the subject, money-management is important and it bodes well for parents to teach their kids the right things on this subject:

‘A credit score is an important number in your life.This three-digit number is a barometer of your financial literacy, responsibility, and a window into how you live your life. A person who manages their finances well is typically responsible, trustworthy and likely to parent in a similar fashion. There are multiple components to a credit score, including the length of your credit history, the type of credit you have, your ability to pay back in a timely fashion, your available credit, and the number of credit applications you have made. We encourage parents to teach their kids about the importance of credit management, budgeting, and the value of money.’

We have highlighted several of the most important money-management tips, but here are a few others to bear in mind:

• Choose a credit card with 0% APR if possible, and no annual fees
• Pick a credit card that offers you rewards for your expenditure such as miles, hotel stays, exclusive gifts, high cashback etc.
• If possible, try to repay the full balance on your credit card every month thereby eliminating the interest-related charges on revolving credit and enjoying the full benefits of cashback.
• Pick a credit card with the highest possible cashback on purchases that you are likely to make. For example, if you’re going to be renovating your home, pick a card that offers generous cashback at home renovation stores etc.

These tips will serve you and your kids well today and in the future. Manage your credit well, and your life will be a lot easier.