Your parents may have prepared you as best they could for the financial realities of adulthood, or they could have left you to figure it all out for yourself. But if you were taught the basics of finance and credit before you left the nest, you may have encountered less of a learning curve than your clueless counterparts. No matter your level of understanding, you likely have to do some learning yourself.
But now, if you’re the parent, one of your priorities is to prepare your kids for adulthood. Just as you would teach your children to dress themselves, ride a bike or do their laundry, you may want to impart lessons about credit to them to help them become successful and financially independent.
Here are five credit lessons you may wish to impart.
1. It’s Important to Regularly Check Your Credit Reports & Credit Scores
Credit reports and credit scores may seem like abstract concepts to teach your children. But you can use simple metaphors. School-age children can understand the concepts of grades and report cards, and these concepts apply to credit. The work you put into your credit is reflected in your credit report and credit score, which “grade” your performance. These grades can then be used to help you get “rewarded,” like by getting the best rate on a credit card or a loan, like for a car or home. (You can check out your free credit report summary on Credit.com, which includes grades on how you’re doing in the five key areas that make up your scores.) This brings us to our next lesson …
2. Credit Affects Their Life
Once your child understands the concept of a credit report and credit score, you can demonstrate how credit has affected your lifestyle. Many of your possessions — your home, car or credit card, for instance — were obtained using credit, and are examples of the power of credit. Of course, credit is not just a way to get “things.” It’s a tool that can help provide shelter, comfort and freedom.
3. There Are 5 Main Influencers of Credit
As your kids get older and have a firmer grasp on these concepts, they may be able to better understand how they can make credit work for them. You can show them credit is determined by five main factors:
Age of accounts
Types of accounts
If you own credit cards, have loans and monitor your credit report, you have teachable moments built into your financial routine. When your children are old enough, you can involve them as you pay a bill or check your credit report, explaining the process as you go.
4. Mistakes Can Cost You
Mistakes can be valuable life lessons for young people. But when it comes to credit, mistakes can be costly and their effects can be long-lasting. One late payment can cause your credit score to drop dramatically. And negative items such as accounts in collections and judgments can stay on your report for at least seven years. To a young person, seven years can be a long time to have difficulty obtaining loans or credit cards. You can also show them how errors on your credit report can be fixed by using this guide.
5. Credit Cards Are Merely Tools
Credit cards are not a magic wand for reckless spending, but they are also not inherently risky items to be avoided. They are tools. They can be invaluable to build credit and financial independence, but they can also be damaging if wielded incorrectly.
It’s no secret that young people can have trouble with impulse control. But you may want to impart that credit cards can be used responsibly or irresponsibly. The results will depend on the user.
Chicago, Ill.-based actor Mike Wollner says at ages 7 and 10 his daughters are already learning how to invest.
Three years ago, Wollner opened custodial brokerage accounts for the girls through Monetta Mutual Funds, which has a Young Investor Fund specifically for young people to invest for the future. Through the fund, parents can open custodial brokerage accounts or 529 college savings accounts on behalf of their children, as well as get access to financial education and a tuition rewards program.
Wollner decided to open the accounts once his daughters began to nab acting gigs and earn an income. They’re already beginning to understand what it means to own a part of the world’s largest companies. “They will ask me to drive past Wendy’s to go to McDonald’s and say, ‘well, we own part of McDonald’s,’” he says.
Wollner hopes his daughters will have saved enough for college by the time they graduate high school. His 10-year-old’s account balance already hovers around $13,000, while his 7-year-old has a little less than $10,000 saved for college in her account.
The Value of Starting Young
The Monetta Fund is only one example of a way to invest on a child’s behalf. The downside to using an actively managed investment account like the one Monetta offers is that it comes with higher fees — the fund’s expense ratio of 1.18% in 2016 is higher than the 0.10% – 0.70% fees typically charged by state-administered 529 college savings plans.
In addition to 529 plans, parents can open Coverdell Education Savings Accounts, or other custodial brokerage or IRA accounts through most financial institutions like Fidelity, Vanguard, or TD Ameritrade.
A college fund serves as a great way to teach kids a little about the time-value of money, but they’ll need to know more than that to manage their finances as well as adults.
“There’s no guarantee that they are going to be financially successful because anything can happen in life, but you’ll be better off with those skills and have a better chance of being successful with those skills than without them,” says Frank Park, founder of Future Investor Clubs of America. The organization operates a financial education program for kids and teens as young as 8 years old about financial management and investing.
He says FICA begins teaching financial concepts at an early age with hopes that the kids who start out with good money management habits now will continue to build on them as they age.
“If they fail to get that type of training now, it may be years into their late 20s, 30s, or 40s before they start. By then it could be too late. It could take 20 years to undo the mistakes they’ve made,” says Park.
3 Ways to Teach Young Kids About Money
Use real-world experiences
Wollner has each daughter cash and physically count out each check they receive from acting gigs.
“They just see a big stack of green bills, but that to a child is cool. It’s like what they see in a suitcase in the movies,” says Wollner.
He then uses the opportunity to teach how taxes work as he has his daughters set aside part of the stack of cash to pay taxes, union fees, and their agent.
“They start to see their big old pile of money diminish and get smaller and smaller,” says Wollner, who says the practice teaches his daughters “everything you make isn’t all yours, and I truly believe that that’s a lesson not many in our society learn.”
Kids don’t need to earn their own money to start learning. Simply getting a child involved with the household’s budgeting process or taking the opportunity to teach how to save with deals when shopping helps teach foundational money management skills.
Park urges parents to also share financial failures and struggles in addition to successes.
“They need to prepare their kids for the ups and downs of financial life so that they don’t panic if they lose their job, have an accident, or [their] identity [is] stolen,” says Park.
Gamified learning through apps or online games can be a fun way to spark or keep younger kids’ interest in a “boring” topic like investing.
There are a number of free resources for games online like those offered through Monetta, Education.com, or the federal government that aim to teach kids about different financial concepts.
Wollner says his youngest daughter benefited from playing a coin game online. He says the 7-year-old is ahead of her peers in fractions and learning about the monetary values of dollars and coins.
“This is how the kids learn. It’s the fun of doing it. They don’t think of it as learning about money, they think of it as a game,” says Bob Monetta, founder of Monetta Mutual Fund. The games Monetta has developed on its website are often used in classrooms.
When kids get a little older and can understand more complicated financial concepts, they can try out a virtual stock market game available for free online such as the SIFMA Foundation’s stock market game, the Knowledge@Wharton High School’s annual investment competition, or MarketWatch’s stock market game.
“The prospect of winning is what makes them leave the classroom still talking about their portfolios and their games,” says Melanie Mortimer, president of the SIFMA Foundation.
Anyone can play the simulation games, including full classrooms of students.
Aaron Greberman teaches personal finance and International Baccalaureate-level business management at Bodine High School for International Affairs in Philadelphia Penn. He says he uses Knowledge@Wharton High School’s annual investment competition in addition to online games like VISA’s websites, financialsoccer.com, and practicalmoneyskills.com, to help teach his high school students financial concepts.
Adults should play the games with children so that they can help when they struggle with a concept or have questions. Adults might even learn something about money in the process. Consider also leveraging mobile apps like Savings Spree and Unleash the Loot to gamify financial learning on the go.
Reinforce with clubs or programs
For more formal reinforcement, try signing kids up for a club or other financial education program targeting kids and teens.
FICA, the Future Investors Clubs of America, provides educational materials and other support to a network of clubs, chapters, and centers sponsored by schools, parents, and other groups across the nation.
When looking at financial education programs, it’s important to recognize all programs are not equal, says FICA founder, Frank Park.
“Generally speaking, you’re going to go with the company that has a good reputation of providing these services, especially if your kid is considering going into business in the future,” says Park.
The National Financial Educators Council says a financial literacy youth program should cover the key lessons on budgeting, credit and debt, savings, financial psychology, skill development, income, risk management, investing, and long-term planning.
Mortimer suggests parents also try getting involved at the child’s school by offering to start or sponsor an after-school investing club. She says many after-school youth financial education or investing organizations nationwide use SIFMA’s stock market simulation to place virtual trades and compete against other teams.
Drones, also known as “unmanned aerial vehicles,” have been used for military purposes since before World War I. Drones for consumer use have only been available for a handful of years, but they’ve become wildly popular in that short time. The first consumer drones were pretty pricey and required a steep learning curve, but today there are lots of budget-friendly ones on the market for flying novices. To that end, we’ve rounded up the best toy drones of 2016.
The Nano Drone from AERIX is perfect for first-timers, with a three-speed calibration system that allows novices to take off slowly and build from there. It should be used indoors, and even has guards and landing skids to protect it just in case you crash into things as you’re learning. Once you’ve figured it out, use the LED lights to fly your Nano in the dark! The remote control is included. The Nano Drone is available for $40 on The Grommet’s website.
Give one of 13 commands, and the Sky Rover Voice Command Drone will do what you ask, including flips! If you’re an unsteady flyer at first, don’t worry. The four motors are cushioned by propeller guards, so this baby is tough to break. Three AAA batteries are required, but hand controls and replacement blades are included. Sky Rover Voice Command Drone is available for $60 at Toys R Us.
3. Portable Pocket Quadcopter With Camera by Odyssey Toys
On the go? Odyssey’s tiny indoor/outdoor drone has collapsible blades so you can take it with you. Great for novices and pros, it features technology to help keep things stable. It also has lights so you can fly it at night. Record your adventures in video and photos, stored on the 4GB Micro-SD card. (Ignore the temptation to spy on your neighbors!) Odyssey’s pocket drone is available for $130 on Brookstone’s website.
4. Air Hogs Connect Augmented Reality Mission Drone
Add another dimension to your drone play with virtual reality! This indoor drone — which comes with its own carrying case, a major plus — is played with an interactive mat and a free iOS or Android app you can use with your tablet. When you fly the drone over the mat, it activates a team of virtual teammates who join in a series of missions. You can also fly solo without the virtual features. Air Hogs Connect Mission Drone is available on Barnes & Noble’s website for $149.95.
Parrot SWING is controlled by the Flypad controller, which easily mounts to your smartphone. Changing settings is a breeze, and SWING can be controlled from as far as 60 meters away. It even has autopilot mode if you’d prefer to be a bystander. Four additional propellers are included. SWING is available for $140 on Parrot’s website.
6. Sky Viper Remote Control Hover Racer Gaming Drone
Fly solo, or race and battle up to four friends! Mount your smart device on the controller, and use the four infrared beacons to set up a course that you can view on the free smartphone app. As you improve, so will your virtual weapons and other fun features. Interchangeable thumb sticks, replacement blades and screwdriver all are included. Priced at $89, Sky Viper is available at Toys R Us.
Hypothetically speaking, let’s say you’re in debt and someone sent a 3-year-old to your door. One glance at those large, innocent eyes looking up at you and asking you to settle up would probably send you running for your checkbook. I doubt you’d even attempt to negotiate your debt. You definitely wouldn’t slam any doors in their faces.
But watch out if a toddler ever wants to loan you something; you might just fall into accidental debt. A new study demonstrates that three-year-olds know when you owe them.
In order to get a true measure of indebtedness, a series of experiments was performed with resources a toddler might value most: stickers and toys. Markus Paulus at Ludwig-Maximilians-University of Munich, took three-year-olds and five-year-olds in groups ranging between 28 and 43 kids and had them participate in a sharing game. The toddlers were tested individually, and had to choose how many of their stickers they wanted to share with specific toy animals of different colors. The game was intentionally crafted so that the toddler would choose a favorite animal to share more stickers with. There were winners and losers. Sadly — if you can feel sorry for a toy — one toy animal only got one sticker or no stickers at all. Such is life.
Researchers leveled the toy animal playing field by showing the toddlers that each of the animals was actually IW (independently wealthy), with its own sticker collection. After adding them all up, kids were shown that each toy animal had the same number of stickers, so even the sad, disadvantaged animals balanced out to the same amount.
Then came time for payback. Suddenly, the toy animals were gifted with irresistible toys that would cause even the most disciplined three-year-olds to stop in their tracks, swoon and start to whine, er, pine — colorful balloons, oh-so-shiny marbles and coloring books graced each animal. Each animal had the same number and type of toys. For a few rounds, the toddlers were told to choose which animals they’d ask to share its alluring resources. Time and time again, the toddlers approached the animals to whom they had given the most stickers.
“At this age, expectations for reciprocity seem to develop, and these expectations start to affect children’s behavior,” Paulus told Credit.com.
If No One Sees It, It Never Happened
Interestingly, researchers then varied the study a little. This time, they had the animals leave the room before the toddlers decided how many stickers to share with each one. So, technically, the toy animals never “saw” when toddlers gave them preferential treatment or more stickers. But by age 3, their young minds already knew that a favor done without a happy recipient didn’t count in the favor bank. When it came time for the toddlers to hit up which animal they’d ask for toys, they no longer asked more from the animals to whom they’d given more stickers. They seemed to know the favor would never be recognized if it hadn’t been seen.
Why It Matters
“I think it really helps us to know how deeply wired we are for relatedness,” said child psychologist Dr. Bob Bartlett in White Plains, NY. From the moment a child is born, the little person relies on expectancies and patterns to navigate life, he said. Nursing mothers and their newborns often perform a “complicated dance” of relating and needing space through body posturing and eye contact, says Bartlett. “That becomes woven into the way we connect with other people as we go forward. So we’re really wired for a sense of expectancy.” Our first experiences of fairness and indebtedness shape our philosophies of meaningful relationships.
“From early on, our parents and caregivers help teach us what to expect from relationships — how sharing is undertaken, how others are thought about. They emerge and really take shape,” Bartlett continued. And we learn reciprocity as it is reinforced by our family and by larger communal settings such as preschool, he said.
It can be witnessed when a toddler’s sense of unfairness is spot on — as soon as they see another kid receive something they don’t have, says Dr. Bartlett. (Just hand an ice-cream cone to another toddler, and see what happens with yours.) “Automatically a child will want what’s given to another,” Bartlett says. “It’s all based on our own need of wanting others to attend to us and give to us.”
And adorable toddlers certainly know how to gain credit in your heart.
There’s no way around it: Your kids are going to need a ton of new items for school. From backpacks to water bottles, I’ve found the some of coolest gear that your kids will love using all year, plus some problem solvers guaranteed to make the kickoff to school a lot easier.
These adorable, water-resistant backpacks are designed for little ones. And c’mon, backpacks with light up wings? Your boys and girls will love them, and so will you because they have a warranty and are PVC-, phthalate-, lead- and BPA-free. For every one purchased, Bixbee will donate a school bag with supplies to a child in need through their “One Here. One There” program.
These cool eco-friendly backpacks look like they’re for big kids, but they are sized for the younger customer without sacrificing space. For every backpack sold, Sydney Paige donates a matching bag, packed with supplies, to a low-income child.
Available in six colors, this roomy, water-resistant backpack will hold a ton of books, notebooks, a laptop and all the little necessities with room to spare. Padded shoulder straps and back panels ensure comfort, no matter how heavy the bag gets, which will also come in handy for backpacking when school is done.
You can always count on The Children’s Place for a fabulous, functional lunch tote. They have plenty of styles for kids of all ages, and the price is right. My current favorites? The Rainbow Photo-Real Lunch Box and The Force Awakens Kylo Ren Lunch Box.
If you need a roomier lunchbag, I recommend these. They are a mini one-shoulder backpack with tons of room for a big lunch, plus a grommet in the front for key chains. With every Yoobi item purchased, one is donated to a classroom in need in the U.S.
These 7×7 ½ reusable re-sealable bags can store sandwiches, fruits and snacks, easily replacing your disposable baggies. You can even steam veggies in them! Easy to rinse in the sink or dishwasher, these are available in four colorful designs.
This 20 oz. bottle has a replaceable MicroDisc filter, so you can rest assured your kids are drinking clean water when they go to refill their bottle. Each MicroDisc lasts about three months, and the bottle has an indicator to let you know when it’s time to replace the filter. Available in purple or blue.
Just the right size for snacks, these stackable, colorful jars are made from recycled HDPE plastic. They’re also BPA- and BPS-free and so tough that they’ll last for years. Top rack dishwasher safe, the jars are available in 13 colors.
Help your kid hang onto their stuff this year with this variety pack of no-iron, long-lasting, customizable labels for clothes, shoes, backpacks, sports equipment and the works. Several variety packs are available.
These no-tie laces are lifesavers for the time-challenged family. They take a couple minutes to install, then kids can slip their feet in their shoes in seconds. Sure, kids need to learn how to tie their shoes, but perhaps you can leave the laces on one pair and put SnapLaces on the rest! These are available in 12 bright colors.
You’ll have one less thing to worry about now that your child has their own clock! Not only will they learn to tell time, they can set an alarm, snooze and see the time if they wake in the night. And if they do wake early and they see the image of the sleeping child, they know to stay in bed. If they see the child on the clock is awake, they can get out of bed.
School’s out and the kids are bouncing off the walls. You want them to go outside and play, but to be fair, the toys out there are sun-bleached and well-worn due to years of hard play.
Here are 14 summer fun toys that are sure to be a hit — and won’t break the bank. (You can see how those high credit card balances may be affecting your credit scores by viewing two of your credit scores for free, updated each month, on Credit.com.) Stock up on a few of these terrific toys and you’ll likely find that the kids may never want to come inside!
A balance bike provides an easy road to a “big bike”! The stylish Cub is lightweight, sturdy and adjustable, so it will grow with your child until they are ready for the real deal. Critical Cycles are delivered right to your door — so convenient! Ages 20 months and up.
This tri-color roller set makes emblazoning the driveway with shimmering rainbows a piece of cake. Once the (non-toxic and easy to clean) rainbows are created, kids’ imaginations will run wild. Ages 3 and up.
This eco-friendly set allows kids to create a different mini golf adventure every time they play. It includes clubs, balls and tracks to guide the course, all in a handy canvas travel tote. Ages 3 and up.
Kids can make bubbles galore with this hand-held bubble machine. The Blaster comes with a 4-oz. bottle of Funrise’s fabulous bubble solution. Simply pour the solution in, press the button and you’ve got bubbles! Note: three AAA batteries are required. Ages 3 and up.
Playing in the sprinklers on a hot day is a must, but this isn’t any sprinkler. The dome spins and the tubes wiggle and squirt water every which way. Hopefully, they’ll make way for you when you run through! Ages 4 and up.
You may already know about Jump Rockets, but you have to check out this new LED-version! Flick the switch, stomp and watch a rocket soar up to 100 feet into the night. Bedtime may fall by the wayside with these fun toys. Ages 4 and up.
This unique, foldable scooter is propelled by a swiveling motion of the hips, rather than pushing off the pavement. It’s very easy to learn, so the kids will be scooting and doing tricks in no time. It can hold up to 175 pounds, so grownups can even hop on and take a spin. Ages 7 and up.
This top-selling hoop is the best because it makes hula hooping easy. It has a patented liquid code that, Wave says, makes hooping 10 times easier than the classic hoop. And there are tons of holographic patterns to choose from. Ages 6 and up.
You can’t have a toy roundup without a drone! This customizable flyer is fun to play with and easy to use. Just download the Freeflight 3 app and get flying. The drone is rugged, shock resistant and even has an embedded camera. Around 10 minutes of flying time per charge. Ages 8 and up.
This set is for Boules, Bocce, Yard Ball and many other weighted ball games (including ones your kids will make up). It’s beautifully packaged and has it’s own carrying case, so you may want to borrow it from the kids for your next barbecue. Ages 8 and up.
2. Roseart Neon Washable Sidewalk Chalk Paint Set ($4.89) at Shopko.com
These eye-popping sidewalk paints will keep them entertained (and outside) for hours. The set comes with two non-toxic, washable paint colors, two foam brushes and one stirring stick. Just mix with water and paint away! Ages 3 and up.
13. Booger Balls Shaker Maker ($12.99) at Toys “R” Us
If you’re open to a messier battle, mix up a batch of these crazy, slimy, flingable faux “boogers” in the Shaker Maker and let the games begin. And don’t worry, the stuff won’t stain. You may hate me but your kids won’t. Ages 5 and up.
14. Little Live Pets S4 Birds Single Pack ($9.88) at Walmart
These sweet birds are like the real thing without the cleanup. They sing, chirp, record and repeat phrases and get happier the more they are played with. Six different styles to choose from. Ages 5 and up.
15. Shopkins Surprise Eggs ($2.99) at Target stores
If your little one is as obsessed with Shopkins as mine is, these eggs, which are available in blue, yellow and pink, are an essential in your Easter basket. Each egg holds four adorable Shopkins. Some, like the Fluffy Rare Pair, are very rare. Ages 5 and up.
Everyone likes to talk about how much money it costs to have and raise kids, but one other topic that sometimes gets glossed over is all the other financial and life details that new parents should have in place before their first child is born (or shortly thereafter, at least).
While we wouldn’t call this a finite list, the following are definitely some of the more important documents and plans you’ll want to have in mind before little Junior makes his or her appearance.
1. Put together a will and trust
Besides the obvious advantages of leaving your possessions and assets to the people you pick, a will is important for a lot of other reasons — for people with and without kids. When you do have kids, though, this becomes even more necessary as a way to legally name guardians for your children should something happen to both you and your significant other. When you don’t have a will in place that names these guardians, a court would decide what happens to your children, where they go and who will raise them, if something were to happen to you, and that’s probably not what you’d like to have happen.
One other important thing to keep in mind is the difference between custodians and guardians. Remember, the person you name as your child’s guardian doesn’t necessarily have to be the person who’s also in charge of your child’s finances. That duty can go to a custodian, who will then take care of any money left in your kids’ names until they turn either 18 or 21 and can take over that task for themselves. Check out this piece for more on how to put a will in place if you need one.
2. Get a life insurance policy
When you have a family, it becomes even more important to put some sort of life insurance policy in place as a way of ensuring that, if something happened to you, the spouse who is still around will be taken care of financially, and so will your kids. While you can set up your life insurance policy for whatever your want it to cover, most financial experts who help you pick one will ask you to consider certain factors, such as:
Do you have a mortgage to pay off?
Do you want to put one or more kids through college?
What sort of monthly finances would be necessary to replace the lost parent’s income?
Adding all these factors together, you’ll be presented with an approximate amount that would cover all of these situations, should something happen to you. While the overall number might scare you at first (think in the millions here, especially if we’re talking about putting a couple of kids through college), there are actually some great plans on the market today that won’t cost you an arm and a leg each month to get.
3. Consider disability insurance
When it comes to disability insurance, consider it this way — if you’re young and healthy, the odds are much greater that you’ll injure yourself and be unable to work for a given amount of time than that you will actually pass away (at which point your life insurance policy would come into play). A disability insurance plan would help cover your family’s necessary expenses while you get back on your feet. Group disability plans are often through employers, and while individual plans are available, they are likely to be a bit more costly depending on your particular situation (if you’re older with high cholesterol, for example, you’ll probably pay more than a young, healthy person). On the other hand, if you’re okay with what your employer offers but would like a little bit more coverage, a supplemental plan might be able to help you make up the difference. For more on disability insurance, check out this story.
4. Have a power of attorney
A power of attorney isn’t necessarily something many people think about when it comes to financial planning, but it probably should be. Assigning someone power of attorney gives them certain rights to make decisions for you based on the type of power of attorney you pick. For example:
General powers of attorney retain comprehensive rights to act on your behalf, and this type of power of attorney can last until you pass away.
Limited powers of attorney can only make decisions for specific purposes and for a set amount of time. This might be useful during something like an illness, where you are unable to make financial decisions yourself.
Durable powers of attorney essentially maintain all the same rights to serve for you as a general power of attorney, and their powers remain effective even after a person becomes incapacitated, so there is no need for court involvement.
Durable powers of attorney for health care allow you to name someone to make health care decisions for you when you cannot make them for yourself.
Setting up a power of attorney ahead of time for whatever your needs might be can save your family a lot of time and trouble (and legal woes) if something happens to you.
5. Create a living will
A living will is a statement that details your desires regarding medical treatment and the like when you are no longer able to express these things yourself. Putting something like this in place helps take the burden off your family to make these decisions during what will likely already be a stressful and emotional time.
Again, while there is much more to estate planning than just the policies and documents listed above, starting with them will help you rest assured that your family will be taken care of emotionally and financially, no matter what the future may bring.