IHMVCU "The Basics of Credit" - Parents

The Basics of Credit COACHING TIPS & ACTIVITY GUIDE

CREDIT ACTIVITY

EXPLAIN TO YOUR CHILD

WHAT CREDIT MEANS People talk about good credit, bad credit, building credit, repairing credit, and the list goes on. Sometimes for parents and adults in general, explaining the ins and outs of credit can be complicated — before explaining credit cards to your child, first explain what credit means.

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EXPLAIN THE BASICS OF CREDIT TO YOUR CHILD Begin by explaining that using credit is a lot like budgeting — the better they are at budgeting when using their credit card, the higher their “credit score” will be. A higher credit score will help them achieve their financial goals. This is important when it comes to buying bigger ticket items like cars, a new cell phone, college costs and applying for student loans.

Using their credit card to pay for smaller ticket items like a new pair of skis or fun activities during the weekend, and making sure to pay your credit card bill on time, is one way to begin building good credit.

What is credit?

Credit is your ability to get a product or service based on the understanding that payment will be made later.

Why should you have credit?

A good credit history is proof to your credit union or bank that they trust you to pay back money.

Why is credit history important?

Your credit score will be considered when you apply for big ticket items — the better your credit history, the better your chances of getting approved for a student or car loan.

CREDIT ACTIVITY

SHOPPING WITH

CREDIT CARDS Take your child holiday gift shopping for presents or DIY holiday gifts. Explain that they’ll be using a credit card and although no money was given to pay for it, the amount spent is put on their card and the amount “charged” will need to be paid back on time. Show them how to securely use the card when paying.

What they’ll learn How to properly use a credit card when paying and to budget their spending so they’ll have enough money to pay on the credit card balance each month.

What you’ll need

Credit Card

Budget

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Shopping Items

Holiday Shopping 1

Explain why you’re using a credit card At checkout, explain the difference between using a credit card versus a debit card. With a credit card, they’re able to borrow money from their credit union or bank and pay off a little of the balance each month.

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Show how to pay with a credit card Use your credit card to pay for the items and show your child the steps that generally pop up on the card reader – such as confirming the total cost and signing your name with card reader pen.

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Explain the process and benefits Explain that they still have to make the required monthly payments to pay off the balance on the card, and that by making these payments on time, they’re building good credit. Good credit shows your credit union or bank that they trust you and will let you continue to borrow money.

CREDIT ACTIVITY

CREDIT CARD SAFETY

People who want to steal your credit and debit card information are sneaky! They can place skimming and shimmer devices on trustworthy ATM machines. Explain to your child what these devices are, how they work and what your child can do to protect their card information.

What they’ll learn Basic security tips when using their credit and debit cards at gas pumps, ATMs and other locations where card payments are accepted.

What you’ll need

Credit Card

Transportation

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ATM/Gas Pump

Learn about ATM skimmers & shimmers Click the link below to learn about the devices being used by fraudsters so that you can explain to your child what these terms mean.

CLICK HERE to view the article!

Play a memory association game Make sure your child understands what skimmers and shimmers are, then ask your child to come up with a shimmer and skimmer dance routine or song that uses the security tips and key words.

By doing this fun muscle memory activity, your child will be able to remember these terms and tips. Join in on the dance and song – you’ll both have fun!

Tell your child these key reminders 1

Check for wiggly or loose parts on a card machine.

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Always cover their keypad when they input their pin number.

CREDIT ACTIVITY

PAYING BACK CREDIT CARDS

Learning about credit card payments and the basics of interest can be overwhelming for anyone, but with a fun and interactive game, it can make explaining the concept to your child much easier to understand.

What they’ll learn How to balance the cash they hold with the interest charges they accrue on their credit card.

What you’ll need

Monopoly Board Game

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Pencil & Paper

Monopoly Game Twist Activity details 1

Instead of using the paper money to pay rent, taxes or other payments, use a credit card.

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When your child lands on GO, an interest amount is added to any future expense.

The banker gives the player an invoice with the interest amount that will be added to the amount they will owe when having to make a payment.

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The player then has the option of paying a minimum amount or the full amount owed.