Today’s fantastic family finance article is:
6 Important Credit Lessons Your Parents Didn’t Teach You
“Neither a borrower nor a lender be.” ~William Shakespeare
...until your next credit card purchase.
Do your kids realize you’re borrowing money every time you make a credit card purchase?
Probably not.
The next time you use a credit card around the kids, strike up a conversation like the following:
“Do you know who just bought lunch?”
“Um, you did. I just watched you pay with your card.”
“Actually, I didn’t pay for it yet.”
“Uh, Dad, are you OK!?”
“The bank paid for it. This credit card lets me borrow the bank’s money. So every purchase is a loan I have to pay back later.”
“Oh. I get it. When do you have to pay them back?”
“By the end of the month.”
“What if you forget?”
“Then I have to pay them back the amount I borrowed plus interest.”
“You mean like the teeny interest I get in my savings account? That’s not so bad.”
“No, like 330 times as much interest!!!” 1
“Ouch! Good to know.”
That’s a conversation you can’t have too often.
Remind your kids that every credit card purchase is a loan. And if they don’t pay it back in time, they’ll be the borrowers they simply can’t afford to be.
1 Assuming a bank savings account interest rate of 0.06% and an average student credit card rate of 19.8%.
Get tomorrow’s tip here.
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