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Nowadays, many youth start using options like credit cards, small loans or ‘buy now pay later’ without complete information. The habit of borrowing starts during college itself. If they don’t have the right information about credit beforehand, costly mistakes can be made later. In such a situation, it is important that the rules of borrowing, spending and returning money are explained to the youth in a simple manner from the very beginning.
Explain the simple meaning of borrowing
Teaching credit can start with a simple lesson. Borrowing means spending future money today. Many youth think of credit card as just a method of payment, but in reality using the card every time is like taking a small loan. It is important to explain that the amount of money taken has to be paid back later and sometimes more money has to be paid.
Provide information about interest and credit history
It is also important to explain to the youth how interest works. If a person does not pay the entire amount at once and only makes small payments, the total amount adds up. Similarly, a record of every payment is created, which is called credit history. Making payments on time improves your record, whereas delaying payments can make it difficult to get a loan in the future.
It is important to teach spending habits and budget
Credit problems often start not from borrowing but from the habit of overspending. Therefore, it is important to teach youth how to budget and manage money. By giving them a fixed amount, they can be given practice in handling the expenses themselves. With this they understand how to manage the money throughout the month. Gradually they learn that credit is not free money but a tool to be used responsibly.
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