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Cent$ible Students: Teaching Kids About Credit Cards and Debit Cards

June 6, 2013

Note From MonsterMortgage.ca

Recently, the children of one of our mortgage agents came home from school excited to share what they had learned at school about money.

The student followed up with their teachers and found that an organization called Cent$ible Students which teaches financial literacy had been at the school.

MonsterMortgage.ca met with Cent$ible Students and they agreed to share their teachings with our clients and those of you that read our blog and follow us on Twitter and Facebook. We hope that you, your family and friends will find this information useful and help you engage your children on the topic of money.

Let Us Know What You Think!

The Following is written by Jenni, Co-Founder of Cent$ible Students

Children see us use our “magical cards” most every day, when we buy gas, clothes and food. Debit or credit? What is the difference? They both seem to do the same thing. It can be very confusing: we want it to make sense.

A student once asked us, “How do you put the money on your credit card? “ Some kids think of credit cards as gift cards, which you might receive on your birthday or holidays. There is a set amount on the card and each purchase is deducted from the total until the card is ‘empty’. Do you want your child to grow up and get their first credit with a $1,000 limit and assume it works like a gift card? I didn’t think so. The following provides some tools that you can use to better help them understand how both Debit Cards and Credit Cards are meant to be used.

Debit Cards

Here is a tool that Centsible Students uses in the classroom to show students how debit cards work. www.oclf.org/atm/debit.html This provides opportunity to go through the following Q & As with your child:

What does the receipt show you?

• Answer: The amount that will be deducted from your bank account immediately with no delay. (In the classroom this inevitably leads to a child asking this follow up question)

What happens if I don’t have enough money in my bank account?

• Answer: Your purchase is declined, which means you won’t be able to buy anything.

Credit Cards

If you are thinking that the last answer leads some students to raise their hands and ask “what about paying with a credit card” well, you are right!

To explain credit cards we emphasize to students that “it is NOT your money; it is a loan from the credit card company or bank”. To purchase the item, you borrow money to pay the store, but you don’t pay for the item right away. Instead, you get a statement at the end of the month that states how much you owe and when you must pay it back. It is then important to emphasize that if you have not kept track of your purchases – ‘charged more than you can handle’ – you will have to pay interest.

Here are a couple of videos that explain it well:
• For kids in the 8-10 year old range – www.youtube.com/watch?v=4w9fKTfrWFY
• For older children try – http://tinyurl.com/ctf37rz

More Helpful Tips?

Online videos, tools and games are engaging tools to get the conversation started. You can also bring the message home by showing your kids your bank and credit card statements. Show them that the government has recently required all credit cards statements to reveal the amount of time it will take you to pay off your credit card if you only pay the minimum payment, and how much in interest you will end up paying on top of the cost of the item. Truly shocking! Check it out yourself!

For more information on Cent$ible Students, check out our website at www.centsiblestudents.ca or follow us on Twitter!