by Allison Stanton

One of the best things about homeschooling your children is that you control what you are teaching them. In addition to the basic 3 Rs, history, science and a foreign language, you can teach them lessons with real world applications. A great example of this is finances. Many public schools have dropped this important topic all together, which means some teens are graduating with no concept of credit, debt or how a checkbook works. With this in mind, check out these tips on teaching your children financial lessons:

Teach the Difference Between Credit and Debit Cards

Many kids think those shiny plastic rectangles you use to pay for things are magical entities that allow you to get whatever you want. Plan a lesson based around debit and credit cards. Explain what each term means and how the cards work. By the time they reach third grade or so, most kids can grasp spending money you actually have versus money you have not made yet. If you use a debit card to pay for most of your purchases, have your child track what is being spent in an average day and determine the amount that will be deducted from your checking account. It will probably be an eye-opening lesson on how much it costs to keep your family running for one day.

Explain What Credit Means

Once your child has a good grasp of borrowing money versus paying for things with cash or a debit card, move onto the concept of credit. Use one of your own credit card statements to explain what interest is and how it’s important to pay your balance in full each month. Use a credit card interest rate calculator, like the one at Bankrate, to show how your payment due increases if it’s not paid off immediately. Teach your children about FICO scores and how every time they use a credit card or take out a loan, three major companies find out about it and keep track. Explain how a high and low FICO score will impact their lives and buying power. If you are comfortable with it, show your kids your credit reports and how any “dings” have caused your score to be lower than it could be.

Teach Them to Budget

Kids are notorious for thinking that money grows on trees. Help them understand the importance of budgeting and living within their means by having them save up for or using a payment plan for a much-desired item. For a younger child who wants a $89.99 LEGO Scooby Doo Mystery Mansion set, work with him or her on the numbers and explain how many weeks’ worth of allowance it will take to have enough money for the set. Suggest that to get the set sooner, he or she can take on extra chores around the house for extra pay. Go over the math on paper to explain how this will help her to reach her goal even faster.

For teens who want a pricey item like an iPad Mini 3, explain how a payment plan, like the one from T-Mobile, ibs a way to get the tablet sooner if he or she is willing to take on an added expense for two years. Show how the site indicates that people can purchase the iPad for $22.08 a month for 24 months with no added interest. Be sure to emphasize that while there is no interest charge, he or she has to come up with the monthly payment amount or risk losing the tablet.