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Financial literacy is, unfortunately, a topic that is not always discussed in school, so as a parent, it falls on you to ensure your children understand the ins and out of their finances. Educating your kids sooner than later will encourage them to make smart financial choices when they become adults. “Adults with a firm understanding of personal finance, credit cards, and credit are more likely to avoid money troubles.” Discuss these important credit choices with your kids so they avoid the financial pit of bad credit.

Pay attention to credit

If you don’t understand what credit is or how it works, it can be very easy to ignore it. Unfortunately, this can lead to missed opportunities, such as purchasing a car or home or even applying for a credit card. Teach your kids the importance of checking their credit score at least once a year early on. This will ensure they not only have an understanding of the process but allows them to monitor how much credit they are using and make adjustments to their processes as needed.

Pay bills on time, all the time

Making payments on time might be the most important credit choice, as your payment history comprises 35% of your credit score. While most creditors will not report a late payment until you’re 30 days past due, it’s best to avoid getting to that point. Just one late payment can cause a drop in your credit score, so ensure that your kids understand the importance of paying bills on time. Brownie points if they pay their bill prior to the due date.

Don’t max out credit cards

It’s easy to see the approved amount your credit card allows and let that burn a hole in your pocket. Credit experts, however, recommend only using 30% or less of your available credit at one time. Not only does it increase the higher minimum payment per month, but is also flags you as being a high credit user and can damage your credit score.

Live within their means

Applying for a ton of credit cards and taking out loans may seem like you’ve got it all together, however, it’s not free money and it will need to be paid back. Taking out too many loans and applying for too many lines of credit can result in a huge financial setback, including massive debt, poor credit, and financial struggles. It’s crucial that your kids understand they should only buy or borrow what they can afford.