Most kids love to spend money, and your child will likely need to borrow money at some point in life. Whether they’re borrowing money for a car, college, or their first home, they’ll need to understand how credit works. Talk to your kids from an early age about different ways to borrow money, so they’re prepared to handle debt down the road.
Reasons for borrowing money
As your kids grow older, they will likely ask to borrow money more often. Kids and teens like borrowing money for toys, hobbies, and going out with friends. Borrowing money can seem like free money to young kids, though, so start teaching your kid early that borrowing money means they will need a plan to pay it back. Help your child make a plan to pay back any borrowed money over time. Good borrowing habits now will help prepare them for bigger borrowing situations in the future. Especially as they consider buying a car, going to college, or buying their first home.
Different types of borrowing money
Borrowing money can help you accomplish many goals, and there are many different ways to borrow money to help you get there. Before you consider borrowing money, know what you’re borrowing money for. Many loans are specific, like a car loan or mortgage on a house. Student loans can pay for your college degree. Other options, like a credit card, can be used more freely. Check out some of the most popular ways to borrow money below.
Borrowing money from a bank
Banks offer many different options to borrow money all in one place. Banks and lending institutions make their money by managing different kinds of loans and financial products, so they are a popular way to borrow money for many goals. While there are countless banks to choose from when you borrow money, they all offer similar loans, like:
- Auto loans
- Personal loans
- Mortgage loans
- Business loans
- Credit cards
Borrowing money for college
Student loans may be a great tool when your kid graduates from high school and takes the next step in their education. Most kids can get a student loan through the government or a private lender like a bank. Federal student loans typically offer lower interest rates and better repayment options. Use student loans to explain to your child how debt must be re-paid with interest over time. Research the best loan options for your child and their future education.
Read more financial articles about borrowing here.