They say children pick up on everything. So what are the kids of rewards chasers picking up as their parents sign up for several rewards cards at a time and milk the resulting sign-up bonuses for family vacations?
In honor of Father’s Day, we asked some of the top players on the card rewards field (who also happen to be parents) what, exactly, they tell their kids about credit – and how they try to set a good example.
Using rewards doesn’t mean living without a budget: Leana Storts of Miles for Family
Mother of two
Storts uses her site to teach regular families how to leverage miles and points – and she’s done her fair share of that, booking family trips and bringing her parents from Europe for visits. She also stresses the importance of travel to her children.
However, Storts says being honest with kids about the family’s budget is an important counterbalance to the allure of travel and the instant gratification plastic can provide.
“A lot of trips are subsidized through credit card rewards, but we have to spend a lot of cash, too,” she says. “That’s why I try to teach my kids the concept of opportunity cost. If I buy this very expensive toy, we won’t be able to afford to go to an amusement park. It’s a little hard for them to comprehend, but we’re working on it.”
As her kids get older, Storts hopes they’ll view credit cards as a useful tool that must be used with caution but not necessarily fear.
“It’s sort of like a knife,” she says. “You can stab someone or you can use it to cut up vegetables for family dinner. I much prefer the latter.”
Don’t repeat my mistakes: John Schmoll, founder of Frugal Rules
Father of three
Schmoll chronicles his successful use of credit card rewards to pay for trips with his kids and wife. But he wasn’t always strategic when it came to credit.
“I struggled with credit cards and rang up my fair share of debt while in college,” Schmoll says. “A lot of it came down to my lack of financial literacy, and I did nothing to educate myself as to how credit cards really work.”
While Schmoll’s kids may one day learn to flex the power of credit cards, for now, he’s concentrating on financial literacy.
“We’re teaching our children that credit cards are a tool to be used wisely and that they’re only to be used when you have the money to pay for the purchase,” he says. “We teach our children risk arises when you see cards as way to inflate your lifestyle beyond your means.”
Don’t lose track of reality: Dan Miller, Points with a Crew
Father of six
Miller and his wife regularly talk to their kids about how credit cards aren’t a “money tree” and that swiping a card means money is drained from your actual bank account.
“This is actually a bit tricky, given some of the outsized value you can get with miles and points from credit cards,” Miller says. “For kids, it can be easy to confuse the jetsetter lifestyle you can get with the more frugal lifestyle you have to live in the real world.”
While Miller has used card rewards to cover a $6,500 Amtrak vacation and flights for his family of eight to Reno, he emphasizes cash with his younger children by giving them actual money as an allowance.
“I think that’s more tangible and easy to understand for younger kids,” he says.
As his kids get older, however, Miller says, it’s important to transition them from responsible use of cash to responsible use of plastic.
“That’s how it’s going to be when they get out in the real world, and if they don’t have a healthy understanding of how to be successful with credit cards, they’re asking to learn some painful and expensive lessons in their early adulthood,” he says.
Don’t break the link between spending and real cash: Brad Barrett, CPA, Richmond Savers
Father of two
Barrett has managed to pull off some impressive rewards feats, including taking his family to Disney World for free. To do that, he and his wife put 100 percent of their spending on cards.
“And the link between this spending and real cash isn’t often apparent to young kids,” he says.
To keep that link strong, Barrett requires his daughters to split their allowance into three buckets: savings, spending and charity. If they forget to bring their spending money and want to buy something while out and about, Barrett and his wife will agree to put it on the credit card but require their kids to pay them back as soon as they get home.
“This mental link between credit card spending and actual cash is crucial,” Barrett says. “We then tell the girls we are taking that money and sending it to the credit card company so they don’t charge us extra money, interest, for borrowing it for that short time.”
As his daughters get older, Barrett plans to teach them more advanced lessons, such as how it’s much more expensive to pay just the minimum instead of paying balances off in full.
Responsibility is rewarding: Angelina Aucello, travel credit cards expert at Angelina Travels
Mother of two
Aucello’s kids (age 1 and 2) are a bit too young to learn about credit. But when they’re ready, they’ll probably benefit from the example set by Aucello’s own father.
“My father taught us at a young age that you had to work hard to earn money and if you couldn’t afford it, you shouldn’t get it,” she says.
Today, Aucello has 18 active travel rewards cards and an impressive record of luxury travel.
“Sometimes people are quick to judge by thinking I must be drowning in debt for a free flight,” she says.
But her habit of using credit only when there’s money in the bank to back it up remains – and is a routine she hopes her children pick up from her example. Other habits Aucello intends to model include paying in full and on time and carefully monitoring your credit (she has an 826 credit score). She also said she plans to add her children as authorized users to a card when they’re old enough. It’s something her dad did for her, jumpstarting her credit history.
“Bottom line,” she says, “if you’re responsible, organized and realistic about money, credit cards can unleash a world of benefits, including free travel.”