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Whether or not a child is ready for a credit card is a common question for many parents. And the answer is… it depends.
Nowadays, many high schoolers have a credit card. While you need to be 18 to legally have a card in your own name, you may share an account with your parent. The problem with credit cards is that your children will never physically see the money. It is just the swipe of a card. So in order to give your children an appreciation for hard-earned money, I’ve included a few ways to teach them about money.
Then, once you feel they truly have a good understanding of when to spend money, you can make the decision to give them a credit card (for necessary purchases only, of course).
A weekly allowance, whether it’s $10 or $50 dollars, helps children realize that money is limited. They will then learn to budget and save money in addition to spending money on what they really want.
In order to use an allowance as a teaching tool, you need to ensure that you as the parent, still do not pay for everything. The allowance should be used as money for extras – clothing, movies, dinner with friends, etc. But if you still end up paying for these types of items, your child is not learning when to spend and when to save (since mom and dad will pay for it anyways).
Therefore, when you first begin giving an allowance, you should lay out the ground rules for what you will still pay for. This gives the child a better understanding of what items they should save for.
Get a Job!
Encouraging your children to work will give them a much greater appreciation for money. It doesn’t matter if it’s babysitting, house chores, or a part-time job, if they are working for money, they will value it more.
As a parent, you can encourage them to save for things such as a clothes, a trip, or college. This will also help teach them the value of saving.
Debit cards are a great teaching tool prior to getting a credit card. While they act just like credit cards, there is only a set amount of money available. Therefore, they can get used to relating a plastic card to real money.
If you feel your child understands the value of money and is on their way to college, it may be beneficial to have an “in case of emergencies” credit card. They can use this if their car breaks down or they need to buy a plane ticket home. This will also help them build their personal credit so that buying a car or house after college will be easier.
Obtaining a credit card for your child is a personal decision, but should not be taken lightly. Making sure your child understands the value of money will hopefully prevent them from going into too much credit card debt later down the road.
I’m a Financial Consultant and Personal Financial Representative with experience in financial analysis, strategic planning, presenting, & financial advisory services.