Start Teaching Teens about Credit

My three year old has taught me a valuable lesson.  We were at the grocery store the other day, and he was playing with my purse while I was finishing up at the checkout.  Rather than pull out my checkbook or cash, he immediately pulled out my credit card and tried to swipe it through.  That’s when I realized he was doing what he had seen me do time and time again.

It makes you realize how our habits impact our kids.  They watch what we do, and they learn from us.  Finances and spending habits are no exception.  I remember listening to my parents talk about how they had no money when I was a teenager.  Yet, we still went and got pizza, went to the mall, and bought things we probably didn’t need.  I always wondered how they did it, but figured it was normal for things to be that way.  Now, as an adult, I know what they were doing.  They were racking up their credit card bills.

There are ways to teach our teens responsible spending habits that will serve them for the rest of their lives.  There are credit cards with extremely low limits out there ($250 for example).  They can carry the card, use the card, and pay the card.  It helps them understand that shopping at the mall with their credit card doesn’t just mean having a good time.  It means that you get a bill later that month.

There are also pre-paid credit cards out there.  You can load (or have your teen load) a certain amount on the card.  Once those funds are gone, the card stops working – very much like a gift card.  That will also teach them that there are limits.  You can also open an account in their name and give them a debit card.  This will show them how money can quickly leave their account if they aren’t careful.  The key is to be careful with which ever option you choose.  Typically, it will be your name backing your child’s.  Make sure the limits and/or balances are kept extremely low.

Another important thing to teach our youth about credit card debt, is that they don’t need to max out there card(s).  Just because you are given a $2,000 credit limit does not mean that you need to spend it.  Teach them the importance of keeping some funds available in case of emergencies.

Some parents would faint at the idea of giving their teen a credit card, but I have found it to be a very successful teaching tool… as long as there are limits and lessons that go along with it!

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