How to Introduce your Teen to Responsible Credit Card Management
Don’t expect your teenager to automatically understand credit and the ramifications of irresponsible spending and credit card management. Instead, begin teaching him or her about finances as soon as she or he is able to understand, and keep the dialogue going until your teen leaves the house.
While you have your teenager at home you can begin to teach him or her about the importance of responsible credit card use and the benefits of maintain a strong credit score:
- Use online calculators to give them examples. Begin by teaching your teen about credit cards, interest rates and monthly payments. Once your teen has a clear understanding of how credit cards work, use an online debt calculator to show him or her how long it will take them to pay off a debt if they pay only the minimum amount. In addition, show them the ramifications of not paying off a debt in a short period of time and the finance charges they will incur as a result.
- Consider teaching your teen the rules of credit using a prepaid debit card. Prepaid debit cards are a great way to teach your teen about finances, and about the importance of budgeting. You can purchase a prepaid debit Master Card or Visa that will work just like a credit card; however, your teen will need to budget him or herself so that they don’t overspend.
- Once your teen begins working, encourage him or her to open a checking account. Balancing a checking account and understanding the importance of not overspending will become very clear when it comes to managing his or her money. Once your teen has proven his or her trustworthiness with a checking account, you can give your teen permission to get a debit card that is linked to his or her account.
- Once your teen has a firm grasp of credit cards and the responsibility that comes along with them, you may want to consider co-signing for a credit card, particularly if he or she plans on going away to college. A card that is in both your name and your teen’s name will allow your teen to enjoy the benefits of a credit card, but will also allow you to oversee his or her spending.
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