Teens and Credit Cards

One way of helping a teen become financially responsible is to allow him or her to have a credit card. The trick is to make the teen fully responsible for its management. The child must have a bank account with money in it and must be responsible for keeping track of bills and payments.

By giving young adults limited financial control, parents are providing them with the opportunity to learn to make good decisions and to develop financial discipline.

Often, teens who are not earning their own money are unable to fully appreciate the real value of a dollar. For that reason, it’s best to allow your teen to have a personal credit card only after getting a part-time job or summer job that provides a financial base for its use. If this isn’t possible, however, you can provide a “salary” for “hired services”  the teen provides for you in the home (i.e. tasks that go beyond normal family responsibilities like helping in the kitchen and keeping one’s room clean). Alternatively, you can simply give your teen a steady allowance that is meant to cover not only entertainment and snacks, but also clothing, toiletries, transportation and other necessities of life. The reason for this is to help the teen learn to work within a budget to handle a large range of expenditures.

Having said all this, there are clear risks in offering a teen credit. A parent may find him or herself in the position of needing to bail a child out of unmanageable debt. Teens are, after all, inexperienced, impulsive and naive (some more than others) – characteristics that can get them into serious trouble of all kinds.

Given this is the case, how can you know if your teen can manage a credit card?

Consider Your Teen’s Personality
Is your teen a natural spender or someone who is able to save for a rainy day? Does your child tend to be impulsive, buying things that he or she never ends up using or do you see evidence of well-considered purchases?

Conduct a Test Drive
Before handing over a credit card, try simply providing a larger allowance and realm of financial responsibility to your teen. See how the youngster handles that extra responsibility. Can he or she function within the budget without coming to you for shortfalls? Is the youngster content within that budget? Is he or she making appropriate choices (i.e. buying lunch as well as t-shirts, instead of just t-shirts?). Can he or she set aside savings for large expenses and needs? “Yes” on all fronts earns a credit card. Even one “No” indicates a need for more experience and maturity before involving the bank!

Communication Skills
If you and your teen aren’t on good speaking terms, be careful about handing over credit. Your teen can get a credit card independently when he or she can present himself responsibly to a bank. Communication needs to be open so that your child can ask you questions when they arise, ask for help when it is needed and keep you informed about personal finances. Although you should not abuse the privilege, it should be possible for you to inquire about the balance on a card that you have co-signed for and you should be able to access the account. If there is no reason for you to do so, however, then DON’T. If you didn’t trust your child in the first place, you should not have provided a credit card. If you feel the need to check the monthly statement on your child’s card, the child should not have a card. Hopefully, you waited until the child showed appropriate signs of financial maturity and credit readiness. If so, everything should go smoothly. As  your teen becomes a young adult, you’ll be able to complete respect his or her financial privacy.

Another aspect of good communication involves YOUR OWN communication with your child. Be very clear – in fact, put it in writing – what the child’s credit card is for. For instance, do you want your child to use the card to buy all of his clothing, outerwear, digital devices, restaurant food and so on and so forth? Let him know what YOU are paying for and what you want HIM or HER to pay for – be as clear as possible in order to avoid misunderstandings and conflict.

Finally, enjoy watching your child become a responsible adult!

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