It’s common for many Americans to get their first debit or credit cards while they’re still teenagers. Working after-school or summer jobs also means it is the ideal time to begin taking responsibility for managing their personal finances, but learning to control a card of their own is a different matter.
Parents who take the time to teach children responsible ways to manage credit card usage are instilling important financial lessons that can stay with kids throughout their adult years. Here are some credit tips to give your teen to help then reduce future money mistakes.
Give Your Teen a Card
Make your teen an authorized user of your credit card. Show your young adult that you’re extending your trust, but also explain that they need to be careful with the amounts spent on purchases.
Explain Credit vs. Debit
Many teens don’t really understand the difference between a debit card and a credit card. To them, the cards both achieve the same result and pay for the items they want to purchase.
Explain to your teen that a debit card withdraws funds from their own cash. By comparison, using a credit card means repaying the amounts used at the end of the month. If your teen is unable to repay the amounts spent by the due date on the statement, they’ll end up paying exorbitant interest rates on the debt until it’s paid back.
Explain Payment Alternatives
A credit or debit card is not always the ideal way to pay for every purchase. There are times when using a debit card is appropriate, but writing a check and withdrawing funds from a checking account might be the best way to pay for other items. Likewise, there are times when a credit card may be more appropriate, such as paying for online purchases.
Where possible, credit cards shouldn’t be used to pay for day-to-day purchases that could easily be paid for with cash instead. Big ticket purchases that can’t be repaid easily by the end of the month should also not be paid for on a credit card.
Explain Repayment Responsibilities
If your teen has already had access to a credit card for a while, you might be tempted to believe he or she is already being responsible with money. However, it’s easy to lose track of money when you’re using a credit card to pay for everything.
At the end of the month, sit down and go over the statement together. Don’t make judgments about what your teen has chosen to spend money on. Simply explain that the amounts spent also need to be repaid.
Discourage Teens from Applying for Multiple Cards
Applying for credit cards can be far too easy, so it can be hard for young adults to avoid the temptation to accumulate several cards. However, too many inquiries can reduce your teen’s credit score.
If your teen has already managed to rack up debts on a few cards and spiraled out of control, try this site for suggestions on regaining financial control. Consolidating credit card debts into one convenient loan can
Teaching your teen to manage their debts is the best way to help them grow into adults who successfully take charge of their financial responsibilities. Take the time to work through their income and spending issues with them and encourage them to find solutions for the things they need.