It is essential for parents to teach their children good financial habits while they are young. Credit card companies are notorious for targeting young adults. Many colleges even partner with credit card companies and allow them to advertise to students on their campus. While the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 forces adults under 21 years of age to have a cosigner when obtaining a credit card, college students are still at risk of falling into debt.
The only way for parents to help their children become financially responsible adults is to teach them good habits while they are still living at home. Unfortunately, many parents don’t know how to do so. Teens are not always the easiest people to teach important lessons to.
How to Approach the Topic of Credit Card Management with Teens
The first thing that parents need to teach their children is that a credit card is not free money. Making a purchase on credit is similar to taking out a loan. When a person purchases an item on credit, they must repay the amount, plus interest.
Many teenagers view a credit limit as money being given to them. They fail to consider that they will need to repay the money they spend. Other teens get caught up in a ‘buy now, pay later’ mentality. Parents need to carefully explain how irresponsible spending can get a person into trouble.
Parents will also want to approach the topic of credit scores. While most teens are aware that consumers are assigned credit scores, they don’t understand how their credit card habits could negatively affect their score. Parents need to let children know that poor credit card habits can affect their ability to obtain an auto loan or home loan in the future.
How to Reinforce Responsible Credit Card Usage
To help teens get use to the idea of having a credit card, parents may want to give their child a credit card or pre-paid credit card to manage. Teens should be expected to make their own payments, using money from their allowance of afterschool job.
To help teens manage their account, parents may want to sit down and go over their credit card statement each month. This will give parents a chance to give feedback, while making sure that the teen is not overspending. Most teenagers will be much less likely to make irresponsible purchases if they know that they will have to answer for them at the end of the month.
Teens that are taught responsible credit card management in high school are more likely to continue these habits once they leave their parent’s home. By teaching good credit card management, parents are not only teaching financial responsibility, they are also helping their children build a positive credit history for the future.
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