Teaching Your Teenager About Credit Cards

teaching your teenTeaching your child financial responsibility is one of the most important tools you brace them with. Unfortunately we can’t rely on them learning any financial skills in school so it’s our responsibilities as parents to prepare our kids the best we can.

Don’t Become Me

I am the perfect example of what can happen if not braced with the proper tools. Though I grew up with a very frugal mom in a single parent household my mom never taught us anything about money. I don’t think she knew how.

My mom has never owed a debt in her life other than a mortgage which she paid off in 15 years. You’d think she’d have great advice to give about hard work and money management but she didn’t. She went through university on full scholarships, graduated in a healthcare field that had great job security and very well-paying job, drove used cars she paid cash for and never carried a credit card balance. Debt was totally foreign to her, and because of this she had no advice about how to avoid it or pay it off when it occurs.

Though my mom had a well-paying job, for many reasons, some of which I still don’t understand, she didn’t put away any savings for mine and my sisters post secondary. I graduated and received some scholarships but not enough to pay for all of my undergrad or when I went back and did a second degree. Very long story short, I graduated my second degree owing about $90,000. Given my total oblivious upbringing on borrowing and credit, I ended up charging over $15,000 of my tuition to credit cards.

Importance of Education

Don’t let your kids end up like me. Just starting life and so deep in debt it is crippling. Though my husband and I have good jobs and a debt repayment plan, so many of my mistakes could have been avoided, like charging tuition to credit cards!

You send your kids to university where they are bombarded with credit card offers. Theses companies entice you in ways you wouldn’t imagine. They can convince you a free, made-in-China water bottle is worth signing up with them, no questions asked. I mean, they give you a free water bottle, they must be trustworthy! If you child isn’t equipped with the know-how about what to do with a credit card, how to use it properly or potential warning signs, they could quickly end up in a mess. Going through this stage in life is difficult enough, adding financial stress is totally unnecessary.

The Talk.

The discussion of credit cards needs to start early. Not when they have one foot out the door. Sitting them down and bombarding them with all the information in one sitting will also not be well received. This very important information needs to be discussed and re-discussed many times, laying out all the information slowly, never in an overwhelming process.

It can start very early, when you’re shopping with your teenager make a point to direct their attention to the fact that you’re paying for ”x item(s)” on your credit card and that it is important that you go home and pay this item off so interest doesn’t get charged. Open a discussion.

When you feel you’ve prepped them enough with the responsibilities of a credit card and are confident in their understanding, go with them to the bank and together, open their first card. Start with a low limit of $500-$1000 so if things do get out of control they won’t be in over their heads. Credit card companies are no longer allowed to increase your credit limit without authorization so make sure you stress that they are not to increase the limit, at least until they’ve proven their proper use.Once they get their first card, make sure you spend the first few months with them going over their statements with them and making sure everything is being paid off in full. If it isn’t, make sure the understand the implications of how interest rates work.

Everyone, not just teenagers need to understand that a credit card is to be treated with respect and shouldn’t be abused. It isn’t free money. This goes for all forms of credit. Credit is lent in trust of repayment to those who deserve it. When used properly, credit cards can offer many benefits.

[GIF credit: Lumen Bigott / http://dribbble.com/LumenBigott]

How old were you when you got your first card? 

About Catherine MacLean

Comments

  1. I think I received my first credit card in college and it was for gas only. It was a different time (60s) and credit cards were not like now.

  2. Probably a good thing!

  3. I got my first credit card when I was around 20. Thankfully I had learned a huge lesson on a debt a year prior so this credit card wasn’t the death of me.

    • That is hugely beneficial. I never really abused credit cards…I got scared too easily! Charging my tuition wasn’t my first choice but it was s-t-u-p-i-d. I was desperate.

  4. I got my first credit card while working at the age of 26 years old. Credit card is helpful if you are responsible users, know how to take the advantage the perks and rewards.

  5. There are things that my children hope won’t follow from me. I’ve made mistakes too. And we want to equip them as much as we can about learning how t take care of their finances.

    • That’s all we can do, give them the information we learned from our mistakes and hope they trust us enough not to make the same ones.

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