Advice for Parents: Teaching Teens about Credit Cards

Q: What’s the first step in teaching children about finances?

A: The first step is to teach children that a credit card is an acceptable form of payment and should not be feared. Using credit effectively is not quite the same as stopping them from acquiring credit. These days the responsibility of managing a credit card is just as vital a tool as owning a cellphone, car or house. Young adults who do not have a solid credit rating and a functioning credit card before living on their own will be ill prepared to maintain financial stability.

Q: Is a credit card appropriate for a high school student?

A: A child can learn the essentials of good credit if the parent provides a credit card in high school. This practice teaches the child how to use the card sensibly to pay for basic needs, and the parent will be able to examine the child’s spending by looking at monthly bills.

Parents should ensure their child’s name is on the credit card. When the card gets paid off on a monthly basis, the child then will accumulate a good credit rating. Good credit can be one of the special legacies passed down to young people.

Q: How else can children learn about fiscal responsibility?

A: Parents should establish a credit limit on the card to control the child’s spending. If the child spends too much money during the month, then the credit card may be revoked. It is important to teach them that paying bills is part of adult life, and that having independence means being able to enjoy this privilege. Keeping receipts from each purchase will account for any spending activity. If the child loses a receipt, parents can require a homemade one.

Additionally, a spending ledger is a necessary organization tool. Similar to a checkbook ledger, it must be kept updated each time the child purchases something. If an expense goes missing in the ledger, the child must pay that amount to the parent or potentially lose credit card privileges.





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