Whether your teen is in middle school, high school, or heading into college, they are probably becoming more and more aware of money, and wanting a checking account, or even a credit card. Teens and credit cards—it can be a scary combination—but it’s an important subject to talk about with your child.
Think ahead to your teen going off to college, or managing their summer job money, buying a car, owning their first cell phone, and entering the world of having a credit card. Parents need to instill financial wisdom and common sense in their children—whether your little one is eight or 18—and talk seriously about what it means to have a credit card, how to use it responsibly, and what credit card debt can do to a person. Follow this expert advice to help you get started with teaching your teen healthy money and credit habits.
You are their personal financial coach, so teach them from a young age about money and safe credit use, as well as the values and practices of your family when it comes to money and credit. Discuss the lessons you’ve learned and the mistakes you’ve made.
It is a good idea, as a teachable exercise, to let your teen get a couple of credit accounts, such as a cell phone account. You can show them how to fill out an account application and gather all the information required. A prepaid credit card is a great way to help your teen learn about using plastic. You can preload their allowance on the card or have them load a card with summer job earnings.
At least once a month, go through any accounts they have and monitor their use, help them match up their expenses to their budget and teach them to check for any erroneous charges. If their use violates what you all have agreed to, rein them in with clear consequences for irresponsibility. Remember that teens are impulsive and we have to teach them how to handle impulsivity. Teaching this is especially important when it comes to credit cards, or they could turn into impulsive adults with credit cards.
You will have greater influence and can command more respect from your teen if you model healthy credit and financial habits yourself.
Teach your teen the importance of taking responsibility for their credit score and how to monitor it themselves. Go ahead and show them how to get a free credit report and read through it with them if they have any credit cards. If not, you can still show them a sample report or your own.
Many adults I speak to point back to their credit problems beginning with that first credit card they applied for in college. Teaching your kids about safe use of credit cards while they are still under your roof will likely prevent major mistakes when they set off on their own.
Inconsistency, when it comes to parenting, can undermine your effectiveness in teaching your teen—especially about money, credit, and debt. Practice what you preach, and if you say you will be monitoring their use of credit, then do so, and be consistent with any consequences when agreements and rules are broken.
Allowing your teen more responsibility for their credit than they have earned can scar them and their credit score for years to come. Start their use of a credit card with baby steps beginning with a prepaid card and only when they’ve shown consistent responsibility, allow them more.
Remember that we cannot rely on our teen’s school to teach them responsible behavior with money and credit. Even if their school teaches some form of personal finance, they need to learn it from their parents by hearing about healthy credit habits, as well as seeing it modeled.
Even after your teen is no longer a teen and off to college, or starting their adult life after college, make yourself available to them for questions and coaching as they prepare for and make larger financial decisions. Be the financial coach and the parent you wish you had as a young adult.
And when extra help is needed, don’t be hesitant or embarrassed if you need to get help from a financial expert. Mistakes will be made, and your teen should learn that instead of hiding mistakes or letting them linger outside of your control, it’s best to find someone who can help. As a parent, you won’t always be there to coach your teen or adult child, so showing them that—when needed—finding a professional who can help to get your finances [back] in order is a part of being financially responsible.
It’s never too early to start teaching financial and credit lessons to your children. I’m not saying you have to sit them down for lectures on high finance, but use everyday, household finance as teachable moments to slowly introduce them to budgeting, earning money, spending money, and using credit. The earlier you start with your teens the more comfortable and educated they will be.
More expert advice about Credit and Debt Management
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