Should you give your child a credit card?
A lot of people are victims of credit card debt. With the ease and convenience of knowing they can pay later, people are more encouraged to buy, which often results in maxed out credit cards. While there are parents who have learned from their financial mistakes, sometimes, their children's credit card debt becomes a burden for them to carry.
Children usually rack up debts during their first jobs when their salaries aren't enough to cover their expenses or simply because they have been tempted by offers to purchase now and then pay later. Educating your college student about credit cards may be tough, but it can be done. So if you are planning to give your child a credit card, make sure that you consider the following factors.
Reasons that Kids Need Credit
• To build good credit- Many parents opt to give their children credit cards so they can help them build their own credit history. In this day and age, it is very important to have a good credit score since it is used by lenders to determine a person's credit worthiness. While building good credit is a fairly good reason to give your child a credit card, before you do so, it is important to educate your child about credit cards and to teach him about good spending habits.
• To teach them healthy spending habits- The best time to give your children a credit card is when they are still living under your roof. In this way, they are still in a position to listen to you and to follow your example. Teach them everything they need to know about credit cards—from the appropriate credit utilization ratio to why you need to order your credit reports. Make them understand the repercussions of having credit card debt and what happens when they max out their credit cards. In this way, they will learn to be more careful about how they use credit.
• To control impulse purchases- By letting your child have a credit card, you are teaching them how to control impulse purchases. Monitor their spending and strictly enforce that they must make timely payments using their allowance. This will help them to get an idea of what it will be like when they enter the real world and have to pay their debts using their income.
• To provide them a safety net- While most parents wish their children maintained good spending habits, children will often make mistakes. Thus, another reason to give your child a credit card, while they are still living with you, is so you can be a safety net for them. You can help them when they encounter problems and assist in resolving any issues that might arise.
In addition to teaching your children good spending habits, it is also important to share your mistakes with them. Explain to them how you committed the mistakes, the consequences of those mistakes, how difficult the lessons were, and how you resolved the problems. Make them understand that mistakes aren't worth repeating, so they become more careful and cautious in their own credit card use.
Once you give your child a credit card, it is important that you guide them and check on them from time to time. Teach them how to check their statements, compute their balances, and the importance of planning ahead--especially when it comes to paying their monthly debts. The best reason for educating kids about money and credit cards by providing them with one will help them learn how to be financially independent and secure. The time will come when they leave your house and live on their own. There is nothing more rewarding for a parent than knowing your children are successful and doing well.
Children usually rack up debts during their first jobs when their salaries aren't enough to cover their expenses or simply because they have been tempted by offers to purchase now and then pay later. Educating your college student about credit cards may be tough, but it can be done. So if you are planning to give your child a credit card, make sure that you consider the following factors.
Reasons that Kids Need Credit
• To build good credit- Many parents opt to give their children credit cards so they can help them build their own credit history. In this day and age, it is very important to have a good credit score since it is used by lenders to determine a person's credit worthiness. While building good credit is a fairly good reason to give your child a credit card, before you do so, it is important to educate your child about credit cards and to teach him about good spending habits.
• To teach them healthy spending habits- The best time to give your children a credit card is when they are still living under your roof. In this way, they are still in a position to listen to you and to follow your example. Teach them everything they need to know about credit cards—from the appropriate credit utilization ratio to why you need to order your credit reports. Make them understand the repercussions of having credit card debt and what happens when they max out their credit cards. In this way, they will learn to be more careful about how they use credit.
• To control impulse purchases- By letting your child have a credit card, you are teaching them how to control impulse purchases. Monitor their spending and strictly enforce that they must make timely payments using their allowance. This will help them to get an idea of what it will be like when they enter the real world and have to pay their debts using their income.
• To provide them a safety net- While most parents wish their children maintained good spending habits, children will often make mistakes. Thus, another reason to give your child a credit card, while they are still living with you, is so you can be a safety net for them. You can help them when they encounter problems and assist in resolving any issues that might arise.
In addition to teaching your children good spending habits, it is also important to share your mistakes with them. Explain to them how you committed the mistakes, the consequences of those mistakes, how difficult the lessons were, and how you resolved the problems. Make them understand that mistakes aren't worth repeating, so they become more careful and cautious in their own credit card use.
Once you give your child a credit card, it is important that you guide them and check on them from time to time. Teach them how to check their statements, compute their balances, and the importance of planning ahead--especially when it comes to paying their monthly debts. The best reason for educating kids about money and credit cards by providing them with one will help them learn how to be financially independent and secure. The time will come when they leave your house and live on their own. There is nothing more rewarding for a parent than knowing your children are successful and doing well.
