Years ago, it would have been unthinkable for teenagers to have their own credit card but nowadays, it is becoming more common. Many parents question, however, if this is a good idea.
There are arguments on both sides as to whether to allow your teen to obtain credit but lenders are so keen to tap this market that there are now credit cards specifically designed for this age group.
For many parents, the idea of a credit card can feel like a step too far and too fast. We all remember growing up without credit cards and can wonder if credit cards are really necessary.
Today’s teens, however, live in a different world. Thanks to the sophistication of modern technology, they are more worldly wise than we were at their age.
With that, comes temptation, for the latest fashions, gadgets and trends. As a parent, you have your own rules about what you allow your teen to experience.
Credit cards are often thought of as little pieces of plastic that can do serious damage and we have all heard the horror stories of adults who have found that out to be true.
Adults are often irresponsible or blinded to the reality of how to manage their credit cards, so it does seem logical that a teenager may fall foul in the same way.
It is so easy to purchase goods with plastic and clearly, you do not want your teen to rack up huge debts or feel upset when impulse buys do get out of hand. After all, we’ve all been there, haven’t we?
So yes, a card can be seductive if not managed responsibly. However, allowing your teens a credit card can be a great learning experience for them and a real benefit to their future.
This is because allowing them a prepaid or limited credit card can help teach them how to manage money, how to spend it wisely and repay it properly.
This is a huge life lesson when you consider its implications. Many adults who find themselves in trouble with finance simply were not taught how to use money appropriately and repeat their mistakes many times over.
Allowing your teens the feeling of financial freedom, even though the card is limited or prepaid, will help them understand that with opportunity comes responsibility.
You could agree to the condition of allowing a set amount of credit per month in return for them working hard at school or helping out around the home.
Draw up a draft agreement that states they will get X amount of credit in return for specific tasks, so they understand how it feels to be in a contract with a provider.
Ensure in the wording that their responsibilities are clear, such as stating that if they wash, dry and put away the laundry, they will be entitled to X amount of credit.
This will help them understand about work and rewards, managing money responsibly and how to honor commitments. It is a worthwhile life lesson for any young adult to learn and will help them create a great future.