We spend the majority of our children’s teen years teaching them about the dangers of smoking, drugs and alcohol, talking about the opposite sex, and preparing them for college, but not a whole lot of time is spent on teaching them about credit. Is it because we feel that credit doesn’t cause as much damage as drugs, or the knowledge will come when they go to college? Simply telling our kids that credit cards are bad is not going to work, as kids have always rebelled against straight “no’s”. We need to instill values in our kids about the good and bad parts of credit.
Actions Speak Louder than Words
Our kids are not going to listen to our rants and raves about how credit can get them into financial trouble, with or without the aid of credit cards. The devastated feeling must be experience by them. Try getting them a prepaid credit card for school clothes shopping, informing them that they need to keep track of all spending. When the card is empty, no more clothes can be bought. They will learn a bit about the value of money, look for sales, and experience the humiliation of having a credit card declined for insufficient funds.
No-frills checking accounts cost much less, so open one for them with no overdraft protection or other “cushions”. After a check or two is returned for insufficient funds, they’ll start keeping track of their checking balances and ATM withdrawals, especially with the bounced check fees from both ends (the bank as well as the check recipient). Consequences are a large factor of credit, as well as the rest of adult life.
Avoiding the Trip Up the River Without a Paddle
Your child’s credit is essential to adulthood, and no one wants to see him or her fail. Get him/her a secured credit card at first, (one that requires a savings account against the credit line) to get their feet wet. If all goes well from there, you may consider raising the credit limit just to test the waters a bit more. Explain to them that new scuba equipment isn’t an emergency (unless it’s their major and their current equipment has sprung a leak), and neither is the Chinese Food ordered during exams week. By setting the boundaries and teaching the limits (without a lot of “I told you so’s"), your child will be floating gracefully down the credit river, not merely treading water.
Up the River Anyways
No matter how hard you try, sometimes things will get out of control. Only you know if bailing out your offspring will help them or not. Some kids will expect that you’ll help them out if and when they get in trouble, others will hope, while the remainder feel that they’re on their own. No one wants to see their kids in trouble, but only you can make the decision. Either way, you should definitely use this as a learning tool for your child and credit.
