Give Me Some Credit

From Shakespeare to trigonometry, by the time graduation rolls around our children have nearly mastered (or tried to master) each of their core classes—now it’s time to master the real world.

Soon after high school, your children will begin a life of their own—with your help, of course. Qualifying for a job, a car loan, even their own apartment requires an established history of good credit.

A credit card in your teenager’s name can be beneficial to begin creating a credit score. Just make sure spending and monthly payments are monitored closely by both the responsible teenager and the parents.

Long before your teenager is handed a credit card, they should be well informed about the workings of a checking account. If they are properly advised on how to balance the account after use of their debit card, they should have no issue keeping track of credit card purchases they make during the month. They should be responsible for paying this running total off by the end of each month.

Talk to your teen about responsible spending. Explain how quickly extra coffees or runs through the drive-thru can add up. Also, don’t forget to talk to them about interest. In the beginning, it may be wise to set a spending limit. Once they have charged that amount (which should be the amount they are comfortable paying off each month), the card goes into lock-down until the next month. If it’s only midway through the month and they’ve reached their limit, hopefully they will begin to rethink their spending habits. 

If you as a parent feel like your young adult is not equipped to handle the responsibility that comes with obtaining a credit card, you may consider a prepaid credit card. This card allows parents to place a set amount of money on the card for use. Once that money is gone, it’s gone. This so-called training wheels method will hopefully teach your teenager to distinguish between what they need to purchase (lunch while at work) and what they want to purchase (that new pair of shoes). You may also choose to look into low-limit credit cards in the beginning. 

Whichever option you choose to explore with your teen, the key is to view the credit card not as “extra” money but as a loan to pay back as soon as possible. With this mental attitude, debt and bad credit can be avoided. 

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