Sometimes it’s easy to think of teenagers as mini-adults. They’re starting to display the traits of adulthood — physically, mentally and creatively. At the same time, teens are notorious for lacking a fully developed sense of judgment. To varying degrees, teens are generally less able to recognize the consequences of their actions than they will just a few years later as adults.
As a parent trying to help your teen learn good financial behaviors, you might have a difficult choice to make. Namely, should you get your teen a credit card? And if so, can you trust your teen to use it responsibly?
When Is the Right Time?
When we talk about teenagers, we are literally referring to those between the ages of 13 and 19, so that is a very large range. At 13, children are just becoming old enough to venture out to stores by themselves, albeit with parental guidance. By this point, parents should be able to entrust most children with small amounts of cash. Learning to spend these limited funds as instructed is one of the key steps toward building the trust and experience necessary to begin spending larger amounts, and using different forms of payment.
As teens get older, and spend more time on their own without parental supervision, parents may want to consider making their child an authorized cardholder on one of their accounts. One strategy is to let the teen carry the card occasionally to make specific purchases. Parents can then ask their children to return with a receipt, or check their credit card account online in order to ensure that their account was used only as permitted. Parents may also wish to allow their children to make discretionary purchases under a certain amount, with the understanding that their child reimburses them from their allowance or savings.
There is one event that triggers many parents to provide their children with a credit card at all times — when teens get their driver’s license, just in case of emergencies. Cars can run out of gas, get flat tires or have mechanical breakdowns. And when this happens on the far side of town from where they live, parents will want their teen to have a means of payment to quickly and safely get back on the road.
After a teenager’s 18th birthday, and as they begin to earn their own money, parents will want to guide them through the process of opening up their own credit card account, while closely monitoring it to make sure it is used responsibly.
Credit Card Alternatives
For parents who are not willing to send their children out into the world with a large line of credit, there are several attractive alternatives to bridge the gap until they are ready. Debit cards offer much of the convenience and security of credit cards, without the possibility of incurring debt. These cards can be offered by a parent’s bank, and reloadable pre-paid debit cards are also becoming increasingly popular. For example, the Bluebird card from American Express and WalMart allows parents to provide their children with sub-accounts that have individually customizable spending limits. Finally, many retailers sell non-reloadable gift cards that are part of the Visa and Mastercard networks. In fact, all of these forms of payment offer greater security and convenience than cash.
As children emerge into adulthood, parents hope to safely guide them through the minefield of their teenage years. By carefully introducing their teenagers to responsible credit card use, parents can relax for just a moment before worrying about all the other difficult choices their children will have to make.