However, handing them a credit card without guiding them through the process of using it responsibly can be very dangerous. Here are 4 surefire ways to know if your teen is ready for their first credit card, and how to prepare them for it.
1. They’re Honest About Money
If your teen is honest and upfront about purchases, then this is a good sign they’re ready. You can test them by giving them a certain amount of money for a needed item.
For example, if they need new shoes for school, provide them with the cash, tell them what the budget is, and send them shopping.
If they go over your budget or buy extra items, then they have proven they’re not quite disciplined enough for their own credit card.
2. They Know How to Spend Wisely
If your teen gets an allowance or has a part-time job, they have access to their own funds. How do they spend their allowance or paycheck?
Do they set some money aside for savings or blow it all the day they receive it? If your teen is a reckless spender, then a credit card will only encourage bad money habits.
Instead, help your child learn the importance of budgeting, saving, and spending wisely with their allowance or paycheck. Once your child shows an improvement in their spending behavior for several months, then reconsider the credit card issue.
3. They Can Keep Deadlines
How does your teen do with deadlines? Are they constantly forgetting important homework deadlines or missing their curfew?
If they can’t turn something as simple as an essay in on time, then they’re not ready to be responsible with making payments on time.
If your teen does miss deadlines and curfew often, let them know they need to work on the habit of timeliness and organization before they can receive their first card.Should you let your teen sign up for a credit card? Here are 4 signs they're ready: Click To Tweet
4. They Understand How Credit Cards Work
Let’s face it, most teens and even many adults view credit cards as free money. If they can’t afford something, it’s no big deal. A credit card can help you get what you want, and all you have to do is make the minimum payment each month.
That’s a totally incorrect way of viewing credit cards, and having this attitude is going to get anyone into serious debt.
Make your teen learn the importance of paying off their credit card statement each month, and show them how to use a credit card wisely. Each expense on the credit card should be written down and deducted from their bank account total.
For example, if they have $500 in the bank, they should keep a running tally of everything they spent, as if the money were coming directly out of their bank account. This is basically the same idea as balancing a checkbook, but in more modern times.
Your teen will know exactly what they’re spending and how much money they can afford to spend. Once the credit card bill comes, they can easily make the payment because they’ve already deducted what they spent. If your teen can get in the habit of writing down every expense, they’ll be financially secure in their adulthood.
Why Give Teens Credit Cards?
Many parents might wonder why they should even bother giving their teens credit cards at all. It’s a valid concern. Credit cards can do a lot of damage to finances, and young adults are more prone to fall for spending temptation.
Obviously, teens don’t need a credit card to survive their high school years. However, it’s smart to have one for emergencies where you’re not around to bail them out (like their car breaking down on a trip).
More importantly, you’re teaching your teens how to use credit card responsibly. Would you rather them learn how to use credit cards under your guidance, or wait for them to move out of the house and ruin their finances because of money mismanagement?
If teens don’t learn anything about credit cards from their parents, there’s a good chance they’ll be offered an irresistible credit card offer in college that might cause them to go into debt. Worse, they may not tell you about it. Give them a 101 course on credit card usage now so they can avoid those mistakes later. Plus, it gives them a head start on developing their credit.
Parents, when did you let your teen get a credit card? When did you get your first credit card? Do you think giving a teenager a credit card is a good idea?