Your teens are growing up, and you want to make sure that they're able to handle their finances once they've left the nest. Is it a good idea to give them a credit card at this stage of life?
No, according to James Roberts, a marketing professor at Baylor University. He found that card-toting teens are “less price-sensitive, spend more, and overestimate their available wealth compared to those who write checks and pay cash.” While that can be said of any age group, you don't want your teen's credit score to crash before they've even graduated high school.
Roberts suggests setting up a bank account for your teen and giving them a debit card to manage. If they prove to be responsible spenders, a pre-paid credit card is another option. Teens with pre-paid cards have a set amount of money they can spend, so there's a limit to the amount of damage they can do. Just beware of high fees associated with such cards.
Perhaps the best thing you can do to prepare your teen for a lifetime of good credit is to set a strong example with your own spending. If you treat credit cards like easy money and find yourself struggling to make your monthly payments, chances are good that your teens will face the same challenges. Talk to them about interest rates, penalties, limits, and the temptation to spend beyond their means.
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