Even with good training, teenagers can sometimes have real difficulty with the onslaught of credit offers they receive, usually in the senior year in high school and early college. Times have changed since we fathers were teens. A credit card was seen as a mark that you had "made it"--that you were credit-worthy. Today, teens get offers in the mail for cards with credit limits that make us cringe. What are some guidelines for helping your teens treat credit with the respect it deserves?
1. Helping them understand credit will help them respect it. Understanding how credit cards work is a big help to teens. They certainly won't get the true story by reading the ads and solicitations they or their friends receive. Some really good tools for fathers who want to help teach their children about credit include:
- Credit Card Payoff Calculator. This site shows you at various interest rates how long it will take to payoff a given balance if you only make minimum payments. This is an incredibly easy resource and the truth can be astounding!
- Written just for teens, the Learn Good Credit Management Page at studentcredit.com can really help a teen understand why credit card companies want them and how they can discipline themselves.
2. Start them out slow. With continuing concerns about teens in credit trouble, it makes some sense to teach them the value of good spending habits with plastic. There are several opportunities to do this with some innovative products. Visa offers a card they call Visa Buxx which is a prepaid Visa card. A parent or teen loads the card with value via electronic funds transfer and then teen then uses the card until the limit is reached. VisaBuxx provides online web access to spending records and allows funds to be added to the card at the parents' initiative.
3. Think about intervention. One of the best ideas I have seen is a credit card sleeve that is marketed by the Institute of Consumer Financial Responsibility. These sleeves have messages on them like "Warning: Overuse is Dangerous" and "If You Can Eat It, Drink It, or Wear It, It is NOT an Emergency." Visit the ICEF site for information on these sleeves.
4. Don't Bail Them Out. If, despite all your best efforts, your teen gets overextended on credit, take a firm hand. Let them experience the consequences of bad financial decisions. You can accompany them to visit the Consumer Credit Counseling Service in your area and help them find a way to get out of debt on their own. It's better to help them take responsibility for a $2,500 debt than a $25,000 debt later on!