Why It May Be a Good Idea to Give Your 15 Year Old a Credit Card
By Nigel Boys
The best way for teenagers to learn to be responsible, especially regarding financial matters, is for them to get experience, examples, and communication from their parents, according to Stacey Tisdale.
The senior content producer, with a focus on personal finance for Black Enterprise magazine, continues that when she was asked to make a guest appearance on the Today show, she brought along a young girl, Kayla, and her mother to share their experiences. She adds that she had been invited by NBC to discuss which age she considered too young to give a child a credit card.
Although Kayla had been given a credit card when she was just 15-years-old, she was one of the most “fiscally responsible teenagers” she had ever met, according to Tisdale. She added that since her mother had problems with credit cards when she was a teenager and in college, she decided that her daughter would have the benefit of experience before she started college.
That experience gave Kayla the confidence to manage her finances wisely, and now she is living away from home, debt-free and saving for her retirement, even though she is only in her 20’s, writes Tisdale. She adds, however, that before they finished the segment on the show, viewers had started to call in, stating that they were appalled at Kayla’s parents’ “irresponsible” decision.
Around 76% of first-year college students already have outstanding credit balances of $1,000 or less, but only 58% felt prepared to manage their money, according to a study by Higher One and EverFi. Higher One is a company that markets financial services to college students and EverFi is one of the leading education technology companies focused on teaching, assessing, badging and certifying students in critical skills.
“Financial experience among incoming college students is increasing, but there has not been a concurrent increase in basic finance management skills or fiscal planning,” according to the report. “This is worrisome as students continue to take out more and higher student loans, affecting their lives both before and after graduation from college.”
Tisdale, who has been a financial journalist for over 20 years, believes that parents need to teach their children three main things in order for them to become fiscally responsible:
- Teach your children by experience.
The best way teenagers will learn to manage their own money is if you give them a chance to learn through experience, according to Tisdale. She adds that you don’t need to let them learn the hard way, but giving them a secured credit card, as in the case of Kayla’s parents, will give them a head-start.
Similar to a prepaid card, a secured credit card requires you to put down a deposit of between 100% to 200% of the amount of credit you require. If you deposit $1,000 into a checking or savings account, which is used to secure this card, you will be given a credit limit of around $500 to $1,000.
However, unlike prepaid cards, which deduct your purchases directly from your account, you must pay off the balance every month. If you make sure your child writes down each purchase they make throughout the month, as Kayla’s mother did, you will be teaching them how to manage other credit cards in the future.
Tisdale believes that although some people might frown on giving a young child this kind or responsibility, parents should always ask themselves, “If I don’t teach them about money, who will?”
- Teach them by example.
“You can’t expect your child to have healthy discussions about money if they’ve never heard one,” writes Tisdale. “Psychologists and financial experts are acknowledging that our first impressions about money stay with us, particularly if we don’t become conscious of them.”
There are two questions you should be asking yourself with regards to what you want your child to learn about money, writes Tisdale. The first being, “What are the financial behaviors I want them to avoid?” This should be followed by, “What changes do I need to make in order to walk the walk and be the role model they need me to be?”
- Talk to your kids about money matters.
Although the older generation believed that it was wrong to talk about money in front of the kids, this didn’t work out too well for their children, writes Tisdale. She adds that every parent should discuss with their children “the importance of things like saving, investing and debt management” and should show them a good example of this in their actions.
However, one crucial area that parents overlook is to teach their kids “non-financial” factors with regards to money, or in other words, the “things that really make us spend,” according to Tisdale.
It’s important that parents teach their children how to avoid falling into the trap of marketing by advertisers, which try to manipulate them into spending more than they can afford.
Tisdale writes that it is important to talk to your child about their goals and dreams and how much they will cost to attain. “That will give them some of the strength they need to stand-up to pressures to spend in ways that don’t serve them.”