Teenagers and credit cards

Parents will at some time consider whether their teenager needs some sort of bank account, be it a savings or checking account. If the teenager has a part time job, it would be good financial education to use a checking account to track the spending of this money, and perhaps a savings account to keep a portion aside for special items, or even for college. If parents always pay for everything that a teen needs, they will have a distorted view of the value of hard work and the true cost of living. The instant gratification of getting everything you want is likely to turn the teenager into a selfish adult.

Teenagers need to be taught about money, and how to manage it, in a constructive way. A good bank will have financial advisers for teens and will spend time explaining how a checking account works, how to balance your check book, and also how credit works. Teenagers under 21 cannot get a credit card without a parents signature , or that of an adult over 21, and many debt advisers would argue that no teenager under 18 should go anywhere near a credit card. There are two schools of thought; one is that the earlier teenagers learn how money and credit works, the better informed they are, the more responsible they will be with money. The second school of thought believes that with the current financial crisis in many countries and the proliferation of debt, nobody under 21 should be allowed credit as they will not be responsible enough to handle it without ending up in debt.

Having a credit card is not to be regarded as financial freedom; it is a potential disaster area in the hands of a teenager who does not understand about interest rates, minimum payments and late fees. The irresponsible teenager does not regard credit as real money, and expects the parents to bail them out of trouble if they overspend. Some parents have learnt the hard way and have had to cut up their teenagers credit cards, pay off their debts and the teenager is now paying them back over a period of some years! Other parents seem oblivious to the pitfalls of teenagers and credit, so poor are they themselves at handling their own credit cards.

Teenagers will have many arguments with their parents about money and these will continue into adulthood. Money is the single, most common topic for marital discord across all age ranges and all cultures. Overspending is a form of addiction, and parents have enough issues with their teenagers without adding financial catastrophe to them. Parents need to teach their teenagers about credit and debt and not countersign that application form until their teenager can prove they can pay off any debt accrued.