A great way to help kids learn financial responsibility is by giving them credit cards for students. These are similar to regular credit cards but have much lower maximum spending limits. By using them correctly, teens can learn financial responsibility and built their credit as well. Here are a few credit card tips for teens that can help them develop good financial habits and build a good credit score.
1. Don’t Follow The Crowd
As is the case with most kids growing up, peer pressure is a real thing nowadays. With more and more parents getting their teens credit cards, the peer pressure is only going to increase. However, that’s not a reason to get a child a credit card.
Before getting a child a credit card, parents need to focus on ensuring that their teen understands exactly why they’re getting a credit card. When they completely understand the reason, they’re less likely to misuse the card.
2. Credit Card = Cash
One of the biggest mistakes teens make when they receive credit cards for students is impulse spending. It’s much easier to spend big with a credit card because it doesn’t involve any physical money.
That’s why parents must focus on teaching their child that their credit card is the same as cash. A good habit is to teach teens to put aside whatever they spend from their credit card from their physical allowance. That way, kids can easily pay their credit card bills on time.
3. Go With A Checking Account
Before getting a teen a credit card, it’s a good idea to test out their financial responsibility level by getting them a checking account and a debit card. These financial tools don’t require the same amount of responsibility as a credit card.
While a checking account and a debit card don’t seem as flashy as a credit card, it’s still a great way to test out a teen’s financial responsibility. If they can showcase financial responsibility with a debit card and a checking account, they’re ready to get a credit card. 4. Be Honest About the Bills
Most parents tend to hide their finances away from the kids, so they don’t have to worry about things. However, it can be more productive to show teens the actual financial responsibilities of being an adult.
Parents should spend some time talking to their kids about the cash flow of the household. That way, it can help teens understand what it takes to run a household as an adult. It’s a great way for kids to learn how to budget and spend their money responsibly.
5. Importance of Co-Signing
Federal legislation in America dictates that anyone under the age of 18 needs to have a parent or guardian co-sign their credit card application. That means that the teen’s credit card record is directly tied to the co-signees.
That’s an extra incentive for parents to educate their children regarding good spending habits.
Adopting these five credit card tips for teens can learn about financial spending habits and build their credit score from a young age!