I just stumbled across this article by Janet Bodnar called Scare Teens Away From Credit? It caught my attention because I spent a bit of time as a financial planner inside a retail bank, and I noticed a lot of parents doing this to their teens when coming in to open accounts before heading to college. Personally, I wish someone would have put some fear in me about credit cards before going to college, as I ended up going a bit overboard, but I think many parents are going too far as well like this article suggests.
I think it is important, especially for a teen who may be leaving home for college to have an emergency card, and obtain that card with the assistance of the parents. If you send your child away armed with nothing more than a debit card and a little cash in the bank, come a real emergency that may not be enough, especially being far from home. I stress that the parents help them get this first card so they can have a say and help educate how the card works and when it is to be used. If the parent doesn’t take the time to help initially, they are off to college and their dorm mailbox will be stuffed with offers that are irresistible, and now they don’t have a full understanding of how credit works and they could end up learning the hard way.
So, it is important to stress to your teen how credit can be a bad thing, causing unnecessary financial burdens. But, it is equally as important to understand that if you help them get off to the right foot with a card with a reasonable limit and teach them how to use it for those necessary times, they will be far less likely to get into trouble on their own in the future.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
I wish someone had stopped me as a teen an showed me the reality of debt. I may not have been as attentive as they might have liked, but a seed would have been planted. Now in my 50's I have learned the hard way what a 10 minute conversation might have prevented.