Giving Your Child Their First Credit Card – Should You?
It might sound crazy, but giving your child their first credit card is a great way to teach him about money. This is a good way to introduce the idea of a credit card, how to use them smartly and managing their own budget/allowance.
As most credit cards here require a minimum age of 18 years old, that could be a good age to start. You can either apply for a student card, which has a low credit limit or apply a supplementary card for them. But if you are thinking about the reasons your child should have a credit card, here’s a few for you to ponder upon:
Knowing The Pros And Cons Of Credit Card
Before you apply one for him, talk to them about the pros and cons of using a credit card. If you do not intend to apply for one, there’s little incentive for a young adult to listen to your “advice”. Teach them about the right time to use it, how they can maximise its rewards and the penalties involved should they spend too much.
You should explain some of the tips and tricks of using credit cards, as well as the various charges that they may incur, especially if they make a late payment.
Allows You To Have An Idea Of Their Spending Patterns
If you hold the principal card, you will be able to have a look at your child’s spending patterns. This can help you determine if they tend to buy on impulse and what they usually spend on. This can be a useful way for you to start a conversation about budgeting for them. For example, if you find that they are spending too much on “wants” other than “needs”, it’s a good way to help them set up a monthly budget in which they can stick to.
Of course, as a parent, you can choose to either pay their bills, or negotiate with your child to have a credit amount with you with which you can draw on to pay their bills. This may also encourage them to look for some side-income such as teaching tuition or working part-time to learn that they will have to earn before they spend.
Help Them To Build Credit
As with all of us, having a credit card is a great way to build up your credit score. You should explain to your child that any late payments or overdraft can affect their credit score, not just incur monetary penalties.
A bad credit score can result in them having problems when applying for their study loans or other credit card applications in future.
Encourage Conversation About Money
It’s sometimes difficult to talk to your child about money. Saying too much and giving advice may bore them and make them think that you do not think they are independent individuals. Using their credit card usage as a way to start the conversation will help you break the ice easily and educate them through real-life examples. You can also share about some of your own mistakes and experiences with them so as to make them feel comfortable about the topic.