Talking To Your Teens About Debit and Credit Cards
As your child advances to high school and into adulthood, you might find that they expect a little more independence in their decisions. Some of those decisions might involve money. At this stage in life, it might be a good idea to talk to your child about how to use debit and credit cards.
Using cards or contactless payment methods are increasingly common practices amongst consumers. The sooner your child understands the differences between these cards and the responsibilities that come with them, the better equipped they will be when they strike out on their own. We recommend covering some of the concepts below when talking to your teen about spending.
The Teaching Opportunities With Debit Cards
As an adult, you are probably very familiar with how a debit card works: it provides a quick and convenient way to use the funds in your checking account to pay for things in-person and online.
Most financial institutions in the US allow people as young as 13 to have debit cards. However, there is no definitive answer as to the “right” age for a child to have one. It’s up to you as the parent to decide when your child is ready.
Learning how to use a debit card is an excellent way to teach money management skills—especially at a time when most transactions are completed digitally. According to an article on The Balance, debit cards can fit in the grander scheme of teaching basic budgeting skills, such as:
- Tracking spending through banking apps and online tools
- Understanding the differences between wants and needs
- Grasping the relationship between income and expenses
- Protecting sensitive financial information
This is also your chance to reinforce your child’s understanding of budgeting, spending, setting financial goals, and how checking or savings accounts work.
Talk About Credit Early
As a concept, “credit” is a metric that indicates a person’s ability to honor financial commitments. Credit is closely linked to financing serious purchases, such as a house or vehicle. Financial institutions use a “credit score” when approving loan applications.
One way for your teen to get a head start on building good credit is to let them be an authorized credit card user. Adding your teen as an authorized user allows them to make transactions in their name, but the balance remains your responsibility. If used correctly, it will enable your teen to build a strong credit history. As a result, it will be easier for them to apply for their own credit cards and loans later in life.
Putting your teen under your credit card is a serious decision—which gives them a chance to learn real lessons with tangible effects. It is up to you to determine if your teen is responsible enough to use your credit line. If you do decide to add them as an authorized user, it paves the way to teaching serious financial skills, such as:
- Understanding how credit works
- Personal responsibility and accountability
- Managing balance and interest payments
- Exercising self-control with impulse purchases
- Learning to read an account statement and understand transactions
An example teaching moment with credit cards is to add your teen to your credit when they can drive, and have them use the card to pay for gas. Then, the money they earn from a part-time job can be used to pay off that portion of the balance.
Of course, using a credit card is an ongoing trust exercise. A situation like this will allow you to talk seriously and earnestly with your child about the value of money.
By letting your child become familiar with debit and credit cards, you are allowing them to have impactful experiences that they can use in life. Remember: you may have access to financial wellness resources from your preferred financial institution to help your child learn more about positive spending practices.