The question of when to introduce credit cards to your kids has come up a lot lately. Not sure what’s in the water, but people are super curious about when to make this introduction. Some have even gone so far as to ask if they should put their child on their own credit card as a user to help them build credit. I pride myself on keeping my thoughts to myself until I know if they will be helpful or not, but my face couldn’t hide it. I was as deadpan as a dead pan would be. Then one eyebrow slowly began to arch up. I couldn’t help it. Even the eyebrow was like, “I’m sorry? What?” I kind of understand where they’re coming from. Building credit is hard and for young adults venturing out on their own, it can be even harder! So, parent’s try to do what they do best and provide a way to help their kids.
Reasons you should wait to introduce them to credit cards.
Though some may disagree with me, my answer to introducing your kids to credit cards is WAIT. My answer to introducing your kids to credit cards by adding them as a user is DON’T! I’m very passionate about this for the following reasons:
- The Pros to credit cards:
- Basically we use them to build our credit score so we can convince some bank to give us a loan because we have proven we can pay off debt.
- This can be helpful for getting a loan, buying a house, etc. etc.
- Some credit cards have rewards attached to them.
- Sounds great, but you have to spend a lot for them to be worth it, and if you spend a lot, can you pay it off?
- Basically we use them to build our credit score so we can convince some bank to give us a loan because we have proven we can pay off debt.
- The Cons to credit cards:
- They have high interest rates.
- Which if not handled correctly could sink you into debt.
- They are one of the top reasons people are in debt.
- Spend too much and your credit score tanks.
- Say goodbye to the loans you were hoping to get.
- Or you’ll get a loan with a CRAZY high interest rate.
- If you’re late on a payment and your child is a user on your card, it can hurt their credit score as well.
- If you think you can get by on just paying the minimum payments while you enjoy the thing you splurged on…see the example below.
- They have high interest rates.
There’s something more helpful than credit cards!
Now you may start to argue, “Hey Lady! They need to know how to use them!” And I would completely agree with you, but I believe most people forget the most crucial point and they may not have even learned it themselves. FINANCIAL LITERACY! According to Investopedia, the definition of Financial Literacy is:
The ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. When you are financially literate, you have the foundation of a relationship with money, and it is a lifelong journey of learning. The earlier you start, the better off you will be, because education is the key to success when it comes to money.
Did you catch that? “Education is the key to success when it comes to money.” MONEY, not credit cards. A lot of the younger generations do not understand money or how to properly live with it. They don’t understand the value of a dollar earned, how to budget, how to save, or how to invest. They are completely in the dark and the first thing I hear is “when can I introduce them to credit cards?”
Introduce and teach kids the foundations of money management FIRST.
- Involve your children with meal planning, grocery shopping, and how to shop for the best price.
- When you save for a vacation, involve them in the planning so they can see how much you are paying for everyone to have a great time.
- Getting ready for BACK TO SCHOOL? Have them help you create a budget for supplies and then shop for those supplies.
- Holidays are an awesome time to introduce kids to money:
- Create a Christmas budget and have them be in charge of getting some stocking stuffers WHILE staying in budget.
- Have an afternoon of baking cookies and teach them how to figure out what a dozen cookies costs to make and how much they would have to sell them to make a profit.
- Teach them about the joy of giving!
I’m sure you could look up online and find 100 different ways to introduce money to your kids. The main point is to teach them so they can confidently make their own informed financial decisions when they become an adult. And if you’re still worried about your kids getting a “late” start on building credit, there are ways. You built credit. I built credit. It can be done and it can be as simple as them getting a car loan for their first car (oh yes, I believe it has to be them, not you), or you could introduce credit cards after they get their first job, when they prove they can be responsible. The goal is not to rush and to teach them first!
If you need some guidance in teaching your kids about money, I can help with that! I’m all for re-building the dream of generational wealth and I believe you and your family can have that.
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