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What to Teach Your Adult Kid About Their First Credit Card


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May 26, 2021

What to Teach Your Adult Kid About Their First Credit Card

The college years are a time of growth and change - both for you and your child. One significant difference that occurs for your child is taking on responsibility of managing their own finances. That is, if they have never done it before.

It's tempting to use credit cards to buy things on impulse or pay off debts with high interest rates. Thus, it'll cause some serious problems down the line.

The worse is, your teen might face financial troubles when they graduate or even before they work full-time.

Benefits of Getting Your Kid a Credit Card

Some parents feel that giving their children a credit card is a terrible idea. But, there are benefits to allowing your child to receive one.

In this article, we'll examine some of the best reasons to give your child a credit card.

Discussing credit cards with your child is crucial. Educating them about proper use can instill an excellent worth ethic and responsibility.

Many kids and teens look forward to getting a credit card, but often for the wrong reasons. Teach your kids the proper ways to use a credit card, and they'll be more likely to stay out of financial trouble.

Kids should learn that credit cards can be helpful if they use them correctly. Also, people should recognize the risks of irresponsible credit card use.

Excessive credit card use can leave them vulnerable to financial ruin. Here are some tips to help you teach your child about credit cards.

It Helps Build Credit History

The most common reason parents give their children a first credit card is so they can build credit. Helping your kid establish a credit rating is a good thing.

It is a crucial step but not the most important. Only 15% of a credit score is determined by how long someone has been using credit. More important is their payment history. Credit bureaus will check if they pay their bills on time.

Sadly, young people who get cards in their teens or college years may end up damaging their credit scores. It can happen if they use the cards irresponsibly.

If you're trying to help your kids build credit with a credit card, make sure they learn what credit means. Also, teach them how to build good financial habits.

They Learn Healthy Spending Habits at an Early Age

Letting your child get a credit card will mold them to have good credit habits. That way, your child will carry a healthy attitude

Overwhelming debt is a result of repeated impulse purchases. As a parent, it is vital to set an excellent example for your children.

Help them distinguish between needs and wants. Teach them about immediate gratification and delayed gratification. Knowing these things will help them keep out of trouble.

Sit with your child before adding them as an authorized user. Afterwards, set some guidelines together. Every month, go over your child's purchases together and remind him/her to pay those purchases in full.

It Makes Them More Responsible

In letting your child pay for their purchases, they get a sense of responsibility. Getting a handle on their finances from a young age will make them more responsible.

For your children to become financially ready later on, you need to teach them this value.

6 Lessons Your Kid Should Learn About Credit Cards

Establish a Monthly Budget

You could have your child figure out what costs they expect each month. It includes money spent at cafes, concerts, and other amenities.

Rather than taking advantage of the cards' credit limits, your kid should base their budgets on the income they get from their jobs or allowance.

Tell your kid to stick to small purchases. They should only get things they could afford to buy. They should be able to pay the entire balance every month with their allowance.

Check Balances Regularly

Every card has its apps nowadays. Tell your kid to download the card's app. Kids should learn to visit the site or app of their credit card company at least once a week. This way, it can help them keep track of their spending and spot any suspicious charges.

Repay the Balance Each Month in Full

Teach your teen this rule every month: pay off his credit card balance in full every month. Having a credit card balance means paying interest on every purchase.

A balance on your credit card can make your purchase more costly. Tell your teenager the pros and cons of setting up a payment plan with the bank. Subscribing to such plans will charge you either the minimum or the total amount owed.

But if your bank account balance appears to be too low, the automatic payment gets withdrawn. Thus, it can cause your account to incur overdraft fees.

Stay Within Your Limits

People don't even know about the fact that charging more than 20% of your available credit hurts your rating. A $500 credit limit on that new card means your teen should keep the monthly charges at $100 or less.

Never let your kids max out their credit cards. They may not even be aware that their monthly balance is being reported to the credit bureaus before paying your bill.

A maxed-out card will result in your credit score plummeting if the credit bureau finds out.

Pay Your Bills on Time

Your teen might not care now, but their credit history will follow them once they leave college. Young people need to know this upfront to begin to build credit during their college years. Having a good credit rating while in school makes it easier to qualify for a loan after graduation and rent an apartment.

Keep Your Credit Card and Financial Information Secure

Always remind your kids to be careful with their credit card details and financial information. If you're going to dump them, tear them up and throw them away. Some people can take advantage of you and open a credit card in your name.

You'd be at risk if someone hacked your information and took out loans or opened credit cards in your name. The situation might get resolved, but it can take a long time and cause many headaches.

To protect your information, you should choose strong passwords. Shred any mail offers you get for credit cards.

With all these laid up tips, your teen will grow with a sense of responsibility and stronger self-discipline. Even if they take a loan from Cash Mart, known as trusted Moneylender Jurong, they can manage to keep up with their finances in a healthy way.

Don't wait for them to suffer in terms of money. As much as possible, teach them these lessons enthusiastically, and watch who they become in the future.


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About the author

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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