The below article on student credit cards was written for the teens. Let us start teaching them financial responsibility as soon as we can.
There is a great debate on what to do these days. The debate to allow your child to have a college student credit card or not. Many parents are afraid to give up this control and allow a teen or college student to have such a large responsibility.
If your teen or young adult has a job then you can help them build credit in college or high school and learn some basic finance skills. In a world were good credit is becoming more and more important you can help your young adult become qualified to purchase a home at a younger age as well as life-long skills. Do you remember how hard it was for you to learn that responsibility?
Below I have outlined some Ideas on how to teach your child about credit by allowing them to use a college student credit card:
1. Keep the credit card limit to $250 or $500.
2. Make sure they understand they must pay the bill.
3. Show them expense tracking and budgeting.
4. Eliminate bad cash spending habits.
5. Set rules for spending (what is ok to buy).
6. Explain the fees, interest, and grace period.
7. Pay-off credit card balance each month.
You also want to make sure you find the best college student credit card:
• No annual fee credit card
• 0% Intro period
• Points, Miles, or other rewards
While teaching your young adult good spending habits and financial responsibility make sure to discuss the dangers of too much credit. This would include over-extension, debt accumulation, credit scoring and how it works, and the problems with debt at a high rate of interest.
Use your good judgment on deciding if a college student credit card is right for your young adult or teen. It may be too early to transfer such responsibility, but the sooner you discuss these types of things the better off you will be in the long run.
Teen credit cards are actually “prepaid” or “secure” credit cards. They are not true credit cards in the sense that they belong only to a teenager and are open and revolving lines of credit. Instead, there are credit programs that are designed so that the only money teenagers can spend is money that is already on the card.
Here is how it works: You sign up for the account. You are on the account, as well as your teenager. You begin with an initial deposit that serves as the “limit.” Every month “payments” are made, increasing what is available on the card (or simply replacing the money that is spent).
The best practice, from the standpoint of teaching money management to teens, is to have the teenager make the payments and keep track of his or her spending. This can help teens get a better idea of how much money they are spending, and get used to the idea that even though they are using a ‘pre’ college student credit card, they still have to pay for what they spend.
It is important to impress upon teenagers the importance of keeping track of what is spent on these cards. Overages can result in fees. Once fees are assessed, another payment adding money to the account will not be worth as much, since fees are deducted as soon as the account gets back in the black. Personal finance software or a ledger can help your teenager keep track of expenses and update balances. Make sure you show your teenager how to balance the statement at the end of each month, and explain the importance of this action.
Teaching your teens and young adults is your responsibility. As parents, the responsibility is never ending. We are obligated to teach it all from how to wash there closes to being responsible for there finances. Teach your children well and you will both see the rewards of it.
There is a great debate on what to do these days. The debate to allow your child to have a college student credit card or not. Many parents are afraid to give up this control and allow a teen or college student to have such a large responsibility.
If your teen or young adult has a job then you can help them build credit in college or high school and learn some basic finance skills. In a world were good credit is becoming more and more important you can help your young adult become qualified to purchase a home at a younger age as well as life-long skills. Do you remember how hard it was for you to learn that responsibility?
Below I have outlined some Ideas on how to teach your child about credit by allowing them to use a college student credit card:
1. Keep the credit card limit to $250 or $500.
2. Make sure they understand they must pay the bill.
3. Show them expense tracking and budgeting.
4. Eliminate bad cash spending habits.
5. Set rules for spending (what is ok to buy).
6. Explain the fees, interest, and grace period.
7. Pay-off credit card balance each month.
You also want to make sure you find the best college student credit card:
• No annual fee credit card
• 0% Intro period
• Points, Miles, or other rewards
While teaching your young adult good spending habits and financial responsibility make sure to discuss the dangers of too much credit. This would include over-extension, debt accumulation, credit scoring and how it works, and the problems with debt at a high rate of interest.
Use your good judgment on deciding if a college student credit card is right for your young adult or teen. It may be too early to transfer such responsibility, but the sooner you discuss these types of things the better off you will be in the long run.
Teen credit cards are actually “prepaid” or “secure” credit cards. They are not true credit cards in the sense that they belong only to a teenager and are open and revolving lines of credit. Instead, there are credit programs that are designed so that the only money teenagers can spend is money that is already on the card.
Here is how it works: You sign up for the account. You are on the account, as well as your teenager. You begin with an initial deposit that serves as the “limit.” Every month “payments” are made, increasing what is available on the card (or simply replacing the money that is spent).
The best practice, from the standpoint of teaching money management to teens, is to have the teenager make the payments and keep track of his or her spending. This can help teens get a better idea of how much money they are spending, and get used to the idea that even though they are using a ‘pre’ college student credit card, they still have to pay for what they spend.
It is important to impress upon teenagers the importance of keeping track of what is spent on these cards. Overages can result in fees. Once fees are assessed, another payment adding money to the account will not be worth as much, since fees are deducted as soon as the account gets back in the black. Personal finance software or a ledger can help your teenager keep track of expenses and update balances. Make sure you show your teenager how to balance the statement at the end of each month, and explain the importance of this action.
Teaching your teens and young adults is your responsibility. As parents, the responsibility is never ending. We are obligated to teach it all from how to wash there closes to being responsible for there finances. Teach your children well and you will both see the rewards of it.
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