College students are some of the worst offenders when it comes to racking up mountains of unpayable debt; a problem that stay with them long after college has finished - the irresponsible use of credit in college can continue causing damage until much later in life. By teaching your kids how to manage money responsibly when they're young, you're setting them on the road to financial health and happiness.
Many banks offer credit cards tailored especially to the needs of high school students. They are issued with a guarantor or co-signer - usually parents or guardians. So although the ultimate responsibility of the card payment lies with the co-signer, wise students will also find they are able to use the credit card to start building a good financial history while they are still young.
Be sure to check out all of the options with your child before you commit to a card. Beware: some banks will try to charge exorbitant fees, reasoning that the applicant has no credit history. But there are reasonable deals to be found if you are willing to do some homework.
Of course there are risks involved - you will have no control over your child's spending and reckless behaviour could lead not only to a heavy burden of debt, but damage to the child's credit rating in the long term. Make sure that the card has a very low credit limit when applying and offer your child as much guidance as possible; encourage them to keep within a budget and to make payments in a timely manner.
If you're not sure whether your child is ready for the responsibility of their own credit card, another option is to get an extra card issued from your own credit card account and give it to them. Most credit card companies will be happy to issue cards to family members at no extra cost. Students will feel less tempted to run-up insurmountable debts and you can keep a very close eye on their spending habits.
If your child is still too young to qualify for a credit card of its own, or if your aim is to teach them financial responsibility after they have demonstrated the opposite, the best option may be a pre-paid card. It's not exactly a credit card and not exactly a debit card. This will allow parents to set up accounts for teens and children. They are quick to set up and you have complete control over them - just put in the amount of money you want your child or teenager to have - when it runs out, the card stops working.
Giving your kids the responsibility of a credit card could be a nerve-wracking ordeal, but it doesn't have to be. If you make the right choices with the card, give proper instructions and support - making sure they understand the consequences of their actions - teaching your kids about the risks, the benefits of credit can be immensely rewarding. This will give them a sense of responsibility that will last for a lifetime.
