Teach Children to Handle Money/ March 5th, 2021
When teens graduate from high school and leave home they're bombarded with credit card and other loan offers. If they've already learned to use financial services responsibly, with their parents' help, they're less likely to get into trouble—paying high interest rates and fees, missing payments, amassing excessive debt, damaging their credit ratings.
Any child with a financial goal is ready for a savings account, and when a young person has a steady income, it's often time to teach money management through use of checking accounts and ATM or debit cards.
After teenagers become proficient at using ATM or debit cards, and writing the occasional check, some parents let them open credit card accounts, usually with a low credit limit such as $500. If a teenager pays the balance off regularly and on time, it builds a positive credit history—essential for basic transactions like renting apartments, getting good jobs, and obtaining car loans once on their own. It also lets teenagers learn to manage credit while their parents are there to help.
Parents should take an active role in teaching young people how to use financial services responsibly. Go over the first few statements with your child and explain how to read them. Go through the statements step by step and show them how to reconcile the account against their own records. Then be there as a resource when they do it on their own.
After young people are accustomed to managing their accounts, parents still should monitor them. Assuming there's a regular channel of communication, ask for periodic updates. In most cases that will be enough.
And, if teenagers make a mistake, make them pay the penalty. Don't bail them out.
Before young people open a checking or credit card account, financial education is vital. Your credit union most likely offers youth financial education classes to teach these concepts; other courses often are available online.