06:09:44 AM Thursday, February 28, 2008

Credit Card Management Lessons for Your Children

Entrusting your child with a credit card to manage on his or her own is a risky thing to do. Especially if your kid has not even graduated high school yet. Despite the fact that most US teens get their first job at 13-14 and know the value of money, managing a credit card account involves much more.

Giving financial education to a child is just a must-do for every parent. But explaining evasive credit card lingo and giving your own example of credit card use, particularly if your credit history is not flawless, is not always effective. Letting your kid deal with a real plastic under your guidance? That is a smart choice.

Teaching your child the basics of financial management is essential for his or her financial future. Some parents, in order to protect children and themselves from any possible money problems, just forbid their son or daughter to use credit cards through parents' co-signing, or making kids authorized users of their plastics. They prefer giving their children pocket money. This way they really do save their kids from getting into financial troubles at an early age.

However, when their beloved offspring becomes eligible to make credit card deals, he or she will almost inevitably face serious problems with credit card use. That is why financial experts advise to start giving your children money management lessons when they turn 6-7, or even earlier. You can start with a traditional piggy bank. When your kid gets old enough to understand some basic credit card terms, such as APR, credit card fees, grace period, promotional offer and others, you are to explain these notions on a so-to-say advanced level.

And credit card companies are there to help concerned parents in not an easy matter of giving children financial education. Some of the creditors issue credit cards for high school students. Just a few years ago no one could even imagine that a minor could qualify for a credit card. But the times have changed, and now the government stands for bringing children to become financially responsible.

So, now your child going to high school can get a credit card. Of course, such cards use involves parental control and digital "allowances". Thus, your kid can get his or her first experience of managing a plastic under your careful supervision.

Student credit cards are also a great chance to study the basics of money management. The problem is that such cards are available only to college students. And if a freshman gets to use a credit card without his or her parents' watchful guidance, a student is most likely to kick over the traces and mess up his or her credit history from the very beginning.

But if you pay attention to training your adolescent kid's money management skills your child has much fewer chances to make some financial missteps when at college.

If you still doubt your kid's competence in managing credit cards and thinking what will be better and safer for your child - credit or debit cards, a prepaid debit card is a good way out. Using such a card is different from paying with cash. At some point it resembles owing a regular credit card a lot, as debit cards also have transaction and annual fees. But with this type of card your child is safe from accruing huge debts.

Think about your kids' financial future today. Help them to understand the rules of credit card use and you can feel safe about your child's credit report.