Kids and Credit Cards?

I am sure you have seen ads, where Credit Card companies or Banks offer you FREE credit cards for other family members.

How about this one, we got this one attached to one of our statements.

What is this teaching our children?

That it is OK to spend mom and dad's money, because they will bail us out anyways.
Imagine having a credit card with a limit of $10.000 or $15.000, some people may have a limit up to $25.000. With cards like these you will give your children that amount of money to play with, they can spend your credit quite easily if they have no idea about money. It is almost like giving them a blank, signed check (book).
This is not teaching our children anything about money, financial responsibility or good money habits, it is all about the credit card companies.

You as a parent may end up losing the good credit score you have built up over the years.

A better idea would be to give your children a credit card of their own, with their own bank account and have a small limit of say $500 or $1.000, depending on how responsible they are. This way, when they keep up with payments, they will start building up a credit score of their own.

An even better idea is to have your children have a "secured" credit card on their own bank account. This means that they need a certain amount in their account, which they can't use, as a security against the credit of the credit card. This way they will never over-spend and they still build up their credit score. They will still need to make sure they pay the card in time, every month.

Building up a good credit score is important later in life when your children are buying a house or other bigger purchases. The mortgage rates and conditions are far better for people with good credit scores than the ones with poor credit scores.
The reason for this is that people with good credit scores have always paid their cards on time and have a skill called, money management. This makes it a lower risk for companies that lend money, therefore the conditions are more favourable.

I believe that having a credit card is not a bad thing, as long as you start off with a small limit to teach responsibility with money, and pay it off each month.
On some TV shows people are advised to cut up their credit cards. This does not solve the problem, the next credit card offer will be in the mail the next week.
It all comes down to learning financial responsibility.

These are just a few of my thoughts on this matter. I'd love to hear some of your ideas, suggestions or questions on the subject. You can post them on my blog.

Cheers.....Amanda van der Gulik.....Excited Life Enthusiast!

P.S. If you are as serious about Teaching Your Child About Money and money habits as we are, make sure you sign up for our course.