Is Your Teen Ready to Use Credit Cards Responsibly?

You know that your teenager needs a good financial education. That means that you need to teach him or her about the appropriate use of credit cards. Indeed, as you teach your children about credit, you might be interested in giving your teen a credit card.

Before you make the decision to authorize your teen to use one of your credit cards, though, it's important to make sure he or she is truly ready for the responsibility. Credit cards are serious business. And, while they are increasingly part of the financial landscape, it doesn't mean that you should just hand one over to your teen.

Determining that Your Teen is Truly Ready for a Credit Card

There are signs that indicate your teen is ready for a credit card (or, conversely, woefully unprepared). At our Credit Card Education Centre, we have a checklist that can help you answer this question: "Is my teen ready for a credit card?" The checklist focuses on responsible behaviours that might indicate that your teenager can handle the accountability associated with using credit. Here are some of the items to consider as you evaluate your teen's readiness for a credit card:

• Earns money: Is your teen earning money? It's important to have some sort of income if you are going to have credit. You shouldn't let your teen use credit unless he or she has a way to pay off the charges.
• Lives within his or her means: Hopefully, you have been teaching your teen financial responsibility. However, there is no way to completely force your teen. However, if he or she is not applying your lessons and living within his or her means, don't give your teen a credit card.
• Saving behaviours: Does your teen save some of his or her money? This is an indication that your teenager is practicing good habits. If you are confident that your teen can continue these behaviours, and will save even though there is a credit card involved now, it might not be a bad idea to let your teen try a credit card.
• Successful test run with a debit card: Have your teen use a debit card first. How does he or she handle it? If there has been a successful test run with a debit card, with your teen tracking his or her spending, and not overdrawing the checking account, it could indicate that he or she will behave appropriately with a credit card.
• Discipline: This is about more than just money. Does your child show the discipline to practice sports or musical instruments? Does he or she do homework first and play video games later? This sort of discipline is likely to translate into disciplined spending with a credit card.
• Responsibility in other life areas: Once again, how your child behaves in non-money areas of life can be a good indication of how he or she is likely to behave toward money. If your child takes care of homework, chores and other items without being constantly nagged, he or she might be ready for a credit card.

Make sure you are honest in your evaluation, and that you aren't blinded by your child's pleadings. And, if you do decide to let your child use a credit card, make sure to lay down the rules and enforce them.