Yahoo! (NASDAQ: YHOO) personal finance guru Laura Rowley thinks high school students ought to have credit cards: "No, I'm not getting paid by the credit card industry. I think those companies are a potentially dangerous enemy, and you have to prepare your child to be a worthy opponent in battle. You want them to conquer this prospective foe, and transform it into a humble servant that does their bidding."
She is exactly right. When my mother was growing up in New York in the 1960s, her parents would take her out to a restaurant every once in awhile and buy her a drink with dinner. Their friends thought they were insane. "How could you encourage your daughter to drink underage?" My grandparents replied that they wanted her to "learn to drink responsibly" and that having a drink with her parents at dinner was a better place to learn that than a party in college. My mother has never had a problem with alcohol.
I would argue that the same thing applies with credit cards. When kids are in high school, their parents can oversee and control their use of credit. They can show them how it works, and let them experience the pitfalls first hand -- in a controlled, fail-soft environment. Isn't that preferable to learning about credit when you turn 18 and the mailman delivers a stack of pre-approved (to pay 23% interest) credit cards every day?
As Rowley writes, "... if teens lose the battle to understand and manage credit cards at 18, the damage can haunt them for years. An estimated 70 percent of employers check credit scores before they hire. Over time, a low credit score will suck tens of thousands of dollars out of your child's pocket when they seek financing for an auto or a home."
So go ahead, sign Junior up for that credit card -- he probably won't want the Hello Kitty one, though.
Reader Comments (Page 1 of 1)
8-07-2007 @ 8:35AM
Dan said...
Hooray for your grandparents! They broke the law! Give them a medal!
I agree with Robert. Drinking alcohol and using credit cards are completely unrelated. I'm glad your mom did not have a drinking problem, but I seriously doubt it is because she was allowed to drink at an early age.
8-07-2007 @ 4:41PM
Robert Tice said...
This is an idiotic position. First, the comparision between drinking (the earlier a person drinks the more likely to become alchoholic is a prove fact, and drinking with parents won't change that.) and credit cards is not valid. They are not related items in any real fashion.
I'd say the real truth could easily be determined by checking out people who had credit early in life vs. those who got credit later. Current indications are that the later you get credit the less trouble you'll have with it since kids with cards are known to be a disaster. An average debt of over $5,000 at age 18, translating to a lifetime debt payment of over $100,000. This whole concept is bankrupt.
8-11-2007 @ 1:52AM
Jeff said...
I think the best thing parents can do is start teaching their teens about managing credit cards by getting them a prepaid debit card.
It is crucial that your kids respect credit and establish good credit spending habits at as an early age as possible. I saw that http://www.crediteria.com has a review of a credit card for parents to give their kids their weekly allowance on a prepaid mastercard called the allow card http://www.crediteria.com/Allow_Card.htm
I think that is the best way to teach you kids about managing credit. They can't run up debt because it's prepaid. Parents have access to the account to see where their kids are spending money. Then you can have some talks with your kids about credit card usage.
Consider setting up the "bank of mom and dad" and "charge" your kids interest on their spending so they get a true understanding and respect for credit.