In Rich Dad Poor Dad, Robert Kiyosaki talks at length about his experience learning about money and wealth and the importance of this education. We all know that dealing with money is part of the process of growing up and becoming an adult. Today money, wealth, credit and debt are as simple and complex as ever. For many the introduction of credit cards and how they handle them will be a defining point in their financial lives. This introduction can come either as a teenager under a parents supervision and guidance or as a young adult with newfound independence. Either way, it would not be ideal to have a young adult applying for one of the first instant approval credit cards that came along the day after they turned 18. Young adults need to be educated before they are financial responsible in the eyes of the law.
There are a number of steps that can help a teenager come to terms with credit cards and the concept of credit and debt in general. Many people who are not used to the concepts of credit and debt and what the responsibility involves and implies can find that a credit card quickly lands them in the kind of debt that can take years to pay off and may impact their credit rating.
If you have a teenager and are considering allowing them a credit card there are some “intermediate products” that can help a young adult learn aboutcredit cards including: prepaid and co-signatory credit cards.
Prepaid credit cards. These are credit cards have a balance that can be “refilled”. This means that an allowance or portion of wages from part time jobs can be added on to the prepaid credit card by the parents. This card still does not have the ability for the child to go in to debt, as the maximum that can be spent is the amount already on the card so it can be quite safe to be used. This can give the parents a good indication of how the young adult copes with spending and saving over a long time period.
Co-signatory credit cards are a logical next step when the teenager is approaching financial independence. These cards are cards where both parties guarantee the credit card debt. For many young adults it may be the best way to get a credit card. This also means that statements are sent to both parties and that the credit limit has to be agreed.
A co-signatory card is an excellent way for a parent to introduce the teenager to the concepts of credit and debt along with the benefits and responsibilities that a credit card entails. There is no set age that a parent should consider introducing the concepts of credit and debt, it would depend on the individual child and their level of maturity.
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