Teaching young adults financial responsibility and assisting them in building credit are excellent ideas. However, giving them a credit or debit card without helping them through the procedure of using it safely, may be quite risky. Here are four solid ways to tell if your young adult is prepared for their initial credit card, as well as how to get them ready.
1- They Are Sincere About Finances
If your young adult is open and honest about expenditures, it’s a positive indicator they’re mature. You may put them to the test by offering them a specific amount of funds for a required item.
For instance, if they require new clothes for school, give them the money, explain the budget, and let them shop. If they end up overspending or buying unnecessary products, they’ve demonstrated that they’re not nearly disciplined sufficiently for their first credit card.
2- They Can Maintain Deadlines
Does your young adult know how to handle deadlines? Is it common for them to overlook critical assignment deadlines or to violate their curfew? If they didn’t complete a basic task like an essay in time, they’re not prepared to be responsible for making payments on time. If your young adult frequently misses deadlines and curfew, tell them that they must develop the habit of punctuality and discipline before they can obtain their first card.
3- They Understand the Importance of Spending Responsibly
If your young adult receives an allowance or works part-time, they have access to their money. What do they do with their allowance or paycheck? Do they save some money or spend it all the same day they get it? A credit card would only foster your young adult’s negative spending habits if they or she is a reckless spender.
Instead, teach your young adult the value of saving, budgeting, and spending sensibly with their allowance or income. After your child’s spending habits have improved for several months, you should rethink the credit card problem.
4- They Know How Credit Cards Operate
Let’s admit it: most young adults and even many grownups regard credit cards as a form of free money. It’s not a huge problem if they couldn’t afford anything. You can acquire everything you want with a credit card, and all you need to do is pay the minimum payment every month. That is a very erroneous attitude toward credit cards, and possessing this mindset will lead to substantial debt for anyone.
Make sure your young adult understands the significance of clearing off the credit card bill each month, and teach them how to operate a credit card responsibly. Each credit card charge should be documented and subtracted from their bank balance.
Many parents may ponder whether they should bother providing their young adults with credit cards in the first place. It’s a legitimate concern. Credit cards may cause significant financial harm, and young folks are more likely to succumb to spending temptation.
However, if young adults learn nothing concerning credit cards through their parents, there’s a strong possibility they’ll be presented with an appealing credit card deal in college, which might lead to debt. Furthermore, they may not inform you of it. Give them a lesson in credit card usage today, so they don’t make the same mistakes later. It also provides them a jump start on building their credit.