Kiplinger’s Personal Finance Editor Janet Bodnar wrote a feature on credit cards, debit cards, and teens. Her article recieved a large number of responses from parents who wanted to weigh in on the issue–one that I find very interesting and relevant to what’s happening in today’s economy.
Bodnar questioned whether parents should allow teens to have debit cards or credit cards. She expressed her belief that they should be given cash, not plastic, to learn money management. Mainly, Bodnar was referring to prepaid/reloadable debit cards that allow parents to continually (and sometimes automatically) transfer money to their kids. However, her thoughts bring up a question that all families will have to consider at some point.
Do you think that it is more effective to teach teenagers money management using credit and debit cards or with hard cash? On one hand, using plastic teaches them to think about budgeting and to recognize that they are to be accountable for how much money they can spend in both the short-and long-term. But only using cash keeps them from spending recklessly and from swiping their plastic without realizing the consequences.
Both methods have their benefits, but do you think parents should choose one or the other when teaching their children about finances?
5 Comments
I think that prepaid cards might be a good compromise. They have the convenience of a credit card, but don’t allow the kids to go into debt. From the kid perspective, there is no purchase that is worth going into debt for.
Depending on what you mean by “kids” I think teenagers should get a low limit credit card to help them build credit and learn responsibility.
A prepaid card might not be a bad idea. They would learn that they cannot purchase more than they have or it will decline. The pretense would be that they would have to earn the money put on the card. Not too bad a solution and a little harder to spend than cash that disappears pretty fast as well. Plus, most cards allow you to cancel if it gets lost vs cash that will be gone permanently.
No, they should not. I filed for bankruptcy, because I got one when I was 19. Stupid mistake. ended up 18K in the hole. Never again…
They should not be allowed to own one, unless they’re at least 21 and have a good job.
Just my Opinion.
-Pat
I agree with the majority of comments above. I think Prepaid Debit Cards are a great way to show your teen the type of responsibility they will need to start developing. The prepaid aspect is what makes it so inciting, and useful. Teens can learn to check how much money is on their cards and regulate their spending, buy things online safely, and you can cancel a card at anytime. Furthermore, at some point in their lives, they will have to manage a credit card or debit cards and a bank account (that’s just the way the world works) and cash won’t teach them the fundamentals they need to survive.