Kids and Cash Part V

Late Teens And Credit Cards: Don't Try This At Home

By Janet Bodnar
Kiplinger's Personal Finance
Sunday, September 28, 2008

Ages 16-18 and Into College: Hold the Plastic

There's a school of thought that says teenagers should get credit cards when they're still at home so they can learn to manage credit responsibly. I disagree -- strongly. In fact, I'm on record as saying that giving teens credit cards makes as much sense as letting them use drugs so they won't turn into addicts.

I'm not against credit cards. I just think that teenagers in general aren't mature enough to manage them. And there's plenty of research to back me up. James Roberts, a marketing professor at Baylor University, has found that young people who use credit cards are "less price-sensitive, spend more, and overestimate their available wealth compared to those who write checks and pay cash." They're also more likely than adults to max out their credit, and they're more susceptible to impulse-buying.

Kids this age need to learn about credit, but remember that a little basic knowledge goes a long way. Teens don't realize that a credit card is not free money. They need to know that when you use a card, you're borrowing from the card issuer, which will charge you a high rate of interest.

My rule: Cash is still king. Help your kids open a checking account (and get a debit card) so they can learn how to balance a checkbook -- either by using a check register or online entry -- before they head off to college (co-sign the account if the bank requires it because they're not yet 18). Fund the account with the money they earn from their summer or part-time jobs and will use to help pay for college expenses. Let them know upfront which expenses you'll pay for -- books, for example -- and which are their responsibility, such as food outside the meal plan.

Next week: Age 21 and beyond

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