Imagine that one day your 15 year old child receives a credit card with $1500 spending limit. Do you think he or she will be prepared to manage it? Is your child mature enough to take all the responsibilities incurred?

If this idea makes you nervous, it is likely that your child will not be able to smoothly integrate into the tricky world of finances. Generally this happens because teenagers have no information on this topic. They know nothing about this business, but this business knows that teenage market is worth aiming at.

Credit card companies monitor the demographic situation and design special programs for different age groups, including teenagers. The minor age market is fast growing and promising. More and more teenagers work and have their own money which they are eager to spend. According to recent research 11% of all US population is teenagers. That is 31.3 million kids which makes quite a good market share.

The amount of money spent by teenagers annually is growing. According to Harris Group Survey in 2006 the total amount spent by youngsters was $195 billion compared with $94 billion in 1999. The great deal of this money is being spent online.

Teens are becoming very powerful consumers. Parents trust them more and more in making decisions on family purchases. Teenagers know what they want and show themselves very competent and savvy when targeted by any credit card issuer.

Despite all that, young people are not ready for personal credit cards. They turned to be quite ignorant on financial topics such as credit score, taxes, pension savings and others. There is lack of personal finance teachings at schools. Children are not financially competent by the time they graduate from high school.

There are institutions that are ready to help teenagers and their parents in this matter. Special educational programs have been developed which describe terms and conditions of different credit cards as well as main principles. One of these institutions is Capital One that issues brochures explaining credit card basics such as interest rates, reward programs, late payment fees.

Alongside with this opinion, there is another point of view according to which it is appalling to teach children anything connected with credit cards. They think it is like saying: "Let us get you in credit debt as soon as we can". Consumer groups have always been against marketing to college students, and high school kids is one step worse.

But nevertheless we cannot deny that credit card is a powerful tool. Making credit card applications is an important skill and there is nothing bad about taking responsibility for that. The sooner a teenager learns how to manage his/her personal finances, the more mature he/she will be after graduating from a high school. Which is more there are five simple steps to take in order to reach this aim.

1. Get your child a credit card under your own account or a secured credit card and teach the connection between charging a credit card one month and paying the next.

2. Set the limit and monitor the kid's usage.

3. If you feel that your child is ready for a separate credit card, encourage to search for lowest APR and no fee credit cards.

4. Encourage your child to find a job and pay off the balance from his/her own money.

5. Tell about the importance of good credit history.

Once you have done all this, take a step back and watch. In fact the biggest problem is when parents are too involved and do not give a teenager any chance of being independent. Give your child a chance, but make good preparations beforehand.

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Comments

Megan, 06:13 AM, October 03, 2007
Having a credit card for a child is a good way of learning money management. But a parent should think if his child is able to deal with a credit card wisely.

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