Unsurprisingly, young people, particularly college students, are not great credit users. Graduating college with a pile of consumer debt, in addition to student loans, can be a major financial stress when entering the real world.
If you tank your score, you could not only hurt your ability to secure a loan for a future car or home, but you could even turn off prospective employers.
Despite all of that, there are some benefits to early credit card use, if and when implemented correctly.
1. You’re starting a discussion about money.
Introducing teens to financial tools like credit is a great way to get a discussion started about spending and good financial habits. It’s also a good time to discuss the implications of poor choices and delinquent financial behavior.
Starting teens out with some financial freedom and responsibility may be a better option than waiting, as you can still teach and monitor their spending and charging habits while they’re still under your roof.
A debit card might be the best starter option. Because debit cards have limits, children will be forced into the habit of not buying more than what they can pay for. If they overdraft, you can hold them accountable.
Learning from minor abuses early on can mean avoiding major mistakes in the future.
2. He or she is learning the ropes.
If your child is able to handle the responsibility of a debit card, perhaps they can upgrade to a credit card when they hit 18.
Get them involved in the process of researching the cards so you can walk them through the major selling points and the caveats in the fine print. Remember to stick to cards with low minimums and no annual fee.
“You can let them make
mistakes while on your watch.”
3. He or she is building credit.
Length of credit history makes up 15 percent of the credit score, so starting early can be helpful.
To build good credit, you need to build good financial habits to go along with it. These habits include the ability to differentiate between needs and wants, not buying what you can’t afford, paying on time, etc.
4. In case of emergencies
When a child goes out of town, either for a short time or for an extended period like college, it can be beneficial for them to have a credit card for emergencies.
There’s also an added safety measure when children carry cards rather than stashes of cash.
If you start children out with financial responsibility early on, you can let them make mistakes and teach them lessons for the future while still on your watch.
Photo source: metro.us