A new survey found that the number of children between the ages of 8 and 14 with a credit card has quadrupled over the past year. A recent survey found that the number of 13 and 14 year olds carrying credit cards has jumped twofold in the past year.
“While it might be shocking to hear that so many preteens and young teenagers have credit cards, since they can’t open them on their own, in most cases parents are opening cards with them,” Kimberly Palmer, a credit card expert for NerdWallet.com, told Newsday. “If parents use that opportunity to talk about how credit cards work, how to avoid debt and how to budget, then it’s a great learning opportunity and will help them graduate to using credit cards responsibly after they leave home.”
But handing a kid a credit card isn’t the best way to teach impressionable minds about money management. For many kids, holding coins and bills in their hands, then spending those same dollars and coins for something tangible is what helps them to figure out what money means.
We need that basic connection to money—the feel and heft of it in our hands, the “pain” of handing it over to someone else for something you want, and the saving up to buy something special. With credit cards, you bypass all of that in an instant.
Want to teach your kids how to avoid debt and how to budget? Then give them an allowance and don’t let them have carte blanche access to your credit cards. We give each of our four children a weekly allowance with only one string attached: they must give at least a five cents each week in the church offering. Here’s some common scenarios and how we’ve handled them.
Scenario one: Child wants something at the store but forgot their cash at home. We grill them on how much the item costs and will occasionally buy it for them, but demand immediate payment when arriving at home.
Scenario two: Teen wants something online. We either make them pay us in cash before hitting the “buy” button or they can purchase an Amazon or iTunes gift card at a store with cash to use for online purchases. Either way, they must ask permission before hitting send—we’ve stressed that we have the right to confiscate any item ordered to return if permission wasn’t granted ahead of ordering it.
Scenario three: Child wants something but doesn’t have enough saved to buy it. We make them wait until they have cash in hand. For one of our daughters, that meant more than a year of saving.
What do these three scenarios teach your child about money? That it comes with a cost. That saving takes discipline and commitment—and you really have to want something to save for months before buying it. And that ordering online with a credit card is exactly the same thing as paying in cash.
However you teach your kids about money, using cold, hard cash is always better than plastic.