A study from Bank Negara Malaysia showed that, based on statistics from 2017, nearly half (47%) of Malaysian youth are struggling with high credit card debt, while those who have taken out personal loans was at about 38%. So, why is it still a good idea to get credit cards for your children? 

Many young adults seem to fall into the deep well of credit card debt. And most of the time, they get rescued by the two ever-reliable people… mom and dad! In our exploration today, we want to consider looking at using credit cards as a means for teaching our children financial education at an earlier age, to eventually develop young adults with better financial awareness.

Why Should You Give Your Child a Credit Card?

Credit cards, when used responsibly, are a powerful instrument to learn from and create a strong economic basis for the future. With maturity, responsibility, and firm boundaries, credit cards can prove useful for older children (teenagers, college students) to safely use. But, why else should we consider allowing them to use credit cards?

  • Learn financial responsibility – With proper guidance and supervision by parents, use this to educate your child about the financial realities of life, such as: spending wisely, incurring debt, clearing debt, interest rates, compound interest, budgeting, and consequences.
  • Safety – A plastic card is more discreet and less likely to attract bad intentions compared with carrying large amounts of cash. Do still teach them to be vigilant and discreet.
  • Convenience – Convenient to swipe and pay, and convenient to track expenses by referring to bills. Set a regular check-in with your child to go over their credit card usage together.
  • Initiate good credit history early – This works if the credit card is in their name. By coaching your child in making timely full payments on their monthly bills, this establishes a good credit score for them. Do explain to them the consequences of a good credit score and how to maintain it.
  • Emergency fund – In case of an unexpected event which requires money urgently for critical reasons. You will need to define the meaning of “emergency” with your child.

… But, Wait!

We’ve given the reasons why to do it, but this is by no means the end of our article!

Parents, you still need to do your part. Teaching financial education and growing healthy money habits are not as simple as just handing over a credit card to an older child and expecting them to “figure it out”. Remember, getting trapped in credit card debt is an easy hole to fall into and tough to crawl out from.

So, What Do Parents Need to Do?

Parenting is hard. But, setting your child up for success has its rewards. Let us explore ways for you to coach and set boundaries with your child when it comes to their credit card usage.

1. Set Limits/Boundaries

Set rules for usage and consequences for not keeping them. At their age, older children can easily be influenced by their peers. Make it clear to your child, what they can or cannot, should or should not, do with their credit card and why. Clearly define what rules they need to live by. How much? Who pays the bills? What defines an emergency? What do they need to prepare for your review? Basically, define how much freedom are they getting and considering their age remember that they will likely want to know WHY for everything.

2. Supervision

Schedule regular check-in sessions with your child where you can both review your child’s spending and expenses together. Build trust by respectfully sticking to the schedule and not suddenly demanding an impromptu review. Use the opportunity to have conversations with your child. Listen to their reasoning and patiently guide them where needed. Ensure they stick to the limits you set, and be reasonable in case there is a need to change the limits.

3. Educate

Take this opportunity to influence your child’s decision-making thought process. Explain about spending wisely. Talk about needs versus wants. Discuss what debt means and the consequences of debt. Together, draft out a budget your child should keep to, and periodically revisit it to revise it. Take the chance to talk about various financial education topics.

4. Patience

Despite the financial education and advice, your child is, after all, a human who can make mistakes. Be patient and be vigilant. But also, stay firm. Without discipline and enforcement, it will be difficult to prove what consequences truly mean. Remember, you are preparing your child for real life.

Conclusion

You can give your children a credit card — with limits and supervision. The experience will help them be more ready for adulthood. But, if you’re not teaching financial responsibility to your children, you might end up paying a lot more, financially and emotionally.

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Do you have more thoughts about the benefits of giving children credit cards or thoughts on what parents need to do? Share them with us.