I recently read an article in the Washington Post discussing, an issue facing many individuals today, credit cards. The article describes a birthday party in which the guest of honor recieved, at age 11 no less, a prepaid credit card. Understandably the author and her husband, denied their young daughter’s request for a credit card of her own. When the author goes on to state that it is equally as irresponsible to give a credit card to a high school or college aged young adult that I begin to question her rationale. It got me to thinking about what constitutes a sound financial upbringing.
My parents started me early, and as most parents do. Chores and an allowance, it wasn’t much but it got me some video games and a chemistry set in time. More importantly however it taught me the value of a dollar. At least as much as such an arrangement can, and I’m sure that for most of us there was an imbalance between the amount of work one did and the allowance. Some weeks you’d work really hard for it, and others you wouldn’t. I doesn’t have to, nor should it, be a completely accurate representation of what the real world is like. Children will have plenty of time to figure that out later. But, the important lesson was that it takes time, and an amount of effort to attain that which you desire.
It wasn’t until years later, when peer and parental pressure convinced me to get a part time job in high school, that I learned exactly how much work it would take for you to get where you wanted to go. This was another important lesson which my parents instilled in me. They asked that I help defray some of the costs for my car, insurance, gas, and social life, which I felt at the time, and still feel was a more than fair thing to ask. It was around this same time that I was given a credit card for emergencies.
Now, my father made it abundantly clear that the card which I was given was for emergencies and emergencies only. As a result the one time that I actually used it before leaving for college was an actual emergency. I was out of the country, on a school trip, my luggage was lost and after 3 days of wearing the same outfit, I needed some clothes, so out it came. Lesson learned, it’s good to keep credit around for a little extra insurance, especially when traveling. It is as important to realize however that my parents’ instruction on this matter was of a vital nature. That I was given the card as a sign of trust, and that it bore a certain responsibility that I not abuse that trust.
Upon entering college, I recieved my first credit card. This was important for a number of reasons, first and foremost, it gave me the opportunity to build credit. This would turn out to be terribly important as I learned in my later years of college. I had friends who would have trouble securing loans due to a lack of credit history. Something that could have been easily rectified if they’d been given a credit card. Additionally, since the statements were sent to my parents they could monitor how I was using my credit, and step in when there was a problem. And there were problems from time to time, but I learned from them. You see even though my father would pay the credit card in it entirety, I’d then be in debt to the Bank of Dad, and you’d be surprised how effective their collection agency is. This arrangment eventually transitioned to a situation in which I recieved the bills and was solely responsible for the payments. Which thanks to the sound advice and education I’d been given was a relatively painless process.
In contrast there are many individuals whom I know, that were never guided in the proper use of credit. Resulting in a rather unfortunate situation for themselves. One individual I know, when they finally recieved their first credit cards rang up ten-thousand dollars worth of debt in less than two months. Another decide to open another credit card account to transfer a balance from a high interest rate card with the intention of paying it off, but instead fell prey to the siren call again, and ended up with two high balance high interest rate credit cards.
These are exactly the reasons that I disagree with the author of the Washington Post article. While 10, 11 even 13 and 14 may be to young for a credit card, you are doing your children a great disservice by not properly educating them on the dangers and uses of credit. By taking the time to slowly introduce to me the concept of credit, and the responsibilities associated with it, my parents provided me with the experience and knowledge necessary to avoid the pitfalls encounted by so many young people today when it comes to credit cards and debt.