Friday, March 4, 2011

How You Can Save Your Teen Kids from Credit Card Debts

The teen years are a wonderful time of our lives when bright colors seem brighter and every glittering thing seems like gold. Teenagers are impulsive, spontaneous, free-spirited and care-free. So, does it make sense to hand over credit-cards to your teenagers? As a matter of fact, there can’t be any other age more appropriate for this. Yet, how they use their credit and mange their debt is up to you. Read on to find out how you can save your teens from credit cards debts.

The reason we have termed teenage as the most appropriate age for allowing your children to have credit-cards is because this is the best age for them to learn about responsibilities. What they learn and implement in their teenage becomes a habit for a lifetime. If you guide them properly on every step, you can save your teens from credit card debt not only in their teens but also even after you are gone.

Let’s take a look at how you can save your teen’s present and secure their future by giving them credit cards.

Look for the lowest rates possible - Do the research on several deals available and compare the pros and cons of each. Involve your teen in the whole process. This way they will learn the importance of deliberation before making any financial decision. Once you are able to find the one with lowest rates and charges, half the battle is won.

Explain Terms and Consequences -Discuss all the terms and rates with them. Tell them the rate of interest they will have to pay and how much it might increase in case of delays.  Also, explain the effects of minimum payments and maxing out their credit on their bills.

Teach Them Budgeting - Help your kids in determining how much credit card debt they can afford to pay in a month. Help them in planning a budget including that expense. Tell them to keep their credit card purchases below the estimated expense they can afford to repay as soon as possible. Ask your credit card company to set a predefined credit limit and not to allow overdraft.

Monitor their Transactions -No matter how much you teach them, it is easy to get caught in attractive deals in the shopping malls. You need to keep track of their transactions in order to make sure they are not overspending.

Allow Mistakes -Help them learn by allowing small mistakes. For instance, tell them how much extra money they paid on their last late payment. Let the numbers speak for themselves.

Don’t Bail them out -Out of parental love, most parents bail their kids out of credit card debt. Such love is only going to keep them from learning a very valuable lesson. Make them come up with ideas to make money on their own. Tell them to sell some of their beloved stuff or to do overtime for few months.

This article is by Albert Harris, contributor at CreditDonkey, where he looks for credit card deals for his family and readers.  Avoid potential pitfalls and learn more about personal finance at our credit card tips blog.

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