In the teen-aged years, teaching fiscal responsibility takes on a new urgency. Most of us realize that our time and influence are slipping away. We need to teach those sound decision-making skills before the kids leave for school or adult life. If possible, allow your child to get a part-time job. As long as it doesn't interfere with education or health, young people gain many, many skills from working as teens.
Consider getting your teen a debit card with parental controls. These programs allow your child to carry plastic, but at the same time help you teach responsible use of credit. Many major credit card companies and banks offer programs with prepaid cards. Set up an account with your child, reach an agreement about who is responsible for loading cash onto the card, and monitor the activity on the card to make sure it's being used wisely.
For children who are leaving home to head off to college, you might want to discuss keeping at least one bank account in the child's name with parents as signers. This will allow you to help out in emergencies. Consider having bills (like credit card or cell phone) and bank statements sent to your primary residence even when they are in your child's name. This way, you will be able to monitor what's being paid, whether payments are made on time, and whether or not fees are being incurred. Most banks and businesses offer on-line accounting, so you can use this tool, as well. Be sure that both of you understand the terms of financial contracts and that your child sets up some accounts and a credit card in just his or her name as soon as it is feasible. Paying these bills on time and in full will build your child's credit score, and will eventually help him or her to take loans for life's larger purchases.
And the ultimate goal, of course, is to “launch” your young adult into the world of finance without damage to either one of your credit scores. Start right now, and teach your child how to budget and manage his or her money. Help him or her to understand credit, learn to check the credit score, and get the most out of sensible credit card usage. Teach as much as you can about savings and investment, and help your child learn where to go for reliable financial advice. Stress the importance of sound money management and hopefully, your child will become successful as an adult while avoiding the pitfalls that can come with debt and credit use.
