A 'red flag' for parents who are
thinking about securing a credit card for their underage children
is being waved by the nonprofit Institute of Consumer Financial
Education (ICFE), based in San Diego, CA. "This alert
is for parents and grandparents because the credit card issuers
have a new target and it is your children and grandchildren,"
says ICFE executive director, Paul Richard, RFC.
"Don't get your children (or grandchildren) hooked on
credit!", is our first reply. If young people want credit,
let them do it on their own AFTER they have a regular, full-time
income. Credit cards in the hands of young people not yet working
and earning a regular income is unwise. It's almost like a parent
getting a part-time job and giving the paycheck to the children.
Co-signing for a credit card for your children Who could otherwise
not obtain credit on their own) sends messages to your children,
on top of the main message from the credit card which is: "SPEND!"
The messages children could be hearing are:
Parents who make credit-based spending available to their youngsters
before they can obtain it on their own, risk setting their children
on the road to a lifetime of debt. Or worse, financial disaster.
Few young people have developed financial self-discipline.
Credit-based spending can be as addicting as nicotine, cocaine
or alcohol. Most proponents of credit minimize the dangers,
however, probably because credit-based spending usually doesn't
do physical harm that other indulgences do. Co-signing for credit
seldom builds credit in your child's name. It does insure that
you will cover all payments your children are unable to make.
If they have to have a piece of plastic, insist they put up
a deposit and get a debit card.
Young people need to be indoctrinated to savings and accumulation
before they are introduced to credit-based spending. When opening
a saving account (take your children along and have them open
up savings accounts also). If saving is important to parents
it will also be important to their children. If credit-based
spending is the norm for parents, it will be for the children
if they are exposed to credit before they become employed full-time
or complete their education.
Parents are too quick to bail their children out of financial
scrapes and troubles and young people seldom have negative consequences
from their extravagance. If a child unwisely spends the entire
allowance money this week instead of saving for the concert
next week, parents should not give more money for the concert.
Let the young people learn the consequences associated with
their spending decisions. In this case, no concert.
Tell them this: "When it comes to saving money most people
in America will stop at nothing!" and then help them get
started in the regular savings habit. Why? Because "Everyday
spending decisions, especially credit-based spending decisions,
can have afar more negative impact on your financial future
than any in investment decisions you will likely ever make."
These decisions include how often: to eat out, go to the convenience
stores, or how much to spend on clothes, etc.
Our 