As a parent, preparing your teen to make smart financial decisions can seem daunting, so start early by opening a joint checking or savings account with your child.
With your guidance, this can help teach them to use a debit card responsibly and save money.
Having a debit card in your teen’s name can help them learn to spend only what they have. When combined with a mobile banking app, they can keep always track of their spending and balances - and as a joint account holder you can monitor them too!
It’s important to discuss the wisdom of spending only when necessary, the dangers of overspending, and how to read monthly statements, as well as using features like mobile deposit and ATM’s.
The next vital step is to explain what credit is, and how to manage it.
Just as you did with the debit card, you’ll want to teach your teen to not overspend, but now you’ll also want to talk about the importance of paying a credit card bill on time and paying it off quickly, and how a share-secured loan can help them build credit safely.
Use an online credit card payoff calculator to show them how interest charges add up if they only make minimum payments, and teach them that missing a payment can damage their credit score and make getting a loan more difficult.
Once they turn 18 and can apply for a share-secured loan and/or a credit card themselves, they’ll be glad you gave them a good financial knowledge foundation!