Remember the good ol' days when young people didn't get a credit card until college? Or at least until they got their first job?
Well that milestone is getting hit a lot earlier these days: According to recent data from T. Rowe Price, 18% of parents with kids ages 8 to 13 give their children a credit card.
But how can you teach your kids not to view plastic as "free money" at such a young age? One company thinks it can help instill responsible financial lessons early on by placing the spending control in parents' hands. Greenlight is a debit MasterCard for kids (yes, it has your child's name on it) that parents fund via a mobile app. Parents limit how much their kids can spend and where they can spend it.
For instance, if you know that your teenager has a weakness for video games, you could set a limit that says he can only spend $50 at GameStop. Parents also get notified in real time on where and when kids swipe at the register; can autofill their kids' cards when allowance day hits; and receive a spending report they can review with their kids. The service costs $4.99 per month per family, for cards up to five children of any age.
There are other cards on the market geared toward kids; Current, Visa Buxx and FamZoo also offer debit cards that give parents a level of spending control, although Greenlight claims to be the only card that allows parents to choose which stores kids can shop at in advance of a transaction actually happening.
One criticism of these types of cards, however, is that when spending — and control of that spending — is so automated, it doesn't allow families to have face-to-face conversations about financial responsibility. Plus, making money mistakes allows children to learn how to bounce back from them. Without those opportunities, they may not be ready to handle the responsibility once they graduate to a "real" credit card.
Regardless of the method you use to teach your kids money lessons, one thing is key: You have to talk about finances honestly with your kids, instead of sweeping it under the rug. Here are a few money lessons worth teaching them now.
Money Is Earned. If you don't want to act as the Bank of Mom and Dad forever, then teach your kids that the money they receive is a result of work they did. Maybe they earn an allowance for doing basic chores; maybe it's only for going above and beyond their expected tasks. You can also explain to them that you earn money — and the money you give them — by putting in your own hard day's work.
Spending Has Boundaries. Like with just about everything else in life, your kids need to know that spending money shouldn't be a free-for-all — otherwise, you could be letting them know that it's OK to live above your means. This means letting them know when you can't afford a purchase they want, or explaining trade-offs — i.e., getting that new tech toy now might mean skimping on a day at an amusement park later.
Money Doesn't Equate to Self Worth. This might be a tough one, seeing as how many parents haven't even learned this yet. But when you offer your kids a few bucks in exchange for good behavior or for things they didn't put any effort into, you might be teaching them that their self-worth is tied to money — a lesson that could have a far greater impact into adulthood.