Dear Mary: I just read the letter from 13-year-old Abby about teaching kids financial responsibility.
I did this with my daughter when she was just a little older than Abby. Prior to that, she wanted name brand jeans, clothing, shoes…whatever she thought all of the “cool” kids had.
She wouldn’t step into a thrift shop or discount store. It was a constant battle until I decided that she would have a clothing/necessity allowance.
I gave her a set amount of money each month to cover those expenses. If there was an event coming up she would need to save ahead to pay for whatever she needed, including her prom gown and all the accessories.
It worked wonderfully. She learned to sit down and figure out what she really needed and then budget for it.
She began shopping at thrift stores and discount stores to save money. She learned to make long range plans. She still dressed fashionably but did it by stretching her money to buy what she needed. It was a valuable lesson that I wished I’d started earlier! —Margaret, email
Dear Margaret: The longer I live the more convinced I am that the only way to train children to be financially confident in ways that will extend far into their adult years, is to give the ability to make their own independent financial decisions while they are still young—then requiring them to live with the consequences of those decisions, good or bad.
Those lessons, as you may have experienced, can be harder on the parents than the kids because we so want to bail our kids out to make sure they suffer no pain.
Suffering the consequences for the decisions we make is the best way to make sure we don’t repeat those mistakes in the future. I applaud your decision to give our daughter the opportunity and the mandate to manage money while she was still over the safety net of your home.
Dear Mary: I have a question with credit cards and electronic devices. I am not sure what would be best. As a general rule, I completely agree with you about no credit cards for kids. However this generation of modern electronics has me in a quandary.
My daughter (age 14) has earned enough money to purchase her own eReader (I am so looking forward to fewer books cluttering her room!). In order to use the device to download things she must have a credit card on file. She is a responsible young lady and I have no fear she will abide by rules I set. Thanks for your advice on the best way to handle this situation. –Kathline K., email
Dear Kathline: I suggest that you add your daughter to your existing credit card as an “Authorized User.” The company will issue a credit card on your account with her name on it and she will have full access to charge to the account, without any legal responsibility for repaying the credit card balance.
And she benefits in another way: As an authorized user, your good credit history will begin show up in her credit file. Even at her tender age, she will begin to build a good credit record by piggybacking onto your credit history.
Sounds like nothing but good, doesn’t it? There are potential downsides for you the credit account holder and for her, an authorized user.
As an authorized user she could go crazy and charge up the account to the limit, without you knowing. She would have no legal obligation to repay the debt and you would have no recourse to make her.
Her potential downside is that your credit behavior as the account holder could take a dive sending all kinds of negative information to her account.
While these possibilities exist, I would say the chances of things turning sour would be slim to none for you and your daughter. Congratulations for having raised your daughter to be responsible enough to have earned your trust in this way. I wish you both the best.