A Strategic Gift for Your Teenager
One of the wisest things you can do is give your teenager a debit card.
This may seem counter-intuitive. I mean, why would any parent want to hand a gun to his child?
Because it isn't loaded.
At age 18, a person's signature on a contract becomes legally enforceable. The credit card companies target these sheep. Pick up any college newspaper. Look for ads for signing up for a credit card. In orientation week, the banks set up desks in the student union and offer freebies to get students signed up.
They get a 0% interest rate . . . for six months. After that, they learn about the reality of a 17% interest rate. Here are several on-line offers for collegians.
If they miss a couple of payments, they get to learn about 24%. Nobody tells them that missing a payment to any creditor -- not just the card company -- allows the card company to hike the rate. They don't read the contract's fine print.
Students with little experience with debt run up bills in the thousands of dollars. Doubt me? Read this.
Over half of all college freshmen have a credit card. On average, 83% of college students have a card.
A debit card is plastic money. But there is no credit involved. A child can spend only what he or his parents have deposited into the account.
The monthly statement encourages budgeting.
A combination gift of a debit card, $100 to open the account, and a copy of Quicken will pay off in the long run.
Tell the recipient that there is another $100 waiting in exchange for a one-year budget plan, which can be produced with Quicken.
They are going to use plastic money. Warn them about credit cards. Spend some pre-college money to move them to a debit card . . . permanently.