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Family Money

It's a hard lesson to grasp and an even harder lesson to learn the hard way—debt. The lure of a credit card is tempting to young adults after landing their first job or during freshman orientation. What they soon realize is how easy it is to rack up debt and how much more difficult it is to climb out of it.

Grasping the Concept – Don't assume your teen understands debt and credit. Sit down with them and have a heart to heart about money. Ask them what they know about credit. What they say may surprise or even shock you! It is important to note: children under the age of 18 can't legally enter into a credit card contract and you will be held responsible for the debt.

Spend, Spend, Spend – Most credit card companies are eager to give credit to young adults. As a first time card holder, I only had a $500 spending limit with good reason. I was 18 and didn't have an established line of credit.

While it is advisable to have credit history, it is not good to have bad credit. If they already have credit cards, sit down with them and review their statements each month. Remind them that credit should only be used for emergencies or big ticket items that they have saved for. Advise them to only charge what they can afford and to pay off the balance in full each month to establish good credit.

Learning the Hard Way – Swiping a credit card is a mindless motion that can ruin your credit history in an instant. Remind your teen that it's a lot of flipping burgers or work-study to climb out of a $500 debt deficit. Acknowledge to your teen that debt is inevitable but stress creditworthiness: good debt vs. bad debt.

As parents, you know your teen the best. Before getting a credit card, teens should have a checking account. Most have a debit card attached to the account. This allows them to track their spending and offers overdraft protection if they get in a bind. Perhaps you ease them into credit with a prepaid or stored-value card, joint credit card, secured card or as an authorized user. There are pros and cons to each card, so choose with your teen wisely.

I've mentioned this time and time again in previous articles, but before your teen gets invested in credit, they should have a healthy respect and understanding of money, interest and savings.

Nikki Ducas is a Fredericksburg mom of two boys, a 5-year-old and 22-month-old. She is always thinking about economics and uses her time as teachable moments.

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