The joys of raising financially confident teens
DEAR MARY: As a teen, my daughter 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. 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 them the ability to make their own independent financial decisions while they are still young — then require them to live with the consequences of those decisions, good or bad. I applaud your decision to give your daughter the opportunity and the mandate to manage money while she was still under your authority.
DEAR MARY: I am in a quandary. My daughter, 14, has earned enough money to purchase her own e-reader. 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.” This will give her the legal right to use the account in her name but without any legal responsibility for repaying the credit card balance.
As an authorized user, your good credit history will begin showing 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.
Just beware that 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 legal 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.
Mary invites questions at firstname.lastname@example.org, or c/o Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.