Teach teens to spend and save responsibly

5 signs your teenager is ready for plastic
Another important part of learning money management is getting a credit card, complete with debt and credit risks. If you think your teen is ready, it's helpful for her to get a card as early as possible, in order to start a credit rating. Here's Chidiak's checklist for what teenagers needs to have before they're ready (and mature enough) for a credit card:

1. A reliable source of income
How large is their income? Is it consistent? What's a reasonable amount for them to pay off? All teens should keep below a $500 limit, and 15- or 16-year-olds with less money might only need a $100 limit. (If your teen is under 18, you'll have to co-sign, so you'll get to set her limit.) Some experts recommend never co-signing for your children, and waiting until they're 18.

2. A budget
"A budget doesn't have to be a spreadsheet," explains Chidiak. "It can be as simple as writing out how long it will take to save for something." They should be able to save toward a goal, and their paycheques or allowance should last the pay period.

3. Savings
Have they been putting 10 per cent of their income away? Savings are a good sign your children have learned to spend within their means, and a good cushion in case their credit card spending gets out of hand.

4. Shopping savvy
Kids who value their money comparison shop, says Chidiak, whereas kids who buy whatever's in front of them often buy based on peer pressure and impulse. Comparison shopping shows your teens frugality.

5. A plan, including long-term goals
If your child has sat down with you and discussed his plans for post-secondary education, a budget, or a savings goal, it's a good sign he's taking responsibility for his financial situation.

Warning! Credit cards can be bad for financial health
Ease the risk by obeying Campbell's rules:
• Have no more than one credit card.
• Start with planned expenses, like buying clothing.
• Pay off the full balance every month.
• If you need to bail them out with a payment, teach them responsibility by getting a written agreement on how theyre going to pay you back.

Share your thoughts on teens and credit cards with other readers in our forums.

Page 2 of 2