Children grow up. As parents, you’re supposed to guide and teach them about life before it’s time for them to leave the nest and be independent. So when should you teach your child about something that will hound them for most of their adult lives: credit money?
A typical young child deals with cold, hard cash during their childhood. Paying for food and other purchases involves the transaction of paper notes and coins that are tangible and countable and therefore easy to understand. But what happens when you want to teach your child to handle money they cannot see?
One way to achieve this is to start slow, with cashless but card-based transactions. Giving them a debit card or a prepaid credit card is one way to familiarise your child with cashless money transactions without the worry of (almost) unlimited spending. The money in a debit or prepaid credit card will still run out, and you can run damage control easily if your child slips up.
After Discussing With Them
This might be a no-brainer, but some parents do skip the entire Credit Talk and just let their children find out about credit themselves. If you’re not a fan of the sink-or-swim method, you might want to sit them down to talk about credit before giving them any form of credit-based tools. You could even make it a game so that it’s fun for the entire family. Either way, a pre-emptive discussion will at least arm your child with the knowledge about credit and what it can and cannot do.
When They’re Over 18
You might want to start teaching your child about credit early on, but the banks think that there’s such a thing as being too early! Banks require the supplementary card holder to be at least 18 years old before they are eligible to become a card holder at all. Nothing’s stopping you from teaching your child about credit cards before they’re 18 though.
After Assessing Your Own Credit Requirements
By default, the credit limit made available to you is split equally between the principal card holder and supplementary card holder(s). For example, if your credit limit is RM10,000, your respective credit limits will be RM5,000 for your principal card and RM5,000 for your supplementary card. However, you can change the ratio of the credit limit so that the principal card holder has a higher limit than the supplementary card holder. It is important to assess your own credit-based expenditures first so that you don’t end up with insufficient credit before the next billing cycle!
Living on credit might sound like a scary thing especially when you’re teaching a child who’s just only learning the value of money, but it is an important skill to learn as most of us live with some form of credit for most of our lives. Giving your child a credit card is one way to start slow!