According to the Obama administration, it’s younger than the age of 21. A recent article in the New York Times talks about the new legislation slated to go into effect regarding the accessibility — or lack thereof — of credit cards for teenagers and those in their early 20s, and how parents should teach their children about money management.
Essentially, the article in NYT does a good job of looking at all different situations — whether or not you have your child immediately sign up for their own credit card and checking account, only allow them to have a debit card, or a healthy combination of these two extremes.
While I can’t really talk about this from the parents’ point of view, since I’m not one yet, I will try to tailor my view as to how I felt when I was turning 18 years old seven (!) years ago. God, I’m getting old.
Anyway, it obviously depends on the maturity level of the child. If they’re a crazy free spirit, giving them access to “free” money may be a bad idea right away. They might have to be weaned into it by first just having a debit card that will only enable you to spend what you have, and then move on to the world of credit. (Or even a charge card.)
When I was about to turn 18, I was a senior in high school and had a part-time job as a front-end clerk at Price Chopper, a local supermarket. While I wasn’t making a great deal of money, I was making some money and only had a savings account (and envelopes hidden in my room) to stash my earnings. My birthday is in late October, and I had already been accepted to a couple of colleges by that time — so I knew I would be moving away to school and have to pay some bills while away. This would require me to have a checking account, since I loathe putting cash into the mail. I was planning on having a work study job while at college, and I was also sure I’d need to make some purchases here and there. Consequently, it would be convenient for me to have a credit card and checking account instead of constantly carrying around wads of cash.
So, I really wanted to get my own checking account and credit card when I turned 18. I’d feel more like the adult I figured I’d eventually become, and have more control over my finances. While I hadn’t had much experience yet, I had been relatively good at managing what little money I made. Thankfully, my mother felt the same way and gave me permission to get a checking account and credit card once I turned 18.
We sat down and she showed me the basics of budgeting, much like the steps I show you, and was always around if I had any questions (of which I’ve had plenty) along the way. I don’t specifically remember us talking about ramifications if I found myself spending more money than I had or overdrawing my account, but I’m sure that it was clear if I did that it would be primarily up to me to fix it. While my parents may have loaned me the money in the short term to fix the problem, I’m sure I would have had to pay it back — and quickly.
Since then, I’ve grown and evolved as a person professionally, personally, and financially. Speaking about the final one, I can confidently say that if I didn’t get such an early start with being responsible for my own finances, I’d be in a lot of trouble today … now that I’m responsible for paying rent, utilities, cell phone, food, college loans, etc.
I think that’s the most important thing here as it relates to giving teenagers the reins to their financial lives. It’s necessary, even if it is scary. Plenty of adults screw up and find themselves mired in debt, and they should know better. Teenagers need time and experience before they “know better”. Whether that means giving them access to a credit card right away, tethering it to parents’ credit cards, or only giving them access to a debit card … do something. Finances are becoming more and more complicated and vital than ever before, and if nothing else, money management is one thing the next generation must have a decent grasp on before starting their lives after high school or college.