It depends on your child’s maturity level, but I do think it’s a good idea for an at least fairly responsible high schooler to have a credit card for emergencies. One of our biggest responsibilities as parents is to teach our children good money habits, and working with them on an emergency credit card can be a great tool for that.
Notice I said working with them. You don’t want to hand them a card and let them run wild. Giving them a card without rules, limits and consequences can easily turn the peace of mind you have from knowing funds are there to help them when they’re stuck on the side of the road into aggravation from fixing a financial mess they’ve gotten themselves (and you) into.
I recommend opening a joint account with your child and keeping a low credit limit. Having the joint account will help build their credit too. Define for your child just what you consider to be an emergency: Is it running out of gas or running out of Red Bull? What will be the repayment rules? Will you be covering the emergency, or will you expect your child to pay the bill?
Consider allowing your child to use that card for the occasional non-emergency or pre-approved purchase to learn the responsible use of credit. Think of it as financial training wheels; he can learn what it’s like to borrow and pay back now to avoid going off on a credit card free-for-all in later years when you won’t have the leverage to require supervision.
It’s safer too for your child to use a credit card rather than his debit card when making online purchases. Don’t forget to teach him how to safeguard financial information, including your credit card number.
When the monthly statement comes, show him how to read it, what interest means, and most importantly, how to pay the bill on time, whether by mailing a check or paying online. The purpose of this training, of course, is so that mistakes can be made with small consequences now as opposed to bigger ones later, so don’t forget to follow through if your child makes an unauthorized purchase or otherwise abuses the privilege. The “tuition” he pays for the lessons learned now is cheap compared to the tuition of a repossessed car or bankruptcy later.
Erin Baehr, CFP, is the owner of Baehr Family Financial, LLC. Baehr is a member of the National Association of Personal Finance Advisors (NAPFA), a fee-only professional association and a Dimespring knowledge partner.