As adults, each person has that first moment when a credit score really matters. Renting your first apartment, trying to buy your first car or home. Usually, at this point, people finally start worrying about having a credit score, building their credit score, and wishing they’d started on the whole project sooner. However, with the right financial outreach programs, ambitious teens can start learning about credit use as soon as their parents allow, then begin building an independent credit score the moment they turn 18.
Parent-Managed Teen Accounts
To open a credit card, users must be at least 18. However, parents have always been able to put their children as authorised users with their own cards and credit records. Some banks already offer parent-managed trainer accounts for affluent children to manage their allowance. But for true outreach, your financial institution will want to create programs that are fast, easy to understand, and safe to use for low-income and underbanked families.
The key is to make the accounts easy for parents have ultimate control, and easy for teens to learn about credit with limited approved use. Consider also pairing with a teen checking account to facilitate bill-pay practice. Here are six useful ways to craft a teen-focused credit program:
The Allowance Card
No matter how small the allowance, teens can learn about credit by getting their allowance amount in the form of their monthly credit limit. The teen will make the same budgeting skills that they would with a traditional allowance. In addition, they will also be learning how to use a credit card and working with their parents to pay the card off on time.
A simple way to enforce on-time training payments is to deactivate the card any time a payment is overdue. This will act as a reasonable, and traditional motivation for the teen. At the same time, minimise monetary penalties for mistakes.
The Emergency Spending Card
Many parents already want to equip their teen with a single emergency spending card. Once we start letting teens explore, it’s only natural to want them to have hotel and bus-pass money to get home from their adventures. Parents worry their cars will break down while the teen is driving or that teens will get stranded by a driving friend.
The emergency card can essentially offer teens a high limit, rare use solution to emergencies away from home. Make it a family tool by sending red-flag emails and texts to parents any time the card is used detailing the card’s last known location and exactly what was bought. With one policy, you can eliminate secret spending on the emergency card and help parents swoop in to the rescue when phones are dead. Not to mention identify thieves if stolen.
The Summer Vacation Card
As teens get older, they start wanting to take road trips or go to special summer camps with their friends. Confident parents who allow their teens on summer adventures need a safe and reliable way to provide a stipend. The summer vacation card could be the answer.
Summer vacations come with a variety of both planned and frivolous expenses, and teens learning financial skills should be able to budget with the right tools. A vacation card can be designed to provide teens with a total summer budget to spend or a summer stipend. The perk for parents is that it can be used as a card which is safer and more reliable than cash, and it keeps teens within a tightly limited budget while still providing summer freedom.
The Gas and/or Grocery Card
In underbanked families, teens often begin driving early for themselves, for work, and to run errands for the family. When parents send teens out in the family car, they need to know their teen can buy gas when necessary– but not spend limited funds on movies and snacks. A gas card, much like the type used by business fleets, is a fun family answer to a traditional responsibility dilemma.
A teen given a gas card that only works for gas-type transactions will quickly learn to think of the card as a purpose-built tool. This will teach them to think of finances in categories and consider the real impact of budgeting choices.
For teens who do the grocery shopping for the family, a gas-style card can be extended to also include approved grocery stores as areas where the card will spend. In all other locations, like restaurants and theme parks, the card simply won’t function. This way, families can give teens selective freedom with their household responsibilities.
The Holiday Card
Finally, you might find traction in a card built for holiday shopping. Christmas time, in particular, is when parents often give their teens a stack of carefully saved money and release them into the mall to buy presents. There are also families who take vacations together and release teens on holiday adventures with a stipend. However, teens equipped with a purpose-built credit card are far more reliable than teens released with a pile of cash or a parent’s unmonitored credit card.
Holiday cards are teen-focused credit cards that parents can activate, set the limit of, and deactivate at will or based on a pre-set calendar. These can be kept and managed by parents to provide a safe avenue for teen spending only on the days and in the places that parents approve. You might even consider giving parents super-tight control like ‘Only within this theme park’ or ‘Only on these e-commerce stores’.
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