There's a lot of advice about giving your kid a credit card. Find one with a low interest rate. Don't cosign for the card because you might ruin your own credit. Make it extremely clear to them that yes, it's real money and yes, they must pay it back on time and in full.
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Beth Kobliner, author of the new book Make Your Kid A Money Genius (Even If You're Not), has some different wisdom on this topic. Her advice for parents: Just don't do it. Don't get them the card. In an interview with PBS News Hour, she points out that with kids, it's best to stick with cash:
When it comes to day-to-day lessons, the best way to teach your kids the value of a dollar is to give them actual dollars. Use cash with your kids. When my daughter was 13, she wanted to go shopping with friends for back-to-school clothes. The other parents gave their girls a credit or debit card and imposed a spending limit. Me? I embarrassed my daughter by handing her $50 … in cash. The reason: I knew that when she got to the checkout line with more than $50 worth of merchandise, she'd have to make hard choices and put something back.
Cash tells kids that money is finite, unlike plastic. A famous study out of MIT showed that people will spend twice as much money on the same item when they pay with credit cards instead of cash. While plastic can seem like play money, cash feels all too real.
The advice might sound a little archaic - who even carries cash around these days? - but for those who are just starting to develop a financial sense, the tactile experience of holding real dollars creates an awareness that what they're spending has been earned. When I was 12 or 13, I remember being so proud to buy a swimsuit at the shopping centre with notes and coins I had saved up for that specific purchase. It must have been a massive pain for the store employee, now that I think about it, but that exchange of real money felt significant, powerful.
Kobliner also recommends using cash in front of your kids to show them that there are limits, and choices must always be made. That's a difficult lesson to teach when all you have is this seemingly magical piece of plastic.