Benefits of a Clothing/Necessity Allowance
Each month, I gave my daughter a set amount of money to cover her expenses. For special events like prom, she had to save in advance. This taught her to prioritize and budget. She started shopping at thrift stores and discount stores, realizing the value of saving money. It was a valuable lesson that I wish I had started earlier.Learning to Make Financial Decisions
She learned to sit down and think about what she really needed. This process forced her to make independent financial decisions. She understood that she couldn't have everything she wanted and had to make choices. It was a great way to develop her financial acumen.For example, when choosing a prom gown, she had to consider not only the price but also how often she would wear it. This taught her to be more thoughtful about her purchases and not be swayed by trends.
Making Long-Range Plans
By having a set allowance and having to save for events, she began to make long-range plans. She learned to think about the future and how her spending today would affect her finances in the long run. This skill will serve her well into adulthood.She started saving for a college fund and realized that every little bit counts. It was amazing to see her take ownership of her financial future.
Adding a Teen to a Credit Card
Kathline faced a dilemma when her 14-year-old daughter earned enough money to buy an e-reader but needed a credit card. I suggested adding her as an "authorized user" to our existing credit card.The Pros of Being an Authorized User
This gave her the legal right to use the account in her name without the legal responsibility for repaying the balance. Her good credit history began to show up in her credit file, and she started building a good credit record by piggybacking on ours.It's a great way for her to learn about credit and how it works. She can see the impact of our spending habits on her credit score.
The Potential Downsides
However, there is a risk. She could go crazy and charge up the account without us knowing. She wouldn't be legally obligated to repay the debt, and we wouldn't have a legal recourse.There's also the possibility that our credit behavior as the account holder could take a dive and send negative information to her account. But the chances of this happening are slim to none.
Policies of Major Credit Card Issuers
Different credit card issuers have different policies regarding authorized users. American Express allows authorized users as young as 13, but reports their activity only if they are at least 18. Bank of America permits authorized users without age restrictions and reports their activity. Barclays allows users aged 16 and above with activity reported. Capital One has no minimum age requirement and reports. Chase permits users aged 18 and above with activity reported. Citi has no minimum age requirement and reports. Discover requires users to be at least 15 and reports. U.S. Bank allows users aged 16 and above with activity reported unless the primary account is delinquent. Wells Fargo permits users aged 18 and above with activity reported.It's important for parents to understand these policies and make informed decisions about adding their teens as authorized users.
Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at "Ask Mary." This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book "Debt-Proof Living."