Is Credit Good for Teens?

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Last week, thanks to Motts, I attended the 2011 BlogHer Conference. Since it was just a short drive from home, I was able to attend during the day and come home to my family at night — a wonderful way to experience a conference!

One of the things that caught my attention in the Exhibit Hall was a display for “the anti-green movement.” Here’s their display:

The words on the Ben Franklin sign:

Does green reduce teen spending? Nope. Green is bad.

To be fair, they weren’t promoting a credit card, per se. This organization is pushing an “instantly trackable, reloadable spend smart card.” However, it did give me pause. Just as some kids aren’t familiar with the great outdoors, fresh fruit, and playing a sport for real (as opposed to a video game version), many of our young — and old — people don’t understand the value of a dollar.

  • Some — certain governments included — don’t realize that money is a limited commodity. 
  • Some don’t get it that when it’s gone, it’s gone.
  • Some don’t know how to manage money so that there’s some left at the end of the budget period.

While a plastic spending card certainly limits or prohibits a credit risk, I’m not sure that it teaches the value of a dollar. I think that cash communicates to our brains better than plastic. When it’s gone, it’s gone. Imagine that….

Having just experienced several months of using our debit cards instead of cash, I can say that it is all too easy to lose track of what you’ve spent if you’re just using plastic. Having the green stuff in the envelope slowly disappear is a very poignant reminder of our limited funds.

And we are a culture that needs to understand limits. We have forgotten the lessons that our grandparents and great-grandparents learned at great cost. And so, what do we teach our kids?

What do YOU think?

Am I all wet? Or is learning to use cash a valuable lesson for our children? Does it matter the form that our spending takes?

Share your money saving idea below.

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  1. I have two teenagers – one in high school, one in college. The older one has used both cash and debit card. The younger only cash so far, but now that he has a job, we really need to transition him to a debit card as well. I think both (cash and debit) are part of teaching your kids good financial habits.

  2. I’ve been thinking of switching back to cash from debit for things like groceries and other budget categories. I do a pretty good job of staying in the budget, but the temptation to rationalize a bit more spending because I find a good deal is not going to help us reach our bigger goals. I certainly pinched my pennies tighter when I paid cash. Time to dig out my envelope system again!

  3. I like the idea of an envelope system for kid. My husband and I are very good with our money and budget, and I would like my daughter to understand the value of money and the importance of staying out of debt.

  4. I think the idea of eliminating cash for kids while they are still learning about money is just absurd. Both forms of money have their purposes, but nothing will ever replace col hard cash for me. It’s far too easy to spend money on trivial things when I’m not using “real” money.

  5. My mother still checks on my 21 year old brother’s bank account to make sure he doesn’t overdraft his debit card. RIDICULOUS! This KID clearly has not mastered the concept of money and how to deal with it. The cash in the envelope method really is necessary until you truly “get” it.

  6. I’m with you when it comes to using cash over plastic. I spend so much more when I don’t see the cash leaving my hand. My Aunt told me when I first got a cc to write a check for ever purchase I made, so that I could see it leaving my bank account. I still do that (just use online banking) I’ve actually send a 50 cent payment to a credit card before. That little tip has kept me out of cc debt for my whole adult life.

  7. I used to use cash, but now it’s all credit card. I’m so used to pinching pennies, it makes me just as sick to spend money with a cc as with cash…but not everyone in the family has the same ‘problem’.

    Besides, some things, such as hotel reservations and online airfare cannot be bought without a cc. Teens will end up getting one; the thing is to encourage self-discipline so that they will be able to manage their spending when they get one.
    Annie Kate

  8. My poor (not for long) kids have been listening to Dave Ramsey’s Financial Peace CD’s with me as we have traveled this summer. I hope to instill in them the importance of avoiding debt from the beginning of their financial lives. We set them up with their very own envelope systems and made them responsible for back-to-school clothing and supplies for the first time. It was a huge success!

  9. Love your thoughts…and agree. We are a cash only family and will remain that way long after my young family grows into teens. There is nothing like the feeling of actually handing over the green stuff only to see an empty wallet after grocery shopping or whatever. I definetly want my children to feel that was well!

  10. On another note, ages ago I had contacted you to ask about blogging and freelance writing for extra income. You said you were going to do an upcoming series on it, but, then, my hard drive crashed. as I search your archives, I am missing the series. would you be kind enough to pop over to my blog – with a comment or to email me with a link to your pieces on this topic. Thank you!!!

  11. Well, the post I shared today goes a tiny bit against this, but at the same time, I’m 100% behind teaching kids/teens about money with CASH FIRST. I think the important point is to teach them the value of money and how to save and not spend outside what they have in the bank account. We use plastic (paid-in-full each month) because our bank doesn’t have a branch in our town. However, the most simple way that I have found to save is to simply NOT SHOP. Twice in the last week I was faced with a choice between going home and going shopping. I picked home because I knew that there was nothing I needed. If you read the post I shared, you’ll see we have much bigger goals in mind, and when I think about momentary gratification, I picture Paris instead. 🙂

    1. P.S. The cardboard woman holding the Benjamin Franklin sign fooled me for a moment – I thought it was you! 🙂

  12. My little one is still in utero, and I still found this post thought provoking! One of the big things my husband and I worry about is being able to raise our baby to be financially responsible when maybe of today’s kids and teens are not.

    1. I recommend starting him or her with an allowance when the child is about five years old. I cannot tell you how easy it is to stop all nagging requests at the store- just simply say,”did you bring your money?”. My child is now 18 years old and has never asked me for more money. He started earning his own by walking dogs and cutting grass when he was about 10 or 11years old. He still does that and has also worked in a restaurant. Now that he is leaving for college, he
      will receive a monthly allowance from us but if wants more, he’ll have to find a way to earn it at school. He does use a debit card because he was required to have one when he went on overseas exchanges. I am not always happy with his bookkeeping skills – but it is his money, not mine so I figure he’ll learn the hard way if he doesn’t keep his account balanced. Blessings on your new baby!!

  13. I believe that cash is the most logical, tangible way to understand the input and output of money– and I think that’s best for most teens/college students. That said, I think it goes without saying that the BEST way to teach about money is to model good, responsible use there-of, however that might be. In our family, our children WILL see us use debit and credit cards over the years… but we’ll talk about it and explain why/when we use them and what it means. We’re both bank-geeks, so it had to be expected. 😉

  14. Some good things to think about. Thanks for the article. I wanted to share a few thoughts I had when reading it.

    Right now our boys are 10 and 15. We give them a very small allowance every week and have done this since they were small. They started out getting .25/ week. They put half in “long term savings” for college, they give a portion in the offering plate and what is left goes into “short term savings.” My youngest now gets $2/week. It takes him a little while to save up enough to buy something he wants to buy. He also sees how quickly his “long term savings” grows when it is never spent. I think this is a good, tangible, age appropriate lesson.

    My oldest is 15 and at some point will need to learn how to use a debit or credit card responsibly. I don’t think it is reasonable to believe he can go through life not ever using a credit card. We dialog often with our kids about how foolish debt is. We would consider helping him get some sort of credit card when he enters college so he can establish credit and learn how to use credit wisely.

    One practical thing my husband does with our credit card purchases that we hope to pass along to our boys, is to record and deduct the amount right away from our check book. He puts the record in parenthesis so he knows it is for the credit card. When the bill comes, he puts a small check next to each credit card purchase indicating they have been paid and writes the check to pay the full balance. A credit card bill has never taken us by surprise and we have never carried a balance. If there is no money in the check book, we don’t use our card. It’s a system that has helped us have a cash mentality in a plastic world.

    I love reading your blog. Thank you for sharing so much helpful advice. The main stream way of thinking about finances with teenagers can be so foolish. As parents we have to be intentional about so many things. Those babies grow into adults so fast and it’s a lot of work to help them on that journey.


  15. I think teens should only get to handle cash, not even a reloadable card. We give our teen a weekly allowance in cash, plus he can earn money by doing extra projects around the house. He saves his money and gives it to me when he orders games on Amazon. He never gets credit from me to order the games; he always has to have cash in hand.

    However, he doesn’t have any savings goals. He’s 15, and I think he needs to think about saving for a car. He’s going to be working part of his way through college, and he’ll need his own transportation.

  16. I think sometimes the convenience of carrying plastic can actually be a good thing.

    To teach responsibility in using it and make it more concrete, use a check register alongside it (electronic or paper).

    In my early days of using plastic, I would record every transaction as I spent it so that I knew exactly what my balance would be to pay off each month.

    Sure, the bank does this for you in a way you can check almost instantly now, but by recording it yourself it drives home the point that the money is spent.

  17. I’m with you. If kids can’t hold it in their hands and watch it disappear I think they miss out on the whole lesson. When its gone its gone. We’ve always had our kids use cash only until they’re 18 and then they can only use a debit card for gas, checks for bills and all other items they have to use cash. It puts a whole new spin on impulse purchases. I just switched over to the cash envelope system myself for household expenses and I do not spend near the amount of money I did when using a debit card for everything. Its been very good for me.

  18. Jessica, I think you are right on track. I loved the point you made about our culture needing to learn limits. This is something we lack completely, as evidenced by the many out of control things we see happening on a daily basis.

    We save money by writing and agreeing to a budget at the beginning of every month, getting CASH (cold, green bills) out, putting money in each envelope, and saving up to buy things we want. At the same time, we are also paying down our debt, so we can be in control of our finances.

    Thanks for sharing what you saw at the conference. It’s nice to know what is being marketed to our society.

  19. I think cash is king, you are so right about watching the green go blub-blub-blub down the drain. The youth need to see that! (I think some adult parents need to see that too!) : )

    As the children become young adults they need to know how to handle plastic too. Hopefully they will learn by example, by paying off the card every month to build a good credit score that will be needed one day if they would ever need a loan for anything at all in case of emergency for example as in needing a used car or house, even a medical emergency for those of us without insurance.

    Most our children learn is from example of what we as parents do and our mentality.

    Interesting and thought provoking post here. : )

    Ultimately the children and youth need to make-do or do without! Our society is out of control and whatever you do do not by into the culture! Our daughters are ages 17 to 28 and we’ve homeschooled for going on 22 years.

    Our daughters have watched me march into the store with change in a fruitcake can to buy things….Yes, the local Real Estate broker’s wife does this. : ) And that’s quite okay by me! : )


  20. I totally agree that people are more careful with their money when they use cash versus plastic. Even when plastic = a debit card. Dave Ramsey’s envelope system makes sense. I would love to see some kind of Dave Ramsey for teens program…not sure if one already exists. I know when I was thrown out in the real world over twelve years ago, I had no clue whatsover how to budget and spent my full paychecks on stuff I did not need!

  21. I totally agree with you. Seeing and touching the “green stuff” makes a big difference. However, it is hard because in this society they need to learn how to manage plastic as well. Debit cards are so popular, I am sure that all of our kids will have their own one day. But yes, they need to understand the value of a dollar, and understand that it does disappear! GREAT post!

  22. We prefer plastic to cash. I know I’m opposite of most of you but I cannot buy things online unless I use a debit card and we purchase loads online and have it shipped to our home. It saves us time and gas because we live an average of 30 minutes from any major store. I think if you do it right, debit or cash leads to the same lesson. With debit, it’s the same as cash – once it’s gone, it’s gone. Also, if my purse gets lost or stolen, I’m only out up to $10 as that’s the only cash I keep on me.

  23. I agree with you 110%. We use our debit cards more often than I would like. I want to put them in the deep freezer but it is so difficult to get four small children out of the car at the gas station. So, we try to use them only for gasoline and online purchases that do not take Paypal.

  24. I’m inclined to agree with YOU. The visual reminder of disappearing cash in the envelope or wallet is much more effective than a “disappearing balance” on a credit card that can just be reloaded.

  25. I think you have to find out which method works best for you. I like using cash, myself, but my husband likes using checks so he always has a record. My older kids use debit cards instead of credit cards since they come right out of their account and they like to have a record and be able to look it up on the internet. What matters is that your kids learn the value of money and sometimes it takes some trials and errors to do so. I think we all have learned that way. If they learn good skills from us, then it won’t matter which method they use.

  26. i think that this type of system can help a teenager learn about how to budget and not abuse “plastic” – as long as they can see the visual of how it is truly affecting their cash flow. I like the ideas that posters have left above about taking the actual money for each transaction out as they pay for it.
    But on the other hand, I think that a college aged student should learn how to properly use a credit card, since that will start to give them a financial history to be used towards his/her credit rating.