A few weeks ago I met with my account manager at my bank to discuss the mechanics of withdrawing money from my son’s RESP. He’s graduating at the end of the month and heading off to SAIT in the fall. During our discussion she suggested we set him up with a credit card. She insisted that he would need one once he was in college, though I can’t imagine why he would. I found the discussion both disturbing and fascinating. What is most disturbing is that the banks appear more than happy, eager actually, to give a young person, one who does not have a regular income, credit. The Globe & Mail recently reported that “Household debt in Canada reached a record $1.41-trillion in December” http://bit.ly/bm4qS0.
Why are banks so willing to start children off on this path. I told my account manager that he didn’t need a credit card. A debit card is sufficient for pretty much anything he could need and if he wants to travel he can use a pre-paid “credit” card. I think she was shocked at my response. I admit that I can see why the banks would want to get young people hooked early. If you give a kid a card but no education on how interest rates and compound interest work then you have a customer (read: sucker) for life. I have worked hard to teach my children how compound interest can work for them when investing and against them with credit card debt. Unfortunately, most schools do not devote nearly enough time to financial education and, let’s face it, many parents are in such a financial mess that they either can’t teach their children successful strategies or are too embarrassed to admit their personal financial status.
I left that day without applying for a credit card for my son. I suppose once he’s 18 he can apply for one without my approval. I hope, however, that I’ve given him enough information to make an informed and intelligent decision. I’d love to hear your opinions on the topic of youth and credit.
I actually wrote about this today on my blog. Students and new grads start their lives with incredible debt because credit cards are so easily available. When I was in college I remember all the major credit card companies camping out at our campus offering credit cards to anyone with a slight pulse.
ReplyDeleteIt's a shame and certainly one of the reasons students graduate in consumer debt.
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It's true, every major credit card company sets up a booth the first day of classes hoping to catch as many of the fresh faced students as possible. Studies show that customers are most loyal to the first credit card they get. It breaks my heart to see young people fall into that trap.
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