What can I do to instil some financial discipline in my college going kids regarding credit card and debit card usage?
Swapnil Naik, Nagpur
Both forms of plastic that you mention are a great convenience tool. The best way to instil discipline when it comes to spending money is to give them a fixed allowance every month by depositing it in a separate bank account in their name. Then only can they use a debit card to withdraw cash, or pay for the expenses. Debit card is safe as there is no risk of overdrawing, which could be the case with credit cards. If they are using a credit card where you are the primary holder, you could set limits even within such cards for them.
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While children should be encouraged to take their own money-related decisions, in a situation where you are paying for their expenses, you should inform them of the costs entailed in case of credit cards. Interest rates in case of defaults and delays could be up to four per cent a month. Educate them to use their cards only for emergencies or for short-term cash requirements. They should be made to pay for the credit card from their own allowances.
You should review the transactions they make every month. If they make a mess of it, you can step in by deducting the expenses from their allowances, so that even the mess will make an impression on them that they are unlikely to forget. A thing with children is that they imitate the elders in their families. If you show responsibility towards managing your own finance and share it with them, they are likely to do the same.
