Congratulations, parents! Your high school graduate is about to embark on a thrilling new chapter—college life or an adventurous gap year in Israel. Exciting stuff, right? It’s a rollercoaster of excitement, nerves and a dash of stress. But amid all the emotions, let’s not forget the practical side of this transition, especially when it comes to their financial journey into adulthood.
Building Credit: The Importance Of Starting Early
One of the most significant aspects of financial independence is establishing credit. A good credit score isn’t just a number; it’s a ticket to various future financial opportunities,like securing loans for a car, renting a fabulous apartment (the wedding is closer than you think!—imagine those beautiful new high-end local apartments with amenities in Teaneck Square or One500) and eventually buying a home. While our teens might think they’ve got everything figured out and know it all, we, as parents, can guide them through the process of responsible credit card use to help them build a solid credit history.
Let’s dive into the world of credit cards—yes, those magical plastic rectangles that can either make or break financial futures. Introducing credit cards to your teen isn’t just about allowing them to splurge on the latest gadgets; it’s about setting them up for financial success. Think of it as giving them a financial head start while minimizing the risk of them blowing their allowance on video games.
Consider adding your child as an authorized user on your credit card account as early as 13 or 14. Think of it as a bar mitzvah present with a future payoff (kind of like an Israeli bond but with better interest). This move allows them to start building their credit history without the full responsibility of managing their own account. Don’t worry,you can set spending limits to prevent any unexpected splurges on Queen Anne or the latest sweatshirt fad. It’s a great way to teach them about credit responsibly while keeping your own credit in check.
When your child turns 18, it’s time to choose a credit card that caters to beginners and offers perks suited for students. For those studying and touring Israel or participating in overseas programs in September, a credit card with no international transaction fees is essential. These fees can quickly add up when making purchases or withdrawing cash overseas. Choose a card that waives these fees to save money while your child is out there discovering the world.
Student Credit Cards
Luckily, several credit cards are perfect for students, offering no annual fees and no international fees. Here are some solid options:
- Capital One Savor Student Card: This option offers 3% cashback on groceries, dining and entertainment. I mean, what else are they really spending money on while living in a dorm?
- Discover it® Student Cash Back: With this card, students earn 2% cash back on all purchases, and Discover will match all cash back earned at the end of the first year.
- Bank of America® Travel Rewards for Students: This offers unlimited 1.5 points on every purchase.
My Personal Experience: Navigating Financial Responsibilities
As someone whose oldest recently returned from a year in Israel, I’ve been through the financial prep process firsthand and, as you know me, I’ve been immersed in the points and miles calculations. Here’s what I did to set him up for success:
I opened a separate checking account specifically for his use while abroad. Why? To ensure that, in the unfortunate event of theft, he wouldn’t lose access to all his hard-earned bar mitzvah money. Choose a bank account with low minimum balances and no account fees.
In the end, I selected Cross River, a local Teaneck bank known for decent interest rates, no international ATM fees, and excellent customer service. This way, he could access cash without incurring the typical three-dollar fee that larger banks charge for international withdrawals. I initially deposited $200 into the account for immediate needs, like paying a classmate for a haircut or a grilled cheese sandwich. (There are multiple food businesses in yeshiva).
Interestingly, this younger generation seems to refuse cash and relies solely on Venmo or credit cards, so he didn’t end up using the account much. (Tip: Download Venmo before heading abroad!) And don’t forget to open a joint account so you have access to deposit additional funds or retrieve a new debit card, especially if your child won’t have an international calling plan.
I kept the initial deposit low to mitigate the risk in case the card was lost. If there was an issue, only a small amount would be at risk.
So, which credit card delivers the best bang for your buck without making you shell out for a fancy dinner in fees? I went with the Capital One Student Card, and he was instantly approved with a $500 limit. Perfect! Enough to cover essentials but not enough to buy out the entire shuk (phew), and it let him manage his expenses without breaking the bank. Side note: Brace yourself for a bit of sticker shock during the first month or two with the chagim as students indulge in every shawarma, falafel and perhaps even a splurge or two at the swankiest spots in Mamilla Mall and Tel Aviv’s most adventurous zactivities.
But don’t worry, it should level out once the holidays—and the novelty of endless food and fun—wear off. If a higher spending limit is needed initially, simply pay off the balance early and the limits will reset monthly. FYI,just like all our credit card payments, this one’s on autopay. Capital One rewarded (dare I say “us”?) with an increased limit after just a few months. Shhh, don’t spill the beans!
For this article, I calculated the cash back he received for the year with the category bonuses compared to a 2% straight cash back card. The Capital One card far exceeded the amount, even when doubled via Discover it.
Conclusion: Empowering Our Children for Financial Success
As parents, we naturally want to provide the best for our children and set them up for success. But it’s also our job to equip them with the tools and knowledge they need to navigate the financial world as they transition into adulthood. Whether they’re heading off to college, embarking on a gap year adventure, or exploring summer programs in Israel, taking proactive steps to establish their financial independence is crucial.
As they embark on this exciting journey of self-discovery and growth, let’s empower them to make informed financial decisions that will shape their future for years to come. With the right tools and guidance, they’ll be well-equipped to handle the financial challenges and opportunities that lie ahead. Here’s to a future filled with financial savvy and success—cheers to our kids and the new adventures they’ll conquer!
