5-Year-Old With Credit Card = Financial Disaster

Most of us who have decent credit get dozens of credit card offers every day. We rip them up, we shred them, we get annoyed that we even have to deal with them, but we do. But what do we do when our children start to get them, too?

For Kristie Addy of Connecticut, this is the question she tried to answer last month when she opened a credit card in her 5-year-old's name. Her son, Hunter Addy, had started receiving regular mailings from Capitol One credit cards. Worried that her son had been placed on some list or, worse, that someone had stolen his identity, she called the company. They asked her to apply for the credit card. They would see the birthday and automatically take him off future mailings.

The plan backfired and little Hunter Addy got his own credit card. At 5 years old.


None of us want our children to repeat our financial mistakes, but these credit card companies do. If you've ever gotten yourself into credit card debt -- and if you have, you are far, far from alone -- then you know how much the finance charges can add up.

In fact, the average family with credit card debt carries about $14,000 of it. It makes no sense, really. Why spend what you don't have? But it's easy to do. We live in a society where we all want, want, want. This is true even when we can't afford it. And our kids are programmed to follow suit. They are being marketed to at a very early age and it can be very hard to teach them the value of a dollar when they never even see cash transactions.

So how do we teach our kids better money management skills? The first step is obviously not to give them a credit card unless you know they can handle it. The most important thing, of course, is to model good financial habits for your children. Help them understand the value of money and that not everything can be purchased easily.

Edward Powell, the chief consumer officer at LendingTree.com, told Forbes:

As a parent, the best way to teach a child about finances is to be a role model. You should show restraint with money. Your child should see you budget, comparison-shop, and make regular contributions to a savings account. It's not enough to talk the talk, you've got to walk the walk.

So there you are. Little Hunter Addy's mother just wanted him off a mailing list, but in the end, it probably opened a discussion we should all be having. And really, the formula is very simple: don't spend more than you make. Period. End of story.

How do you teach your children about money?

Image via Robert Scoble/Flickr

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