“My teenager has racked up $4,000 in credit card debt”

I am a female entrepreneur and I have a 15 year old son. I gave her a fixed amount as pocket money until she was 15.

I then decided to issue him an additional credit card under my main credit card account so that he could gain financial knowledge and manage his budget.

However, within a few months, he racked up credit card debt worth Dh15,000 ($4,084) by buying expensive shoes, gadgets and online games.

Although I didn’t review his spending initially because I wanted him to learn from his mistakes and give him a sense of responsibility with the money, things are spiraling out of control now.

Do I have to set strict rules on limits and guide him on how credit cards work? I thought it was taught in schools.

He also hides the monthly credit card statements from me so I don’t know about his expenses and asks his dad to pay the bill instead.

I’m also worried that unpaid bills on this additional credit card will affect my credit history. Please advise. RK, Dubai

Debt 1 panelist: Steve Cronin, founder of DeadSimpleSaving.com

It’s great that you decided to teach your son practical financial literacy while he’s still quite young.

Unfortunately, he’s already shown he can’t use the card responsibly, so the “hands-off” part of the experiment must end now.

We don’t know what his monthly budget is, whether you’ve told him the amount or the consequences of going over budget.

These consequences would be both on the part of the bank – him having to repay the full amount each month or face late fees and interest – and on you, such as cutting the card in front of him.

It’s also unclear whether you set a limit on his spending per month or even an overall limit on his total spending other than your own card limit.

I agree with you not to scrutinize his spending because he should be able to spend his money as he sees fit within his budget.

However, the card statement must reach you each month, preferably electronically so that it cannot be hidden, and you can then send it to him.

Your son hiding the statements is a breach of trust (and, frankly, maybe an admission that he knows what he’s doing is wrong).

Charging his father is also not acceptable, especially if it is a way of pitting the parents against each other.

You should discuss the right approach with his father and establish clear rules for using and paying for the card. The card is in your account rather than his father’s – unless you want your child to be spoiled, it’s probably best to keep it that way.

You mention card debt rather than card spend. If the balance has not been fully paid off for the month, any accumulation of debt is totally unacceptable.

Credit card use is not taught in most schools, nor any other aspect of personal finance. If only these useful skills were taught! Trigonometry can wait.

So you need to make very clear rules, explain them clearly and explain to your son in detail how credit cards work.

He is strongly encouraged to find out about this, because his card access depends on it.

You should also be very clear about the consequences of breaking these rules. You have to stick to these consequences if he wants to learn, even if he gets angry and compares you to the more forgiving parents of his friends.

I suggest lowering the limit for minor mistakes, like being one day late, and raising it until the card is canceled if he can’t stay within budget after three months.

You should also have zero tolerance for evasive antics like hiding statements or charging her dad for overspending that you haven’t previously approved.

Reassure him that you won’t be looking at detailed expenses on card statements and that all you care about is staying within budget and paying on time.

Your credit score is most definitely affected by his actions because he does not have his own credit score. You have kindly given him a powerful tool – for your own good as well as his, teach him how to use it wisely.

Felicity Glover, personal finance editor at ‘The National’

I believe that parents and schools have a responsibility to teach children financial literacy skills and this should be a required subject in all curricula.

Obviously, your son isn’t ready to take responsibility for having a credit card, doesn’t understand how they work or how to use them.

It also worries me that he is already hiding statements from you and accumulating a debt of 15,000 Dh in such a short time.

You should also have zero tolerance for evasive antics like hiding statements or charging her dad for excess expenses that weren’t pre-approved by you.

Steve Cronin, founder of DeadSimpleSaving.com

As blunt as it sounds, my advice would be to cancel the credit card immediately and explain why.

These days, there are many other options for parents to give spending money to their children, none of which involve a credit card.

Some banks in the UAE have already introduced digital banking options for children aged 8-18 to encourage responsible spending and saving.

For example, ADIB launched its digital bank Amwali last year, while Emirates NBD has Liv. and Mashreq has its Neo option.

A number of FinTech start-ups in the UAE have also introduced a range of family banking and financial education apps to equip children with the tools they need to earn, save and spend responsibly in real time.

Parents remain in control as the primary account holder and can transfer spending money to their children’s sub-account, allowing them to set aside money for their savings or spend it as they wish.

All of these options come with personalized debit cards, but most importantly, no credit is involved.

Instead, kids have a certain amount of money to spend each month and once it runs out, that’s it. It is then up to you whether you will transfer more money if they overspend.

Smart financial skills are essential for kids – and parents, for that matter – to learn.

Sadly, this has never been a priority for schools, but that attitude is starting to change and there are now financial literacy classes aimed at children and teens to help them learn to be financially responsible.

Also worth checking out for your son.

The UAE government has also changed UAE labor laws and children aged 15 and above are now allowed to work part-time.

This could be a great way for your son to learn how to manage his money and help pay off that Dh15,000 debt he has accumulated on your behalf.

The Debt Panel is a weekly column to help readers manage their debts more effectively. If you have a question for the panel, write to [email protected]

Updated: September 28, 2022, 5:30 a.m.