Many people get a credit card because it has become an "essential" for buying over the internet, booking flights, buying tickets for concerts and reserving hotels without having to have cash on you or having to send a cheque.
Many people don't realise, however, that there is such a thing as
a debit card. A debit card works just like a credit card except you are using your own money. As soon as the purchase is done, the money comes directly out of your own bank account.
The bank usually charges a monthly fee for this, but the advantage of a debit card is that it tends to protect you from overspending - when your account is empty and you try to put a purchase on your card it will come up "declined".
This could help protect you from making poor financial decisions which will affect you in the future.
For a short time people can spend more than they earn - but only by using credit cards and getting loans to buy things they can't afford to pay cash for.
Buying things on credit has become so easy that people often find themselves in serious debt very quickly.
Learn this yourself and then teach kids to avoid credit cards.
If they learn to spend and save according to a well-thought-out spending and savings plan, you give them an important advantage after they leave home.
Sylvia is the author of How To Stop Your Kids Going Broke which is available from silbo.co.nz
She is also the author of the New Zealand Household Budget Kit which is available through major bookshops and also from her website.
