High school graduation is an important rite of passage for young people in America. It's a time of hope, promise and opportunity for things yet discovered. But along with the idealistic sense of possibility comes the realistic expectation of a deeply rooted American tradition. I am referring to the all-important graduation gift.

MONEY & FINANCE Section: Smart Savings Guide Survey: Better Off 5 Years Ago? FROM OUR PARTNERS Tips: Put Financial House In Order Habits: Of Millionaires Credit: Repair Poor Rating

For kicks, ask a graduating high school senior what’s on their graduation gift wish list. If you are the parent of a high school senior, it’s quite possible you already have your child’s list committed to memory. Topping the list of many soon-to-be grads are things like a computer, money, and a car.

What you probably won’t find on the list is something I have been advocating for the past several years -- a credit card.

This year, consider giving your high school graduate a credit card. Not a debit card (which ideally would have been introduced a few years earlier), but a credit card. At a recent workshop, I made the same suggestion and one gentleman quickly replied, “you must be crazy”. Before you dismiss the suggestion as being totally insane, please read on.

Today in the U.S., a young person can get a credit card without parental signature at age 18. That’s a fairly sobering reality that many parents overlook as they are preparing their child for the real world. Whether they are heading off to college, trade school or into the work world, very few 18-year-olds understand the mechanics of how credit cards really work.

I’m not talking about knowing how to swipe a card through a machine. I‘m talking about understanding how the card works if you carry a balance, are late with a payment or take cash advances. Most young people have no idea that one late payment can mean a double-digit jump in their annual percentage rate (APR or the card's interest rate). They also don't know that making minimum payments can drag out card balances for years, or that a person's credit score can impact their ability to get a job, buy a car and rent an apartment.

Many adults don’t understand this stuff either. That’s not a judgment, just another sobering bit of reality. But the earlier families teach their offspring how credit cards really work, the better they’ll be at making healthy choices when they’re on their own. Remember, it’s always easier to instill healthy financial habits in a young person than it is to unravel unhealthy habits later in life.

According to Nellie Mae, 56 percent of college freshmen report signing up for their first credit card at age 18. Many after they have left home. It is precisely why I agreed with JoAnn and Rudy when they asked me about getting Josh, their 17-year-old son, a credit card.

It’s important to note that JoAnn and Rudy started teaching Josh about money at a young age. First, with cash, when he was in elementary school, and then, a checking account and debit card when he got his first part-time job as a sophomore. After those skills were mastered, they made a smart decision and took Josh to their local bank to see about getting him a credit card.

This is a big step with an increased amount of responsibility. But learning how to use a credit card at home in a controlled environment is often much better than learning on the fly where spending temptations are numerous.

For an excellent youth-friendly description on credit cards and credit scores visit www.whatsmyscore.org. Click on case studies to download their very helpful booklet on credit scores.

When did you get your first credit card and did anyone teach you how it worked?

The phrase "head it off at the pass" takes on new meaning when it comes to teaching about credit cards. Most young people are overwhelmed with easy credit offerings. Trump the offers by teaching them how to manage their credit wisely before they leave home. The benefits could have lifelong implications.

According to student loan provider Nellie Mae, the majority of college seniors have four or more credit cards with an average balance of $2,864.

Source: www.nelliemae.com

---

If you have comments or questions for Dungan, click here.

---