The Bills

Should I Make My 25-Year-Old Daughter Get a Credit Card?

Your personal finance questions, answered.

millennial cash.

How, you ask, can you help your daughter select the right credit card? Easy: You don’t.

dobok/Thinkstock

Welcome to Ask the Bills, where every two weeks Helaine Olen answers readers’ questions about their most nagging personal finance and financial etiquette dilemmas. Seeking advice on a money issue? Email helaine.olen@slate.com.

Helaine,

My daughter is 25 and still doesn’t have a credit card. She graduated from college a few years ago and is working in a great but low-paying job. She lives with a few roommates, pays her own bills, and manages really well. But like many of her millennial pals, she uses her debit card exclusively. She is incredibly reluctant to get a credit card and says she doesn’t see any value in it. In fact, she says she’s managed to live within her means without it and is afraid if she has one, she will accumulate debt. It’s hard to argue with that, but I’ve been urging her to get a credit card because I think she needs to establish good credit. She has not had to find her own apartment or set up her cable or electricity account. (She moved in with friends who were already established.) Do you think she needs a credit card? And, if yes, how do I help her select the best one? I can hardly do that for myself, since there are so many choices.

Let me see if I can get this straight. You’ve raised a daughter who appears to be showing financial good sense. She’s working at a less-than-lucrative job but is managing to live within her means. She’s so committed to not getting in over her head that she doesn’t even want to tempt herself by applying for a credit card. And this is a problem?

No, it’s not.

But there is a problem, just not the one you raised. How, you ask, can you help your daughter select the right credit card? Easy: You don’t. You need to let go and let her live her own life—and that includes allowing her to make her own mistakes and learning to sort out the consequences. She’ll decide on a credit card when she’s ready.

One last point: It’s currently a thing to worry about millennials and their reluctance to use credit cards with the enthusiasm of their elders. One day they’ll need to sign an apartment lease or apply for a mortgage, the naysayers moan, and they’ll be denied because their credit report will be deemed skimpy. Call me skeptical. It’s almost certain that the holdouts will want a credit card as they age, if for no other reason than convenience. And it should be easy enough. If your daughter’s habits are as good as you claim, it’s likely some outfit will issue her a credit card, even if she initially needs to turn to a secured credit card. What’s that, you ask? In return for putting down a deposit, which protects the issuer on the off-chance your daughter does turn out to be a deadbeat, she’ll be issued credit.

Helaine,

Things aren’t good. I’m in my late 50s, my wife a few years younger. We have two tweens. We’ve never been on the same page financially. Before our marriage, I lived frugally, while my wife entered a debt-management program at the prodding of her parents, who covered many of her expenses. When we married I paid off her $11,000 debt, but she started to accrue it again. Rather than putting my foot down as my late mother-in-law warned me to do, I went along to get along, and am an accessory to our living beyond our means. We have survived the past 12 years by exhausting an inheritance, using my retirement funds and money from the 529 funds set up by my mother-in-law for the kids, running up an equity loan against our house, and notching about $80,000 in credit card debt. We are currently in a debt-management program paying off $50,000 of the credit card debt, but we have no savings, no retirement, no college funds, and the home equity line comes due in 2017. If we were to get a decent price for the house, we’d be able to pay off the mortgage and equity line and maybe a real estate agent’s fee. At my bidding we’ve consulted many financial advisers over the years who have all told us we need to cut back, but we never have till now, and that’s out of necessity. I don’t think we were grossly extravagant—mainly just foolish for having moved to an expensive suburban–New York City town, and having just one income for a number of years. We’ve been to marriage counselors and an attorney to consider bankruptcy. But it appears we make too much money to declare complete bankruptcy, and until recently I worked for a finance firm, where that would’ve been an issue. (I no longer work there.) As I write this email, my head-in-the-financial-sand approach becomes shamefully clear as having been irresponsible, especially given the impact this will have on our children. What would you recommend at this point?

That’s the thing about marriage. You meet a girl or a guy and fall in love. No one tells you that one day, more than a decade later, you’ll be bickering about the same thing for the 846th time and you’ll think, “I can’t deal with this argument again.” So many don’t. They go along to get along. And money is the No. 1 cause of marital arguments, often futile ones. A Fidelity Investments survey from 2014 found that almost 40 percent of spats over finances between couples went unresolved. So, in your case, you and your wife tossed money at the problem. It makes sense, in a way. You live with this woman and love her, and you have children with her and you want everyone to be happy. And spending money is pleasant, at least in the short term. Who doesn’t want to go on vacation?

The common-sense thing would be to consider bankruptcy. You’re in your late 50s. It’s more likely than not you won’t be employed a decade from now. Yes, more people than before are staying in the workforce past the traditional retirement age. They are also still a minority of people above the age of 65. It sounds like you and your wife earn too much money to declare Chapter 7 bankruptcy, which would allow for an immediate discharge of the obligations you can’t pay. Instead, you would need to file a Chapter 13 plan, which would put you on a monthly payment plan and would only discharge the unpayable debt after a few years of payments. And to be clear, I think it’s more likely than not that some portion of this debt will overwhelm you at some point.

But don’t go running to the courthouse yet. There is a complicating factor here. It’s obvious you are living with an addict, someone who has a real issue controlling her spending. Declaring bankruptcy might give the two of you temporary breathing room, but if your wife doesn’t deal with the underlying problem, you’ll likely find yourself back in the same spot again—except by then you’ll possibly be out of the workforce, with little in the way of options. It sounds like there have already been numerous interventions, from debt-management plans to financial advisers, marriage counselors, and lawyers. You’ve drained an inheritance, the house, and even your children’s college funds. If you sell the house to come up with more money, I can all but guarantee all you’ll have thrown away one more asset for no long-term gain.

You need to give your wife an ultimatum. She needs to cease using credit cards—now. She also should attend Debtors Anonymous meetings, where she can work with others who have faced similar issues in their lives, and who can help her overcome what is clearly compulsive behavior. Only then can the two of you decide how to move forward with the rest of your financial lives. And if she can’t do that? You’ll need to contemplate the title of one my favorite advice columns of all time. That would be “Can This Marriage Be Saved?” You can’t enable an addict forever, after all.

Helaine,

My divorce was finalized a few months ago, and I am walking away with a retirement account worth about $115,000. Financial investments were always my ex-husband’s expertise, and I have no clue where to begin. I would like to keep contributing to my future retirement, but I have only been able to find part-time work while I take care of two children at home. I do receive child support and maintenance, but I will be scraping by every month. I have two questions: First, I am 36 years old. What would be a smart thing to do with the $115,000? Second, what percentage of my income should I be adding to it every month?

First, good on you for wanting to learn more about how to manage your retirement account. No doubt it would be easier to let it go on autopilot, leaving the current investments in place. That might or might not be a good idea, depending on what the money is invested in. I’d begin by picking up a copy of Kimberly Palmer’s Smart Mom, Rich Mom or Jonathan Clement’s Money Guide 2016. Regular readers of my work know I like low-fee index funds of the sort offered by the Vanguard Group or Fidelity Investments. Since you are young, the vast majority should be in an S&P 500 fund, with a small portion in a bond fund. Finally, how much should you save? The ideal would be at least 10 percent, but it doesn’t sound like you are financially capable of that right now. If your current employer offers a retirement account, put as much in as the employer matches, which is often 3 percent. But I say that with a caveat: Don’t do it if you are going to simply run up credit card debt to compensate for the money you’re putting aside. You’ll lose more than you’ll gain. But I’m not worried about you. Admitting you need to learn more about money and taking charge of your own finances are the best ways to protect yourself going forward.