4 Ways to Teach Your Kids About Credit Cards


credit card advice

Alexandra Leslie
By: Alexandra Leslie
Posted: August 4, 2014
Our personal finance experts dish out the most trusted credit card advice on the web, including juicy tips, tricks and secrets from inside the credit card industry.

It’s no surprise many college students get their first credit card and go wild with what feels like free money.

Sure, some of those kids came from homes where they were taught not to do this, but in many cases, they were never taught about credit and the perils of credit card debt.

Try these techniques to teach your kids about the ins and outs of credit cards so they make the right decisions as they get older.

1. Teach the basics.

Once your kids are old enough to understand how money works, it’s key to teach them the difference between borrowing and saving. One way to do this is to encourage them to save up their allowance for something they want rather than letting them borrow the money upfront.

If they want it right now and want to borrow from you, consider requiring an interest payment so they can see the benefits of delayed gratification versus the downside of buying something with money you don’t yet have.

Drive home the point that it’s always better to save first, and if you have to borrow, pay it back as soon as you can.

2. Lead by example.

Children learn from their parents and pick up habits from them, especially when it comes to managing finances.

Do you save diligently for big expenses like a new TV, or do you put it on a credit card? Do you work within a budget, or do you spend frivolously?

It’s one thing to tell your kids it’s smarter to save and not rely on credit cards, but it’s another to actually do it. Try to ensure your behavior shows them how to use credit cards responsibly.

“Understanding real-world impact may

help your kids to be responsible.”

3. Give them a card with limits.

Once your child gets older, you can get another card for your account in their name but impose limits.

One way you could do this is get your teen a credit card when they turn 16, but tell them it is for gas purchases only. You also could give a card to your new college student, but let them know it’s for food and emergencies only.

Make sure they are aware you will check the statements regularly and take it away if they misuse it. It’s up to you whether you require your child to repay you or whether you cover the bill. Either way, it’s key they understand this is not free money.

4. Explain the why, not just the how

Some kids, especially teens, get frustrated when parents tell them not to do something without a reason.

Be sure to explain the impact credit can have on their lives so they understand the importance of being smart with that piece of plastic. Bad credit can affect your ability to get a job, buy a car or home, whether you can lease an apartment, and much more.

Understanding the real-world impact or short-term responsibility may help your kids be more motivated to be responsible.

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