How To Teach Your Kids About Credit Cards

by Neal Frankle, CFP ®

My 14 year-old, like most kids, loves to spend money.  I like having control over that spending and I do this by providing her cash because I can limit the damage.  But sooner or later she’s going to get a credit card like her older siblings.  Here are the tools I used with the older kids to help them learn about the proper use of credit cards.  They haven’t had any problems and I’m hoping for the same effect with my baby. Wish me luck with my littlest Pilgrim!


credit cards for kids

 The Set-up:

Growing up, the kids saw us perform magic. Whenever the family needed or wanted something, we pulled out a magic (credit) card…and poof! The clerk gave us whatever we wanted. So when kids see us perform this magic, they acquired two flawed beliefs: First, they were awed by the magic superpower of the card. Next, they came to see that using credit cards is a “grown up” thing to do. Heck, when my kids were young, they used to play “store” using playing cards as pretend credit cards.

Of course one solution is to blindfold them whenever you go to a store if they are still young. The only problem is that it might raise suspicions and prompt calls to Children and Family Services. Imaginative, but not good.

Here are 5 tips I used.  Try it yourself to make sure your child never has credit card debt problems.

1. Talk soon. Talk often.

Explain that when you use the credit card, you are just borrowing the money…you aren’t creating it. This is important no matter how old or young the kids are. Tell them how you make the money at work to pay back what you borrow using the credit card. Explain that it’s nice to use the card because you don’t have to carry lots of money around in your purse or wallet. But the only purpose of the card is to save you from that burden.

Tell them you don’t use the card to spend money if you can’t pay it back. Go on and tell them that some people do use the card when they don’t have the money to pay back what they borrow and explain what happens to these people.

When should you start these talks? Probably today. Now, if you have a grown child, this may be a tough discussion but it’s still possible.

2. Debunk the credit score lie.

While it’s true that your child can start building her credit score by giving her a credit card early, it’s not worth it. Spending money they don’t have is not the best way to build her credit history.  You don’t want just any history.  You want a good one.  They have plenty of time to get on the path.  In my opinion the time to give them a credit card is when they have a job so they can spend their own money.  This is the best way to teach them how to make good decisions around credit.  When they have skin the game, they acquire skill much faster..

3. Use the budget.

Make sure she uses a budget tracking system and updates it (at least) monthly. This way she’ll know how much she spends every month and how she spends it.

4. Get statement duplicates.

If you are a co-signer on a card, make sure you receive statements. This is a must.

5. Don’t pay your child’s bills.

Even if your child is a college student and you are helping her financially, don’t pay her bills. Instead, total up everything it’s going to cost to put her through school for the year, divide that number by 12 and transfer that amount to her account each month. That includes money for tuition, room and board, books…everything. Make sure you budget in a bit extra for unexpected items and emergencies.  Then let her pay the bills – all of them.  This includes her credit card bill.

This is the best thing you can do to make sure your child learns to be financially responsible and understands how to use a credit card without getting in hot water. And never bail them out. It will be tough to watch them flounder but if you “save them” it could ruin their financial future…and yours. Take some time to focus on this issue now. It could be the best investment you could make for your own retirement.

Do your kids have credit cards?  When did you provide them?  What do you do to help them stay safe?



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{ 8 comments… read them below or add one }

Mark Ross December 15, 2013 at 5:14 AM

I think teaching kids early on how to use a credit card would be great for them.
Doing that would hopefully, help them avoid debt better than those who weren’t taught about credit cards before.


Neal Frankle, CFP ® December 15, 2013 at 10:52 PM

Thanks Mark. What age do you think makes sense to start? I am thinking….18 to 20?


Mark Ross December 16, 2013 at 12:46 AM

“The early, the better.” :) So, 18 would be a good choice.


Neal Frankle, CFP ® December 16, 2013 at 7:29 AM

Agreed. I think that before that is too soon. What about you?


Michelle December 11, 2013 at 5:51 AM

Love the last tip! And you are totally right! Credit cards are like magic wands. It only gets worse now that debit cards are so popular.


Neal Frankle, CFP ® December 11, 2013 at 10:10 AM

Thanks Michelle. What has been your experience with kids and credit cards? Any stories you’d like to share?


Khaleef @ KNS Financial October 22, 2010 at 12:09 PM

I think it’s great to teach kids about finances and the dangers of borrowing money at an early age. They need to be able to make logical decisions about debt and wealth and not be influenced by other idiots in this society!


Invest It Wisely October 17, 2010 at 12:57 PM

Thanks for the mention, Neal!


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