Finance Blog

Three Lessons to Teach Your Children about Credit Cards

Written by Miranda Marquit on November 12, 2012 in Credit  |   1 comment

Many parents aren’t interested in teaching their children about credit cards and what those cards mean to a credit score. However, the problem with that approach is that, at some point, your child is probably going to have a credit card and will need to…

credit cards kids Many parents aren’t interested in teaching their children about credit cards and what those cards mean to a credit score. However, the problem with that approach is that, at some point, your child is probably going to have a credit card and will need to take control of his or her finances. If your child hasn’t had good lessons in how to use credit responsibly, it can become a real problem.

Even though my son is only 10 years old, we’ve already started talking about credit cards and how they work. He sees me use them, and I talk about how we pay off what we spent on them at the end of the month. When your child is old enough to understand the basics of personal finance and money management, it’s a good idea to talk about credit cards and to share some valuable lessons. Here are three of them:

1. Credit is a loan.

The first—and most important—lesson to learn about credit cards is that credit isn’t money that is your child’s to spend. Money from a credit card is a loan. Instead of using your own money, you are borrowing money from someone else.

Children need to understand this concept early on. Even if you pay off your credit cards in full at the end of the month, talk to your children about how you are using someone else’s money and how you are paying the money back.

If you carry a balance, show your child your credit card statement and show that you have to pay interest on the money because it’s a loan. It’s vital that children understand that a credit card doesn’t show how much money someone has—it shows how much someone can borrow.

2. Credit cards should only be used in conjunction with a spending plan.

Make it clear that if credit cards are used, they should only be used in conjunction with a responsible spending plan. If you want to get the rewards from using a credit card, you need to make sure that you aren’t spending more than you can afford to repay—preferably before you are charged interest.

If you don’t already have a spending plan in place, involve your kids in creating one. Show your child that you use your credit card only for purchases that you have planned, like groceries, utilities, and big-ticket items for which you have already saved. Show your kids that credit cards can be tools used to earn rewards, but this will only work if the spending is already planned out and the money to repay the loan is already available. Point out that carrying a balance results in interest charges that may amount to more than the rewards earned.

3. It’s OK to not have a credit card.

While credit cards can be valuable when it comes to building a good credit score, there are many people who get along fine without them. Let your child know that using a credit card is a choice, and if he or she doesn’t want to use a credit card, that’s just fine. One of the most important financial lessons that children can learn is that they don’t have to be like everyone else—as long as they are always financially responsible.

Teach your child to know him or herself. Maybe your child isn’t ready for a credit card at age 18, but after landing a job and learning some money management savvy, he or she will be ready for one at age 20. Don’t push your child into something that he or she may not want right now.

In the end, the best thing you can do is start teaching your children about good money habits when they are young. Teach the value of saving, investing, smart spending, and avoiding debt. And don’t forget to touch on your mistakes and the lessons you then learned. That way, if your child does decide to get a credit card at some point, he or she is much less likely to make big mistakes with it.

Miranda Marquit is a freelance writer and professional blogger specializing in personal finance, family finance and business topics. She writes for several online and offline publications. Miranda is the co-author of Community 101: How to Grow an Online Community, and the writer behind PlantingMoneySeeds.com.

1 comment

  1. Anonymous says:

    Cool Tip

Leave a Comment

Name :

Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.

Credit Archive

Stay Informed Sign up for our FREE Equifax email Newsletter