What Your Children Need to Know About Credit and When

Children are full of questions about most everything, including credit. From an early age, children can start to observe the different ways their parents pay for things and note that one of those ways involves using colorful, fun-looking cards! So, don’t be surprised if they start asking you about those cards.

What should you teach your kids about credit? And at which age? If this topic brings you parental anxiety, relax. Here are some basic guidelines to help you have the “big talk” with your kids. You know, the one about credit.

Ages 3 – 11

At these ages, according to the Consumer Financial Protection Bureau, the most important thing is to educate your kids on basic finance. Even toddlers will develop a concept of money by watching you and imitating your transactions with their toys. You can foster their early engagement by playing along with them and sprinkling in some basic points about counting dollars and cents.

Around age six is typically when parents start their kids on allowances, along with discussions of responsible spending and saving. By the time they’re nine, budding pre-teens are eager to act like adults, and you can expect some more advanced questions about credit cards, debit cards, interest rates, and the like. It’s important to be open and to try to answer your child’s questions in as much detail—backed by simple examples—as possible.

Demystifying these concepts is one of the best ways to give your child a head start on a healthy, knowledgeable relationship with credit. In your discussions, it’s important to stress the basic tradeoff of credit cards: that they are convenient and allow you to defer payment, but that they also come with costs, such as interest, fees, and penalties for late or missed payments.

As your child nears the latter end of this age range, you may want to consider giving your child their own bank account to provide them with some additional practical financial experience.

Ages 12 – 17

This is the age range in which you may first consider making credit available for your child. To be clear, a person must be 18 or older to have a credit card in their own name. But before then, you can authorize your child to use your credit card as an authorized user on your account. Doing so will give your child some real-world experience and even let them build up some actual credit history of their own, which could be beneficial to your child’s credit score later on. That is assuming you pay your bills on that account on time; detrimental behavior on that account could actually harm your child’s credit score later on!

Determining which age is best for authorizing your child to use your credit card depends on several factors, including:

• How financially curious has your child been throughout their life, and how adept are they at mastering financial concepts such as interest rates?

• How responsible has your child acted—not just with money but with other areas of life such as schoolwork and chores?

• Has your child already had experience with bank accounts, debit cards, and checkbooks? Those are important “training wheels” for your child before turning them loose with credit cards.

Before authorizing your child, you’ll want to ensure they’re aware of credit reports and scores and how they can affect their life, for better or worse. You’ll want to monitor your child’s use of your credit card, set clear limits, and try to share with them the details of the credit card statements so they understand the ramifications of their actions.

Ages 18+

At this age range, your child is technically a child no more. They can now legally apply for their own credit card, although you can also (and may have to in order for them to qualify) cosign for them, which carries its own set of benefits and risks.

This is when you’ll find out whether your years of good counsel on credit have paid off. If you’ve done your duty, your child will have all of the mental tools—as well as a strong-but-budding credit history as an authorized user—to choose a card that’s low-risk and appropriate for their needs.

Congratulations. Your child is credit-wise and responsible…and now ready to give you a whole new set of worries!