A couple people have asked me, “So, when is a good time to talk to my kids about money?”

I always answer: “Now”

If your children can open your wallet and pull everything out, you can start talking to them about credit.

Many of us wonder how to save our children from the heavy burden of consumer debt, often associated with credit cards.  Some debt – like the medical debt my parents incurred when I was in high school – may be unavoidable.  Debt from buying nice(r) things can be avoided.  We often wait to have conversations with our kids until they are older, but most kids form habits around money at an early age, mostly by observation.  Money habits start very young, and you can help with that.

My kids are 1, 3, 5, and 7.  We talk about money a lot.  Recently, I’ve started to talk to them about credit cards.  Here are some suggestions, by age, to talk to your kids about money and credit cards at a young age, based off of conversations I’ve had with my own children.  The key for me is to talk about money in the context of daily life

2-3 years:   

When your child sees the credit card:

“Do you know what this is? (holding up a dollar bill) – This is called money, and it is how we buy you the clothes you are wearing, and pay for our food and car.  Do you know what this is? (holding up a credit card) – This is called a credit card.  You can use this at the grocery store to buy food, or to buy clothes, but every month you have to use regular money (hold up the dollar bill) to pay it off.  Remember:  you always need money (holding up a dollar bill) to pay for things.”

This is particularly useful if you child has just pulled out everything from your wallet, because it can be timed with putting everything back in place.

4-5 years:

At the store, or when typing in the credit card information for an online purchase:

“Why are we using the credit card?  Can you see the chip or the strip – that’s how the machine reads the card, just like when we read books.  See that (pointing to the amount you  are charging to the credit card), that $42 is something that we use the credit card to pay for, and we will have to pay at the end of the month.  What do we use to pay the credit card? (Wait for it. . . )  Money!!  (let them see a dollar).  So what do we use to pay the credit card bill? (Say it together, with high fives) Money!!”

6-7 years:

At the bank (even if, like me, you favor online banking, going to a bank is a valuable expedition):

“What is this called?  It’s a Debit Card, it pulls money right out of my bank account. How is that different from a credit card?  (Wait a moment).  The Debit card acts just like money, but a credit card is credit – it’s something you don’t pay on right away.  But when do you have to pay the credit card bill?  (Wait a moment).  Every month.  And what happens if you don’t pay the credit card bill?  (Pause), then the credit card company charges you extra money.  Oh no!  We don’t want that.  So I guess that means we have to pay the credit card every month.”

This is particularly useful if you can have your child use the debit card to get money out of your bank account.  Or, if they already have a savings account, deposit some money into their own account.

When paying a credit card bill (online or in-person):

“Take a look at this, tell me what you see.  What are these (point to the dates)?  What are these (point to the descriptions?  And how about these (point to the dollar amounts).  This shows the purchase, the data we made the purchase, and the amount of the purchase.  The credit card company paid it on our behalf for a short time.  Isn’t that great?  But guess what (pause for dramatic effect), now we have to pay them BACK.  What if we don’t pay this off right away?  The company will charge us interest – and we don’t want to pay extra money.  Let’s pay this off together using money from our bank account.”

If you are in credit card debt, and cannot pay the balance off, tell your kids that you are in the process of paying it off.  Don’t hide your finances.  Debt and money problems love to be kept a secret.  Openness about debt help brings freedom.  Credit cards can help or hinder.  The faster you bring your kids into a conversation about the habit of paying off debt, the better you give them the habit of good money management.  How you use your money is the principal way to express your values.  Involving your children in the financial discussion helps them build their own value of keeping consumer debt at bay.

Photo by Alexander Kagan on Unsplash