At what age should you start teaching your child about credit?

Financial education starts much earlier than age 18, when you can open your first card. 

Children begin to form their lifelong money habits as early as preschool.

Behavioral researchers from Cambridge University encourage parents to start teaching their kids about money as young as 3. And there are developmentally appropriate ways to help your kids begin to understand personal finance and credit cards at every stage of childhood.

Below is advice on how to get started teaching your children about money, according to three financial experts.

Early childhood (ages 3-5)

Young children who are just learning their numbers come to understand money through playing and observing the people closest to them. They start to see the financial transactions taking place, and they begin to understand that a credit card is something their parents swipe at the checkout and money is required to make purchases.

“Developmentally, kids can understand from a very early age that you can do four basic things with money. You can spend it, save it, invest it or give it away,” certified financial planner and author of “The Four Money Bears,” Mac Gardner, tells CNBC Select.

These concepts are “simple,” says Gardner, yet because most of us never receive financial education in school, it can feel daunting to know where to start with these conversations at home. Gardner wrote a children’s book to introduce students to what he calls the “four functions” of money. In it, Gardner introduces four “Money Bears” that represent each one of money’s main purposes.

“The bears have to work together to make a budget,” explains Gardner, and that’s how they overcome the story’s obstacles. Too often, he says, children associate money with spending, when really there are many ways to use money in life.

On a social-emotional level, the CFPB reports that kids in the early childhood stage are learning how to have patience, take control over their decisions, and focus. Developing these life skills will help them later when it comes time to manage their finances.

“If every child could understand from an early age what their options are with money, then 15 years from now they might make different choices,” says Gardner.

Middle childhood (ages 6-12)

Apart from storytelling, establishing some simple routines can give kids the opportunity to practice life skills like counting, planning, and saving their cash.

Rod Griffin, director of public education and advocacy at Experian, began teaching his grandchildren about saving when they were young.

“They would want to stop and get ice cream,” he explains, “so I started leaving change in the backseat every time we went out.” Over time, his grandkids saved until they had enough to buy their treats.

Tim Sheehan, co-founder, and CEO of Greenlight, a financial literacy app that helps parents teach kids about debit cards, argues that chores also play an important part in helping kids grow up to be good credit card users.

“You want the concept of earning to be ingrained before moving on to borrowing money and paying it back later,” Sheehan explains.

Developmentally, the CFPB reports that kids in this age group are learning how to plan ahead, budget, and rely on their own inner guidance when making decisions. They are also developing the ability to be consistent and see longer-term goals through to completion. But their friends and community begin to have a greater influence in their lives at this age, so you might notice that they compare their material belongings with what their friends have more often than when they were younger.

Teens and young adults (ages 13-21)

Teenagers can start making some financial decisions independently and take steps to prepare to get their first credit card at age 18. But before they do, you’ll want to help them develop critical thinking skills so they can make smart decisions about their money.

According to the CFPB, teenagers are developmentally ready to align their spending with their values, and they should have a stronger sense of who they are and what they care about as they start to grow into an adult. They are also starting to keep the future in mind while they make more significant life decisions.

If you feel your teen is ready, you could add them as an authorized user to your own credit card. Doing this will help them establish a credit history, and in some cases, they only need to be 13 to 15 years old to qualify (read about the minimum ages for each card issuer).

As an authorized user, they can use your card for their everyday spending, but as an added level of financial education, you should take some time to review your credit card statement with them each month.

“Walk them through the billing statement,” Griffin encourages parents, “and talk about what it means to repay, what happens if you carry a balance and pay interest, what the future consequences are if you don’t pay that bill.”

This is also a good time to help them experience firsthand the benefits of achieving a long-term savings goal. Encourage them to save for the deposit on a secured credit card. In some cases, if a person has a savings account at a bank or credit union, they can borrow against that account to open a secured card..

The trick is learning what motivates your child, then start from there,” Griffin says. “For me, it was buying my first car, but every teen will be different.

“As you’re looking at going on trips, buying cars, and going to college, that’s when you need to have more in-depth conversations,” Griffin says. And there will be more tangible opportunities to do so as your teenager begins to think about the future, he says.

The No. 1 money behavior kids learn

According to Gardner, who visits elementary schools to talk about money with kids ages 5 to 10, everywhere kids look, they are being influenced to buy stuff. And what’s most concerning to Gardner is that “only 21 states require any kind of financial literacy by high school.”

As a result, the financial lessons that do happen at home usually have to do with spending more than saving, investing, or borrowing. Kids pick up on what they observe most commonly, and they see the everyday household shopping more than the other stuff that generally happens behind-the-scenes.

The result?

“Nine times out of 10, when I tell kids to imagine I handed them a $100 bill, they tell me they would buy candy or something with it,” Gardner says. “What this tells me is that kids are being programmed early on to consume.”

By the time many kids grow up to become young adults and apply for their first credit card, “they’ve already had 10 years of programming,” Gardner explains unless parents are actively involved in teaching their kids how to save and invest in order to achieve their goals.

Bottom line

There’s no “perfect age” to start teaching your child about credit, but according to Griffin, “If your kids are asking you about money, then it’s time to start teaching them.”

This means that parents should look for early signs that their child is interested in your spending habits, talk to them about all the functions of money, even the ones they don’t see, and learn about the ways you can help them practice money habits in developmentally appropriate ways.

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