Girl inserting coin from mother into red piggy bank on coffee table
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It’s no secret that credit is an important part of managing your finances throughout adulthood. Your credit score determines interest rates on mortgages, eligibility for personal or small business loans and so much more. However, most parents aren’t actively teaching their children about credit, credit cards or the role both will play in the rest of their lives.

A recent study from CreditCards.com found that an alarming number of respondents were never taught financial literacy by their parents. Furthermore, many of those who were taught concepts such as budgeting, giving or investing weren’t taught about borrowing money or responsible credit card usage. The Federal Reserve reported that 40.8 billion payments were made with credit cards in 2017, and credit card payments have only become more prevalent as EMV cards, mobile wallets and contactless payments have risen in popularity. With swiping becoming second nature, it’s more important than ever that kids are taught credit card basics at a young age.

Start at a young age

Parents don’t have to give their elementary or middle school aged children access to a credit card to start teaching them about credit and how important healthy borrowing habits are to financial health. Conversations as simple as explaining why you use a credit card at the grocery store and how you plan on budgeting for the money spent on the card can help kids get comfortable with the concept of credit.

If you engage in discussions about money, credit and credit cards from an early age, they’ll be more confident in their financial knowledge by the time they reach high school or college.

Take advantage of learning programs

Many schools and businesses sponsor learning opportunities that give kids of all ages experience with finances, and many of those programs include sections on credit card usage and borrowing basics.

Junior Achievement, an organization dedicated to teaching young people how to succeed financially, teams up with schools across the country to bring their financial literacy programs to the classroom. Each program is designed with a specific age range and set of financial concepts in mind, offering an interactive and hands-on approach to learning. For example, JA Personal Finance® is a five-session program built to help high schoolers prepare for the world after graduation, including budgeting, saving, fraud prevention and an entire session dedicated to building and maintaining good credit.

Some public libraries will also offer financial literacy courses for kids of various ages.

Don’t shy away from apps

Apps are an excellent tool that parents can use to teach kids about credit usage and budgeting. According to Ted Rossman, industry analyst for CreditCards.com and Bankrate, there are plenty of companies out there that offer learning opportunities when it comes to cards targeted at children and teens.

There are many apps aimed toward young children that can help them learn the basics of budgeting or spending money. Bankraoo acts as a virtual bank (not attached to a real account) to help kids track allowances, birthday money and pocket change. Savings Spree is built for young children learning cause and effect with financial concepts like budgeting, saving and even investing. As children become teens, there are also apps that give them real-life experience with managing cards. For example, FamZoo offers prepaid cards that allow teens to practice using a card while parents have full visibility and control over spending.

As mobile wallets, peer-to-peer payment apps like Venmo and financial budgeting apps like Mint become increasingly popular, using an app to help teach kids about credit card payments makes more and more sense.

Encourage teens to build credit

The earlier high schoolers and college students start to build credit, the better off they’ll be in the long-term. Financing for a car, personal or small business loans and even some apartment applications all depend on how trustworthy creditors view an applicant. The longer their credit history with a track record for paying bills on time and in full, the more options they’ll have when it comes time to finance a car or rent their first place.

Secured credit cards are a great way to start as long as the card reports payments to the credit bureaus. Adding a teen as an authorized user on a parent’s card is another way to help them build credit while allowing parental insight into how much they’re spending and what they’re spending it on.

The bottom line

Financial literacy is important to teach kids of all ages, but the basics of credit and credit card usage oftentimes fall through the cracks. It can be tricky to know when and how to broach the subject with children, but apps and programs can make it easier for parents unsure of where to start.

Credit is such an important aspect of overall financial health. It’s essential that children are introduced to the idea of borrowing responsibly so that they can be prepared for the credit-driven world once they hit adulthood.