Answer: a lot younger than you think.
Credit cards and youth can be a dangerous combination. Many adults who have had problems managing their credit card accounts can trace their difficulties back to when they were teenagers or in college. Unfortunately, the bad habits of credit card use that young adults develop are difficult to break in adulthood.
It doesn’t have to be this way. Parents can introduce their children to responsible credit card usage at any age, and it’s important that they do so early.
How I was raised
Even before I became a credit card expert, I always had been savvy with credit cards. I thank my parents for teaching me how credit cards work at a very young age — making me an authorized cardholder on one of their accounts when I was a teenager.
At first, the card I was given was probably more for their convenience than my own. With a credit card in hand, I could run errands for them and pay small charges, such as meals or movie tickets with my friends. And like all other credit card users, my parents didn’t have to worry whether I had cash to pay for these expenses.
I was also given strict instructions to use the card only with their permission, and I had to pay back any personal expenses each month out of my allowance or savings.
Furthermore, having a credit card was vital in the case of an emergency, especially once I started driving. We were all more comfortable knowing I’d never be stranded if I ran out of gas, had a flat tire, or had some other mechanical problem while on the road.
When I became a legal adult and opened a credit card account in my own name, my parents guided me through the process. Perhaps their most important contribution was their insistence that I avoid interest charges by always paying my credit card statement balance in full and on time, every month.
I vividly recall telephone conversations in college where I would plead, “Yes mom, I did pay my bill in full, just like I told you the last three times you asked me this month.” Looking back, it was probably these conversations that separated me from my classmates, who started carrying a balance in college and struggled for years to pay it off.
How I’m raising my children
Now that I have two children of my own, I have a chance to pass on the lessons I learned from my parents, as well as in my career. But rather than lecturing my young children about personal finance, I seized the moment when they brought up the subject. At a very early age, my children observed me using a credit card in the store, and I took that opportunity to explain how it works in very simple terms. It’s important they know that it costs money to use a credit card, and that we must pay our bills every month with the money we earn from our jobs.
As they grow older, I plan on showing them my credit card statements — and letting them help me pay the bills online. I’ll explain what it costs if I were to carry a balance and show them how I’m not paying interest because I only charge what I can afford to pay.
Eventually, I plan on making them authorized cardholders in my account sometime when they’re teenagers, depending on when my wife and I feel they are mature and responsible enough to only use the card with our permission. I’ll even have the opportunity to monitor their spending online, a feature the my parents could never enjoy when I was young.
Bottom line: When parents take the time to teach their children about credit cards at an early age, the advantages of giving them a credit card will far outweigh the risks.