I was 19 when I received my first credit card and I had no idea what I was doing — and I’m not alone. In fact, according to a recent Bankrate survery, over half of Americans have not received a strong financial education, affecting their ability to build positive money habits.
If you are a parent or a guardian, then teaching your children about credit cards may take a backseat to teaching them how to drive or make their bed. While it may be tempting to wait until your child is old enough to carry a credit card on their own to introduce them to the ins and outs, the clash of inexperience with new financial responsibility may lead young adults to make rash mistakes or uninformed decisions that will follow them for years.
To get a headstart on their financial education, we’ve put together a series of lesson plans and activities that run from kindergarten to college that you can use to teach your kids about the world of credit cards. Many of the lesson plans share concepts or steps, as repetition is essential for mastering finances. Here’s how you can teach your child how to use and pay for a credit card, calculate interest and avoid unmanageable debt. It’s never too early (or too late) to start!
What all kids should know
Credit cards may be one of the first financial products your child will encounter as an adult so it’s best they get familiar with them now.
Parents should introduce children to the concept of money, including how credit cards work, the concept of interest, and how it accumulates over time sooner rather than later.
— Kelley Weil, EVP of Consumer Banking Services at BOK Financial
Weil continues: “It’s important to discuss the long-term impact of owing money, such as how it can affect their ability to save for goals … As time passes, the importance of money and choices around finite resources should, and will, naturally have more gravity.”
No matter what age your child is, there are a few credit card basics that they should understand.
Using credit cards responsibly has benefits
Credit cards have become a common method of payment in addition to cash mainly because they are thought to be more convenient and more secure. Plus, credit cards are used more often for credit-building.
Two common security benefits included with credit cards are fraud protection and zero liability. Children should be aware that most cards feature tools that protect their identity by the issuer and, if someone steals their identity and makes a purchase, typically they won’t be liable for it. This can be more reassuring than paying with cash, especially when making large purchases or for online shopping.
However, another major reason people use credit cards over cash is to easily build their credit score. Often, credit scores determine the kind of loan, house, car and even job you can have access to, but there are not a lot of avenues for building it. Credit cards give your children an opportunity to show how they handle debt without the weight of a large loan.
Bankrate Insight
The use of credit cards, invented in the 1950s with the launch of the Diners Club, has slowly but surely grown in popularity over the years. According to the Federal Reserve 2024 Diary of Consumer Payment Choice, overall payments made with cash fell to 16 percent, while 32 percent of payments made per month were with credit cards.
Credit is a loan
It’s easy to adopt an “out of sight, out of mind” mindset with credit cards. Unlike cash or debit cards, credit card limits are typically much higher than the cash cardholders have on hand, so most people are not used to that kind of accessibility. And having the ability to get something you want now and paying it off monthly seems like an easy compromise and can be very tempting, especially for new cardholders.
Children should learn that credit cards are a type of loan that must be paid off. Using a card to pay for purchases they can’t afford can quickly lead to bad spending habits and out-of-control debt.
All cards come with fees
Every credit card comes with some fees, even the ones that claim “no fees.” Often cards that boast no fees include no-annual-fees cards, cards that don’t charge foreign transaction fees or cards that waive the first late payment fees. That said, every card, especially the best cards, will come with some fees, whether it’s for cash advances, return payments or in the form of penalty annual percentage rates (APRs). Make sure your child reads the card’s fine print and is aware of all the potential fees (and how to avoid them).
Debt is expensive
On the surface, having a set, low monthly payment for a multitude of purchases may not seem like a big deal. After all, the purchases are being paid for while giving you space to breathe. Yet, children should learn that when they calculate the actual cost of the purchases along with the interest being added by the card issuer, it can cost hundreds, if not thousands, of dollars in addition to whatever they paid for the items. And having high debt can negatively impact their credit score, which might lead to fees, affect their ability to own a car or house and, in some cases, can influence their chances of getting a job.
By teaching your children to pay their balance in full every month, they can avoid interest, save money and make sure their credit score stays high. It also helps them to avoid falling into a debt cycle.
Good habits are simple and consistent
Finances can be complicated, but children should understand that the key to making sure they stay in a good place is consistency. This includes making payments on time, paying off the balance in full every month, keeping balances low and monitoring their credit score.
A few good habits can save your child time and money in the long run, so make sure to reinforce these habits as much as possible.
Credit card terms to know
There are many credit card terms, and it’s great to be aware of all of them. However, here are a few to get you started:
Important card terms
- Balance
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how much debt you have on your card
- Credit limit
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the maximum amount you are allowed to spend on your credit card
- Annual percentage rate (APR)/Interest rate
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fee applied to your balance for borrowing money from the issuer; APR is the total annual amount of interest you would be charged within a year. Both terms are usually used interchangeably.
- Credit score
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a number that is calculated to determine your “credit worthiness” (i.e. how well you use and pay back credit). The most common scores are FICO and VantageScore.
- Late fee
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a fee applied when you miss a payment deadline, usually around $40
- Minimum payment
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the minimum you can pay per billing cycle toward your credit card’s balance to avoid late fees or a penalty APR (but the remaining balance will accrue interest)
- Statement
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a document, typically generated for a 30-day billing cycle, that lists your transactions, balance, terms for your card, interest rate and sometimes your credit score
- Billing cycle
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the length of time between the last and the current statement dates, typically 30 days
Lesson plans for ages 5–8
For young children, it’s best to keep lessons simple and immersive. Make sure to balance knowledge with play to keep them engaged. Finances are confusing at any age, so be prepared to answer questions. If you’re unsure, research the answer together.
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1. Using a credit card
Show how you use a credit card when making a purchase in person and online. Explain credit limits and how the card now has a balance on it after you make purchases, increasing how much you owe the issuer and lowering the credit limit (or how much you can spend on the card).
2. Paying back a credit card
Show how to pay off a credit card and how it lowers the balance and raises the credit limit again.
3. Consequences for missed payments
Show how fees will be added for late or missing payments.
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Activity goal: To successfully make a payment with a credit card and pay off the card
Materials: A table, 5–10 items to “shop” for (this can be anything you have around the house), a cash register toy (optional)
Estimated time: 30 minutes to 1 hour
Give a child a fake credit card (this can be a toy card, library or grocery card, etc.) and give them a limit. Set up a small shop with a few items both under and over their limit. Have the child pick an item and pay for it using the card at the cashier.
After they make their purchase, go to another area where they can make a payment on their card. For this, you can have them pay the cashier in person with fake money or simulate paying over the phone or online. Accuracy is not the priority. Instead, you want them to understand that they have to pay back what they spent.
Lesson plans for ages 9-12
At this age, your child can start grasping more complicated concepts, such as interest and fees. Credit cards are an easy way to get into debt because the balance can be high and the money “invisible.” Unlike cash or debit cards, the amount you can spend isn’t limited to how much you have at the moment. You want to make sure that they know the “invisible” money they spend is directly tied to their ability to pay it back and how important it is to do just that.
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1. Using a credit card
Show how you use a credit card when making a purchase in person and online as well as how to make a payment online. Explain credit limits and how the card now has a balance on it, lowering that credit limit.
2. Interest and fees
Explain common fees included on a credit card, including a late fee, annual fee, foreign transaction fee and ongoing interest rate (you can set this at the average credit card interest rate of 20 percent).
3. Consequences for missed payments
Show how fees will be added for late or missing payments.
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Activity goal: To practice how to manage a credit card in different situations
Materials: Markers, paint, printer paper and pen
Estimated time: 3 hours
Print or create art pieces for “auction.” Your child will be given a limit of $1,000. They have to bid on art under that limit. Each player must make at least one purchase for the round to end. After every auction round, the children will be given a “paycheck” of up to $100 to make a payment toward their purchase. They can pay up to $100 or a minimum of $10. They can also choose to skip the round but must pay a fee of $15 at the end of the game. As the banker, you keep track of their spending and payments.
Have them play the game for at least three rounds. At the end, have them calculate their final balance. The winner of the game is the player with the most art and the lowest credit card balance. If they go over their limit at any point in the game, they automatically lose.
Lesson plans for ages 13-18
The teenager stage is marked as a time of independence. They’re often preparing for large milestones, such as their first job or college. At this stage, you want to focus on teaching your teen how to plan for purchases they want to make, whether necessary or impulsive.
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1. Using and paying back a credit card
Show how you use a credit card when making a purchase in person and online. Explain credit limits and how the card now has a balance on it, lowering that credit limit. Show how to pay off a credit card and how making a payment lowers the balance and raises the credit limit again.
2. Interest and fees
Explain common fees included on a credit card, including a late fee, annual fee, foreign transaction fee and ongoing interest rate (you can set this at the average credit card interest rate of 20 percent).
3. Cost of carrying a balance
Walk your teenager through a spending example of how much it will cost to carry a balance long-term. Show how this can lead to a debt cycle when additional purchases are made.
4. Credit scores
Explain the overall purpose of a credit score and the difference between each level of credit. Show them how to check their credit score.
5. Consequences for missed payments
Show how fees will be added for late or missing payments.
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Activity goal: To plan for a purchase and understand the full cost of it
Materials: Calculator, notebook and pen or phone
Estimated time: 1 hour
Take your pre-teen/teenager to one of their favorite stores and have them find one item they like, big or small. Give them a credit limit of $2,000. Have your teen calculate the cost of purchasing that item if they only made the minimum payment with a 20 percent interest rate or use a credit card payoff calculator. From there, have them calculate how much it would be to pay for the item over 12, 18 and 24 months as well as the amount of interest they would pay.
Lesson plans for ages 18+
With your child entering adulthood, it’s crucial they understand that credit cards are often part of a larger budget, either allocated to specific purchases or used as a go-to card for everyday expenses. Learning how to balance larger, uncommon purchases, like a laptop, with regular use of their credit card is key in managing their debt.
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1. Using and paying back a credit card
Show how you use a credit card when making a purchase in person and online. Explain credit limits and how the card now has a balance on it, lowering that credit limit. Show how to pay off a credit card and how making a payment lowers the balance and raises the credit limit again.
2. Interest and fees
Explain common fees included on a credit card, including a late fee, annual fee, foreign transaction fee and ongoing interest rate (you can set this at the average credit card interest rate of 20 percent).
3. Cost of carrying a balance
Walk your teenager through a spending example of how much it will cost to carry a balance long-term. Show how this can lead to a debt cycle when additional purchases are made.
4. Rewards strategies
Explain credit card perks like cash back, travel benefits and card protections. Give examples of how to use them, stressing they should resist overspending just to earn rewards.
5. Credit scores
Explain the overall purpose of a credit score and the difference between each level of credit. Show them how to check their credit score.
6. Consequences for missed payments
Show how fees will be added for late or missing payments.
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Activity goal: To plan for a large purchase and balance it within a budget that includes recurring purchases
Materials: Computer or phone, notebook and calculator
Estimated time: 1-2 hours
Have your young adult plan for either a large purchase or vacation of at least $1,000 with a credit limit of $5,000. Have them calculate the monthly payments for 18 months on a credit card with a 20 percent interest rate for this purchase as well as five other recurring payments (subscriptions, restaurants, etc.). Have them create a budget and payment plan that avoids fees and high credit utilization, or the the ratio of how much you owe across all open revolving lines of credit in comparison to your total credit limit.
You’ll also want to go over the credit card terms and conditions page with them so they know what it looks like and what it means. You can show them a terms and conditions page for one of your cards or a card they’re interested in getting.
The bottom line
Teaching children about finances and credit cards can be a daunting task, but the best thing to do is to start. Make sure to research the topics you want to teach them. Reflect on your own experiences and what you want them to learn. If you can’t quite get the lesson right or keep them engaged, you can always try again another day. Most importantly, leave room for questions and answer them with simplicity and empathy.
“Teaching kids about money can be both fun and effective when you incorporate it into everyday activities. For example, take your child to the grocery store and turn the trip into an interactive game. Ask them to help decide which items to buy based on their price and your budget,” advises Weil. “With everything that could come between you and your kids, you don’t want money to come between you now.”
Credit cards and money can be a confusing topic, and they won’t understand everything overnight. However, if you keep engaging them and help them understand that budgeting is going to be part of their everyday life, they’ll have a better chance at navigating their money and credit with ease as an adult.
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