Talking to children about using credit cards can be challenging, especially for parents who never received the same financial literacy lessons from their family or who have struggled with credit card debt.

But financial experts say it’s an essential conversation to have — especially before your child goes away to college or moves out to live on their own — to head off financial mistakes. Here are five habits to instill in your children as they start using credit cards:

Track spending

Manually recording spending might sound extreme, especially when apps or websites can show the statement at any time. But Jared Tanimoto, founder of Ascent Wealth Advisors in Newport Beach, Calif., said it’s an important step to take for credit card newbies to establish a solid habit of knowing exactly where the money is going and to avoid surprises at the end of the month. 

In fact, it might even help to share your own credit card statements with your children, said Angie Furubotten-LaRosee, a certified financial planner in Richland, Wash. That can help spur a conversation about how you avoid credit card debt or reasons you have carried a balance.

Embrace budgeting

Another financial habit to encourage a young adult to embrace: sticking to a budget, such as the 50/30/20 method, which is spending 50 percent of take-home pay on needs, 30 percent on wants and 20 percent on savings and debt payments.

“Think of your credit card purchases as using cash,” said Kelly Reddy-Heffner, a financial planner in Greencastle, Pa. “If you don’t have the cash already available, wait 24 hours to decide if the purchase is necessary.”

Avoid fees and interest

“You’re not ready to use credit cards unless you’re ready to pay for it,” said Jaime Quiros, certified financial planner and portfolio manager at FBB Capital Partners in Bethesda, Md.

In other words, it’s important for those just starting their financial lives to know that paying off the balance in full each month is critical to avoiding interest and fees. Making on-time payments will also help build their credit score, which they will need when they are ready to take out other loans, such as a mortgage or auto loan.

Keep credit cards to yourself

While college students tend to share everything from textbooks to germs, credit cards shouldn’t be passed around. The same goes for parents and kids, Quiros said. Because students often aren’t able to take out a credit card in their name unless they earn income and have a credit history, some parents share a credit card with their children, either by adding them as an authorized user on their existing credit card or co-signing on a student credit card.

This approach can go wrong if overspending ends up hurting their parents’ finances. Instead, Quiros recommended that parents take out a new credit card with a low credit limit, so even if the child overspends, the potential damage is reduced. Parents could also consider a secured credit card, which requires an upfront security deposit that is usually the credit limit.

Pick the right card

Compare credit card offers and reward programs to find the one that will pay off for the spending that the student expects to do most.


Kimberly Palmer is a writer at NerdWallet. E-mail: Twitter: @kimberlypalmer.