4. Set ground rules

Credit cards may seem convenient for everyday expenses like movie tickets and pizza, but using them this way invites bad habits.

• Counsel your children to use credit only for big-ticket items (to avoid carrying around a lot of cash), telephone or Internet purchases (such as airline tickets, concert tickets or CDs) and emergencies.
• Start with a low credit limit on the account.
• Make sure your kids pay their balances each month with their money from a part-time job, allowance or gifts. This way they will learn only to charge what they can afford.

< previous step | next step >