This article was originally published by Main Street Nashville on May 9, 2022.

One of the more important responsibilities we have as parents is teaching our children how to manage money, which includes showing them how to develop savvy saving and spending habits.

As parents, we often forget that our children are watching when we use our credit card. They see how easy it is to buy (almost) anything we want. What they do not see, however, are the problems that could pile up quickly if the debt owed on that piece of plastic is not repaid in a timely manner.

That’s why it is essential that your children learn how to spend wisely before they strike out on their own. Experian’s 2021 State of Credit report found that the average Gen Z consumer (ages 24 and younger) carried $2,312 in credit card debt. The balance is nearly 50% more for college students, according to CollegeFinance.com, which estimates that college students on average owe $3,280 on their credit cards.

With school nearly over, use this summer (when your kids do not have any homework assignments) to teach a few “courses” about money management. Here’s how:

1. First things first: have your child open a savings account

One of the best places to begin helping your children manage money is by having them open a savings account, which opens the door to great teaching moments. Teens get to learn firsthand how to deposit money from an allowance or a part-time job, and you can help them set savings goals so they can watch their money grow. Before opening an account, look for ones that are specifically designed for kids that have zero or minimal monthly fees and low initial deposit requirements. (Ascend, for example, has a youth account where we donate the first $5 when an account is opened.)

2. Begin the credit journey with a secured credit card

One effective way to introduce your young adult to using credit sensibly is by having them start with a secure credit card. This type of card is similar to a traditional credit card, but the credit limit (and the amount they can charge to the card) is based on a security deposit that is required to open the account. A secure credit card is a great tool to help your college-age kids begin building a strong credit history.

3. Teach the next generation how to use a credit card responsibly

When used wisely, a credit card provides many benefits. It’s easy to use for most purchases and certain cards provide cash-back rewards, to name a few examples. Most adults, however, have heard their fair share of stories involving young adults who have run into serious financial problems because of credit card debt. That’s why it is important that young people learn how to use a credit card responsibly. Talk about why it should not be used for impulse purchases (like clothing or the last electronic gadget) or any purchase so large that the cost can’t be covered when payment is due in about 30 days. And stress the importance of paying the full balance each month and to avoid missing a payment and incurring expensive late fees and interest charges.

4. Show them how credit scores and credit reports work

If you want to kick it up a notch, have discussions with your son or daughter about credit scores and credit reports. Talk about the factors that go into determining a credit score, such as payment history, credit usage/utilization, credit history length, credit mix and new credit. Let them know that having a poor credit score could prevent them from renting an apartment or result in higher premiums for auto insurance.

Getting into credit card debt is one of the easiest and most costly financial blunders young adults make. Teaching our young people, especially while they are still in the process of creating their spending habits, how to use a credit card responsibly will help them develop spending habits that will last a lifetime.