Did you know that more than 50 percent of all purchases in the United States are transacted with a plastic card?

When I share that little factoid with parents their quick response is often, “Really? I had no idea". The follow-up question however usually gives them cause for pause.

How often do you explain to your child the difference between using a credit card and a debit card? And more specifically, your decision process for using one over the other?

According to CardTrak, between Thanksgiving and Christmas Day, Americans will use a plastic card for $108 billion in retail purchases. That’s more than $3 billion of purchases a day!

Sure, they are convenient, and yes, you will get frequent flyer miles, but the next time you pull a plastic card out of your wallet stop and think about the transaction from the perspective of a six, eight, or 10 year old.

Transacting in plastic is a very abstract concept for a child to understand. While they probably know the item you’re purchasing costs something, it is highly unlikely they will understand what happens after your card is swiped through the machine.

Most kids don’t understand that when you use a debit card the money is deducted immediately from your account -- compared with a credit card when the bill arrives at the end of the month.

One thing they do understand (especially this time of year), is that mom and dad use plastic cards for a lot of purchases.

Given that the average college student has four credit cards and $3,000 of credit card debt, my hunch is that not many of them have learned the difference between debit and credit.

Look for teachable moments to help your child learn the difference between debit and credit cards.

Start by using cash for basic transactions. Show them how much money it takes for a routine trip to the grocery store. Next time, use your debit card and show them the receipt for your transaction and how it gets deducted from your account. Complete the lesson by using a credit card. Show them the bill at the end of the month and more importantly how you pay it off.

The lesson might seem basic to you, but it will be enormously valuable to your child as they learn how the payment process works with different financial tools.

How often do you explain the difference between cash, debit and credit transactions to your child?

Once is definitely not enough. I would encourage you to repeat this lesson many, many times throughout the year. A side benefit: by modeling the different possibilities for your child, you can reflect on your own financial habits and values.

The Money Talks question is designed to build on the Share-Save-Spend tip for the week and can be used as a springboard for additional conversations with family and friends.

In 2004, Americans will charge more than $2.4 trillion on debit and credit cards. (Source: CardTrak)

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