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core concepts

It’s never too early or too late to start teaching children about money. Building good money habits early on will help kids better manage their finances in the future, setting them up for a more secure adulthood. Here is a breakdown of how you could approach financial education for kids by age group, and what concepts make the most sense.

Age group: K-2

What to teach: When kids see money come out of the ATM or see their parents swipe their credit card, they may not realize where money comes from or that it is a finite source. It’s important to teach them that money has to be earned by working.

How: Help them set up a bank account for saving, and make them work for their money. Give them a chore chart and an allowance for successfully completing their jobs. However, it’s important to delineate between their obligations as a member of the household, and chores that will help them earn allowances. It’s okay to expect your child to clean up after himself or herself, and to contribute to the household responsibilities without “pay.”  

Age group: Grades 3-6

What to teach: Everyone has a limited amount of money they can use to buy things they need or want. This is why it’s important to make smart choices about how to spend money. Saving is one of the best things you can do with your money.

How: Have your kids make a list of five things they need and then have them rank them in order of importance. Then have them do the same for things they want. Next, assess their lists and put in an estimated cost for each item. This will open their eyes and help them make smarter choices when spending their own money earned or received Stress the importance of setting a goal with savings, like saving for a new doll, DVD, or video game.

Age group: Grades 7-12

What to teach: Understanding credit cards and how they work can be confusing. It’s important that kids understand that credit is not free money. Continue focusing on saving for the future, especially before college.

How: For kids under 18, have them practice using credit by borrowing money from parents. Set up a credit limit, repayment terms, and a standard interest rate to familiarize them with these concepts. If they miss a payment, don’t hesitate to charge a small late fee. This will help teach them the cost of credit and the habit of paying on time. It will also help them learn the basics of credit before mistakes can harm their credit report and score.

(continue on to Jobs and Allowances: How Kids Can Earn Money)...

American Consumer Credit Counseling is a non-profit credit counseling and debt management center for individuals and families who want to settle credit card debt and learn to live life debt free. In our free counseling sessions, our certified credit counselors help consumers make a debt reduction plan for eliminating credit card debt over a period of time – usually five years or less. After reviewing a client’s financial situation, counselors work with consumers to find the best path to credit card debt elimination. This may involve providing education about credit card debt and bankruptcy, comparing debt consolidation vs chapter 13 bankruptcy or debt settlement services, and answering basic debt reduction and debt consolidation questions, such as “what is credit counseling?” and “how can I protect my credit score?”

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