My FICO logo $$$$$$$$$$$ 9876 5432 1234 5678 CREDIT CARD KELLY SMITH 11/26 My FICO logo
SCORE
Skip Navigation
  • Why FICO
  • How It Works
  • Pricing
  • Education
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Start Plan
 
  • Why FICO
  • How It Works
  • Pricing
  •  
  • Education
    • Credit Education
    • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Scores Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
    • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
    • Blog
    • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
    • Know Your Rights
    • Identity Theft
    • FAQ
    • Glossary
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • How Can We Help
    • Monitor Credit & Identity
    • Mortgages
    • Credit Cards
    • Auto Loans
  • Credit Education
  • Community
  • Support
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • Credit Education
  • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Score Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
  • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
  • Blog
  • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
  • Know Your Rights
  • Identity Theft
  • FAQ
  • Glossary
View all Personal Finance articles

Financial Literacy for Future Generations: 5 Lessons to Teach Kids About Money

Teaching your child key money lessons when they are young could help set them up to be more financially successful as adults.

Keeping your child safe and healthy is only the beginning of your journey as a parent. It's also your job to help your son or daughter develop the many skills they'll need to navigate the world as an adult.

Because finances have such a big influence over day-to-day life, it's critical to teach your children how to manage money and credit successfully. If you're not sure where to start your child's financial education, don't worry. Below are five key lessons about money and credit that can help you give your son or daughter a good financial foundation.

1. How Earning Money Works

One of the first lessons you may want to teach your child about finances is how earning money works. A great way to accomplish this goal is by giving your son or daughter some hands-on opportunities to bring in cash for themselves.

Consider setting up a series of tasks for your child to complete throughout the week (e.g., chores, reading books, etc.). Once your son or daughter successfully completes enough tasks, they receive an allowance for their efforts. You can track chores and allowance with a simple sticker chart on the refrigerator or through one of the many allowance apps you can find online.

For older children and teenagers, you may want to mix in some money-earning opportunities that you don't have to pay out of your personal bank account. For example, you could help your son or daughter look for a part-time job, host a yard sale, advertise babysitting or lawn care services, or even start an online business. Helping your child earn his or her own money can be incredibly rewarding—not only financially but also in terms of your child's self-esteem.

2. The Importance of Budgeting

Training your child what to do with the money they make maybe even more important than teaching them how to earn it. It's critical to show your child the value of a budget.

There are two effective ways you can help your son or daughter develop the habit of budgeting. First, let your child be involved in your own household budget. Sit down together and go over the different categories you use to divvy up your monthly income. Next, walk your child through how you decide where to spend the money you earn.

When your child earns their own money, either through an allowance or another avenue, it's also important to teach them how to manage those funds. This is a great opportunity to illustrate the difference between wants and needs. Needs receive the priority when you create a budget. Wants, on the other hand, sometimes have to wait until you save up enough money to make them happen.

3. Saving Money (and Why Savings Matters)

As you budget with your child, remember to demonstrate the power of savings. Your child should learn that a savings account is a tool that can protect your family from setbacks and help you afford the things that matter most to you.

You can start teaching children the concept of saving money very early. All you need is a piggy bank or savings jar. If you want to take the lesson to the next level, consider adding on printable savings trackers. Savings trackers can help your child visualize progress toward a larger financial goal (like a new toy, video game, or even a first vehicle).

With older children and teenagers, a real savings account is a wise upgrade to the piggy bank or jar savings method. Be sure to take the time to explain how compound interest can grow the money they tuck away in savings even more.

4. Giving Money to Others

As you show your child how to earn, budget, and save their money, don't forget to include lessons about giving to others. The habit of charitable giving not only can help other people, but it can also benefit the giver as well. A study by Charities Aid Foundation found that 42% of people who donate money to charity do so because of the enjoyment they receive from giving.

If your budget allows, consider incorporating charitable contributions into your household budget. You can encourage your child to do the same with the money they earn. Most of all, you can let your child get involved in choosing the organizations you support.

5. How Credit Works

Last but not least, don't forget to teach your young one about credit. It's important to show your child how borrowing (and repaying) money works and how credit reporting and FICO® Scores fit into that process.

As you use a credit card, for example, you can walk a child through the fact that you have to repay the card issuer for that purchase. And explain how if you have the money in the bank to pay right away (by your next statement), you should be able to avoid interest fees.

When (and if) you feel your child is ready, you can consider adding him or her as an authorized user on your credit card account. Not only can becoming an authorized user on a credit card provide an opportunity for credit management practice, but it might also help your child build some credit history.

Bottom Line

In adulthood, the ability to manage money and credit can have a major impact on your overall quality of life. According to the Urban Institute, a mere $250 to $749 in savings makes families less likely to face eviction or miss a utility or housing payment when faced with financial issues like job loss, health problems, or income reduction.

On the other hand, bad financial habits like overspending, taking on too much debt, late payments, and failure to budget can create a lot of stress. For example, a recent survey by Fidelity found that 67% of couples who are concerned about debt are likely to argue about money.

When you teach your child wise money and credit management habits at a young age, you can give them a head start. Your son or daughter will be better equipped to lead a financially successful life thanks to your example.

Michelle Black

Michelle Black, Founder of CreditWriter.com is a leading credit expert, financial writer, and speaker with nearly two decades of experience. Her work has been featured with major outlets such as Forbes, Reader's Digest, and U.S. News and World Report.

Estimate your FICO Score range

Answer 10 easy questions to get a free estimate of your FICO Score range

740 - 790
Estimate for Free

Instant Access to Your FICO® Score

90% of Top Lenders Use FICO® Scores. Do you know yours?

Get Access Now!

Page footer

Products

  • Home
  • Why FICO
  • How It Works
  • Pricing

Learn

  • Education
  • Community
  • Support
  • Blog

Company

  • About Us
  • Terms of Use
  • Privacy Policy
  • Affiliate Program
  • Accessibility

Get Our App

  • Download iOS app on the App Store
  • fil_get
    Get Android app on the Google Play Store

Follow Us

  • Twitter
  • Facebook
  • Instagram

Credit Education

  • Credit scores
  • What is a FICO Score?
  • FICO Score versions
  • How scores are calculated
  • Payment history
  • Amount of debt
  • Length of credit history
  • Credit mix
  • New credit
  • Credit reports
  • What's in your report
  • Bureaus
  • Inquiries
  • Errors on your report?
  • Calculators
  • Know your rights
  • Identity theft
  • FAQ
  • Glossary

Copyright ©2001- Fair Isaac Corporation. All rights reserved.

IMPORTANT INFORMATION:

All FICO® Score products made available on myFICO.com include a FICO® Score 8, and may include additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.

PRIVACY NOTICE: When you visit this website we collect your browsing activities on our site and use that information to analyze and research improvements to the website, and to our products and services. When you register for our products and services, we also collect certain personal information from you for identification purposes, such as your name, address, email address, telephone number, social security number, IP address, and date of birth. Further information is available in our FICO Data Privacy Policy. For visitors with visual disabilities, access to this website, including our FICO Data Privacy Policy, is available through assistive technologies, such as BrowseAloud, JAWS, VoiceOver, Narrator, ChromeVox, and Window-Eyes. More details on software and accessibility are available at WebAIM.org.