Simplest Way To Teaching Kids About Credit Cards

Benefit or their worst nightmare

Teaching kids about credit cards early on will only work to their benefit. It is easily one of the worst places to be when you are bogged down by exorbitant fees and interest rates.

At one time or another, most of us have been there but if we are able to teach our kids through simple ideas and powerful lessons, they will recognize the pros and cons and pitfalls of these.

Start off with you being the credit card

A simple way for you to do this is by letting your child “borrow” from you for something they want.

Let’s use a toy or game that is worth $50 as an example.

Before allowing your child to make the purchase using this money, set some ground rules for borrowing that money.

Make a list of chores with a monetary value (if they are unable to work a paying job). Let’s say mowing the lawn is worth $20, washing the windows is $10 and vacuuming the house is worth $10

You can work any combination of this to equate the price of the game until that amount is met and you are satisfied with the quality of work performed.

Here is what you do if fulfill the agreement

They performed the task, paid off what they owed you in full and they get their toy!


Do this a few times a year with different items such as snacks, lower cost toys or anything that is a “want” versus a “need”.

After you and your child are comfortable with the amount requested and the chores that are accomplished, you can slowly increase the amount they are able to borrow.

The catch is they will need to do more chores to fulfill their obligation.

Proceed to the next section to know what happens if they don’t…

Here is what you do if they don’t fulfill the agreement

Teaching kids about credit cards may be a bumpy road, but that’s OK! The idea is that they learn from their mistakes early on! They will quickly realize that it is best to not go over the “due date” of what they borrowed. Make sure you let them know the consequences before borrowing!

If they do not accomplish all of these chores to your standards, they will have to do them again the following month.

Guess what?

They are unable to buy any more “wants” such as toys, games or snacks until they are caught up with that initial purchase.

How to make it work like credit

When they accomplish the task, repay the borrowed money within the appropriate time frame, feel free to expand or contract your “credit” based on how well they are doing with it.

If they are accomplishing them with flawless effort, try bumping up the amount they can use to purchase an item.

If they are not, then allow them to use less credit.

Have fun with this and track your efforts!

Either way, they are learning and you are successfully teaching kids about credit cards!

Here is what you do next

  1. Start coming up with age appropriate chores they can do, together
  2. Explain how they can get something they want by doing those chores and what happens if they don’t do them all within the month
  3. Assign a monetary value to each chore and the frequency to be done (Example: Lawn can be done twice a month)
  4. Keep an ear out for when they want or ask for something that is not a need
  5. Implement the above strategy
  6. Repeat this exercise

You are both learning from each other. When teaching kids about credit cards, be patient with them and know that you directly improving their ability to understand how credit works at such a young age!