American Credit Foundation Suggests Tips for Teaching Children the Importance of Money

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The holiday season is a good opportunity to make children aware of spending and responsibility.

Though parents face their children’s seemingly insatiable desires to spend on a daily basis, Christmas commercialization adds a unique twist to their barrage of purchase requests. The American Credit Foundation suggests utilizing the spending habits and issues of the holidays to give children a deeper understanding of where money really comes from. Reducing greed, instilling awareness and teaching good work habits in children will go a long way to creating financially successful adults.

According to Mike Peterson of the American Credit Foundation, there are seven ways to positively teach children about money.

*Start Early: The best way to start is when they’re young. As soon as they’re ready, teach them about coins, dollar bills, and their increments. Explain what “work” is, why you need money, what you do for your employer and how the work structure operates. Showing them the importance of money will help them to understand why they can’t have everything they see.

*Turn the Water Off: Counter the concept of money and spending with the idea of waste. Using the simple illustrations related to utility bills, compare electricity and water waste to unnecessary bills and spending. Explain how these wasted resources could be utilized for needed expenditures or uses. These simple and visible examples will help children easily understand that money is allocated for specific expense, not endless want.

*Differentiate Between “Want” and “Need”: Teaching children the difference between want and need is an important step in helping them decide what to do with their money. Begin by exploring what the children already have, whether their existing items can be repaired or revamped, how often they use specific items and what they truly need in comparison.

*Make Saving Fun: Using a common piggy bank, allow children to put coins into the bank after certain agreed-upon chores are completed. When the bank is full, work with the child to wrap the money into rolls and then take them to the bank. Setting aside some of the money for saving and some for spending, sign up for an ATM card and allow the child to make withdrawals from their own account.

*Give Them Purchasing Power: Take your child to the store with you and help them to understand prices and sales. This would work well with a list of gift items for family and friends. While establishing a budget with the goal of staying within that amount, allow them to decide which items are the wisest to purchase. Give the child a calculator and allow them to keep track of how much is spent. If for some reason it is necessary to override their decision, make sure they understand why. This will both broaden their sense of responsibility and improve their analytical skills.

*Teach Them Personal Responsibility: The simple concept of teaching a child how to care for and take responsibility for their personal possessions helps them to understand value. Value is crucial in appreciating worth. Once a child really appreciates worth, the concept of money will fall into place.

*Let Them Work: Let children earn money in small ways around the house, rather than just giving them a weekly allowance. From cleaning up their room to mowing the lawn, jobs are essential in teaching children that money will never grow on trees. Pay a fair wage and don’t overcompensate, but make sure the child has enough incentive to want to work, much like an adult.

Teaching children from an early age about money can save you and them a lot of trouble in their later years. Remember that children, as adults, most appreciate those things that they’ve worked hard to get. You aren’t doing your children any favors by buying them everything they want. A little financial instruction can go a long way to helping your children become financially responsible adults.

About American Credit Foundation

Mike Peterson is the Vice President and a Credit Counselor with American Credit Foundation. Since 1999, American Credit Foundation has assisted thousands of individuals and families with their financial situations by providing seminars, education, confidential counseling services, and, when applicable, by establishing debt management repayment plans. The Foundations credit counselors are certified through the National Institute for Financial Counseling Education. is the official website of the American Credit Foundation and contains a number of free consumer resources. For more information, please visit

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