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Give Your Kids a Head Start by Teaching Them About Saving Money and Building Credit

teaching kids about saving money

As parents, we have a responsibility to send our children out into the world armed with certain knowledge. From knowing how to do laundry to having a basic understanding of how finances work, we want to do right by our kids. But while many of us want to do these things, knowing how to do them-and do them well-can be a whole different matter.

As a parent to three young children, I am working hard to make sure that my children learn what I didn’t. I graduated college with $31,000 in student loans, and racked up $1,500 in credit card debt shortly after. I have worked hard to dig myself out of this financial hole. I plan on passing along the lessons I have learned to my children when it comes to saving and to using credit wisely. Here is a general outline of what (and why) I am going to teach my kids about money

Start with Bank Accounts

A bank account can be a great tool to get your child started on the road towards saving. While piggy banks are good for younger children, for older kids, a savings account provides more valuable insights that can help them understand how money works and the power of saving.


Teaching kids the importance of saving is even more critical given that nearly one in three American adults has no emergency savings. Introducing the concept of saving when your child is old enough to understand it but still relatively young, between the ages of 5 to 12, is vital.

If possible, take your child to a local bank rather than banking through an online-only establishment. Making a deposit and seeing their balance grow can encourage your kids to save in a way that numbers on a screen will not. Show your child how the interest is growing on his or her account, and explain how interest works; that lesson will be important for the future, particularly as you begin to explain how credit cards work.

Start by encouraging your child to set aside a certain percentage of his or her income or allowance to save each month. A good rule of thumb is 10 or 20%, which is what I encourage with my eight-year-old son. If he receives $50 on his birthday, he may choose to put $5 or $10 of that money into his bank account. While this may not result in your child saving thousands of dollars, that isn’t the goal. Getting your child into the habit of putting aside a certain percentage of money into savings can help them save automatically in the future, when the stakes are higher.

While your child is setting money aside, help him or her save for both short and long term goals. For example, my son wants to save up for a new bike, which is a long term goal, but he also wants to save money to spend when we are on vacation. Having a savings account can help your child differentiate between these two types of goals; perhaps a jar or piggy bank can be used for shorter-term goals like vacation money, while the bank can be used for bigger goals like a bike or a video game system.

Bank accounts can be a great way to teach your kids how to save and plan for the future. It is a great way to help them get in the habit of saving, and to learn to delay gratification for things that they want.

Lead to Credit Cards

If you have been teaching your kids about saving through bank accounts, then the next step of financial learning should not be daunting: learning about credit cards. This is a big topic. After all, even some of us Millennials don’t fully understand credit cards.

Ideally, when you opened a savings account with your child, you talked to him or her about interest, and how interest earned on deposits helped their savings grow. Now it is time to flip that lesson to talk about credit cards.


Credit cards are not inherently bad, and are a useful financial tool that can help build a credit history. Explain to your kids that just like interest can be used to help them grow their savings, when they put money on their credit cards that they don’t pay off, the banks charge interest. That interest will grow in the same way, and it will grow at a much higher rate – so much so that it may be very difficult to pay off. Older kids will likely understand the concept of compound interest, while younger kids may need a simpler explanation.

Teach your kids the fundamentals of how credit cards work, and how they impact their credit score. Helping them understand these basics can help them build a solid foundation for their future, and avoid some of the pitfalls that credit cards can bring.

While financial literacy is a difficult subject to tackle, starting early is a tremendous asset when it comes to teaching lifelong habits. Start your kids with a bank account, and move onto credit cards as they get older – and help them on the path to a bright financial future.

This article was reviewed and approved by Rachel Wise, CEO of educationandbehavior.com.

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