Credit may seem like a very complicated topic to teach children, but like so many other lessons, it’s best learned early. Here are some popular tips on teaching credit and financial literacy to your younger students:
Start with a budget.
Incorporating reward-based games in the classroom is a great way to introduce how to handle money.
Mrs. Charles, my second grade teacher, hosted a weekly marketplace on Friday afternoons during our lunch time where we were encouraged to “shop” for small items using the points we earned during the week through following directions and good behavior. Growing up without an allowance, this was my first hands-on exposure to an “income,” and I was able to budget my points to get as many items as I could afford.
Children may experience peer pressure from their friends when creating their budgets to buy something cooler, or to spend faster instead of saving towards a big-ticket item. Encourage them to stick to their budget and to avoid pushing their shopping desires onto their friends. Teaching positive spending habits before introducing the concept of credit is crucial to setting them up for financial success.
Keep it private.
Privacy and security are key concepts to introduce when talking about credit. Talk to your students about how important it is to not share their information with other people. Everybody uses their own and it’s dangerous to give credit card information to a stranger.
Remind your students that they’re spending real cash, even if it doesn’t look like it. If they give away their information to somebody that can’t be trusted, that person can steal their money – and can even pretend to be them, hurting their credit score and making problems for them in the future.
Credit scores are like grades.
While there are lots of risks to using credit that your students need to know, it’s also important for them to understand that they can benefit from it. Credit scores are kind of like grades – when you perform well, you get a good grade.
Developing good habits like paying off your debt every month and only charging purchases to your credit card that you already have the money to pay can boost your credit score. The better your credit “grades” are, the easier it is to do cool stuff like buy a new car or get your own apartment.
If you feel like simply talking to them about their credit score isn’t enough, here’s a sure way to grab their attention: pizza.
It’s a tool, not a toy.
Using a credit card can be really fun. It can feel like you’re getting things for free, and it’s so easy to swipe it again and again. Even as an adult it’s hard sometimes to control spending.
Acknowledging to your students that spending on a credit card can be exciting can prepare them for their own shopping experiences. However, it’s important to also emphasize the role of a credit card as a tool which must be used carefully.
Charging lots of items to a credit card is easy and can boost your credit score if you pay them off quickly, but charging too much at one time can actually cost more money. When you leave a balance on your credit card at the end of the month, the company charges you more to encourage you to pay them back faster. It’s really easy to spend more than you can pay back, so it’s important to put limits on your shopping.
Ask their parents.
Involving their parents in the learning process enables your students to take the lessons home with them. You could even suggest they put their children on their credit card as an approved user with specific instructions on what they can buy and how much they can spend.
Once you have helped them structure their budget, made them aware of the risks associated with credit card spending, and suggested boundaries for their shopping behaviors, the only thing left for them to do is practice. While there are many creative strategies for teaching financial literacy in the classroom, the best way for many children to learn is by making the lesson hands-on.
Vanessa Baioni is an intern for the K-12 Marketing team.