A recent study reveals that 42% of Americans have accrued more credit card debt since the COVID-19 pandemic began. It appears that COVID-19 has created unparalleled financial challenges for both individuals and families, and this is especially true when it comes to their credit card balances. And while this is an unfortunate situation, this is not a new phenomenon; credit card debt has been an ongoing problem for a long time.

The purpose of this guide is to empower parents by offering a step-by-step process to help their children develop a positive relationship with credit. We’ll give parents the tools they need to guide their children – to give them a clear understanding of financial literacy by the time they graduate.

Education and Habit Formation Are Key To Financial Literacy

It’s important that parents understand their children are closely watching and modeling their own financial behaviour. Studies reveal that children as young as three and five years old already display an understanding of how their actions influence future outcomes, while children at age 7-years are already developing habits. This shows that the most effective way of helping children learn positive habits is to ensure parents themselves are modeling key financial behaviors.

Financial Education

It’s really important that, as children get older, they learn about complex financial concepts like credit scores and compound interest.

Preschool and Early Elementary

Part 1: Learning About Money

Children this young learn best through hands-on tasks, so money activities should include lots of real life experiences.

Different Types of Money

These lessons should include helping young children understand there are various kinds of money, like coins, paper money, and credit and debit cards. They should also be learning about the value of different types of currency.

What Money is Used For

It’s not only important that parents teach children that money is used to buy items we need or want, it’s also important to teach that money is used to help other people.

How We Get More Money

Because of our use of credit and debit cards, younger children are inclined to believe that money comes out of nowhere – that there’s an unlimited supply. It’s up to parents to explain that there is a limited supply and we can’t have everything we want.

Part 1: Good Financial Habits

Saying no, and explaining why, are important concepts for children to learn.

Spending Habits

One of the most important words children need to hear is the word ‘no.’ As a parent, it’s up to you to determine if your children have the idea that money is used to purchase anything and everything they ask for.

Saving Habits

The best habit parents can teach their young children is to save a portion of their income – just this one habit can have a positive effect throughout their lives.

Sharing Habits

Children should observe their parents’ healthy attitude towards money, including the concept that money is not only for them – it’s also used to help others.

Elementary School

Part 1: Saving Habits

During this stage of a child’s life the main habit to emphasize is saving.

Open a Savings Account

Saving money should be a positive experience – opening a kid-friendly savings account at their local bank should be a huge event for your child.


At this age children start wanting more expensive items, so parents can use a money-bank or savings jar with photos of items they’re saving up for. Watching their savings grow can be a huge motivator for children to save, while achieving a money goal can be a valuable lesson to last their entire lives.

Part 1: Spending Habits

At this stage of their lives, children are learning how to make decisions on spending.

Comparing Prices

Parents should teach their children about quality and quantity when it comes to price comparisons; the theory being that it sometimes makes sense to purchase a more expensive item due to its higher quality or larger quantity.

Part 1: Becoming Financially Responsible

 At this stage of their development, children should be learning to become responsible for their own money. They’ll learn valuable lessons, often from making mistakes.

Click here to read the rest of this article written by experts  Pat Collins and John Halloran