Cashing In Q&A columns

5 lessons to teach kids how interest works

While your kids may readily grasp the concept of putting money aside for a rainy day, getting them to understand how interest can add to their wealth or leave them drowning in debt may require more novel explanations.

Try comparing interest to the idea of renting, suggests Elisabeth Donati, owner of Creative Wealth International, a Santa Barbara, Calif., company that holds financial summer camps for children. The next time you rent a movie tell them, “we had to pay a rental fee in order to use this video. When you put your money in the bank, the bank pays you a rental fee to use your money,” Donati explains. Here are five exercises you can use to make the concept more real for your kids (click through each lesson).

See related:6 tools to help parents teach kids about money, Teaching kids good money habits by example, Preparing kids for credit card management


What’s up next?

In Cashing In Q&A columns

Financial denial: When avoidance creates money mayhem

In our final installment of money disorder stories, we focus on financial denial -- when the anxiety of dealing with debt is so great that you just check out

Published: April 22, 2011

See more stories
Credit Card Rate Report Updated: October 16th, 2019
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.