Financial literacy activity
Credit and Borrowing
Borrow a toy from a family member, play with it, then give it back with a thank-you. Practice keeping the borrow-and-return promise!
Materials and setup
- play money
- paper
- pencil
- cardboard for credit card
How this changes by age
Pre-K (ages 3–4)
Borrow a toy from a family member, play with it, then give it back with a thank-you. Practice keeping the borrow-and-return promise!
Steps
- Borrow a toy from a family member. Say: 'May I borrow this? I promise to give it back after I play.'
- Play with the toy for a few minutes, then return it. 'Thank you for letting me borrow it!'
- Discuss: 'Borrowing means using something that belongs to someone else and giving it back.'
- What happens if you do not give it back? 'The person might be sad and not want to lend again.'
- Draw a picture of yourself borrowing and returning something.
Learning objectives
- Understand that borrowing means using something and returning it
- Practice asking politely to borrow and saying thank you
- Recognize that keeping promises about borrowed things builds trust
Kindergarten (ages 5–6)
Explore borrowing with play money IOUs! Write 'I Owe You' notes when you borrow, and learn that borrowed money must be paid back. Discover why trust matters in lending.
Steps
- Set up a 'bank' with play money. Child wants to buy a toy but is 3 coins short.
- Bank lends 3 coins. Child writes an IOU: 'I owe the bank 3 coins.'
- Child 'earns' coins by doing tasks. When they have 3, they pay back the bank.
- Discuss: 'What if you borrowed and never paid back? The bank would not lend to you again.'
- Practice: write IOUs for 3 different pretend loans. Pay each one back.
Learning objectives
- Understand that an IOU is a promise to pay back borrowed money
- Practice the cycle of borrowing, earning, and repaying
- Recognize that paying back builds trust and future borrowing ability
Early elementary (ages 6–8)
Learn how credit works through a pretend credit card system. Borrow now, pay later, and discover what happens when interest gets added. Track your balance and learn why paying on time matters.
Steps
- Create a pretend credit card from cardboard. Child 'buys' items by swiping the card and signing a receipt.
- Keep a running balance: item costs are added to the bill. After 5 purchases, calculate the total owed.
- Introduce interest: 'If you do not pay the full bill, you owe extra next month.' Add 10% to the unpaid balance.
- Scenario: pay the full bill versus only paying half. After 3 months, how much more do you owe with partial payments?
- Discuss: 'Credit is useful for big purchases, but paying on time avoids extra charges.'
Learning objectives
- Understand that credit means buying now and paying later
- Calculate how interest accumulates on unpaid balances
- Compare the cost of paying in full versus making partial payments
Upper elementary (ages 8–10)
Dive into the world of credit scores, responsible borrowing, and the true cost of loans. Compare different types of credit, calculate total interest paid over the life of a loan, and learn the habits that build good credit.
Steps
- Research: What is a credit score? What range is considered good? What factors affect it (payment history, amount owed, length of history)?
- Simulate a credit score: start at 700. On-time payment: +5 points. Late payment: -30 points. New debt: -10 points. Play through 12 months of decisions.
- Loan comparison: A $1,000 loan at 5% for 2 years vs 15% for 2 years. Calculate total interest paid for each. How much more does the high-interest loan cost?
- Discuss types of credit: credit cards, car loans, mortgages, student loans. Which are typically high or low interest? Why?
- Create a 'Credit Health' guide: list 5 habits that build good credit and 5 mistakes that hurt it.
- Debate: 'Is borrowing always bad?' Discuss when borrowing makes sense (education, home) versus when it is risky (unnecessary purchases).
Learning objectives
- Explain how credit scores work and what factors affect them
- Calculate and compare total interest costs across different loan scenarios
- Evaluate when borrowing is a wise financial decision versus a risky one
Safety and evidence note
Read the full activity before beginning. An adult should supervise tools, heat, food, outdoor work, movement, and experiments as appropriate. Completion records that the activity was done; the child’s explanation, work sample, photo, or demonstration is stronger evidence of learning than a completion check alone.
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