Handling money, dealing with budgets, saving, keeping good credit - so many facets of money use and abuse, and children are not born with these skills. If I could, I'd begin with the basic tenet that the abuse of credit is a hard lesson to undo, and they need to be taught this long before they get that first piece of plastic. The need to actually establish credit is just as important - as many financial institutions will tell you, no credit is as bad as having tarnished credit.
I had my first passbook savings as a child in school - does anyone remember this? The local bank would allow the teacher to collect money, and she would stamp your passbook with your "deposits" each week and the school would drop off the money to the bank. No withdrawals were permitted - it was all about savings. By the time I left elementary school, I had saved the tidy sum of $108.00 from lunch money change. A big deal for a nine year old in 1973. Nowadays, kids don't have savings accounts, they have checking accounts with debit cards and spend it as fast as it's earned. And when they don't have cash? Credit cards are the easy solution - with no thought to the consequences when the bill comes later.
As the former director of a shelter for homeless families, I was constantly amazed that individuals with a high school education had no concept of creating a working household budget - they couldn't even get their heads around the idea of putting money aside each week toward bills.
The best idea I'd heard in ages was the three can/box system that can be used on kids of any age to help them get the hang of money. The boxes or cans, labeled "Save", "Spend" and "Share" are created. Every payday, a pre-decided amount or percentage of the pay is put into the three boxes. Save corresponds to the amount needed to go out monthly on bills balanced equally between the number of paychecks each month, Spend is for spending cash for the pay period, and the last - Share - allows them to put aside a small amount to donate to a local nonprofit or faith based organization. No matter how young, children can use this system and take part in the process of donating their hard earned "share" with a deserving organization. The money can also be used to purchase items needed by a local nonprofit (such as food for a foodbank) and your child can drop them off. A handmade card by your child is always a nice touch.
Handling money wisely - both for their own use and for the good of others - is the best lesson we can share not only for their quality of lives but for the community at large. Prevent future problems today by teaching your children the value of money, and the real worth in values.