We teach our children about savings, budgeting and being financially responsible. Let’s be honest, how many are teaching your child about debt? That’s a word that we try to shelter our children from – a mean, adult concept that they shouldn’t be introduced to. However, imagine how different your financial outlook would be if managing debt was something you learned and mastered at an early age. Teaching your child about debt and other financial basics at an early age helps them grow into financially responsible adults.
Ways to teach your child about debt
- Setting a good example. We are the best “real life” teachers our children have. If they see us making healthy financial decisions, they will most likely mimic that behavior as they get older. Also, be open to being honest about mistakes you may have made and explain the consequences. I’m not saying to go into in-depth detail about your household financial situation, but older children, especially, can understand that there are additional bills to pay and we’re cutting back on extras for a short-term so we can enjoy the long-term benefits
- Teach them to live within their means. Kids want things – it’s natural. As parents we need to teach them early the difference between needs and wants.
- Help them learn how to save. Many adults go into debt because it’s easier to use credit to pay for items they could wait and save for. Teach your children early how to save and spend their money wisely. Often items bought on impulse can be purchased for a lower price if we wait for a sale.
- Explain the difference between good and bad debt. Not all debt is necessarily bad. The key is borrowing responsibly.
- Make money lessons fun. Games like Monopoly help teach financial lessons and are entertaining for families to play together.
What early lessons about debt have you taught your child?
Head here to find out why I agreed to pay for 50% of the car my 11-year-old is saving for… and click on the picture below to catch up on our Financial Literacy Series for April.