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When to Talk About Debt with Your Kids

savings jar and coins

Good financial habits are a learned behavior that can make or break our lifestyle as adults. When it comes to children and money—how soon should you talk about debt with your kids? On one hand, parents don’t want to pressure their kids with money woes. On the other hand, the sooner children learn how to manage money the better off they will be later on in life.

The good thing about money management is it’s a learned behavior. That means if you don’t learn about it as a child and end up getting into debt as a young adult—there is still time to learn from the mistakes and change bad habits. But wouldn’t it be nice to talk debt with your kids at a young age and save them a whole heap of trouble?

Here are four ways to talk debt with your kids and teach them how to be responsible with money:

The Sooner the Better

When it comes to talking to your kids about money popular TV host Dr. Phil says the sooner you initiate the conversation the better. “Parents should teach kids about money at the same age that we teach our children to say please and thank you, how to share and how to brush their teeth. Children as young as age 4 associate the visible accumulation of coins with the abstract concept of saving.”

Teach Them to Set Realistic Goals

Money and goals go hand in hand. It’s great to teach your kids to dream big, but at the same time you don’t want to set them up for disappointment. Teach your kids about setting realistic money goals when it comes to saving. Base goals on their income and teach them to pay off debt in a reasonable amount of time. Explain that someday this will help them maintain a good credit score and avoid interest charges. It’s very important that kids learn they need to save up money to buy the items they want and that borrowed money has to be paid back.

Open a Young Savers Bank Account

Money is addictive. It may seem shallow, but it’s true. The more your kids see their bank account balance rising, the more they will want to save. Sesame Street has a helpful tool called for me, for you, for later that teaches kids the first steps to spending, sharing, and saving money.

Give Your Kids a Loan

It may seem like a crazy idea to loan your kids money— especially if they’re young—but it’s a great way to teach them about the value of money and the cost of borrowing. If your child wants to buy something like a new toy (or if they’re saving for college), loan them the money. Have them pay you back over time with a payment plan. The option to charge interest is up to you, but giving your kids some responsibility will definitely help them learn that money doesn’t grow on trees.

Photo from Pixabay


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