Children need to learn about debt before they experience it first hand. In our society, instant gratification has turned many young people into shopaholics. They feel it is more important to fill closets with fashionable shoes and clothing than saving for the future. As parents we must instil some financial common sense.
While parents talk to their adult children about debt since that is when they are eligible for credit cards, it is a good idea to begin these talks earlier.
Here are several ways to approach the topic of debt with a child:
- Help them open a bank account when they get their first job or with money that comes from gifts. It is a good way to start a discussion about money management.
- Tell them that not all debt is bad. Living with a mortgage or student loans has become an important part of life.
- Teach them about the effects of uncontrolled debt. They should be aware that credit card debt can jeopardize their chances of getting good interest rates on mortgage and car loans.
- Read through credit card offers so they understand how interest rates work.
- Encourage them to take business classes in high school. Many schools are starting to see how they can make a difference by incorporating money skills in the curriculum.
- Work with them to plan a budget when they move out on their own. Talk about monthly expenses and savings goals. The last thing they want is to have to move back home and be stuck living in the basement while they get their debt under control.
- Start young and play board games that teach money management in a fun way. Two such games are Monopoly and The Game of Life.
As parents, we must do our bit by trying to lead by example. If we are carrying unreasonable credit card debt and can only manage minimal monthly payments, our children will likely end up not much smarter than we are.
