FLM2017 How to Teach Kids About DebtNov 02, 2017
Canadians are carrying an average of $22,000 of consumer debt. Families are faced with a lot of additional costs, like day care, health care, recreation and school costs, to name a few.
Paying down debt is a skill that needs to be learned and practiced. If you have middle-school age kids, you can start to teach them about debt. Now’s the time to shape their attitude towards consumer debt and teach them skills to manage money.
Use teaching tools they’ll enjoy
Practical Money Skills offers parents and teachers resources for kids of various ages. There are quizzes, puzzles, videos, and worksheets. They also link to comics that teach kids about the difference between wants and needs, which is a good place to start the conversation about consumer debt.
Even though they might not see cash often, those plastic cards aren’t free money. Introduce them to how online banking works and what bills look like.
What are my alternatives to consumer debt?
Kids can learn that thinking outside the consumer debt box can save them a lot of money, but still get them some of their wants.
Eva at Teens Got Cents blog talks about bartering. Teach kids to think about ways to earn something besides spending money—or taking on debt—for things they want. And, there are more than just financial benefits.
Kids who learn that they have more to offer than money will also discover their own personal worth, which may also lead them to be more satisfied with less. If they realise they can offer skills instead of money, they’re more likely to be excited about their abilities and hone their skills. Tutoring, music lessons, babysitting, dog walking, lawn care or running errands are all services your kids could offer to others.
Be your kids’ first lender
Nothing is quite as effective as experience. If your kids are asking for something, consider setting up a loan for them to make the purchase. Then work with them as they earn money (chores, allowance, taking on extra work) to pay you back—with interest.
As the realities of paying off their loan set in, it’s a good time to circle back to the lesson about wants vs needs. Ask them to re-evaluate whether they think their purchase was worth the extra payments, or if they’d save enough money to buy it next time (or not make that purchase at all).
Teaching kids to focus on thoughtful spending and creative ways to make extra cash can develop good money habits that will prevent them from relying on consumer debt when they’re older.