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Guest Blog

Talking To Your Kids About Debt

In the past most parents did not talk to their children about money matters. Parents might have been afraid to talk to their kids about their financial situation because they didn’t feel confident about it themselves. They wanted to protect their child’s innocence for as long as they could, which is likely what their parents did to them.


Secret Money

The household budget was a private adult matter that the kids should not know about and parents feared that they were corrupting their children by introducing them to the concept of debt, savings and more.

However, this old fashioned notion has proven to be false and there are no disadvantages to talking to your kids openly and honestly about money. In fact, talking about money management basics to your young children can help to empower them to make the right choices when it comes to their money in the future so that they can thrive as adults.

If you don’t have an honest discussion with your kids about money, someone else will talk to them about it and you might not like the message that they have to give. Not teaching them about money and especially debt will leave them woefully unprepared for the world that they will face when they become independent from you. They will reach adulthood with little knowledge of how finances work and no strategies for saving money, living within their means and staying out of debt. They will be suckered into loans with high interest rates, get into dangerous spending patterns and not have a clue how to manage their own budget or pay their bills.

You don’t want to send your child out into the world this unprepared, so take the time to have honest discussions with them about money. Don’t worry if you are not perfect when it comes to money management yourself; just be humble enough to admit the parts that you got wrong so that they can learn from your mistakes.

Explain to your kids the concept of debt and how borrowing money works. This will be one of the most important lessons that they will learn, because having the right attitude toward debt when they are adults will help them immensely over the course of their lives.

How to Talk about Debt with a Child

The way that you explain debt to a young child really depends on how old they are and your knowledge of what they already understand. Children as young as four can understand the abstract concept of saving but your child might have to be a few years older until they start to fully understand debt.

You might want to start by talking about the concept of borrowing. You can bring up an example of when a child borrowed a toy from a friend. You can emphasize that when they borrowed the item, they needed to return it when they were done.

You can then explain that when you borrow money from the bank, you need to give it back to them. However, when you pay it back to the bank you also have to pay them some extra money (interest). You can use an example which is in small numbers, such as borrowing £10 and having to pay back £15. If it helps, you can illustrate these numbers by using beads, blocks, Lego or any other small items. The visual aid can sometimes help to make the concept clearer.

When the child is a little older, you can create a real life scenario which involves them, such as “Imagine you borrowed enough money from me to buy an iPod. Would you be able to pay it all back with one week’s allowance?” This can lead you into a discussion about paying back loans over time.

Debt can be a bit of a tricky subject for kids to understand, but talking to them about it is so important in order to help them make the right financial choices in the future.

Katie Latchford is a writer who often creates blogs about all sorts of financial topics, including debt consolidation loans and the National Budget – explained in a way that everyone in the family can understand.


About Dangerous Lee

Writer of essays, short stories and Ask A Black Girl. Author of Keep Your Panties Up and Your Skirt Down & The Half Series - When Black People Look White. Webmaster of DangerousLee.biz.


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