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How To Talk To Your Children About Debt And Savings
As parents, we try to prepare our children for the world. We pass on concepts like the importance of education and the power of charity work. When it comes to more taboo subjects, it can be challenging to get the conversation started.
One such taboo talking point is money, especially debt and savings. It is natural to feel the need to shield children from family finances to protect them from any money-related stress. Regardless of whether you want to introduce your children to the inner workings of your family’s debt and savings or not, there are ways to help your kids understand the broader concepts.
Clear Savings Jar
The concept of money has become more digital, and the idea of saving can be abstract to younger children. Watching numbers rise or fall on a computer screen does not have the same tangible understanding as real money. Give your children a large clear jar to hold their savings. Physically watching money fill and empty the jar helps bring a concrete element to saving money. As the amounts from chores and birthdays increase over the years, adding a second jar will introduce the difference between savings and checking accounts.
An empty jar can have a more powerful lasting effect than a row of zeros.
Small Time Debt
Sometimes the best way to understand something is to experience it. This applies to debt and your children. Letting them enter debt by taking out a loan from you can help open valuable chances for educational conversations.
It may feel counterintuitive to let your children enter debt, but the result is indispensable. It is imperative to pick the size of the loan to make it work for your family. Factor in allowance and the proximity of potential money earning events like holidays or birthday to find the correct amount. The quick reward versus length of repayment will be a harsh but useful lesson on debt.
Set Saving Goals
There are few things more rewarding than working hard, saving up, and getting what you want. Your children can experience those same proud feelings by setting and completing purchasing goals. The first step is to negotiate allowance and gifts. Instead of giving allowance for pocket money and buying toys and candy for them yourself, increase the allowance and limit how often you buy gifts. You may experience pushback initially, but it will dissipate after their first big-ticket purchase. A video game or pair of rollerblades becomes more precious when your children saved up for it themselves.
Adults find the concept of debt and savings interesting because it directly impacts every aspect of their lives. For your children, it can be incredibly dry due to the lack of influence on their day to day. Games are a fun and educational way to introduce finances to your kids.
Classic board games like Monopoly or The Game of Life can help cleverly teach debt and savings to younger family members. If you want to add the concept of real-world money to your lessons, opening a lemonade stand is another fun option. This low stake money making venture teaches great financial lessons, especially if you require your children to pay back supplies needed for the beverages. This simple addition explains the importance of hard work to pay off debt.
Debt and savings education doesn’t stop when you become an adult. If you find yourself saddled with debt, contacting the certified credit counselors at CreditGUARD can help. Through our debt management programs, you can start to make the steps towards a healthier financial future. Call us today at 1-800-500-6489 to get started.