How to Talk to Your Kids About Debt and Money Management

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No one likes talking about money, especially when it comes to debt. But as a parent, it’s important to have these conversations with your kids early and often. After all, money management is a crucial life skill that will serve them well into adulthood.

Here are a few tips on how to approach this sensitive subject with your children.

1. Start Early

It’s never too early to start talking to your kids about money and debt. You’ll want to begin by teaching them the basics of earning, saving, and spending.

If you feel overwhelmed with the idea of teaching money management to small children, I recommend using age appropriate games or books.

Children love learning through play and when you can engage with them in a way they understand, it makes the learning process that much more enjoyable.

As they get older, you can help them understand credit and debt.

You may want to buy a financial planner or journal for them to start using.

By having these engaging moments early on, you’ll instill in them strong money management habits that will last a lifetime.

2. Be Open and Honest

When it comes to discussing debt with your children, it’s important to be open and honest.

Explain to them the difference between both good and bad debt.

Help them understand that while some debts are necessary and can lead to positive outcomes (like buying a home or getting an affordable education), other debts can be detrimental to their financial health (like credit card debt).

Discussing these concepts openly will help your children make sound financial decisions when they’re faced with difficult choices later in life.

3. Use Real-Life Examples

Whenever possible, use real-life examples to illustrate your points about debt and money management.

For example, if you get a lot of credit card offers in the mail, use that as an opportunity to explain how credit cards work and the dangers of using them irresponsibly.

You may want to use this opportunity to discuss with them the concept of interest.

This will help them understand how quickly debt can spiral out of control if it’s not managed properly.

You can also use everyday scenarios to teach your children about budgeting and saving money. For instance, if you’re going grocery shopping as a family,  have your kids help you create a budget for the trip.

You can also discuss the difference between buying name brand, store brand, homemade, or going without certain items.

Making these money management concepts relatable to your children’s everyday lives will help them better understand and retain the information.

4. Set a Good Example

Remember that actions speak louder than words when it comes to teaching your kids about money management.

If your children see the people in their lives making sound financial decisions, they’re more likely to do the same.

On the other hand, if they see the people around them constantly struggling with debt or making poor money choices, they may be more likely to follow suit.

That’s why it’s so important to set a good example and ask your children good questions, so you can talk with each other. 

Be mindful of the choices you make in front of your children and take the time to explain why you’re making them.

If you’re struggling with debt, be honest about it with your kids. 

Share with them your plans for getting out of debt and discuss with them the sacrifices you may have to make in order to reach your goal.

5. Teach Frugality

One of the best ways to instill strong money management skills in your children is to teach them the value of frugality.

Encourage your kids to be mindful of their spending and to only purchase items they truly need.

Help them understand that there’s nothing wrong with being thrifty and that sometimes it’s actually better to save your money than to spend it.

You may want to give them a small allowance and challenge them to see how long they can make it last.

This will teach them the importance of budgeting and being mindful of their spending.

6. Encourage Savings

In addition to teaching your children the value of frugality, it’s also important to encourage them to save their money.

Help them understand that by saving now, they’ll be able to afford the things they want later in life.

Encourage them to see how long they can go without spending any money. Instead of buying a book, they can print free coloring pages like these ones. 

You can also help them set up a savings account and if your situation allows you can offer to match the funds they deposit.

This will not only teach them the importance of savings, but it will also help them understand the concept of compound interest.

7. Discuss Investing

Investing is another important money management skill that you should discuss with your children.

Help them understand that by investing their money, they can grow their wealth over time.

There are many different ways to invest, so you’ll want to spend some time explaining the basics of investing to your children.

I recommend reading the book, “Rich Dad, Poor Dad” by Robert Kiyosaki or “How To Turn $100 Into $1,000,000” by James McKenna and Jeannine Glista.

These books are written specifically for children and they do a great job of explaining the basics of investing in a way that kids can understand.

8. Help Them Find a Job

One of the best ways to teach your children about money management is to help them find a job.

This will not only give them some spending money, but it will also help them understand the importance of work and earning an income.

There are many part-time jobs that are perfect for kids, such as babysitting, mowing lawns, or walking dogs.

Final Thoughts

We hope you feel more empowered to talk about money with your children after reading this post. It’s such an important life skill, and one that we can all benefit from learning at a young age. If you found this helpful, please share it with a friend! Let’s help empower the next generation of money managers together.