Teaching your kids how to avoid debt – even if you haven’t.

How to teach your kids to avoid debt

While it’s the natural instinct of a parent to try and shield our children from the worries of adult life, failing to give our kids a solid understanding of money management is actually doing them a disservice in the long run.

kids how to avoid debt

Luckily, teaching your youngsters invaluable skills like budgeting, how to distinguish between a need and a want, and how to save money can be fun – and you might even learn a thing or two yourself in the process! And even if your own finances aren’t exactly in the greatest health, you have the opportunity to help your kids avoid the mistakes you have made.  And at the end of the day, isn’t that what being a good parent is all about?

Let’s take a look at how every parent can start instilling good money sense with these practical steps.



Don’t avoid the issue

If the only time your kids hear about money is when you and your partner are arguing over the general lack of it, you’re starting them off with a negative attitude. By including them in positive household decisions appropriate to their age, you can create a space where they’re free to ask questions and learn at their own pace.

With young children, the best place to start is from the shopping trolley. Teach them to look at prices and compare offers. If they’re very young, this might be as simple as picking two items and having them tell you which one costs more. As they get older and more experienced, you can make the calculations more complex. This one costs more, but the package is bigger – so which one is better value? This one costs less, but look at the ingredients! Is it really better to buy the cheaper one?


Teach the difference between needs and wants

This can be a tough one, especially with young kids where everything is a need; but it’s probably also the most important one. Some parents find it helpful to sit down with a catalog from the local store, and go through some items, deciding which is a ‘want’ and which is a ‘need’. You can make it a family game with commercials that come on TV too.

Extend this exercise to your monthly family budget – we need groceries, but do we need cookies and chocolates? For visual learners, there are plenty of fun YouTube videos that might help too. Give them a set allowance for their ‘wants’, and stick to it. Many children will learn very quickly that once their money runs out, it’s gone – if they want it to last longer, they’ll need to evaluate their buying decisions more carefully.  Use your own needs and wants as an example too – make it clear that no matter how much you might want that new handbag or TV, (and feel free to make a show of it!) you don’t really need it.


Teach them how debt works

Whether it’s a student loan, mortgage or vehicle finance – one day your kids are going to face debt of some kind. They’ll be better equipped for it if they have an understanding that borrowing money costs money. The next time they really want a large ticket item (and if you think they’re old enough of course) consider giving them a proper loan – with interest. Draw up a repayment schedule and demonstrate how much they will end up paying back. Some savvy kids may even surprise you by looking at the facts and deciding they would rather save up themselves than take the loan from you!

And even if you are struggling with debt yourself, considering debt review or having to overhaul your own budget, this doesn’t mean you can’t let your kids learn from your mistakes, and maybe even offer some helpful thoughts! Conversations like how does debt review work, how can we cut back on expenses, or how can we budget better don’t have to be off the table if your kids are mature enough.


Use terms (and tech) they can relate to

The fact of the matter is, kids and teenagers aren’t good at thinking long-term. You’re not going to get through to them about the importance of saving for retirement or the wonders of compound interest! What you can teach them about are short term goals like saving up for a concert ticket or a new smartphone, and how to make better spending decisions. With these core concepts understood, time will do the rest.

And don’t be afraid to learn from them too – ask them to find a free web based budgeting tool or app and have them show you how the tech works! It will make them feel more confident on their own turf, so to speak, and you’ll probably find what they come up with handy yourself.

Whether you’re the proud parent of a toddler or a teenager, lessons about money management and wise spending are crucial to raising a child who’s ready to take on the world. Whatever your personal financial situation, make a commitment to teaching them these vital skills, and learning with them along the way!



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For more money saving ideas from me at Baby Budgeting and Thrifty Home


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