How to Talk to Your Kids about Debt

talk_to_kids_about_moneyThe following is a guest post from David Moran who writes at Finance for Your Future.

Talking to your kids about the value of proper money management is essential, but most parents tend to put it off until their children are college-bound or older. Unfortunately, what your kids don’t know can hurt them, especially when it comes to finances.

Kids learn about money the same way they learn about other things in life: from their friends, from the school, from teammates or other peer groups. If you don’t have the money talk with your kids, chances are someone else will. That person may not have the same financial perceptions that you do, which in turn may create friction between you and your child when a financial situation arises. Alternatively, if you try to hide your debt from your kids, you set a poor precedent for their financial future.

Start by Building a Solid Foundation

Don’t wait until you’re in debt to start talking about money. Begin with the basics. Just like you teach a toddler “The Alphabet Song” or to count their blocks, teach them about saving their pennies. Learning to “feed the piggy” at an early age teaches kids the importance of saving. Take them into the bank with you and let them watch you deposit money. As they get older, show them how you pay the bills and the importance of a budget. We set up a checking account for my children when they turned 13 and taught them how to properly balance a checkbook—a skill that many 20-somethings don’t have.

Being upfront with your kids about the family budget gets them to buy into any changes you may have to make later due to a job loss, salary reduction or other event leading to a loss of income.

Help Your Children Set Their Own Budget

To give kids a concrete lesson in budgeting for themselves, give them an allowance on a regular schedule. Tell them what they are expected to pay for: such as clothes over and above what’s bought for school, iPod downloads, meals out with friends and the like. If they go over budget, stick to your agreement and let them figure a way out of it. Learning to delay gratification makes them appreciate what they have once they get it. You can even go so far as creating a detailed budget in Excel; in my experience: the more detailed, the better.

The Serious Discussion

If you are in debt, be honest with your kids. Explain how you got there and how you’re getting out of it. Particularly focus on what it means for their spending and their day-to-day life. They need to understand the budget cuts affect everyone. Have them help you brainstorm ways to make extra money. Most of all, explain that once you are out of debt your lives will be better because you will be living within your means.

Talking about money with your kids isn’t fun, but it is necessary. Having the talk now can prevent your kids making mistakes later.

Editor’s Comment – I welcome everyone’s feedback and comments on today’s guest post!


  1. says

    I think we can make money fun for them and also teach them valuable lessons to help them afterward. Not to mention that setting a GOOD example is also important. I mean I could tell my daughter till I’m blue in the face that she should be responsible, if I’m recklessly spending, she’ll learn that and not what I’m ‘preaching’ 😀

    • says

      Dojo–I completely agree. Making dealing with money something fun and interesting will make your kids (especially younger kids) pay more attention and help them out in the long run. You definitely don’t want to be “preachy” but you want them to understand that smart financial decisions are important. Thanks for reading!

  2. says

    Its such a shame that so many young people see debt as a normal, acceptable part of life. They see their parents in debt. They see that its acceptable to take out debt to fund their education, to buy a car, to buy a house. So its no surprise that they see debt as an acceptable way of funding a lifestyle beyond their means.
    Society and advertising make us all sucker for the debt trap

  3. says

    Teaching kids how to make and keep a budget is such a great idea. It doesn’t have to be complicated or for a long period. Start simple and make it fun and that will in turn have positive impacts long term.

  4. says

    This is an area I’ve been very blessed in, since my dad made an effort to teach me about budgeting, debt, and being resourceful with my money as I was growing up. It’s made a huge difference in my life, I can tell you that!

    • Squirrelers says

      It’s great to have that experience when younger, to have a parent who teaches you valuable lessons. I can see how that can make a big difference.

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