#BackToSchool: How to Teach Your Kids About DebtAug 01, 2018
Back to school is an exciting and hectic time for both kids and parents. It’s also a great time for parents to share a few lessons of their own: teaching their children (whether they’re in elementary or post-secondary) about managing their finances effectively and avoiding unnecessary debt.
First lesson: how to use a budget
Budgeting is a skill that kids need to learn at an early age in order manage their money successfully and avoid running into any problems with debt later on.
If your kids are younger, work with them to create a simple back-to-school budget in order to determine how much they have to spend. You can also encourage them to think about how they might use any saved allowance or gift money to pay for some or those “extra” items on their wish-list.
By the time your kids get to post-secondary, they’ll need their own personal monthly budget to track spending, expenses and possibly student loans. For parents, this is another great teachable moment. If they’re not already familiar with budgeting, introduce them to an online budget worksheet this one, help them choose a money management app or just connect them with some great budgeting advice and resources.
Second lesson: needs vs wants
While the concept of a need vs. might seem easy to understand, it can be difficult to remember, especially when FOMO (Fear Of Missing Out) comes into play. Many kids have a strong desire to fit in with their peers. It’s a great time of year to talk to your kids about what’s absolutely necessary and what really isn’t. After they’ve created their back-to-school budget, ask them to categorize each item as a want or a need.
Third lesson: introduction to credit, loans and interest charges
As your high-school-age kids get ready for university or college, it’s vital that they understand the ins and outs of using a credit card, how to apply for a student loan or grant, how interest charges are calculated and the student loan repayment process. Making sure your kids have the tools and knowledge they need to manage credit and debt will set them up for success as they become more financially independent.