Talking to my daughters about money comes very naturally to me, but I recognize that some parents struggle to do so in a manner that doesn’t come across as a lecture. I find the best way to integrate money talks is to look for everyday teachable moments. This way you avoid the “after school special” vibe and instead have a normal conversation with your kids.
Debt is one of the hardest money conversations for most parents. It’s a subject we’d like to avoid, given our own sensitivity to the subject matter. As I mentioned before, we may not want our kids to experience debt, but most will in some shape or form. So let’s help them learn how to think about debt, so they know when to leverage it appropriately and when to avoid it.
This is an easy way to introduce your kids to consumer debt. Plus, it gives you the chance to demonstrate to them the importance of setting goals and prioritizing wants.
Take your kids with you to the store when you have achieved a goal and saved money for something you want. Generally speaking, this works best if the goal is tangible and relatable to your kids (a gadget or purse, etc). Ideally it is something your kids will see you use often and not something that you use once, such as tickets to a concert or a sporting event. Once you’re at the store tell them:
“I’m so excited to buy [insert item] today. I’ve wanted this for a long time and I finally saved enough money to buy it. There was a time when I would have bought it right away, but that is a mistake I no longer make.”
Unless your kids are exceptionally polite or not very curious, they will ask you about your mistake, which is what you want them to do. Even if they don’t ask, tell them anyways.
“I used to buy everything I wanted without taking the time to figure out if I really needed it and could afford it. Eventually, I ended up spending more money than I had. Do you know why that was a mistake?”
Let them answer. You may be surprised by what they think. Dialogue with them and confirm where their understanding of debt is correct and help them work through any flawed thinking, generally this is around not understanding how credit cards work and interest charges.
The goal is not to teach your kids to avoid “wanting” things. We will always find things we want. Instead, we need to teach our kids what to do when they find something they want.
“Now I no longer rush to buy things I want. I take my time to figure out if I truly want it and compare it against my other goals. If I really do want it, I turn it into a goal and save my money for it. Now I can enjoy it with any regret or guilt.
We are surrounded by teachable moments. Here are a few more suggestions:
Again and again, I hear from so many adults that they wish their parents had talked to them about money, particularly about debt. Will doing so guarantee that your kids won’t get themselves into money trouble? Of course not. But most kids go out into the world with little understanding of debt and have no idea of the dangers of it until they are hip-deep in debt. They won’t know to avoid unnecessary debt unless we teach them. So let’s talk to them.
Shannon
SHANNON RYAN, CFP®
I've started talking to my daughter about credit cards by explaining the differences in interest between a cash advance and a regular purchase. I have also started talking to my daughter about student loans as well - her wanting to go to college will be coming up very soon as she is sixteen already!
What I like is that I can apply these to a conversation with my teens.
My son who has been working for about four months now asked me about the difference between a credit card and debit card. We had a great talk and I even shared our own mistakes and gave him advice I wish I had been given when I got my first credit card.
I've been watching him and I see he's very careful with his expenses....let's me know he's listening :)
Thanks for sharing these tips! Hope all is well :)
We don't have any kids but if we did I would certainly include them in the budgeting process. I would want them to understand how money and debt works even if that means having them draw up their own little budget and working with them to balance it. It's a great way to teach them so they understand that they need to earn enough money before they pay for it. It's such a huge topic. Thanks!
One of the most important things that needs to be raised is the concept of instant justification...and how this can lead to debt problems. This is a problem with society.
When people learn to wait for thing, then credit can be managed well and used effectively...eg not for wants.
Alex
You have made a very good point. Debt matters should be included in everyday family conversations. Everything comes natural if parents explain to their children things about spending, splurging and credit cards when all of you are in a relaxed mood.