Money Conversations

How to Talk to Your Kids about Family Debt

How To Talk to Kids about Family DebtI often get asked when parents should start talking to their kids about money. My father started his Money Lessons with me when I was thirteen, but I began teaching my girls when they were only toddlers. It’s my belief that children as young as age three begin observing their parents’ money habits.

It makes sense when you think about it. Our children learn how to walk and talk by mimicking us. Why wouldn’t they watch how we interact with money? These observations— good or bad—are their first introduction to money and create a long-lasting impression on them that they often carry into adulthood. Your money hang-ups become their money-hang-ups. This is one of the reasons why I encourage you to take stock of your own relationship with money, then demonstrate good financial behavior to your children.

The other question I get asked frequently is how do I talk to my kids about our family’s financial situation, particularly when there is substantial debt involved? Debt is often a foreign concept to kids as they have no personal experience with it, and it can be scary for them once they understand what it means.

How to Talk to Your Kids about Debt without Scaring Them

Your goal is to get them onboard with your debt repayment efforts while minimizing their fear at the same time.

1. Create a Comfortable Environment

While I’m generally not a huge fan of sit-down money conversations, this is one topic that probably warrants it. However, I suggest keeping it in a casual environment, perhaps over dinner. The more of a “to-do” it becomes, the more nervous your kids will be. You want to project confidence and control, but still create an open atmosphere where their questions and concerns are welcome.

2. Have Your Plan in Place

Before you talk to your kids, have a plan in place that both you and your spouse fully support. You’ve crunched the numbers, know what needs to be cut, what changes will directly impact the kids and most importantly—are prepared to answer these two questions:

3. Focus on What It Means for Them

You don’t have to give your kids play-by-play of the steps you’re taking to eliminate your debt. Instead, focus your attention on how it affects them and how they can support your efforts. Know in advance what will most likely trigger a meltdown, so you can help them see the bigger picture. Offer alternatives, such as helping them cultivate their entrepreneurial skills, so they can earn enough money to continue participating in their favorite activity or buying the latest gadget or designer jeans if those things mean that much to them.

Repeat often how getting out of debt will make their lives better. Give them specific examples. Ask them for their support and let them know how much you appreciate it.

4. Keep Having Fun as a Family

Depending on your situation, your life may become quite spartan for a period of time. One mistake I see families make in this situation is to believe no-frills means no-fun. Au contraire, my friends. You may not be able to afford extravagant vacations, but there is no reason why you cannot have fun. You just need to get creative. Look for free family events in your local community. Plan a family day at a local park or beach and pack a picnic lunch. Go camping, even if it’s in your own backyard or Grandma’s. Borrow a movie from the library or a friend and have a make-your-own pizza and movie night.

Look for ways to earn money together. Hold a garage sale and agree that 10% of profits can be used for family fun. Or have your kids sell unwanted toys and clothes on Craigslist or eBay and agree on what percent they can keep (maybe even all of it) and what percent goes towards eliminating family debt.

Live a “Rich” Life Now

We think in order to live a “rich” life that we need to spend lots of money. This belief has caused many families to live beyond their means and go into debt. In my opinion, a “rich” life isn’t based on how much money you spend, but how you use your money on what matters most. And by getting yourself out of debt and giving your family financial stability, you are living a “rich” life now.


Leave a Comment


  1. Monday, June 10th, 2013
    Nice post Shannon! This is something I wish that my parents would've done when I was growing up. I figured out by 12 or 13 they had some pretty bad debt, but did not know why or how it impacted me. I think that by breaking it down and helping them understand it really can produce a variety of solid lessons for them that they can take with them as they get older.
    • Monday, June 10th, 2013
      Thanks, John! It's definitely a balance, but teenagers definitely realize something is up, so you might as well be honest and use the family debt to teach them some important lessons.
  2. Monday, June 10th, 2013
    Another great read! I think some of the problem is that many of the parents never got taught about finances at an early age so they either aren't good at finances or don't think is needed. I started talking to my son at 10 and will be earlier for our newborn.
    • Monday, June 10th, 2013
      Thanks, Thomas! You're spot on - most parents don't realize they need to talk to their kids about money because no one ever talked to them about it. We all learned by a certain amount of trial and error. It's great that you're talking to your son about money and plan to talk to your new baby too (congrats!). Those conversations will make a huge difference in their life.
  3. Monday, June 10th, 2013
    Yeah I agree that you need to probably keep having "fun" with the family. The last think you want to do is stress out the kids and have them feel that burden.
    • Monday, June 10th, 2013
      Getting out of debt definitely takes work, but completely eliminating fun makes people go stir crazy, so they go out and splurge on something big. Now, they created additional debt which may cause them to give-up. There are definitely low-cost and no-cost options for family fun and family fun should remain a priority.
  4. Monday, June 10th, 2013
    Great thoughts Shannon! Kids need explanations and reasons. It helps them understand why. We have been talking (age appropriately) with our kids about our debt payoff plan with our mortgage just to get their buy-in. They know it's a goal and can't wait until it's finished. It has helped them already understand what debt actually is, how to set goals, how to implement those goals and how to sacrifice.
    • Monday, June 10th, 2013
      Great job, Brian! We think sheltering our kids is the best choice and while we certainly don't want to scare them - they do need explanations when their lifestyle changes too. Otherwise it's Mom and Dad being mean and they feel deprived. But when they understand what is going on, you can address any questions and concerns and move forward together.
  5. Monday, June 10th, 2013
    I love all of these points. Keeping the discussion simple is key and showing your family that you can still have a fun and happy life without spending loads of cash is important as well.

    I've watched a number of kids that grew up in homes where the parents weren't necessarily in debt, but were so frugal that the family never did anything fun together. So once the kids were 21 or so they were anxious to get out and experience the life they never had. They were sick of being frugal because they were taught as kids that frugal meant no fun, so they went out and spent lots of money to have fun and make up for lost time. But, if as you said, they had been taught that you can have fun for less, they may not have been in a such a hurry to spend loads of cash to have the fun they felt they missed out on.
    • Monday, June 10th, 2013
      Thanks, Sicorra! Our emotions get so tangled with how we use our money that we sometimes hoard money or spend recklessly based on what we observed as children. A balanced approach with money is important, not only for ourselves, but also for our children.
  6. Monday, June 10th, 2013
    I agree about still having fun, even if it means simply playing board games at home. Some of my favorite memories from childhood were playing Life or card games, and a lot of my friends say the same!
    • Monday, June 10th, 2013
      Absolutely, Anna! Sure, we love big trips, but often our favorite memories are just being together with our family. We forget that sometimes and it's important to remember fun doesn't have to break the bank.
  7. Monday, June 10th, 2013
    Great advice to make sure you keep having fun. Without having had to do this, I think my approach would be to keep my kids involved in the general household budgeting and to simply make debt a line item. I'm not sure I would emphasize it, as I wouldn't really want to scare them. Just having them understand that we had an obligation, like paying the electricity bill, should give them enough information to know why our activities might be limited. I would probably try to teach them how debt works in other ways, particularly by giving them the opportunity to experience it personally on a small scale with us. That way they could learn in a safe environment without having to be scared about the trouble our family may or may not be in.
    • Monday, June 10th, 2013
      I agree Matt that it's a delicate balance and you don't want to scare your kids. Depending on the situation and age of your kids, you may not need to go into much detail if they won't be experiencing much of a change and can teach them about debt in general terms. However, if they will, such as no longer being able to participate activities, then you do need to address the situation with them.
  8. Monday, June 10th, 2013
    I think this is a wonderful way to approach debt within a family. The part about having fun is an especially important aspect to teach your kids!
    • Monday, June 10th, 2013
      Thanks, Vanessa! Debt may not be fun, but it definitely doesn't mean you can't have fun as a family. You just have to adjust expectations and find the joy of simple pleasures, like playing at the park or a favorite board game. Something we should do whether we have debt or not! :)
  9. Monday, June 10th, 2013
    Some great points Shannon. At first I wasn't sure if we had kids and debt if we would burden them with the such information at a young age but we all need to learn from somewhere. I think it's best to be upfront especially if you don't have money to do things the kids ask to do. It's better to explain to them like it is and why and how you plan to sort out the debts so they know you are working hard to sort it out. Mr.CBB
    • Monday, June 10th, 2013
      Thanks, Mr. CBB. With young children you definitely have to be careful, so you don't scare them and for that reason some parents will opt not to talk to their kids. But you also have to be prepared to address changes, otherwise, it just becomes confusing to them. They will eventually figure it out so you might as well be upfront and make sure they understand, rather than speculating.
  10. Monday, June 10th, 2013
    Good balance of not wanting to make it a stressful factor for them while offering a reminder and a lesson for the future. Hard fine line to take, though.
  11. Monday, June 10th, 2013
    Trying to explain mortgages to my daughter went way over her head. I am so determined to share all financial details that I got a bit carried away!

    That being said, I was so ashamed when we were in credit card debt that I would have had a hard time talking about that, and I think lots of parents are in the same boat. I wouldn't want to make my child feel bad or scared, but I think it would be good to let them see the consequences of getting into debt. Thankfully, we can talk about it from the outside looking in rather than right in the middle.
    • Tuesday, June 11th, 2013
      LOL! I'm sure your daughter was like what is Mom talking about? :) I think the shame people feel and fear of scaring their kids prevent a lot of parents from talking to their kids about debt. I agree that you don't want to scare your kids but older kids probably already know that that money is tight and won't understand why if you don't explain it to them. It's a bit of catch-22 and every parent needs to find the right balance.
  12. Monday, June 10th, 2013
    I hope I don't have to do this, but thank you for them tips. I do plan on discussing my debt with my son when he is old enough.
    • Tuesday, June 11th, 2013
      You're welcome, Grayson. I'm glad you got yourself out of debt and will share your story with your son. It's important kids understand debt because most don't, until they are hip deep in it as adults.
  13. Tuesday, June 11th, 2013
    Great post! When my kids are older, I hope to explain how debt can impact their lives.
    • Tuesday, June 11th, 2013
      Thanks, Holly! I have no doubt that you and Greg will teach your kids about avoiding unnecessary debt, given your own intense dislike of it. :)
  14. Tuesday, June 11th, 2013
    Great post, Shannon! You know well that this resonates closely with our story. We have be open with the kids about our situation and what we're doing to get out of it. The one thing I would make sure the kids understand is that the debt is not to be feared - when you're taking control of it. Otherwise, yes, it can cause big trouble. Also, after the initial talk, look for other opportunities to talk about it, especially when faced with spending choices. We look for opportunities, when the kids ask why we used to spend money on this or that and we can't now, to tell them "Yes, and that's exactly why we're in the situation we are today. If we had chosen to be more frugal back then, our financial life would be very different today." I think it's really helping them to see how today's choices in life can influence tomorrow, either for better or for worse.
    • Tuesday, June 11th, 2013
      Absolutely, Laurie. I thought of you when writing it. :) Great point - debt is scary when you're not in control, but when you take back control and figure out a plan to eliminate it - now it's just something to deal with and move on. You're doing a great job explaining to your kids why you and your husband changed how you handle money and demonstrating to them how to make conscious spending decisions.
  15. Tuesday, June 11th, 2013
    I've thought a lot about this. I don't want our future kids to "worry" if we get in a pinch but I want them to understand money and what it takes to manage it well! Great post!
    • Tuesday, June 11th, 2013
      Thanks, Cat! It's definitely a balance, because first and foremost you don't want to scare the kids unnecessarily, which is why I recommend keeping the explanation simple and focusing how the family benefits. We want to shelter our kids but we also need to let them see the "real" world too.
  16. Tuesday, June 11th, 2013
    Hi Shannon
    It's hard to admit to but I haven't really ever had an honest money conversation with my sixteen year old daughter. My daughter has an awareness that we've got bill and debt that we're trying to pay off but nothing beyond that.
    I think you raise an important point about talking to my kid about money - I'm not really sure what to to say yet but I think I need to do this. No need for her to repeat my mistakes if she can learn from mine!
    • Tuesday, June 11th, 2013
      Hi Lindsey,
      You are not the only parent who hasn't started talking to their kids about money, so don't feel bad. But I'm glad that you are aware you need to start. Understandably you might not know where to jump in and I would suggest integrating it into a normal conversation - rather than making it a big to-do. Parents sometimes think it should be a big production, but it doesn't need to be. The conversations should be fun! :) One idea to start the conversation is to give her a back-to-school budget and work with her to identify the things she "wants" and the things she "needs". Help her prioritize and find creative solutions to get the most bang for her buck, so to speak! Once you start talking to her about money, you'll find the conversations get easier and more spontaneous.
  17. Jake @ Common Cents Wealth
    Tuesday, June 11th, 2013
    This is a great article. I learned a lot from my parents, but not much from them outwardly telling me how to do things. I learned how to handle money by watching how they handled money. The good thing for me is that they were pretty good at it, so I modeled myself after good money behavior.
    • Thursday, June 13th, 2013
      Thanks, Jake! It's great that your parents were at least good financial role models, even if they didn't talk to you directly about handling money. A common problem, since most of us didn't grow up talking about money within o ur homes, we don't think to do it ourselves with our children. You're fortunate that your parents actions helped instill good money behavior as sadly most kids do not. Thanks for stopping by and commenting! I appreciate it.
  18. Greg@Thriftgenuity
    Thursday, June 13th, 2013
    I really agree. I think that something like game night provides just as much fun as a night going out to eat or to the movies. It is good to be as upfront as you can with the kids but also point out it is not the end of the world.
    • Thursday, June 13th, 2013
      I agree, Greg. There is a lot of fun to be had with the things many of us already own. We get caught up in the idea that the best things are the most expensive things. And when it comes to fun that's not necessarily the truth.
  19. Thursday, June 13th, 2013
    I love your "keep having fun as a family" tip. It's so important that even when Mom and Dad are trying to cut back and tackle debt that the kids are still entertained and you are able to have good family time.
    • Thursday, June 13th, 2013
      Thanks, DC! Being able to show your kids how to have fun without spending a ton of money (or sometimes even any money) is a great lesson to teach your kids. As adults, when we look back at our childhood, we most often remember experiences, rather than toys. With a little creativity parents can create many wonderful, inexpensive memories for their kids.
  20. Friday, June 14th, 2013
    Thanks for the excellent advice. I might need to pick it up in the teaching by example department. My wife knows our financial strategy and position, but we don't really talk about it with our kids. They are pretty small but it's probably a subject we should be a little more open about with them.
    • Saturday, June 15th, 2013
      I would definitely encourage you to talk to your kids about money. Again, most conversations are not big sit down lectures, but taking advantage of teachable moments that occur in every day activities, like when you go grocery shopping, etc. Thanks for stopping and commenting, David. I really appreciate it. Happy Father's Day!
  21. Friday, June 14th, 2013
    Totally agree about the "Rich" life, Shannon. A rich life is first and foremost rich in experiences, not in the spent amount. And there are tons of great free experiences.
    • Saturday, June 15th, 2013
      Thanks, Dennis! I absolutely agree. Experiences are things we treasure and they don't have to cost a penny. We have somehow developed a mindset or belief that in order for something to be valuable, it must be expensive and that is not true.
  22. Monday, June 17th, 2013
    All Great tips! #4 is a great point to remember. One lesson my dad taught me is that memories don't have to be expensive. I remember some of my fondest childhood memories were just taking the bus downtown with my dad. Just walking the shops, through the park and finishing with a doughnut while he sipped his espresso at a local cafe.
    • Monday, June 17th, 2013
      Absolutely! I certainly love our big trips with the girls, but I also know some of my fondest memories are an afternoon at the beach with my family and it didn't cost us a penny.
  23. Monday, June 17th, 2013
    Thank you, David! I agree - we think by hiding our problems from our kids we're helping, but that is not the case. How are kids supposed to understand debt, if we don't talk to them about it? They won't understand until they are already in debt.
  24. Friday, October 10th, 2014
    Very true indeed. Specially no. 1.

    As parents, we don't want do develop that fear in the dinner table whenever our kids sense something serious is going to be discussed, let alone the family debts.

    I find really important, though hard and challenging, to be honest with our kids since we all don't want to disappoint them in a way, or give them a hurdle of emotions knowing that there is a serious situation - which they are in to - specially when they are in a young state. These things can be brought about when they grow up, but I also firmly believe in the importance of honesty and being truthful with the current situation as well. These tips will really help a lot delivering the message to our kids and let them learn a lesson or two from the situation or problems a family has.
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan