Welcome to the third and last part of Managing Debt with Kids – a series which addresses the challenges that parents face when raising a family alongside the heavy burden of debt. This article focuses on how important it is to teach our children about money throughout their childhood and beyond.
If you’re a parent who is struggling with debt, you’ll know how hard it is trying to manage financially whilst making sure you’re doing the best you can raising your kids. Debt can be crippling for some people, to the extent where they can’t afford to make the minimum payments on their debt and put food on the table too. If you have kids, debt issues can quickly become much more serious because your kids become your first priority.
Your debt aside though, as a parent, you’ll no doubt want to make sure that your kids don’t make the same financial mistakes that you did in the past. And the good news is that you can teach them some very valuable lessons around money as they grow up which will stand them in good stead as they continue their adult lives.
How to teach kids about money
1. Talk freely about money
Debt is still very much a taboo subject even though 18% of UK households with children are currently experiencing problem debt. Some parents might not feel comfortable talking with the kids about money issues, but actually making an effort to involve your kids in such matters will help them to understand more about money and how to spend it wisely.
I’m not saying that you should try to explain to your 4 year old that they can’t have such and such toy because you have a mountain of debt to pay off. But even at this young age, children can learn what money is used for – how we earn money by working and with this money we buy the things that we need such as food and clothes for warmth. You can tell them that it’s good to save our money for the future so that we’ll always have some. You can even say that it’s ok to treat ourselves now and then providing we can save up enough money to pay for it.
If your kids are older, you might want to tell them about your debt problems. However, this should be done in an age appropriate way and shouldn’t make them feel like they are in some way to blame. Kids can really worry about things anyway and debt is a serious subject. So always make sure that as well as highlighting your money mistakes, you’re confidently explaining what you’re doing to rectify them and that there is no need for them to worry.
When talking about debt or money issues like this with your kids, you can help them to understand the consequences of what happens when you are careless with money. You can instil in your children the right values and mindset around money from a young age. Believe it or not, kids don’t get lessons in money at school, so it’s important that you – as a parent – be their teacher in this respect.
2. Let your kids handle money
All too often these days, we hand over our debit (or credit) card to be swiped when we pay for something. How are we to expect our children to grow up financially literate when actually seeing and handling money is a rarity?
When shopping for groceries, I always pay with cash. I do this because it’s easier for me to control what I’m spending. I also do this so that my 3 year old daughter can see me handling money and passing it over to cashier. Now she wants to pay for the food shopping, so I give her the money to pay the cashier. This simple method allows my daughter to see a tangible exchange – groceries in exchange for money in mummy’s purse. My daughter also knows that mummy earns money by working.
3. Allow your kids to earn money
There’s nothing wrong with letting your kids earn their own money. My daughter earns her own money already (just loose change!) by tidying her toys away and helping me to unload the dishwasher for example. Again, there’s a tangible exchange that children can see by adopting this approach. And that’s actively doing something (working) in exchange for money.
If your kids are older, they could earn money by washing the car, doing different household chores, doing a paper round or babysitting for example. With the money that they earn, they could be encouraged to save it up for that special game, toy or whatever it is that they desperately want so badly. Then they can take the money that they’ve earned and spend it themselves. This helps your child learn about where money comes from, different ways of earning money and how you can use it.
4. Empower your kids to make financial decisions
Kids want a lot of stuff these days, particularly when their friends are sporting the latest clothing brands or have a brand new computer game or toy for example. Chances are that at some point, your kids will go through the “I want” stage. Of course it’s fine for you to treat your kids and it’s nice to do that from time to time.
But it’s really important to not get carried away with letting your kids have what they want all of the time. In fact if you’re a parent in debt, this is especially important – you just don’t have the money to spend in this way.
If you let your kids earn their own money, you can give them a set of choices and empower them to make financial decisions even from a young age. The first decision they’ll be making is whether to work or not to earn some spending money. This puts the ball in their court – will they put the effort in to earn some money?
The second financial decision that they could make is whether to save or spend the money that they earn. You can teach your kids that by saving their money for longer, they could buy something better later down the line. This is where the value of money really comes into play. Earning money means working hard and sometimes it’s better to save our hard earned money for something which is more important, rather than some material thing we want now which we’ll have forgotten about next week.
Communicating about money as your kids grow is a key factor in getting them to understand the consequences of what happens if you do make money mistakes. Remember, all money mistakes can be rectified!
If you let your kids handle, earn, save and spend their own money throughout their childhood, you’ll be able to lay a strong foundation and the right set of beliefs around money for your kids to use and build upon as they become adults.
If you missed parts 1 and 2 of the Managing Debt with Kids series, you can read them here:
- Managing Debt with Kids Part 1: Paying off Debt with a Family to Support
- Managing Debt with Kids Part 2: Making the Most of Family Life Whilst in Debt
Author Bio: As well as writing for Debt Advice Blog, Hayley also writes about how she’s getting out of debt over at her website Disease Called Debt. There you’ll find further reading on how she’s managing debt with a family as well as a whole bunch of debt payoff tips. You can also follow Hayley on Twitter.