3 Money Lessons for Kids that Will Help You Avoid DebtMar 01, 2018
Kids will always compare what they have with what their friends have. Whether it’s as big as a new bike, or as small as a candy bar, parents often run into the question, “why can’t I?” For Generation X parents who are already financially strapped or in debt, though, it’s hard to keep up with the Joneses.
Parents can manage their kids’ expectations and help them understand concepts like budgeting by ensuring they learn basic money principles as they grow.
Spring break is a great opportunity for this. With a week off, many parents need to fill time with activities, day care, and even short trips. Some are accumulating additional consumer debt to do this: a BDO poll last year found that 40 per cent of parents would take more than a month to pay off their spring break debt.
The problem is rising interest rates have already put the squeeze on many Gen Xers. Those who have variable rate loans or mortgages are seeing increases in debt payments. Toronto parents are also feeling the pressure from increasing child care costs — which have risen 15 per cent in two years.
Rather than try to keep up with other parents this spring break, try something new. The break can be a great chance to teach your kids financial literacy and build their understanding (and acceptance) of a thriftier lifestyle.
Here are three tips that will help you accomplish two goals at the same time: give your kids three valuable money lessons, while you also rein in your spring break spending (and consumer debt).
- Try the “Three Jars” to start goal-setting
Kids in early elementary are too young to understand debt and the need to pay it down, but they can start learning about basic savings. Sesame Street has a toolkit for parents teaching finance to their kids, and they recommend making three jars, labeled Spending, Sharing, and Saving.
You can have fun with your child decorating these jars, but ultimately they have a serious purpose: teaching your child how to make basic money decisions. Talk to your child about the difference between spending and saving. For the Sharing jar, consider introducing them to charities and kids of similar age who are in need.
- Don’t shy away from tough money questions
Kids can be fascinated by things like credit cards and ATMs. In response, parents don’t need to shy away from these money topics with their older kids. If you’re at a bank machine, keep your kid in the loop by explaining what you’re doing. If they have questions, help answer them in a way they can understand ($3 service charges might be a bit much).
- Allow kids to spend their own money
In this blog from Dad Camp, we meet a family with kids who have piggy banks before they can even write their own name. While this might seem too early, introducing children to money early on can actually help them develop good money habits as they grow.
If your pre-teen wants to participate in a spring break activity or purchase an item that falls outside of what you can spend, offer them the option of making up the difference with their own spending money. Let your child decide if it would be worthwhile.
Spring break is a great time to manage your kids’ expectations by teaching them these basic financial lessons. Remember, one of the best ways to teach kids about money is for parents to model good financial habits. The upside: keeping your spring break spending in checking will help you avoid facing spring break debt when school’s back in session.