Using Debt as a Lesson for Your Kids
We live in a country where debt is constantly in the headlines, and many people are going to have a difficult time explaining the concepts of debt, altering spending habits, and the economy to their children. However, kids are bound to hear about these kinds of issues, and it is important that parents do their best to instruct their kids about how to properly manage money and debt. This kind of instruction is especially important when the parents themselves are in debt, as their kids may be especially curious about the details of what debt is and how it going to affect their lives. The following are some hints of how you can use debt as a lesson for your kids.
Younger Children and Debt
First, the way that you teach your kids about debt is largely going to depend on their ages. Very young children are not going to understand more complicated concepts like interest, and you will need to come up with more simple ways to teach your younger children about your debt. A good way to start is to make a comparison with terms that they may understand. A good option would be to let your child borrow something that they consume but explain to them that they will have to repay you with a similar item. For example, a parent could give their child a piece of candy but let them know that they will be required to give a piece back in the future. Then, once the child has grasped the concept, you can explain how money can be borrowed and repaid.
Teaching Older Kids
Older children are already going to be familiar with the concept of borrowing and repayment, but they may not know how "adult" debt is conducted. For these kids, your lessons can be a bit more in depth, and you can start to explain some of the basic principles of your debt. For example, you may be able to teach an older child about how borrowing larger amounts of money will often lead to interest costs that need to be calculated into the debt. Once again, parents can use an example. Lets say for example your older child wants to purchase a bicycle but does not have the money. You could tell them that you would loan them the money, but that they would have to mow the lawn a certain number of times in order to pay off the debt. This kind of example will help teach the principle of installment payments and how debt is paid off.
Going to the Bank
If your child is especially curious about debt, a trip to the bank may be in order. At the bank, kids can see how money is used by the bank and how loans are issued. Also, many banks are going to have educational programs for younger patrons that can help teach them about accounts, loans and debt. A trip to the bank in order to learn more about money and debt is going to be an experience that a child will be more prone to remember than a simple discussion with a parent.
While using debt as a lesson for your kids, it is important that you stress the common nature of debt and how it fits into your finances. Debt can be a very scary thing for kids, and they need to know that it is common and can be managed properly. With the right tips and information, you can effectively teach your kids about debt and help them avoid potential problems in the future.
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