Debt is a word that no one wants to hear. When you're in debt, you want to get out. When you aren't in debt, you want to do everything in your power to avoid it. What do you wish you had known about debt when you were growing up? Here are a few tips for teaching your kids about how to handle debt.
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Sharing Your Story
Be honest with children about the trouble that debt has gotten you into the past. You need to realize your own financial deficiencies in order to teach your kids about debt. You can even show them the problems debt has caused or could cause. For example, remind them of a time you had to cancel a family vacation, and let them know that it was because of excessive debt.
A Low Limit Credit Card
If your children are old enough, get them a credit card that has a very low limit on it. They will see how important it is to spend only the amount that they are able to afford in a month. This is suitable for older teenagers.
An Escape from Debt
When teenagers and young adults think about debt, they often immediately envision credit card and student loan payments. Explain to them how you as a parent manage and pay off your debt. If they are in a financial emergency, they could use a cash advance.
Be sure to explain all the options of ways to get out of and manage debt.
Handling Their Own Money
At some point, you are going to have to encourage your teenagers to get a job. When this happens, they should be responsible for paying for their outings with friends, filling up the car with gas, and so forth. When they start to see the value of money, they will also realize that they do not want to get into debt. They will want to use their money wisely and limit the amount of debt they acquire.
It's also important to start a savings account for your children when they are young. As they grow, they can also contribute some money to it. Do not allow them to take money out of the account for random purchases, but teach them that spending on some on practical purchases, such as college tuition, is an acceptable step to take.
In order to ensure that your children know about the dangers of debt, you need to be open with them and explain the different types of debt out there.