Debt and Savings: Family Sized Lessons


Kids are expensive. You know that. They don’t know that. It’s one of the magical parts of childhood—you don’t have to worry about how much things cost. Your parents just give you what you need. When we’re little, it’s okay to assume that somehow we will always just get the things we need. As we get older, though, it’s important to learn about money—otherwise adult life will be a real punch in the face.

It’s possible that it’s been punching you in the face for a while. Not everybody was taught financial literacy as a kid. Some of us weren’t even taught about it in school (beyond the value of coins for use in story math problems). What’s important is not what you learned then, but what you learn now and how you apply it so that your kids aren’t caught as unaware as you were.

piggy bank

Step One: Savings

One of the biggest issues with adulthood, particularly once credit cards and mortgages come into play, is “should I save up or pay down my debt?” Here’s the truth: you need to do both. You never know when that rainy day is going to show up and every little bit you have saved up for it will be helpful. Even if you can only afford to save $10 a week while you’re paying off your credit cards—that’s okay!

Parenting tip: Get your kids into the habit of saving now by making it a rule that at least a portion of their allowances or after school/weekend earnings go into a savings account.

Step Two: Debt

One of the hardest parts of teaching your kids to be financially responsible is teaching them how to properly manage credit cards. Your kids might start asking a variety of financial questions, such as should you pay debt before saving? But if you show them a good financial road to follow, they will be able to answer these questions on their own. One good way to do this is through practical application. Buy something for your child and have them pay you back a little bit at a time (weekly or monthly, it’s up to you).  Charge interest, late and missed payment fees. Keep track of it all on paper or on the computer so that he can see how his payments are working toward their debt and how interest and fees affect his ability to pay off his purchase. When the item is paid off add up what he spent so that he can see just how much he actually paid for the item (as opposed to what the sticker price of the item might have been).

Make sure, as your teaching your child this valuable debtor’s lesson, that you are keeping up with your bills too. Always pay more than the minimum amount due. Even tacking on five or ten bucks helps. If you pay only the minimum due you aren’t reducing your debt, you’re simply maintaining it. Search for deals on the best low interest credit cards and balance transfers to help you get your debt paid off quicker. And, most importantly, let your kids see you paying your bills! In fact, you might even have them sit with you as you pay them so that they can see the impact those bills have on your family.

Step Three: Budget

To really help your family live a financially stable lifestyle, you need to set up a family budget. Include things like your home payments, your credit card payments and important things like food, gas, utilities, etc. But also make sure you include some space for fun. Ask your kids to help you as you work to plot out how much money you can afford to spend every month. Then, keep a copy of your current budget handy so that you can check it as often as you need to.

The real trick to keeping everybody financially savvy is to be open and honest about where your money comes from, where it goes and why. Good luck!

Have a tip you’d like to share? Share it in the comments!

*This post was contributed by Rebecca W.