I’m going to go out on a limb today and say that this journey of paying off six figures of debt has been a great thing for our children. I realize that might sound a little far-fetched, especially since debt isn’t discussed at all in many families, so hear me out.
I have heard of families where one spouse is working hard to pay off debt alone because it was a debt incurred individually (like getting an advanced degree) or a debt that built up before marriage.
For us, it’s not just the two adults sharing the load of (what used to be) six figures of debt. In our family, we all claim the debt. The debt from my husband’s law degree is a burden we share. We have the kids involved too. This becoming-debt-free thing is a family affair.
We have made some conscious choices to help our children understand and be a part of our debt repayment journey.
Here are three aspects that we’ve focused on:
Be open and on their level
With our extreme debt situation and the lifestyle changes involved (i.e. living in grandma and grandpa’s basement), we didn’t think twice about being open with our kids. When we got serious about paying off these student loans asap, they were 5, 4, and almost 2. We told them, “We borrowed money so Daddy could go do law school and now we need to pay the money back. The longer we take to pay it back, the more we will have to pay.”
The kids are great at helping us stay on track. The oldest is really an entrepreneur. She has all sorts of ideas of how we can earn money to “pay for Daddy’s law school.” They remind us not to waste gas or food. They don’t beg for things at the store. They know what our priorities are and they are happy to be a part of the goal. Involving children in your goals gives them a chance to share in the successes.
Help them develop healthy financial habits
Being open about finances helps our children learn good financial habits. Being money conscious at a young age will give them a financial edge. They know that our obligation to God is the most important, so we always pay tithing first. They know that we get money from working hard. Having their own experience working hard helps them appreciate what they earn and naturally teaches them to spend it well They are learning to save and spend wisely.
Part of helping our children develop healthy financial habits is to make them aware of the choices and sacrifices that we make. Many times this means we say out loud some thing we would otherwise just say in our heads. I might say, “I would really like to get that new blender, but we don’t have money for it this month. I’ll have to keep saving.” They see that Mommy and Daddy don’t get everything they want. They learn self-control, discipline, and goal-setting when we clue them in to what goes on in out heads.
Be aware of your own attitude
Any negative attitudes you have will likely be passed down to (and amplified in) your children. If finances make you angry and uptight, your children will learn that dealing with finances is scary, bad, and something to avoid. If you show resentment for not getting what you want when you want it, your kids will have that tendency too.
On the other hand, if you take control of your financial situation instead of letting your money (or lack thereof) control you, kids will feel empowered and safe. If you willingly and regularly make sacrifices to achieve your goals, your kids will learn to handle hardships with grace and they’ll see the satisfaction that comes with working hard to achieve a goal.
Having a positive attitude about money will help your children feel in control and empowered regarding finance, but it’s not just about your kids. Financial problems are the root of many other problems. Being level-headed and open about finances will help you achieve your goals and improve your relationships, especially when money is tight and times are tough.
Overall, making debt a family affair has been a positive learning experience for our children. By being open with our kids, helping them learn and develop healthy money habits, and keeping a positive attitude, we have avoided resentment and bitterness. Instead, we have fostered teamwork and goal-setting by involving our kids in our repayment.
Of course everyone’s experience and situation will differ, but if you’re not already working together as a family to tackle your debt, I recommend giving it a shot!
How about you?
I’m curious to hear how you have approached the topic of debt with your children young and old.
- What ways have you taught your children about debt?
- How have you involved them in your journey to get out of debt?
[The bulk of this post was originally published on SixFiguresUnder.com on April 2, 2014.]
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Hi,
I love reading your blog!
But now I would like to add a little warning when it comes to kids and finances. My parents sheltered us from their financial struggles, still, I could sense that we didn’t have that much money. So as the oldest daughter I felt super responsible, and I remember times that I didn’t dared to ask for new underwear/other necessary clothing for I knew that it would be a burden to my parents. But I was too young to take responsibility! Which was NOT my responsibility in the first place (!) at all. So yes, I agree with you that you should teach your kids financial wisdom, but I would advocate to teach them these lessons with their own earned (or weekly /monthy given) money. I think that is their appropriate level. Not with your own heavy grown-up financial problems/debt. Because these problems they are your responsibility, not your kids.. And they should never ever feel responsible for it.
Again, I really love your blog, I’m just telling you this as a little warning, because of my own bad experience..
Keep up the good work!
We talk to our kids about finances. We like to involve them in grocery shopping – pointing out where to find the unit price so you can work out the best deals and so on. Our 7 year old has maybe taken the lessons too much to heart. He is convinced that we only buy generic brands; if we try to buy a name brand he’ll try to talk us out of it. He loves saving and whenever our 9 year old wants to use her pocket money to buy a toy, he’ll give her a lecture: “You’re wasting your money! Are you really going to play with that?” (The kid gets $3 a week pocket money and has already saved up more than $100.) We only use the credit card when we book a flight or rent a car (to take advantage of the card’s travel insurance) – but when we get a bill, we’ll sit down with the kids and show them the bill and explain that if we pay it all off before the due date, it costs us, say, $500. But if we only pay the minimum, we’ll still be paying it off in 10 years’ time and it will have cost us $2500 (or whatever it is – it’s all very clearly written on the credit card statement). I’m also a huge fan of pocket money. I never got any growing up; but I like how it gives us opportunities to teach the kids money management. I also like how it instantly stops any nagging at the shops: “Well, do you have enough money for it?”
Just last week we had a family night talking to our kids about our financial goals. We’ve always been fairly open about our finances to the level that they understand. They know when we don’t have money for other things. And they know we borrowed money for law school. I think the idea of making your kids pay you back for stuff in increments is a great idea! Especially once they reach a certain age. We have our house savings plan up on our fridge that has where we currently are and every month we will look at it and add in what we have saved. Our 8 year old is super excited to contribute and whenever she asks for things, we have to remind her what we are saving for and she’s ok. She’s even started insisting that she can use her own money to get a happy meal, which I’m fine with even though I’d prefer that she spend it on something better than that, it’s nice to see that she wants something enough to spend her own money on it!
I think it’s so important to teach kids about finances including how it all works: banking, debt, saving, investing, making choices. I am 60 now, but still remember getting my first full time job at 17. My father insisted I open a checking account and marched me into the bank. Having never been taught anything about money or banking, I thought getting a checking account was just a right of passage into adulthood. I had no idea it meant I had to deposit my paycheck into the bank and was horrified when I was asked to hand it over, and mortified that I didn’t understand the whole thing
Don’t let this be your kid!! 🙂
Your story makes me think of when Mr. Banks takes Jane and Michael to the bank to deposit their tuppence (in Mary Poppins) and Michael freaks out when they take it. 🙂 Thanks for sharing CS!
Love your positive post and the quote: “Involving children in your goals gives them a chance to share in the successes.” One of the approaches we’ve used to teach our kids about debt is to make each a parent-financed loan for a big ticket item or two (everything else they have to save up for in advance). Then we direct a portion of their allowance, chore or job payments to paying off the loan each period. By making regular payments over an extended period of time, not only will your kids learn to responsibly manage payments, but they’ll appreciate the cost of expensive items more and take better care of them. With some experience under their belts, I think it helps them think twice before taking on their first loan in the “real world”.
Thanks Bill! Seeing some of your money each pay period “disappear” to go toward something that’s already been purchased and enjoyed (and maybe even forgotten), would be a good way to learn the reality of going into debt. Thanks for sharing what works for your family!
I have to admit that for the most part we have sheltered our kids from our finances, I guess perhaps because that’s what my parents did with me. But now we have a child beginning the college process so I know we have to start discussing things more openly. Your tips are great and make a lot of sense. Thanks for this article!
Nancy at Hungry Enough To Eat Six
2014 A to Z Challenge Participant
It’s “normal” do teach the way our parents taught (or didn’t teach). It’s never too late to start. There’s a lot you can share with your upcoming college student to help prevent the money mistakes that are becoming the norm.
Hi Stephanie. Our 9-year-old daughter has severe OCD and anxiety disorder. So it’s been a struggle for me to include her in our debt repayment without making her overly worried about where every cent is going. I mean she will actually obsess over how much each plate of food we eat is costing us. So hard when she’s telling me to give her just a half plate so she won’t be so expensive to feed. Holy moly! So I’m afraid I’ve downplayed the real situation for her. As with everything, I need to educate her about finances and budgeting slowly and gradually.
Definitely do what works best for your family. You know your children and what is best for their individual personalities. I agree that downplaying your debt situation for your daughter’s sake makes sense. Feeling safe and secure for her is especially important since she has a tendency to worry and be anxious. Keep teaching her slowly on a basic level. It sounds like you are doing a great job at personalizing things to meet her needs.
When my kids were little and they’d ask for something at the store, I’d say we couldn’t buy it because I didn’t have a coupon for it. After a while, they figured we couldn’t buy anything “extra” unless we had a coupon for it. Of course, as they got a little older they got a little wiser and figured out my ploy to keep from buying them whatever they asked for. Oh, well. It worked for a while!
Thanks for stopping by Melinda! That’s a great way to teach kids to be frugal and never to pay regular price for things. I think it’s important for kids to start to realize about the price of things when they are young. It will help them learn to base their purchase decisions, not just on what they want, but to weigh the value and price of things too.
Hi Stephanie – This post is so valuable and important. My children are now grown, and I must confess that we did not involve them as much as we should have in finances. They knew we would say no to things we did not need, and we explained it some, but not to the point where they really got a handle on it.
They are grown now and doing fine, but each of them have gone through their own struggles with money management. Keep up what you are doing to help your children understand debt. It will help them all of their lives.
I am enjoying your blog posts.
LeAllyson
Hi LeAllyson! You are not alone. I think it isn’t that common to have parents who are open about finances, especially in past generations. It seems like it is starting to become more common now though, at least in the mom circles I’m in (or maybe I am just more aware of it). We definitely have to do something to fight the entitlement mentality of those who don’t learn how to work hard.
I’m glad your children are doing fine. I think sometimes, even when we do teach our kids, they still have to learn through their own experience.
Yes, my children are in their 30s now. Their money troubles and the fact that my husband and I did not bail them out helped them to mature. They now do well with managing their money, plus they work hard for it. We are so blessed.
LeAllyson