Educating Your Kids About Debt
Teaching your kids regarding matters concerning finances is important for them to develop a good trait in managing their finance in the future. It is one way for them to acquire useful skills on how they can manage their money. By doing so, you are teaching your kids a skill that they can utilize in their lifetime.
Whether you’re an expert when it comes to budgeting, or looking for the best deals and saving more money, if you can’t knock down your debt, it wouldn’t be possible for you to build your wealth.
Each of us may have a similar experience during our college or university years. A fine credit card representative approaches you on the corridor with a clipboard granting your first-ever credit card. Several young people may have considered the offer without any skills to handle the debt. This is likely similar to a line of credit, a debt you owe from a friend and an overdraft in your account. Now, if you were not taught of the skills to efficiently handle your debt, possibilities are, you’ll surely be sacrificing a big part of your finances.
How To Start Incorporating Financial Literacy To Your Children
In this guide, you will know more about how to get started in making debt as part of financial literacy.
Start Money Talk as Early as Possible
When your kids started talking and getting curious about things, you should start incorporating and nourishing their minds on how to handle spending. Also, they should understand what is debt and how to handle it.
By considering the topic pertaining to finances and debt, your kids are likely to develop a healthy attitude towards money. They are also likely to enhance and develop certain abilities to manage it. If this is accomplished, they’d probably be accountable when signing up for any credit card in their university or colleges.
Furthermore, when educating your kids pertaining to debt, you also have to set certain limits. You have to understand their level of understanding and the amount of information that they can sink in. For instance, you can tell your kids that they can spend their $10 to any toys they wish considering that they already save something in their piggy bank and have set aside some money for their school supplies.
Good Debt vs. Bad Debt
In terms of financial literacy and incorporating debt in the conversation, it is important that you tackle the difference between good debt and bad debt. Also, you have to use simple terms that they can understand. Good debt can be money that you have borrowed for you to go to school, buy your house or money you borrow to put up into something that will make it grow.
On the other hand, you can explain that bad debt is something that you spent on things that you don’t need like buying expensive food outside instead of cooking healthy meals or shopping healthy, borrowing money and spending it for fun and enjoyment.
Moreover, you have to educate them about credit card debt. You have to make them realize that spending on things that are not needed with a credit card is considered as a bad debt.
Additionally, bad debt is usually charged to your credit card debt while good debt is frequently locked as a longer-term loan arrangement with a lower rate. Also, teaching young people to avoid bad debt, will give them an idea of its consequences.
Show Them Your Statements
When your kids are a little bit older, you can show them your credit card agreements and your statement to show them how it works. Things like how long will it take you when paying the minimum payments and your credit card interest rates. This can help them get an initial idea which may compel their drive to shun the sky-high interest rates that they may be facing when overspending their card in the future.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.