Meta: We want to protect our kids, but is it important to share our debt issues?
Many parents want to protect their children from their worries, and keeping their debt from their children is no exception. You may have a small amount of debt, like a credit card, or a larger debt, like a mortgage. You might not want your children to know about such things, because you might think that kids should be free to be kids without that hassle and adult concern. But when should we share such matters with our children?
Well, the idea is not to burden children with your debt (you don’t want them worrying about you!) but to instead enlighten and educate them about what debt is, what debt you might have, how to manage it and how debt can be normal – but – should not be overlooked or ignored. With this key information, they can grow into sensible, financially literate adults.
The wider picture to this story is the younger generation entering the adult world with little knowledge of debt. Wonga Money Academy calls this financial literacy. Many teenagers and young adults have little knowledge of finances and debt, and so it falls upon parents and carers to begin to introduce these ideas and topics from an early age. Of course, it should always be age appropriate and you shouldn’t be burdening your children with your money worries if you have any. This handy guide gives age appropriate information on what is good to teach at what age.
So, how do you introduce the idea of debt? It is useful when a child reaches teenage status for them to know what a mortgage is. Wonga SA advises learning about ‘good’ and ‘bad’ debt. E.g. bad debt might be money spent on frivolous things, and good debt might be money for a car that gets you to a full time job. At some point in their life, your child may also choose to get a loan. This doesn’t need to be a bad thing, indeed if we learn anything from Wonga’s blog post, we will know that some debt can help further us if it is deemed ‘good debt.’ But your child SHOULD know about repayments, and should only be applying for the loan if they fully understand it. Some unlicensed loan providers are also dangerous to get involved with, and your child should know about reputable companies and how to spot a scam or con.
Your child may want to own their own house one day, and if they do then they’ll need to know about saving for a deposit, interest rates, property prices, the cost of debt and so on. All this information is useful knowing from an early age so that the child sets some rough goals in their mind, and so they know what to do with their money when they do start earning a full time wage.