How to Talk to Your Teen About Debt

Starting the conversation: What your teenager needs to know about debt

Talking about financial matters with family

Regular discussions about money with teenagers can generally make the topic of money less burdensome. According to Elizabeth Hicks, a child psychologist and co-founder of Parenting Nerd, a blog dedicated to parenting, teenagers can greatly benefit from having conversations about money.

What is debt?

You are in debt when you borrow money with the promise to pay it back, and this is a fundamental concept that teenagers need to understand. When they are younger and see parents consistently using plastic cards to purchase goods, teenagers may not realize that this money sometimes needs to be repaid.

Using a credit card

Once your child has a basic understanding of how debt works, explain what it means to have a credit card. According to Experian data from the fourth quarter of 2018, over 60% of young adults aged 18 have at least one credit card with an average balance of $3,914. This is a significant amount of debt at a young age, and it is important that you as parents or guardians teach your child what it really means to have a credit card.

Borrowing for higher education costs

If your child is planning to attend college, it’s important to talk about how to finance their higher education for them and the family. In some cases, your teenager may need to borrow student loans, and this will impact their financial future.

How much debt is acceptable?

Having debt isn’t necessarily a bad thing. Many consumers take on mortgage debt and student loans to make significant progress in their personal, professional, and financial lives. However, you want your children to understand what acceptable debt is and how they can avoid accumulating it.

Frequently asked questions

Do teenagers have credit scores? Is it better to use a credit card to pay for tuition instead of student loans? How can I start a conversation with my teen about debt and money?

Source: https://www.thebalancemoney.com/how-to-talk-to-your-teen-about-debt-5202023