Debt and Kids

I saw an interesting (which is really another word for horrifying in this case) documentary on the social security system, retirement savings in America, and the collapse of pensions. It’s quite the scary situation even for people who are doing it right.

One of the people in the documentary is a 46-year-old married man with two sons, who I would guess were around 12 and 10. During a conversation regarding their budget with the film maker, one of the sons (older I think) interrupts and asks dad if they are in debt. He answers yes. Then the kid asks how much, to which the dad replies, “None of your business.”

Got me thinking….

Why isn’t it the kid’s business? First, you are far less likely to retire self-sufficient and stable than not. Second, even if you are on the road to self-sufficiency, the system provides no stable guarantees that your efforts will pay off (ask anyone set to retire in 2008 about that…). Third, it is growing increasingly common for multiple generations to exist under the same roof because of financial concerns. Your debt is absolutely your kids’ business (within reason of course).

It got me thinking of a conversation that Katherine and I had (she’s 10) not that long ago. We had gone grocery shopping, and as is common, she had asked for things. Instead of saying no, I pulled out my shopping list and showed her the cash I had brought with me (around $100). We then went through the entire list and wrote down how much all those groceries cost. At the end, we were right around $90. I added in $5 to cover taxes, and then asked her what should we do with that last $5. She got real excited about the idea of spending it until I asked her to imagine what would happen if I only had $90 instead of $100.

We went through the mental exercise of putting $5 back out of cart, and the light went on; she independently suggested that we save that $5 just in case next week we only had $90.

Driving home, she asked if we were poor because we only had $100. That opened up a long conversation about how we choose to live differently and without debt. I told her how we choose to save money today so that we have money for tomorrow. We talked about a family in our neighborhood who had recently become unemployed and how they were having to make really hard sacrifices and changes to their budgets just to survive. We talked about how they might lose their house.

Then Katherine asked me how much debt we had. When I told her that we didn’t have any debt (besides the house), she smiled.

Kids get this, but not only do they get it, they have a right to know (within reason again). We don’t make Katherine or our other kids privy to all the details of our budgets, my salary, and where we are with financials, but I take the time to frequently talk with them about money, how it works, how debt hurts, and what we are doing. Just this last week, Katherine asked me what we make with my new job, and I told her that that was a private conversation I would have with her another time (we were eating supper with the entire family, and that is information I’d share with her, but not necessarily the other kids). And I will tell her. I will sit her down and show her how that equals X per month and we need Y per month to live. I’ll show her that we put money in savings, that we keep ourselves safe for emergencies, and that we are doing everything we can to finish paying off the house.

Because in not too long, Courtney and I will get to see if (1) we are one of the increasingly small people who hit retirement fully self-sufficient, (2) we are one of those that can skirt the lack of guarantees in the system, and (3) who do not need the help of their children to make it.

But even then, we have a special needs child who may or may not get to the point that he is self-sufficient and able to take care of himself. I imagine that will be a relatively life-long experience for us. And for Katherine when we’re gone. Oh yes, she–and our other kids–have rights to this information. How could I ever dream of leaving any of it to them if I didn’t think they could handle it? That’s on me since the world is obviously doing a bang up job of teaching financial literacy!

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4 Responses to Debt and Kids

  1. Howto$tuffYourPig says:

    I agree that we need to teach personal finance. I also believe that it’s time to drop the idea of keeping finances private. Healthy discussion is the best way to learn and grow in any subject whether it be a discussion with children or another adult. We have a serious debt and savings crisis going on in the U.S. and the only way we will get out is by opening the lines of communication.

    • daveloveless says:

      Yes. There is a time and place for those conversations, and I do think some elements of finance are personal, but healthy discussions about money are not had behind curtains, especially when we talk about our national monetary and budgetary crises as you said. Great insight. Thanks for the comment!

  2. Emmerin says:

    My childhood was basically a Dave Ramsey course but with very few formal lessons. My parents talked about money with us on a regular basis. They talked about waiting to buy things until they were on a good deal, how different kinds of insurance work, how they were paying extra on their mortgage payment and when they planned to have it paid off. They talked about why we drove older cars, how investing money pays off later on and why they didn’t go into debt for anything. When my dad would tell my mom, “The bank account is dropping: we need to pull back our spending,” he said it in front of us. When he went back to school, my parents told us why we weren’t going out to eat as often. They talked about the sacrifices they made to graduate from college debt-free and how doing well in school could help us get scholarships. They talked about why they weren’t buying a bigger house because they had concerns about job security, and they talked a lot about how cars are money pits. At the appropriate age, they told me what their income was.

    I entered adulthood with a very strong grasp of how money works. I have never taken out a loan or carried a credit card balance, and I have trouble remembering that loans are a thing because I was so thoroughly brainwashed. I have learned what things are important to spend money on and what things you can do without. Kiffen and I are far from perfect money wise, but we have significantly more savings and retirement savings than most people our age. I attribute that to my parents.

    We spent a week with friends. They give their 3 year old an allowance of 2 quarters when they go to the local mall, and she has to choose what she wants to do with them. When they’re gone, they’re gone, and she doesn’t get more. They talk about how something is too much money because it’s 3 quarters. She will be in great shape as an adult.

  3. antdun says:

    Way to teach what so few parents are teaching these days. I plan to do the same when Lucy and her siblings are old enough.

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