How to Use an Online Debt Calculator with Your KidsMar 01, 2018
Spring break is when many Canadian families try to spend time outside of the house and away from TV and computer screens. This year, consider spending a bit of time in front of the screen for a good cause—learning how to use an online debt calculator.
Spring break can be an expensive time for families, with 20 per cent of families saying last year that they’d take on debt to finance the fun. Keep the costs down this year by focusing on financial literacy and include your kids in the discussion about spending.
Check out SavvyMom to find out how she identified her personal needs while cutting costs in simple ways.
Here are some financial topics to get started
Even though the major financial decisions are in the hands of parents, financial literacy isn’t just for adults. If March break has you staying near home, it’s a good time to focus on teaching your kids a financial lesson.
Here’s a great blog with an extensive list of money topics you can discuss with your kids.
How to introduce the concept of debt to children
Have your kids brainstorm a list of things to do or buy. The sky’s the limit. Then get to work. Let them narrow down their top five wants, and research the costs of all the items. Ask them how they think they can pay for them.
They might suggest using the money in their piggy bank. But chances are, there won’t be enough in those plump piggies to cover everything they want.
This is a good time to introduce them to the concept of lending and borrowing money.
Explaining interest rates
Your little one might jump at the idea of borrowing money to buy whatever they want. And thus far in their lives, all their money has probably been gifts, or money they’ve earned for doing chores. If they’re under 18, they definitely don’t have a credit card!
Introducing interest rates can make the topic a bit more complicated, but it’s the most important part of the lesson.
Plug one of their wants into an online debt calculator. If they have a weekly or monthly allowance, you can make that their payment amount. To show them how interest works, set an 18 per cent interest rate on the purchase, and then see how many months, and how many payments, it would take to pay off. They may soon realize how much more it would cost them to buy something on credit!
Credit card rates are pretty consistent across the board, so they’re a good example. Plus, credit cards are (unfortunately) readily available, highly visible, and likely one of the first forms of credit your kids will get as they become adults.
How to keep the conversation going
As you do different activities or go shopping during your break, keep talking about money. Price things out together, and teach your kids the difference between wants and needs. They may want to buy cookies, but you need to buy soap. Which item do you put in the cart, and why?
Put your kids to work
Offer your kids the chance to earn money on their break. Have them take on some responsibilities and chores, and then use those earnings to start saving for one of those top five items they identified at the beginning of the week.
At the end of the break, talk to your kids again, and see if their desire for the activities or items has changed.
Bookmark an online debt calculator and visit it regularly when you’re discussing budgets and priorities as a family. You can use the one on our website to find out how long until you’re debt free.