How to Teach Young Adults to Borrow Responsibly
posted on Nov 6, 2020 | 536 likes
Establish a solid financial background for your children
If you're the parent of a young adult, you're certainly no stranger to teaching essential life skills and lessons.
Doesn’t it feel like it was just last week when you first showed them how to tie their shoes or use a spoon?
Now as you prepare to send them off into the world, you may find yourself wondering, “with everything that I've taught them, have I done enough to prepare them financially? Have I shown them what it means to be responsible with money?”
If you find yourself doubting your answers to these questions, don't panic—now's the perfect time to start this discussion! But you don’t have to go it alone—we’ll help you understand the importance of talking with your kids about responsible borrowing and basic money management.
We'll also provide tips and recommended approaches for openly discussing financial matters in a truthful and meaningful way.
Talk Early and Often
In today's digital age, it can be tough to capture the attention of young adults. Between smartphones, social media, and the rise of viral internet challenges, there's a lot to be preoccupied with.
But don't let these digital distractions discourage you from reaching out to your child, especially when it comes to financial matters.
As parents, we play a significant role in shaping our children's relationship with and perception of money.
Take advantage of everyday occurrences such as shopping or paying bills to help inspire casual conversations around the topic of finances.
By keeping an honest, open, and ongoing line of communication, you can help ensure that your child has a solid understanding of the value of money and what it means to be financially savvy.
If your child is facing an upcoming financial decision such as opening a bank account or taking out a loan, make it a point to be involved in the process.
Advise them on the importance of understanding how bank accounts, debit cards and loans work, and that it's not "free" money—it's money that they are borrowing and will be required to pay back.
You'll also want to make it a point to go over the details of their agreement together and truthfully answer any questions they may have.
Your involvement will help them understand their responsibility when it comes to borrowing money and reinforce the notion that you're a trusted ally who has their best interest at heart.
Go Over the Basics
One of the greatest things you can do for your child is to empower them with knowledge. To help your child establish good financial habits, you'll want first to provide a basic foundation. This includes teaching your child about key financial topics such as:
· The value of budgets and how to create one.
· What interest rates are and how they impact your loan and credit card accounts.
· Different forms of debt and what it actually means to accumulate it.
While this isn’t a complete list, it’s a great starting point for teaching your child what it means to borrow money responsibly.
Look Towards the Future
It may be difficult for your child to imagine now, but there will likely come a time when their current financial standing could impact their future.
Whether they want to buy a house, travel the world, start a business, get married, or have kids of their own, it's important to help them understand the value of building and maintaining a good credit score.
Advise them that staying on top of their budget and making monthly payments on time will help put them on the right track for achieving their life goals.
It's never too late to teach your child about good financial habits, especially when it comes to personal loans and borrowing money.