Basic Debt Payoff Principles to Teach Your Kids
When it comes to debt payoffs and learning solid principles, it is clear that our society is severely lacking. Debt is rising all the time and that is not going to change anytime soon without some major changes. For our society to truly turn things around, the parents and adults of today are going to have to start teaching kids about money. The best way to prevent a need for debt payoff is to prevent debt in the first place. Here are some principles that the kids of today need to embrace and learn:
A Dollar Saved is a Dollar Earned
This is the most basic principle around but you would think it was a foreign language. The idea of saving money is not a popular one but it needs to be instilled early on in life. Look at it as paying yourself before you pay anyone else. Good habits like this will prevent debt payoff from ever becoming an issue.
Debt Means a Spending Freeze
When you are in debt, the last thing you should be doing is spending money on anything other than needs. Kids need to understand what it means to tighten your belt and to do without. This builds character and will help kids to understand their obligations. If you owe someone and have overdue obligations, you should not be spending money and making it worse.
High Interest is Your Enemy
Interest rates will absolutely crush your financial profile and kids need to understand how that works at a young age. When you borrow money it costs extra to pay back. Interest is a concept that many kids don’t understand until they have all those student loans come due. That is the wrong time to learn about it.
Don’t Buy Anything You Can’t Afford in Cash
Nothing is worse than having debt payoff obligations because you bought things over your head. When you teach kids about spending, explain to them that only your home and sometimes your car should be financed. Outside of that, you should be able to pay cash for it or you should leave it on the shelf. You might use a credit card to build a credit profile, but you pay it off right away.
Always Earn More Than You Spend
If your earnings don’t stay ahead of your spending, you are guaranteed debt payoff problems. Always make sure you earn more than you spend and you will never be in debt. This, coupled with a solid savings plan, will help your kids to grow up financially smart.
Spending some time on these principles with your kids is the only real hope we have for turning the economy around long term. In a world of consumerism, it is the least we can do to prepare our kids.