The Debt Talk You Need to Have This March BreakMar 16, 2018
In our podcast this month, our Licensed Insolvency Trustees (LITs) discuss March break spending and how to teach your kids lessons about budgeting and consumer debt.
If you have a teen (or two) in the house, use the break to talk about debt and what responsibilities they’ll have in the next few years. Here are a few tips for teaching them some valuable lessons.
Involve your teen in the planning
In 2017, B.C. parents planned, on average, to spend over $900 for March break activities, and many even planned to take on additional debt during the break.
The idea of accumulating additional debt for March break spending just might not be on the radar for some B.C. parents this year. One recent poll found that Gen Xers (33-54) are the most indebted generation in Canada right now. Parents of school-aged kids are dealing with hefty mortgages, rising interest rates and record consumer debt.
If you’ve made it your goal to avoid March break debt altogether, think about involving your teen in the planning.
Have your teen research the cost of the activities they want to do (there are a lot of choices in the Kelowna area). This is a good time to teach them about the “hidden” or less obvious costs that usually follow: transportation, food and beverage, clothing or gear, rentals and the like.
Give them a budget
Ultimately, you’re the one who’ll be dealing with the consumer debt after March break is over. So set a realistic budget that keeps your finances safe, and then hand the budget over to your teen.
Let them make choices
If your teen’s choice of activity and associated expenses exceeds the budget, discuss the options. Talk about changing or reducing the activity, or offsetting costs (packing food and water, etc.).
Explain to them what it would mean to borrow the extra money and how long it would take to pay off that debt using an online debt repayment calculator.
Finally, if they’d rather pay the extra money to do the activity rather than change it, let them contribute to the budget with their own spending money. That’s a good lesson about sacrifice.
Consider installing the Mint budgeting app on your teen’s phone so they can manage the budget on the go.
On the other hand, if your son or daughter has managed to bring the activity in below budget, offer them the remaining money to put into a savings account or investment of their choice. This will reinforce the positive aspects of planning and avoiding consumer debt.
Everyday experiences like school breaks offer parents a great opportunity to teach kids important money lessons. Your goal to avoid debt is a timely lesson for your teen. Work together to budget for March break and increase your teen’s understanding of debt along the way.