Taboo Subjects With Kids

This classic banger was written in 2009. Just after the financial crisis, when household debt was exploding, and payday lenders lurked on every street corner like raccoons around my green bin. Fast-forward to today, and not much has changed except now kids can rack up debt digitally before they’re old enough to rent a car. Buy-now-pay-later, subscription traps, student loans, inflation, and housing insanity have made teaching kids about debt go from “nice idea” to “minimum requirement for survival.”
Too Long: Didn’t Read

Larry MacDonald asked me a few questions for an article he is working on. This made me think more about a subject essential for parents to discuss with their kids. What are the taboo subjects with kids in most families? As a child, my parents never brought this subject up, and I must also admit that most of what I initially learned about it I learned “on the street.”

What is this taboo subject that so few of us talk to our kids about (and heaven forbid ever want to educate them about)? Debt is the new taboo subject, not sex. My parents did talk about Money, but mostly in platitudes about the importance of saving, knowing how much Money you earn, and working hard (the Anglo-Catholic work ethic).

The subject of DEBT was taboo, and I suspect it is in many houses because parents feel squeamish talking to their kids about this important topic. Admitting to your kids that you carry Debt seems almost like talking about whether you did drugs as a kid or when you lost your virginity. Nope, haven’t talked about either subject with my kids either.

My Perspectives 🧐

As a youngster, the first time I heard about DEBT and borrowing was from a school chum. He said his Dad had got some money from HFC (Household Finance) and that at the end of the month he had to pay back MORE Money than he had been loaned. This concept seemed completely foreign and weird to me. I may have brought the subject up with my parents, and they may have dismissed it with a, “Well, never deal with a company like that….”.

There was an opportunity to teach a young mind about Debt and borrowing. Unfortunately, it was an opportunity missed.

You don’t have to go into gross details about your Debt to your kids. However, explaining to them what Debt you have, WHY you have that Debt, is an essential lesson to teach your children. If you don’t want to use real numbers, at least have them understand the concepts.

An example would be explaining your Mortgage and why you carry that Debt. Kids think you own your house (I know I did). I didn’t realize my parents didn’t own the home until I was graduating from high school. Then there was talk of Mortgage burning parties and such. Having kids understand what a mortgage is for (and maybe what it is NOT for) helps them understand what Debt is. The more they know Debt, the less likely they are to get themselves into a “Debt Jam.”

I am from a generation that has actually had two credit card applications DENIED! That is how old I am.

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Too many kids I know have no idea what Debt is, or worse, don't seem to care how it can disrupt, strain or even destroy lives and relationships. If your kid grows up with the following cause-and-effect model:

I ask Mum and Dad for an iPhone -> They argue about it, say that it is too
expensive -> I keep asking, and finally, they buy it for me -> They get mad
at me when I lose it or use it

What are these kids learning? Did you have to go into Debt to buy this toy? Can you afford to pay for this toy? Does your kid value this toy? (I believe the answers in this example are: Nothing, Yes, No, and No.)

Children and Debt Redux 💸

Debt education is strangely absent from Canadian schools. We’ll talk about stranger danger, peer pressure, puberty, and how not to microwave metal, but mention “interest compounding daily,” and suddenly everyone needs a nap. The irony is that debt harms more families than any of those topics, except maybe that microwave thing. Debt is like teenage sex, as I have said before.

If we want financially resilient kids, we need to make these topics and conversations normal. Tell them what the borrowing costs are, and show them a spreadsheet with a payback schedule. Explain why credit cards aren’t magical rectangles that grant wishes (explain that to anyone else who thinks that as well). Walk them through the mortgage statement. And maybe most importantly, tell them about your own screwups? Nothing teaches like parental shame. If your kid likes arithmetic, show them a pay-down schedule for a mortgage, which shows how little you pay off early in the cycle.

The truth is, kids who understand debt early become adults who avoid it or at least don’t fall face-first into it. If you want to have your kids living in your basement for the rest of your life, don't worry about this either.

Teach Your Children Well 👩‍👶‍👦

Teach your kids about Debt (aka the 800-pound Rhinoceros in the room). Please encourage them to learn about it on their own. Don't let them know about it on the streets!

Psychological Tricks for Success 𝚿 ⚕️

• Normalize money talk early. Kids learn what’s “taboo” by watching adults squirm. Talk about money, or they'll end up living in your basement, forever!
• Use concrete examples. “This house costs $X. We borrowed $Y. It costs $Z extra to borrow.” Show them a spreadsheet with the paydown schedule.
• Highlight consequences without fear-mongering. The goal is awareness, not trauma. Fear does work sometimes, though.
• Model behaviour in front of them. They copy what you do, not what you say. If that doesn't scare the crap out of you, think about it.
• Let them make small mistakes now. Better they blow $20 today than $20,000 at 20, especially if it might be YOUR money they blow.