December 8, 2023

How to Raise Debt Free Children

How to Raise Debt Free Children

If you have struggled with money problems in the past or are experiencing difficulty now, you will likely be adamant about making sure your children don’t suffer the same stress and concern in the future.

Raising money-savvy children need not be a difficult task, even if you as a parent have had a bad relationship with money.

Here Are Our Top Six Tips to Raise Children Who Don’t Have Debt Problems in the Future

1. Start Them Early

The sooner you can teach children the value of money, the better. This doesn’t mean you need to stress them out or raise them to be over-the-top frugal, but from the age of about 4 or 5, you can start to introduce them to simple concepts about saving and spending.

2. Teach Them the Importance of Having Goals

Not only is goal setting a great life skill to master, but it also teaches children the value of working and saving for something. Encourage your children to work towards a saving goal when they want something new. It won’t take long, and they will enjoy the thrill of reaching their goals, and they will start to set bigger ones in all areas of their lives.

3. Teach Them How to Shop Smart

It is a great idea to introduce children to the concept of shopping around for items they want to buy. This can include helping them look in catalogues, checking prices online and in-store so they can make an informed decision and get the best deal.

4. Let Them Pay 

When your child asks you for something, don’t buy it for them straight away. Encourage them to set goals and save for the item to teach them that just because we want something then and there does not mean we can have it. Discourage instant gratification; this will set your children up so that later in life, they won't rely on credit cards for all the things they must have then and there.

5. Teach Them Budget Basics

Try to teach your children about budgeting with their pocket money. Encourage them to set some of their money aside each week as savings. Get them involved in a bank savings program through their school or take them once per week to deposit some cash into their bank account. Alternatively, you can even help them log into their online bank account and see their money grow each week.

These behaviours will go a long way to making your child feel comfortable with money and help them become financially literate. Teaching them about the value of money will instill values into them for the future. This strategy can help ensure that they are more likely to understand the importance of sound money management and have a successful financial future without worrying about debt.

6. Teach Them about Needs vs Wants

Teaching kids about needs vs wants can be tricky! Just like being an adult, one can intellectually grasp the difference, but that doesn’t necessarily change the want or remove the desire. The most significant factor that helps kids appreciate the difference between a need and a want is encouraging gratitude for the things they already have. Help your children understand that what they want is probably something they already have! Your kids will probably be adamant in telling you that they NEED toys (and who could blame them for believing that)! However, as a parent, you can help them understand the distinction by explaining “the three basic needs.”

The three basic needs are a roof over your head, food in your belly and clothes to keep you warm. Of course, if you are guilty of splurging on yourself – be prepared for resistance from your child! You can overcome this resistance by demonstrating your own self-mastery. When you’re out and about, show your kids an item that you “want,” and show them what you like about it. Then turn the tables and ask them: “Is a need or a want for Mummy/Daddy?” We bet they will delight in telling you, “It is a want, not a need,” and helping you make the right financial decision!


We spoke with Budget Coach @moneybossmama on Instagram, and she has kindly shared some of her top ways to teach kids about money!

Pay Them for Their Work

We love this recommendation! Many of the most financially successful adults had parents who taught them about personal finance and the value of hard work with pocket money! Once they are 6 or 7, you can start teaching them how people work to earn money, from their chores and homework. 

Set Up a Sinking Fund

Further to teaching your kids how to set up money goals, go through setting up a sinking fund (i.e. in an online bank account) with them. Sit down and talk about their goals, give them some ideas for what they could aspire to, and help them to decide on some short-term, medium-term, and long-term savings goals. Then, set up a savings account for each goal with the target savings amount in mind. This will help teach your child the importance of both financial goal-setting and delayed gratification. 

Match a Percentage of What They Save

This strategy can help teach your child about the benefits of compound interest, which is the next step after saving. Interest is one of the more challenging concepts for children to grasp, but the sooner they understand it, the better off they will be! If you really wanted to, you could even teach them about the OTHER side of interest – the interest you pay when you owe money! 

Open the Dialogue!

Money is historically taboo to discuss with kids, but normalising this discussion can turn it into an empowering experience! When talking to your kids about money, focus on values, the best ways to use money and what money can help you achieve. Keep it age-appropriate, and use visual aids such as showing them cash, a bill, and even showing them what money looks like in your digital bank account. You can even make it a family matter so that everybody in the family is present for the discussion and has the chance to ask questions and learn. Finish the lesson by setting up a family savings goal, with a reward at the end!

Are you currently struggling with unbearable debt that impacts your ability to provide for your family? Credit Counsellors’ team of expert debt advisors are here to help you overcome the struggle and turn your finances around. Call us on 1300 003 328 for a confidential, obligation-free debt assessment to get started on your debt-free journey.

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