Teaching Kids The Basics Of Borrowing Money

Credit, lending, loan and quick money are only some of the things adults encounter every day. These financial subjects affect households, businesses and individuals in terms of acquiring properties such as cars and houses and simple purchases like groceries and clothing. For adults, it is but normal to use credit cards whenever they take the family out for dinner and borrow money when a certain purchase or payment exceeds that of their savings.

Borrowing or loaning results to debt but depending on the person's ability to repay, it could enhance his credit history which in turn could be used so he can loan a bigger amount next time. Sadly, these things also contribute to large debt and eventually the collapse of a once strong financial.

For kids, they might not be aware of these situations or do not fully understand the meaning and importance of the financial subjects. However, kids might be observing and developing in their minds the same ideas when it comes to money and availing a want. So when is the right time to educate kids about financial matters? What are the important things to teach them in their young age?

The thought of wanting to avail something that is unaffordable and actually availing something beyond what a person can afford happens daily in people. They include adults, teenagers and kids alike. At school, kids may want to purchase tickets but if their allowance fall short of the ticket price, chances are they will ask their parents for extra money or they may borrow from friends. Commonly, this is how a lot of people started to get involved in borrowing. They all started small.

When this situation presents itself to parents, this should be taken as an opportunity to educate kids regarding the meaning of borrowing money and the importance of savings and living within ones means. With the situation aforementioned, parents have a choice. They could either give in to the kids' pleading for more money or explain to them the meaning and consequences of borrowing and encourage saving money instead before purchasing their desired item.

In simple terms, borrowing money could be explained as money given not as a gift but an amount to be repaid back in full together with its corresponding interest. Borrowing results to debt that if couldn't be paid on time may result to bigger amount of debt. Then ask the kids, which is better- saving or borrowing?