How Can I Get My Child Out Of Debt?

Any mother or father can attest to the fact that the joys of parenthood are many. Too numerous to count. So much so that we spend our kid’s entire childhoods just trying to keep up! Back in “the day” proud mom’s and dad’s would follow their little ones around snapping polaroids, trying to catch those candid shots, and rolling the camcorder so they could share their adorable footage at the next family get together.

Today parents dote on their precious little loves in a completely different way. They needn’t follow them around any longer with large cameras and video recorders. The way of this millennium is much smaller, faster, and farther reaching. Mom can pull out her phone and capture the cutest candid moments on her personal device while scheduling a doctors appointment in the line at the grocery store. Dad is able to record his child’s championship winning shot and share it with the rest of the world from the side line before the clock even runs out on the game!

As parents we use all of our available resources to support, share, and brag on our children simply because we love them. A a result, when they find themselves in difficult situations their first instincts are often to think of mommy and daddy. Mommy and daddy’s first instincts are, naturally, to rush to the rescue. However, when your child finds themselves in debt, there are a few things you may want to take into consideration before putting on your cape and saving the day.

  •  First of all, the fruit doesn’t fall far from the tree. If your child has trouble managing money it’s possible they didn’t learn the skills necessary when they should have. Modeling financial responsibility and healthy money management is an important part of parenting that often gets overlooked. In an effort to protect their children from the responsibility and weight of financial concerns or to shield them from the woes of financial struggle, many parents keep money matters “off the table” when it comes to training their children. This approach, albeit well meaning, has a tendency to backfire once that child reaches adulthood without the necessary skills to balance a budget and live within their means. Be selective, but don’t shield your children completely from the business of making ends meet. They, their credit, and their bank accounts will thank you later.
  • Adding your kids to your credit cards is a quick way to extend a financial lifeline without relinquishing all control. By adding your child to your credit card as an approved authorized user, you give them access to the financial support that they likely are in need of at this point in their financial journey. At the same time, you are able to maintain a watchful eye through your credit card statements. You can see exactly what they are spending and where they spent it. This can be a great tool and incentive for encouraging good and discouraging bad financial behavior. Proceed with caution, however, as your child’s behavior will have a direct impact on your credit rating and score.
  • Intercepting or intervening can interrupt natural consequences. It is always difficult for a parent to see a child struggle. We don’t want any hurt, harm, or danger to come to them if we can help it. But, the truth is that if we don’t allow anything to happen to them, nothing will EVER happen to them. In other words, parents must relinquish some control to allow and permit the flow of natural consequences in the lives of their children. If a child overspends in one area, it is natural to have less money available for other responsibilities or desires. Learning to budget and manage money responsibly is a process. Without the pain and consequences of struggle, some hardship, and a little sacrifice it is unlikely that anyone would ever learn the necessary lessons to become financially functional and credit conscious.
  • Agree to lend them money with a contract, use this as a teachable moment. Giving money to a financially unaware and irresponsible child is a waste and doesn’t help either party. Instead, consider loaning your child the money. Draw up a contract that includes terms that will be challenging yet attainable and require them to stick to it. This is a great way to take advantage of a teachable moment or season in your child’s life. Much better that they learn these lessons from you now rather than from capitalistic creditors and predatory lenders later.
  • If you just can’t say no, give a gift rather than a loan. If you just can’t find it in your heart to say no and it pains you to see your child struggling with their less than ideal financial situation, you are not alone. It is difficult to watch while a child figures things out for themselves for the first time. Rather than trying to muster up a false sense of sternness, let yourself and your child off the hook by giving them a gift rather than forcing them to agree to terms that you yourself will not be willing to enforce. You will both feel better about it and you always have next time to help them learn the lessons that will lead to financial and credit savvy in the future.
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