3 Reasons to Make Debt the Topic of Spring BreakMar 01, 2018
Canadian families are in debt. On average, Canadian households owe $1.71 for each dollar of disposable income. Here are three reasons you should make consumer debt the star of your family’s spring break.
- We’re a (largely) cash-less world
The number of available digital payment methods seems to be growing as fast as our household debt.
In fact, more than 50 per cent of Canadians use a cashless method more often than not. Smartphones, watches, online payment methods, credit cards, and debit cards are popular and convenient.
Your kids are growing up in a digital world, and that means that the money they spend might not be visible to them. And it’s hard to manage something you don’t see.
For cash-strapped parents, charging expenses is common – our 2017 spring break spending poll found that 20 per cent of parents expected to take on debt to pay for spring break activities. In fact, with all the plastic and digital methods of payment, your kids might have a difficult time understanding why financial planning is so important. After all, there’s probably a credit card in reach.
It’s important to take every opportunity to help your kids understand all the work that goes on behind the scenes (or the credit card). Here are a couple of resources that can help:
The Financial Consumer Agency of Canada has an online financial goal calculator to introduce kids to the concept of planning and setting realistic timeframes to achieve goals.
Introduce them to their future best (financial) friend: money management, planning, and budgeting with Mint’s online or app service.
- Gen X is the most in-debt group, but their kids don’t have to be
If you’re a parent, you know how expensive living costs can be. And if you’re a Gen X parent, you’re a part of the most in-debt group in Canada.
With large mortgages, high consumer debt, rising interest rates, and child care costs, there’s little wiggle room in the budgets of many Canadian households.
If you’ve dealt with these or any of the other financial challenges facing many Newfoundlanders right now, you know how stressful it can be. Carrying debt that becomes unmanageable because of economic changes or unexpected financial costs can be stressful.
Chances are, you don’t want your kids to learn those lessons the hard way, so give them the benefit of your hard-earned experience.
Go online and check out the FCAC’s credit card repayment calculator and show your kids how long it really can take to pay back cash to plastic impulses.
Having money set aside for a rainy day is an invaluable lesson for kids and parents. Check out the FCAC’s tips on how to set up an emergency fund.
- Credit scores matter
Can you imagine being handed a sack with $5,000 dollars in it when you turned 18?
Credit cards, student loans (and unfortunately, payday loans) can end up in the hands of your barely-legally-adult child – and so can consumer debt.
And while most teens would agree that having debt that you can’t ever repay would be a bad thing, they might not understand that there can still be negative consequences to their financial health even if they do pay that money back.
Missed or late payments, or making only the minimum payment to lenders can cause a credit score to drop. Holding more than 35 per cent of your allowable debt limit sets off alarms, too. Bad credit can take a long time to rebuild.
On the other hand, if your teen learns about credit scores now, they’re more likely to be successful. Talk to them about the importance of keeping credit score health in mind. Learning how to manage money and debt strategically to protect or increase their credit score sets them up for many more opportunities in the future.
Mortgage approval, student loans or lines of credit, vehicle loans, and even being offered employment opportunities can depend on good credit.
What’s myth and what’s fact when it comes to credit scores? Check out My Money Coach with your teen to introduce them to the facts. You might be surprised yourself.
Spring break is an opportunity to get your teen thinking seriously about debt. Help them understand how to manage money they don’t see, how to prepare for financial hardships, and how to protect their credit.