Debt can cause stress, fear, anxiety and worry in adults who are trying find a way to get out of it but it also has a serious effect on children as well. Kids don’t understand the current economic situation or what sub-prime lending, market crash or recession means. So how do you go about explaining debt to a child who has no concept about money in the first place?

The first thing a child will notice about being in debt is the fact they don’t get all the things they used to get or go all the places they used to go. They don’t understand money yet or what it means to be in debt. All they understand is they are getting and doing less (and sometimes, nothing at all.) Explaining this to a child is difficult, but necessary.

A child can’t rationalize the reasons behind getting less and doing less. Because they don’t understand the concept of money and debt, they may think things have changed because of something they did wrong or even worse, they may think their parents love them less for some reason. This is why it is very important to explain to a child about money and debt quickly before these feelings set in.

One way to explain complicated topics like money and debt is through stories. Children love stories and you can tell them about money and debt through a good story. There are books online written on this topic to help parents explain this very difficult to understand situation.

Children don’t understand complex things and this is a complex situation. It has to be broken down to a level they will understand. The first lesson has to be about money in general. What it is, how people earn money, what money is worth and what happens when you don’t have enough to go around.

Another approach is to explain to the child the importance of saving money and not spending recklessly. Some parents don’t broach this subject with a child until they get their first job or go off to college. Depending on your child, you have to make the call on when to start discussing this topic, but sooner is always better than later. Even children as young as three or four can

Kids are more aware of things around them and pick up on things a little more quickly than children in the past. They seem to be growing up too fast and they will begin asking questions at a much younger age than children in the past did.

If you went into debt due to overspending, it is important to teach your child about overspending – what it means and why it causes so many problems. If they learn this lesson now, they are less likely to repeat your mistakes in the future. It will also help them understand why entertainment, toys and treats have been less available.

In the current economic situation, parents all over are trying to make ends meet and you need to take the time to be sure your kids understand a few things:

* They are not to blame for the problems at hand.
* They need to know their parents are doing everything they can to pay the bills.
* Their parents are not mad at them even if they seem to get upset more than usual.

The most important thing to make sure your kids know is how your love for them has not changed and that finances will always ebb and flow. As you take the steps to pay the bills on time and save money, your debt will ease and your financial situation will begin to improve. The kids will then be able to learn how to make smart spending choices, even when there is a little extra money.

Everyone has debt;  it’s just how our society works these days. You buy things with money you don’t have and then spend years paying it off. You probably end up paying up to three times more for something on a credit card over time than if you waited and bought it with cash. 

Now you’ve dug yourself into a nice debt hole, how do you get out of it? 

1. Cut up the Credit Cards and Cancel Them – Credit cards are your worst temptations and if you don’t have them, you can’t use them. Keep one for emergencies and tape a piece of paper over it saying “Emergency Only” so you have to remove the paper and tape to use it. 

2. Debt Services – Gather, sit down and make a call to a debt consolidation service to help drop those interest rates and lower your payments so you actually get out of debt. 

3. Subscription Services - If you have anything that automatically comes out of your checking account every month, re-evaluate if you really need it or not. If you don’t need it, cancel it. 

4. E-Bay – Everyone has stuff lying around the basement or attic they don’t use or want anymore. You can place your unwanted items on E-Bay. You may not make a killing but look at it this way, it’s free money and every penny counts. 

5. Change Your Day-To-Day Spending Habits - Do you normally stop to get a cup of coffee and a breakfast sandwich on the way to work? Maybe you get a candy bar or two at work everyday. Simply put, stop buying stuff you don’t need to buy. Make some coffee at home before you go to work and take it with you. Bring snacks to work. Little things like this add up over time and you may find you are spending a lot more on nothing than you realize. 

Not only will these tips help you get out of debt, they will help you not get into debt in the first place. It is all about spending wisely. Think before you spend.