Thinking back to your childhood, money didn’t seem to be a particularly complicated or worrying subject, did it? At the preschool age, your biggest concern about money was likely to have been whether you had enough of it to buy your favourite sweets from the shop or a cupcake from your school bake sale!

It’s not until adulthood that the subject of money transforms into a huge part of life. Into conversations about credit and debit cards, mortgages, salaries and budgeting — especially when you have kids!

Teaching our kids about the meaning and value of money is a vitally important part of their upbringing, and while some money-related conversations may be easier to have than others, there’s one conversation that is absolutely necessary: the topic of debt.

What is debt?

Debt occurs when one party owes another money, as they have borrowed it to meet a financial need that they couldn’t otherwise. It can be something as small as borrowing twenty pounds off a friend to book a taxi home, or something as large as taking out a substantial credit card loan.

So, now we understand what debt is, let’s look into why it’s important to teach our children about the subject of debt at the preschool age.

Why is it important to teach my child about debt?

First, you may be wondering - how does a subject like debt even apply to my child?

As adults, we can all look back on financial decisions that we might either regret or would have done differently given the chance. Therefore, it’s important that we use our knowledge and life experience to help our little ones make the right financial judgments as early on as possible. Even though it will be many years before they will even be given enough financial responsibility over their own lives to potentially land themselves into debt, it’s useful for them to learn about the topic at this age in preparation for any debt-related situations they may come across in their future.

After all, although your children may be very little now, before you know it they’ll be lending to and borrowing money from friends, having their own debit card, and even taking out a student loan!

Now, let’s look at some easy, practical ways you can teach your child about some basic debt concepts when they are at the preschool age.

How can I teach my child about debt?

We understand that debt can feel like a huge topic to tackle or explain, especially when it comes to your little preschoolers. However, through teaching them basic debt concepts, your child will gain all the knowledge they need for their stage of development.

Try out these 3 simple lessons:

Buying items costs money — whether you use cash or credit. It may sound obvious, but children at the preschool age don’t really understand that buying items will cost money. Therefore, it’s important to convey this to them in as simple a way as possible. To do this, next time you’re in a grocery store, tell your child to pick out something that costs five pounds. Then take out your credit card and a five-pound note, and explain that you can use either of these to buy it.

Lead with positive advice. The first thing to understand about teaching your child about this subject is that it’s best not to scare them with horror stories of what can happen if they do get into debt. (I.e., debt collectors knocking at the door or falling out with friends). Instead, lead with positive advice that positions debt as something they should balance, not worry about or avoid. For example, you should explain that sometimes borrowing makes sense. For instance, taking out reasonable student loans to afford university is a smart move, as is borrowing to buy a home. However, in other aspects of their financial lives, make it clear that it’s better not to borrow money.

You can’t always get what you want. We know you love your child more than anything, and it’s natural to want to spoil them with gifts and treats. However, at the preschool age, it’s vital that they grasp the fact that they can’t always get what they want — whenever they want it! Help your child to exercise limits early on by taking them shopping and not buying little extras every time they ask. Reinforcing small habits such as these will mean that later on in life, your child will be more able to exercise self-control with their own credit or debit card.

How do I teach my child about debt?

It’s never too early, says Unii.