How to Teach Your Kids about Loans

The concept of loans is something that you should teach to your kids nowadays. By doing so, you’re opening your kids to one of the most common aspects of finance. However, Singapore flexi loans, payday loans and all associated topics can be overwhelming at times. In this case, you have to curtail your approach and make relevant examples. You can apply the following techniques to help your kids understand the world of loans.

 

Candy Analogy 

payday loansDepending on your kids’ age, you can use candies as examples. For the candy analogy, you can assume that a friend of your kid asked for a candy. Now, your kid agreed, but only for an additional candy as repayment. This is the basic application of a loan. You’re teaching your kids about the responsibility of paying the debt full, along with the respective interest. There are times when your kids will ask about the need for the ‘extra candy’ or interest rate. You can explain that the interest rate is the way lenders make their money.

 

 

Early Loan Responsibilities

Another factor that you should teach your kids is the responsibility of having a loan. Emphasize that a loan must be paid as much as possible. By focusing on responsibilities, your kids will understand that applying for a loan is not something that you must do all the time. You’ll also set an example to your kids and they will have a firm grasp on the concept of integrity.

 

Importance of Economy

As your kids get older, they will understand the importance of economy. You can connect this premise to the volatility of loans. One angle to explore is the growth of interest rates whenever the economy undergoes a rapid curve. You can also share a primer on mortgage loans, but don’t delve too deep or your kids might be overwhelmed with all the data.

kiddie bank

 

Banks as Established Lenders

It’s often safe to teach your kids about the importance of banks when it comes to loans. If your kids realize that banks are reliable lenders, they will be more comfortable with bank processes. You should also explain that small-time lenders should be viewed with extra caution, but they can also be trusted to a certain degree.

Teaching your kids about loans and loan management will prepare them for the coming years. As they become adults, they will have effective loan management techniques, and they won’t just borrow without precaution. Do the hard work today and watch it pay off in the future.