Saving vs Borrowing – A Parents Guide

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When adults think about borrowing money, our thoughts go to straight to working with our preferred lender for the larger expenses in life. From loans to purchase vehicles, mortgages to finance homes, even the credit cards in our wallets, these are are all forms of borrowing from one financial institution or another. This is wildly different than your teen asking to borrow a few dollars for the latest video game or a day out with friends. How did we get here from there?

While every conversation with your teen doesn’t have to be a lecture about the nature of debt or monthly obligations, creating a basic understanding of ‘when to save’ versus ‘when to borrow money’ is a concept that, when learned early, will better prepare your teen when it comes to making important financial decisions in adulthood.

The Importance of Realistic Goals

When talking to your teen about money, it’s important to focus on setting realistic saving goals. Ask yourself: what are some of the reasons your teen borrows? How can you encourage them to save for those specific things? While your teen may not be financing or putting away money for large purchases like cars and real estate at this stage in their life, setting the expectation of being realistic with their finances can set them up to be successful in their future planning as adults.

Good Debt vs Bad Debt

Part of being realistic and transparent with your teen about borrowing money is also talking about the appropriate times in which loans and borrowing can be a good practice. While not all debt is bad debt, we want our children to understand the times in which a loan can be a good resource but also how incurring too much debt can negatively impact their future. And while borrowing is the topic of conversation, it’s also important to talk about the responsibilities of loans such as interest and repayment.

The Teaching Potential of Each Borrowed Dollar

The next time your teenager asks to borrow money, consider the ways that you can engage your teen to save. Can you turn a few borrowed dollars into a teaching moment? Here our some of favorite ways to start that conversation.

Starter Questions to Get the Conversation Going

  • Ask your teen if the funds needed are towards something that’s best if saved up for?
  • If they borrow, what are their plans to pay back? What can they afford each week or month?
  • What are a few ways in which they can earn extra money towards their savings goal?

Obviously, with teenagers, this isn’t going to work every time. But any time you can plant a seed about the importance of saving, the chance of it growing into a habit that will guide them into healthy financial adulthood increases dramatically.


Looking for more ways in which to talk to your teen about the importance of saving? Check out our previous Parents Guide on Setting Early Financial Goals. For all the other installments in our Parents Guide series, click here. And for regularly updated content around teaching financial concepts to children of all ages, be sure to bookmark our Money & Beyond Jr page so you can come back to it often!

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