What to Tell Your Kids When You’re Drowning In Debt

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We started our debt-free journey drowning in debt. About as much as our gross income. Yep, we screwed up…..BIG TIME.

I remember the day when we sat down and told our four kids that we had made a mess of our money. A BIG mess. We expected them to be ticked. I’m not sure why we expected them to be angry. 

I mean, it must’ve been evident to some extent that money wasn’t great by the number of times we said “no” to anything fun as we struggled to pay the bills each month.

We Told Them We Were Drowning in Debt

I’ve been through a lot of stuff in my life. Scary situations that most people only see in movies. But I was almost as scared as I’d ever been when I had to face our four kids and tell them their dad and I were drowning in debt. 

Talk about facing the music. After the big revelation, they started to ask questions. 

 “How did you get into debt?” the then-five-year-old asked.

 “Well,” I answered with trepidation, “We spent more money than we had for a lot of years.”

 “How can you spend money when you don’t have it?” he replied.

Kids are so logical it’s annoying.

Next thing I knew I was educating our kids about credit cards, about how they give you money to spend on stuff but then ask you to pay back more than you borrowed because of interest.

It was then that the uselessness of it all becomes crystal clear. The uselessness of keeping up with the Joneses. The uselessness of caring what others think about what we owned or didn’t own. The shock when I realized that we were okay with giving our money to the banks instead of keeping it for ourselves.

I told the kids about how we always believed that wealth was a “luck of the draw” thing: either you had it or you didn’t. And about how I had found some info online (the blessed world of personal finance blogs) that showed me that we didn’t have to stay drowning in debt and struggling for money.

I told them that we wanted things to be different for our family; that we didn’t want to have to struggle for money anymore. And I told them that our journey to debt freedom meant money would be really tight for a while as we reigned in spending and put extra cash toward debt.

I then made a budget for the first time in our sixteen years of marriage. Like Brian and his family, I used tools like Dave Ramsey’s debt snowball to make a plan for getting out of debt.

And I told the kids that as we worked to pay off debt we were going to teach them a better way of handling money so that they could avoid the mistakes that we made with our finances. Here’s what I’ve taught them (and myself) along the way.

Accountability Increases Progress

Because the kids know about the debt and because we’ve made the journey out of debt a family deal, they keep a respectful but honest eye on our family spending. 

We’re pretty self-policed now, but in the beginning, it was hard to change our ways. The kids stepped up when I was considering a purchase that was frivolous, and asked if we “really needed” to buy that.

Likewise, when they get money from gifts or from working (paid for chores, jobs, etc.) I ask them what their plans are for the cash. I encourage them to put at least something into savings and to plan ahead for upcoming expenses like sibling gifts or things they want to buy. 

I try to encourage them to avoid spending the money simply because they have it and to be thoughtful about how they manage it.

This dual accountability plan helps our kids to take positive correction and also give positive correction. It has given them the confidence to approach me as an authority figure and say “Are you sure that’s the best move?” and to work as a team with our family to improve our financial situation.

“No” Means I’ve Got Something Better Planned

At first, when we began our journey, a couple of the kids had a hard time with the adjustments. They felt a bit short-changed at our new smaller spending limits on everything.

Like Brian and his family, we changed how we lived life. We canceled cable. We switched to a much cheaper cell phone plan. 

We wanted something different, so we started doing things to change our financial situation to something different than we had in the past. We helped the kids adjust to the changes by helping them envision the big picture.

When we started our journey we were paying $1200 in interest payments each month. As I shared this with the kids, I asked them to imagine how life would be different if we could keep that $1200 each month. 

What would that mean for our family? What vacations could we go on? What would it be like to have a nice clothing budget each month (three of our four kids are girls 🙂 ).

Helping them to envision that our actions would lead to a better future meant that “no” wasn’t a rejection, but simply a “let’s hold out for better things”.

Make Purchase Decisions on What’s Best for You

I’m also helping the kids to avoid falling into the trap of caring what others think about their possessions. I remind them that styles and gadgets come and go and are always replaced with “newer, bigger, better,” revealing the futility at working to “have it all”.

Instead, I encourage the kids to follow my lead and to determine for themselves what their short, medium and long-term financial dreams are.

College Doesn’t Have to Equal Debt

Another thing I’m working on teaching the kids about money is that college doesn’t automatically have to come with student loans and force you to be drowning in debt. 

I’m working hard with them to discover what it is they are meant to do in life and whether or not that requires a college degree. If it does, we’re actively researching the many different ways to obtain a degree and avoid debt, such as:

  • Taking advantage of our state’s PSEO (College credits while in high school) program
  • Searching our local community college courses for completing the first two years of school
  • Setting up 529 accounts and other savings vehicles that will help pay for school
  • Working to save money before it’s time to go to college
  • Considering a local college so they can live at home while attending school
  • How to live a frugal lifestyle in general so that “extra” college costs are minimal
  • How to position themselves for approval for scholarships, etc.

The goal is to help them graduate with little or no debt and to encourage them not to go to college without a plan and a purpose.

Financial Independence is Attainable

I also work hard at teaching the kids that financial freedom is possible. I share interest calculator calculations and encourage them to save money. 

As they watch their bank balances rise – and our family’s net worth increase – they become more and more convinced that good money management is a choice and not just “luck of the draw”.

As I’ve worked our journey out of debt I’ve kept the kids involved every step of the way. We have an Excel spreadsheet that lists each month’s expenditures, debt balances, and debt totals. 

We’re not out of debt yet, but we’re getting there. And each month, when we see forward progress in our financial goals, we have a little bit more peace, knowing that the confines of being deep in debt won’t hold us, hostage, much longer.


Since I first wrote this post in 2016, things have changed for our family. My (now ex) husband, who’d long struggled with anger and addiction, slid deeper into a cycle of violence that was continually putting myself and the kids at risk. 

I separated from him in January of 2018 and our divorce was final in March of 2019. As you might imagine, this event meant the debt payoff was put on hold and more debt was accumulated as I paid legal fees to protect myself and my kids. 

But I’m happy to say that, because I taught my kids early on about the importance of debt freedom, we are once again making great strides toward debt freedom as a family. 

I’m running three businesses out of my home. The kids and I are working together on a fourth business that we’ll run as a family.  

My kids and I are healthy, safe, working on overcoming trauma effects and achieving financial freedom! My oldest, now working and pursuing an art career, save a minimum of 10% of her income. 

When people ask her why she won’t spend her savings on “fun stuff”, she answers “Because it’s called a SAVINGS account. It’s there to provide a cushion in case of an emergency or large expense. It’s not to be touched otherwise.”

I have a good feeling they won’t end up drowning in debt.

Mission accomplished. 

29 thoughts on “What to Tell Your Kids When You’re Drowning In Debt”

  1. I love the phrase “No means I’ve got something better planned.” I think this applies to all children’s financial education, whether the family is deeply in debt or not. Parents are sometimes made to feel like if they aren’t showering gifts or experiences on their kids, they’re being stingy or selfish. Such a lie. That stuff may make your kid happier now, but I’ve seen in some friends the damage parents can do when their children are accustomed to a lifestyle the children can’t afford once they’re out on their own. It’s so hard for them to simplify and live on less when they never had to do that growing up.

    • So very true. As a society we seem to push the concept that anything our kids want we should provide. But ultimately that will just lead to an unhappy lifestyle later on when they can’t afford it, or worse they treat mom and dad like a bank. I like the approach of “No means I’ve got something better planned as well”. Its a bit of an abstract concept for kids, but the sooner they understand that what you make is not what you need to spend the better off they will be. The best thing you can leave your kids with is the opportunities that education brings and a clean slate to start their lives.

      • Great comment, FTF. We’ve had plenty of real life opportunities from stories around us that allow us to show the kids what not restricting your spending can result in. They’re really starting to understand that the freedom that comes with disciplined spending is a huge blessing.

  2. I love this post, Laurie! And I really like how you’ve involved the whole family. Sometimes it’s hard for kids to understand and I like your approach of holding out for “better things”.

    Since we have a junior in high school and future educational costs are almost constantly on my mind, I particularly enjoyed your points that “college doesn’t have to equal debt”. I don’t want to see my kids deeply in debt from their college experience. It’s an ongoing discussion at our house – what has helped my son the most is to figure how much money he will likely make upon getting a degree for his chosen career path and work backwards to find ways to make it affordable.

  3. I love the two-way accountability, Laurie. You don’t have to be a grown-up to recognize frivolous spending and help the family stay on course. The act of making good money choices now is important practice for later when the money is all their own.

  4. Great post, Laurie! You are doing an amazing job getting out of debt and using this time to teach your kids valuable money lessons. How close (time frame) are you to becoming debt free?


    • Thanks, Michael!! On the timeline, not exactly sure yet. We are in the process of working to balance investing for retirement and debt payoff, but may put retirement investing on hold for a short period in order to accelerate the debt freedom date.

      • Hi Laurie,

        From a priority perspective, I would rank saving for retirement higher over paying off debt. When I was swimming in my pool of credit card debt, I did not stop contributing to my 401k. You can see my personal pecking order aka my prioritized personal finance checklist here – http://stretchadime.com/personal-finance-checklist/.

        One thing I would suggest is to make projections and have a timeline with a clear line of sight on when you will be debt free. That will keep you very objective and focused. I am a big picture person, having a clear line of sight to the finish line helped me.

        I don’t know your exact situation. In general, I would never stop saving for retirement to pay off consumer debt faster.


  5. Great practical tips! I especially love that you focus on passing the debt free principles to the kids with a realistic debt free college plan!

  6. I had the same realization in college about interest payments. I’d pay my minimum but then an extra $200 on one card, $100 on another and minimum on a third. One month it hit me that, “Holy hell, I’d have at minimum an extra $400/mo if I paid off my cards and didn’t have these payments to make each month…” Did it change anything? Sadly, not really.

    Why? Unlike you, I didn’t change my habits. I kept doing what I’d done to get me there in the first place. That’s a hard first step…

    We’ve already started teaching our kids about money, Mrs. SSC being the sage with all of her financial wisdom and me as the “don’t be like me” living example of why you should listen to Mrs. SSC’s advice, lol. They’re getting there, but I definitely want them to have a more firm financial grasp of reality than I did.

    • LOL, don’t feel bad – it took us nearly two decades to learn our lesson about debt. 🙂 Yeah, that’s what we’re teaching our kids too: don’t be like us. Well, be like us now. Don’t be like us then. 🙂

  7. It’s astonishing how much yong children can understand if you give them the respect you would give an adult, in language they can understand. Great job, Laurie. And involving them in the decisionmaking allows them to take pride in helping the family, as a whole.

  8. “How can you spend money when you don’t have it?” Out of the mouths of babes! That $1200 monthly interest payment made me wince. Every $10 bit that comes off of that total will build your debt snowball as it goes against the principal. I look forward to the day you announce that your consumer debt is G-O-N-E.

  9. Explaining to kids that the family is in debt is an crucial task that every parent should do, so that kids would know and understand the situation as much as they could. I think it’s also one way that every parent should take advantage of teaching their kids taking responsibility as well. It’s good that kids are part of it, but parents should be careful to handle this with care.

  10. Great post, the phrase that stuck out most to me was ““No” Means I’ve Got Something Better Planned.” I love that perspective. Lots of people think of saving money as sacrificing, but really it’s buying yourself a more secure future. I also really liked reading about how you kept your kids involved throughout the whole process. It’s such valuable experience and learning for them to see you guys walk through this as a family. It’s awesome that they even encouraged you at times to avoid buying things you didn’t need. Really cool story, thanks for sharing!

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