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Money Management International Improving Lives Through Financial Education
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What does it mean to be ‘in debt’?

MMI Copywriter

By Kim McGrigg, MMI Community Manager

It’s common for people to refer to themselves or others as “in debt.”

“My brother is in debt.”

“More and more people are finding themselves in debt.”

“After my divorce, I found myself in debt.”

But what does being “in debt” mean exactly?

The vast majority of people owe someone something. In fact, I am fairly certain that I have never met an adult who owes zero debt. Auto loans, credit card debt, mortgage debt, medical debt, student loans, and personal loans are some of the most common types of debt that most people find themselves owing.

If it’s true that nearly everyone has debts to repay, then most of us are technically “in debt,” yet only some of us are described that way. The phrase “in debt” seems to be reserved for people who owe too much, but even that is hard to pinpoint. How much is too much?

Many experts believe that you are in, or are headed for, financial trouble when too much of your paycheck (36%) is being allocated toward debt payments. But I think that being in debt is more like being in love—you just know. To borrow a few words from Robert Palmer: “You can’t sleep. You can’t eat. There’s no doubt, you’re in deep.” In other words, my definition of being “in debt” is more about a feeling than a number.

What’s your definition of “in debt”?

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Everyday lessons on teaching kids about money

 

We’ve all heard the quote from Benjamin Franklin, “a penny saved is a penny earned.” This expression is even truer in today’s volatile economy. Wise financial planning encourages wise spending and saving for the future. Learning smart spending habits can have a profound impact on a young child’s life. The financial lessons children learn today will last well into adulthood.

According to a recent survey by T. Rowe Price, a global investment organization, 48 percent of parents indicated that they are having more discussions with their children about money, saving, and spending than in years’ past. There are many simple ways to incorporate financial lessons into your child’s everyday life. The financial experts at Money Management International offer the following tips in raising financially smart kids.

Turn grocery shopping into a teachable moment. This is a great opportunity to teach kids about comparison shopping. Teach children how to shop by value rather than brand. Remember to always shop with a list. Shopping with a list helps children understand how prior preparation can lead to great savings in the end.

Give children an allowance. There are differing opinions on whether or not to give children an allowance. While some may consider it “spoiling” kids, giving children a regular “income” can be a great opportunity to teach them the basics of earning, spending, and saving. Parents can also use an allowance to help children learn the difference between wants and needs.

Help your child open a small business. During the warm summer months, lemonade stands are common in many neighborhoods. This is a great way for young entrepreneurs to learn financial skills. The adventure of starting a small business is a great financial and confidence-building lesson for kids. Children learn how to set and achieve goals, understand profit and price, and further develop basic math skills.

Open a checking/savings account for your child. Many banks and credit unions offer parents the opportunity to open an account in their child’s name. Owning and maintaining an account helps children learn important life skills.

There are many ways to teach children about money. The most important thing parents can do is to communicate with their children about managing money and budgeting. Parents should offer several examples of how money is earned and give children an opportunity to help decide how it is spent. And, most importantly parents need to educate children about the dangers of overspending, borrowing too much, and paying high interest.


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About Money Management International

Money Management International (MMI) is a nonprofit, full-service credit counseling agency, providing confidential financial guidance, financial education, counseling and debt management assistance to consumers since 1958. MMI helps consumers trim their expenses, develop a spending plan and repay debts. Counseling is available by appointment in branch offices and 24 hours a day, 7 days a week by telephone and Internet. Services are available in English or Spanish. To learn more, call
866.530.9869 or visit MoneyManagement.org.


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