What Should I Teach Kids About Homeownership?

What difference would it make if we taught people about homeownership before they had to take on the process of buying a house? Would it encourage people to plan ahead for large payments—including the cost of a mortgage? Would it spare someone from purchasing a home they might not be able to afford yet? And what if kids started learning these lessons as early as 5-10 years old?

Purchasing a home doesn’t have to be daunting, nor does it have to be a mysterious process only talked about at a certain age. In fact, it’s a topic that should be covered long before that financial choice presents itself to us as adults.

The Basics of Homeownership

Young minds are curious minds. Teaching kids about homeownership is important because it shows them there’s a cost for everything. Their parents might own the home they live in or they might not.

Either way, discussing home ownership early will help kids understand why parents care about certain home-focused factors like maintaining the interior and exterior of the property or even why their parents can’t dig a hole in the backyard so they can all have a pool. 

Present homeownership in simple terms so they can understand it based on their age. And don’t forget to assure them that owning a home isn’t for everyone. Go over the pros and cons and describe why it may make more sense to rent a home rather than purchase a home. 

Younger kids (5-10 years old):

Younger kids need to merely understand that owning a home means it’s a special place just for you. You get to decorate how you’d like, build tree houses on the property, and add other fun things. However, with the benefit of doing what you want with it, comes the pitfall of realizing you’re the one required to take care of it. This means you’ll have to clean, do yard work, and find ways to fix things that will inevitably break. 

Let them know that saving for a home can take a long time and dedication. It’s a pretty big cost, so once you’ve got enough, it’s important to remember how lucky you are to have it and that it was worth it because it was a special purchase.

Address the following homeownership vocabulary terms to kids ages 5-10:

• Home: Introduce the concept of a home and a place to life. Let them know that owning a home means you have control of what happens to the house and land around the house. 
• Renting: Explain that renting means that you pay money to use something that belongs to someone else. That means you will have to get permission from the person who actually owns it if you want to make a change or do something with it.
• Save: Explain how saving money is like putting money in a piggy bank for a big purchase later. Say something like, "Saving money helps us buy things we really want, and a house is a super special purchase!" Consider having them play with this savings calculator during class to show them how they can earn interest (an added portion of money) on the money they save over time.
• Mortgage (optional): Introduce the concept of a mortgage in a simple way. Explain that taking out a mortgage is like borrowing money from a grown-up—money that you’ll have to pay back eventually. That payback process, however, happens slowly over time.

Mid-aged kids (10-15 years old):

Ten to fifteen-year-olds are old enough to start understanding more in-depth concepts about purchasing and borrowing. Now is a good time to start introducing financial literacy concepts like budgeting, saving, and responsible spending. At this age, they could start getting involved in the planning of family finances and how much things cost.

Teach them the process of buying a home. You can cover the basic steps of buying a house, including what a down payment is and the process of saving for one. Let them know that buying a home is a huge financial commitment, but it can also guarantee a more stable way of living.

Cover the following homeownership vocabulary terms:

• Budget: Introduce the concept of a budget as a plan for how you spend your money. You can say, "A budget helps us decide where our money goes, so we can save for things we want, like a new bike, and also pay for things we need, like food and electricity."
• Down Payment: Explain that a down payment is a chunk of money you pay upfront when you buy a house. You can say, "When you buy a house, you usually need to pay some money first, like putting a coin in a gumball machine before you get the gumball. That's called a down payment."
• Property Taxes: You can explain property taxes as a fee you pay to help maintain things like roads, schools, and parks in your neighborhood. You can say, "Property taxes are like a small fee we pay to help take care of our neighborhood, kind of like how we pay for school supplies to help take care of our classroom."
• Homeowner's Insurance (optional): Briefly explain that homeowner's insurance helps protect your house from unexpected events like fires or storms.

Teenagers (15 and above):

If there is any age that a child should learn about homeownership, it’s in their teens. Explaining how credit scores affect your ability to borrow money and get a good mortgage rate helps teach teens about financial responsibility.

Try having teens research different housing options and the costs associated with each. As they explore the online listing, introduce them to the Banzai Mortgage Affordability Calculator to have them explore what a monthly payment could look like and what home prices suit different payments..

Cover the following homeownership vocabulary terms with your teens:

• Credit Score: Explain how a credit score is a number that shows how responsible you are with borrowing money. You can say, "A credit score is like a report card for your borrowing habits. A good score makes it easier to get loans for things like a house and car."
• Interest Rate: Explain that interest rates are the additional cost you pay when you borrow money. You can say, "When you borrow money, you’ll almost always pay back more than you originally took out. This is because interest charges you a percentage of the overall total.."
• Equity: You can explain equity as the ownership you have in your home that grows as you pay off your mortgage. You can say, "The more you pay towards your mortgage, the more equity you build in your house. It's like slowly filling up a jar to show how much of the house is really yours."
• Real Estate Agent (optional): If you discuss buying a house, you can introduce the role of a real estate agent who helps people find and buy homes.

Buying a home has long been considered a key part of the American Dream. Help set kids up with the know-how to decide whether buying a home makes sense for them in the future or whether renting is the way to go. That decision will be made a whole lot easier when the time comes with your help.