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Teaching Your Kids About Debt

By Rubina Ahmed-Haq on June 9, 2016 No Comments

Teaching kids’ financial literacy is important. Knowing how to manage money is an invaluable skill that will be used for life. But what about teaching young people more about debt? No matter how good you’re at making a budget, saving money and scoring the best deals, if you can’t manage your debt you’ll never build your wealth.

We’ve all have had that experience in college or university. A nice credit card representative approaches you on campus with a clip board offering you a first ever charge card. Many young people sign up without having the skills to manage the debt. This also is true for a line of credit, a loan from a friend and overdraft in your bank account. If you haven’t been taught the skills to manage debt, chances are you’ll soon be hurting your personal finances.

If you want to make debt a bigger part of the financial literacy conversion here’s how to get started.

Start as young as possible

As soon as your kids start talking, start talking to them about money and debt. By making debt an everyday topic in your home kids are more likely to grow up with a healthy attitude about money and the ability to talk about it. If for example they sign up for credit card in university, they will be better prepared to use it responsibly. When kids are young you can teach them about debt by setting limits. Telling your child they have $10 they can spend on a toy and everything after that is debt will create boundaries and they will start to understand how to stay within their limits.

Good debt vs. bad debt.

Good debt is money borrowed to go to school, buy a house or to make a business investment. Basically money that will help fund an activity that will further you academically or financially. Bad debt is money spent on consumables, dinners out, drinks with friends, clothing you will wear once. Bad debt is often charged to a credit card, good debt is often locked into a longer term loan agreement with a much lower rate. Teach young people to stay away from bad debt. Pay cash for nights out and dinner with friends. If you’re charging a retail purchase make sure you have the cash in the bank to make your payment in full once the statement arrives.

Show them your statements

This is something you can do when they’re a little older. It’s an excellent way to get young people to understanding how credit card charges work. There is so much information available on your credit card statement, for example how long it would take to pay off you loan if you only made minimal payments and what you interest rate is. There will come a day when they get a statement like this in the mail in their name, don’t make that the first time they see a credit card statement.

Image Credit: Christian Schnettelker

Rubina Ahmed-Haq


Rubina Ahmed-Haq is a Journalist and Personal Finance Expert. She is the go-to money expert in Canada for several media outlets. She regularly appears on CBC Radio, CBC News Network, CTV Your Morning and Global Toronto. She writes for Homes Publishing group, ratesupermarket.ca, debt.ca and has her own website www.alwayssavemoney.ca. Rubina began her career as a broadcast journalist in 1999. Since then she has covered everything from local news, foreign affairs, politics, sports and of course finance! As a business reporter she has worked for CP24 from the Toronto Stock Exchange and reported for BNN. Her work has also appeared in the Toronto Star and various other magazines. She has a Bachelor of Arts degree from York University and is an alumna of the Humber College post graduate journalism program and holds the CSC designation. Her goal is to help Canadians find easy ways to manage their own finances. Follow her on Twitter @alwayssavemoney.

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