Explaining Debt to Your Children: How and Why You Should Do It

There are many life skills that we want our children to learn, some sooner rather than later. Teaching them the fundamentals of life while they are young will help them grasp good habits that will lead them to make better choices and decisions when they get older. One critical topic that you need to teach your children about while they are young is debt. The younger they appreciate the impact debt has on their lives, the sooner they will be able to form habits to ensure that they never get stuck in the hole when they are older.

You may be thinking: How do I get started talking about such a topic with my child? The good news is that you don’t have to go into all the nitty-gritty, at least not yet. The important thing is to teach them about the basics, so it will be easier for them to grasp more complex concepts on debt later on. This blog post will help you open the door to teaching your children about debt and the benefits of doing so. 

Explaining Debt to Your Children: How and Why You Should Do It

Opening the topic about debt may seem like a difficult one, especially with younger children. However, you can help them understand debt and how to go about using it when they are older.

Good Debt vs. Bad Debt

When explaining debt to children, it is a good idea to separate debt into good vs. bad. Generally, people perceive debt to be bad. However, good debt is when it will be used to secure a financial future. Read on to get tips on how to discuss this with your children.

Tips to Teaching Children about Debt

1 - Teach Them Why Good Debt is Intrinsically “Good.”

Good debt helps a person increase their net worth and better their credit score in the long run. Teach them that if money is owed, it should always be repaid. 

2 - Advise Them to Stay Away from Bad Debt

Bad debt, on the other hand, may push a person further and further into more debt. This usually happens when a person spends more than they can afford and does not live within their means. 

3 - Tell Them Why Credit Card Bills Need to Be Paid on Time

To build good credit, it is a must to pay off all credit card dues on time. Teach them that credit cards may have the tendency to snowball and get larger and larger over time if they are not paid off at the end of each month.

4 - Tell Them They Shouldn’t Borrow Money Without a Payback Plan

Teaching your children about debt should also involve teaching them that before they take out a loan or borrow money from a friend, they should always plan to pay the money back. 


Teaching children about debt may be tricky, especially at first. However, if you can open the topic at the right time and lead by proper example, you will be able to get through to them. Also, having toys and visuals will also help them turn textbook knowledge into practice. 

If you want to add to your list of toys or apps to help your children learn about debt and credit, use the best chore tracker app, Kiddie Kredit! This is a mobile app designed to educate children on the credit system by completing chores. Download the app today!

John D Saunders

John D. Saunders is a Web Designer and Founder at 5Four Digital, CMO at Kiddie Kredit and an Automation Expert with a decade of experience building brands online. He's worked with clients including Audi, NAACP and Apps Without Code.