What to Teach Your Kids to Keep Them Out of Debt

Updated: September 8, 2020

Many people struggle with getting out of debt, specially credit card debts. One reason for this is because I believe, there is very little emphasis on the importance of proper personal finance in our educational system.

While we are all advised that saving money is good, we are however not really taught in school how to track our expenses, create a personal budget system, and many other smart money habits.

Thus, learning financial literacy becomes a personal initiative and unfortunately, not many give it the importance and priority it needs.

Eliza, our guest blogger for today, shares with us her take on this subject. She emphasizes that when it comes to personal finance, learning still starts at home.

Let’s now read what she has to say and consider her advice on how you can help your child stay away from a financial debt disaster.


It’s our job as parents to set our kids up for success in life. While you may not be able to give your child a big trust fund, you can give them something just as good – financial lessons that will keep them out of debt.

You see, if your kids can avoid being deep in debt the first few years of out of college, they can start socking away money that will make them millionaires by the time they retire. Here are some valuable lessons to teach your kids to keep them out of debt.

Save part of everything you earn.

Saving money is one of the most solid pieces of financial advice you can give. We save money so we don’t have to go into debt when there’s an emergency.

Or, we save up for an expensive purchase instead of putting it on a credit card. If your kids begin saving for retirement in their early 20s, they can accumulate a larger savings account with less money each month than if they wait.

You have to pay back what you borrow.

Paying back debt wouldn’t be so hard if it didn’t mean making serious sacrifices. The more money we put toward debt, the less money we have for everything else, like saving and normal expenses. Some people end up creating debt on top of debt because they don’t put off purchases until they can afford them.

There’s good debt and there’s bad debt.

Not all debt is considered bad debt. If a debt helps you create wealth, it’s typically called good debt.

For example, a student loan can be good debt because it helps you get an education that leads to better-paying jobs. All debt can become bad debt if you take on too much. Or, if you use “good” debt toward a degree that doesn’t typically pay well.

Learn more: On Good Debt, Bad Debt and Ugly Debt

Your money may not stretch as far as you think.

People often overextend themselves with debt thinking they can afford to pay it back later. When you’re young, the sky is the limit. You expect to graduate from college and get a great job with a salary at the top of the pay scale.

But, that’s not always the case. A job after graduation isn’t guaranteed, neither is any particular salary. You can be sure the lenders want their monthly payments whether you’re employed or not.

Use cash if a debit card makes you lose control.

Managing money electronically isn’t easy. When we wrote more checks, we used a checkbook register to keep a record of our account balances. But, in the rise of debit cards and online banking, balancing a checkbook is ancient accounting.

It’s easy to lose track of your balance when you’re using a debit card because you have to do a lot of math in your head. Let your kids know that cash is still accepted for everyday transactions and it’s always an option if debit cards cause them to overspend.

Help your child learn more about financial management by suggesting some books and websites on the subject. Best of all, make sure you’re in good financial shape yourself.

This post was written by Eliza Collins.

What to read next: All About Credit Cards

What to do next: Click here to start your financial journey with IMG Wealth Academy


  1. Thanks for the opportunity to be a guest blogger, Fitz!

    One very basic thing which I’d like to add is the misconception which kids have about ATMs. It will be best for your kids to know where the money in the ATM comes from as early as possible. In their eyes, you push a button and money comes out =) My daughter asked me several times to go and get money from the ATM if we needed more than we had… that was when she was just two and a half! So, make sure your kids know that when you go to work, you earn money, which is then deposited in the bank, so you can go to the ATM and take it out when you need it.

    Looking forward to your questions!

  2. Yep. But ONLY telling them what to do is not gonna work out for most children. They have to experience it first. I’m not saying they should, but they should understand what you are talking about them. If you just mumble about these things, then all of them would go topsy-turvy. And besides, kids are more visually oriented. They’d want to see it for themselves, and not just being told. That way, the teachings you gave them would linger for many years, and that it would serve as their principle in life.

  3. @Eliza

    This is such a nice topic for discussion because kids now as early as 2yrs old begin asking about money. Maybe, another way to teach our kids about debts is how to value hard-earned money by teaching them to work for it and manage it at their very young age. I’ve read in an article that one father pays his child a dollar for arranging his bed. Then the child keeps 3 jars for savings, giving out and expenses. If the child wants something, they will check his expenses jar if the child can afford it or not. This way, the child’s money and spending behavior can be honed early and for sure, he will be responsible enough in the future when it comes to acquiring debts.

    Just my two cents.

    hope you could visit my blog http://www.myquestforriches.com/


  4. We try to explain to the kids that Daddy and Mommy have to work so that we will have the money to buy food, pay the rent, etc. When they want to buy something, they have to work for it, e.g. high score on exam, help out on house chore, so that they will understand that it is hard to earn money so it should be spent wisely.

  5. Good read, Fitz.

    I’m glad that I am practicing all those, even if the only thing my mom taught me was to save, save, and nothing but save. Haha.

  6. I agree that parents should always walk the talk, especially in terms of financial literacy. Children generally always copy what they see.

  7. Maybe I was fortunate,most of my older children listened about finances until one did not. I can not totally fault my eldest daughter for trying to help a friend in need. Her intentions were good. Her mistake was not remembering the part where we said: “offer a helping hand up but NEVER do anything that will drag you down.” A cash advance on a credit that was NOT being paid back in a timely fashion taught mt daughter a solid lesson. She did work this out on her own and I think she will not make this mistake ever again. Very good idea to start children young on financial awareness.

  8. Happy to see this posted a year after my comment above. With the threat of COVID-19 still with us in September 2020, many folks are opting for home schooling in one form or another. Since financial education is lacking in most schools around the world, we add this vital subject. I love to send a post just like this one to all of our troops and challenge them to write an essay for me about what they have learned from their reading, how they will implement the knowledge etc. A small cash prize added to the savings account for a job well done certainly helps motivate them. Thank you again Fritz for great articles and wonderful guest postings.

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