Teach kids the difference between good and bad credit. Use our "Family Bank" tip and "Debt Duty" worksheet to show them how interest makes life more expensive
The secret to credit is knowing what you’re buying.
Good credit is borrowing to buy things that grow in value or earn you money. So think of a loan to start a small business or to purchase a home, for example.
Bad credit, on the other hand, is borrowing for things that lose value instantly, like toys, fast food, or clothes.
A really practical way of looking at it is that good debt is an investment in your future, whereas bad debt is you consuming tomorrow’s money today.
So if it doesn't grow in value, don't use credit to buy it.
Credit is a power tool, not a paycheck.
Most people use credit to buy things they can’t afford. But a mini millionaire uses other people's money to build something bigger.
Cultivate a mindset that one’s credit score is a reputation that has to be protected, not as extra (or even free) cash to be spent.
When kids see credit as their Financial Reputation, they’ll treat it with more respect. Early financial socialisation between the ages of 6 and 12 forms their money habits, norms, and values, and sets the tone for how they manage debt (and the other parts of their financial world) as adults.
Takeaway: The better their financial rep, the more doors it opens for them.
Practice a Credit vs. Cash price check.
Here’s something you can do the next time they need to purchase something (even if they are paying for it in cash).
Before making the purchase, have your mini millionaire calculate the real price.
For example, if they borrowed R100 from you today for a R100 toy but have to pay back R110 next week, the toy actually costs R110.
That’s R10 more than the cash price on the shelf.
Forming the habit of checking the interest helps kids realise that bad credit makes life more expensive. And this habit of pausing and calculating the real cost reduces impulsive spending.
Takeaway: Always ask: "Is this item worth the extra cost of borrowing?"
The Family Bank.
Set up a Family Bank where kids can borrow R20 for a small treat today, but must pay back R22 by Friday.
This R2 interest teaches them that borrowing isn't free.
On the flip side, you can let them lend you money; if they give you R20, you need to pay them back R22 next week.
Experiencing both sides of the coin in a safe environment is the best teacher, since hands-on experience with interest helps kids understand how debt grows before they go out in the big, bad world with its real-life consequences.
Takeaway: Feeling the sting of interest when they’re young prevents painful financial lessons as adults.
This week’s free downloadable resource is the Debt Duty template.
It’s a practical worksheet to help your mini millionaire actually see the real cost of borrowing.
Using a Lego set as an example, it breaks down how an R800 item can end up costing R1'000 once one adds the interest. This template guides them to calculate deposits, monthly repayments, and most importantly, the hit their future allowance will take while they’re paying back debt.
It also has a blank version to run the numbers on their next "must-have" item, and the perfect tool for a hands-on Family Bank session we spoke about as this week’s Tip to Try.
Download it, print it out, and let your mini millionaire see the real cost of buying something on credit.
