Managing Debt
💸 Debt = borrowed money you have to pay back later, usually with extra (called interest)
✅ Good debt helps your future — like student loans or a house
❌ Bad debt is buying random stuff with credit and only paying the minimum
⚠️ Interest adds up fast — you could end up paying way more than you spent
💡 Smart move: borrow only what you can repay and learn how it all works early
Debt is money that you borrow and are required to pay back over time, usually with extra cost called interest. This can come from credit cards, student loans, or even borrowing from friends and family. While debt can sometimes help you afford big things like college or a car, it can also become a serious problem if you borrow more than you can handle or don’t understand how interest works. This underscores the importance of having a part time job as a teenager.
What is debt?
Why Debt Management is Important?
Learning how to manage debt early on can save you from financial stress later. If you build strong habits now, like only borrowing what you can pay back and understanding the cost of interest, you’ll be in control of your money. Smart debt management is key to staying financially healthy and reaching your goals, whether it’s buying a car, going to college, or just being financially independent.
Not all debt is bad. Some types of debt can actually help you grow financially over time. For example, taking out a student loan to pay for college can be considered good debt because it can lead to better job opportunities and higher income in the future. Another example is a mortgage, a loan used to buy a house , which can grow in value as property prices rise. Good debt usually helps you invest in your future, and it often comes with lower interest rates and reasonable repayment terms.
Good Debt?
Bad Debt?
Bad debt usually happens when you borrow money to buy things you don’t really need or can’t afford. This includes using credit cards to buy clothes, video games, or fast food and then only paying the minimum amount back each month. These kinds of purchases usually lose value quickly and often come with high interest rates, which means you end up paying way more than the item is worth. Over time, bad debt can grow fast and hurt your ability to save, invest, or qualify for future loans.
“You will either learn to manage money, or the lack of it will manage you.”
Dave Ramsey
Common Questions Teens Have
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It’s the extra money you pay on top of what you borrowed. Borrow $100 with 10% interest? You owe $110. It's like the fee for borrowing.
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Your debt grows, your credit score drops, and you’ll have a harder time getting loans for things like a car or apartment later. It stacks up fast.
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Only borrow for stuff that matters and you know you can pay back. If you can’t afford it now and don’t need it, skip it.
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It can be easier and interest-free, but it can also get awkward fast. If you don’t pay them back, it can mess up relationships. Always treat it like a real loan, and agree on how and when you’ll repay it.