After a decade of anaemic economic growth and limited job creation, many South Africans now struggle with managing their household debt and savings. In an effort to assist them, Nedbank has created the Consumer Financial Education Booklet to help South Africans understand money matters in plain language. It explains the basics of budgeting, saving, and borrowing, with a focus on helping households avoid the most common financial pitfalls.

One of its clearest lessons is the difference between “good debt” and “bad debt.” Good debt is borrowing that helps you build long-term security. A home loan can fall into this category because it gives you a place to live while also allowing you to own an asset that may rise in value over time. A student loan can be good debt too if it pays for studies that lead to higher earnings.

Bad debt, by contrast, is money borrowed for things that lose value quickly or bring only short-term satisfaction. Store cards, credit cards, and payday loans are the most common culprits. These come with high interest rates, the extra cost added on top of what you borrow. Because interest compounds, meaning it is added onto the outstanding balance month after month, small debts can snowball fast. A pair of shoes bought on credit can end up costing twice its price tag once the fees and interest are counted. The booklet warns that: “borrowing to fund a lifestyle rather than an investment is the fastest way into financial distress.”

So what can indebted households do?

The first step is to target the most expensive debts, the ones with the highest interest, while keeping up at least the minimum payments on the rest. This protects your credit record, which is your track record of how reliably you repay loans. A healthy credit record makes it easier and cheaper to borrow in the future when you really need it. Limiting the number of accounts you juggle is also vital because too many loans and store cards make it easy to lose track and fall behind.

Borrowing can help you buy a home or gain an education, but using credit for day-to-day spending is risky. The smart question to ask before signing any credit agreement is whether this loan will build your future or burden it.