Introduction to Debt for Kids and Teens
This video explains the concept of debt in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about debt, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Elementary School
- Middle School
- High School
The topics covered are:
What is debt?
Debt is money that an individual, a company or a Government borrows from another party for a specific purpose or an unforeseen event.
They also make a promise to pay back that money to the lender over time; plus a little extra money, called interest.
What are the types of debt?
Similarly Governments can borrow money by issuing debt instruments like Treasury bills (T-Bills), Treasury Bonds (T-Bonds) and Treasury notes (T-notes). Since the government bonds are backed by the government’s promise, they are less risky and therefore pay less interest than corporate bonds.
Who can lend money?
Banks, credit unions and credit card companies can give loans to individuals.
Companies can get loans from banks or borrow from the general public by issuing bonds.
Governments can borrow from international banks like the World Bank or the International Monetary Fund, or raise money from individuals, corporations and other governments by issuing treasury instruments.
Why would anyone take on debt?
For companies, debt might be a better way to raise money for large purchases than issuing additional shares and diluting their ownership.
Similarly, when government income is not enough to fund large projects, they can cover the difference by taking on debt.