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What is Net Worth? A Simple Explanation for Kids, Teens & Students of All Ages


Introduction to Net Worth for Kids and Teens

This video explains the concept of net worth in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about net worth calculation, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

What is Net Worth - A Simple Explanation for Kids and Students
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Suitable for students from grade levels:

  • Kindergarten
  • Elementary School
  • Middle School
  • High School

The topics covered are:


Howdy Wall Street Willy!

In the newspaper, I read that someone has a really high net worth.

What is Net Worth anyway?

Well, net worth is your assets, or whatever you own – like a home or a car, minus your liabilities, which is debt or money that you owe someone else – like car loan, student loan, credit card debt and a mortgage which is a loan for a house.

So you just subtract your liabilities from your assets to get your net worth.

Net Worth for Kids - An Easy Definition
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Okay. Is my piggy bank part of my net worth?

Yes, it is part of your net worth. Very small part of it, but it still is a part of your net worth.

Excellent question!

Is my home part of my net worth?

Yes, it is because it is an asset and something you own.

But a mortgage on your home would be considered as a liability because it’s something you owe a bank. So you have to subtract that from your assets.

Okay.

What’s my net worth if my liabilities are more than my assets?

Well, if that happens, then your net worth will be in negative. But if you pay back part of your loans, then it will start becoming positive.

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So, let’s say that you have a house of $100,000 and a car of $10,000. But you have a mortgage or loan on your house for $150,000 and a car loan for $10,000.

Then, your $100,000 house plus your $10,000 car would equal $110,000, but your mortgage would be $150,000 plus $10,000 loan on your car which would be $160,000. So your net worth would be negative $50,000.

  • Assets: $100,000 house + $10,000 car = $110,000
  • Liabilities: $150,000 mortgage + $10,000 car loan = $160,000
  • Net Worth = Assets – Liabilities: $110,000 – $160,000 = -$50,000

But if you paid back $100,000 on your mortgage, then your net worth would be $50,000.

  • Assets: $100,000 house + $10,000 car = $110,000
  • Liabilities: $50,000 mortgage + $10,000 car loan = $60,000
  • Net Worth = Assets – Liabilities: $110,000 – $60,000 = +$50,000

That’s really good.

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Who should calculate their net worth?

Probably only rich people, right?

No, not at all – it is definitely not only for the rich people. Everyone should calculate their net worth.

From the richest person in the world to people like you and me, everyone should calculate their net worth to track their financial progress each year.

Even if you think that your net worth is really less, you should still calculate it.

Net Worth Calculation for Kids and Students
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When do you calculate your net worth anyway?

You should calculate it at least once a year. That helps you track your financial progress over the years, so you know how much your net worth has grown or gotten smaller.

Thank you very much for all the information about what net worth is!

You’re welcome.

Remember, finance is your friend!

Did you like this article? You can find more articles on fundamental topics of personal finance in the ‘Basics’ category.


Download the Easy Peasy Finance Net Worth Calculator

Please check out: Net Worth Calculator Download

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Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids and Teens


Podcast: What is Net Worth?

What is Net Worth
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