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Earning your own money

Lesson 44 · Written for kid, teen, and little

Debt That Helps and Debt That Traps

Some borrowing can help you, and some just piles up.

The idea

Debt means you borrowed money and have to pay it back, almost always with extra on top called interest. Some borrowing may help you, like a loan for training or a modest car that gets you to work, because it can buy something that lasts or helps you earn. Other borrowing pays for things that are used up fast and charges a high rate, so the payments can follow you around long after the fun is over. A useful test is: what does the borrowing cost, and is anything still worth something once you finish paying? ⚖️

A

Words to know

5

Debt

Money you borrowed and have to pay back. A $500 card balance is debt until it reaches zero.

Interest

The extra cost of borrowing. In a simple-interest example, $500 at 24% for one year costs $120 before fees; compounding and payment timing change the total.

Interest rate

How much extra you pay each year, shown as a percent. A card at 24% costs far more than a student loan at 5%.

Minimum payment

The smallest amount a credit card lets you pay that month. Paying only the minimum on $500 can take years to clear.

Credit card

A card that lets you buy now and pay the bank back later. Free if you clear it each month, expensive if you do not.

Try it — no accountSort into groups

Not all borrowing is the same. Some may help you later, some just piles up.

Sort each one: debt that may help, or debt that can trap you?

0 / 6 sorted

In the full lesson

  1. 1Sort into groups
  2. 2Put it in order
  3. 3Make the call

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