LESSON 10: DEBT
Unit 1: Video 1: Paying for stuff
- This episode shows us the pros and cons when we buy stuff using a credit card. Credit cards allow us to buy things without having to pay first. Credit cards: They are convenient to use but there are charges.
- When you use credit cards, you will receive your credit card abill at the end of the month. When you get your bill, you have two choices. You can pay it off completely or make the monthly payments(pay your bills by either paying in full or make monthly payments). If you make the monthly minimum payments, there will be charges.
- Having a credit card can bring you a lot of problem. You are not only paying for the stuff you bought but also the interest. You will be paying so much more.
- If you do not make the payments, the bank can take you to court. When you are taken to court, your name will be blacklisted and you will not be able to get another credit card or take a loan.
- Credit cards are useful. Remember, use it only when necessary and when you do use it, pay it off on time. A good substitute would be a debit card.
Unit 2: Video 2: Impact of interest on credit
- In this episode, the kids learn about the impact of interest. Interest is Paid by the Borrower to the Lender for the Amount of Money Borrowed. A lender is the one who is giving the money while the borrower is the one who is receiving the money.
- When we talk about interest, we should also know what the term principal mean. Principal refers to the Amount of Money Borrowed. Over time, The Interest that you Pay will ADD UP to be a LOT!
- When you take a loan, there are 2 things that will affect your Borrowing... the interest rate and the duration of the loan. The higher the interest rate, the more you have to pay back. The longer the duration, the more you have to pay back.
- Avoid borrowing money unnecessarily. If you do borrow, pay it up fast!
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Unit 3: Video 3: Good debt vs. bad debt
- In this episode, students learn what debt is all about.Hiya, kids. Now let's talk about debts. It (a debt) is something you owe someone and it is created when a Lender agrees to lend a sum of money to a Borrower. Nowadays, a debt is usually given with the expected repayment... plus interest.
- When you borrow $10 from your friend, you are in debt to him. You will have to pay your friend back. Normally a friend would not charge you interest but sometimes they do!
- There are 2 types of Debts, The Good Debt and The Bad Debt.
- A Good Debt is when you borrow Money to Invest in things that will help you make MORE Money. Your returns from your Investment must be more than the Interest you have to pay for borrowing the money. A good debt will help create value for you. For example, study loan, house loan or business loan.
- A bad debt is when you borrow money to spend on things that decrease in value. Not only you have to pay interest, you will also lose money as the value decreases. Bad debts do not generate long-term income. For example car loan, credit cards or easy payment schemes.
- So before Borrowing, always ask yourself if it is a Good Debt or Bad Debt.
- Always choose GOOD DEBT over Bad Debt!
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