CashVille Kidz Episode 21: Good Debt vs Bad Debt

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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!