50 Finance Concepts Explained to Kids (Part 1)
1. Business
Let’s imagine you are selling lemonade.
Example: Your lemon stand is your business because you sell lemonade there.
Let’s imagine you are selling lemonade.
Example: Your lemon stand is your business because you sell lemonade there.
2. Money
This is what people give you when they buy your lemonade.
Example: When your friends buy lemonade from your stand, they give you money.
This is what people give you when they buy your lemonade.
Example: When your friends buy lemonade from your stand, they give you money.
3. Cost
This is what you pay for lemons & sugar to make lemonade.
Example: If you buy a lemon for $1 and sugar for $1, your cost is $2.
This is what you pay for lemons & sugar to make lemonade.
Example: If you buy a lemon for $1 and sugar for $1, your cost is $2.
4. Profit
This is the money left after you pay all your costs.
Example: If you sell lemonade for $5 & it costs $2 to make, your profit is $3.
This is the money left after you pay all your costs.
Example: If you sell lemonade for $5 & it costs $2 to make, your profit is $3.
6.Investing
This is using your saved money to make your lemon stand better.
Example: If you use your saved $2 to buy a new sign, you are investing.
This is using your saved money to make your lemon stand better.
Example: If you use your saved $2 to buy a new sign, you are investing.
7. Price
This is how much people have to give you to get one lemonade.
Example: If each cup of lemonade is $1, that’s the price.
This is how much people have to give you to get one lemonade.
Example: If each cup of lemonade is $1, that’s the price.
8. Customer
These are the friends who come to buy your lemonade.
Example: When your friend buys a lemonade from you, they are a customer.
These are the friends who come to buy your lemonade.
Example: When your friend buys a lemonade from you, they are a customer.
9. Supply and demand
If many friends want your lemonade but you have only a little, you might ask for more money.
Example: If you only have 10 lemonades and 20 friends want one, you might ask for $2 instead of $1.
If many friends want your lemonade but you have only a little, you might ask for more money.
Example: If you only have 10 lemonades and 20 friends want one, you might ask for $2 instead of $1.
10. Advertisement
This is telling people about your lemon stand so they come to buy your lemonade.
Example: If you make a sign that says “Best Lemonade Here!” to show to people, that’s an advertisement.
This is telling people about your lemon stand so they come to buy your lemonade.
Example: If you make a sign that says “Best Lemonade Here!” to show to people, that’s an advertisement.
11. Asset
This is something valuable you own.
Example: Your lemon stand & the lemons are your assets.
This is something valuable you own.
Example: Your lemon stand & the lemons are your assets.
12. Liability
This is something you owe.
Example: If you borrowed $5 to buy lemons, that $5 is a liability.
This is something you owe.
Example: If you borrowed $5 to buy lemons, that $5 is a liability.
13. Depreciation
This is when something you own loses value over time.
Example: If your lemon stand is getting old and worn, it’s depreciating.
This is when something you own loses value over time.
Example: If your lemon stand is getting old and worn, it’s depreciating.
14. Capital Gain
This is the profit you make if you sell something for more than you bought it.
Example: If you sell your lemon stand for more money than you spent to make it, that’s a capital gain.
This is the profit you make if you sell something for more than you bought it.
Example: If you sell your lemon stand for more money than you spent to make it, that’s a capital gain.
15. Dividend
This is money shared with people who own part of a business.
Example: If your lemon stand makes a $10 profit, and you give $5 to your friend who owns part of it, that’s a dividend.
This is money shared with people who own part of a business.
Example: If your lemon stand makes a $10 profit, and you give $5 to your friend who owns part of it, that’s a dividend.
16. Economics
This is the study of how people use resources and make and spend money.
Example: Learning about how many lemons people want to buy is studying economics.
This is the study of how people use resources and make and spend money.
Example: Learning about how many lemons people want to buy is studying economics.
17. Risk
This is the chance of losing something.
Example: If you think it might rain and nobody will buy lemonade, that’s a risk.
This is the chance of losing something.
Example: If you think it might rain and nobody will buy lemonade, that’s a risk.
18. Leverage
This is using borrowed money to make more money.
Example: If you borrow $10 to buy more lemons & make more lemonade to sell, you are using leverage
This is using borrowed money to make more money.
Example: If you borrow $10 to buy more lemons & make more lemonade to sell, you are using leverage
19. Opportunity Cost
This is the value of what you give up when you make a choice.
Example: If you choose to sell lemonade instead of playing, the fun you miss is the opportunity cost.
This is the value of what you give up when you make a choice.
Example: If you choose to sell lemonade instead of playing, the fun you miss is the opportunity cost.
20. Demand
This is how much people want something.
Example: If many people want your lemonade, the demand is high.
This is how much people want something.
Example: If many people want your lemonade, the demand is high.
21. Supply
This is how much of something is available.
Example: If you have 100 cups of lemonade, that’s your supply.
This is how much of something is available.
Example: If you have 100 cups of lemonade, that’s your supply.
22. Market Price
This is the amount of money people are willing to pay for something.
Example: If people will pay $1 for a cup of lemonade, that’s the market price.
This is the amount of money people are willing to pay for something.
Example: If people will pay $1 for a cup of lemonade, that’s the market price.
23. Break-even Point
This is when your income equals your costs.
Example: If you spend $10 on lemons and sugar and earn $10 from selling lemonade, you break even.
This is when your income equals your costs.
Example: If you spend $10 on lemons and sugar and earn $10 from selling lemonade, you break even.
24. Credit Score
This is a number that shows how well someone pays back borrowed money.
Example: If you always pay back money you borrow for lemons, you have a good credit score.
This is a number that shows how well someone pays back borrowed money.
Example: If you always pay back money you borrow for lemons, you have a good credit score.
25. Tax
This is money that you have to pay to the government.
Example: If you earn $10 from lemonade, you might have to give $1 as tax.
This is money that you have to pay to the government.
Example: If you earn $10 from lemonade, you might have to give $1 as tax.
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