Grade 3 Lesson 7: Liabilities
What is a #liability?
A liability is something a person owes, usually a sum of #money. In other words, when you borrow money from someone, it becomes a liability for you. Unlike assets, liabilities take money out of your pocket. Typically, liabilities are settled over time through the transfer of #economic #benefits including money, #goods, or #services.
Examples of liabilities:
- #Carloan
- #Student #loan
- #Creditcard #debt
- #Mortgage
- Vacations
- Clothes
An asset for one person can be a liability for another person. For example, if someone lends you $10, that loan is a liability for you because that’s the money you owe that person. But it is an asset for her/him, because it is her/his money that will go back to her/him when you repay
People who are wealthy typically have a large #assetbase. The poor typically have a lot of liabilities.
It is critical to understand the importance of assets and liabilities when it comes to your #finance and #money. Assets add value to your life and increase your #networth, while liabilities reduce value from your life. The more your assets outweigh your liabilities, the stronger your #financial #health.
ayu ecosystem #kids #education #finance