Debt is the money you borrow from someone else, agreeing to pay it back later, usually with extra charges called interest. Unexpected events like losing a job or medical emergencies can make it hard to repay what's owed, leading to even more debt. It's important to borrow wisely and make sure to pay back what's owed on time to avoid getting overwhelmed by debt.

Debt can be classified into various types, including secured and unsecured, revolving, and installment.

• Secured debt is backed by collateral, such as a house in the case of a mortgage, reducing the lender's risk.
• Unsecured debt, like most credit card debt, does not have collateral and often carries higher interest rates.
• Revolving debt, such as credit card debt, allows for the borrowed amount to be repeatedly borrowed and repaid up to a certain limit.
• Installment debt, like a car loan, is repaid in regular payments over a set term.

Managing debt well means knowing the terms, total borrowing costs (like interest and fees), and when to pay it back. When handled properly, debt can be helpful for reaching financial goals and staying financially stable.

• Use Simple Terms: Start with a basic explanation of what debt is—owing money to someone else that must be paid back, often with extra (interest).
• Illustrate with Examples: Use relatable examples to explain how debt works. For instance, compare it to borrowing a toy from a friend and needing to return it, perhaps with a small thank you note or treat for letting you borrow it (interest).
• Discuss Good vs. Bad Debt: Explain that not all debt is bad. For instance, a mortgage can be considered good debt because it's for a home, potentially increasing in value. Conversely, high-interest credit card debt from unnecessary purchases is often seen as bad debt.