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It’s a Money Thing Junior ← All Articles Why Do People Borrow Money? Profile Image

It's a Money Thing Junior Financial Education SHARE

Why Do People Borrow Money?

Borrowing money comes at a cost. This extra cost is called interest.

If borrowing money costs more, why do people still do it? Here are three reasons why:

Reason 1: They don’t want to wait

It’s better to wait until you can afford something before you buy it. Some people do not want to wait. They borrow money that they cannot repay, and they go into debt.

(Article continues below video)

Reason 2: They need to buy something REALLY big

Remember how it’s better to save money to buy things yourself? This is hard to do with something as big as a car or a house. By borrowing money, people get to use their car or house while they are still paying for it.

Reason 3: They have an emergency

Sometimes, people need to pay for accidents or unexpected repairs. It’s important to save money in an emergency fund so that you do not have to borrow money the next time an emergency takes you by surprise.

Discussion questions

What is interest?
How can borrowing money help you? Give an example.
How can borrowing money hurt you? Give an example.
Why is it important to save money in an emergency fund?

FixedRateMortgage_FeaturedContent_Question

Activity sheet: Borrowing blues

Junior is borrowing too much money! What can he do instead? Draw a line to connect each picture in the top row to its match in the bottom row.

Download the activity sheet

Comic: Interesting interest

Interest is the price you pay for using someone else's money. Read this comic to learn more!

Download the comic

It’s a Money Thing® is a registered trademark of Currency Marketing and is in partnership with Randolph-Brooks Federal Credit Union (RBFCU) to offer a digital library of financial topics.

Information in this article is general in nature and for your consideration, not as financial advice. Please contact your own financial professionals regarding your specific needs before taking any action based upon this information.

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