- Image by artemuestra via Flickr
You never know how something you teach may influence a student later. While you may not think those sat prep courses really sunk in enough to last them well past the test date, the comprehensive questions idolize real life situations in all aspects of life including, business, financing, and consolidation. When you teach business finance, you may be giving your students the skills they need to make smart financial decisions in their lives. This can be true if you spend time helping students understand the difference between good and bad debt.
Good debt has real potential to offer the debtor a return at some later date. For example, financing a home can allow a person to live in a place for less money than they would spend renting a house or apartment. In most cases, the house will retain its value even after the person pays off the mortgage. When the housing market tanks, the house still has value, and a person can continue to live in the home until the market turns around.
On the other side of the debt scale, bad debt offers little in return to the debtor. Despite the fact that people often finance cars, this can be bad debt. Cars lose value the minute owners drive them off the lot. If you buy a brand new car and try to sell it the next day, you won’t get what the dealer did.
Part of teaching your students about debt is helping them learn how to evaluate debt based on their individual situations. For example, while a car loan may seem like bad debt, there are times when it can be good debt. Consider a woman who needs transportation to get to a job. Now, the equation changes. Instead of basing the decision on the value of the car, a person has to calculate the purchase of the car and consider the potential income a woman can get by having transportation.
When your students understand how to determine the value and risk of debt, they are more apt to have healthy finances later in life.