Let’s talk about amortization — it’s a big word, but don’t worry, we’ll make it super simple!
Imagine you want to buy a toy that costs $10, but you only have $1 today. So, your parents say, “It’s okay, you can pay us $1 every week until the toy is fully paid for.” That’s kind of like amortization!
💡 Amortization means paying for something little by little over time, instead of paying all at once. Grown-ups do this with big things like cars or houses, because those cost way more than toys!
Now, let’s say you buy a toy house for $100. You promise to pay $10 every month. Each month, a little bit of your $10 goes toward:
- Paying off the price of the toy house
- Maybe a tiny fee for borrowing money (that’s called “interest”)
Each month, you get closer and closer to owning the whole toy house, and one day—ta-da!—it’s all yours because you paid it off. That’s amortization in action!
📚 Grown-ups use amortization schedules (fancy charts) to know how much they owe and how much they’ve paid. It’s like a countdown to being debt-free!
So next time you ask, “Can I pay for this in pieces?” — you’re really talking about amortization. 😉
