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Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market by David W. Bianchi

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CHAPTER 11 NET WORTH (WHAT'S YOUR STUFF WORTH?)

Think of it as a thermometer that measures your money. As you work and save, your net worth will increase over time, and you can watch your wealth grow.

Assets

Assets are generally things that you own, such as real estate, jewelry, art, cars, boats, furniture, money, stocks, bonds, and so on.

Liabilities

Liabilities are generally things that you owe to other people such as any bank loans you may have, claims for money that others may have against you, legal judgments against you, ongoing payments that you have to make, unpaid taxes, and so on.

Net Worth

Net worth is a term that is used to determine the total value of all the assets that a person owns minus all of the debts and other things that the person owes to other people. In short, it is assets minus liabilities.

When someone says that Bill Gates is a billionaire, they are really saying that his net worth is more than $1 billion. If someone's net worth is $100,000, the total value of everything that person owns, minus all of his liabilities, is $100,000.

Here is a simple example to calculate a person's net worth:

  • Assets:
  • Market value of house: $250,000
  • Cash in the bank: $10,000
  • Value of stuff in the house: $2,000
  • Value of car: $5,000
  • Total value of all assets: $267,000
  • Liabilities:
  • Mortgage on house: $100,000
  • Credit card debt $20,000
  • Unpaid child support $5,000
  • Total value of all liabilities: $125,000

Net Worth:

Financial Statements

Financial statements ...

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