What are debt cycles?

Debt cycles are like when you borrow something now and have to pay it back later, but sometimes that payment gets bigger or happens more often.

Imagine you have a piggy bank, and you want candy. But your piggy bank is empty. So you ask your friend for some candy now, promising to give them extra candy next week. That's like taking on debt. But then, when the time comes to pay back the candy, you realize you also need more candy for another activity, so you borrow even more candy from another friend. Now you have two friends expecting candy payments, and it feels like a never-ending game of candy trading. That’s a debt cycle: borrowing more and more because you’re paying back what you owe.

Sometimes, when you pay back your debt, you might need to borrow again, just like how you needed more candy after the first payment. This is like having a cycle where you keep borrowing, using up more of your savings or time to pay it all back later.

It’s similar to taking out a loan for a toy now and promising to pay it off with allowance next month, but if you need another toy before then, the cycle keeps going!