What are fixed costs?

Fixed costs are things you have to pay no matter how much you use something.

Imagine you have a lemonade stand. Every day, you pay $3 for a table to put your cups on. Whether you sell 1 cup of lemonade or 100 cups, that table is still there, and you still need to pay for it. That $3 is a fixed cost, it doesn’t change based on how many lemonades you make.

Fixed costs are like your favorite backpack, it stays with you no matter where you go or what you do. You might carry it to school, to the park, or even on a trip. The backpack is always there, and it doesn’t get heavier or lighter based on how many toys you bring.

In the same way, fixed costs are things you pay for whether you're busy or not, like rent, insurance, or that table at your lemonade stand. They're steady and predictable, just like your backpack.

• Rent, You pay rent every month, no matter how many people live in the house.
• Insurance, It's a fee you pay regularly to stay protected.
• A monthly subscription, Like a video game membership, you pay each month, whether you play or not.

Fixed costs are like your constant friends, they're always there for you.