Deficit facts for kids

A deficit happens when you spend more money than you have, or when something you have is less than what you need. Imagine you have $10 for the week, but you spend $12. That extra $2 you spent is a deficit! It means you've fallen short of having enough.

What is a Deficit?

A deficit is basically a shortage. It's when the amount you have is less than the amount you need or want. This idea applies to many different areas, from your personal money to how countries manage their finances.

Deficits and Money

When we talk about money, a deficit means spending more than you earn. If a person, a business, or even a government spends more money than they bring in, they have a deficit. This often means they have to borrow money to cover the extra spending.

Deficits in a Country's Economy

Countries also deal with deficits. These are usually much bigger numbers, but the idea is the same.

Government Budget Deficit

A government budget deficit happens when a government spends more money than it collects in taxes and other income over a certain period, usually a year.

• Governments spend money on things like schools, roads, hospitals, and defense.
• They get money from taxes (like income tax or sales tax) and other fees.
• If their spending is higher than their income, they have a budget deficit.
• To cover this deficit, governments often borrow money, which adds to the national debt.

Trade Deficit

A trade deficit occurs when a country buys more goods and services from other countries (these are called imports) than it sells to other countries (these are called exports).

• Imagine your country buys $100 worth of toys from another country, but only sells $80 worth of cars to that country.
• Your country would have a $20 trade deficit with that country.
• A large trade deficit can sometimes mean a country is relying too much on foreign goods.

Deficit Spending

Deficit spending is when a government intentionally spends more money than it collects. They might do this to try and boost the economy during tough times, like a recession. The idea is that by spending more, the government creates jobs and encourages people to spend, which helps the economy grow.

Deficits in Psychology

The word "deficit" can also describe a shortage or weakness in how someone thinks or behaves.

Attention Deficit Hyperactivity Disorder (ADHD)

Attention Deficit Hyperactivity Disorder, or ADHD, is a common developmental disorder. It affects how people pay attention, control impulsive behaviors, and manage their energy levels.

• People with ADHD might find it hard to focus on tasks, sit still, or think before they act.
• It's called an "attention deficit" because it involves challenges with attention and focus, not a complete lack of it.
• ADHD is a real condition that can be managed with support and strategies.

Deficit vs. Debt

It's easy to confuse "deficit" and "debt," but they are different:

• A deficit is like a single bad month where you spent more than you earned. It's about a specific period of time.
• Debt is the total amount of money you owe because of all those past deficits. It's the accumulated total.
• So, if a government has a budget deficit year after year, all those deficits add up to create a larger national debt.

See also

In Spanish: Déficit para niños

• Government debt
• Deficit reduction