What is devaluation?

Devaluation is when a country’s money suddenly becomes worth less compared to other countries’ money.

Imagine you have a piggy bank full of toy coins that are used in your town. One day, the town next door decides their toy coins aren’t as valuable anymore, they’re like your toy coins but smaller and lighter. So now, if you want to trade your toy coins for theirs, you need more of them to get the same amount.

That’s what happens with devaluation. A country’s currency (like dollars or euros) loses value compared to other currencies. This can happen because the country has too much debt, spends too much on things it doesn’t need, or people stop believing in its money.

Think of it like trading your lunch for someone else’s. If your sandwich suddenly isn’t as good as theirs, you might need to give up more of yours to get the same amount of their food, that’s what devaluation feels like for a country.