Overview... 1 Introduction... 3

Transcription

1 Debit and Credit Overview... 1 Introduction... 3 Traditional Lesson Plans Lesson One Banking Partners... 5 Lesson Two Personal Spending Lesson Three Savvy Shopping Lesson Four Managing Credit Extension Activities Checks and Checking Accounts Students practice check writing and keep a check register to track their checks, deposits, withdrawals, and automatic electronic payments. Installment Debt Students become aware that an installment debt can be considerably greater than the original purchase price of an item. Leasing vs. Buying a Car Students assess the pluses and minuses of leasing or buying a car. Identity Theft Students learn about steps they can take to help protect their payment cards and personal identity from theft. Rent or Home Ownership Students compare the benefits and responsibilities that come with renting or owning a home.

2

3 Debit and Credit Overview Students compare financial institutions and their services. Through discussion and a game activity, they also weigh the advantages and disadvantages of debit and credit. Lastly, students examine the role that credit scores and credit reporting have on personal finances. Objectives Students will be able to: Define financial institution and identify the services it provides. Examine debit and credit cards and their use. Explain the benefits and common pitfalls of credit cards. Explain the benefits of debit cards. Define credit score and describe how it influences the ability to get credit and borrow money. Preparation Determine whether you will use the traditional classroom presentation or the Project-Based Learning option. Review and organize the materials for the extension activities you plan to teach. Summary and Assessment Use the lesson summaries at the end of each lesson to review concepts. To assess knowledge learned, administer the Debit and Credit Assessment on Pages (Answer Key is on Page 37-38). Required Lessons Lesson One: Banking Partners Lesson Two: Personal Spending Lesson Three: Savvy Shopping Lesson Four: Managing Credit Time The lessons can typically be completed in four 45-minute sessions. Concepts Concepts Banking Credit Credit reports Credit score Debit Debt Deposit insurance Financial responsibility Identity theft Interest Loans Payment methods Skills Comprehension and collaborative learning, critical thinking and reasoning, information literacy, inquiry, speaking and listening, research strategies, self-direction, smallgroup discussion, vocabulary acquisition Extension Activities 1. Checking and Checking Accounts 2. Installment Debt 3. Rent or Home Ownership 4. Leasing vs. Buying a Car 5. Identity Theft 1Debit and Credit Lesson One

4

5 Debit and Credit Introduction James is in eighth grade. He earns money in the summer by caring for the homes of neighbors when they go on vacation. James expects to earn about $150 a month doing those jobs. He wants a new bike, which he plans to buy with the cash he earns and keeps in a savings account. Yvonne is a high school senior with a part-time job. She is making payments on a used car. She also is responsible for paying for her gas and car insurance. With end-of-the-year exams and schoolwork, Yvonne decides to cut back on her hours at work. Looking over her budget, she knows she won t have enough money to meet her expenses. Yvonne sees little choice but to pay her bills with the credit card her parents have cosigned for emergencies. Consumers of all ages are confronted with such financial choices. Banks and credit unions help consumers with their choices by providing saving accounts and more complex investments. Financial institutions also provide loans, debit and credit cards, and online services to help people buy the goods and services they need and want. Knowing how banks and debit and credit work will help students make wise choices when managing and spending their hard-earned money. How much consumers borrow and how they manage debt will have a long-term impact on their finances and financial options. 3Debit and Credit Lesson One

6 JA Finance Park Teacher Notes 4 JA Finance Park

7 Debit and Credit Lesson One: Banking Partners Teacher Introduction Nearly everyone who earns income uses the services of a financial institution. Financial institutions help people complete their money transactions safely, quickly, and conveniently. Today s students need to be prepared to use these services as they move into the world independently. Lesson Time: 45 minutes A financial institution is a business that offers money-related services. Credit unions and banks are examples of financial institutions. They help consumers save for the future; hold and transfer money; handle credit, debit, and loan transactions; and provide mortgage and consumer loans for houses, cars, and home improvements. They earn money by charging their customers interest on loans and fees for services. Interest is a fee received or paid for the use of money. The trend among many consumers today is to use tablets and smartphones to conduct banking transactions. An Internet bank is an online bank without brick-and-mortar branches. Transactions are performed exclusively online. In addition to face-to-face transactions, traditional banks and credit unions also offer online banking. Online banking is a way to view account activity and pay bills once logged on to an institution s website. With a user name or address and password, consumers have quick access to their financial accounts, including checking and savings accounts. It is common for financial institutions to issue alerts and be compatible with money-managing programs such as Quicken and Microsoft Money. Mobile banking is a wireless service that allows bank customers to access their accounts using an app or Web browser on a mobile device. Vocabulary Bank A for-profit institution that offers personal loans, mortgages, and other services. Credit union A not-for-profit cooperative that offers bank services and is owned by its members. Financial institution A business that provides moneyrelated services. Interest A fee received or paid for the use of money. Internet bank A Web-only bank. Mobile banking A wireless service that allows financial transactions by using an app or Web browser from a mobile device. Online banking An electronic way to view account activity and pay bills via the Internet and an institution s website. 5Debit and Credit Lesson One

8 JA Finance Park Materials Student Workbooks JA Finance Park Debit and Credit Slides 1-6 Scissors Colored markers Lesson Preparation Review the Set the Stage talking points. Review the Banking Partners: Lesson Steps. Review the Student Worksheets on Pages My Bank Organizer Worksheet My Online & Mobile Security Foldable Worksheet Banking Partners: Lesson Begins Set the Stage 5 Minutes Spend a few minutes discussing the following questions with the students. What other services besides savings and investments do banks provide? (Possible answers: checking accounts, car and home loans, check cashing, debit and credit cards, change machine.) Have students fill in the My Bank Organizer Worksheet on Page 46 in the Student Workbook to help them gauge what they know and do not know about financial institutions. If they don t know an answer to a question, have them leave the space blank. They will have the opportunity to complete the worksheet at the end of the lesson. Display Slide 1 as you introduce today s lesson topic. 6 JA Finance Park

9 Banking Partners: Lesson Steps 35 Minutes 1. Present Slides 2 and 3 with the lesson s vocabulary. Students should highlight the words in their Student Workbooks on Page 45 as you introduce them. 2. Ask the class, If you were in the market for a new smartphone, what would you want to know before buying one? (Possible answers: What is the coverage area? What are the costs of the various data plans, text plans, and the talk plans?) Explain to students that consumers must do the same comparison shopping before selecting a bank. Choosing a financial institution is a major decision, and there is no one right choice for all consumers. Suggest the following things to look for in a financial institution: Safety and convenience. Accounts with little or no fees. Minimum deposit requirements. A high interest rate on savings. A low interest rate on loans. Checking accounts and debit and credit cards with no or low fees. A user-friendly website and knowledgeable customer service representatives. 3. Present Slide 4. Describe banks and credit unions. Checks and Checking Accounts Activity Have students practice writing a check and keeping a check register. For instructions, turn to the Extension Activity on Page 41. 7Debit and Credit Lesson One

10 JA Finance Park Bank Is a for-profit financial institution. A bank is a business; its goal is to earn a profit. Offers personal loans, mortgages, and other services, including debit and credit cards. Is insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC protects each depositor s money in checking, savings, money market accounts, and in certificates of deposit up to $250,000. Credit Union Is a not-for-profit cooperative financial institution. A credit union is owned and controlled by its members. If you have an account with a credit union, you are a member. Offers personal loans, mortgages, and other bank services, including debit and credit cards. Provides network privileges that allow members to bank at other credit unions. Is insured by the National Credit Union Share Insurance Fund (NCUSIF). Each depositor s personal savings is insured for up to $250, Present Slide 5. Point out that consumers may prefer visiting a financial institution in their neighborhood or using a branch in a grocery store or mall. Others might choose the convenience of online banking. Introduce online banking. Online and Mobile Banking Bank 24/7 using the Internet. Manage accounts and pay bills online. No need to write a check, pay cash, or swipe a debit or credit card. Log on securely to an account or app using a user name and password. Tap, swipe, and scroll to access account balances and transfer money from one account to another. 8 JA Finance Park

11 Deposit checks into eligible accounts with the camera on your mobile device. Safety Alert Tip! Consumers should keep their banking information private. For example, avoid banking online when using public wireless networks (Wi-Fi). Others may be able to see and access your account information. 5. Present Slide 6. Introduce Internet banks. Internet Bank Sometimes called a direct bank. Internet banks are online banks; they have no physical branches with tellers or drive-up windows. Name and password are needed to log on to an account or mobile device app. Safety Alert Tip! Did you know that websites of other financial institutions linked to your bank s website may not be FDIC-insured? Customers can access money For more information on safe in a number of ways, including Internet banking, have students postal mail, mobile apps, log on to the FDIC s website: telephone, the bank s Web page, and automated teller machines individual/online/safe.html (ATMs). A name and password are needed to log on securely to an account. No cash deposits can be made. Before opening an account, consumers should check a bank s website for information about its security practices and features. For example, a bank s website address should be secure (using https with a visible padlock symbol) and require a username, strong password, and, perhaps, a personal security image before access is granted. 6. Ask students if they would be comfortable with an Internet-only bank. Have them give the reasons for their answers. 9Debit and Credit Lesson One

12 JA Finance Park 7. Optional activity: Include if time permits or consider assigning as homework. My Online and Mobile Security Foldable Worksheet Directions: 1. Highlight the information using markers. 2. Cut the large hexagon from the sheet. 3. Cut the lines between each smaller hexagon. Be careful not to cut across the dashed folding lines. 4. Flip the piece so the text faces down. 5. Close the foldable by folding in the congruent hexagons, one on top of the other. 6. Glue to your Student Workbook on Page 49. Ask students to open their workbooks to Page 47, My Online & Mobile Security Foldable Worksheet. Working in pairs, students should read and discuss the information and then the instructions to cut and fold their worksheets. Optional: On the workbook page, have students design an app icon or image for a new banking security app. Color it in. Summary and Review 5 Minutes After completing the lesson, ask students the following review questions. Have them use their answers to complete their My Bank Organizer Worksheet on Page 46. Who uses financial institutions? (Answer: Almost everyone who has or earns money uses financial institutions to help them handle their money and make financial transactions.) Why is it important to know about financial institutions? (Answer: Someday I may want to open a savings or checking account, automatically deposit a paycheck, use a credit or debit card, or take out a loan.) How do financial institutions earn a profit? (Answer: Banks charge more interest to borrowers than the interest they pay to savers. They may also collect account maintenance fees.) Where do financial institutions offer services? (Answer: Financial institutions offer services at main offices, branches, ATM machines, and on online websites.) 10 JA Finance Park

13 My Bank Organizer Debit and Credit Lesson One Student Worksheet, Page 46 Debit and Credit Lesson One 11

14 JA Finance Park My Online & Mobile Security Foldable Debit and Credit Lesson One Student Worksheet, Page JA Finance Park

15 Debit and Credit Lesson Two: Personal Spending Teacher Introduction Debit and credit cards have surpassed cash and checks as forms of payment as Americans look for more convenient ways to make purchases. Lesson Time: 45 minutes A debit card is like cash or a personal check. With a debit card, a consumer buys now and pays now. The money is a debit, or a deduction, from a checking or savings account. Consumers may also use PayPal or other online payment services that are tied to checking, savings, or credit card accounts to buy and sell goods and transfer money electronically. A credit card, on the other hand, provides an instant loan to a consumer from a bank or other financial institution. A credit card is used with the understanding that the money will be repaid with interest if the debt is not paid in full each month. Credit the ability to borrow money can be a helpful tool when used responsibly. Credit offers some advantages: the freedom to carry small amounts of cash, the opportunity to establish a good credit history, and the ability to track expenditures. Credit also increases financial flexibility, allowing users to enjoy goods and services now and pay for them at a later date. Students need to know, however, that credit is not free. It is not additional income that allows them to buy more. Credit is a loan that must be repaid. Large credit card bills and the interest on them can become burdensome and reduce the amount of money a cardholder can spend on other wants or needs. And if the loan is not repaid, it becomes a debt. Vocabulary Bankruptcy A legal process that gives a debtor protection from creditors. Cash Money in the form of bills or coins. Check A written order for a bank to pay money. Credit The amount of financial trust extended to a person or a business by a lender; a loan. Credit card A card authorizing the holder to buy goods and services that can be paid for later. Debit An amount deducted from a bank account. Delinquencies on both credit and loan payments often have significant impact on credit history and may in severe cases lead to bankruptcy or foreclosure. Lastly, credit card terms such as APR, credit limit, finance charges, minimum payment due, and previous balance will be further explained in this lesson. Debit card A card that looks like a credit card but operates like cash; money is immediately subtracted from the cardholder s bank account when a purchase is made. Debt Money owed. Foreclosure A legal process in which a lender takes possession of mortgaged property from a mortgage holder who failed to make payments. PayPal An online payment service that allows consumers to transfer money electronically. Debit and Credit Lesson Two 13

16 JA Finance Park Materials Student Workbooks JA Finance Park Debit and Credit Slides 7-13 Optional: Bring to class a debit card and a credit card and copies of credit card disclosure summaries from actual credit card offers to share with students. Scissors Calculators Optional: Computers and Internet access Lesson Preparation Review the Set the Stage talking points. Review the Personal Spending Lesson Steps. Review the Student Worksheet on Page 20. Payment Cards and Teens Debit card: Many banks offer debit cards to teens ages who open a checking account with an adult co-signer. Sample Credit Card Statement Worksheet Personal Spending: Lesson Begins Set the Stage 5 Minutes Credit card: Generally, teens may be issued a credit card if they have reached the age of majority in their state, meet certain credit qualifications, have an adult co-signer, and can demonstrate the ability to repay their debts. Spend a few minutes discussing the following questions with the students. How do you pay for the things you buy? How do your parents? (Possible answers: cash, check, debit or credit cards.) (Hold up a debit card and a credit card if you have them.) Debit and credit cards may look the same, but they work differently. Do you 14 JA Finance Park

17 know the difference? Raise your hand to answer true or false to the following statements: o A debit card is just another name for a credit card. (False. Use a debit card when you have the money in a checking or savings account. Use a credit card when you prefer to pay later.) o Debit means withdrawal or deduction. (True.) o Debit cardholders are charged interest each time they swipe their cards. (False. Money is immediately subtracted from a checking or savings account. It is not a loan.) o Credit cards are a buy-now-pay-now payment option. (False. Credit cards are a buy now, pay when the bill comes type of payment.) o Credit cards are a safe way to pay for online purchases. (True.) o Credit cards are free money. (False. Credit is a loan that must be paid back.) What are the consequences if you can t pay for the things you buy? (Answer: late fees and penalties, accounts turned over to debt collectors, repossession, possible bankruptcy or loss of your home.) Personal Spending: Lesson Steps 35 Minutes Debit and Credit Lesson Two 1. Present Slide 7 with the lesson s key vocabulary. Have students highlight the words in their Student Workbooks on Page 51 as you introduce them. 2. Ask, If you had the money to buy the number one thing on your must-have list, what would you buy? Write the suggested items on the board. Have students determine if the items listed are needs or wants. Explain that a need is something they must have to live, such as food, clothing, and a place to live. A want is something they could live without. Although a car, computer tablet, and smartphone are items many teens (and adults) believe they need, these items are actually wants. Emphasize that impulse buying and spending on too many wants often leads to overspending, debt, and an inability to pay for things that are really needed. 15

18 JA Finance Park 3. Initiate a discussion about how today s consumers pay for the things they need and want. 4. Explain that cash, checks, instant online money transfer accounts (PayPal, for example), and debit cards require money in hand or in a checking or savings account. 5. Activity: Have the students pair off and, using the information discussed so far in this lesson, brainstorm the advantages and disadvantages of debit cards. After 3 minutes, have the pairs share their ideas with the class. PayPal PayPal personal accounts can be used to send money to a friend or make a purchase online. To start, you ll need: Money transferred to a PayPal account (before you can buy anything). A savings, checking, or credit card account from which money can be withdrawn instantly. 6. Present Slide 8, which provides a list of the advantages and disadvantages of debit cards. Point out any items that the students missed. Discuss the pros and cons of this payment type. Key things to remember about debit cards: A debit card allows for an immediate electronic transfer of money from a cardholder s savings or checking account. A debit card is essentially a paper check but doesn t require the processing time that a check does. A debit card is a buy-now, pay-now payment type. When a debit card is used, the money is immediately subtracted from the account. Office of the Comptroller of the Currency Find information online about debit and credit cards, including what to do if your card is stolen, at the U.S. Department of the Treasury s Answers & Solutions page: get-answers/credit-cards/ index-credit-cards.html. 7. Present Slide 9, which lists the advantages and disadvantages of a credit card. Invite students to read from the slide. Discuss the pros and cons of this payment type. 16 JA Finance Park

19 Key things to remember about credit cards: A credit card provides preapproved credit. It does not require immediate funds. It is a buy-now, pay-later payment type. It provides free short-term borrowing when the balance is paid on time and in full. Credit allows consumers to buy in an emergency. Credit cards are the best way to order something online or over the phone. If a service or item is not as expected, you can dispute the charge. Borrowing has consequences. Credit card companies charge interest (at an annual percentage rate, or APR) on unpaid balances. Cash advances and transfers usually have higher interest rates. Credit cards issue monthly statements with a minimum amount due. Credit card users need money or an income to pay their bill when it comes due. 8. Optional: Distribute the copies of credit card disclosure summaries from actual credit card offers that you brought to class. Have students compare them. Financial Institutions and Credit Cards Financial institutions make money by charging interest to the people who carry balances on their credit cards and by charging fees to businesses that accept the cards. Merchants often then raise the prices of goods and services to cover the fees they have to pay. Debit and Credit Lesson Two 9. Present Slide 10, Sample Credit Card Statement. Ask students to take a close look at the statement worksheet in their workbooks on Page 53 and find the following vocabulary terms: annual fee, APR, credit limit, finance charges (fees and interest charged), minimum payment due, and previous balance. Ask students the following: What does Stacie owe on her credit card? (Answer: $ ) Is Stacie charging more than she is paying off? (Answer: Yes, Stacie only made a $15 minimum payment.) Why might Stacie have $35 in Fees Charged on her bill? (Possible answers: a late fee, a fee for going over the credit limit, or a cash advance fee.) Credit Is a Privilege Remind students that credit is granted to those who have demonstrated the ability to manage money. Paying back a credit card loan on time is the responsibility of the cardholder. 17

20 JA Finance Park What is Stacie s annual fee for the use of her card? (Answer: $0.) What will happen to Stacie s finances over time if she keeps the same spending habits and pays the minimum due? (Answer: Her debt will increase.) 10. Present Slide 11, Cost of Using Credit. Point out that consumers who carry debt for a long time may pay more in interest than the cost of their original purchase. Ask students to discuss why it is difficult to pay off debt and how debt payments can work against consumers. Optional: The following slides are optional and can be presented based on class time and teacher interest. Present Slide 12. Explain the uses of a prepaid card as another banking payment method. Prepaid cards work like debit cards and can be used to make purchases, buy items online, or withdraw cash from an ATM. Employers may also use prepaid payroll cards in place of issuing paper paychecks to their employees. That is a controversial practice because many prepaid cards require fees to activate and maintain the card account and to withdraw cash. Employees, by federal law, are not required to accept prepaid payroll cards. Present Slide 13. Talk briefly about the consequences of credit and loan default. Vocabulary Annual fee A yearly fee. APR Annual percentage rate is the amount of interest charged for any unpaid balance. Credit limit The maximum a cardholder can borrow. It is recommended that cardholders keep a balance of no more than 25 percent of the credit limit. Finance charges The cost of credit the fees and interest charged to finance the unpaid balance. Minimum payment due The smallest amount that can be paid to meet loan requirements. Previous balance Amount still owed from purchases prior to the current 30-day charge cycle. 18 JA Finance Park

21 Summary and Review 5 Minutes Inform students that during the next class, they will play a game called Savvy Shopper. It will give them an opportunity to make decisions about purchases using debit and credit cards. Digging Deeper: Installment Debt Activity Students become aware that an installment debt can be considerably greater than the original purchase price of an item. Explore credit further in this Extension Activity. Instructions begin on Page 49. Debit and Credit Lesson Two 19

22 JA Finance Park Sample Credit Card Statement Debit and Credit Lesson Two Student Worksheet, Page JA Finance Park

23 Lesson Three: Savvy Shopping Teacher Introduction The Savvy Shopper Game, the activity for today s lesson, will help students see the costs and benefits of debit and credit. Lesson Time: 45 Minutes Materials Student Workbooks 0 $10 er ice y lat 0 pr bit w; pa $12 ice y no pr Bu dit Cre Co lle ct De Move back one space es 1. Place game pieces on the START square. Collect $50. Mark your tally sheet. Pay $25 Debit card overdraft fee Debit price $50 Buy now; Credit pay later price $60 Buy DVD s Jeans Buy Debit price Buy $50 now; pay Credi t price later $60 Collect $50 Pay Day! Pay $25 ATM overdraft fee Directions 2. Roll the die. The player rolling the highest number goes first. Play proceeds counterclockwise. 3. Follow the directions on the squares as you land on them. Fill in your tally sheet after each turn. 4. If you land on a hat, jeans, DVDs, shoes, or bike square, you may buy the item with a debit or credit card. If you have the cash, pay the debit price. If you don t have the money, pay the credit price. You may choose not to purchase the item. Pay $35 Late paymen fee t 5. With each item purchased, circle the item at the bottom of your tally sheet. 6. Each time you pass START, collect $ Keep a running tally of your purchases and what you owe. Late payment fee Debit price $150 Buy a Bike Buy now; pay later Credit price $180 Discard pile Savvy Shopper Game Goal To be the first player to buy a hat, jeans, DVDs, shoes, and a bike and have $0 debt. Pay $35 ho ys Bu Game Continue play until one player has bought a hat, jeans, DVDs, shoes, and a bike, and is debt free. Pay Day! Collect $50 Collect $50 Optional: Computers and Internet access WILD Cards Place cards face down Start Calculators s ving t ed Sa coun rn Ac st ea re inte $10 Collect $50 Collect $50 Pay Day! 6 dice Pay $25 Game tokens, candy pieces, or pennies, one for each student JA Finance Park Savvy Shopper Bounced check fee 6 Savvy Shopper Wild Card Sheets Savvy Shopper Game.pdf 1 5/16/14 4:17 PM Pay Day! 6 Savvy Shopper Game Boards Buy a Hat Debit price $20 Buy now; pay later Credit price $24 it Credrd ck ba Rewa 1% rd Ca t $30 llec Co 2014 Junior Achievement USA, M1208 Savvy Shopper Game Board, Section 3 Savvy Shopper Game Board Savvy Shopper Wild Card Sheet Debit and Credit Lesson Three Debit and Credit Lesson Preparation Review the Set the Stage talking points. Review the Savvy Shopping Lesson Steps. Review the Student Worksheets on Pages Savvy Shopper Tally Sheet Worksheet Credit Scenarios Worksheet 21

24 JA Finance Park Savvy Shopping: Lesson Begins Set the Stage 5 Minutes Spend a few minutes reviewing the advantages and disadvantages of debit cards and credit cards, based on the previous lesson information. If Slide 12, Prepaid Cards, and Slide 13, Bankruptcy and Foreclosure, were not discussed at the end of the previous lesson, discuss them now. Savvy Shopping: Activity 35 Minutes Activity: Present Slide 14 and then play the Savvy Shopper Game. The game will help students see the costs and benefits of debit and credit cards. The goal of the game is to be the first player to buy a hat, jeans, DVDs, shoes, and a bike and have $0 debt. Optional: You may change the items to be purchased depending on student preference. Separate the class into groups of four to six. Give each group a Savvy Shopper game board and a Wild Cards sheet. Have students turn to Page 54 in the Student Workbook to find their Savvy Shopper Tally Sheet. They will need this sheet to keep track of their transactions. Ask a student in each group to cut apart and shuffle the Wild Cards and place them facedown on the game board. 22 JA Finance Park

25 00 $1 ter ice y la 0 pr a 12 bit w; p e $ o ric y n it p Bu red C gs vin nt ed Sa ccou arn A st e ere t in 10 Co $ ct lle De Move back one space Pay Day! ho ys Bu es Directions JA Finance Park 1. Place game pieces on the Start square. Receive $50. Mark your tally sheet. 2. Roll the die. The highest number Game goes first. Play proceeds WILD Cards counterclockwise. 3. Follow the directions on squares as you land on them. Fill in your tally Place cards Discard face down pile sheet after each turn. 4. If you land on a hat, jeans, DVDs, shoes, or bike square, you may buy Savvy Shopper Game Goal Directions the item with a debit or credit card. If you have the cash, pay the debit price. If you don t have the money, pay the credit price. You may choose not to purchase the item. Buy a Hat! Pay Day 5. With each item purchased, circle Start the item on the bottom of your tally sheet. 6. Each time you pass the Start square, collect $ Each time you land on a Pay day! square, collect $ If you land on a fee square, write the amount due in the (-) column of your tally sheet. 9. Keep a running tally of your purchases and what you owe. 10. Continue play until one player has bought all the items and is debt free. Pay $25 Debit price $5 0 Buy no w; Credit pay later price $6 0 Buy D VDs ns Buy Jea 2. Roll the die. The player rolling the highest number goes first. Play proceeds counterclockwise. 3. Follow the directions on the squares as you land on them. Fill in your tally sheet after each turn. Pay $3 5 La paymte en fee t 5. With each item purchased, circle the item at the bottom of your tally sheet. 6. Each time you pass START, collect $ Keep a running tally of your purchases and what you owe. Pay $35 4. If you land on a hat, jeans, DVDs, shoes, or bike square, you may buy the item with a debit or credit card. If you have the cash, pay the debit price. If you don t have the money, pay the credit price. You may choose not to purchase the item. Late paymeent fe ATM overdraft fee Pay $25 Pay Day! Buy a Bike Debit price $150 Buy now; pay later Credit price $180 Collect $50 Pay Day! Collect $50 To be the first player to buy a hat, jeans, DVDs, shoes, and a bike and have $0 debt. 1. Place game pieces on the START square. Collect $50. Mark your tally sheet. Debit price Buy $50 no Cred w; pay la it pric te e $60 r Pay $25 Bounced check fee Savvy Shopper Debit card overdraft fee Continue play until one player has bought a hat, jeans, DVDs, shoes, and a bike, and is debt free. dit Cre rd ck a ba Rew 1% ard C Collect $50 Collect $50 Debit price $20 Buy now; pay later Credit price $24 ct lle 0 $3 Co 2014 Junior Achievement USA, M1208 Savvy Shopper Game Board, Section 3 Debit and Credit Lesson Three Savvy Shopper Game.pdf 1 5/16/14 4:17 PM Collect $50 Savvy Shopper Game Goal: To be the first player to buy a hat, jeans, DVDs, shoes, and a bike and have $0 debt. Summary and Review 5 Minutes Ask students what they would do differently if they could play the game again. Explain that their future success requires making wise decisions about when to use debit and when to use credit. If there is extra time in the session, have students research credit card offers online and create a comparison chart showing the different card types (college, gold or platinum, and reward options) along with their benefits, annual fees, and APR rates. Or have students read the Credit Scenarios worksheet in their Student Workbooks on Page 55, and circle the advantages and underline the disadvantages of using credit. 23

26 JA Finance Park Savvy Shopper Wild Card Sheet Debit and Credit Lesson Three 24 JA Finance Park

27 Savvy Shopper Tally Sheet Debit and Credit Lesson Three Student Worksheet, Page 54 Debit and Credit Lesson Three 25

28 JA Finance Park Credit Scenarios Debit and Credit Lesson Three Student Worksheet, Page JA Finance Park

29 Debit and Credit Lesson Four: Managing Credit Teacher Introduction Students may know about the consequences of bad debt but may not know about the benefits of good debt as it pertains to a consumer s financial record. When a debt is paid on time and with no missed payments, the action reflects positively on a consumer s credit. When credit is used responsibly, Lesson Time: 45 minutes it demonstrates to lenders that a consumer is creditworthy that he or she has used credit successfully with a history of paying bills on time. Maintaining a good credit record is important. With it, consumers can get loans for houses, cars, boats, and home improvements. Lenders need a way to understand the financial risk of issuing a line of credit to someone. Credit reports and credit scores are two ways prospective lenders assess the likelihood of a consumer loan being paid on time and in full. A credit report determines a consumer s creditworthiness. It details personal and financial information about a person, including existing loans and credit accounts, any late payments, and recent inquiries from other creditors. A credit score is a numerical expression of a person s creditworthiness and is based on information in a credit report. Credit reporting companies keep records on a consumer s credit experience. A credit report includes information on where a consumer lives, how they pay their bills, and whether they have been sued or arrested or have filed for bankruptcy. According to the Federal Trade Commission, the three nationwide credit report companies Equifax, Experian, and TransUnion sell the information in your report to creditors, insurers, employers (with written consent), and other businesses that use it to evaluate your applications for credit, insurance, employment, or housing. Simply put, if you are a responsible borrower, you will have a good credit rating. If not, you will have a poor credit rating. Whether to use credit is an important decision. It is essential that students understand the fundamentals of building a good credit reputation so that when the time comes, they can apply for and receive loans. Vocabulary Credit report A record of a person s financial information, including previous addresses, Social Security number, current and previous employers, estimated income, credit card accounts with amount owed and payment history, and loan information. Credit score A standardized measurement of the potential to repay a debt. Debit and Credit Lesson Four 27

30 JA Finance Park Materials Student Workbooks JA Finance Park Debit and Credit Slides One coin Lesson Preparation Review the Set the Stage talking points. Optional: Make copies of the Debit and Credit Assessment, Pages 35-36, one for each student. Students will take the assessment at the conclusion of this lesson. The assessment takes minutes to complete. Review the Managing Credit: Lesson Steps. For the Credit Score! game in this lesson, you will need to: o Draw a simple football field on the board. Add your school s name to the end zones. o Draw a simple scoreboard. Managing Credit: Lesson Begins Set the Stage 5 Minutes Spend a few minutes discussing the following questions with the students. Ask students if they have ever been asked to loan money to a friend. If not, have students imagine the following: You have $1,000 in a savings account. A good friend comes to you and asks for $300 to buy a bike. Your friend will use the bike to 28 JA Finance Park

31 ride to and from a new job where she will earn $100 a week, $25 of which will go toward paying you back. Do you loan your friend the money? Why or why not? Have the students reimagine the scenario: You have $1,000 in a savings account. Someone you don t know knocks on your door and asks for $300. She tells you she needs the money to buy a bike to get to and from work. She assures you that she will earn $150 a week and can pay you $50 each week toward paying off the loan. Do you loan this person the money? Why or why not? What would you want to see or know about a person before giving him or her money? Managing Credit: Lesson Steps 35 Minutes 1. Point out that lenders need some way of understanding the financial risk of giving consumers lines of credit. Before they agree to make loans, they ll want to know a number of things about borrowers, such as where they work and live, how much money they make and spend, and their ability to repay debts. 2. Explain that although a number of people might be able to buy a $300 bike with cash, many could not afford to pay for a house or a car in the same way. Typically, houses and cars are bought by taking out a loan. Debit and Credit Lesson Four 3. Emphasize that how consumers spend their money and pay their bills has an impact on whether they can borrow money and at what cost. Responsible consumers have an easier time getting loans. 4. Present Slide 15 with the lesson s vocabulary. Define credit report and credit score and have students highlight the words on Page 56 in their Student Workbooks. Renting or Home Ownership Activity Before committing to a lease or a mortgage, students should understand the benefits and responsibilities that come with renting or owning a home. For more about renting or owning, see the Extension Activity on Page

32 JA Finance Park 5. Present Slides 16 and 17. Tell students you are a bank. They want to borrow money to buy a shiny new car. Should you loan them the money? Share with students what goes into determining whether a consumer is creditworthy. Payment history. Outstanding debt. Credit-use history. Ownership of valuable assets such as real estate, personal property, and investments and savings. 6. Explain that good debt is the term used when debts are paid on time. This reflects well on a consumer s credit record. 7. Emphasize that a credit score influences the credit available to a consumer. If a potential borrower has a high score, the bank will loan money with the expectation that it will be paid back in a timely fashion. With an acceptable credit score, a consumer is one step closer to buying a new home or car or being allowed to rent an apartment 8. Present Slide 18, Credit Report Agencies. Explain to students that the three major credit-reporting agencies Equifax, Experian, and TransUnion keep records of a consumer s credit experience. A credit report includes personal information: Social Security number, date of birth, where a consumer lives, how he pays his bills, and whether he has been sued or arrested or has filed for bankruptcy. Leasing vs. Buying a Car Activity Students should understand the pluses and minuses of leasing or buying a car to make the best decision. For more about leasing versus owning, see the Extension Activity on Page 61. What Is a Social Security Number? A Social Security number is a unique number often used as a personal identifier by government agencies, financial institutions and colleges and universities. A Social Security number is needed for credit checks, to get a jobs and to collect Social Security benefits. A credit report also contains a consumer s Social Security number. The Social Security Administration provides Social Security numbers and cards at no cost to eligible U.S. citizens. 30 JA Finance Park

33 These agencies sell that information to creditors, insurers, employers (with written consent), and other businesses that use it to evaluate applications for credit, insurance, employment, or renting. 9. Present Slide 19, FICO Score Breakdown. Slide 20, FICO Credit Score, is optional depending on class time and teacher interest. FICO is an acronym for the Fair Isaac Corporation, founded in 1956 by engineer Bill Fair and mathematician Earl Isaac. Together, they developed the formula for the FICO score. It is the standard credit score in the United States, used in more than 90 percent of lending decisions ( Credit scores range from 300 to 850. The higher the credit score, the better the reference for the consumer and the lower the risk to the lender. A score of 720 or above is considered very good to excellent. Below 600 is a potentially poor credit risk. Late payments, exceeding the credit limit, applying for credit frequently, and having an account turned over to a collection agency will affect a consumer s credit score. While many lenders use FICO credit scores to help them make lending decisions, each lender has its own process for making decisions. 10. The Fair Credit Reporting Act (FCRA) requires each of the nationwide reporting companies to provide consumers with a free copy of their credit report, upon request, once every 12 months. The Federal Trade Commission (FTC), the nation s consumer protection agency, enforces the act and requires that consumer reporting companies keep accurate credit reports. 11. Present Slide 21. Reemphasize that building a good credit history is one way to demonstrate to lenders who do not know you that you are reliable and will pay back a loan. Free Credit Reports Consumers may order a copy of their credit report from one of the companies or all of the companies at the same time. Visit annualcreditreport. com or call Debit and Credit Lesson Four 31

34 JA Finance Park 12. Point out that identity theft of personal and private information is a threat to everyone. The FTC estimates that more than 9 million people have their identity stolen each year. Ask students to raise their hands if they or anyone in their family have been victims of identity theft. Mention any security breaches that are currently in the news. For people of all ages, a stolen identity is an inconvenient, expensive, and timeconsuming problem to fix. Identity Theft Activity For more information about how students can help protect themselves from identity theft, turn to the Extension Activity on Page Activity: Play the Credit Score! game. This activity will reinforce the lesson s vocabulary terms and concepts. Separate the class into two teams. Ask teams to choose a captain and a team name. Meanwhile, if you haven t already done so, draw a simple football field and scoreboard on the board. 14. Game rules: a) Correct answer = 10 yards (a first down). Go again. b) Incorrect answer = fumble. The ball (and question) goes to the other team. c) Three correct answers in a row = a field goal. Add three points to the team s score or the team can continue play to go for a possible touchdown. d) With a touchdown, a team is awarded seven points. Add seven points to the team s score. Ball goes to the other team. e) Unsportsmanlike conduct: 15-yard penalty and the loss of the ball. Teacher s call! (Use for poor team play, answering out-ofturn, etc.) f) Supplement the activity with additional questions from today s lesson, if needed. Students rotate turns. Explain that only the student from each team who is asked the question may answer, but he or she may ask for help from the team. Answers must be supported or explained with information from today s lesson. Flip the coin and start play. Give the team that wins the toss the choice of taking control of the ball or letting the other team start first. Draw a football or attach a paper football on the 20-yard line of the team that starts play. Move the ball back and forth across the field as questions are answered. Announce the winner. 32 JA Finance Park

35 Credit Score! Questions 1. Why do banks want to know the financial history of their loan customers? (Answer: Lenders need some way of understanding the financial risk of giving a consumer a line of credit.) 2. I m your bank. You want a loan. Why should I loan you money? (Answer: I am creditworthy; I pay my bills on time; I have little debt.) 3. A credit report contains many pieces of personal information about a consumer. Name two. (Possible answers: Previous addresses, Social Security number, current and previous employers, estimated income, credit card accounts with amount owed and payment history, loan information.) 4. You are busy with finals and forgot to pay your credit card bill. You are charged $100 in late fees. This will likely lower your (fill in the blank). (Answer: credit score.) 5. In your own words, define credit score. (Answer: A credit score is a standardized measurement of a person s potential to repay a debt.) 6. Name one of the three nationwide credit reporting agencies. (Answer: Equifax, Experian, TransUnion.) 7. What does a consumer reporting agency do? (Answer: It keeps records of consumers credit history.) 8. You pay your bills on time. Is this a smart move? (Answer: Yes. It shows lenders you can pay off your debts.) 9. Your credit score is 699. According to the FICO credit score system, is this a good or bad credit score? (Answer: Good.) 10. Could this happen? Bill and Sandy are buying their first home. Unfortunately, after checking their credit history, their bank turns them down for a loan because of nonpayment of past credit card bills. (Answer: Yes. Missing payments may lower a consumer s credit rating and affect his or her ability to get a loan.) 11. Your available credit is $1,000, but you keep your debt to $200. How does this help you build a positive credit history? (Answer: When you spend less than your credit limit, it reflects positively on your spending habits.) 12. You decide to charge your new cellphone on a credit card and pay it off immediately. Does this help or hurt your credit? (Answer: It helps. You build credit without accumulating debt.) Debit and Credit Lesson Four 33

36 JA Finance Park 13. Does this help or hurt? You decide the best way to build credit is to apply for credit cards at every store you love at the mall. (Answer: It hurts. Having multiple open accounts could cause lenders to question what would happen if you spend up to or exceed your credit limit. Collecting credit cards is not a good thing.) 14. True or false? You suspect you are a victim of identity theft. Your friends tell you that getting a credit report costs big bucks, so you let it go. (Answer: False. Credit agencies are required by law to issue a free credit report to consumers once a year.) 15. Could this happen? Tyler is looking for a job and to buy his first home. The loan company denies him. (Answer: Yes. With no job, Tyler has no income to pay a mortgage. Plus, he has no home-loan history.) Summary and Review 5 Minutes Extend game play and have students create new questions to ask the opposing team. If time allows, have students write an essay in response to the following persuasive writing prompt. Optional: Distribute the Debit and Credit Assessment sheets and have students complete them. The Answer Key is found on Pages Digging Deeper: Extension Some parents co-sign a credit card for their teens to use because they believe a credit card teaches young people how to be financially responsible. Some parents prefer to give their teens prepaid debit cards. Explain what you think parents should do and why. 34 JA Finance Park

37 Debit and Credit Assessment Choose the best answer for each question. Write the letter that corresponds with your answer on the line provided. For questions that require explanation, use the space below the questions. 1. An example of a financial institution is: a. A department store. b. A bank. c. A school. d. An ATM machine. 2. Who uses financial institutions? a. Adults. b. College graduates. c. Almost everyone who maintains a savings or checking account, uses debit or credit cards, or needs a loan. d. Account holders with lots of cash. 3. Define online banking. 4. Identify the incorrect statement. a. A debit card allows for an immediate electronic transfer of money from a cardholder s savings or checking account. b. A debit card is essentially a paper check but doesn t require the processing time a check does. c. A debit card is handy in an emergency when you don t have the money to spend. d. A debit card is a pay-now payment type with no grace period for payments. 5. To keep your account safe, create a strong password when banking online. Name two additional safety tips when banking online. JA Finance Park

38 Debit and Credit Assessment 6. True or false? A bank is a not-for-profit financial institution. You order your favorite foot-long sandwich with chips and a drink using your debit card. The total comes to $5.68. Your online statement shows a charge of $ The extra amount is an overdraft fee. A credit card provides preapproved credit. Internet banking means using a bank branch to make deposits and withdrawals. The lower an applicant s credit score, the lower the risk to the lender. Identity theft is a threat to anyone with a good credit rating. 7. Lenders use credit agencies to determine: a. An applicant s credit score. b. An applicant s credit history. c. Whether an applicant has any outstanding debt or defaults. d. All of the above. 8. When lenders lend money to borrowers, they charge an additional fee for the use of their money. This fee is called: a. Debit. b. Stock. c. Interest. d. Credit. 9. List an advantage and disadvantage of a credit card. 10. Banks want college students to have their credit cards. Why do you think this is? Is it a good idea? Explain your answer. JA Finance Park

39 Debit and Credit Assessment Answer Key Choose the best answer for each question. Write the letter that corresponds with your answer on the line provided. For questions that require explanation, use the space below the questions. 1. b An example of a financial institution is: a. A department store. b. A bank. c. A school. d. An ATM machine. 2. c Who uses financial institutions? a. Adults. b. College graduates. c. Almost everyone who maintains a savings or checking account, uses debit or credit cards, or needs a loan. d. Account holders with lots of cash. 3. Define online banking. Online banking is an electronic way to view account activity and pay bills via the Internet and an institution s website. Debit and Credit Lesson Four 4. c Identify the incorrect statement. a. A debit card allows for an immediate electronic transfer of money from a cardholder s savings or checking account. b. A debit card is essentially a paper check but doesn t require the processing time a check does. c. A debit card is handy in an emergency when you don t have the money to spend. d. A debit card is a pay-now payment type with no grace period for payments. 5. To keep your account safe, create a strong password when banking online. Name two additional safety tips when banking online. Keep my user name and password private; don t store my account number or PIN on my mobile device; log off my account and close the browser window when finished. 37

40 JA Finance Park Debit and Credit Assessment Answer Key 6. True or false? F A bank is a not-for-profit financial institution. T You order your favorite foot-long sandwich with chips and a drink using your debit card. The total comes to $5.68. Your online statement shows a charge of $ The extra amount is an overdraft fee. T A credit card provides preapproved credit. F Internet banking means using a bank branch to make deposits and withdrawals. F The lower an applicant s credit score, the lower the risk to the lender. T Identity theft is a threat to anyone with a good credit rating. 7. d Lenders use credit agencies to determine: a. An applicant s credit score. b. An applicant s credit history. c. Whether an applicant has any outstanding debt or defaults. d. All of the above. 8. c When lenders lend money to borrowers, they charge an additional fee for the use of their money. This fee is called: a. Debit. b. Stock. c. Interest. d. Credit. 9. List an advantage and disadvantage of a credit card. A credit card provides a preapproved credit. It does not require immediate funds. It is a buy now, pay later payment type. Credit allows you to pay for things in emergencies that you otherwise could not afford. Credit cards are the best way to order something online or over the phone. If a service or item is not as expected, you can dispute the charge. Credit cards charge interest (at an annual percentage rate or APR) on unpaid balances. Cash advances and transfers usually have higher interest rates. Credit cards are not free money. Money charged to a credit card must be paid back plus interest if the bill is not paid in full. 10. Banks want college students to have their credit cards. Why do you think this is? Is it a good idea? Explain your answer. College students use credit cards to buy the things they need and want. Banks want college students to become lifelong customers. College students may one day need additional bank services for car and home loans. Banks make money when students buy things on a credit card and don t pay the balance in full each month. 38 JA Finance Park

41 Debit and Credit Extension Activities Checks and Checking Accounts Students practice check writing and keeping a check register to track their checks, deposits, withdrawals, and automatic electronic payments. Installment Debt Students become aware that an installment debt can be considerably greater than the original purchase price of an item. Rent or Home Ownership Students compare the benefits and responsibilities that come with renting or owning a home. Leasing vs. Buying 4a Car Students understand the pluses and minuses of leasing or buying a car. Identity Theft Students learn about steps they can take to help protect their payment cards and personal identity from theft. Debit and Credit Extension Activities 39

42

43 Checks and Checking Accounts 1Extension Activity Overview Students will practice writing a check and keeping a check register. Reviewing a checking account balance regularly helps consumers keep track of their checks, deposits and withdrawals, and any scheduled automatic electronic payments. Teacher Introduction Activity Time: 45 minutes A checking account is a secure place for consumers to keep their cash. A checking account allows for deposits and withdrawals, check writing, ATM withdrawals, and debit card transactions. Although declining in use with the rise of Web-based payment tools, check writing remains a way for consumers to pay rent, buy groceries, and/or pay bills by mail. Knowing how to write a check and keep a record of it is a practical moneymanagement skill. Current technology also permits bank deposits by scanning paper checks using a smartphone camera. Student checking accounts can be opened with a small deposit, identification, and a Social Security number. Generally, a parent has to be a co-owner of the account if the student is under 18. A debit card is like a check. When the card is used to buy an item, the amount is instantly deducted from a checking account. Keeping track of debit charges helps keep a checking account from being overdrawn. Debit cards are accepted at many grocery and retail stores, gas stations, and restaurants. Using a debit card gives consumers an alternative to carrying a checkbook. In addition, many stores are more likely to accept a debit card than a personal check because a debit payment is approved and credited to the merchant immediately. Debit and Credit Extension Activity 1 41

44 JA Finance Park Materials and Preparation o Review Student Worksheets on Pages Write a Check Worksheet Tracking Expenses Worksheet Check Register Worksheet Write a Check and Check Register Activity Steps 1. Students practice writing a $25.00 birthday check to a family member. 2. Have students turn to Page 57 in their Student Workbook, Write a Check Worksheet. (Answer Key on Page 43.) 3. Check-writing instructions: a) Use a pen when writing a check. b) Write your name, address, and zip code in the upper left-hand corner. c) Enter the date in the upper right-hand corner. Include the month, day, and year. d) Pay to the order of: Print the name of the person or business you are paying. e) In the box near the dollar sign ($): Using numbers, fill in the dollar amount (25.00). The number should be written close to the dollar sign. f) Print the amount on the line underneath using words and fractions. g) Memo line: Print the reason or purpose of the check here. h) Sign your check. Use your full name. No nicknames. A check is a formal bank document. i) Keep track of your checks and the account balance in a register or ledger. 42 JA Finance Park

45 4. Students will now record expenses in a check register. Have students turn to Pages 58 and 59 in their Student Workbook, Tracking Expenses and Check Register Worksheets. 5. Demonstrate how to record the first Tracking Expenses Worksheet transaction on a board or interactive whiteboard. ( On April 14, you wrote check number 3456 to [family member] in the amount of $ ) Travis McCray Miller Place Date April 14, 2016 Anytown, CO NON-NEGOTIABLE Pay to the Order of Craig Lents $ Twenty-five dollars xx/100 Memo JA Finance Park Birthday Gift Travis McCray 6. Have students record the remaining check and debit card transactions. (Answer Key on Page 44.) Dollars Debit and Credit Extension Activity 1 43

46 JA Finance Park Check Register Answer Key Number Date Description Debit (-) Credit (+) Balance 4/11/16 Previous balance $ /14/16 Craig s birthday $25.00 $ /15/16 Direct deposit check $ $ /16/16 ATM withdrawal $20.00 $ /16/16 Gas $43.01 $ /18/16 Water + Electricity Bill $65.39 $ /20/16 Cable $56.50 $ /22/16 Central Bank (car payment) $ $ /23/16 School store $55.57 $ /23/16 Lunch $22.52 $ /24/16 ATM withdrawal $20.00 $ /25/16 Mom $19.00 $ /27/16 Graduation gift from grandma $50.00 $ Summary and Review Even if students rarely need to write a check, keeping a register for cash and debit transactions will help them learn how to track their spending. 44 JA Finance Park

47 Write a Check Debit and Credit Extension Activity Student Worksheet, Page 57 Debit and Credit Extension Activity 1 45

48 JA Finance Park Tracking Expenses Debit and Credit Extension Activity Student Worksheet, Page JA Finance Park

49 Check Register Debit and Credit Extension Activity Student Worksheet, Page 59 Debit and Credit Extension Activity 1 47

50

51 2 Installment Overview Students become aware that an installment debt can be considerably greater than the original purchase price of an item. Teacher Introduction Debt Extension Activity Activity Time: 20 minutes Ask students if they have seen auto advertisements that offer a car for no money down and low monthly payments. This type of loan is called an installment loan. An installment loan is a form of credit that must be repaid over time with a set number of monthly payments. Payments are usually structured so that the borrower pays more in interest in the early months of the loan before paying off the principal (the price tag) of the item. Consumers who use installment loans are paying for the benefit of using an item (house or car) before it is paid for in full. Buying on Credit Advantages: Offers immediate use of the goods or services; adds an element of flexibility in money management (for example, the ability to take advantage of a one-time offer or sale price); provides a convenient way to pay; helps a personal credit rating when payments are made on time. Buying on Credit Disadvantages: Usually requires a credit check and income verification (the borrower needs steady income); adds the burden of personal debt; results in higher costs when interest and other charges are added; could result in the loan being rolled over into a new loan with extended monthly payments if the borrower buys another car before paying off the loan on the previous car. Debit and Credit Extension Activity 2 49

52 JA Finance Park Materials and Preparation o Review Student Worksheets on Pages One-Day- Only Sale! Skit Worksheets Buying on Credit Activity Steps 1. Have students turn to Page 60 in their Student Workbook and review the One-Day-Only Sale! Skit Worksheet. 2. Ask student volunteers to read aloud the parts of Trey, Marie, and the Sales Associate. 3. Once the skit has been read, have the students calculate the monthly cost of the new home theater system. (Note: Payment calculations are rounded to the next higher dollar.) One-Day-Only Sale! Skit Answer Key Marie: How long did you say we have to pay? Sales Associate: Three years. Marie (doing some figuring): Three years, that s 36 months. Trey (adding things up): In all, we ll be paying $1,456 over the next three years. Marie: Hmm. That s a lot more than the sale price of $1,100. Take a poll and see which decision students think Trey and Marie should make. a) Purchase the sound system with cash. b) Purchase the sound system on an installment plan. c) Delay the purchase of the system until all options are considered. Ask students to write reasons for their choice on Page 61 of their workbook. 50 JA Finance Park

53 Summary and Review Review the advantages and disadvantages of using installment loans. Be sure to emphasize that using credit is a privilege that can be costly. Also, borrowing money for purchases imposes a legal obligation to repay the debt. Provide students with a sample persuasion map like the one here. Tell them you are looking for ideas for an educational video on installment loan debt to post on YouTube for teens to see. Students should fill in the map with their ideas and explain why they would work. Good Idea Why it will work Reason #1 Why it will work Reason #2 Fact or example Fact or example Debit and Credit Extension Activity 2 Why it will work Reason #3 Fact or example 51

54 JA Finance Park One-Day-Only Sale! Skit Debit and Credit Extension Activity Student Worksheet, Page JA Finance Park

55 One-Day-Only Sale! Skit Debit and Credit Extension Activity Student Worksheet, Page 61 Debit and Credit Extension Activity 2 53

56

57 3 Rent Overview Before committing to a lease or a mortgage, students should understand the benefits and responsibilities that come with renting or owning a home. Teacher Introduction or Home Ownership Extension Activity Activity Time: 45 minutes Someday, students will want a place to call their own. Renting will offer them a place to live with little upkeep costs and the option to move without having to sell a property. Rent is generally less expensive than a mortgage payment. Owning a home, however, remains a goal for many families. People want to own a home for a variety of reasons. They might want a place that will provide privacy and security; a personal dwelling to decorate or remodel as they see fit; or an investment property that builds equity and provides tax benefits. Home equity is the difference between what a homeowner owes on his home and what it is worth. A home s market value may increase or decline over time. If a home is in their future, students will need to carefully consider how much house they can afford and how long they are willing and able to commit to paying for it. For many consumers, mortgages make up the largest share of household debt. Buying a home requires money. Currently, a 20 percent down payment (a large cash deposit to be paid at the time of sale) on the purchase price of the home is often required by a bank or lender. This deposit is deducted from the home s price to determine the amount that must be borrowed from a bank. The loan is then divided into monthly mortgage payments. The monthly payment includes the principal, interest, property taxes, and usually homeowner s insurance. If borrowers cannot make a down payment of 20 percent, they will need to take out private mortgage insurance to protect the lender in case the borrowers stop paying the loan. Debit and Credit Extension Activity 3 Students can use a price-to-rent ratio formula that shows the price of renting versus the cost of buying in a certain area. Handy online calculators show the price-to-rent ratio for most cities. 55

58 JA Finance Park Materials and Preparation o Review Student Worksheet on Pages Rent or Home Ownership Worksheet My First Lease Worksheet o Optional: Computer and Internet access; extra sheets of paper Rent or Home Ownership Activity Steps 1. Write the following loan amount example on the board. Go through one or two sample mortgage calculations with the class. 30-Year Loan Amount Formula: Loan Amount (home price minus down payment) 360 (months) = Monthly Mortgage Payment Example: You want to buy a $100,000 townhome. $100,000 (price) - $20,000 (20% down payment) = $80,000 (loan amount) $80, = $ Housing Line 1: Home cost Line 2: Down payment amount Line 3: Loan amount (Line 1 minus Line 2) Line 4: Monthly mortgage payment (divide Line 3 by 360) $ $ $ $ 56 JA Finance Park

59 2. Emphasize that these calculations do not include interest. Assuming a 6 percent interest rate (considered the historical rate over the last 50 years), the payment would more than double. For example, a $300,000 house payment that excludes interest would be $300,000/360 = $ per month. At 6 percent interest, the monthly payment would be $1, Have students turn to Page 62, Rent or Home Ownership Sheet in their workbooks. Have student pairs do the following: Read each section and highlight any new words or concepts. Discuss renting and owning and which one they prefer. 4. If time permits, have students describe what would make a perfect apartment and then fill in the My First Lease Worksheet on Page 63 in their workbooks. Summary and Review Mortgage amount: Mortgage term: 30 years or 360 Interest rate: Read the following rent-or-buy scenarios to your students. Have students share their opinions about whether the person mentioned should consider a house or a rental. 6 $ 300,000 % per year Mortgage start date: March Monthly payments: $ 1, months Rent or buy? With interest rates low, John, 22, thinks it s a great time to buy a home. He works part time and has little savings. Debit and Credit Extension Activity 3 Rent or buy? Carlos travels a lot with his new company. He expects to relocate in two to three years. Rent or buy? Chris and Kim want more room for their growing family. Their combined income is $86,000. They have little credit card debt but have car payments and $30,000 in student loans. 57

60 JA Finance Park Rent or Home Ownership Overview Sheet Debit and Credit Extension Activity Student Worksheet, Page JA Finance Park

61 My First Lease Debit and Credit Extension Activity Student Worksheet, Page 63 Debit and Credit Extension Activity 3 59

62

63 4 Overview For many students, having a car is a rite of passage and the culmination of a dream. Before finding the perfect ride, students should understand the pluses and minuses of leasing or owning a car. Teacher Introduction Leasing vs. Buying a Car Extension Activity Ask the students how many of them want to buy a car when they get a job. Ask how many of them will need a car to get to that job. For many students, especially those living in rural or suburban areas, cars are necessary forms of transportation. Explain to students that transportation is the secondlargest expense for most households after housing. If they use a car to travel, they will have ownership costs. This is their monthly loan or lease payment. They ll also need to pay monthly operating costs. Operating costs include car maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking, and tolls. When they are ready for their first car, they may choose to buy or lease it. Buying a car may seem ideal because it will belong to the buyer once payments are made, if it cannot be bought outright. Longer-term loans often have smaller monthly payments. These loans, however, cost more over the life of the loan because the consumer is paying interest for a longer period of time. Also, as the car loses value (depreciates) over time, the owner may end up owing more on the loan than the car is worth. That s why some people prefer to lease, knowing that a lease means they can have a new car every few years and they don t have to worry about selling a car before getting a new one. Activity Time: 30 minutes Auto Loan Most car buyers need financing to buy a new car. One option includes direct lending. This type of loan comes from a finance company, bank, or credit union. In direct lending, a buyer agrees to pay the amount financed plus an agreed-upon finance charge over a period of time. On the other hand, dealership financing comes directly from the dealer. This type of financing offers convenience, and sometimes manufacturersponsored, low-rate deals. An online auto calculator can help you see what your monthly auto loan payment will be. To use an online calculator, insert the auto loan amount, the auto loan term (years or months), the interest rate (% per year), and the auto loan start date in the appropriate boxes and click calculate. Debit and Credit Extension Activity 4 61

64 JA Finance Park To compare leasing versus owning in depth, have students visit www. leaseguide.com and Both sites have online calculators and frequently asked questions on leasing versus buying a car. Whether buying or leasing, encourage students to get the terms of any agreement they or their parents negotiate in writing. Students will examine the advantages and disadvantages to buying and leasing a car to determine what is best for them. Materials and Preparation o Review Student Worksheets on Pages Leasing vs. Buying a Car Graphic Organizer Worksheet Leasing vs. Buying a Car Tip Sheet Worksheet o Optional: Colored pencils or markers o Optional: Computer and Internet access Leasing vs. Buying a Car Activity Steps 1. Draw two columns on the board, labeled Lease and Buy. 2. Define lease as a contract by which one party conveys land or property (in this case, a car) to another person for a set amount of time in exchange for specified payments. This is the same as renting an apartment. Define buy as obtaining ownership of an item in exchange for payment. Ask students to tell you the difference between the two. 3. Tell students they are going to make a decision about which they would prefer: to lease or buy a car. 62 JA Finance Park

65 4. Note: Tell students that for this activity, they will make a decision about buying or leasing a car without the benefit of information about their overall income and spending budgets. In the future, when they are earning real income, they may make different decisions. 5. Have students open their workbooks to the Leasing vs. Buying a Car Graphic Organizer and Tip Sheet worksheets, Pages 64 and Tell students to read the Tip Sheet. If a student believes that a tip fits his thinking, he should color in the corresponding space on the Graphic Organizer. The tips in the lease and buy columns are not necessarily in opposition to each other, so a student could agree with the first tip, for example, in both columns. Students can color with colored pencils or markers, or just shade with pencils or pens. 7. After reading the entire Tip Sheet and coloring in the appropriate spaces on the Graphic Organizer, students should examine the cars and see which one has the most colors. This will make it clear if leasing or buying is the best option. 8. Tell students to put tally marks on the board under Lease or Buy once they have a preference. Optional: To see what is most important to the class, draw a table on the board titled What Matters Most to Us. List under the Lease a Car and Buy a Car subtitles the five tips tally numbers. Then ask students to write one or two sentences describing the results. Finally, ask student volunteers to share how the class results compare with their own. Summary and Review What Matters Most to Us Sample Table Lease a Car Buy a Car Debit and Credit Extension Activity 4 Calculate the total number of preferences for Lease and Buy on the board. Ask a few students why they chose what they did and then tell students what the most popular class choice was. Ask if a lower- or higher-thanexpected income would change their choice, and why. If it isn t said, tell students that a change in income level might change the kind of car a person can afford to lease or buy. 63

66 JA Finance Park Leasing vs. Buying a Car Graphic Organizer Debit and Credit Extension Activity Student Worksheet, Page JA Finance Park

67 Leasing vs. Buying a Car Tip Sheet Debit and Credit Extension Activity Student Worksheet, Page 65 Debit and Credit Extension Activity 4 65

68

69 5 Overview Students learn there are things they can do to help protect their payment cards and identity from theft. Teacher Introduction Identity Theft Extension Activity Activity Time: 30 minutes Current technology makes it relatively easy for thieves to access personal information and use it in fraudulent ways. Protecting one s identity and privacy is something students need to consider in today s digital world. The Federal Trade Commission (FTC), the nation s consumer protection agency, works to prevent fraudulent and deceptive practices in the marketplace. According to the FTC, acting fast limits a consumer s liability for credit card or debit charges that he or she didn t authorize. Report the loss or theft of your card to the card issuer as quickly as possible. Many companies have toll-free numbers and 24-hour service for such emergencies. Once you report the loss of your debit card, federal law says you cannot be held liable for unauthorized transfers that occur after that time. Follow up with a letter or . Include your account number, the date and time when you noticed your card was missing, and when you first reported the loss. Check your card statement carefully for transactions you didn t make. Report these transactions to the card issuer as quickly as possible. If you or someone you know owns a home, check to see if the homeowner s insurance policy covers liability for card thefts. Debit and Credit Extension Activity 5 67

70 JA Finance Park Materials and Preparation o Review the Student Worksheet on Page 71 o Make six copies of the Card Sort Sheet, Page 70, one for each small group Card Sort Sheet Identity Theft Overview Worksheet o Optional: Computers with Internet access o Scissors Prevent Fraud Activity Steps 1. Separate students into groups of 3 4 and arrange desks to create a table. 2. Distribute one Card Sort Sheet to each group. Have a student volunteer cut the sheet into 10 slips and spread them out. 3. Write the following three topics on the board: Prevent Identity Theft, Prevent Credit or Debit Card Fraud, and Prevent Debit Card Fraud. 4. Have students read the Identity Theft Overview Worksheet found in their workbooks. Based on the worksheet, students are to determine under which topic Prevent Identity Theft, Prevent Credit or Debit Card Fraud or Prevent Debit Card Fraud each word or phrase appears. 5. Have groups use the information from the worksheet to confirm their topic picks. Ask those students who picked other topics to support their choices using personal experience or other criteria or evidence. 68 JA Finance Park