Credit and Debt

Define debt and differentiate between good debt and bad debt

Define credit and explain its purpose Describe the positive and negative effects of

credit use and the impact on credit histories and scores

Explain how interest rates work

Lesson Objectives

Key Vocabulary

Annual Fee Annual Percentage

Rate Average daily balance Bankruptcy Bond Credit Credit Bureau Credit Card

Credit rating Credit report Creditor Debtor Debt-to-income ratio Default FICO

Key Vocabulary

Finance charge Fixed rate Grace period Interest Interest rate Introductory rate Late fee Line of credit

Minimum payment Mortgage Over-the-limit fee Personal installment

loan Student loan Syndicated loan Variable rate

Debt among 18- to 24-year-olds has risen 104% since 1992.

A $3,389 charge on a credit card would take 39.5 years to pay off and cost an additional $9,098 in interest payments if making the minimum monthly payments (using an 18% interest rate and a minimum payment of 2%).

Young adults spend almost 30% of their income on debt payments.

70% of teens are unable to stick to a basic budget for one week

True or False

Presentation

Credit and Debt

Download: Anticipation guide-The truth about credit worksheet

Discuss and give reasons to each statement

Download: Reading-The truth about credit Read one section of the reading.

Truth about Credit

What can a report card say about a student? What are some of the effects of having good

grades? What are some of the effects of having bad

grades?

Importance of Credit Scores

Download: Web Quest-Credit Reports and Credit Agencies

Research the topic of credit reports and credit reporting agencies

Maintaining a positive credit report is critical for securing loans, applying for rental property, and even their employment opportunities

Importance of Credit Scores

Long Live Dreams! Don’t leave home without it! There are some things money can’t buy. For

everything else there’s MasterCard. Visa. Love every day. It pays to Discover. With a card like this, who needs cash?

Credit Card Slogans

Could be cheap. Could be expensive. Visa. All you need

What is the slogan trying to make you believe about the credit card and its use?

Credit Card Slogans

www.visa.com www.mastercard.com In what ways do the advertisements tell a st

ory? How would different audiences interpret the

ads? For instance, parents versus teens or wealthy businessman versus a retired couple on a fixed income?

Credit Card Advertisements

This PSA will serve to educate the public about the financial risks and rewards of using credit as well as the factors to consider before using credit

Download- Directions: Public Service Announcement

Download- Example: PSA

Public Service Announcement

How does this example meet the requirements for this assignment?

What did the designer do well on this example?

Public Service Announcement

Begin working independently to create three slogans that take into account what you have learned about debt management and credit use

After completing the slogan pass them a to partner for review and feedback

Critique the slogans for what you like and don’t like

Public Service Announcement

Choose one advertisement for the draft for the PSA assignment

Create a rough draft for review

Public Service Announcement

Form groups of three or four to discuss their first drafts with one another.

After reviewing each draft, use sticky notes to write a one- to two-sentence statement describing your first reaction to the PSA. (For example, “I found that the PSA made me really think about how people use credit cards to purchase items they don’t really need.” Or, “I was a bit confused about what the slogan was trying to say about credit card use.”)

Use a “?” to note any places in the PSA that seem unclear or don’t really add to the effectiveness of the PSA.

Use a “*” to note any strengths of the PSA and write a statement explaining your reasoning

Public Service Announcement

After feedback and review have been taken into account create your final PSA

After viewing the PSA, describe one thing that you learned about credit and debt.

Public Service Announcement

Write testimonies from the point of view of people who have gone bankrupt. I would like you to look up famous people who had millions of dollars but eventually had to file for bankruptcy. Describe their rise to stardom, the highest net worth, their fall from grace, how bankruptcy is affecting them, describe what could have been done to prevent this situation.

Project

Download: Memo- Financial Literacy Alert Objectives to draw from memo

Become a financial education consultant Choose one topic to highlight and present

Personal Finance Issues

How can we as Academy of Finance students, educate our families and fellow students about issues critical to a person’s financial literacy?

Launch Memo From the Principal

Download: Reference- Financial Literacy Quotes Read and discuss the concern of the author in

each quote Re-write the quote in your own words

Being financially literate can help people increase their earnings and better meet life’s challenges, such as paying for a child’s education, purchasing a home, job loss, and retirement

Quotable Quotes

Better educated consumers make better decisions

Primary goal is to educate the audience about personal finance issues Example 3 panel display board

Download: Rubric: Culminating Project Three-Panel Display Board Only for display board

Reflection on the Example

How does this example meet the requirements for this assignment?

What did the designer do well on this example?

What would you improve if this example was a draft you created?

Reflection on the Example

A fundamental part of completing the project is to understand the specific components of the project as well as time frames for each task

Keep in mind **How can we, as Academy of Finance

students, educate our families and fellow students about issues critical to a person’s financial literacy?**

Project Workflow

What do you need to know to begin the project?

What steps would you take to gather the needed information?

Download: Guide- Project Workflow Do not fill out just read through and become

familiar with it What types of interpersonal skills would be

necessary to complete a successful culminating project?

Project Workflow

Teamwork is the name of the game The complexity and time given will need you

to use all of your skills in connection with each other

Employers love to give employees team activities and goes a long way when hiring

Project Workflow

Personal Literacy Terms Do one word at a time and try make as many

associations as you can between the word and what you have learned in this course

What type of information is the most important to understand when evaluating an individual’s knowledge of personal financial literacy?

Idea Mapping

Write down 3 ideas (individually) that you feel are the MOST essential to learning financial literacy.

Now come together with your group and decide what topics are the most important to financial literacy

Now all groups come together and determine the top 10 for the class

Idea Mapping

Now choose your top 3 from the class list of 10 You must explain your reasoning for your

choices with the following prompt [Insert topic] is an important personal financial

concept to grasp because… I will review answers and create groups based

on which topics they chose

Choosing Topics

Groups of 4 based on their topic within financial literacy

Group Formation

This taxonomy is based on credit and debt 3 minutes to think of as many words as

possible 3 minutes to see what your table has come

up with 4 minutes to walk around the room to see

what you classmates came up with

Taxonomy

Understanding debt is important because… Maintaining a positive credit report can… With regard to the final project, I am most

excited about… I think my topic is important because…

Answer and turn into classpress

Initial Reflection

Have students compare cash and credit for purchases. Have students look through ads, catalogs, etc., and choose an expensive item that they would like to purchase (computer or television, etc.). Have them compute the total financial cost when paying cash versus the total financial cost when using credit.

Enrichment

Continue researching credit card slogans, especially, Citigroup’s slogan “A deal is a deal.” Visit the New York Times article at http://www.nytimes.com/2008/06/25/business/media/25adco.html?_r=1&fta=y. Instruct students to summarize the article and explain the controversy behind the slogan.

Enrichment

Instruct students to watch Frontline’s “Secret History of the Credit Card.” Students can view the full 60-minute program online at http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/.

Enrichment

Have students research an individual who has gone into major debt due to credit card abuse and write a one-page double-spaced paper on how the situation might have been avoided.

Enrichment

Social Studies: Have students research the history of credit and debt. The following topics could be explored: The Sumerians were the first recorded culture to develop the

concept of interest. Have students research how interest was used and calculated by this group of people and present their findings to the class.

Up until the mid-1800s you could get put in jail for failing to pay back your debts. By 1833 the practice of imprisonment for debts was eliminated at the federal level. Have students explore the type of debt that you still could be put in jail for today and present their findings to the class. For instance, fraud, child support evasion, etc.

Have students research debtors’ prisons such as Philadelphia County Prison, (debtors’ wing), Debtors’ Prison in Accomack County, VA, and York County Gaol, York County, ME. Have students create posters highlighting details and dates specific to each prison.

Have students write testimonies from the point of view of historical famous people who were placed in debtors’ prisons, such as Charles Goodyear and Robert Morris. Students should take on the role of the individual and explain his side of the story to the class.

Cross-Curricular Integration