Transcript Credit and Debt

Credit and Debt
Lesson Objectives
 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
Key Vocabulary
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Annual Fee
Annual Percentage Rate
Average daily balance
Bankruptcy
Bond
Credit
Credit Bureau
Credit Card
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Credit rating
Credit report
Creditor
Debtor
Debt-to-income ratio
Default
FICO
Key Vocabulary
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Finance charge
Fixed rate
Grace period
Interest
Interest rate
Introductory rate
Late fee
Line of credit
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Minimum payment
Mortgage
Over-the-limit fee
Personal installment loan
Student loan
Syndicated loan
Variable rate
True or False
 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
Credit and Debt
 Presentation
Truth about Credit
 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.
Importance of Credit Scores
 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
Credit Card Slogans
 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 Advertisements
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www.visa.com
www.mastercard.com
In what ways do the advertisements tell a story?
How would different audiences interpret the ads? For
instance, parents versus teens or wealthy
businessman versus a retired couple on a fixed
income?
Public Service Announcement
 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.
Project
 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.
Launch Memo From the Principal
 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?
Quotable Quotes
 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
Reflection on the Example
 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?
Project Workflow
 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
Idea Mapping
 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
Choosing Topics
 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
Group Formation
 Groups of 4 based on their topic within financial
literacy
Taxonomy
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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
Initial Reflection
 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
Enrichment
 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 60minute program online at
http://www.pbs.org/wgbh/pages/frontline/shows/cre
dit/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.
Cross-Curricular Integration
 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.