Credit friend or foe? Year level: Year 9 and 10 Duration: 60 minutes (lesson 1 of 2 connecting lessons) Key learning area: English, Mathematics, *Economics and business Lesson description Students explore and investigate the diversity of consumer rookie errors associated with using a credit card to purchase goods and services. Learning begins with watching the MoneySmart Rookie: Credit hangover video. Students then discuss and reflect on the pros and cons of credit cards, interest charges and where to seek assistance with managing credit card debt and repayment issues. In the second part of the lesson students complete an activity worksheet to investigate the necessary precautions and knowledge to avoid making credit card rookie errors. Enduring understanding/deep learnings: Making informed and responsible choices around using a credit card and other credit products to purchase goods and services. You can save money and avoid common 'rookie errors' if you research credit card options, services and interest rates. If credit and debt issues arise you can seek help from your credit provider. A free financial counselor can also help. * Please note that this lesson plan has been aligned with the draft Economics and business curriculum. This mapping will be confirmed when the curriculum is endorsed. 1
Activity 1: MoneySmart Rookie - Credit hangover video (10 minutes) *Teacher tip: Be aware that discussion of credit and debt may be a sensitive issue for some families or communities. Task 1: Video Watch the MoneySmart Rookie 'Credit hangover video in class (Duration 6 minutes) http://teaching.moneysmart.gov.au/resource-centre/moneysmart-rookie-for-educators. Task 2: Discussion Ask students to pair up and identify at least three key messages mentioned in the 'Credit hangover' video. Ask each pair for their main message. Write these statements on the board. If there is a double-up, tick the statement. The expected responses may include: Credit is borrowed money that you have to pay back with extra costs such as interest, fees and changes There are different types of credit products including credit cards, personal loans Credit can be useful, but if not managed properly you can run into trouble It is important to have a good credit report You need to pay bills on time Wait before you decide to spend money to avoid impulse buying Don t just stick with the minimum repayments on your credit card. Increasing credit card or loan repayments will save money You can get help when you run into credit card debt and repayment issues. *Teacher tip: Only give groups two or three minutes to discuss their key messages Activity 2: What do you know about credit? (20 minutes) Task 1: What do you know about credit? Distribute Worksheet 1: What do you know about credit? Students apply the information from the MoneySmart Rookie 'Credit hangover' video, the Under 25s section of ASIC's MoneySmart website at: https://www.moneysmart.gov.au/life-events-and-you/under-25s/credit-and-debt to help with these questions. 1. What is credit? 2. List different types of credit. 3. How do you work out how much credit you can afford? 4. Why would anyone need a credit card? 5. Explain what happens if you pay the entire amount owed on a credit card by the due date. 6. Explain what happens if you only pay the minimum balance owed each month on a credit card. 7. Why is it the case, that if you paid $5,000 for a used car using your credit card and only made the minimum repayment every month, that it might take more than 35 years to repay the original loan and it would cost more than $18,000? 8. What is a credit report? 9. What might happen if you get a bad credit report? 10. What can you do if you experience credit card debt or loan repayment difficulties? 2
Task 2: Discussion Discuss answers with students. Suggested responses are: Credit is borrowed money that must be paid back after you use it along with any interest, fees and charges that may apply. Different types of credit include credit cards, store cards, personal loans, interest free deals and home loans. The amount you can borrow will depend on the your income, your expenses and what you can afford to pay back Credit cards can be useful for making purchases online, overseas or when you don t have cash especially if you can pay them off by the due date which is an interest free period. It might take more than 35 years to repay an original loan of $5000 if you only made the minimum repayment every month because of interest and it would cost you more than $18,000. A credit report details your credit history, including every time you have applied for credit, defaulted on a repayment and missed a payment. It is held by a credit reporting agency. If you happen to get a bad credit report it may affect your chances of getting other loans in the future, such as for a car or house. Contact your credit provider if you have a problem with repayments. Free financial counselling is available if you run into problems with credit. A financial counsellor can help you work out a repayment plan. Activity 3: Managing a credit card (25 minutes) Task 1: Case study: Steve gets his first credit card Ask the class to watch the video Steve gets his first credit card (58 seconds) at: https://www.moneysmart.gov.au/life-events-and-you/under-25s/credit-and-debt/using-credit Ask the students to identify the issues with Steve's decision to put an expensive trip on his credit card. Then ask them what steps Steve took to help manage his credit card debt and avoid a poor credit rating. Answers should include: Where Steve went wrong: Paid for his trip using a credit card and then couldn't meet the repayments Would have paid more for the trip by putting it on a credit card Had only been working for six months so no savings behind him in case something happened such as losing his job Had a credit card with a high interest rate Applied for the credit card online and didn't understand what he was signing up for What Steve did to manage his debt: Talked to his credit provider to explain that his circumstances had changed and that he had lost his job Saw a financial counsellor and worked out a repayment plan Avoided a poor credit rating After discussion, ask students How can you make credit work for you? As outcomes of the discussion emphasise: that credit cards can be useful if used wisely and paid off within the interest free period always do your homework and 'shop around' before you sign up for any credit product. 3
Reflective/summative activity (5 minutes) List three new things that you learned today about credit cards and/or debt? In your opinion, which of these components is the most important to you? Alternative activity: 'Credit and debt' practice conversation (10 minutes) This activity is described in Lesson plan 2. However, it may be helpful for some students to do this activity in Lesson 1 as well so that their participation in Lesson 2 becomes a strengthening of the development of their practical skills in this type of conversation. 4
Resources 1. MoneySmart Rookie Credit hangover video 2. Data projector/tv and DVD player or computer 3. Credit and debt convo 4. Activity worksheet/s 5. Computers with internet access 6. ASIC's MoneySmart and MoneySmart Teaching websites Additional resources This lesson plan is part of the MoneySmart Rookie suite of resources for educators which can be accessed at: http://teaching.moneysmart.gov.au/resource-centre/moneysmart-rookie-for-educators. Other topics include: First car First job Mobile phone ownership Moving out of home Online financial transactions The Under 25s section of the MoneySmart website has additional MoneySmart Rookie materials for young people including case studies, videos, tips and tools and calculators. These can be accessed at: https://www.moneysmart.gov.au/life-events-and-you/under-25s The MoneySmart Teaching secondary package has a number of units of work related to this lesson plan. The package can be downloaded for free at: http://teaching.moneysmart.gov.au/professionallearning/moneysmart-teaching-packages. The Financial Health for Teachers personal learning program is designed to inspire and empower teachers to take charge of their financial lives and of the choices they make as consumers. Read current issues, or subscribe at http://teaching.moneysmart.gov.au/professional-learning/financial-health-forteachers. The Australian Taxation Office has developed Tax, Super and You, a resource to guide students learning about their future tax and superannuation obligations at http://www.taxsuperandyou.gov.au/. English Year 9 Could I live smaller? Online transactions, consumerism, shopping online English Year 10 Teens talk money. Financial planning, online payments, budgeting Mathematics Year 9 How can we obtain more money? Earning, managing and growing money, achieving goals, data analysis, statistics and samples. Mathematics Year 10 Reaching goals: What's involved? Setting goals and planning, compound interest in a range of financial contexts, risks and rewards of borrowing money 5
Worksheet 1: What do you know about credit? NAME: Using the Credit hangover video, answer the following questions: 1. What is credit? 2. List different types of credit. 3. How do you work out how much credit you can afford? 4. Why would anyone need a credit card? 5. Explain what happens if you pay the entire amount owed on a credit card by the due date. 6. Explain what happens if you only pay the minimum balance owed each month on a credit card. 7. Why is it the case that if you paid $5000 for a used car using your credit card and only made the minimum repayment every month, that it might take more than 35 years to repay the original loan and cost you more than $18,000? 6
8. What is a credit report? 9. What might happen if you get a bad credit report? 10. What can you do if you experience credit card debt or repayment difficulties? 7
Links to the Australian Curriculum and National Consumer and Financial Literacy Framework Australian Curriculum content English Understand how language use can have inclusive and exclusive social effects, and can empower or disempower people (ACELA1564) (Language/Language for interaction). Analyse and explain how text structures, language features and visual features of texts and the context in which texts are experienced may influence audience response (ACELT1641) (Literature/Responding to literature). Mathematics Evaluate statistical reports in the media and other places by linking claims to displays, statistics and representative data (ACMSP253) (Statistics and Probability/Data representation and interpretation). Economics and business Year 9 Ways of managing consumer and financial risk to individuals and the community. Year 10 The range of factors influencing consumer choice including marketing by finance institutions. National Consumer and Financial Literacy student learnings Identify and explain strategies to manage personal finances. Appreciate that there is often no one right answer in making financial decisions because these depend on individual circumstances, preferences and values. ASIC s MoneySmart Teaching initiative builds the consumer and financial literacy capabilities of Australian school students by developing students knowledge, skills, values and behaviours to enable them to make confident, informed consumer choices and responsible financial decisions that are essential to their future financial wellbeing. To view the MoneySmart Teaching Primary and Secondary packages and all the online and digital resources visit 8