F1.4 Explain the concepts of credit and debt, and describe how financial decisions may be impacted by each.
Activity 1: Michael Wants a Truck!
Facilitate a discussion with students about credit and debt. Ask the following questions:
- What are examples of a good or a service that people may get and agree to pay for them in the future? (credit)
- What is debt?
- Why is it important to pay our debts regularly?
- What are examples of things that people may owe money for? (debt)
Present the following scenario to students:
Michael's brother just bought a truck, and he wants to buy one too. He found a used truck at the dealer that costs $14 000. He has only $5000 in his savings account, so he needs to borrow $11 000 from the bank for his purchase. He applies for a loan that is repayable in 5 years, at an interest rate of 6.9%. He will make monthly payments of $217.29. At the end of the 5 years, Michael's total repayment will be $13 002.86.
Ask the following questions:
- In your opinion, is Michael making a good financial decision? Explain your reasoning.
- Would it be more economical for Michael to save his money instead of taking out a personal loan?
- If Michael wants to follow in his brother's footsteps, does he risk getting into debt he cannot get out of?
Activity 2: Sales Tactics
Invite students to create a comic strip to demonstrate how a person’s financial decision may be influenced by one of the following sales tactics:
- the use of celebrities to sell a product
- a low interest rate on a product
- the use of popular brands
- the use of catchy slogans
- a day without taxes
- a scarceness of a product
Invite students to present their comic strip and discuss the financial decisions their situation may influence (managing debt, setting financial goals, creating a budget, prioritizing spending, etc.).