Cost of Credit

Learning Goals/Objectives:

The students will investigate and be assessed as to how to determine the amount of money the average American consumers pays in finance charges.
The student will demonstrate they understand how to modify their budget based on various credit card debt and college debt scenarios by completing the working budget sheet.

Grouping of Students:

Groups based on the group discussion questions initially
Individual

Methods:

Classroom Discussion/Dialogue (Auditory learners)
Computer Assisted Learning (Visual learners)
Direct Instruction (Auditory learners)

Activities:

“Hook” – Today we are going to use real numbers - - the average American’s credit card debt - - to learn about how much money can be saved by using credit wisely.

a. Computer Assisted Learning – 25 minutes~Handout and complete ‘How much does debt cost?’ as a class or individually~Go to www.pbs.org/wgbh/pages/frontline/teach/credit/hand2.htmlhttp://aol1.bank...

b. Direct Instruction & Written Response with Working Budget Template – 20 minutes~”Let’s look at the opportunity cost of credit card debt” Using the ‘working budget’, you will make adjustments on the budget based on paying off your credit card debt (at 19%) in one year, two years, and three years. Re-allocate your budget. You can only re-allocate food, entertainment, disability insurance, ROTH IRA and 401K contributions, emergency savings, clothing, personal care, basic cable, and philanthropy. All other line items are necessary to live your life or you are legally bound to paying for the line item (taxes & insurance).
~You will need to give some things up, what will they be?
~At the conclusion, discuss and insert college debt. Stress monthly college debt should never exceed 10% of your gross monthly pay. For example, if you earn $3,000 a month gross, your monthly college debt payment should not exceed $300.

c. Self-Sustained Reading - Extra Credit/Extra Time ~Read the summary of the consumer protection legislation passed in 2009 entitled ‘Upcoming Credit Card Protections’ and describe why you believe or you do not believe the new legislation would be helpful for consumers.

Materials:

Computer lab or projector with internet connection; Student handout ‘How much does debt cost?’; ‘Opportunity Cost Worksheet’; Website address: http://aol1.bankrate.com/aol/calc/MinPayment.asp?nav=cc&page=calc_home; www.econedlink.org/lessons/index.cfm?lesson=MM188&page=teacher;

Assessment:

‘How Much Does Debt Cost’ Handout (27 points – 1 point each); ‘Budget Worksheet’ Handout (15 points); ‘Credit Card Legislation Summary’

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