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Shop till You Drop & Learn About Financial Literacy An Engaging Lesson for Middle-School Aged Students Ellen F. Reece Blended Learning Coach North Iredell High School Olin, NC

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Learning Targets I will understand what a credit card is & how people use it I will understand what a credit score is and how it affects risk-based interest rates I can use a spreadsheet to calculate loan repayment & the cost of credit I can correctly solve real world problems that involve simple interest and percentages.

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How does this fit in Common Core? 7.RP.3 Use proportional relationships to solve percent problems. Examples: simple interest, tax

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To Learn this.. We shop! Image from MicroSoft Clip Art

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Initially we will be in two groups to do this activity: Group 1. Roll the dice - credit rating Investigate credit cards and interest rates Roll the dice determine monthly payments Task: Record personal information and fill out the worksheet. Group 2.Shopping!!! (Everyones Favorite Part) Task: Students record purchases on a sales slip and use coupons. This part lasts as long as it takes Group 1 to get through their part then we switch and each group does the other task.

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Groups switch tasks: Then as a whole class: Determine how long it will take to pay for purchases & how much interest it will cost! (I use an initial worksheet and then an Excel Spreadsheet) Then reflect on what youve learned.

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Group 1: Roll the Die & Give Out the Credit Cards Roll a 1 or 2 - credit rating is 400 (very bad) Roll a 3 or 4 credit rating is 600 (medium) Roll a 5 or 6 credit rating is 800 (excellent)

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Group 1: Investigate what those numbers mean.. Watch these two videos and fill in the answers. http://www.youtube.com/watch?v=qWWZ77- 1YuA www.youtube.com/watch?v=dlne-tAEV4c

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Group 1: Now Compare the Scores: Students fill in the table while watching the video. Credit Score: 400 List likely behaviors that lead to that score Credit Score: 600 List likely behaviors that lead to that score Credit Score: 800 List likely behaviors that lead to that score

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Group 1: Now Compare the Scores: Example of one filled in after watching the video. Credit Score: 400 List likely behaviors that lead to that score Credit Score: 600 List likely behaviors that lead to that score Credit Score: 800 List likely behaviors that lead to that score Too much debt for your income Moderate amount of debtLittle to no debt Always late making paymentsSometimes late with payments Never late with payments Some debts not paid at all; too little income Not much income left each month after bills paid Plenty of income left after bills are paid Credit card balances increasing each month; too many credit cards too quickly Several credit cards with remaining balances each month Credit cards paid off each month No savings living month to month Some savingsSubstantial savings and investments

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Group 1: Investigate Credit Card Interest Rates Students are given the task of reading informational texts credit card disclosure statements Then they are asked to assign a credit card interest rate to each credit rating These are actual disclosure statements that came in my mail.

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Group1: Investigating Credit Card Interest Rates Continued Credit Score: 400 Credit Score: 600 Credit Score: 800 Students are required to read the disclosure statement and then assign a logical prediction of the interest rate that will be charged based on the credit score. I do not allow them to use the 0% intro rate.

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Investigating Credit Card Interest Rates: students record their rate on their credit card. Credit Score: 400 Credit Score: 600 Credit Score: 800 Interest Rate is 29.99% Interest rate is 14.99% Interest rate is 9.99% Students are required to read the disclosure statement and then assign a logical prediction of the interest rate that will be charged based on the credit score. I do not allow them to use the 0% intro rate.

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Roll a die to determine the amount repaid monthly; record on credit card Roll a 1 repay $10 per month Roll a 2 repay $20 per month Roll a 3 repay $30 per month Roll a 4 repay $40 per month Roll a 5 repay $50 per month Roll a 6 repay $60 per month

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Group 1: All information is then recorded on the students credit card Iwil Taku Money International Bank Credit Card Name________________________________________ Credit Score Number_________ Credit Rating_________ Annual Interest Rate_________ Monthly repayment Amount_________

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While the first group is determining their credit card data, the other group shops! In small groups, pick your merchandise from the selection of catalogs provided. Record your purchases on the sales slip. Dont forget to add in a sales tax of 7%. I try to have a wide variety of catalogs on hand for them to look through. I give them at least a half hour to do this. Also I walk around with discount coupons they can apply to purchases.

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Sales Slip Name_________________________ Item #CatalogDescriptionPriceSales Price Number Purchased Total Amt With Tax Total Amount Owed to Credit Card Company = ____________

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Sales Slip Example: Name___Joe Smith__________________ Item # page # CatalogDescriptionPrice % Discount Sales Price Number Purchased Total Amt With 7% Tax KP-78069 47 Hammacker Schlemmer 144x Binoculars$199.9525% $149.96 1$160.46 KP-82960 77 Hammacker Schlemmer Remote controlled dueling helicopters $99.950%4 sets$427.79 839555 70 Melton International Tackle PENN Fathom Star Drag Reel $449.9915% $377.83 1$404.28 Total Amount Owed to Credit Card Company = $992.53

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Coupons! If students are grouped by ability: Group A: pass out 10%, 20%, & 30% off coupons Have them look for structure & patterns. Group B: pass out 0.005%, 0.05%, 0.5%, 5%, and 50% off coupons Have them look for structure & patterns Group C: pass out 50% off, -50% off, 500% off, and -500% off coupons Ask them to make sense of these coupons, which would they rather have; ask them to justify their answer

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Repayment!!!! Group 1: Use the Excel spreadsheet, your interest rate, and monthly payment to determine how long it will be before you have paid the debt. Also determine how much your interest cost will be. This part can easily be differentiated.

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Repayment!!!! Group 2: Same tasks as Group 1 plus compare each individuals situation in your group and answer these questions: 1. What characteristics do people have in common that are able to pay off their debt quickly with minimal interest expense? 2. What characteristics do people have in common that are not able to pay off their debt quickly and have a large interest expense. 3. Is anyone never going to be able to pay their debt off? Why? What will happen to that person? This part can easily be differentiated.

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Repayment!!!! Group 3: Create an Excel spreadsheet that will calculate your the debt repayment scenario using your interest rate and monthly payment; determine how long it will be before you have paid the debt. Also determine how much your interest cost will be. This part can easily be differentiated.

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Math Involved: Simple Interest Formula I = prt where p = principal (amt. borrowed) r = the monthly interest rate t = the time (1 month for this example) Remember: Annual interest rate is for the whole year; if we are determining monthly payments, we must divide the interest rate by 12.

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Example of 1 st Months Payment: Joe Smith borrowed $992.53 Interest rate = 14.99% Monthly repayment amt = $20 First monthly payment = $20.00 He owes $972.53 Interest = ($972.53)(0.1599/12)(1) = $12.18 New amt owed = $972.53 + $12.18 = $984.71

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Questions? How much did he pay? $20.00 How much did his bill go down? About $8.00 Does it look like he will be able to pay off his debt quickly? These facts are always eye openers for the students!

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Now on to the spreadsheet As a whole group: I ask volunteers to use their individual cases to figure out what kind of shape they are in financially. There are always students who go bankrupt! And there are always students who are very conservative with their purchases and the amount they pay in interest. It is good for the whole class to see the differences.

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Reflections: Answer these questions in full sentences using correct punctuation, spelling, and grammar.

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Adam, The interest is increased as the credit rating goes down, which means that you must pay more when you receive a bill. Danielle, You have to pay a lot more; you could go bankrupt. Courtney, You could end up owing a lot of money. What are the consequences of having a bad credit rating?

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Is it better to pay the maximum or minimum each month? Brooklyn, Maximum because if you pay the minimum, you will never get it done. Justin, The most because you will pay it off faster. Sarah, Maximum, so you can finish paying it off faster, and it wont affect your credit.

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What is good about a credit card? Jacob, You wont have to carry around all your money in your pocket and if it is stolen, you can track the last time it was used. Courtney, You could run out of gas and have no cash. Lane, You can use it to order things on line. JT, It is convenient.

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What is the connection between responsible credit card use and being able to borrow for large purchases? Maggie, It is good to have a credit card so you can buy a house and car. Elizabeth, Most people need to borrow money sometimes. You couldnt have a house or a car because you cant pay them out of pocket.

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What is bad about a credit card? Justin, You are more likely to spend more than what you need to. Brooklyn, You will always have to pay the money back to the bank. Kendall, You could go overboard and not pay it back. Danielle, You have to pay it all off with interest; it can be a lot of money. Briann, If you have bad credit, it might make you go bankrupt because the interest might be more than you can pay.

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What is the most important thing you learned about credit cards? Avery, Never spend more than you can pay off. Ethan, You need to have a good credit score and enough money to pay off bills. Emily, Be careful on how much you spend, it will take a long time to pay it off. Adam, That sooner or later you will have to pay what you owe and to act modestly and wisely.

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How Does This Fit Common Core and Your Teacher Evaluation? 7.RP.3 Use proportional relationships to solve percent problems. Examples: simple interest, tax The students have read informational text in the form of credit card disclosure statements. Theyve used or created technology in the form of a spreadsheet. Youve increased their 21 st Century skills by educating them about a real-world, common financial instrument. Their written reflections show how important this real-life lesson is!

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Resources on my school website: The student worksheet, the credit card template, the spreadsheet, this ppt, and the links to the videos I found. I did not list the disclosure statements to avoid copyright infringement. These items are meant to be approximations of the real world.