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Grade: 10 Lesson # 6 How do choices consumers make affect their financial stability? SS.912.FL.3.1: Discuss the reasons why some people have a tendency to be impatient and choose immediate spending over saving for the future. Correlated Literacy Standards: LAFS.910.RH.2.4: Determine the meaning of words and phrases as they are used in a text, including vocabulary describing political, social, or economic aspects of history/social science. Rebecca Bloomwood learns about consumer choice, compulsive spending and debt LAFS.910.SL.1.1: Initiate and participate effectively in a range of collaborative discussions (one-on-one, in groups, and teacher-led) with diverse partners on grades 9–10 topics, texts, and issues, building on others’ ideas and expressing their own clearly and persuasively. 1 SS.912.FL.3.1: Discuss the reasons why some people have a tendency to be impatient and choose immediate spending over saving for the future. It’s A Bargain! Confessions of a Compulsive Spender Using Credit Cards Lesson Number: 6 Correlated Florida Standards (See Full Text on Cover Page) LAFS.910.RH.2.4 LAFS.910.SL.1.1 Essential Question What are the responsibilities associated with managing personal finances (savings, checking, credit, etc.)? How do consumers effectively choose quality goods and services at an affordable cost? Why should consumers use practical reasoning when approaching spending habits? Learning Goals/Objectives Identify the opportunity cost in examples of personal decision making. Understand that spending is exchanging money for goods and services Compare the price of a good at more than one store. Understand that all consumers have limited budgets and must make choices. Analyze and discuss a person’s use of credit, consumer strategies, and the decision making process. Define personal finance and credit vocabulary terms associated with suggested text Overview In this lesson, students will learn the concept of scarcity, having unlimited wants with limited resources. Students should understand that when purchasing goods and services, avoid impulse spending, bargain hunting (especially “Black Friday” or “Cyber Monday”), and excessive purchases. Materials Credit Card Facts (Promethean or SMART Board) (Included in Lesson Plan) Credit Score Tips Handout #1 (Included in Lesson Plan) Shopaholic Vocabulary Handout #2 (Included in Lesson Plan) Dictionaries Shopaholic Credit Case Handout #3 (Included in Lesson Plan) Calculators Time 50 minutes Vocabulary Scarcity, Opportunity Cost, Trade-Offs (weighing cost and benefits), Consequences, Budget, Decision-Making, Savings, Goods, Price, Credit, bargaining hunt, Black Friday, Cyber Monday Activity Sequence INTRODUCTION/HOOK On the Promethean or SMART Board, brainstorm the differences of wise consumerism versus wasteful spending when using credit cards [5 minutes] ACTIVITY 1) Discuss Credit Card Facts using a Promethean or SMART board[5 minutes] 2) Discuss Credit Score Tips handout. Compare and contrast Rebecca’s use of credit to the suggested use of credit [10 minutes] 3) Complete and discuss Shopaholic Vocabulary worksheet. Relate the vocabulary terms to the text and to credit and personal finance[15 minutes] 4) Complete the Shopaholic Credit Case Study activity. Use the appropriate mathematical procedures and operations to figure out the total cost of a loan. Calculate the equivalent of British pounds and U.S. dollars by using an estimated exchange rate. [20 minutes] CLOSURE Conclude the lesson by having students review the opportunity cost and consequences illustrated by Rebecca Bloomwood. Ask students if they would compulsively spend money because it’s advertised as a bargain, such as end of the year sale (usually car dealerships), Black Friday or Cyber Monday? Remind students of the benefits and consequences of indulging in buying items that you cannot afford [5 minutes] OPTIONAL EXTENSION SUGGESTION/HOME LEARNING Discuss financial literacy with parents or guardians. See how this lesson applies to your home life. Bibliographic Information that contributed to this lesson: Kornegay, Julie Confessions of a Shopaholic Lesson Plan http://www.mceeonline.org/teacher-night-at-the-fed/ Making Finance Personal: Project-Based Learning for the Personal Finance Classroom https://www.frbatlanta.org/education/publications/extra-credit/2015/spring/lessons-and-activities/highschool/personal-finance/project-based-learning-for-personal-finance-classroom.aspx Take Control of Debt: Use Credit Wisely http://www.dallasfed.org/assets/documents/educate/pubs/wealth_classroom/09_lesson.pdf Unit C: All about Credit https://www.stlouisfed.org/education/its-your-paycheck-curriculum-unit Lesson 6: Credit Reports—and You Thought Your Report Card Was Important https://www.stlouisfed.org/~/media/Education/Curriculum/pdf/Its-Your-Paycheck-Lesson-6.pdf Lesson 7: Creditors’ Criteria and Borrowers’ Rights and Responsibilities https://www.stlouisfed.org/~/media/Education/Curriculum/pdf/Its-Your-Paycheck-Lesson-7.pdf UNDERSTANDING CREDIT CARDS (Advanced Lesson Plan) http://wp.lps.org/bjames/files/2015/02/Understanding_Credit_Cards_Lesson_Plan_2.6.3.pdf 5 Reasons a Maxed-Out Credit Card is Bad http://credit.about.com/od/creditcardbasics/tp/you-shouldnt-max-out-your-credit-card.htm Credit Card Facts 10% of North American teenagers use their parents’ credit cards. 92% of college students have a credit card by their sophomore year. 1 out of every 5 college students owes between $3,000 and $7,000 in credit card debt Almost half (47%) of all college students carry 4 or more credit cards. Handout #1 Credit Score Tips A. To establish a credit history, you should: B. The function of a credit bureau is: C. What are some of the consumer protection laws illustrated in the “To Your Credit video? D. What is the function of a credit counseling service? Handout #1 (Answers) Credit Score Tips A. To establish a credit history, you should: 1) Not overdraft checks 2) Pay bills promptly 3) Obtain a bank credit card (Visa/MasterCard) and pay it off 4) Obtain a retail credit card (Department store card) and pay it off 5) At college, pay utility bills and rent on time B. The function of a credit bureau is: 1) To provide creditors with your bill paying/credit record C. What are some of the consumer protection laws illustrated in the “To Your Credit video? 1) You are entitled to information from the credit bureau (Your credit history) 2) Creditors may not ask your marital status, age, gender, race, etc. 3) Lenders must provide the APR, total cost of the loan, # of payments & monthly payment amounts (Schumer Box) D. What is the function of a credit counseling service? 1) Help people get out of debt. 2) Teach people about money management. Name: _____________________________________________________ Period: _______ Shopaholic Vocabulary Directions: Define the following vocabulary terms as they relate to the text and to personal finance and credit: minimum payment: frugality: profit: advantage points: expenditure: itemize: unsecured loan: debt: debit card: VISA card: (aka bank credit card) Octagon charge card: (aka retail credit card) frozen account: Name: _____________________________________________________ Period: _______ Shopaholic Credit Case Study Rebecca Bloomwood is at it again! She went on a shopping spree at her favorite shop: Octagon. The purchases totaled £370.56. She used her Octagon credit card to pay for her purchase. The Annual Percentage Rate (APR) on the credit card is 17%. Each month she will pay £45 towards her credit card bill. Calculate the number of months, the total cost of the loan and the total finance charge for the loan. Original cost of Becky’s shopping spree: ______________________ Monthly interest rate (show work & round to 2 decimal places): _________________ Number of months to pay back the loan: ___________________ Total cost of the loan (original purchases + interest): _________________________ Total interest paid for the loan: ________________________ Show all work! Now use the estimated exchange rate to calculate: (Exchange rate may change) 1) How much she originally spent at Octagon in U.S. dollars. 2) Total cost of the loan in U.S. dollars. 3) Total interest paid for the loan in U.S. dollars. £1 = US $ 1.66