The Good, The Bad, The Credit What is credit? Why would, or should, we borrow money? What does it cost? Is credit good? Antique three-column full-keyboard cash register "http://www.nunes.house.gov/images/antiquecashregister7.gif"

Ready... What is the nature of credit and borrowing? We are exploring these topics because they are important to developing a healthy understanding of how our personal financing and savings plans work. This may be a complex topic with many big words. Consult a dictionary to find definitions for any difficult to understand. Imagine you want to have $1000 to buy gifts for the next holiday season. How would you accumulate the cash?

Set... The US Government reported "The use of general-purpose credit cards jumped from 56 percent of all families in 1989 to about 66 percent in 1995. About 52 percent always paid off their balances, 20 percent paid off sometimes, while 28 percent hardly ever paid them off." The action committee Demo's reports that "Average credit card debt among indebted young adults increased by 55 percent between 1992 and 2001, to $4,088 (2001 dollars)." They report, "The average credit card indebted young adult household now spends nearly 24 percent of its income on debt payments, four percentage points more, on average, than young adults did in 1992." In this lesson you will create a holiday budget of $1000 dollars. Will you spend the money from savings, or finance, your holiday gifts. There may be at least three ways to decide how to best pay for the purchases. Save it? Borrow it? Get the money from your mom, dad, guardian, or friend?

Go... Download the CreditSavings Excel model for the lesson. Pay with Savings Use the following formula to calculate the monthly amount of the monthly amount of savings it would take to save $1000 in 11 months. The annual saving rate is 3%. A = Principle * rate * time Assume that savings is calculated on 30 days per month. We will calculate the rate on a 360-day basis. Use the savings model to check your answer. Experiment with different rates and savings payment plans. Pay with credit You purchased $1000 dollars in gifts with your credit card. What is the monthly payment required to payoff the credit card within 11 months? Using the simple interest formula calculate the annual rate. Try calculating interest using the simple interest: A = Principle * (1 + rate)time You should use the credit card model for this part of the lesson. The Interview Define the following terms using own words. Revolving Agreement Charge Agreement Installment Agreement We use credit to buy an education, a house, a car, or gifts for our loved ones and friends. Is there good credit? What do you think? Write a 1-Page paper 12-point Arial font double spaced. Answer the following statements/questions: List examples of purchases that you would consider putting on credit. Label them "Good" or "Bad". Would you save the money starting at the first of the year, or would you to put your purchases on a credit card and pay the balance of over the following year? Why? Explain your current view of credit. This lesson is worth 10 project points. Done Early? Take a look at how credit cards work Ready, Set, Credit. Discuss the article with an adult or friend. Complete the read along above and conduct and interview.