Credit and Debit

Today’s Agenda:

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1. Review Session 2, Money Management and Budgeting
1. Quick Game Check-in

Link for games: https://www.financiascholars.com/portal/games

• Debit and Credit Slides:
• Credit Card
• Debit Card
• Debt
• Savings
• Interest
• Credit Score
• Finish:
• Watch the video
• Then play some games!
• Stay focused throughout the entire lesson, as this is very important!

Time to Review!

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The rules are the same, everyone must get their question right to move. Try your best!

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Point is to debrief and get back into finance mode!

What is a Credit Card?

• A credit card is a special card that allows you to buy things now and pay for them later
• It's like borrowing money from the bank, and you need to be responsible and pay back what you owe
• It's important to use it wisely and not spend more than you can afford
• If you don’t pay back your credit card spendings, you could have a lower credit score in the future

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What is a Debit Card?

• A debit card is a card that is linked to your bank account, and it allows you to buy things by using the money you already have
• When you use a debit card, the money is taken directly from your account, so you can only spend what you have
• It's like using your own money to pay for things
• Debit and Credit are completely different, keep that in mind!!

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What is debt?

• Debt is money that you owe to an individual/business because you borrowed it or bought something with credit
• It's like owing a friend some toys and promising to give them back later
• It's important to be careful not to accumulate too much debt and to make sure you pay it back on time
• For example, we usually take on a debt when we buy a house because we take a loan from the bank, and that debt that we accumulate needs to be paid back with interest

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Savings:

• Savings are the money you set aside and keep for the future
• It's like collecting toys or stickers for later when you want to use them
• Saving money is important because it helps you be prepared for unexpected expenses and future goals, and it can also help you avoid borrowing too much
• Retirement, 401k, Social Security, are all examples of specific situations of saving money or how to save money

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Interest:

• Interest is the extra money you have to pay when you borrow money or cannot pay the credit card amount that is due each month
• It's like a small fee for using someone else's money

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Credit Score:

• A credit score is a number that shows how well you handle money and credit
• It's like a report card for your financial responsibility
• When you pay your bills on time and use credit responsibly, your credit score goes up, and it becomes easier to borrow money or get a loan in the future
• Loans, payback history, and spending all are accounted for when calculating your credit score

Final Video

https://www.youtube.com/watch?v=FbjlEp_sII8

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*Click on this link and find the specified game:

https://www.financiascholars.com/games

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Loans and Debt

Objectives:

1. What are loans and what are the different types of loans?
2. How do we get loans and why are they important?
3. What is debt?
4. How do we collect debt?
5. What do we do with debt?
6. Major Examples of Debt globally

What are Loans?

Loans:

Loans are financial arrangements involving two parties: a lender and a borrower

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• Principal:
• The initial amount borrowed by the borrower.
• Interest:
• The cost of borrowing money, typically a percentage of the principal.
• Compound Interest: The interest that is compounded over a certain period, that grows exponentially
• The Rate can be fixed or variable, which affects the overall cost
• Term: The specific period where the loan is to be repaid
• Collateral: Assets or property pledged as security for the loan

What are different types of Loans?

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Types of Loans

• Personal Loans:
• Loans used for personal use and is Unsecured
• Mortgage Loans
• Used to by real-estate and properties
• Auto loans
• Loans intended for the purchase of a vehicle
• Student Loans
• Loans for Colleges, High School, and other educational expenses
• Business Loans:
• Loans for funding of business operations

How do we get Loans

• Credit Cards:
• Good Credit scores lead to loan opportunities

• Mortgage brokers:
• Specialize in Home loans that help

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What is debt?

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Debt:

• Debt is the accumulation of all the money that needs to be owed
• For example, the money that we loan out from the banks is regarded as a debt
• Debt most likely occurs for fancy purchases such as cars, houses, yachts, and many others

2008 recession:

The 2008 recession is the 3rd worst recession, 2nd worst since the Great Depression, behind only the Pandemic recession. This recession perfectly summarizes all the components that we went over, in a bad way.

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Explanation:

• The 2008 recession was a recession that started when the government started to lower the nation bank interest rate, and this led to many banks encouraging the general public to invest in real estate
• As more people bought real estate, those assets that were purchased were flipped from different banks and eventually these assets turned into bad assets due to the fact that the people couldn’t pay them
• Eventually the banks went into bankruptcy because of the lost value that they got from these loans

Video

Loans video:

https://www.youtube.com/watch?v=AOP5wiu7mRU

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Loan Labyrinth!

*Click on this link and find the specified game:

https://www.financiascholars.com/games

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