Credit = Borrowing From Future You

What your kid learns

• Credit is trust

  Credit means a lender trusts you to pay back later. You get something now and promise future money for it.

• Borrowing comes in many forms

  Loans, credit cards, pay-later plans and IOUs are all borrowing. “$0 down” and “Pay in 4” are borrowing, too.

• Borrowing costs extra

  You pay back what you borrowed, plus interest. So future you has less money to spend.

• Sometimes waiting wins

  If something can wait, saving first usually costs less. Borrowing can make sense for things that last and matter, like school or a home.

The story: Alex and the $200 bike

Alex sees a $200 bike with a “$0 down” sign and compares borrowing with saving.

1. Helper: Alex wants a $200 bike. Alex earns about $30 a week walking dogs.
2. Alex: The shop says I can ride it today. “$0 down! Pay later!”
3. Helper: “$0 down” is still borrowing. A grown-up would have to sign. Then Alex would pay $25 a week for 10 weeks.
4. Alex: Wait. That’s $250 for a $200 bike. And $25 of my $30 is gone each week.
5. Helper: Or Alex could save $25 a week. In 8 weeks, Alex pays $200 and owes nothing.
6. Alex: I’ll wait. I keep my future money, and I save $50.
7. Helper: Borrowing spends future you’s money. Sometimes that’s worth it. This time, waiting won.

The game: Now or later?

Help Alex decide about a pretend $200 bike. Choose, then see what happens to Alex’s weekly money.

Games use pretend money and work with taps or a keyboard. Nothing is timed.

New words

credit

trust that you’ll pay back money later

loan

money you borrow and pay back, often with interest

lender and borrower

the lender gives the money; the borrower pays it back

debt

money you owe

Questions at the end

• What is credit?
• Which one is a form of borrowing?
• You borrow a pretend $100 and pay back $120. What did borrowing cost?
• How does borrowing change future you’s money?
• You want a game that can wait. Borrowing adds a fee. What usually wins?

Remember this

Borrowing spends future you’s money.

Talk about it

When is borrowing worth it, and when is waiting better?

Try it at home: Wait or borrow? Ask for a story

1. If a grown-up wants to share, ask about a time they waited instead of borrowing.
2. Or use Alex’s bike story. Borrow: $25 a week for 10 weeks. Save: $25 a week for 8 weeks.
3. What did waiting cost? What did it save?

If a grown-up wants to share, ask about a time they waited instead of borrowing. Or use Alex’s bike story. Borrow: $25 a week for 10 weeks. Save: $25 a week for 8 weeks.

School standards

• Grades 6–8
• National Standards for Personal Financial Education: Managing Credit