The Price of Borrowing

What your kid learns

• Interest works both ways

  The borrower gets the money. The lender gives it. Savers earn interest. Borrowers pay it.

• Borrowing costs more

  Borrow a pretend $100 at 10¢ for each $1, for a year. You pay back $110. The longer you take, the more interest you pay.

• Save first, or borrow?

  Saving first means paying just the price tag. Sometimes borrowing makes sense, like for a home or for school. Grown-ups compare the cost first.

The story: The Case of the Scooter Loan

In a bank lobby, Jo compares borrowing a pretend $100 for a scooter now with saving for it first.

1. Helper: Quick clue: the borrower gets money. The lender gives it.
2. Jo: I want this scooter now. It costs a pretend $100.
3. Banker: A pretend loan could get it now. Interest: 10¢ for each $1, for a year.
4. Kid: So you would pay back $110. The extra $10 is interest.
5. Jo: Or I save $10 a week. In 10 weeks, I pay just $100.
6. Jo: Now, or later for less? I’ll compare before I choose.
7. Helper: Case closed! Interest works for savers and costs borrowers.

The game: Borrow or Wait?

Jo wants a pretend $100 scooter. Read the clues. Pick the better choice for each question.

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

New words

borrower and lender

the borrower gets the money; the lender gives it

interest

the price of borrowing money

loan

money you borrow and pay back

total cost

the price plus the interest

Questions at the end

• Who pays interest on a loan?
• Borrow a pretend $50 at 10¢ for each $1, for a year. What do you pay back?
• What do you trade when you borrow instead of waiting?

Remember this

Interest helps you when you save. It costs you when you borrow.

Talk about it

Ask: what’s one thing worth borrowing for, and one thing that isn’t?

Try it at home: Ask about borrowing

1. Ask a grown-up: what do families often borrow for?
2. Ask why they might borrow for it.
3. Name one thing worth borrowing for, and one that isn’t.

This whole mission is free. No account or app needed.

For grown-ups: live facts

• Typical loan and credit card rates today. The lesson’s rates are pretend.

  Source: Federal Reserve G.19 Consumer Credit(opens in a new tab)

School standards

• National Standards for Personal Financial Education: Managing Credit
• Common Core Math 5.NBT.B.5
• Common Core Math 5.NBT.B.7
• Common Core Math 6.RP.A.3c (stretch)