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The Cost of Credit

Category: On the Web | Age Group: 14-16

TOPIC:

The cost of credit

RESOURCES NEEDED:

Access to the on-line video FunnyMoney, Get it on Credit: http://www.youtube.com/watch?feature=player_detailpage&v=83wtyEqD1fc

LEARNING OPPORTUNITY:

It is important for teenagers to understand that an item can actually end up costing a great deal more than its purchase price depending upon how you pay it off.

THE ACTIVITY:
  • Talk with your son or daughter about how an item can cost more than its purchase price—sometimes much more—simply because you used a credit card to purchase it. Talk about the level of interest that is charged on balances left on a credit card. Show them one of your credit card statements if you can. Talk about the penalties that can be charged if payments are late.
  • Next, watch the video available via the link above.
  • Then talk with your child about the steps they can take to keep the cost of any item purchased with a credit card to the lowest amount possible.
TIPS:
  • Talk about how important it is to only charge what you can afford to pay off at the end of the month. Carrying balances on a credit card is very expensive.
  • Talk about the importance of keeping track of your spending—and knowing where your money is going and what you are doing with it so that you don’t get surprises at the end of the month—or find that you are always short of money for things you “need” to spend money on.
  • Talk about the importance of not skipping a monthly payment. You can use this time to also talk about how each person will have a credit rating—how it is important to make sure you have a good credit rating—and that missing credit card payments can hurt your credit rating—which can make it harder to borrow more money if you need to.
FOLLOW UP IDEAS:
  • Visit the website of the Financial Consumer Agency of Canada (FCAC) to learn more about different kinds of credit cards and how to pick the best one for you.
WEBSITES: