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My Five Cents: Why borrowing can cost you more

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Woman with worried look
My Five Cents: Why borrowing can cost you more

SUBJECTS:  Economics, Maths

YEARS:  7–8, 9–10


Think credit cards are basically free money?

Gen Fricker will make you think again. Learn how interest rates and fees affect the money you borrow, and why they may be more expensive in the long run. Oh dear!

Then test yourself with ASIC Moneysmart's "Things to think about" classroom exercises.


Things to think about

  1. 1.Reflect on the following questions: (a) Have you ever lent money to your friends (at the canteen line)? Did you get the money back? (b) What makes us buy things we can't afford? (c) How much debt do you think is 'too much'? (d) Does good debt exist? Why/Why not? If yes, what are types of good debt?
  2. 2.List the terms that stand out to you as you watch the video. For example: credit card, borrow, debt, interest, minimum repayment, fees, penalty, "buy now, pay later", dishonouring. Investigate any terms that are unclear by searching the Moneysmart glossary page.
  3. 3.

    Use the ASIC Moneysmart Personal loan calculator to complete the following exercises. Using the 'How can I repay my loan sooner?' tab, answer the following questions.

    Q1: Tunde takes out a loan for $1,000 at 16% interest. Her repayments are $25 monthly, with no monthly fees. (a) How long will it take Tunde to repay the loan? (b) How much interest does she pay on the loan?

    Q2: Tunde compares an alternative scenario. She increases her monthly repayments to $50. (a) How long will it take Tunde to repay the loan? (b) How much interest does she pay on the loan? (c) How much does she save by increasing her monthly repayments?

    Q3: Tunde works a few extra shifts and decides to only borrow $500 instead $1,000. Write a short response justifying how borrowing $500 is the better option. Use your responses for Question 1 and 2 and the calculator.


Teachers

ASIC Moneysmart Teaching:


Acknowledgements

The learning materials provided with this video were created by ASIC Moneysmart.


Production Date: 2019


Copyright

Metadata © Australian Broadcasting Corporation 2020 (except where otherwise indicated). Digital content © Australian Broadcasting Corporation (except where otherwise indicated). Video © Australian Broadcasting Corporation (except where otherwise indicated). All images copyright their respective owners. Text © Australian Broadcasting Corporation and ASIC.

Posted , updated