Moneysmart Rookie Community Educator Guide Topic 2: Credit and Debt

MoneySmart Rookie
Community educator guide
Topic 2: Credit and debt

Financial literacy for young people

www.teaching.moneysmart.gov.au

Copyright

Copyright information

Website: www.teaching.moneysmart.gov.au

ISBN: 978 0 9805533 9 0.

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This Community educator guide is available under the Creative Commons license (BY - NC - SA). Under this license, the material is available for free use and adaption so that educators can use, adapt and re-publish material from the resource without seeking the permission of ASIC.

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The material in this Community educator guide is made available for the purpose of providing access to general information about consumer and financial literacy education and is not professional advice. If you intend to rely on the material, you should obtain advice relevant to your particular circumstances to evaluate its accuracy, currency and completeness.

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This Community educator guide is exempt from collection by copyright agencies and is a free resource for educational institutions.

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Introduction

Introduction

ASIC’s role in financial literacy

Financial literacy is about understanding money and finances and being able to apply that knowledge to make effective decisions.

The Australian Securities and Investments Commission is the Australian Government agency responsible for financial literacy. One of ASIC’s key aims is to have confident and informed consumers and investors.

ASIC’s MoneySmart Rookie education initiative

ASIC’s MoneySmart Rookie education initiative helps 16 to 25 year olds avoid expensive mistakes or “rookie errors” when they make their first financial decisions. We want young people transitioning into adulthood to have the motivation and tools to manage their money with confidence.

This education initiative was developed through extensive research and consultation with youth organisations and young people themselves.

Topics

The MoneySmart Rookie education initiative covers six topics:

4  Car ownership

4  Credit and debt

4  Mobile phone ownership

4  Moving out of home

4  Online financial transactions

4  First job

Who is the Community educator guide for?

This Community educator guide is designed for use by youth and community workers, student advisers, mentors and others who assist young people to become aware of their financial decisions and the impact these decisions may have on their lives.

The target audience for activities in this guide is people aged 16 to 25 years of age. Different activities are designed to suit the various levels of knowledge and understanding of participants.

The guide is a flexible learning tool so you can use the parts that are relevant to your participants. There is a logical flow of activities through a topic, but you can use them in any order.

Timing might be affected by:

4  the needs of the learners

4  the setting and context for learning

4  the time available

The activities and discussions offer young people the opportunity to learn consumer and financial literacy skills using ‘real life’ situations, such as buying a mobile phone, getting a first car and moving out of home.

How to access the MoneySmart Rookie resources

The content is structured to suit both young people and educators:

Young people can go directly to the Under 25s section of www.moneysmart.gov.au to see engaging articles, case studies and videos.

For community educators and teachers who are working with young people, additional material is on ASIC’s MoneySmart Teaching website (www.teaching.moneysmart.gov.au):

Teacher lesson plans – assist Year 9 and 10 secondary school teachers to utilise the resources in classroom teaching, and deliver the Australian Curriculum.

Convos – are self-paced online learning activities allowing young people to practice tricky conversations.

Community educator guide [this guide] – has been created to help youth and community workers, student advisers, mentors and others who assist young people to become aware of their financial decisions.

Facilitation options

The activities have been designed so that they can be used formally or informally in the following ways:

4  One-on-one

4  Participants in pairs

4  Small groups

4  Large groups

The facilitator can adapt activities and discussions to suit their learners and context.

Some general suggestions are provided in the table below:

Participants / Activity options
One-on-one / Photocopy activity worksheets, individual reflection and discussion with facilitator, sharing individual experiences, insights and challenges with facilitator. If reading skills are required, either the participant or facilitator could read text aloud or review quietly if preferred.
Pairs / ‘Buddy’ activity work with photocopied activity worksheets, individual reflection and sharing with each other, sharing individual experiences, insights and challenges with facilitator. If reading skills are required, either the participants or facilitator could read text aloud or review quietly if preferred.
Groups / Photocopy activity worksheets, facilitator/participants use whiteboard/butcher’s paper to record activity questions and responses, individual reflection and discussion within small and large groups, sharing individual experiences, insights and challenges with small and large groups. If reading skills are required, one participant per group or the facilitator could read text aloud and individuals could raise hands or point to indicate choices/responses. If writing skills are required, one participant in a group could write down everybody’s ideas.

Complementary resources

The activities may be undertaken using this guide and video/s where relevant.

References for further or related MoneySmart Rookie information are included in this guide.

If young people want to explore any of the topics on their own, they can go to the MoneySmart website (www.moneysmart.gov.au) and search for Under 25s.

Knowledge levels

What content will suit your participants? The level of information you use will depend on how much understanding your participants have of a topic. The following describes the content that best suits different levels of understanding (1, 2, and 3):

Your audience has this level of knowledge / Description
Level 1: No or a limited understanding / If your participants cannot answer any of your questions or can only answer them a bit, they have no or a limited understanding.
You can help them to understand more by showing the MoneySmart Rookie video for the topic. You can also go through the Level 1 activities in the guide.
After watching the video, see if your participants have developed some understanding of the topic by asking them to answer the questions again.
Level 2: Some level of understanding / If your participants answer one or more of your questions, they have some level of understanding.
You can show them the MoneySmart Rookie video to review the topic.
You may wish to pause the video in sections and discuss key issues shown.
You can also go through the Level 2 activities and stories in the guide, as these are for participants with some level of understanding.
Level 3: Good level of understanding / If your participants are able to answer all of your questions, they have a good level of understanding.
You can show them the MoneySmart Rookie video to review the topic.
You can also go through the Level 2 and 3 activities in the guide, as these are for participants with a good level of understanding.

www.teaching.moneysmart.gov.au

TOPIC 2: Credit and debt

TOPIC 2:Credit and debt

Activities are arranged so there is a logical flow through the topic, but you can use them in any order you wish.

Activities and resources / Level / Key messages / Pg
A: Understanding credit / 4
2.1: Paying for your holiday – is credit the best option? / Level 1 / 4  Credit is borrowed money that you have to pay back.
4  Credit has costs.
4  You pay interest, fees and charges to use credit.
4  Too much credit can cause money problems.
2.2: Chloe’s trick to control her impulse / Level 1
2.3: Amy and Maria make different decisions / Level 2
B: Different types of credit / 9
2.4: Tom uses different types of credit / Level 1 / 4  There are many different types of credit.
4  Different types of credit are used for different purposes.
4  Some credit costs more than others.
4  Look for credit that is best for you.
2.5: Tom ends up with repayment problems / Level 2
2.6: Look for credit that is best for you / Level 2
2.7: Different types of credit for different purposes / Level 2
C: Credit contracts / 16
2.8: Red-flagging cost items in a credit card offer / Level 2 / 4  A contract is a legal agreement.
4  Do not sign anything you do not understand.
4  You may not be able to cancel a contract just because you change your mind.
4  Get help to understand the contract.
2.9: Asking questions about the red flags / Level 3
2.10: Understanding a contract / Level 3
D: Problems with credit / 21
2.11: Chloe makes a rookie error and gets help / Level 2 / 4  Get help if you are experiencing financial difficulties.
4  You may have legal problems by not paying what you owe.
4  There may be long term effects if you do not pay what you owe.
4  You may affect your credit rating if you do not meet your financial obligations.
2.12: How Chloe could have ended up with legal problems / Level 2

Overview

The topic is about how a person can control their use of credit and manage their debt.

It will help young people:

4  Understand the different types of credit available and the costs involved

4  Understand what their credit rating is

4  Understand how to manage their repayment of debt

4  Know where to go to get help if there is a problem

Reflection questions

At the end of each session, educators can use the following questions to reflect on the effectiveness of the session:

4  What worked well?

4  What did not work well?

4  Did the participants understand the key messages?

4  Did the activity engage the participants?

4  How could the activity have been more effective?

4  What questions unexpectedly emerged and how did you handle them?

4  What might you do differently next time?

More information for your participants

For more information or to search for words you don’t understand, go to the MoneySmart website (www.moneysmart.gov.au) and search for Under 25s.

Knowledge levels

Ask these types of questions to check the participants’ existing level of knowledge about credit. Ask the participants to explain the following:

4  What types of credit are available to people?

4  What kinds of costs do you have to pay when you get credit?

4  What is meant by a person’s “credit rating”?

Decide what information they need based on their level of knowledge. Use the table below to help you.

Your participants has this level of knowledge / Description and suitable activities
Level 1:
No or a limited understanding / If your participants cannot answer any of your questions or can only answer them a bit, they have no or a limited understanding.
You can help them to understand more by showing the MoneySmart Rookie: Credit hangover video. You can also go through the Level 1 activities in the guide.
After watching the video, see if your participants have developed some understanding of the topic by asking them to answer the questions again.
Level 2:
Some level of understanding / If your participants answer one or more of your questions, they have some level of understanding.
You can show them the MoneySmart Rookie: Credit hangover video to review the topic.
You may wish to pause the video in sections and discuss key issues shown.
You can also go through the Level 2 activities and stories in the guide, as these are for participants with some level of understanding.
Level 3:
Good level of understanding / If your participants are able to answer all of your questions, they have a good level of understanding.
You can show them the MoneySmart Rookie: Credit hangover video to review the topic.
You can also go through the Level 2 and 3 activities in the guide, as these are for participants with a good level of understanding.

A: Understanding credit

Key messages:

4  Credit is borrowed money that you have to pay back

4  Credit has costs

4  You pay interest, fees and charges to use credit

4  Too much credit can cause money problems

Content for the educator

Credit is money you borrow from a financial institution like a bank, credit union or building society.

Credit has a cost; it isn’t your personal money tree growing in the backyard. Any credit you use becomes a debt that must be repaid to the credit provider – usually with interest included.

Interest is an extra amount you have to pay as a cost for borrowing the credit provider’s money. This cost is added to the original amount of money you borrowed.

Many retailers offer interest-free deals but the purchase is only interest-free for a certain period of time which is often 12 to 24 months. If the purchase balance is not paid in full within the interest-free period, interest will be charged on the outstanding amount at a high interest rate.

Before you start looking for credit, do a budget – and make sure you only borrow what you can afford to pay back so you don’t end up with money problems.