Using Credit and Debt Responsibly

As youth get older, they start to face the prospects of borrowing money to help with major expenses – e.g., post-secondary education, training, starting a business, cars. It is important to help youth understand the different kinds of loans there are, where one can take out a loan, how loans are negotiated, the types of costs they will face, the importance of paying back loans on time to avoid penalties – and to pay off loans as quickly as possible. Youth should be aware of the importance of one’s credit rating and how to establish and maintain a good credit rating – and how to access and check their credit rating. Youth should be aware of the information that will be important to lenders and the factors that can influence whether they will be able to get a loan or not. Youth should be aware of factors that can influence the rate of interest they may be asked to pay. Managing debt responsibly is one of the most important financial skills to be able to avoid financial stress and anxiety.

Please Note: Teaching Units provided are for support and consideration by teachers and are not prescriptive.

Learning Map and Supports for Instruction

The “Learning Map” identifies teaching opportunities in Alberta’s curriculum for each topic and you will find them as part of the Support Teaching Materials provided here. Teachers can, of course, integrate the target areas of financial knowledge, skills, attitudes, and behaviours anywhere they can find a fit. The Supports for Instruction provide videos, animations, and links to other resources to support teachers in their efforts to improve the financial literacy of their students.

Borrowing Money - Division IV: Gr. 10-12

Knowledge

  • Using a credit card is borrowing money

  • Various types of loans for different purposes – e.g., car, mortgage for a home, consolidation loan

  • Why interest rates and the cost to borrow money can vary

  • Different sources for borrowing money

  • Factors affecting whether you can get a loan and how much you can borrow

  • How financial institutions make money on the spread between interest paid on savings and interest charged on loans

  • Advantages and disadvantages of credit cards and how to manage a credit card

  • Factors that will affect one’s credit rating and how to have a good credit rating

  • How a mortgage works and factors affecting the cost of a mortgage

  • Loans can be negotiated and there is competition among lending institutions

Skills

  • Pay debts on time

  • Use a credit card wisely

  • How to avoid fees and penalties

  • Estimate credit card debt that can be reasonably afforded

  • Compare credit card types, services, and costs to make credit card decisions

  • Use the services of a financial institution effectively to seek or obtain a loan

  • Apply for a loan and/or credit card

  • How to negotiate for a car – purchase of lease

  • How to negotiate a mortgage

Attitudes/Behaviours

  • Accept responsibility for deciding how much you borrow since others may be willing to lend more than you can reasonably afford

  • Accept responsibility for returning money that you borrowed – on time and in full

  • Pick a credit card most suited to their needs

  • Assume debts that are affordable

  • Pay off credit card balances in full as quickly as possible

  • Avoid paying higher costs to borrow than is necessary

  • Avoid unnecessary fess and penalties

  • Avoid borrowing from high cost sources (e.g., payday loans)