Social Studies: Financial Literacy – Grade 4 - Part 3

When people earn money, they have important choices to make! 💵 Every dollar that comes in has to go somewhere, and understanding these choices helps you become smarter with money.

When your parents get paid from their jobs, or when you receive money for your birthday, that money is called income. People use their income in three main ways:

Saving means putting money away for the future instead of spending it right now. When you put money in a piggy bank 🐷 or your parents put money in a savings account, that's saving! People save money so they can buy things later, prepare for emergencies, or reach special goals.

Spending on goods and services means using money to buy things you need or want right now. Goods are things you can touch, like food 🍎, clothes 👕, toys 🧸, or bikes 🚲. Services are things people do for you, like getting a haircut ✂️, going to the doctor 👩‍⚕️, or having someone fix your bicycle.

Paying taxes means giving money to the government so they can provide services for everyone. Taxes help pay for schools 🏫, roads 🛣️, libraries 📚, parks 🌳, and police and fire departments 🚒. Even though you might not see taxes directly as a fourth grader, your parents pay them, and understanding them helps you see how communities work together.

Think about when you get money for your birthday or allowance. You have to decide: Should I spend this money on something fun right now, or should I save it for something bigger later? Should I help my family by contributing to something we need? These are the same choices adults make every day!

For example, if you earn $\$10$ from helping with chores, you might:

• Save $\$5$ for a bigger toy you want
• Spend $\$3$ on a snack you want today
• Contribute $\$2$ to help buy groceries for the family

Understanding how income works helps you make better decisions with money throughout your life. When you know that every dollar has to go somewhere, you start thinking more carefully about your choices. This skill will help you when you're older and earning your own money from jobs!

People who understand how to manage their income wisely are more likely to have enough money for the things they need and want. They can handle unexpected expenses better and feel more confident about their financial future.

Let's look at some examples of how families use their income:

The Johnson Family earns $\$4,000$ per month. They might use their income like this:

• Saving: $\$400$ goes into savings for emergencies and future goals
• Spending on goods: $\$1,200$ for groceries, clothes, and household items
• Spending on services: $\$800$ for utilities, phone, and internet
• Housing: $\$1,200$ for rent or mortgage
• Taxes: $\$400$ for federal and state taxes

Notice how they balance all three uses of income to meet their family's needs both now and in the future.

Have you ever wanted something right now but decided to wait? 🤔 That's exactly what saving money is about! When you save, you're making a choice to give up something today so you can get something even better tomorrow.

When you save money, you're making what adults call a trade-off. This means you're giving up the chance to buy something now so you can buy something different (and often better) later. It's like choosing between having one cookie today or waiting to have three cookies tomorrow! 🍪

Let's say you have $\$20$ and you see a toy you want that costs $\$15$. If you buy the toy, you'll have $\$5$ left and the toy. But if you save that $\$20$ instead, you give up getting the toy today, but you'll have $\$20$ to spend on something else later.

Every time you save money, you're giving up the opportunity to buy something else. This is called opportunity cost - it's what you give up to get something you want more.

For example, imagine you save $\$20$ instead of buying a video game. Your opportunity cost is the fun you would have had playing that video game right now. But by saving, you might be able to buy a better video game later, or save up enough money to buy a bike! 🚲

People save money because they understand that waiting can lead to better things. Here are some reasons why saving is worth giving up immediate purchases:

Bigger and Better Things: If you save $\$5$ each week for 10 weeks, you'll have $\$50$ to spend on something much bigger than what you could buy with just $\$5$.

Emergency Preparedness: Sometimes unexpected things happen, like a bicycle chain breaking or needing new school supplies. Having saved money means you can handle these situations without stress.

Dreams and Goals: Maybe you want to go to a special summer camp, buy a musical instrument, or help your family with something important. Saving helps you turn these dreams into reality.

Learning Self-Control: When you practice saving, you're building a skill called self-control. This helps you make better decisions in many areas of life, not just with money.

Let's look at some real examples of how kids your age make saving choices:

Maria's Choice: Maria gets $\$10$ allowance each week. She really wants a new art set that costs $\$40$. She could spend her $\$10$ each week on candy and small toys, but instead, she saves it. After 4 weeks, she has enough to buy the art set. She gave up 4 weeks of small purchases to get something she wanted more.

Jake's Goal: Jake wants to buy his mom a special birthday present that costs $\$25$. He earns $\$5$ each week doing chores. Instead of buying snacks and toys, he saves his money for 5 weeks. He gives up immediate fun to do something kind for his mom.

Giving up things you want now can be hard, but here are some tricks to make it easier:

Picture Your Goal: Draw a picture of what you're saving for and put it where you'll see it every day. This reminds you why you're saving! 🎨

Track Your Progress: Use a chart or jar to see how much you've saved. Watching your money grow makes the waiting more exciting.

Celebrate Small Wins: When you choose to save instead of spend, celebrate! You made a smart choice that will help you reach your goal.

Find Free Fun: Look for things you can do for free while you're saving, like playing at the park, reading library books, or spending time with friends.

When you finally reach your savings goal and buy what you wanted, it feels amazing! 🎉 You'll feel proud that you had the patience and self-control to wait. Plus, you'll have learned a valuable skill that will help you throughout your life.

Where do you keep your money safe? 🏠 There are many different places people can save their money, and each one has special advantages. Let's explore the options from simple home methods to professional financial institutions!

Many people start saving money at home using simple but effective methods:

Piggy Banks are probably the most famous way to save money at home! 🐷 These special containers make it easy to drop in coins and bills, and some even count your money as you save. Piggy banks work great because they keep your money in one place and make saving feel fun.

Jars and Containers are another popular home option. You can use mason jars, empty coffee cans, or special money boxes. Some families have different jars for different goals - one for spending money, one for saving, and one for helping others.

Safe Boxes are more secure home options. These are special locked boxes that keep money safe from theft and accidents. Some families use small safes or locked drawers to store important papers and money.

Money Envelopes help people organize their money for different purposes. You might have one envelope for spending money, one for saving, and one for gifts.

While home saving is great for small amounts, larger amounts of money need more secure places:

Commercial Banks are businesses that help people save and borrow money. They have strong security systems, insurance protection, and they pay you interest for keeping your money with them. Banks like Chase, Bank of America, and Wells Fargo are examples you might see in your community.

Credit Unions are special organizations owned by their members. They often offer better interest rates and lower fees than regular banks. Credit unions serve specific groups of people, like teachers, military families, or people who live in certain areas.

Savings and Loan Companies focus specifically on helping people save money and get loans to buy homes. They're similar to banks but specialize in certain types of financial services.

Let's compare these different saving places:

Home Saving Advantages:

• Easy to access your money anytime
• No fees or minimum amounts
• You can see and touch your money
• Great for teaching kids about saving
• No paperwork required

Home Saving Disadvantages:

• Money doesn't grow (no interest)
• Risk of theft or loss
• Not protected by insurance
• Easy to spend impulsively
• Limited security

Financial Institution Advantages:

• Your money earns interest and grows
• Protected by government insurance
• Very secure with professional security
• Harder to spend impulsively
• Professional record-keeping

Financial Institution Disadvantages:

• May have fees or minimum balance requirements
• Takes time to access your money
• Requires paperwork and identification
• Can be intimidating for new savers

The best place to save depends on your situation:

For Small Amounts (under $\$100$): Home saving methods work great! They're simple, easy, and help you build the habit of saving.

For Larger Amounts (over $\$100$): Financial institutions become more important for security and growth.

For Different Goals: You might use both! Keep spending money in a jar at home for easy access, but put longer-term savings in a bank account.

For Learning: Starting with a piggy bank or jar helps you understand saving before moving to more complex options.

Here are some questions to help you choose:

1. How much money do you plan to save?
2. How quickly might you need the money?
3. Are you saving for something specific or just building a general emergency fund?
4. Do you want your money to grow with interest?
5. How important is it that your money is completely safe?

Many people use multiple saving methods. For example, they might keep $\$20$ in a piggy bank for small purchases and $\$200$ in a bank account for bigger goals.

Remember, the most important thing is that your money is safe! Whether you choose a piggy bank or a bank account, make sure:

• Your money is protected from theft
• You remember where you put it
• You keep track of how much you have
• You only save in places your family approves of

The place you choose to save is less important than building the habit of saving regularly. Whether you put coins in a piggy bank or dollars in a bank account, the important thing is that you're learning to save money consistently! 💪

Have you ever wanted something so much that you were willing to save your money for it? 🎯 That's the power of a savings goal! When you have something specific you want to buy or achieve, saving money becomes much easier and more exciting.

A savings goal is something specific you want to buy or achieve with the money you save. It's like having a target to aim for! Instead of just saving money without a purpose, you're saving for something that matters to you.

Savings goals can be:

• Short-term: Things you can save for in a few weeks or months
• Long-term: Things that take many months or even years to save for
• Small: Like a new book or toy
• Big: Like a bicycle, computer, or helping your family

Without a goal, saving money can feel boring or pointless. But when you have a clear goal, everything changes! Here's why:

Motivation: When you see that toy, book, or bike you want, you remember why you're saving instead of spending.

Progress Tracking: You can see how much closer you are to your goal each time you save money.

Easier Decisions: When you want to buy something small, you can ask yourself: "Do I want this more than my savings goal?"

Excitement: Imagining yourself with the thing you're saving for makes saving feel fun instead of hard.

Let's look at different types of goals that kids your age might have:

Toy and Game Goals 🎮

• A new video game ($\$60$)
• A special doll or action figure ($\$25$)
• A board game to play with family ($\$30$)
• Art supplies for creative projects ($\$40$)

Experience Goals 🎢

• Tickets to a movie or theme park ($\$50$)
• A special outing with friends ($\$30$)
• Lessons for something you want to learn ($\$100$)
• A camping trip or vacation contribution ($\$200$)

Big Purchase Goals 🚲

• A new bicycle ($\$150$)
• A musical instrument ($\$100$)
• A computer or tablet ($\$300$)
• Sports equipment ($\$80$)

Helping Others Goals 💝

• A special gift for a family member ($\$50$)
• Donating to a charity you care about ($\$25$)
• Helping your family with an expense ($\$100$)
• Buying supplies for a school project ($\$20$)

Not all goals are created equal! Here's how to set a goal that will motivate you:

Make It Specific: Instead of "I want to save money," say "I want to save $\$75$ to buy a new skateboard."

Make It Realistic: Choose something you can actually save for with your income. If you get $\$10$ per week, a $\$500$ goal might be too big to stay motivated.

Make It Meaningful: Choose something you really want, not something you think you should want.

Make It Visible: Write it down, draw a picture, or find a photo of what you're saving for.

Set a Deadline: Decide when you want to reach your goal. This helps you figure out how much to save each week.

Once you have a goal, you need a plan! Here's how:

Example: Sarah's Bike Goal Sarah wants to buy a bike that costs $\$120$. She gets $\$15$ allowance each week and can earn $\$5$ more doing extra chores.

1. Goal: $\$120$ for a new bike
2. Income: $\$15$ allowance + $\$5$ chores = $\$20$ per week
3. Savings Rate: She decides to save $\$15$ per week and spend $\$5$
4. Timeline: $\$120$ ÷ $\$15$ = 8 weeks
5. Target Date: 8 weeks from now

Saving for weeks or months can be challenging. Here are ways to stay motivated:

Visual Reminders: Put a picture of your goal where you'll see it every day - on your mirror, in your room, or as your phone wallpaper.

Progress Charts: Create a chart that shows how much you've saved and how much you still need. Color in sections as you save!

Celebration Milestones: Celebrate when you reach 25%, 50%, and 75% of your goal. You're making great progress!

Share Your Goal: Tell family and friends about your goal. They can encourage you and help you stay on track.

Adjust When Needed: If your goal is taking too long or you find something you want more, it's okay to change your plan.

Some people have more than one savings goal at a time:

Short-term Goal: Something you can buy in a few weeks Long-term Goal: Something bigger that takes months to save for Helping Goal: Money set aside to help others or contribute to family needs

For example, you might save:

• $\$5$ per week for a short-term goal
• $\$8$ per week for a long-term goal
• $\$2$ per week for helping others

Reaching a savings goal feels amazing! 🎉 You've proven to yourself that you can be patient, make smart choices, and achieve what you set out to do. This success will make it easier to set and reach even bigger goals in the future.

After you reach a goal, take some time to:

• Celebrate your success!
• Think about what you learned
• Set a new goal to keep building your saving skills
• Be proud of the self-control and patience you showed

Did you know that banks can actually help your money grow while keeping it safe? 🏦 When you put money in a bank, amazing things happen that don't occur when you save money at home. Let's explore how banks work and why they're such great partners for savers!

When you put money in a bank, you're not just storing it - you're actually helping the bank help other people! Here's how it works:

You Deposit Money: You give the bank your money to keep safe. This is called making a deposit.

The Bank Lends It Out: The bank takes your money (along with money from other savers) and lends it to people who need to borrow money for things like buying houses, starting businesses, or going to college.

Borrowers Pay Interest: The people who borrow money pay the bank extra money called interest for the privilege of using the money.

The Bank Shares With You: The bank keeps some of that interest as profit, but they also share some of it with you as a thank-you for letting them use your money!

Interest is extra money that the bank pays you for keeping your money with them. It's like a reward for being a good saver! 💰

Here's how it works:

• If you put $\$100$ in a savings account
• The bank might pay you 2% interest per year
• After one year, you would have $\$102$ (your original $\$100$ plus $\$2$ in interest)
• Your money grew without you doing anything!

Many people worry about putting their money in banks, but banks are actually very safe places for your money:

Strong Security: Banks have security cameras, alarms, vault doors, and guards to protect against theft. They spend lots of money on security systems that are much better than what you could have at home.

Government Insurance: Most banks are protected by something called FDIC insurance. This means that even if something terrible happened to the bank, the government would make sure you get your money back (up to $\$250,000$ per account).

Professional Management: Banks have trained professionals who know how to keep money safe and make smart decisions with it.

Regulations: The government has strict rules that banks must follow to make sure they operate safely and fairly.

Banks want people to save money with them because they need money to lend to borrowers. To attract savers, banks offer several benefits:

Interest Payments: Banks pay you interest to encourage you to save with them instead of keeping money at home or with other banks.

Safety and Security: Banks provide much better security than you could have at home.

Convenience: Banks make it easy to access your money when you need it, with ATMs, online banking, and mobile apps.

Record Keeping: Banks keep detailed records of all your deposits and withdrawals, so you always know exactly how much money you have.

Additional Services: Many banks offer other helpful services like debit cards, online bill paying, and financial advice.

Let's see how bank savings compare to keeping money at home:

Jenny's Piggy Bank: Jenny saves $\$10$ per month in her piggy bank. After 12 months, she has exactly $\$120$.

Maria's Bank Account: Maria saves $\$10$ per month in a bank account that pays 2% interest per year. After 12 months, she has about $\$121.20$ - her money grew!

While $\$1.20$ might not seem like much, imagine if they both saved $\$1,000$. After one year:

• Jenny would still have $\$1,000$
• Maria would have $\$1,020$

The more money you save and the longer you save it, the more your interest earnings grow!

Banks offer different types of accounts for different needs:

Savings Accounts: These are designed for saving money. They pay interest but limit how often you can take money out.

Checking Accounts: These are for money you need to access frequently. They usually pay little or no interest but let you write checks and use debit cards.

Youth Accounts: Many banks have special accounts designed just for kids and teenagers, with lower minimum balances and special features.

Certificate of Deposit (CD): These pay higher interest, but you have to leave your money in the bank for a specific time period.

The really exciting thing about bank interest is something called compound interest. This means you earn interest not just on the money you put in, but also on the interest you've already earned!

Here's an example:

• Year 1: You save $\$100$, earn $\$2$ interest, total: $\$102$
• Year 2: You earn interest on $\$102$, so you earn $\$2.04$, total: $\$104.04$
• Year 3: You earn interest on $\$104.04$, so you earn $\$2.08$, total: $\$106.12$

Your interest earnings grow each year because you're earning interest on a bigger amount!

If you're interested in opening a bank account, here's what usually happens:

1. Choose a Bank: Look for banks in your area that offer youth accounts
2. Visit With a Parent: Kids usually need a parent or guardian to help open accounts
3. Bring Identification: You'll need to prove who you are
4. Make Your First Deposit: Many accounts require a small amount to start
5. Learn How to Use It: The bank will teach you how to make deposits, check your balance, and access your money

To get the most benefit from bank savings:

Compare Interest Rates: Different banks pay different amounts of interest. Look for the best rates!

Avoid Fees: Some accounts have monthly fees. Look for accounts with no fees or low fees.

Keep Some Money Accessible: Don't put all your money in accounts that are hard to access. Keep some money available for emergencies.

Track Your Progress: Watch how your money grows each month. It's exciting to see your savings increase!

Start Early: The sooner you start saving in a bank, the more time your money has to grow through compound interest.

When you borrow money from someone, you don't just pay them back the same amount - you pay them extra! 💰 This extra money is called interest, and it's the price you pay for using someone else's money.

Interest is extra money that borrowers pay to lenders as a fee for using their money. Think of it like renting money! When you rent a movie, you pay a fee to use it for a while. When you borrow money, you pay interest as a fee to use that money for a while.

Here's how it works:

• You borrow $\$100$ from a bank
• The bank charges 5% interest per year
• After one year, you owe $\$105$ (the original $\$100$ plus $\$5$ in interest)
• The extra $\$5$ is the price you paid for using the bank's money

Lenders charge interest for several important reasons:

It's Their Business: Banks and other lenders are businesses that make money by lending to people. Interest is how they earn money to pay their employees, rent their buildings, and make a profit.

They Take Risk: When someone lends money, there's always a risk that the borrower might not pay it back. Interest helps compensate for this risk.

Time Value of Money: Money today is worth more than money tomorrow because you can use it to buy things or earn more money. Interest compensates lenders for giving up the use of their money.

Inflation Protection: Over time, things generally cost more money (this is called inflation). Interest helps protect lenders from losing value over time.

Let's see how interest works with a real example:

Alex wants to buy a new phone that costs $\$100$, but he only has $\$50$. He asks his older brother to lend him $\$50$ and agrees to pay 10% interest.

• Amount borrowed: $\$50$
• Interest rate: 10%
• Interest amount: $\$50 × 0.10 = \$5$
• Total amount to pay back: $\$50 + \$5 = \$55$

Alex gets his phone now, but he has to pay back $\$55$ instead of just $\$50$. The extra $\$5$ is the price he pays for not having to wait until he saved up the full $\$100$.

Interest rates are usually expressed as percentages and time periods:

Annual Interest Rate: This is the interest charged per year. If you borrow $\$100$ at 8% per year, you'll pay $\$8$ in interest each year.

Monthly Interest Rate: Some loans charge interest monthly. A 1% monthly rate means you pay $\$1$ in interest for every $\$100$ you owe each month.

Different Rates for Different Loans: Interest rates vary based on:

• How risky the loan is
• How long you take to pay it back
• What you're buying with the money
• Your history of paying back loans

The longer you take to pay back borrowed money, the more interest you usually pay:

Example: Sarah's Bike Loan Sarah borrows $\$200$ at 6% annual interest to buy a bike.

• If she pays it back in 1 year: She pays $\$200 + \$12 = \$212$
• If she pays it back in 2 years: She pays $\$200 + \$24 = \$224$
• If she pays it back in 3 years: She pays $\$200 + \$36 = \$236$

The longer Sarah takes to pay back the loan, the more interest she pays!

When you borrow money, it's important to understand the total cost of what you're buying:

Purchase Price: The original cost of the item Interest Cost: The extra money you pay for borrowing Total Cost: Purchase price + interest cost

For example:

• Bike price: $\$200$
• Interest cost: $\$24$ (over 2 years)
• True cost to you: $\$224$

That $\$200$ bike actually costs you $\$224$ when you borrow money to buy it!

Before borrowing money, smart people ask themselves:

1. Do I really need this now? Could I wait and save up the money instead?
2. How much total will I pay? What's the real cost including interest?
3. Can I afford the payments? Will I have enough money to pay back the loan?
4. Are there other options? Could I find a cheaper item or save up faster?

Simple Interest: You pay interest only on the original amount borrowed. Compound Interest: You pay interest on the original amount plus any unpaid interest (this makes loans more expensive!).

Example of Compound Interest: If you borrow $\$100$ at 10% compound interest per year and don't make any payments:

• Year 1: You owe $\$100 + \$10 = \$110$
• Year 2: You owe $\$110 + \$11 = \$121$ (interest on $\$110$)
• Year 3: You owe $\$121 + \$12.10 = \$133.10$ (interest on $\$121$)

The interest grows each year because you're paying interest on interest!

Understanding interest helps you make better decisions:

When Interest Might Be Worth It:

• Buying something you need for school or work
• Purchasing something that will last a long time
• Getting something that helps you earn more money

When Interest Might Not Be Worth It:

• Buying something just for fun that you could save up for
• Purchasing something that will break quickly
• Getting something you don't really need

Interest is the price you pay for using someone else's money. It's not good or bad - it's just part of how borrowing works. The key is understanding what you're paying so you can make smart decisions about when borrowing makes sense for you! 🤔

Have you ever wanted something that costs more money than you have? 🤔 That's when credit can help! Credit lets people buy things now and pay for them later. Let's explore when people use credit and how it works in real life.

Credit is when someone lets you buy something now and pay for it later. It's like a promise - you promise to pay back the money plus interest over time. When you use credit, you get something valuable right away, but you also take on the responsibility to pay it back.

Think of credit like this:

• You want something that costs $\$500$
• You only have $\$50$
• Someone lends you $\$450$ to buy it now
• You promise to pay back $\$450$ plus interest over time
• You get to use the item while you're paying for it

Let's look at a real example with the Martinez family:

The Martinez Family's Car The Martinez family needs a car that costs $\$15,000$. They have $\$3,000$ saved up, but they need the car now for work and school.

Here's how they use credit:

1. They pay $\$3,000$ as a down payment
2. They borrow $\$12,000$ from a bank
3. They get the car immediately and can use it
4. They pay back the bank $\$300$ every month for 4 years
5. In total, they pay $\$14,400$ ($\$300 × 48$ months)
6. The extra $\$2,400$ is the interest they pay for using the bank's money

People use credit to buy many different things:

Big Purchases (Usually Good Uses of Credit) 🏠

• Houses: Most people borrow money to buy homes because houses cost hundreds of thousands of dollars
• Cars: Vehicles are expensive but necessary for work and transportation
• Education: College loans help people get education that leads to better jobs
• Home Improvements: Making homes safer or more valuable

Medium Purchases (Sometimes Good Uses of Credit) 💻

• Appliances: Refrigerators, washing machines, and other household needs
• Computers: Technology needed for work or school
• Medical Bills: Unexpected health expenses
• Furniture: Items that last for many years

Small Purchases (Usually Not Good Uses of Credit) 🍕

• Clothes: Items that wear out quickly
• Food and Entertainment: Things you consume quickly
• Toys and Games: Fun items that aren't necessities
• Vacations: Experiences that don't create lasting value

People use credit for several reasons:

They Need Something Now: Sometimes you can't wait to save up. If your car breaks down and you need it for work, you might need to use credit to buy a replacement.

The Item Will Last a Long Time: It makes sense to pay for something over time if you'll use it for many years, like a house or car.

It Helps Them Earn More Money: If borrowing money helps you get a better job or education, the extra income might be worth the interest cost.

Building Credit History: Using credit responsibly helps people build a good credit history, which makes it easier to borrow money in the future.

Emergency Situations: Sometimes unexpected things happen, like medical bills or home repairs, and credit helps people handle these situations.

When someone uses credit, they make an agreement with the lender:

The Borrower Promises To:

• Pay back the money on time
• Pay the agreed-upon interest
• Follow the rules of the loan
• Take care of the item (if it's something like a car or house)

The Lender Promises To:

• Provide the money or let the person buy the item
• Give clear information about interest and payments
• Follow fair lending practices
• Not change the terms unfairly

Let's see how a kid might use credit:

Emma wants a bike that costs $\$120$. She has $\$40$ saved up and gets $\$10$ allowance per week. She has two choices:

Option 1: Save Up

• She needs $\$80$ more
• At $\$10$ per week, it will take 8 weeks
• Total cost: $\$120$
• She gets the bike in 8 weeks

Option 2: Borrow from Mom

• She borrows $\$80$ from her mom
• Mom charges 5% interest ($\$4$)
• She pays back $\$14$ per week for 6 weeks
• Total cost: $\$124$ ($\$120 + \$4$ interest)
• She gets the bike immediately

Emma has to decide: Is it worth paying an extra $\$4$ to get the bike 8 weeks sooner?

Using credit can be helpful, but it's important to make smart decisions:

Good Times to Use Credit:

• You need something important right away
• The item will last longer than the loan
• You have a plan to pay back the money
• The total cost (including interest) is reasonable
• You've compared different options

Times to Avoid Credit:

• You want something just for fun
• You're not sure you can make the payments
• The interest rate is very high
• You already have a lot of debt
• You could easily save up the money quickly

When you use credit, paying it back is very important:

If You Pay on Time:

• You build a good credit history
• You can borrow money more easily in the future
• You pay less in interest
• You keep your promises

If You Don't Pay on Time:

• You may have to pay extra fees
• Your credit history becomes bad
• It becomes harder to borrow money
• You might lose the item you bought

Let's compare credit and saving with an example:

Jake wants a $\$60$ video game.

Saving Option:

• Saves $\$10$ per week for 6 weeks
• Gets the game in 6 weeks
• Total cost: $\$60$
• Learns patience and planning

Credit Option:

• Borrows $\$60$ from dad at 10% interest
• Gets the game immediately
• Pays back $\$11$ per week for 6 weeks
• Total cost: $\$66$
• Learns about borrowing and interest

Both options teach valuable lessons! Saving teaches patience and planning, while credit teaches responsibility and the cost of borrowing.

As you grow up, you'll probably use credit for important purchases. Understanding how it works now will help you make smart decisions later. Remember:

• Credit is a tool, not free money
• Every loan has a cost (interest)
• Only borrow what you can afford to pay back
• Compare different options before borrowing
• Always read and understand the agreement

By learning about credit now, you're preparing yourself to use it wisely when you're an adult! 📚