Credit vs. Savings

Do teens know the difference between saving up for a major purchase and borrowing for it? Do they know when it makes sense to borrow and when it’s more prudent to save?

1200px-visa-mastercardI had my grade 8 students explore those questions during a unit on percents. In their favourite homework assignment of all time, I asked students to think of a major purchase they wanted to make before graduation (approximately four years away). Their choices were interesting an varied: concert tickets, iPhones, travel, clothes…

Having determined the price of their chosen item, including tax, students used this spreadsheet to compare two different financing options: saving up for their purchase and borrowing using a credit card. They were then asked to select the best option and discuss the advantages and disadvantages of that option.

Some students determined that it makes sense to borrow, even though they end up paying more in the long run. For example, one student really wanted to buy tickets to a concert. She didn’t have time to save up the money, but was willing to pay the cost of the interest on top of the cost of the ticket in order to be able to go.

Other students realized that saving makes more sense. One student had a ah-ha moment when he realized that if be used a credit card to buy the latest iPhone, it would be obsolete before he paid it off. He decided instead to save is money and use his savings to buy the next generation iPhone.

Would you like to do this activity with your class? You’re welcome to make your own copy of the task sheet and spreadsheet to use with your students.


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