Teaching Kids Finance – Behind the News

Oh, “Need money now?” Yes. “Don’t want to wait?” Who does? “Call now.” OK. Hello, Credit Crunch Loans.
Are you in a dash for cash? Jake speaking.
Hi, Jake. How can I help you?
Oh, I need a loan. Right. I can offer you
a $2,000 credit loan… Oh, cool.
..with an interest rate of 18.25%. Oh, OK. Does that…
But we do have a special offer if you sign up in the next
20 seconds. Yeah.
No interest for 24 months. Of course, that interest will double
after 24 months but shall we go ahead?
Erm… It can all sound pretty confusing. But it’s really just about
one thing – money. Money is a pretty important part
of our lives but, over the years, the way
we use it has changed quite a bit. Today, dollars and cents are often
replaced by taps and clicks on a computer or on your phone. So it can mean we’re able
to spend money faster than we can keep track of, and that’s got some experts worried
about your generation. We live in such
a cashless society now, the fact that there are
so few barriers to spending, again, we are opening up
young people to the possibility of getting into quite
a difficult financial situation down the track. Recently, a survey found
that most Aussie teens don’t understand how credit cards
and interest rates work. For example, one in five thought it would take a year to pay off a $2,000 debt with an 18% interest rate, when in fact it could take 15 years. So let’s give you
a quick crash course in both right now. First, interest. That is the fee paid by someone who borrows money, usually from a bank. The interest rate is the amount that borrower has to pay back on top of what they borrowed. So, the higher the interest rate, the more you’ll have to end up
paying back. Then there are credit cards. You can use them to buy stuff. Heaps of adults use them every day. But when you use a credit card, you’re actually borrowing money
from the bank, so if you don’t pay back what you spend each month, you’ll get charged interest
on top too. Experts say it’s really important
for kids to start learning about things like interest rates
and credit cards now. That’s what these guys are doing
at Mansfield State High School, in Queensland. I use a card at the moment ’cause I’m earning as well
from a job that I’ve got, and this has really helped
with managing debt and money and what goes out and what comes in
and everything, and keeping it stable. It’s good to set me up for life, and it’ll really help me
in the future so I know, you know, what to do in terms of
financial problems and situations. These guys say it’s a lesson
that all Aussie kids should learn so they can take care
of their cash in the future. So, are you interested in our offer? Um, I might just think about it. Or not. (PHONE CLICKS) (DIAL TONE)

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