Getting Out of Debt
This lesson uses the Better Money Habits video Steps to Help You Get Out of Debt to explain the concept of debt.
This lesson uses the Better Money Habits video Steps to Help You Get Out of Debt to explain the concept of debt. It shows students some of the problems associated with debt and provides them with different steps to reduce their overall debt. Some of these steps include creating an emergency fund, tracking their spending, and following a budget or spending plan. The lesson helps students understand how debt is created and the potential long-term impact it can have. Other topics include the differences between secured debt and unsecured debt, and discusses debt consolidation loans.
- Identify the steps to getting out of debt.
- Explain the costs and benefits of credit.
- Describe ways to avoid debt problems.
- Describe ways to correct debt problems.
- Ask students if they have ever borrowed money from anyone. Ask students if they have ever needed a loan to buy something. Explain that borrowing money causes debt because it must be repaid to the lender, whether it is their friends, their parents, a bank, or a credit card company. Ask students to describe how it feels to be in debt and owe money to someone else. Remind students that they will probably have debt at some point in time, even if they do not have any right now.
- Tell students that this lesson is designed to help them determine what steps are needed to get out of debt. Explain that owing a friend a dollar is much different than owing 100 friends a dollar, or owing a bank for the loan on a car; the more debt they have, the more challenging it is to repay.
- Tell students they will be viewing a video that will discuss how people get into debt, the steps they can take to reduce their debt, the importance of having a budget or spending plan, the differences between secured and unsecured debt, debt consolidation loans, and the potential need to earn extra income to pay off their debt.
- Distribute copies of Handout 1.1. Ask students to complete the handout with information from the video. Explain that you will be stopping the video at different points to allow them sufficient time to complete the handout. (A video transcript with recommended STOPS is included at the end of this lesson – Teaching Supplement 1.1).
- After completing the handout, have students discuss the challenges of getting out of debt.