Substitute Lesson Plan: Money Smart — Borrowing & Credit

Grade Level: 9-12 | Duration: ~45 minutes | Subject: Financial Literacy

---

Objective

Students will be able to:

• Define credit, creditworthiness, and debt-to-income ratio
• Explain the difference between credit cards and debit cards
• Identify the four factors that determine creditworthiness (capacity, capital, character, collateral)
• Describe options for paying for college (grants, scholarships, student loans, work-study)

Materials

• "Money Smart: Borrowing & Credit (Grades 9-12)" resource (printed copies or read aloud from this plan)
• Whiteboard or chart paper and markers
• Paper and pen/pencil for each student (for exit ticket)
• Calculator (optional, for debt-to-income ratio practice)

Warm-up (~5 min)

Write this question on the board and have students jot down a quick answer, then share with a neighbor:

"What do you think is the difference between a credit card and a debit card?"

After 2 minutes of discussion, ask 2-3 volunteers to share their answers aloud. Do not correct answers yet — tell students they'll find out the real answer during the lesson.

Main Activity (~25 min)

Part 1: Credit Basics (10 min)
Read aloud or summarize the following from the resource:

• Credit is the use of someone else's money for a fee.
• Being creditworthy means showing lenders you can repay borrowed money on time.
• Write the four C's of creditworthiness on the board and briefly define each:
• Capacity — able to meet payments
• Capital — value of things you own
• Character — history of paying bills
• Collateral — things of value used to secure a loan

Ask students: "Which of these four do you think is hardest for a teenager to prove? Why?" Take 2-3 responses.

Part 2: Credit Cards vs. Debit Cards (7 min)
Read aloud the resource's explanation:

• A credit card means borrowing money you must repay, plus interest if not paid in full by the due date.
• A debit card uses money directly from your own checking/savings account — no interest, but requires having enough money at time of purchase.

On the board, draw two columns labeled "Credit Card" and "Debit Card." Ask students to call out facts from what was just read, and write them in the correct column as a quick recap.

Part 3: Debt-to-Income Ratio (8 min)
Explain using the resource's example:

• Debt-to-income ratio = monthly debt ÷ monthly gross income
• Example: $200 car loan + $1,000 home loan = $1,200 total monthly debt. If monthly gross income is $4,000, then $1,200 ÷ $4,000 = 30% debt-to-income ratio.

Write this example on the board step-by-step. Then give students this practice problem to solve individually or in pairs:

"If someone pays $150/month for a car loan and $350/month for a credit card, and their monthly gross income is $2,500, what is their debt-to-income ratio?"

(Answer: $500 ÷ $2,500 = 20%)

Have a student share their answer and confirm on the board.

Wrap-up / Exit Ticket (~10 min)

Have students answer the following on a sheet of paper to turn in:

1. In your own words, what does it mean to be "creditworthy"?
2. Name one difference between a credit card and a debit card.
3. True or False: A high debt-to-income ratio signals to lenders that a borrower may struggle to make monthly payments.
4. Name one way a student can pay for college without having to repay the money (hint: it was mentioned as a type of financial aid).

Collect exit tickets as students leave or at the end of class.

If Time Remains

Ask students to brainstorm out loud (or in pairs) what they know about FAFSA (Free Application for Federal Student Aid). Prompt with: "What three types of student aid were mentioned in the reading?" (Answer: grants and scholarships — do not have to repay; student loans — repaid with interest; work-study — earn money while attending college.) Write student answers on the board as a quick review.