Hidden Holiday Budget Breakers: Where Did All That Money Go?!

While it can be challenging to set and stick to a budget for holiday gift shopping, that facet of the holiday budgeting is actually one of the easiest to estimate and track. While you may ideally want to splurge on a fantastic new bike for your child, there are many other options that will delight your child and help you stick to your overall gift-giving budget. We may not like the other options as well, but we do have choices that are easy to see and consider.

 When it comes to other aspects of this holiday season, there are many expenditures that sneak up on your bank account. The focus of this blog post from the team at FUTURES is to shed some light on seven big holiday budget drainers. From events to logistics, it can all add up to ultimately big subtractions from your already-strained December monthly budget.

Want to boost your own financial literacy this holiday season? Check out the one financial literacy program that is ALWAYS FREE—FUTURES: Financially Literate Kids for a Financially Literate Society.™ This amazing free program covers the key financial literacy topics of Personal Finance, Economics, Entrepreneurship, and of course, Investing, and could be a big help in managing your holiday budget surprises. 

 These invisible demands are easier than ever to miss these days. With the ability to quickly insert a credit card or hold your phone over the checkout kiosk, it’s easy to lose sight of the many out of-pocket expenses that happen over the holidays. The following Seven Surprise Costs can sneak right up on your budget if you aren’t mindful, so let’s explore each one. Check the Try This! alternate ideas for each, too.

1: That FREE Event is Far from Free

• There’s a free concert at the park.

• Ice skating is free on Tuesdays from 4 until 6.

• The mall is offering a free chance for your kids to sit on Santa’s knee.

• The local paper has a map showing six different free tree-lighting events this weekend.

• Your office group isn’t going out for drinks this year; to save money, everyone’s baking cookies and you’ll celebrate in the break room. 

It’s great to take advantage of these festive holiday happenings to get in the spirit of the season. While each of these events is technically FREE, check out these potential hidden expenses.

 Free Concert at the Park: The concert is free, but the hot chocolate for all six of you isn’t. At $3.00 a cup plus a little something to put in the vendor’s tip cup you’re down a $20-bill and the singing hasn’t even begun.

Try This: Plan head and pack a thermos and some paper cups. Host your own little hot chocolate picnic while you wait for the concert to begin.

Free Skate on Tuesdays from 4 until 6: Free Skate is great and you don’t need to pay to be on the ice, but the skate rental fee is still $6.00 per child and how can you not buy your thirsty kids a bottle of water? On the way home, you realize it is far too late to begin to cook dinner, and even with that coupon, the pizza set you back another $10.

Try This: Call ahead to confirm the price of skates. See if you can borrow some. Free Skate Night is a great night to pop some taco fixings in the crock pot to be sure there’s a warm and economical dinner waiting for your hungry little skaters when you get home. 

Santa’s Knee is Free: While Santa’s knee may be free, the photo isn’t. It’s a lot of pressure to choose the smallest photo package or to resist that fancy frame Grandma would love. Even a free visit with Santa and a quick photo on your cell phone can be costly if you yield to the temptation to see your child’s sweet face on a mug. 

Try This: If a visit to Santa is super important, try going early to avoid the lines. This can help you get in and out more quickly, making temptations easier to avoid. Consider that coffee mug; what matters is your child’s sweet face, not Santa’s. Why not wait until after the holidays to order a personalized coffee cup on sale?

 Not-so Free Tree Lighting: Free tree-lighting isn’t free when there’s a fee to get you there. The events are free, but transportation for such adventures can be pricey. Even buses and commuter trains can be expensive. Depending upon where the events are located and how familiar you are with the areas, you might end up making less economical choices than you might in your own more familiar neighborhood.

Try This: Scope out the neighborhood and know the public transportation schedules, keeping in mind that holiday schedules can be different. Also, check out your preferred transportation methods. Some trains offer free transportation at certain hours and on holiday weekends. You might also invite another family, carpool, and share the price of parking. That thermos and those pre-packed snacks from home can do wonders for keeping your holiday budget intact.

 Costly Cookies: Cookies in the break room cost money, too. While you’re not spending on drinks for yourself and/or colleagues, making cookies can still be pricey. The ingredients and the time can add up. If you opt to make a fragile creation, you might further decide that the less-expensive train is out that day and decide instead to drive and instead to protect and transport your culinary creations. When you add in the $25/day for parking near your office to your ingredients list, those are some very expensive cookies.

Try This: Keep in mind that everyone will be bringing treats and even your hungry colleagues can only consume so much. Instead of giving up one night to bake and another to decorate, why not budget your time and finances differently? Research a bakery near the office. Request that they whip up a dozen fun or fancy cupcakes that you can swing by and pick up just as you head into the office on cookie day. These cupcakes are sure to cost less money, they’ll look wonderful, and you can still hop on the train to get to the office. You just might be the hit of the celebration with those sea-salt caramel cupcakes you only had to buy and pay for! Worried about showing up with only a dozen? Think quality, not quantity. Cupcakes are easy to share, too. Why not cut a few in half as you unbox your contributions. Besides, store-bought or home-made, cupcakes are never calorie-free and this approach lets everyone savor a taste!

2: Park the Hurried Angels Pay

Parking at malls may be free, but those dings to your bumper are anything but. In a hurry? Stayed too long at the store and got a ticket? Forget your commuter pass and had to pay extra? Even public transportation costs add up. When you consider the hidden costs of a few phone clicks away from a private car service like Uber or Lyft, the dents in your budget start to grow even bigger.

Try This: Add a “commuting” allowance to your budget to avoid these surprises. Keep an extra few dollars tucked away for quick transportation emergencies. Since it’s often easier to drive to do your shopping, why not plan to shop with a friend, share the cost of gas, and alternate to lighten the transportation burden on each of you. Lastly, try ordering online to save yourself all this extra expense. Just be sure to confirm the shipping terms and return policy to avoid surprises later.

3: Did You Want Fries with That Gift?

Shopper’s Paradise is often an elusive feeling during the holidays. It’s easy to find yourself momentarily delighted with that clearance coat for Uncle Max that is exactly his size. Two minutes later, you’re at the end of a very long line. When it’s finally your turn, they’re out of register tape, they’re out of boxes, and your coupon is expired! As your head starts to swirl, you remember you forgot to eat lunch. While the coat was budgeted on your gift-giving list, the fast-food snack you were too hungry to resist wasn’t.

Try This: Remember to stock your pockets with quick, nourishing snacks. Keep coupons on your phone, and save boxes in the back of the closet so you won’t need to stand in a second line or dash out to buy a box right before you see Uncle Max!

4: It’s a Wrap

While we painstakingly budget for the gifts we need to purchase for others, it’s easy to overlook the trimming for these gifts. The price of wrapping paper, ribbons, bows, tape, and tissue can swiftly swell to a very real number. On top of that, if gifts must be mailed, postage is often a further surprise to your budget.

Try This: At the end of this holiday season, why not stock up and stash away  some much-discounted wrapping paper and other clearance-priced supplies for next season?  As for postage, if you can order and ship directly from an online store, you might come out ahead, especially if stores are offering free shipping at the holidays. Many online stores also permit a free gift message, even if wrapping is extra.

 5: Table for Six

Actual celebration days can be full of both stress and hidden costs. While it is difficult for some to avoid the stresses that can come with extended family visits and celebrations at the holidays, the hidden costs related to hosting major family meals is often a surprise to your budget’s bottom line. Even when everyone brings a covered dish, there are extra hidden costs associated with having the event in your home. From extra household supplies to more food and drinks than usual, entertaining costs add up. If it’s your turn to host this holiday season, be sure to include the foods, supplies, and any clean-up costs on your holiday planning budget. If the celebration is at another family member’s home this season, you still need to budget for gasoline or other travel expenses, the cost of ingredients in your covered dish or dessert, and even the cost of an oversized heavy-duty foil pan.

Try This: Come up with a crafty, inexpensive way to decorate the table. If you’re planning on place cards, opt for something simple and inexpensive like writing names on hand-cut paper snowflakes. If you need to prepare the main course, shop ahead and look for sales. When others ask what they can bring, suggest that in addition to their food contributions, everyone bring some soft drinks, someone else bring a big bag of ice, and another guest brings some disposable paper goods. This approach helps better distribute the hidden costs of hosting an event in your home. And of course, when it’s time to clean up and your guests offer to help, say yes!

6: Many Unhappy Returns

Did you ever forgot you bought a gift only to discover after the holidays, hidden in the back of the closet? What about that extra-small reindeer sweater your great aunt thought would surely fit you? While her sense of your size might be flattering, a store credit or the chance to exchange this for something you’ll truly wear, is likely more appealing. If the gift you wish to return was purchased online, be mindful of their return shipping policies. It could cost you more to return that reindeer sweater than you realize. While stores are often generous with return and exchange windows at the holidays, many policies have hidden costs like shipping fees, restocking fees, and a no refund policy.

Try This: When it comes to making returns, stay organized and be prompt. Keep gift receipts with the items and head off to make your returns as soon as possible. The sooner you return or exchange your purchases and gifts, the more accommodating stores are likely to be. If you can only return for an in-store credit, keep track of this found money, note the credit’s expiration date, and tuck these credits in a safe place. If you find yourself stranded in a long return line, try to be understanding. Kindness goes a long way. Before heading into the return line, check through the store to find another of the item you wish to return or exchange. This makes it easy for the cashier to make your return. Your thoughtfulness might just gain you a full refund.

 7: Getting Carded!

Last but not least, a major holiday expense that it’s easy to overlook is the cost of creating or choosing, printing or buying, and mailing a long list of holiday greeting cards. Custom-designed family photo holiday cards, for example, may be a tradition or seen as expected in your family, but these photo-and-foil style holiday greeting cards can be very expensive. Stop to consider not only the cost of the card itself, but also the price to include extra envelopes, mailing and return labels, and of course, the postage. These cards are often oversized, hiking up the postage costs even more.

Try This: Instead of opting for a fancy photo holiday greeting card this year, why not consider approaching this tradition differently? What if you crafted a lovely email and attached a family photo, taking the time to personally connect individually with recipients, asking how their family is faring this year, and perhaps even begin a true exchange? You might also be on the lookout for seasonal specials on blank cards, stock up on a few different designs, and then tuck in a home-printed photo of the kids. Lastly, consider sending e-cards this year. There are lots of fun and animated greetings that are sure to delight recipients, without straining your wallet.

FUTURES™ is Always FREE!

As you work to tackle your hidden holiday expenses, remember to check out the one financial literacy program that truly is 100% FREE—every day! FUTURES: Financially Literate Kids for a Financially Literate Society™ is the FREE, groundbreaking Financial Literacy Program that has 29 different sections across four instructional strands: Personal Finance, Economics, Entrepreneurship, and of course, Investing. Each section begins with a detailed ready-to-use planning guide and is brimming with handouts and resources—including worksheets, charts, and other handy tools. Who knows? There might be someone on your list who would love to receive this program as a gift!

Early next week, look for Post 4, where we will share with you how to Give a Gift for the Future: Stock up on Learning during this holiday season. Until then, when it comes to hidden costs, keep your eyes open and your wallet closed!

Winning Game Plans Save Money!

This time of year can be full of joy, celebration, and festivities. For many, it can also be a time of worry, anxiety, and overspending—but, it doesn’t have to be! Check out these ten family-focused ideas for ways to start smart and save some money during this holiday season. Even if you can only try one or two of these ideas, you might become inspired to come up with a few more that work for your family!

1: Cash Counts!

Credit cards are often tempting when it’s time to shop during gift-giving season. The convenience of these cards can often backfire when the bills are due. This first strategy can help—a lot. Once you create a budget for your shopping plans, why not consider paying with cash? After all, with this approach, you can only spend what’s actually in your pocket. As with all forms of cash and credit, exercise care when carrying around a lot of cards or cash because safety should always be the first order of business.

2: Hold the Latte

Shopping, holiday errands, and too many events can mean a lot of running; this can lead to a skipped meal or two. It might also make the luxury of indulging in a supersized, foamy peppermint latte and a warm gingerbread cookie seem like necessities for survival. With lines, traffic, and too much to do, this feeling’s no surprise. It’s also no bargain. This tip can help.

By skipping these higher priced and higher calorie snacks on the go, it’s possible to save enough money to buy an extra gift or two! The price of such snacks can tip the scales at $8 to $10 dollars. Switching to a simple drip coffee and a granola bar from your backpack even just twice a week between now and Christmas, could result in an extra $50 to spend on gifts. Now, THAT’s a very sweet treat!

3: Quality, Not Quantity

These days, gift giving might more accurately be described as GIFTS-giving. In today’s high volume-based world, multiple gifts per person can be an expected norm. Instead of buying several smaller gifts per person, reverse it. Truly listening for hints about one special gift that might be at the TOP of your recipients’ wish lists. By thoughtfully considering, researching, and shopping for that nicely made red sweater for your aunt, for example, you can potentially invest the same money and give one longer lasting gift that she will wear and enjoy for years to come. Three smaller gifts at $15 each might not mean nearly so much as one beautiful $45 sweater.

4: Dollar Store Delights

Not all gifts need to be store bought or expensive. What gifts could you and your family create together? Could you bake and decorate cookies and then line a round foil pie pan with a home-made holiday construction paper snowflake? Top this treat with a festive, inexpensive dish towel from the local dollar store, and all that’s left to add is a card. The dollar store is a treasure trove for lots of economical gift-making supplies. Pick up a few plain ceramic coffee cups, write recipients’ name or initials in permanent marker, and tuck in some tea bags or candy. Why not buy plain ornaments at the dollar store and spend some family time decorating them with glue, odd buttons, dots of nail polish, and ribbon or yarn scraps? By making the decoration styles random, even kids will relax and discover there’s no wrong way to decorate a keepsake ornament.

5: The Gift of Time
Remembering that time can be more valuable than money is a great gift-giving strategy to add to your planning. What about creating some simple IOUs for friends and family? Volunteer to babysit, walk a friend’s dog, or bring in the trash cans for a busy neighbor during the winter months. CARPOOL or ERRANDS Certificates with no expiration dates could be a life-saver to a friend. The financial cost of these gifts is low, but the consideration and value to those who receive them can be high, if not priceless.

6: Trade-Ya!
Along the same lines as the IOU and homemade customized gift certificates described in idea 4, suggest to friends and family that you dream up a few TRADE-YA ideas. For example, if you can sew, offer to hem three pairs of pants in exchange for two ready-to-freeze casseroles. By choosing to trade activities that come easily to one of you but are a struggle for the other, everyone wins. This money-saving idea has an added bonus: TRADE-YA gifts set a wonderful example for kids. Beyond modeling that not all gifts are tangible, you can work together as a family to bring these special gestures to life for family and friends. Everyone can contribute. If you take a photo while you’re working together, you can give an inexpensive keepsake, too! Making memories is a great trade.

7: New Traditions
Sometimes, holiday traditions like pricey tickets for a holiday performance or feeling pressured to buy the expensive photo package of your kids on Santa’s lap can feel like mandatory expenditures. Why not choose more carefully this year, perhaps opting for only one tradition that costs money and introducing some new traditions that are low-cost or even free.

Pop over to the library or scope out a free, public-domain version of  holiday story on your phone to create your own home performance by reading or even acting out a new favorite holiday tale. Each child can play a part, too. Don’t forget to take a photo or two! Look for tree-lighting neighborhood events, community center festivities, or invent new family traditions like taking a walk to see the holiday lights or inventing festive names for economical dinner ideas. You and your family will treasure these new activities especially if you come up with them together.

 8: Location, Location, Location
While after the holidays is the perfect time to stock up on clearance decorations for next year, this year’s budget can quickly become strained with last-minute shopping for new decorations. If you pull out the box of old decorations only to discover that it’s less plentiful than you remembered, don’t despair—and don’t go shopping. Try switching up what you have saved from past seasons. Change a ribbon color, put those tattered pinecones in a different basket or flower vase with some crinkled tissue for color. Most of all, swap locations. By placing old decorations in new places, they’ll look new to guests, to your family—and to you!  

9: Keep It Together for Happy Returns
Stay organized this season. Don’t tuck receipts and change in coat pockets or shopping bags. Instead, form the habit of putting every receipt in one central and consistent place in a big envelope labeled November and December Receipts. This way, if you discover you need to return a gift you purchased earlier, you can more easily make time to get your money back. In addition to convenience, keeping all receipts in one place lets you make fast tallies of what you’ve spent to date so you’re ready to pay the bills when they come due. Keep loose change in a bowl or cup nearby, too. You might even discover you’ve saved up enough pocket change to treat yourself to that one last peppermint latte before this seasonal treat disappears from the menu board.

10: Become a Sales Sleuth
At this time of year, it seems like every store and website is promoting a BIG sale, but be careful. Sometimes sale prices are not nearly so reduced as claims promise. Making enough time to research and check for best and lowest prices before you make bigger purchases can result in big savings. By comparing prices ahead of time, you are an informed buyer. Not only will recipients value what you buy, you’ll receive a real value, too. Spending more time ahead of time can save your budget big-time, too.

11: Say NO to SnowBILL Fights
After all the gifts are all opened, it’s quickly back to school at the start of the new year. It’s also the start of payback time as the bills come pouring in. Credit card debt is a serious matter and debt and interest payments can add up quickly. Be prepared.

Make your payback plan NOW. By calculating your budget, sticking to it, and planning out beforehand how long it will take you to pay down what you owe, you’ll feel in control and be better able to contain spending. By giving yourself a HARD Shopping Stop Date, you will limit those SnowBILLs—helping to prevent your interest payments from snowballing. Now that’s a great gift to yourself for the start of 2020!

 Get Smart from the Start with FUTURES!

These ten ideas can help you stay on track during the holidays. If you want some more specific, easy-to-grasp-and-apply information about Personal Finance, check out the Personal Finance Strand of FUTURES: Financially Literate Kids for a Financially Literate Society™. This FREE, groundbreaking Financial Literacy Program has 29 different sections across the four strands. Each section begins with a detailed ready-to-use planning guide and is brimming with handouts and resources—including worksheets, charts, and other handy tools. This school program “travels” smoothly outside of classrooms, making it easy to introduce and weave in financial education topics in after school programs, home-school settings, and even around the family dinner table. In the late-night hours, turn worry time into learning time with FUTURES.

Early next week, look for Post 3, Hidden Holiday Budget Breakers, where we bring into clearer focus all of those fuzzy, forgotten holiday costs that can trip up even the most committed holiday budget planners. 

Holidays Express!

T’is the season to go shopping! Welcome to December. Did you know that during this holiday season we actually have six fewer shopping days between Thanksgiving and Christmas than we did last year? It’s all a function of the calendar, of course, but this express time window plays a key role in holiday spending, too.

Mindful Reminders!

We can’t think of a better time of year to be mindful of financial literacy. That’s why your FUTURES™ team will post 12 Days of Blogging! during this holiday season. Every few days between today and the first week of January, we’ll share seasonal posts filled with ideas, reality checks, strategies, and great ways to connect with your kids about financial literacy on these action-packed spending days—and nights!

 A Financially Literate Holiday Season

The FUTURES team knows all about Financial Literacy and how to integrate this critical skill set into your family and classroom. From Personal Finance and Economics to Entrepreneurship and Investing, FUTURES: Financially Literate Kids for a Financially Literate Society™ is the groundbreaking Financial Literacy Program that empowers students BEFORE High School—to achieve their best success AFTER High School. And, unlike the other items on your shopping list, this program is FREE!

Because this time of is year is so busy, we know you likely won’t have time to dive into the whole FUTURES program even though it IS free; time is at a premium. So, these twelve posts will be rich with relevant, easy-to-apply FUTURES concepts and ideas that you can quickly incorporate into this holiday season both in the classroom and around the kitchen table.

Why We Buy

This tightened Thanksgiving-to-Christmas timeframe doesn’t correlate to consumers doing less shopping. In fact, the reverse is often true. Time compression makes many people feel an urgency that translates into spending even more money in less time! Expedited shipping fees, less time to scope out coupons and discounts, limited inventory choices, short deal windows, and too many confusing sales are symptoms of a compressed shopping season and often increase the amount of money that buyers spend because temptations abound!

 People tend to fall into several different categories when it comes to the reasons that they justify spending more—

• What other choice do I have? I need to buy gifts.

• I’ll forget about my debt until the bills come.

• I’m luckier than most; after all, my only worry is money.

• I don’t want my kids to feel the disappointment I felt as a child.

• It makes me so happy to buy for others and give great gifts!

 Worry All The Way

Whatever reasons might ring most true for you, this time of year is often about spending—and over-spending. Credit cards make it even easier to spend now without considering the interest, debt, and overdrawn anxiety that is soon to follow. Phone ads, commercials, banner ads, and videos tend to focus on shopping, deals, the need to BUY IT NOW! But BUY NOW all too quickly morphs into PAY LATER–and later is not far away. It’s easy to get caught up in and distracted by events, excitement, and traditions. While it’s easy to push away those nagging worries, in truth, most of us worry all the way, anyway. If this scenario feels familiar, check out the Loans and Credit section in the Personal Finance Strand of FUTURES for a quick refresher. You might even want to do a few of the activities with your kids. It’s never too early to foster financial literacy.

Because gifts are often stashed in hiding spots, it’s easy to forget all that’s been purchased until it’s time to get wrapping. It’s only when it’s time to step back and wrap that many of us actually see all of our purchases in one place. This is when the reality of what’s been spent sinks in. By this point, however it’s too late to undo much of the damage.

Start Smart

Do you often hear the words, “But, I need it!” or “Here’s my HAVE-TO-HAVE list for this year!” from your children, students, or even your partner? This season is an ideal time to help those you love, including the young people in your life, to become more aware of their own financial responsibility, too. Try these two quick strategies to get your small group focused on what really matters—starting with you.

Checking Your Lists

A great way to control what you spend at this time of year is to have a plan. Before you ask for anyone else’s lists, be sure to make one of your own. It’s the most important list you’ll make.

To stay on budget, one must have a budget, so before you begin to spend in earnest this season, stop and assess exactly how much money you can afford to spend. Use a budgeting form like the one below to help you consider both obvious and hidden expenses.

Do the Math

Before you ask for gift lists, do the math. Calculate how many people you’re buying for. If you have three kids, a parent, two siblings, and four dear friends who always buy for you, consider assigning categories to each group. Can you afford to spend $15 on each friend? Are you the only person buying for your kids? What percentage of your budget should be dedicated to them? Can you suggest that your family draw names from a hat and each person chooses one extended family member to buy for in order to give one more significant gift? Why not propose a limit so everyone spends the same amount?

When you begin with your budget, and look at the list of gift recipients on your list, you may discover you need to pare down your list or get more creative in your gifting approaches. (More on this topic in this weekend’s post.) 

Set Expectations, Get Options

Now that you know what your resources look like, you’ve begun to shape your own expectations. Next, it’s time to set the expectations of those for whom you’re shopping. One way of setting the stage is to share the scope of what you can do. Perhaps you begin by explaining that this year you hope to be able to buy each person one nicer gift like a coat or one new game. By giving examples, you are clarifying what you mean by nicer so no one is disappointed when gifts are opened. Even the nicest coat pales in comparison to a hoped-for new cell phone or the hottest new tennis shoes.

When you ask others for ideas, be clear about what you want to know. Ask for three different ideas for a bigger gift in the range of X dollars and ask for five ideas for three smaller gifts in the range of Y dollars. While these discussions might reduce the level of surprise by your recipients, it equally reduces your own surprise when the billing cycles roll around. Asking for options helps everyone know what to expect. You’ll know you’re spending your hard-earned money on something that recipients want, you’re not boxed into overpaying for just one item, and there’s still an element of surprise when gifts are opened. Your recipients will also be prepared for fewer, more meaningful gifts.

Underneath It All

Under the colorful, active trimmings of the holiday season, at the heart of all your planning, purchasing, and paying actions, you’ll discover financial literacy.

The four strands of the FUTURES program are hard at work all through this season. Economics and Personal Finance lead to Investing in gifts that matter to others and that you can afford to give while tapping into your Entrepreneurial talents for those more creative gift-giving ideas that work for recipients—and your budget.

Jumpstart your own financial planning this holiday season by checking out the Personal Finance strand of FUTURES. It’s full of worksheets and ideas you can apply all month long. In fact, click here to download the entire program. We’ll be back in a few days with our next post, Winning Game Plans Save Money!

When All Cs are Terrific!—The 5 Cs of Credit

“Hey—can I borrow $30?”

How many times do families hear that kind of “Can I borrow. . .” question? Many of us feel it is too often. It’s easy to “tend to lend” even when we know our kids are less than dependable credit risks. In the real world, however, getting credit isn’t easy or casual; it’s an important financial literacy lesson and reminder for all of us.  

In today’s hectic world, it’s common to foster these “informal no-pay-back loans” for lots of reasons. As those in charge of classrooms and families, however, we need to help prepare our kids to be able to secure credit in the real world—by helping them to understand and form better borrowing habits today. Certain characteristics make you a desirable candidate for a loan and even then, there are many hurdles. 

On Day 16 of Financial Literacy Month with FUTURES: Financially Literate Kids for a Financially Literate Society™, we’re talking credit—apart to explain it to kids in easy-to-grasp ways. By explaining to kids that credit is money you borrow from a bank or another similar institution, with a promise to pay it back later, we are beginning to distinguish between the formal criteria for borrowing from an institution and casual family-based loans. With the former, repayment includes interest, or fees on top of the original amount borrowed.

Most people with a mortgage on a home—which is a kind of credit—pay interest on top of the regular loan for a period of 30 or 15 years, or however long they decided when they signed the papers. Credit cards also charge fees when you have a balance, or don’t pay the full amount you charged each month. Sometimes people put too much money on credit cards—or get into debt in other ways—and have trouble paying them back. Understanding how credit works can help you avoid getting into difficult situations.

There’s also something called a credit score that determines how attractive a person comes across as a potential borrower. You don’t have to have the best possible score to get a loan, but it helps to have good credit.

The 5 Cs of Credit

Entrepreneurs often need credit to start their businesses. A bank weighs each factor to determine if it will give a loan to a potential business owner. Here are the 5Cs a loaning institution considers before agreeing to give a person or new business credit:

• Capacity: Measures a borrower’s ability to repay a loan by comparing income to recurring debts.

• Capital: Refers to a borrower’s reputation or track record for repaying debts. This is sometimes referred to as credit history.

• Character: Any funds the borrower puts toward the potential investment.

• Collateral: Any property or other asset that a borrow offers as a way to secure a loan. If the borrower shops the promised loan payments, the lender can seize the collateral as payment.

• Conditions: The conditions of a loan, such as its interest rate and amount of principal, influence a lender’s decision to make a loan to the borrower.

 Play the Credit Qualifying Game!

This entrepreneurial activity might completely overhaul the next “Can I borrow $30?” discussion in your home or serve as a strong role-play activity in school. Kids of all ages can play this game—pair the youngest kids with the oldest if they need help participating.

Consider the following 15 scenarios in terms of the 5Cs of Credit: Capacity, Capital, Character, Collateral, and Conditions. Think of it like a matching or memory game.

For a bonus, choose any three or four scenarios randomly, and then have kids decide whether they would give a candidate with those characteristics a loan if they were a bank or lending institution. Kids can even role play, applicant, lender, and entrepreneur to underscore the scenarios.

Visit Us Every Day in April

Check back tomorrow as we continue Financial Literacy Month with a post on revenue and cash flow that uses some mouth-watering examples.

For more information about FUTURES: Financially Literate Kids for a Financially Literate Society™ for students in kindergarten through eighth grade or to download any of the 29 sections of the program, please click below.