Financial literacy activity
Debt Simulator
Borrow 5 pennies for a treat — and pay back 6. Notice that borrowing costs more than just borrowing.
Materials and setup
- paper
- calculator
- optional: a $100 toy you wish you had
How this changes by age
Pre-K (ages 3–4)
Borrow 5 pennies for a treat — and pay back 6. Notice that borrowing costs more than just borrowing.
Steps
- Parent 'lends' you 5 pennies for a treat.
- After 1 day, you have to give back 6 pennies.
- Notice: borrowing costs more than borrowing!
- Talk about how it felt to owe an extra penny.
Learning objectives
- Experience borrowing and paying back
- Notice that paying back costs more than was borrowed
- Begin to feel the cost of debt
Kindergarten (ages 5–6)
Pretend-borrow $5 from a parent for a toy. Each week you don't pay it back, you owe $1 more. After 4 weeks, count up what you owe and talk about why borrowing is expensive.
Steps
- Pretend-borrow $5 from parent for a toy.
- Each week you don't pay it back, you owe 1 more dollar.
- After 4 weeks, how much do you owe?
- Why is borrowing expensive?
Learning objectives
- Track a growing debt over multiple weeks
- Add interest charges over time
- Explain in simple words why borrowing costs money
Early elementary (ages 6–8)
You want a $50 toy. You have $20. Borrow the rest from a parent at $5/month interest. Compare the cost of borrowing vs. just saving up.
Steps
- You want a $50 toy. You have $20.
- Pretend-borrow $30 from parent at $5 per month 'interest.'
- How long until you've paid it off if you pay $10 per month?
- How much extra did borrowing cost you?
- Could you have just saved instead? Compare.
Learning objectives
- Calculate a payoff timeline with monthly interest
- Compute total extra cost from borrowing
- Compare borrowing to saving as two paths to the same purchase
Upper elementary (ages 8–10)
Full credit-card-style simulation. $100 toy, $40 saved, borrow $60 at 10% MONTHLY interest, only pay $10/month. Track 6 months and feel why credit-card debt is dangerous.
Steps
- Full simulation. You want a $100 toy. You have $40. Borrow $60 from a parent at 10% MONTHLY interest. IMPORTANT: real credit cards charge around 20-30% APR ANNUALLY — still very high, but annual, not monthly. Over a year, a 10% MONTHLY rate would compound to over 200% — much worse than real cards. We are using this exaggerated rate so you can feel the pain in just 6 months.
- Track your balance over 6 months if you pay only $10/month.
- After 6 months, how much do you still owe? How much did the toy actually cost you in total?
- Compare to: what if you'd saved $10/month for 6 months instead — would you have $100? This is why credit-card debt is dangerous.
- Write 3 sentences about when debt is okay (mortgage, surgery) and when it's a trap (impulse purchase).
Learning objectives
- Track a debt balance with compounding monthly interest
- Compare total cost of borrowing to a savings alternative
- Distinguish between productive debt and trap debt
Safety and evidence note
Read the full activity before beginning. An adult should supervise tools, heat, food, outdoor work, movement, and experiments as appropriate. Completion records that the activity was done; the child’s explanation, work sample, photo, or demonstration is stronger evidence of learning than a completion check alone.
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