A loan spends coins from months that have not happened yet.
The big ideaA loan is paid from pay not yet earned, so less is left to spend.
How it works
In the made-up town of Lantern Bay, Kai earned ten pretend coins a month. A bicycle cost twelve, so Kai was two short, and Bea lent the twelve.
The plan was three coins a month for four months, and Bea asked one extra coin each month, so Kai paid four coins a month.
On payday four of the ten went to Bea and six stayed with Kai. A loan spends coins from months that have not happened yet, which is how it shrinks your future.
Kai paid sixteen coins for a bicycle that cost twelve. The extra four were the price of riding today. Odo saved instead and paid twelve, three months later.
What Kai pays each month, by plan.What each plan costs in all.Kai borrowed. Odo saved.
Example 1: What Kai pays each month
The bicycle costs 12 and the plan is 4 months.
12 ÷ 4 = 3 coins a month for the bicycle.
Bea asks 1 extra coin each month.
3 + 1 = 4 coins a month.
Example 2: What is left on payday
Kai's pay is 10 coins a month, and 4 go to Bea.
10 − 4 = 6 coins stay with Kai.
A honey bun costs 2 coins, so before the loan 10 ÷ 2 = 5 buns.
Now 6 ÷ 2 = 3 buns. Same payday, less to spend.
Example 3: The price of riding today
Four months of 4 coins is 4 + 4 + 4 + 4 = 16.
The bicycle costs 12.
16 − 12 = 4 extra coins.
That is the price of riding today.
Example 4: Odo saves instead
Odo saves 4 coins a month.
After three months the jar holds 4 + 4 + 4 = 12.
Odo buys the bicycle with no extra.
Kai rode from week one and paid 16. Odo waited three months and paid 12.
Example 5: Other plans for 12 coins
Three months: 12 ÷ 3 = 4, plus the extra 1, is 5 a month, so 15 in all.
Six months: 12 ÷ 6 = 2, plus the extra 1, is 3 a month, so 18 in all.
Short plans take more each month, but long plans cost more in all.
Words to know
loan
Coins lent to you, paid back a little at a time.
extra
The small coin Bea asks each month for the lending.
plan
How many coins, each month, for how many months.
payday
The day the pay arrives.
future pay
Coins from months that have not happened yet.
Watch out
A loan is paid from pay that has not arrived yet, so less is left to spend.
A plan with a lower payment each month can cost more in all.
Borrowing is okay. It just has a cost.
Both plans are fine: one traded time for coins and the other traded coins for time.
Try it
Kai's pay is 10 and 4 goes to Bea. How much stays with Kai?
Four coins a month for four months is how many coins?
The bicycle costs 12 and Kai paid 16. What were the extra coins the price of?
Which plan takes the fewest coins each month: three, four or six months?
Answers: 1. 6 · 2. 16 · 3. Riding it today · 4. Six months
Try at homeWith a grown-up, talk about something your family saved up for instead of getting it right away. What was good about waiting, and what was hard?
For grown-upsAsk your child to talk about something they waited and saved for, and how waiting felt, the good part and the hard part. This is a pretend loan in a made-up town, not advice about any real loan.
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