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Ages 7+ · Money · Credit and loans
What is a loan?
Ask for a loanAgree the planon paperGet the coinsPay back alittle eachweek
How Nico's loan went.
The big ideaA loan is borrowed coins with a plan to pay back, plus a little extra.

How it works

A loan is coins we borrow and agree to pay back. It is bigger than a borrowed pencil, so it has an agreement: a plan that both people say yes to.

Bea wrote it on paper: how many coins, how long and how often. Nico borrowed ten coins, to pay back over three weeks.

Bea added one extra coin in all for waiting. That extra coin is called interest.

If a plan gets hard to keep, talk to the lender early. It is better than going quiet.

Coins paid back012344Week one4Week two3Week threecoins
What Nico paid Bea each week.
Borrowed• 10 coins into Nico's hands• Bea writes the plan downPaid back• 4 + 4 + 3 = 11 coins• The extra coin is interest
Borrowed, and paid back.

Example 1: The parts of Nico's loan

  1. How many: ten coins.
  2. How long: three weeks, a little each week.
  3. The price: one extra coin, called interest.
  4. The plan: written on paper, and each of them keeps a copy.

Example 2: Adding up what Nico paid

  1. Week one: 4 coins. Week two: 4 coins. Week three: 3 coins.
  2. 4 + 4 = 8, and 8 + 3 = 11.
  3. Nico paid back 11 coins in all.

Example 3: Finding the interest

  1. Nico borrowed 10 coins and paid back 11 coins.
  2. 11 − 10 = 1.
  3. The interest is 1 coin, the extra coin for waiting.

Example 4: A loan or a gift?

  1. A gift has nothing to pay back, so it is not a loan.
  2. A loan is coins borrowed with a plan to pay them back.
  3. If the plan gets hard, tell the lender early.

Words to know

loan
Coins we borrow and agree to pay back.
lender
The one who lets others borrow coins.
borrower
The one who takes the coins and pays them back.
interest
The extra coin paid for waiting.
agreement
A plan both people say yes to.

Watch out

Try it

  1. Nico borrowed 10 coins and paid back 11. What is the interest?
  2. Who is the lender, and who is the borrower?
  3. Name two parts of a loan.
  4. Nico's plan gets hard to keep. What is better to do?
Answers: 1. 1 coin · 2. Bea lends and Nico borrows · 3. For example how many coins and how long to pay back · 4. Talk to the lender early
Try at homeWith a grown-up, say what a loan is in your own words, and make a list of questions to ask before agreeing to one.
For grown-upsThe coins here are pretend. Ask your child what they would want to know before agreeing to a loan: how much, how long, and what extra? Real loans are a grown-up matter.
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