Be Moneysmart Module 4: Debt Management Student Workbook
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Be Moneysmart
Module 4: Debt Management
Student Workbook
Important information
Resource updates (as at August 2021)
• The Be Moneysmart video resource was filmed and published in 2015. There are no plans for the videos to
be updated in future.
• Student Workbooks were last updated in August 2021. There are no plans for the print resources to be
updated in future.
• This resource no longer supports the FNSFLT301A ‘Be Moneysmart’ unit of competency within the Certificate
III in Financial Services Training Package even though the digital resource still states it does.
Disclaimer
Not legal or financial advice
The information and materials in this resource have been provided by ASIC to assist your financial literacy education.
It is not and should not be regarded as legal or financial advice. You should seek your own professional advice where
appropriate. Whilst every effort is made to ensure the accuracy of the information and materials in this resource,
ASIC does not warrant the accuracy, completeness and currency of all the information provided.
Some material may include or summarise views, standards or recommendations of third parties. ASIC does not
endorse such material and its inclusion does not indicate that ASIC recommends any course of action.
Third parties
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Some material may include or summarise views, standards or recommendations of third parties. ASIC does not
endorse such material and its inclusion does not indicate that ASIC recommends any course of action.
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Be Moneysmart Student Workbook Page 2 of 11Table of contents
Important information ........................................................................................................................................ 2
Disclaimer ............................................................................................................................................................... 2
Copyright ................................................................................................................................................................ 2
MODULE 4: Debt management ............................................................................................................................ 4
Activity 1: Using Moneysmart calculators............................................................................................................... 4
Activity 2a: Comparing debt products .................................................................................................................... 5
Activity 2b: The impact of saving ............................................................................................................................ 6
Activity 3a: Paying off credit cards.......................................................................................................................... 8
Activity 3b: Comparing credit cards ........................................................................................................................ 9
Activity 4: Making the right choice ....................................................................................................................... 10
Activity 5: Staying out of debt............................................................................................................................... 11
Optional activity: Check your credit report........................................................................................................... 11
Be Moneysmart Student Workbook Page 3 of 11MODULE 4: Debt management
1 hour online + 2 hours Student Workbook
Activity 1: Using Moneysmart calculators
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
o Watch videos at screens 2-3.
• Moneysmart calculators:
o Interest-free deal calculator
o Personal loan calculator
o Mortgage calculator
Select a character scenario to follow or write one yourself. Use the table on the next page to work through some key
considerations when deciding to make a purchase by accessing credit.
Scenarios Your task
Bec’s television has broken down and she has decided to Go to Moneysmart’s Interest-free deal calculator and
buy a new one to replace it. She went into a shop to work out how much Bec will really be paying for her
check out the televisions and decided on the spot to buy television.
a huge ‘smart’ television, using a 12-month interest-free
Per month:
deal, after talking to the salesperson. Bec was so excited
that she didn’t wait to shop around and thought that the Total cost:
interest-free deal sounded good. The television costs
What would happen if Bec couldn’t pay her full
$1598.
instalment or if she missed a payment? Check the advice
‘Want’ or ‘Need’? provided on the Interest-free deal calculator.
Does Bec ‘want’ or ‘need’ this television? Explain your
answer.
Will bought his dream car for his work at a cost of Go to Moneysmart’s Personal loan calculator and work
$25 000 using a secured personal loan over five years out how much Will’s loan was costing him.
charging 9.5% interest with a $10 per month account
Per month:
fee. Will found that he couldn’t keep up the car loan
repayments. Total cost:
‘Want’ or ‘Need’?
Did Will ‘want’ or ‘need’ this car? Explain your answer.
Sally is a ‘snow bunny’ and loves to ski. The trouble is Go to Moneysmart’s Personal loan calculator and work
skiing is an expensive hobby. Sally’s friends have asked out how much Sally’s loan will cost her.
her to go on a ski holiday to New Zealand in three
Per month:
months and she hasn’t had time to save any money. Sally
is thinking about taking out an unsecured personal loan Total cost:
of $3000 over 2 years at 13.9% interest with a $10 per
month account fee. Sally needs to cover the cost of a ski
package, flights and spending money.
‘Want’ or ‘Need’?
Does Sally ‘need’ or ‘want’ this holiday? Explain your
answer.
Be Moneysmart Student Workbook Page 4 of 11Develop your own scenario to work on. Select a ‘large Go to Moneysmart’s Personal loan calculator OR if you
ticket’ item that you might plan to purchase (e.g. house, are planning a house purchase the Mortgage calculator.
white goods, car etc.).
How much will your loan cost you?
List a realistic price for the item. Assume that you will
Per month:
require either a personal loan or a home loan (if you are
planning a house purchase). Check the market rate for Total cost:
the type of loan you will need by visiting at least two
different providers, including one bank and one credit
union or building society.
How much do you plan to borrow?
Over what period of time will you repay the loan?
What will the interest rate be?
‘Want’ or ‘Need’?
Do you ‘need’ or ‘want’ this item? Explain your answer.
Activity 2a: Comparing debt products
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
o Watch videos at screens 4-5.
• Moneysmart calculators:
o Personal loan calculator
o Credit card calculator
• Moneysmart webpage: Home loans
If you were looking for a car, you wouldn’t buy the first one you saw. It’s the same when you borrow. Look at lots of
different products and compare interest rates, features, fees and charges. A small difference in the interest rate can
make a big difference to your repayments over time.
Using the internet to assist you in your research, select two different debt products and apply these to each of the
scenarios outlined in Activity 1 above.
Explore the range of debt products available and how they might impact on how much Bec, Will, Sally or you would
have to pay for credit.
Make sure you check current interest rates and use either Moneysmart’s Personal loan calculator or Credit card
calculator.
If you are investigating home loan products, go to Moneysmart’s Home loans webpage for a list of products.
TIP: Use a debit card not a credit card
Obtain a debit card to avoid the high interest charged on credit cards and to make purchases using your
own money to help avoid running into debt.
Study assist
Some people are eligible to borrow money from the government to pay for course tuition fees. For further
information regarding eligibility requirements visit studyassist.gov.au. There are loan fees associated with
this type of debt.
Be Moneysmart Student Workbook Page 5 of 11Scenario Debt product 1 Debt product 2
Bec Product type: Product type:
Wants to borrow $1598 and wants Interest rate: Interest rate:
to pay this back over 12 months.
Monthly payment: Monthly payment:
Total payment: Total payment:
Will Product type: Product type:
Wants to borrow $25 000 and Interest rate: Interest rate:
wants to pay this back over
Monthly payment: Monthly payment:
5 years.
Total payment: Total payment:
Sally Product type: Product type:
Wants to borrow $3000 and wants Interest rate: Interest rate:
to pay this back over 2 years.
Monthly payment: Monthly payment:
Total payment: Total payment:
Your own scenario Product type: Product type:
Interest rate: Interest rate:
Monthly payment: Monthly payment:
Total payment: Total payment:
Activity 2b: The impact of saving
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
o Watch videos at screens 4-5 again.
• Moneysmart calculators
Savings goal calculator
Compound interest calculator
Help Bec, Will and Sally to make their savings work for them by putting their money into an account where it will
grow. Savings accounts are great because you can earn compound interest on your savings.
Work through the scenarios in the table below to find out how Bec, Will and Sally might save for their goals.
Scenario Question Answer
Bec How much money Go to Moneysmart’s
will Bec need to Savings goals calculator
Bec decides she wants to save up to purchase a ‘smart’
save each month?
television that costs $1598. She has an initial deposit of $300 Savings per month:
and she wants to purchase the new television in 12 months. She
decides to put money into an interest-earning savings account
with a fixed interest rate of 4.5%.
Will What will the Go to Moneysmart’s
balance of Will’s Compound interest
Will is 21 years old and has decided he would like to purchase his
account be after calculator
first home in seven years’ time. Will is committed to saving $500
seven years?
per month and already has an initial deposit of $3000. He has Balance:
selected a savings account that has an interest rate of 5.00% per
annum (before fees and tax).
Compound frequency is monthly.
Be Moneysmart Student Workbook Page 6 of 11Scenario Question Answer
Sally What will the Go to Moneysmart’s
balance of Sally’s Compound interest
Sally is 23 and she wants to purchase her first home in seven
account be after calculator
years’ time. Sally decides to open a bank account to save a
seven years?
deposit. She is committed to saving $300 per fortnight and Balance:
already has an initial deposit of $1200. Sally selects an account
with an interest rate of 5.00% per annum (before fees and tax).
Compound frequency is monthly.
TIP: Saving for goals
The best way to save for short-term or long-term goals is to reduce your spending on non-essential items, like
entertainment, dining out, memberships or subscriptions. It is often easier to stay on top of your spending if
you use cash, EFTPOS or a debit card when shopping instead of using a credit card or signing up to interest-
free deals.
Lenders’ mortgage insurance (LMI)
Lenders’ mortgage insurance (LMI) is a type of insurance that credit providers take out to protect themselves
from borrowers not being able to repay the loan. The fee the lender charges you for LMI can be many
thousands of dollars and is usually added to your home loan amount.
Be Moneysmart Student Workbook Page 7 of 11Activity 3a: Paying off credit cards
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
o Watch videos at screens 6.
• Moneysmart’s Credit card calculator
• Moneysmart website: Credit cards
• Copies of a credit card statement
Find a credit card statement to use for this activity. Use one of your own or ask the permission of a family member
to use theirs. The statement tells you how long it will take to pay off the credit card balance using the minimum
monthly amount. It will also identify how much you will need to pay per month to pay off the balance in a couple of
years. If you are not comfortable finding a statement, assume a balance of $5000 and a minimum monthly payment
of 2%.
Use Moneysmart’s Credit card calculator and see what happens if you increase the monthly payment. Write your
answers below.
• What is the original balance and minimum monthly payment?
• What happens if you increase the minimum payment by $40?
• What happens if you increase the minimum payment by $80?
Notes
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Be Moneysmart Student Workbook Page 8 of 11Activity 3b: Comparing credit cards
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
o Watch videos at screens 6 again.
• Moneysmart website: Using comparison websites
• Moneysmart website: Choosing a credit card
The type of credit card you choose depends on how you want to pay off your debt. When comparing credit cards,
you should consider interest rates, features, fees and charges, and interest-free periods. You can access credit card
comparison websites on the internet to help you choose which credit card might be the right one for you.
Comparison websites can be helpful when you’re shopping around for insurance, credit cards, home loans,
investments or bank accounts. When using comparison websites, you should:
• identify key features to compare
• shop around
• make a short list of potential products
• get more details
• make an informed decision.
Go to Moneysmart’s Using comparison websites webpage to find out more about using comparison websites.
Credit card features Card A Card B
Account interest-free period
Interest rates
Annual fee
Other features
Credit card limit
TIP: Credit card: whose money?
To see some smart ways to use your credit card – visit Moneysmart’s Credit cards page
Be Moneysmart Student Workbook Page 9 of 11Activity 4: Making the right choice
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
o Watch videos at screens 7-9.
Consider again the scenarios in Activity 1. Using the information, you have learnt throughout this module, review the
original decisions made by Bec, Will, Sally or the decision you made for yourself in your own scenario.
What advice would you provide to each character? Should they use a particular debt product? If so, which one suits
them best? Or, rather than using a debt product, should each character:
• buy something cheaper
• save some money first
• change their plan?
Write your advice in the table below. Add the information and advice for your own scenario.
Character Original choice Your advice
Bec Debt product: interest-free deal
Will Debt product: secured personal loan
Sally Debt product: unsecured personal loan
You
Be Moneysmart Student Workbook Page 10 of 11Activity 5: Staying out of debt
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
o Watch videos at screens 7-9 again.
• Moneysmart website: Managing debt
It is easy to borrow money these days – and even easier to get into debt. Don’t give up if you are having trouble
managing your debts. There are always options available to you and people who can help you. Visit Moneysmart’s
managing debts webpage and select one category to explore. Create and list three tips that you could share with
others who are struggling to manage their debts.
Topics may include:
• making repayments
• trouble with debt
• problems paying your mortgage or rent
• dealing with debt collectors, including phone and internet providers
• consolidating and refinancing debts
• financial counselling
• free legal advice
• how to get out of travel debt.
Tip 1
Tip 2
Tip 3
Optional activity: Check your credit report
Student resource(s) required for this activity:
• Be Moneysmart Student Workbook - Module 4
• Moneysmart website: Credit scores and credit reports
If you have a credit card, a personal loan or a home loan, consider getting a free credit report from a credit-reporting
agency. Use the list of credit-reporting agencies on the Moneysmart’s credit scores and credit report webpage.
TIP: Credit-reporting agencies
Don’t search for credit-reporting agencies over the internet, as you may find fake sites offering ‘free
credit reports’ that are really out to scam you. If you want to contact a credit-reporting agency online,
type its URL into the address bar of your web browser.
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