Things You'll Need:
- Checkbook with a ledger
- Calculator
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Step 1
A debit is the reduction of money in an account. If you have the child think of a debit card, he can remember what debit means. When he uses his debit or ATM card, he is withdrawing money from his account. His account balance or total then decreases. A helpful hint to remembering debits is to have the child think of the saying "Debit equals down." They both start with "d."
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Step 2
A credit is the addition of money in an account. This causes the account balance or total to increase. The child should understand that, every time she makes a deposit, she is adding a credit to her account. An example is when someone goes to the bank and deposits his paycheck for the week. If the paycheck was $500, his account balance at the bank would go up $500. If he had $212 in the bank, his new total would be $712. To ensure that the child remembers the function of a credit, have her think of the phrase "Credit equals climb." We all associate climbing with going up.
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Step 3
Show the students a checkbook ledger. Explain the function of each line. The first line is for the check number (if the transaction entailed writing a check). The second line is for the date of the transaction. The third line is for a description of the transaction (what is happening to the account). The fourth line is for debits and the fifth for credits. The final line is a tally of the total account balance.
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Step 4
Use a calculator to show some examples. Start off with an account balance at the top. For this example, we will use $400. Tell your students that is the amount already in the bank. Now have them write a check for their car insurance. Make sure they put the insurance total (we'll say it's $120 for the month) in the debit column (line number 4). Now have them rewrite the total on the top line of the last column. Show them they now need to subtract the $120 from the $400. The total, $280, is then written under the $120.
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Step 5
Now give the students an example of a credit. Tell them they worked a part-time job at Burger Shack and just got paid $295, which they need to deposit in the bank. They must write the total of $295 in the credit column, because they are increasing their account total. The credit column is line number 5. Then the students must write the total again underneath the previous entry's total balance. That means the $295 goes under the $280. Now the students are to add up the two totals to be written under the $295. The new account total should be $575.
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Step 6
Give the kids a few more realistic examples and have them practice. Check their work to make sure they have a full grasp of the concept. Once they do, they should have no problem getting their own accounts and keeping them current. This is a concept that can be taught in one day.
