Lesson 2

Respecting Money: Being A Wise Consumer


Lesson Goal:

Lesson 2 covers: 1) credit; 2) debt; 3) identify theft; 4) resolving store complaints; and 5) organizing finances.


Learning Objectives:

The students will:

  • Compare and contrast forms of credit.
  • Recall the benefits of establishing credit.
  • Define interest as it relates to loans and credit cards.
  • Summarize the disadvantages of debt.
  • Recognize signs of too much debt.
  • Explain what bankruptcy is and how it affects a person's future.
  • Know what identify theft is, how it affects individuals and how to prevent it.
  • Recall steps in resolving a store complaint and name a law protecting consumers.
  • Tell the advantages of and steps to becoming financially organized.


Content Standards Addressed:

Common Core State Standards

National Standards 



  • Bankruptcy - the financial state of being unable to pay any debts owed.
  • Credit - a financial arrangement that postpones payment for a purchase or loan.
  • Debit card - a card that deducts money directly from a financial account to pay for a purchase or obtain a sum of money.
  • Debt - money owed.
  • Default - failure to pay a debt owed.
  • Finance charges - expenses associated with the use of credit.
  • Grace period - interval of time granted a borrower before debt is considered outstanding.
  • Identity theft - taking an individual's personal information with criminal intent.
  • PIN - personal identification number.
  • Secured loan - a loan backed by a pledge of property.
  • Unsecured loan - a loan backed only by the borrower's promise to repay.



To reinforce Lesson 1, review these points:

  • Setting goals - financial and otherwise - provides direction and focus.
  • An individual's net worth is an indication of his or her financial health, and is calculated by totaling assets and subtracting total liabilities.
  • Creating and following a budget helps an individual stay on track financially so he or she can achieve financial goals and related life goals.


Part 1: The Advantages Of Credit

Materials needed:

Introductory Discussion:

  • Lesson 1 discussed setting financial goals. Do any of your future financial goals involve the purchase of an expensive item like a house or car?
  • If so, how do you plan to pay for this item?

Nearly everyone at some point in their lives needs to borrow money. Paying medical bills, attending college, and buying cars and houses may require more money than most individuals have saved. Credit is a financial arrangement between a borrower (an individual, company, etc.) and a lender (a bank or other lending organization). Money (or a good or service) is provided to the borrower and, in exchange, the borrower makes a binding promise to repay the money (or pay for the good or service) later. Each month, the borrower makes regular payments according to a payment schedule or pays at least a minimum amount, with the understanding that the full amount must eventually be paid off.

For the privilege of borrowing, individuals also agree to pay an extra charge, interest. This amount is a percentage of the loan that is added to the balance owed. The lending institution or credit card company continues to charge interest until the entire loan or card balance - the original amount and all the accumulated interest - is paid off.

Buying on credit is not a recent development. Laws made by King Hammurabi of Babylon (who reigned 1792-1750 B.C.) make reference to loans secured with promises to repay with silver or grain. Here in the United States, Pilgrim grocers and other merchants extended credit; during Revolutionary War times most business was done on a credit basis.

Customers in the 19th and 20th century were unwilling to buy only what they could afford and would go elsewhere if they couldn't buy on credit. Cars, furniture, household appliances, clothing and many other goods were often bought on an installment plan (also called a payment plan): a customer paid money "down" as possession was taken and agreed to pay a certain amount every week or month until the item was paid for.

Many kinds of loans are available today and are of two types: secured and unsecured.

Secured Loans

Secured loans are backed by the purchased item itself or other personal property, called collateral, and include car loans and home mortgages.

Secured loans for cars, boats, furniture, etc., can be obtained through the seller (usually at a higher rate of interest), or through a financial institution like a bank or credit union. If the borrower fails to repay (defaults on) the loan, the property can be repossessed and sold to cover the remaining debt owed.

A house will likely be an individual's most expensive purchase. A home mortgage loan can have a term (length) of 15 or 30 years, and the interest rate can be fixed (the same) or adjustable (changing) through the term. A homeowner who defaults on mortgage payments faces the repossession and sale of the home, an action called foreclosure.

Unsecured Loans

Unsecured loans usually have a higher rate of interest because they are backed only by a borrower's promise to repay. Credit card charges and student loans are examples of unsecured loans.

Credit cards of some sort have been in existence for more than 150 years. Around the time of the Civil War, department stores made available "charge coins," which were originally made of celluloid (a sort of early plastic), but later were formed from metal. Like the "charge plates" that followed, the coins were good only at the businesses that distributed them, and the charges were to be paid in full every month.

The ancestors of today's credit cards arrived on the scene more than 50 years ago and introduced consumers to revolving credit: balances could now be carried over from month to month (while interest accumulated).

Credit cards are very convenient, can be used nearly everywhere, day or night, are widely accepted in foreign countries, and make carrying large amounts of cash completely unnecessary. Some credit cards offer benefits like rebates to cardholders, returning very small percentages - usually one percent or less - of the total charged purchases. Some offer air travel miles, free hotel stays and other travel perks for dollars spent.

About two-thirds of college students require financial assistance in the form of loans; at graduation, the average debt owed is about $20,000. The interest and/or payments on student loans can be deferred (delayed) until after graduation, and the loan may be partially forgiven if the student enters the military, does community service, or works as a teacher or doctor in certain geographical areas of the country.

Buying on credit is convenient and actually makes better sense in certain situations, as when traveling. It's safer not to travel with a lot of cash, and travelers without credit cards could find it difficult to rent a car or reserve a hotel room.

Using credit wisely actually builds a person's credit score. A credit score number indicates financial trustworthiness. The score tells lenders, like banks and credit card companies, stores and others, how risky it is to do business with someone, so it affects whether a loan or credit extended. A credit score will also help determine a loan or credit card interest rate. For example, a person who has a high credit score will be offered a better loan interest rate, which could mean thousands of dollars saved in interest on a large loan. A landlord could use a credit score to help decide whether or not to rent an apartment to someone, since it indicates the likelihood the rent will be paid on time. Someone with a low credit score may be required to put down a deposit of money when opening a telephone, utility or similar account.

An individual's credit score is influenced by his or her:

  • Total amount of outstanding debt. Everything from library fines and parking tickets to unpaid cell phone bills and mortgages is included.
  • Prompt bill payment.
  • Percentage of available credit used.
  • Percentage of debt paid. (Does he or she pay off the balance each month or just the minimum due?)
  • Length of credit history: how long he or she has had open accounts, borrowed money or had credit extended.

A credit score changes depending on a person's financial behavior. The score can fall quickly due to poor money management and will rise gradually when the person gets back on track financially. Individuals can obtain one free credit report a year from each of the national credit bureaus: Equifax, Experian and TransUnion. Regular monitoring of one's credit scores is important, because mistakes can be made.

Reproducible: Credit Crossword

To review this section, make copies of the reproducible Credit Crossword for every student. To make the puzzle less of a challenge, you can provide the vocabulary:

Charge Coin Three​ Credit Card​
Credit​ Debt​ Unsecured​
Default​ Credit score​ Secured​
Home​ Interest​

The answers are here.​

Part 2: The Disadvantages Of Debt

Materials Needed:

Debt. It's everywhere. The U.S. debt amounts to trillions of dollars. The average American owes more than $8,000 in credit card debt, and only half of young adults pay their bills on time every month. Very few people borrowed money 50 years ago; now nearly half spend more than they earn, and the savings rate is nearly zero.

Why are Americans so often in debt? Experts say part of the problem is the availability of credit. As in previous generations, consumers don't like their choices limited by what they can afford. Instead, they charge a purchase with a credit card or take out a loan.

The days of recording debts with a reed stylus on wet clay tablets haven't been seen for thousands of years. But, as in King Hammurabi's time, a loan, whether a library loan, credit card charge or home mortgage, is a debt that must be repaid.

Long ago, debt affected one's very life. A farmer who owed money could lose the farm, his family's means of survival. Whole families could be enslaved for years to pay a debt. Debtor jails were crowded, dirty and unheated, and a person could be imprisoned for life for owing as little as 50 cents. Although people are still imprisoned today for financial misdeeds, debtor prisons here in the United States are fortunately a thing of the past.

Borrowing money, whatever form it takes, is not unwise in itself. But debt adds up fast. Without careful planning and continuous monitoring, someone can easily get in over his or her head, especially if a large, unexpected expense pops up or the person becomes sick or disabled and can't work. And debts can literally take decades to pay off.

Credit cards are a convenient way to buy goods and services. Each has a unique look, and other "unique" qualities that may not be as obvious: finance charges! Finance charges include interest expenses, fees and other charges.

Some credit cards are free, while others charge an annual fee of $50 or more. A fee may also be charged when the cardholder:

  • Pays a bill late
  • Misses a payment.
  • Gets a cash advance (obtains money by charging the amount on the card).

A cardholder (or borrower) is granted a period of time before interest starts to accumulate on the debt. This is called the grace period. A credit card's grace period is less than a month. If the cardholder pays less than the balance owed, interest - a percentage of the debt - will be added the next month. Because the interest is compounded, calculated on the accumulated interest as well as the outstanding balance, the debt significantly increases over time.

To show how credit card debt adds up, read and discuss the following scenario with the students:

Austin Clark had an excellent credit score until he was rear-ended by a truck one day while driving. Austin was hospitalized and unable to work for three months. During his slow recovery, he charged $5,000 worth of living expenses on a credit card.


  • If no interest was charged, and Austin paid a required minimum monthly payment of $200, how long would it take him to pay off his bill?

($5,000 divided by $200 = 25 months, or 2 years, 1 month.)


Activity: The High Price Of Debt

Due to high interest rates, it's important to pay off debt as soon as possible. If the credit card's APR (annual percentages rate of interest) is 19 percent and Austin paid the minimum amount of $200 each month, how long would it take to pay off the debt, and how much more money would be paid in added interest?

The students can use an online debt calculator to figure out the answers. Modern Woodmen provides a debt calculator here. Have them select "loan period," then enter $5,000 for the loan amount, 19 percent for the annual rate and $200 for the monthly payment.

The students will find that Austin will pay off his debt in 33 months, or 2 years, 9 months. In addition, he will pay $1,415 more in loan interest over that period of time.

If Austin increased his monthly payment, he would pay much less interest because he'd pay off the balance sooner. By substituting other monthly payment amounts, the students can determine how quickly the debt will be paid off and how much interest will be paid.


Monthly Payment Total Interest Paid Balance Paid Off
$200 (minimum) $1,415​ 2 years, 9 months​
$300​ $851​ 1 year, 8 months​
$400 $616​ 1 year, 2 months​
$500​ $486​ 11 months​

By law, credit card companies must send a warning in monthly statements showing how interest increases credit debt over time. They must also clearly describe all fees, charges and the APR in the cardholder agreement, as well as how much they can change under certain conditions. For example, the interest rate can increase when a borrower:

  • Pays less than the minimum amount.
  • Submits a late payment.
  • Falls behind in payments.

Cardholders must be notified in writing of these interest rate changes, within a certain period of time, before they can become effective.

It's very important to read and understand:

  • The cardholder or loan agreement before applying for a credit card or borrowing money.
  • Correspondence from creditors to be aware of changes to an account. A cardholder could receive notification of:

- A lowered credit limit.

- A closed account, which might damage a credit score.

- A new requirement to pay off the balance within a certain period of time. This could drastically increase the minimum payment due each month.

A debit card looks like a credit card and also provides a convenient way to obtain cash and pay for goods and services. As debit cards gain acceptance, credit cards are being used less often. Consumers like the fact that debit cards are potentially less hazardous to their personal finances. Since charges are deducted directly from a financial account, there's no chance of accumulating dangerous debt as with a credit card. If the money isn't already in the account, no transaction will take place.

Debit cards do have some disadvantages, however:

  • Fees. Credit cards may have annual fees, but consumers aren't charged fees for individual transactions (except for purchases made in a foreign country). Debit cards may have annual or monthly fees, and a fee may also be charged for each transaction.
  • Stolen or lost cards. By Law, a credit cardholder has just $50 worth of responsibility for unauthorized purchases or cash advances. A debit card is often used with a personal identification number (PIN), known only to the cardholder. If the card is lost or stolen and the PIN becomes known, a thief could wipe out the victim's financial account(s). The victim bears responsibility for the charges according to when the bank was notified of the theft or loss.
  • Unsatisfactory purchases. A consumer who uses a credit card can refuse to pay for unsatisfactory purchases until the matter is settled. A consumer using a debit card may have a harder time resolving a complaint, since the amount has already been deducted from the account.
  • Credit scores. Wise use of credit cards builds a credit score. Using debit cards wisely does not.


Every year, more than a million Americans file for bankruptcy, a legal process to solve very serious money problems.

There are two primary types of bankruptcy an individual can file, Chapter 7 and Chapter 13. In Chapter 7 bankruptcy, a person appointed by a court takes the bankrupt individual's personal property and sells all but the most essential items needed to live. The money is used to pay his or her debts. (Some debts cannot be forgiven, including student loans, income taxes, some types of credit debt, court fines, tickets and other debts associated with illegal actions.) Filing bankruptcy under Chapter 7 stays on a credit report for 10 years.

Chapter 13 bankruptcy helps those who are judged financially capable of paying their debts. The individual pays off the debt in installments over a period of time, according to a payment schedule approved by a court. Filing bankruptcy under Chapter 13 stays on a credit report for seven years.

When an individual files for bankruptcy, he or she must:

  • Pay a filing fee.
  • Undergo credit counseling.
  • Learn money management.
  • Provide documents showing income, assets, debts owed, etc.

After bankruptcy, the individual may find it nearly impossible to obtain a loan through a lending institution. The damaged credit score may affect his or her ability to rent an apartment, find a job, etc. Because of its long-term impact, bankruptcy should only be considered as a last resort.

Easy Loans

A person who has a low credit score and needs a loan may resort to establishments that advertise "easy-access" loans. True to their name, these loans are readily available - but at a cost. The interest rates are sky-high and go higher still if the borrower defaults, so they should never be considered unless one has an emergency need and there are no other options (for example, borrowing from friends or family).

Pawn loans. A pawn loan is secured by an individual's personal possession: jewelry, tools, electronic equipment, etc. The possession is appraised (examined to determine the worth) and a percentage of its worth is loaned. Borrowers pay high monthly fees. If the loan isn't repaid, the pawned item may have to be surrendered.

Title loans. Title loans are secured by proof of ownership of a card, boat, truck, etc. After the item is appraised, the borrower is usually given a fraction of its value, depending on how much money is still owed on the good. If he or she falls behind in payments or even pays the loan back early, there could be penalties. Title loans usually charge very high interest, as much as 20-25 percent of the loan amount per month.

Payday loans. Payday loans have the highest interest rates of easy-access loans. The borrower writes a check for the amount of the loan, adds a high fee and receives the loan amount in cash. The lender holds the check until payday, at which time the check is cashed. If the loan isn't paid back in full, it may be extended, but another fee is charged.

Rent-to-own. Consumers who can't afford to buy furniture, appliances and other goods may choose rent-to-own. They pay weekly rent and can purchase the item at any time. At the end of the rental period, however, the rent paid is usually two to four times the actual retail price. Fees may also be charged if the contract is ended early.

Credit card mismanagement can cause serious debt. Generally speaking, adults under 21 years of age are unable to apply for credit cards, but your students could still find themselves in financial jeopardy in the future due to their buying habits. They may gain insight by completing the reproducible Shopping and You.


Reproducible: Shopping and You 

Make copies of the reproducible Shopping and You for each student. Share the following information after they read their shopping "profiles".

Problem Shoppers:

  • Often spend more money and buy more stuff than they intend.
  • Feel guilty, embarrassed or ashamed of their shopping habit and purchases.
  • Shop when sad, lonely or stressed out.
  • Think about money and shopping a lot.
  • Lie to others about what they buy or how much money they spend.
  • Hide receipts and purchases to keep others from knowing about shopping trips.
  • Get angry when confronted about their purchases or spending habits.
  • Feel a "rush" when shopping or buying something.
  • Follow a buy-return-buy-return cycle.
  • Holiday power-shop all year long.
  • Give up relationships and worthwhile activities in order to shop more.
  • Frequently shop alone.

In finances, "the best offense is a great defense." Wise consumers protect themselves by:

  • Monitoring spending. Keeping receipts and financial statements helps someone know how much money he or she has and how and where it's being spent.
  • Having money deposited directly into accounts and withdrawing only what is needed. Carrying money provides a temptation to spend.
  • Waiting before making a big purchase. A good guideline is to wait as many days as one's age. The individual can use the time to research the product, find the best price and explore the wisest way to pay.

It's important to recognize early signs of "dangerous" debt. A person who's in trouble financially may:

  • Have no savings.
  • Continue to spend money after becoming aware of a debt problem.
  • Pay bills late (if at all) or pay only the minimum amount due.
  • "Max out" (reach the credit limit on) one or more credit cards.
  • Not know exactly how much or where money is owed.
  • Open additional lines of credit trying to keep up with bills.
If debt does become a serious problem, it's very important to take these steps:
1. Face the truth and admit there's financial trouble.
2. Honestly explain the problem to creditors and ask for assistance in working out solutions.
3. Cut up credit and debit cards to avoid spending more money.
4. Meet with a financial counselor who will point out how finances got off track and help determine how to begin "digging out" of debt.
5. Get serious about paying off the debt: work additional jobs, sell unneeded possessions, downsize houses and cars, and reduce living expenses. For example, eliminate luxuries like cable TV, cell phone and Internet service.
6. Learn from the experience and try to ensure it doesn't happen again.
Being in serious debt affects individuals mentally, emotionally and physically. Financial problems lead to shame, worry and anxiety about the future, causing emotional stress, which in turn affects personal relationships. Debt undermines self-confidence and the trust placed in others.
Special note: Now would be a good time to distribute the Teens' Guide to Being Wise About Money slide guide, included with Level 3 of Modern Woodmen's Financial Literacy Program. The front of the guide touches on important topics like credit and debt, budgeting and more. The reverse side shows that saving money regularly adds up over time. The students will appreciate the handy, fun format. 
Part 3: Get Smart!
Materials Needed:


Smart Consumers Are Cautious Consumers

An estimated 2-10 million individuals are affected each year by identity theft. When a person's identity is stolen, others may open credit accounts and purchase goods and services in his or her name and completely drain money from his or her accounts. Sadly, a victim may not be aware of the problem for days, weeks or even months. By that time, his or her credit score may have been severely damaged and require lots of time and effort to repair.

In recent years, organizations and businesses have taken steps to protect customer personal information. But individuals can be caught off guard and share their names, addresses, Social Security numbers and dates of birth without realizing it. This is especially true when using the Internet. Danger zones include emails, pop-up advertisements, social networking sites and online forums.


  • Have you ever received a strange email that was probably a scam?
  • What did the email say?
  • What made you suspicious?
  • What actions did you take, if any?

Discuss the following identity theft precautions with your students. The Federal Trade Commission provides teacher and student resources about identity theft and other topics at this website.

Computer Precautions

  • Delete without opening:
    • Email from unknown senders.
    • Email with suspicious subject lines from known senders.
  • Be careful about sharing an email address with an unknown source to enter a contest or get something free. This can sometimes lead to lots of junk mail.
  • Beware of clicking links found in emails or pop-up advertisements.
  • Protect a computer with a firewall and antivirus/antispyware software. Effective software is available to download free of charge.
  • Make sure a web page is secure before ordering online or completing an online application. Secure sites have "https" in the web address and/or a padlock icon.

Passwords, PINs and User IDs

  • Don't share passwords, PINs and user IDs with anyone.
  • Create unique user IDs and passwords. They should not be based on information that could be easily discovered or guessed, like a birthday, full name or hometown. A combination of numbers, capital and lower-case letters is most secure.

Phone Calls

  • Call or email a company or organization to confirm a request for personal information. A legitimate business will not mind being contacted.


  • Shred applications and personal mail before recycling or disposing. If the local recycling program doesn't accept shredded paper, it can be used for animal bedding, packaging material, composting, etc.
  • Read financial account information and credit card statements carefully. Contact institutions and companies if unexpected charges or unusual activity is noticed.
  • Don't give personal documents like birth certificates and passports to anyone. Store them in a locked cabinet or other safe place, not in a backpack, purse or locker, where they could be easily accessed.

Smart Consumers Are Knowledgeable Consumers

Chances are, your students already frequent malls and shop online. Statistics show "tweens" and young teens spend, on average, $2,000-$5,000 a year. Wise consumers spend money sensibly, and they know their rights.

Though nearly every store claims to have a commitment to customer satisfaction - it's good business practice - it's always a wise idea to confirm a store's return policy, usually posted by the registers or in the customer service area. A customer should note:

  • If merchandise can be returned.
  • If a receipt is needed for a return. (If so, will the store offer an exchange if the receipt's been lost?)
  • If there's a time limit on returns.
  • If the full retail price will be refunded if the item's been on sale since the purchase. (Some stores will only refund the sale price.)

To resolve a complaint with a store or other seller:

  • Return merchandise in perfect condition with the original packaging, the owner's manual and all paperwork, including the receipt.
  • Be polite. Nothing more is accomplished with anger or sarcasm.
  • Explain the situation. Tell 1) what was purchased and when; 2) how the merchandise has failed to meet expectations; and 3) how the problem could best be resolved (with a refund, an exchange, help with use).

If a customer is still dissatisfied after complaining to the customer service department, he or she can take the next steps:

1. Speak with the department manager or the store manager. Explain the problem again and ask for assistance.

2. Write a letter to the store manager. Enclose copies of receipts and other important paperwork. Describe the steps previously taken, giving names of store employees, dates of calls, emails, visits, etc.

3. Email, write or call the company that manufactures the good or provides the service. Look for a Contact Us link on the company's home page. Describe the situation and the steps already taken.

4. Contact:

  • The Better Business Bureau. An online complaint form may be found here.
  • The Department of Consumer Affairs or the attorney general's office of the state in which the consumer resides. (Click on the U.S. map here.)


Activity: Role Play

Divide the group into pairs. Provide each pair with a prop of "merchandise" (article of clothing, CD player, etc.) One student will portray a store's customer service representative, the other a customer returning merchandise. Let the pair decide whether or not the customer: 1) is friendly but assertive; 2) returns the merchandise in near-perfect condition with packaging, etc.; 3) leaves the store satisfied; 4) needs to take further action. When role play is over, discuss both individuals' behaviors.


Smart Consumers are Organized Consumers


  • Have you ever misplaced something very important? What was it?
  • Did you ever find the item? Where was it?
  • Why did you think it was misplaced?
  • Did you learn anything from the experience?

A wise consumer knows "a place for everything, and everything in its place" makes good sense. Organizing bills, receipts, warranties, owners manuals, contracts and other documents and storing them in a safe place so they can easily be located and referred to is important.

An expandable 12-pocket file is a handy and inexpensive way to begin organizing financial records. Label the pockets and place bills, correspondence (letters, copies of emails, etc.) and other information in them. Possible categories include:

  • Bank (or other financial institution) - statements, deposit and withdrawal slips, and account information.
  • Credit card/debit card - statements, correspondence and cardholder information like card numbers.
  • School - school calendar, handbook.
  • Work - paycheck stubs, other information.
  • Taxes.
  • Medical - bills and information.
  • House (or apartment) - lease.
  • Utility - statements, information.
  • Phone - statements, information.
  • Cable TV - statements, information.
  • Insurance - certificates, policies, annual statements.

Important Documents

Real estate deeds, contracts, title documents, passports, Social Security cards and birth certificates should be kept in a fireproof safe or a safe-deposit box rented from a financial institution. (Note that the box won't be accessible when the financial institution is closed.)

Keep A Record

  • List all IDs, membership cards and credit cards that are carried in a wallet or purse in the event of theft. The businesses or organizations should be notified so the cards can be cancelled and reissued. If not done promptly, the victim may be held responsible for some fraudulent debit and credit card activity.
  • Credit card accounts, driver's license and other important numbers should be recorded and kept in a secure location in the event the cards are lost or stolen and need to be cancelled and replaced. Serial numbers can help authorities identify stolen personal property.
  • Keep a personal property inventory in a secure location in case of disaster or theft. (See Lesson 3).

Reviewing financial files every year or so is a good way to stay organized. Look through each pocket or folder, deciding what and what not to keep.


  • Receipts and statements used in filing taxes.
  • Bills, invoices and other paperwork that show home improvements.
  • Warranty information, manuals and sales receipts for goods that 1) are under warranty and may need future service or repair; 2) may be resold in the future.

Throw away:

  • Receipts, sales slips and other paperwork for goods that aren't 1) covered under warranty; 2) related to tax documents.
  • Owners manuals, warranty information and other documents associated with items that are no longer owned.

Getting organized and maintaining financial organization takes time, but the peace of mind it affords is well worth it.

Reproducible: Smart Consumer True-False Quiz

To reinforce this section's content, makes copies of the reproducible Smart Consumer True-False Quiz for every student. The answers are here. While checking answers, invite students to substitute true statements for the false ones.