A WORKBOOK FOR UNDERSTANDING PERSONAL FINANCE TEACHER’S GUIDE

20 Pages·2006·1.14 MB·English

A WORKBOOK FOR
UNDERSTANDING
PERSONAL FINANCE
TEACHER’S GUIDE
Endorsed by
Chief Financial Officer
Florida Department of Financial Services
and
Commissioner
Florida Department of Agriculture and Consumer Services
A project of the
FINANCIAL FREEDOM CONTENT MATRIX
Managing Banking Job Consumer Buying an Auto Finding a
Cash Basics Search Credit Automobile Insurance Place to Live
Advertising • • • •
Benefits/Costs • • • • • • •
Carer/Labor • •
Competition • • • • • •
Consumer/Personal Finance • • • • • • •
Demographics • • •
Employment •
Entrepreneurship • •
Law & Ethics • • • • • •
Decision Making • • • • • • •
Technology • •
Monetary Policy • • • •
International •
Fiscal Policy •
Opportunity Cost • • • • • • •
FINANCIAL FREEDOM CONTENT MATRIX
Managing Banking Job Consumer Buying an Auto Finding a
Cash Basics Search Credit Automobile Insurance Place to Live
Middle School • • • •
Academy of Finance • • • • • • •
Business/Office Education • • • • • • •
Consumer Economics • • • • • • •
Economics • • • • •
Journalism/English • • •
Math/Science • • • •
Social Studies • • •
School to Work • • • • • • •
Teacher Guide Acknowledgements
Barbara Tranquila, Miami Killian Senior High School, Miami
Pamela M. Brewer, JRE Lee Opportunity Middle School, South Miami
Mary Alexis Galeri, South Miami Senior High School, Miami
Charlie Anderson, G Holmes Braddock Senior High School, Miami
Elaine Silney-Basca, Academy of Finance, Miami
Bernardo Montero, Charles R. Drew Middle School, Miami
©
800.707.4247 2006 Florida Council on Economic Education www.fcee.org
Section 1: Managing Cash
Section Focus:
Managing cash is always a difficult task. Some individuals are better cash managers than others. In
order for you to fully enjoy your cash flow, you must be able to manage it well. Ultimately, it comes
down to making wise choices about saving and spending to achieve control of your cash. If financial
independence is your goal, then learn to plan and manage your cash by making smart decisions.
Remember, the choices you make today will shape your future.
Vocabulary:
Cash
Available cash
Long-term needs
Cash flow
Immediate needs
Realistic budget
Financial independence
Questions for Discussion:
1. What is cash flow? Section 1.2. Amount of money you earn and amount of money you spend.
2. What does building financial independence mean to you? Section 1.2. Getting control of your cash.
Taking care of yourself without asking your parents to pay for the things you need.
3. List three steps you must carefully take in order to gain control of your cash flow.
Sections 1.2 - 1.12.
a. Understanding your long-term cash flow – estimate money you receive and money you spend
over one year.
b. Tracking your short term spending on a weekly basis.
c. Create a cash plan by making a monthly budget of expenses.
4. How does a cash flow estimate help you get control of your cash? Sections 1.3 - 1.4. Helps you to
see how you can expect your money to come and go during a whole year.
5. How does a one-week cash flow help you get control of your cash? Sections 1.6 - 1.9. Helps track
how you actually spend your money for a week.
6. Why is a monthly budget considered a good tool for getting control of your money? Sections
1.10 - 1.12. Helps individuals move from thinking about money as something that’s only here and now
to thinking about future plans.
7. What is the biggest factor in creating a successful budget? Section 1.11. Expectations of what will
happen with savings and expenses.
Section 1.1
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Section 1: Managing Cash
Suggested Follow-up Activities:
1. Complete section 1.3 by assuming you have just completed your first year of college. Your first year
of college was totally funded through a scholarship (you did not budget your expenses).
Unfortunately, your second year of college will not be fully funded. You are determined to
continue your education even if it will cost you more. How can you stay at the same learning
institution and financially overcome new costs? You will be making important decisions about how
to spend your hard earned cash in college. You must find a way to deal with the expenses of tuition,
room and board, books, parties, traveling expenses, fraternity/sorority fees, sporting events and
recreational activities in your new financial circumstances. In order for you to enjoy financial
independence during college, take the first step in understanding your cash flow by estimating your
cash flow for one year.
Given:
• Tuition, room, board, fees, books, and supplies = $13,000 (public college/university)
• Part time job = $150 per week
• Scholarship/Grants = $5,000
2. Complete section 1.4 and discuss in small groups.
3. Where does your money go on a weekly basis? Complete sections 1.6 - 1.9 and discuss in
small groups.
4. Complete section 1.12 and discuss in small groups.
5. Ask students to decide what college they would like to attend.
Things to consider in choosing a college:
• Major. Is the college known for this major?
• Expenses. Can differ dramatically between public/private and in-state/out-of-state.
• Location. Distance from home.
• Personality. Large classes or smaller, more personalized classes needed.
• Greek organizations (fraternity/sorority).
• Sports.
Once students have chosen a college, allow them to research it to find out tuition fees, housing costs,
food costs, etc. Then visit http://money.cnn.com/pf/college/ and utilize the
available resource links. Discuss how saving for college needs to be included in their budgets.
Section 1.2
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800.707.4247 2006 Florida Council on Economic Education www.fcee.org
Section 2: Banking Basics
Section Focus:
Do you know all the services and products that a bank or credit union offers its customers? This
section will help you to understand the basics of banking.
Vocabulary:
Balance your account
Bouncing a check
Certificate of Deposit/CD
Checking account register
Commercial bank
Consumable
Credit Union
Credit card
Deposit
Duplicate check
FDIC
Financial
Interest
Joint account
Minimum balance
Money Market account
Opening deposit
Service charges
Signature card
Statement savings account
Traditional savings account
Questions for Discussion:
1. What does financial freedom or financial independence mean to you? Getting control of your
cash and taking care of yourself without asking your parents to pay for the things you need.
2. Name one way you can get your money to work as hard for you as you did for it. Section 2.2.
Put it in an interest-bearing account, i.e. a traditional savings account, a certificate of deposit, or a
money market account.
3. What is the “out-of-sight-out-of-mind” factor? Section 2.2. If you do not see the money or have it
in your possession, you are not as likely to spend it.
4. What are some fees a bank or credit union might charge you? Sections 2.2 – 2.4 and 2.10.
Monthly maintenance fee for checking and savings accounts, a per-check fee, an ATM fee, check
bouncing fee.
5. What compensation will you receive for putting your money in a bank or credit union? Section
2.7. Interest on the money.
Section 2.1
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Section 2: Banking Basics
6. What compensation will you receive for putting your money into a certificate of deposit (CD)?
Section 2.8. More interest on the money than a regular bank or credit union account.
7. What negatives are involved with CDs? Section 2.8. Must wait a set period of time before
withdrawing the money for use or pay a penalty.
8. Which is better for you as a young adult just gaining your financial freedom – a credit card or a
debit card? Section 2.11. Debit card prevents running up large bills, getting in credit trouble,
usually no fee.
9. At what point is a credit card desirable for you? When accustomed to handling own finances for a
year or two successfully.
10. Is it okay to bounce a check? Why? Section 2.10. No. Costs extra money, costs depositor money,
inconvenience, black mark against credit.
Suggested Follow-up Activities:
1. Have students go to two local banks and two local credit unions and get the application to open
an account, as well as the literature about the accounts, services, and fees. Put students in groups
to share their recommendations. (May also be done via the Internet)
2. Form groups to use the Internet to research interest rates on savings accounts, certificates of
deposit, and money market accounts. Try various search engines and enter the following terms:
• Savings account interest
• Certificate of deposit
• Money market account
3. Use this unit as an introduction to personal financial planning. Plan a follow-up unit on additional
financial choices available to young people with steady jobs, including: DriPs, 401(k) plans,
company stock purchase plans, etc. Invite a retired person or other volunteer with investment
knowledge to speak to the class.
4. Introduce students to the rule of 72.
1. Take the amount of money you have (lump sum).
2. Divide interest rate that you are drawing into the number 72.
3. The answer will be how long it will take that money to double.
4. Divide that number into the number of years that you have until you want to use that
money (retirement).
5. Double the original amount that many times.
5. Introduce students to the power of compound interest and saving early in life. Go to
www.dinkytown.com. Click on ‘Savings’ on the left sidebar for a savings calculator (includes many
types of savings calculators).
Section 2.2
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800.707.4247 2006 Florida Council on Economic Education www.fcee.org
Section 3: Job Search
Section Focus:
Getting a job is a necessary part of gaining the individual freedom that every teenager wants. This
section is a step-by-step plan that will take you through the decision making process about whether
you are ready to handle the commitment that having a job entails. You will learn what type of job is
best for you and how to conduct a job search, including resume writing and locating potential jobs.
This section also offers helpful hints about how to dress and act during the job search, filling out a
job application and appropriate follow-up techniques such as thank you letters.
Vocabulary:
Attributes
Minimum wage
Disposable income
Net income
Entrepreneur
Reference
Gross income
Resume
Internship
Retail
Marketing
Social Security tax
Medicare tax
Withholding tax
Questions for Discussion:
1. What are the advantages of getting a job at your age? Sections 3.4 -3.6. Possible answers include:
earning money to spend, saving for college, helping parents with household responsibilities, learning to
balance responsibilities, learning to handle money, being exposed to the business world and career
opportunities.
2. What are the disadvantages of getting a job at your age? Sections 3.4 - 3.6. Possible answers include:
not enough time to study, less time with family and friends, having to choose between extra-curricular
activities and working, not getting enough sleep.
3. How can you benefit from volunteering? Section 3.3. Possible answers include: easier to get an
unpaid position than a paid position, on-the-job experience, networking with influential people, may
become paid position, learning about different career opportunities.
4. What is an entrepreneur? Sections 3.8 - 3.9. A person who creates his/her own business.
5. Name and explain some advantages of being an entrepreneur. Sections 3.8 - 3.9. More independence,
make own decisions, profit potential.
Section 3.1
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Section 3: Job Search
6. Name and explain some disadvantages of being an entrepreneur. Sections 3.8 -3.9. Have all the
responsibilities, may be difficult to start, may fail, income is not assured. You may choose to have
students create a table comparing advantages and disadvantages from #5 and #6.
7. Discuss the job search process. Sections 3.10 - 3.23. Answers may include making a list of places to
look for job openings, keeping application information handy (address, social security number, names
and addresses of references, past work experience), dressing appropriately, making contact with
employers, preparing a resume, following up after interviews.
8. Why is it important to dress appropriately for job interviews? Section 3.15. It shows that you are
capable of dressing professionally and that you are concerned about making the right impression.
9. What is a resume? Sections 3.16 - 3.21. A concise document given to a potential employer.
10. What types of information do you need to include on your resume? Sections 3.16 - 3.21. Include
your name, address, education, work experience, work goals, and any other pertinent information such
as awards.
11. Why is it important to follow-up on job applications and interviews? Sections 3.21 - 3.22. Shows
that you are really interested in the job. Demonstrates good manners. Keeps you fresh in the employer’s
mind. You may do this by sending short thank you notes, calling, or stopping by.
Suggested Follow-up Activities:
1. Discuss with students how basic economic concepts such as tradeoffs and opportunity costs relate
to this section. Have students list the opportunity benefits and opportunity costs of choosing to
work. Share and discuss.
2. Have students work in cooperative learning groups to brainstorm where to find a job. In addition
to jobs they have seen advertised, tell them to think about the people they know who might
provide a lead. Introduce the concept of networking. After the ideas are shared and discussed with
the class, have the same small groups of students brainstorm entrepreneurial opportunities for
teenagers. Share and discuss.
3. Conduct mock job interviews in class. Students to be interviewed should “dress the part.” Help the
remaining students with potential questions and instruct them in what to look for when watching
the interview. (http://interview.monster.com/ and
http://www.quintcareers.com/sample_behavioral.html have interviewing and hiring tips.) After the
interviews, have students critique the interviewees and vote on who would get the job.
4. Ask students (for extra credit) to volunteer at a homeless shelter, hospital, nursing home, or other
organization. Have them share their experiences with the other students.
5. Discuss the traits of an entrepreneur with your students. (Self-awareness, self-motivation, courage,
confidence, patience, decisiveness, experience, knowledge, perseverance, drive) Students may visit
one or both of the following web sites to take entrepreneurial quizzes:
http://www.2h.com
http://www.realm.net/wayofthinking/quizzes/q2.cfm
Section 3.2
©
800.707.4247 2006 Florida Council on Economic Education www.fcee.org
Section 4: Consumer Credit (and Debit!)
Section Focus:
The lure of a credit card is difficult to resist. It’s easy. It’s cool. It’s a step towards adulthood. Credit
can be a wonderful tool. However, if used unwisely, it can wreak havoc on your future. In this
section, you will learn the basics of credit use.
Vocabulary:
Annual percentage rate (APR)
Available credit
Bank credit card
Co-signer
Credit reporting agency
Credit limit
Credit rating
Default
Deferred payment price
Delinquent account
Finance charge
Installment
Principal
Repossession
Title
Truth in Lending law
Questions for Discussion:
1. What are the advantages of having a credit card? Section 4.1. Do not need to carry cash, liable only
to certain amount, may dispute charges, ready line of credit for emergencies.
2. What are the disadvantages of having a credit card? Section 4.10. Must pay interest, annual fees
often apply, late charges, may encourage spending beyond one’s ability to repay.
3. What must you have/do before a creditor will lend you money? Sections 4.6 - 4.7. Permanent
address, steady employment, maintain a savings and checking account, pay bills on time, good credit
history, be 18 or older.
4. What are common sources for loans? Section 4.8. Commercial banks, credit unions, sales
financing companies.
5. If there is a fee of $24 to open a credit card account and an Annual Percentage Rate (APR) of 18%,
what is the monthly fee for a $100 purchase 30 days past billing due date? Pro-rate the card fee to
$2 a month. 18% interest on $100 for 12 months is $18. Cost for borrowing $100 for one month is
$1.50. Add to that the prorated fee of $2. The total is $3.50 for a 30-day use of the money.
6. How is the minimum payment for a credit card determined? Section 4.13 It is a percentage of the
total balance set by the credit card company.
Section 4.1
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Section 4: Consumer Credit (and Debit!)
7. How many years does it take for the owner of the Credit is U card to pay it off making only the
minimum payments? Section 4.19 207 months - over 17 years
8. What do you think would happen if the owner of the Credit is U card paid more than the minimum
amount each month? Section 4.24 The loan would be paid off more quickly and with less interest charged.
9. How many months would it take to pay off the loan if the holder of the Credit is U card paid $50
a month? Section 4.24 (Use http://www.cardratings.com/cr feditcardtrapcalc.htm )
10.Why is it important to have a correct credit history? Section 4.15. Errors may prevent someone from
getting credit.
11.Where can you locate free credit reports? Section 4.15. Experian Information Services at
1-800-392-1122 (www .experian.com ), Equifax at 1-800-685-1111 (www .equifax.com ), Trans Union
at 1-800-916-8800 (www .transunion.com ). By law, you may now get a free credit report at
www.annualcreditreport.com
12. When is credit a good investment? Section 4.29 When you use it to purchase an asset - something
of enduring value.
13. What are some things that you might use credit for in the years to come? Section 4.29 Car,
engagement ring, house, loan to start a business, tuition…
Suggested Follow-up Activities:
1. Divide the class into small groups. Ask each group to create a T-chart comparing necessary items
that require credit to purchase and nonessential items that may be delayed until money is available.
Discuss with students.
2. Have students revisit the personal monthly budget they created in an earlier activity. Ask them to
identify purchases that may justify use of credit. Discuss.
3. Divide class into groups. Ask half of the groups to create a commercial for a credit card company.
Ask the other half of the gr oups to cr eate a Public Service Announcement warning of the dangers
of unwise credit use. Have students perform for each other.
4. Invite a guest speaker to visit the classroom and discuss bankruptcy with the students, as this is often
the consequence of unwise cr edit use.
5. Create a classroom credit card for each student. As students go through their week, ask them to
itemize on the back of the ‘card’ purchases that they would have made on a credit card. At the end
of the week, discuss the results with students. Ask them: Are you able to pay off this debt? What
would be the interest charges? Was it easy to spend this ‘money’?
6. Ask students if they know what ATM or debit cards are. Ask: What is the difference between a
credit card and a debit card? Explain to students that there are two types of debit cards. One is
called an on-line card. This is an immediate transfer of money from your bank account to the
merchant’s bank account. It requires a PIN number. The other type of debit card is an off-line card.
These cards create a debit against your account and process usually within 2-3 days. This does not
require a PIN number, but you must sign a receipt as with a credit card. Have students create a
Section 4.2
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800.707.4247 2006 Florida Council on Economic Education www.fcee.org