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Do Now What values do you have regarding money? How do those values effect your personal goals? Money Management Rap Video Questions 1) Why does the rap video say that money management is important? 2) Define these terms from the video: Employer Budget Purchasing power Savings Account Deposit Checking Account 3) What does the video mean by the phrase “I wanna control money and not let it control me? Personal Finance Chapter 1 Personal Financial Planning The Money Plan: Respond in your notebook Q: I am a high school student. I do not have money for investments or buying property. So what difference does it make how I spend my money now? A: You will not always be a student. Learning to save and use money wisely now will help you know how to achieve financial security in the future. While you are in high school, financial planning can help you decide how to spend, save, and invest your money for special purchases or activities that matter to you. You may even be able to buy stock Personal Financial Decisions Personal finance is everything in your life that involves money. Some of the benefits of personal financial planning are: You have more money and financial security. You know how to use money to achieve your goals. You have less chance of going into debt you cannot handle. You can help your partner and support your children, if you have a family. 6 Steps of Financial Planning The financial planning process has six steps to help you reach your goals. Step 1: Determine Your Current Financial Situation To figure out your current financial situation, make a list of items that relate to your finances, such as: Savings Monthly income (job earnings, allowance, gifts, and interest on bank accounts) Monthly expenses (money you spend) Debts (money you owe to others) When you have determined your financial situation, you will be able to start planning. 6 Steps of Financial Planning Step 2: Develop Your Financial Goals To develop clear financial goals, think about your attitude toward money and ask yourself some questions: Is it more important to spend your money now or to save for the future? Would you rather get a job right after high school or continue your education? Do your personal values affect your financial decisions? Do you know the difference between your needs and your wants? 6 Steps of Financial Planning Step 3: Identify Your Options It is impossible to make a good decision unless you know all your options. If you are saving $50 a month, for example, you might have these options: Expand the current situation by increasing the amount of money you save every month to $60. Change the current situation by investing in stocks instead of putting your money into a savings account. Start something new by using the $50 to pay off your debts. Continue the same course of action 6 Steps of Financial Planning Step 4: Evaluate Your Alternatives You must consider the consequences and risks of each decision you make during the financial planning process. You can do this by: Using the many available sources of financial information to keep you up-to-date with social and economic conditions that can affect your financial situation. Understanding the opportunity cost of your decisions. 6 Steps of Financial Planning Understanding Risks When you make a financial decision, you also accept certain financial risks. Some types of financial risks include: Inflation Risk Interest Rate Risk Income Risk Personal Risk Liquidity Risk 6 Steps of Financial Planning Step 5: Create and Use Your Financial Plan of Action A plan of action is a list of ways to achieve your financial goals. Some examples of plans of action include: Cutting back on spending to increase your savings. Getting a part-time job or working more hours at your present job to increase your income. 6 Steps of Financial Planning Step 6: Review and Revise Your Plan As you get older, your finances and needs will change. That means that your financial plan will have to change too. You should reevaluate and revise it every year The Importance of Financial Planning Activity: Importance of Financial Planning Skit Your goal is to work in groups of 3-4 to design a skit that will outline the importance of financial planning. Your skit needs to include at least 3 of the steps to financial planning with a detailed explaination of how those steps can be implemented. Feel free to have FUN with this activity: Some ideas for your skit could include A commercial for people who have struggled with financial planning in the past A talk show where someone is being confronted about their poor financial management skills A News report or interview with a financial expert about the importance of financial planning Homework Practice skits, write out scripts or bring props to present next class Read chapter 1.1-take reading notes and ACE vocabulary Vocabulary Quiz Using the ACE system define the following words: Personal Financial Planning Goals: Values: Opportunity Cost: Personal Finance Chapter 1: Developing Personal Financial Goals Types of Financial Goals Two factors will influence your planning for financial goals. These factors are: 1) The time frame in which you would like to achieve your goals. 2) The type of financial need that inspires your goals. Time Frame of Goals Goals can be defined by the time it takes to achieve them: Short-term goals take one year or less to achieve (such as saving to buy a computer). Intermediate goals take two to five years to achieve (such as saving for a down payment on a house). Long-term goals take more than five years to achieve (such as planning for retirement). Start with short-term goals that may lead to longterm ones. Goals for Different Needs Services and goods are two different categories of financial needs. A haircut is an example of a service, while a new car is a good. How you establish and reach your financial goals will depend on whether a goal involves the need for: Consumable goods (such as a soda) Durable goods (such as a car) Intangible items (such as an education) Guidelines for Setting Goals When setting your financial goals, follow these guidelines: Your financial goals should be realistic. Your financial goals should be specific. Your financial goals should have a clear time frame. Your financial goals should help you decide what type of action to take. Your financial goals will change as you go through life. Financial Goal Setting Video Notebook Activity In your notebook, use the information we’ve learned today about goal setting to set 4 financial goals for yourself 2 should be short term goals and 2 should be long term goals. Talk with the person next you about the goals you have set for yourself and come up with a short plan of how to acheieve these goals Adding Personal Financial Goals to your Skit Now that you have a skit that outlines the importance of financial planning, find a way to implement today’s lesson on Personal Financial Goals. It doesn’t need to be long and drawn out, just be sure to find a way to mention it in your skit Performances will begin in 20 minutes With your skit you must turn in: A script or storyboard outlining the major points and events that the skit will cover Homework: Come up with a common financial problem that teens today face. Turn this financial problem into a letter to an advice columnist asking for help. Tomorrow we will play the role of advice columnists and try to answer each other’s financial problems with the information we have received in class Do Now 1) Name 2 or 3 financial problems that teenagers face? 2) Name 2 or 3 financial problems that adults face? 3) How do these problems differ? How are they the same? Chapter 1: Influences on Personal Financial Planning What Influences my Financial Decisions? Many factors will influence your day-to-day decisions about finances. The three most important factors are: Life situations Personal values Economic factors Life Situations and Personal Values Your financial planning will be affected by changes in your life situation, such as: Going to college Starting a new career Getting married Having children Moving to a new city Your personal values also influence your financial decisions. Economic Factors Economic factors across the country and around the world play a role in day-to-day financial planning and decision making for most people. To understand economics and the economy, you need to be aware of: Market forces Financial institutions Global influences Economic conditions Market Forces The forces of supply and demand determine the prices of products, or goods and services, you purchase. When there is a high demand for an item, or when a company cannot manufacture enough of a certain product to keep up with the demand, the price of the product rises. Supply and Demand: Indiana Jones Economovies Financial Institutions Most people do business with financial institutions, which include: Banks Credit unions Savings and loan associations Insurance companies Investment companies Financial institutions provide services that increase financial activity in the economy. The Federal Reserve System The Federal Reserve System’s primary role in the U.S. economy is the regulation of the money supply. The Fed controls the money supply by: Determining interest rates Buying or selling government securities Its decisions affect: The interest rate you earn on your savings The interest rate you pay when you borrow money The prices of the products you buy The Federal Reserve Explained in 3 Minutes Global Influences You and the money you spend are part of the global marketplace, which is another economic factor that can affect financial planning. The economy of every nation is affected by competition with other nations. When more money is leaving the U.S. than entering it, for example: Less money is available for spending and investing. Interest rates may rise. These global influences also affect personal financial decisions. Economic Conditions Current economic conditions also affect your personal financial decisions. The three important economic conditions are: Consumer prices Consumer spending Interest rates Consumer Prices Over time the prices of most products inflate. The main cause of inflation is an increase in demand without an increase in supply. For example, prices will rise if: People have more money to spend because of pay increases or borrowing. The same amounts of goods and services are available. The inflation rate affects consumer prices and varies from year to year. Interest Rates Interest rates represent the cost of money and are also influenced by supply and demand. Interest rates will affect your financial planning as you: Save Invest Obtain loans Interest rates are just one facet of the economic factors that influence your personal financial planning. Interest Rates: Explained Activity: Supply and Demand Article Review To help you get a better understanding of how supply and demand influences consumerism, you will read a variety of current events articles. You have been handed a set of articles: Section A or Section B. Using the articles, read through them critically and complete the graphic organizer. You will need to be able to identify the A) Market B) Cause of change in supply/demand C) Demand (Did it increase, decrease or stay the same) D) Supply (Did it increase, decrease or stay the same?) E) Solution: How could you fix the supply or demand issue? Activity: Jigsaw Supply and Demand Activity Find 3 other people who had a different article from you and have them explain to you how their article dealt with supply and demand. For each article you need to identify the following: Market What is being supplied/demanded? How are the supply/demand issues being dealt with? Is there a better way to handle the supply and demand issues? If so, explain. Homework Read chapter 1.2 Opportunity Costs and Financial Strategies ACE Vocabulary Chapter 1.2 (Time value of money, principal, future value, annuity, present value) Vocabulary Quiz next class 8/31 Bring Crayons/Markers or colored pencils next class!!! Do Now: Vocabulary Quiz Using the ACE vocabulary strategy, define the following terms Principal: Future Value: Present Value: Chapter 1.2 Opportunity Costs and Financial Strategies Personal and Financial Opportunity Costs Whenever you make a choice, you have to give up, or trade off, some of your other options. When making your financial decisions and plans, you will need to carefully consider: Personal opportunity costs Financial opportunity costs Personal Opportunity Costs Like financial resources, your personal resources require management. These resources include: Health Knowledge Skills Time You have to decide how to use your time to meet your needs, to achieve your goals, and to satisfy your values. Financial Opportunity Costs You also must make choices about how you spend money. To help make choices, consider the time value of money every time you: Spend Save Invest Think about the time value of this money as an opportunity cost. Cashville Kids: Opportunity Cost Video Opportunity Cost Cartoon Activity Your job is to design a cartoon that clearly illustrates your understanding of the concept “Opportunity Cost”. Cartoon may be done in the style of a comic strip (Several slides) or in the style of a political cartoon (one large picture) Project should include the following: ___ Large, clear and colorful title (5 points) ___ Clear depiction of an opportunity cost through pictures and/or dialogue ( 20 points) ___ Colorful, creative visual ___ Neat and organized ___ Demonstrates understanding of the topic ____Short explanation of your cartoon on back in paragraph form (10 points) Examples: Opportunity Cost Cartoon Homework Financial Portfolio Project: Due September 8th Read Article: “Opportunity Cost at the Olympics” and take notes in your notebook. Be prepared for a reading quiz over the material Notebook check September 8th. Please be sure your TOC and notebook are up to date with all assignments Questions You Will Answer: What are the five steps in the personal financial process? How do you set “SMART” goals? How do your choices affect your money? How can money help you live a satisfying life? Quotes to Consider “Most people don’t plan to fail. They simply fail to plan.” “If you don’t know where you are going, any road will take you there.” Can You Believe… Only ___% of teenagers have ever made a written plan for their money. In a national survey, ___% of teenagers thought earnings from a savings account might not be taxed. Can You Believe… ___% of teenagers surveyed thought you had no responsibility at all to repay fraudulent charges on a credit card. ___% of teenagers surveyed said they put some money in savings when they receive an allowance or earn some money. Can You Believe… ___% of teenagers are likely to go to their parents for financial information. ___% of teenagers consider themselves to be spenders rather than savers. Financial Planning Process STEP 1 Set Goals NEEDS vs WANTS NEEDS Essentials…the basics of life Food Clothing Shelter NEEDS vs WANTS WANTS Simply increase the quality of living Assignment 1.1 page 4 “My Needs and Wants: Can I Tell the Difference” Values The beliefs and practices in your life that are very important to you. Family Friends Teachers Church Work Assignment 1.2 My Values Page 5 Specific Measurable Attainable Realistic Time-bound SMART Goals Timelines Short Up Term to three months Intermediate Three Long Term months to one year Term Longer than one year DELAYED GRATIFICATION Assignment 1.3 My SMART Goals Page 7 Save $25 so I can take my friend out for pizza. 1st of next month Short term $25.00 $25.00 $7.50 $7.50 Step 2 Analyze Information Cash Flow A measure of the money you receive and the money you spend. Assignment 1.4 Personal Spending Record Page 8 Step 3 Create A Plan Decision Making The process of considering and analyzing information in order to make a decision. Factors that Can Influence Your Goal Setting and Decision Making Opportunity Cost Choosing one option may mean giving up altogether another goal. It’s a tradeoff! Assignment 1.5 My Decision Pros Cons Step 4 Implement the Plan Three Rs of Money Reality Responsibility Restraint Step 5 Monitor and Modify the Plan Monitor and Modify Are your existing goals still worth doing? Is there a new goal to add to your list? Is there an existing goal you want to drop or change? ACTION STEPS Page 14 Write down two BIG GOALS Write the first and second step for each goal Questions To Answer: What are the five steps in the personal financial process? How do you set “SMART” goals? How do your choices affect your money? How can money help you live a satisfying life? 2001 National Endowment for Financial Education, Greenwood Village, Colorado, 80111
