Transcript ECON 593: Workshop on Economic Education

FINANCIAL LITERACY FOR
THE ELEMENTARY
CLASSROOM
Before Day One Notes
Sponsored by:
Maryland Council on Economic Education and
Towson University College of Business and Economics.
Common Myths

Myth: The tooth fairy will trade with you – she will
give you candy/money in exchange for your old tooth
if you leave it under your pillow.
Common Myths


Myth: The tooth fairy will trade with you – she will
give you candy/money in exchange for your old tooth
if you leave it under your pillow.
Reality: Why would anyone outside of your family
want your old tooth?
Economic and Personal Finance Myths?

Myth: Economics is about how to make money, lots of money.
Economic and Personal Finance Myths?


Myth: Economics is about how to make money, lots of money.
Reality: Economics is really about how people make choices
when they cannot have everything that they want.
Economic and Personal Finance Myths?



Myth: Economics is about how to make money, lots of money.
Reality: Economics is really about how people make choices
when they cannot have everything that they want.
Myth: Personal Finance is about how to make money, lots of
money.
Economic and Personal Finance Myths?




Myth: Economics is about how to make money, lots of money.
Reality: Economics is really about how people make choices
when they cannot have everything that they want.
Myth: Personal Finance is about how to make money, lots of
money.
Reality: Personal Finance is about a set of skills (knowledge)
that allows an individual to make informed choices about our
finances (how money is spent and budgeted, saving, lending,
and the risk involved in each).
Topics for today
1.
2.
3.
4.
Wants
Opportunity Cost
Scarcity
Decision Making
What do you want?




Everything – clothes, house, a new car, food, medical
care…
Economic wants are desires that can be satisfied by
consuming a good, service, or leisure activity.
Therefore, economics is part of our daily lives.
And so is personal finance because we are frequently
making decisions about how to spend our money to
get these wants.
Opportunity Cost


We are all forced to make choices.
Choices always involve costs.
 Opportunity
cost is the SINGLE most desired good or
service that is forgone in order to obtain something else.
 Every
choice involves an opportunity cost. Why?
Scarcity

Scarcity occurs when there is not enough of something to meet the
demand for it.



How many people can go on a swing (down a slide) at one time?
What if there are five people but only one cookie?
Scarcity is a problem for EVERYONE!



Consumers do not have enough money to buy everything that their
families want.
Companies (firms) cannot make enough of a product so that every
child can have one.
Schools do not have enough money to buy all of the supplies that
teachers want.
What do you hear?

What do we call it when we do not have enough money to
meet people’s desires? You might hear:




money is “tight”
“mommy and daddy do not make enough to afford all of those
things”
“we cannot afford to buy that right now”
How do we handle the scarcity problem?
 We
make decisions about how to use our resources.
 What criteria do we use to make this decision?
Decision Making Model


1.
2.
3.
4.
The process of considering alternatives and
analyzing information to make a choice.
Four steps:
What is the problem?
List the choices or options to solve problem.
Identify what you want to get out of this choice
Evaluate alternatives.
How to spend birthday money?
Criteria 
Alternatives
↓
How to spend birthday money?
Criteria 
Alternatives
↓
Soccer
ball
Video
Game
Save
How to spend birthday money?
Within
budget
Save
Can share
with friends
Video
Game
Future
expense
necessary
Alternatives
↓
durable
Soccer
ball
Parents
approve
Criteria 
How to spend birthday money?
Within
budget
+
Save
Can share
with friends
Video
Game
Future
expense
necessary
Alternatives
↓
durable
Soccer
ball
Parents
approve
Criteria 
How to spend birthday money?
Save
Within
budget
+
Video
Game
Can share
with friends
+
Soccer
ball
Future
expense
necessary
Parents
approve
Alternatives
↓
durable
Criteria 
How to spend birthday money?
+
+
Video
Game
Save
Within
budget
Future
expense
necessary
+
Soccer
ball
Can share
with friends
Parents
approve
Alternatives
↓
durable
Criteria 
How to spend birthday money?
Future
expense
necessary
Can share
with friends
+
+
+
-
Soccer
ball
Video
Game
Save
Within
budget
Parents
approve
Alternatives
↓
durable
Criteria 
How to spend birthday money?
Parents
approve
Future
expense
necessary
Can share
with friends
Within
budget
Alternatives
↓
durable
Criteria 
+
+
+
-
+
Soccer
ball
Video
Game
Save
How to spend birthday money?
Future
expense
necessary
Can share
with friends
Within
budget
durable
Alternatives
↓
Parents
approve
Criteria 
+
+
-
+
Soccer
ball
Video
Game
+
Save
+
How to spend birthday money?
-
Save
+
+
Within
budget
+
Can share
with friends
Parents
approve
Video
Game
Alternatives
↓
Future
expense
necessary
durable
Criteria 
+
-
+
Soccer
ball
How to spend birthday money?
Future
expense
necessary
+
-
+
Save
+
+
+
Within
budget
Parents
approve
Video
Game
Alternatives
↓
Can share
with friends
durable
Criteria 
-
+
Soccer
ball
How to spend birthday money?
Parents
approve
Future
expense
necessary
Can share
with friends
Video
Game
+
-
+
+
Save
+
+
+
-
Alternatives
↓
Within
budget
durable
Criteria 
Soccer
ball
+
How to spend birthday money?
durable
Parents
approve
Future
expense
necessary
Can share
with friends
Within
budget
Criteria 
Video
Game
+
-
+
+
-
Save
+
+
+
-
+
Alternatives
↓
Soccer
ball
How to spend birthday money?
Future
expense
necessary
Can share
with friends
Within
budget
Soccer
ball
+
Video
Game
+
-
+
+
-
Save
+
+
+
-
+
Alternatives
↓
durable
Parents
approve
Criteria 
How to spend birthday money?
durable
Parents
approve
Future
expense
necessary
Can share
with friends
Within
budget
Criteria 
Soccer
ball
+
+
Video
Game
+
-
+
+
-
Save
+
+
+
-
+
Alternatives
↓
How to spend birthday money?
durable
Parents
approve
Future
expense
necessary
Can share
with friends
Within
budget
Criteria 
Soccer
ball
+
+
+
Video
Game
+
-
+
+
-
Save
+
+
+
-
+
Alternatives
↓
How to spend birthday money?
Parents
approve
Future
expense
necessary
Can share
with friends
Soccer
ball
+
+
+
+
Video
Game
+
-
+
+
-
Save
+
+
+
-
+
Alternatives
↓
Within
budget
durable
Criteria 
How to spend birthday money?
durable
Parents
approve
Future
expense
necessary
Can share
with friends
Within
budget
Criteria 
Soccer
ball
+
+
+
+
+
Video
Game
+
-
+
+
-
Save
+
+
+
-
+
Alternatives
↓
What Impacts Decision Making?


We generally assume that all economic and financial
actors are rational so all decisions they make are
rational.
However, there are many instances where attitudes and
assumptions about money influence financial decisions,
causing people to behave in unpredictable or irrational
ways:
Buying more expensive name brand product over generic.
 Philanthropy including volunteer work or charity.

What We Learned
1.
2.
3.
4.
Wants
Opportunity Cost
Scarcity
Decision Making