Transcript Melissa - Towson University

FINANCIAL LITERACY FOR
THE ELEMENTARY
CLASSROOM
Day One.
Sponsored by:
Maryland Council on Economic Education and
Towson University College of Business and Economics.
Questions?
Online material on Decision Making, Scarcity,
Wants, Opportunity Cost.
Day One Session 1
Standard One (continued)
Make Informed, Financially Responsible Decisions
Where have we been?
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Economic wants
Opportunity cost
Scarcity
Decision making
How are all of these concepts important to
economics and personal finance?
 Households
and businesses make decisions
about how to use resources to achieve goals
Making the Connection
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What resources?
– skills and talents
 Capital – goods used in the production of final
goods/services
 Natural – gifts of nature
 Human
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So now lets link all of these economic
concepts to financial literacy material (what
are these goals anyway?)
Personal Finance Goals
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Goal: statement about what a person wants to be, to do, or to
have accomplished by taking certain steps; provides direction to
a plan of action.
Financial Goals are things you want to accomplish that cost or
involve money. For example,
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Debt reduction
Get through holidays without debt
Pay for college for my two children
Retire at 70 and live comfortably
Attitudes about money, saving and investing impact goals.
Will talk about developing financial goals next class.
What Impacts PF Decisions or Actions?
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Age, sex, race
Family size and structure
Confidence or trust (banks, investing, medical)
Personality (future oriented)
Income sources and level
Religion
Health
Expectations (earnings, lifestyle, health, …)
Final Decision - Where to Buy?
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Market – where goods, services and resources are
bought and sold.
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Good – tangible items that are made/grown that satisfy an economic want.
Services – actions that people do for one another to satisfy economic wants.
Requires both a buyer (demand / consumer) and seller (supply / producer).
Markets exist in many places:
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Face to face (school lunch, grocery store, babysitter)
Phone, mail or online (eBay, craigs list, website or catalog)
How do you choose market type? Personality and preferences.
Types of Markets
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Just like many sources of income, there are many
types of markets:
Output market – consumers and producers efficiently
determine price and quantity of output available. Output is
a good or service.
 Labor (input) market – employers and workers efficiently
determine wages and quantity of labor hired.
 Financial market – consumers and producers efficiently
determine the price and quantity of the item (stocks, bonds,
commodities) available.
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Philanthropy
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A personal or corporate interest in helping others,
especially through gifts to charities, or endowments
to institutions.
Does NOT have to involve money:
 Volunteer
service – working to help others in the
community without being paid (read-a-thon)
 Charity – The voluntary provision of money, materials,
or help to people in need (trick or treat for UNICEF,
canned food drive)
Day One Session 2
Standard Two:
Relate Careers, Education and Income
Why do we work?
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To make purchases (money does not grow on trees).
 Most
people get money by earning it (income) in the
labor market.
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Brainstorm (as a child) – where could you get money?
What special human resources (skills and talents) do I have?
 How do I enjoy spending my time:
 Do my friends, neighbors or family need help with something?
 Are there capital resources I have at home or could borrow
(computers, tools or art supplies) and use to earn money?
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Sources of Income
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Income from employment:
 Determined
by education, training, interests,
location, personal characteristics and luck.
 Largest source for most.
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Investment income:
 financial
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skills, personal characteristics
Inheritance or gifts:
 intergenerational
impact
Jobs and Careers
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A job can lead to a career (pattern of activities
and positions involved in an individuals lifetime of
work to which the person has made a long term
commitment).
What impacts career choices?
 Education,
personal characteristics, wealth,
opportunities, interests, income potential (from
education, training), time preference…
Why care about jobs?
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Larger macroeconomic benefit of jobs and
encouraging employment:
provide income  income allows for consumption
 consumption creates more job growth.
 Circular flow.
 Jobs
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How does income impact spending?
 Cash
for consumption or saving (marginal propensity to
consume)
 Determines access to credit (more next class)
Day One Session 3
Standard Three (supplemental):
Plan and Manage Money
First, let’s clarify something…
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Saving different from investing. Some think
the two are the same… they are wrong!
Saving – short term
Investing – long term
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How are these distinct? Let’s take a look…
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Saving
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One saves by reducing present consumption - a
fisherman who spares a fish for use as tomorrow’s bait,
reduces his present consumption in the hope of
increasing it in the future.
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Savings are typically for short-term needs such as eating
tomorrow (the fish), emergencies or upcoming expenses such
as holiday season, vacation, weekend plans.
Since it is short term you earn a low, fixed rate of return and can
withdraw your money easily.
 Savings account, money market, cd, piggy bank.
Investing
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One invests in the hope of increasing future
consumption (realizing higher long-term
returns).
But, it is risky…
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Unlike bank savings, stocks and bonds over the long
term have returned enough to outpace inflation, but they
also decline in value from time to time.
The decision about which investment to choose is
influenced by factors such as yield (rate of return), risk
(probability of losing money), and liquidity (how likely you
are to need to convert to cash).
Phew!
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Now that we have clarified the difference
between saving and investing… let’s move on.
Spending Plan (aka Budget)
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Budget – A plan that balances money coming
in (income) with money going out (expenses).
 Make
a list of all income sources.
 Make a list of all expenses.
 Do you have enough for everything?
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Use a budget to make decisions about what is
most important to you.
Debbie has a great budget example for you.
Products at Financial Institutions
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Organizations that provide financial services for its
clients or members.
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Checking account (interest bearing on some, low risk)
Savings account (low interest rates, low risk)
Money market account (minimum balance, interest, low
risk)
Certificate of Deposit (fixed term, interest, fee for early
withdrawal)
Mortgages
Insurance
Bank websites are excellent sources for information
on these account types.
Financial Goals
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We talked about these last class – they are the
things you want to accomplish that cost or
involve money.
Goals can be short term (one year), medium
term (3-5 years) and long term (5+ years).
Examples include debt reduction, wealth
accumulation for retirement, buy a
house/car/iPhone.
Developing Financial Goals
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Goals based on personal values
What do you want to accomplish (helping others, self,
community, church, family).
 Allow them to define – do not tell what “should” be goal.
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Age appropriate financial goals
Time preference and young children.
 Budget size.
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Ways to earn (job opportunities) and save for future
What do people need?
 Child or pet care (dog walking)
 Chores or errands for family or neighbor.
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Let’s have some fun. Time to play
a game…
Taxation
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Taxes are a compulsory payment by
individuals or organizations to the government;
fees placed on income, property, or goods to
support government programs.
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What do taxes support? Public goods.
How do taxes affect individuals, families, and
communities? Services and opportunities?
Reasons for paying taxes? Tragedy of the
commons.
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Contracts with Consequences
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Contracts are legally enforceable written or
oral agreements between two of more parties
to do or not so something. Credit is a contract.
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Common for children: behavioral, cell phone,
library card, jobs (babysitting, yard work, paper
route), allowance, promises.
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Why enter into a contract?