Teacher Guide. A Practical Guide for Teaching Students to Understand and Manage Their Money

Transcription

1 Teacher Guide A Practical Guide for Teaching Students to Understand and Manage Their Money Federally insured by NCUA

2 Financial Literacy What is it? Why is it important? Money plays an integral part of our lives. There are consequences for every decision made in life; this includes your financial choices. Making good money choices requires learning how to make wise decisions and how to manage your money appropriately. This concept, known as financial literacy, provides awareness of how money works and how to effectively manage it. Overwhelming evidence supports the critical need for education regarding money matters. Major national findings include: 61% of Americans live paycheck to paycheck 50% of Americans have less than one moth s income saved 41% of Generation Y (ages 18-29) do not pay their bills on time each month All elements to survive in this world involve money. Shelter, food, clothing, transportation, healthcare, and vacations all require money. Understanding these concepts can make the difference between living a life of prosperity or a life of constant financial worry. Having a place to live will be one of the biggest expenses you will have during your lifetime, yet statistics indicate that: 15% of U.S. home loans are consistently delinquent 1 child in every classroom in America is at risk of losing his or her home because the family is unable to pay the mortgage 6 in 10 homeowners wish they understood the terms and details of their mortgage better A survey conducted in 2008 by the national Jump $tart Coalition of high school and college students revealed alarming results of students understanding of financial literacy. High school students scored 48.3%, while college students scored 62.2%. The scores indicate that young adults lack the necessary skills to handle their personal finances effectively. The inability to handle personal finances has led many Americans to accumulate unnecessary debt. $75,082 is the average debt (including housing) for those who are head of household and 55 or older $15,216 is the average household credit card debt $5,446 is the forecasted credit card debt per individual as of the end of In addition, the National Financial Educators Council found that both students and parents agree that college students are not prepared to deal with the financial challenges that lie ahead. Their research revealed that: $23,186 is the average student loan debt in the United States 85% of college graduates plan to move back home after graduation 76% of college students wish they had more help preparing their personal finances 54% of college students reported they had overdrawn their bank accounts

3 In New Mexico, financial literacy courses must be offered to high school students and count as an elective credit. Currently, students have a choice whether to take the class or not since it is not a requirement for graduation. The financial problems encountered in New Mexico are not much different from the national findings. A 2012 study of New Mexicans money habits (conducted by the FINRA Investor Educational Foundation) found that: 62.8% of New Mexicans do not have three months of emergency savings 40% pay the minimum monthly payment on their credit card bills 25% have unpaid medical bills 11.5% of New Mexicans do not use a checking or savings account An abundance of information about financial literacy is available; however, many of the resources focus on selected financial components, lacking in depth and broadness. This course is unique in that it contains 18 financially relevant topics (ranging from Budgeting to Investing to Retirement) that are organized in such a way as to engage the young adult to learn about the different stages of life (from adolescent to late adult) along with the corresponding money issues a student might confront. The student can apply this information to their own lives, resulting in a culminating Capstone Project including unexpected life events, which will force critical decision making about their finances. It is recommended that the student hold onto this guide as a reference in class and for the future. The knowledge gained from this course will empower New Mexico students to understand real-world financial concepts, which should enable them to make sound financial decisions about savings, student loan debt, buying a car, paying taxes, and more. Their actions and application can help secure a happy financial future. In conclusion, teaching Americans, particularly the youth, to save, budget, and manage money and credit effectively will reap long-term benefits. According to the Financial Literacy and Education Commission, financially literate people are more likely to be self-supporting; to prepare for financial setbacks and emergencies; and to increase their standard of living through wise spending, saving, planning and investing. They are also less susceptible to scams and identity theft. Financially literate citizens contribute positively to the local and national economy, improving peace of mind and national stability. Financial literacy provides security for individuals and families by promoting a higher standard of living and prosperity.

4 Teacher Hints It is recommended that each topic be delivered in sequential order. The Teaching Guide is presented as follows: Pages on the left side of the Teacher s Guide highlight key terms, teaching tips, and engagement activities to guide the teacher through the topic. Pages on the right side of the Teacher s Guide are identical to what the students see in the Student Guide. - The Student Guide contains activities and assignments for the students (some of which are Internet-based). - PowerPoint presentations correlate to each topic in the same order as in the Teaching Guide and the Student Guide. - Each topic contains an Assessment containing 10 questions (5 True and False; and 5 Matching). - Emphasize the importance of writing legibly with the students. - Video links are provided within the PowerPoint presentations and the Teacher Guide. - Many links are to YouTube; thus, permission from your school administration might be necessary. - The Life Stages Project should be used throughout the semester. It walks the students through the various stages of life and plots their associated financial situations.

5 Website references Average American Expects to be Debt Free by Age 53: html;_ylt+A2KjahrINtRGxgAIC2TmYIQ Business Insider Slideshow: Jump $tart Coalition Survey of Personal Financial Literacy Among Students: National Financial Educators Council: New Mexico Savings Rate Among Worst in the Country The Truth About Credit Card Debt U.S. Delinquencies, Foreclosures Decline to Pre-crisis Rates Teaching Kids Financial Responsibility is Vital The Federal Reserve NeighborWorks America PewResearchCenter Mortgage Bankers Association Freddie Mac: Why Borrowers Don t Ask for Help

6 Additional financial literacy resources Topic 1 Building Wealth Compound Interest Calculator Compound Interest Forecaster Net Worth Calculator Topic 2 Financial Services How is a Credit Union Different From a Bank? Bank.aspx Credit Union Locator Credit Union and Bank Rates Banks and Credit Unions in Albuquerque Hands on Banking Topic 3 Employee Smarts Career Test Salary.com My Future: Career College Military Topic 4 Budget Expense Tracker Monthly Budget Worksheets Video-Select Make Your Money Work For You Spending

7 Topic 5 Investing and Saving My Kids Bank Artificial Bank for Savings Education CNN Money Investing Investopedia Mutual Funds Video-Select Do It Yourself (Entrepreneurship) Video-Select Ways to Save Video-Select Making It and Keeping It Biz Kids (Kids Teach Kids About Money and Business) Topic 6 Retirement FDIC and NCUA Keep Your Money Safe Savings and Retirement Calculator Video-Select Saving for Retirement Protect Yourself-Retirement Planning: What s the Best Way to Plan for Retirement? Traditional and Roth IRAs Comparison Chart Topic 7 Cost of College Guide to College Savings Plan Federal Student Aid Financial Aid The ACT:

8 Topic 8 Renting an Apartment Renting an Apartment Renter s Rights Security Deposit and Eviction Topic 9 Credit Cards Credit Cards Credit for Beginners (student link) Video-Select Digging Out of Debt Video Minimum Payments on Credit Cards Video Credit Scores (legitimate vs. non-legitimate sites) Video A Truly Free Credit Report Video AnnualCreditReport.Com-Rock Jingle Video AnnualCreditReport.Com-Irish Jingle Topic 10 Insurance Renter s Insurance: Video Get Insured Topic 11 Buying a Car Auto Loan Calculator Video Paying Your Car Loan Video Buying a Car

9 Buying a Car Financing an Auto Topic 12 Buying a Home Mortgage Comparison Worksheets Home Maintenance Worksheets Home Ownership Topic 13 Taxes Understanding Taxes Topic 14 Financing a Family Getting Married Topic 15 Identity Theft Video FTC Documentary on Identity Theft Federal Trade Commission Identity Theft Video Signs of Identity Theft Video Identity Theft: Rapid Response Techniques: Video-What if You are a Victim of Identity Theft? Online Game ID Theft Faceoff Topic 16 Predatory Lending Federal Trade Commission Video Payday Lending

10 Topic 17 Online Purchases How to Shop Online More Safely Shopping Online Topic 18 Avoiding Financial Mistakes Emergency Fund Calculator Plan for the What-ifs of Life Teaching Resources Other Jump$tart Coalition (National Financial Literacy Standards/Best Practices/Survey of High School Students) NCUA Assistance Center How to Get a Higher Rate on Your Savings Econedlink Personal Finance Lessons: Yahoo Finance Cash Course Smart About Money Money Skill Online Reality-based Personal Finance Course Practical Money Skills Mind Your Finances CNN-Money Financial Tutorials - Other Video (in entirety) Your Life, Your Money (Young People Dealing with Real Life and lmportant Financial Issues) Notes: (1) Individual segments also appear under appropriate topics; & (2) See Tools & Resources for Facilitator s Guide, quizzes, and other useful information.

11 Teacher Guide Table of Contents Life Stages Project Instructions 1. Building Wealth 2. Financial Services 3. Employee Smarts 4. Budget 5. Investing and Saving 6. Retirement 7. Cost of College 8. Renting an Apartment 9. Credit Cards 10. Insurance 11. Buying a Car 12. Buying a Home 13. Taxes 14. Financing a Family 15. Identity Theft 16. Predatory Lending 17. Online Purchases 18. Avoiding Financial Mistakes Nusenda Federal Credit Union. All rights reserved.

12 Estimated Class Sessions for Each Topic Topic Traditional Schedule Block Scheduling # of Class Sessions # of Class Sessions 1. Building Wealth Financial Services Employee Smarts Budgeting Investing and Saving Retirement Cost of College Renting an Apartment Credit Cards Insurance Buying a Car Buying a Home Taxes Financing a Family Identity Theft Predatory Lending Online Purchases Avoiding Financial Mistakes Life Stages Ledger 10 5 Total Sessions 90 45

13 Life Stages Project Teacher Instructions The Teaching Guide for the semester Life Stages Project follows. This project is cumulative in nature and should be implemented periodically (every 2-3 weeks) with the first segment completed the first day of class. Purpose: Guides the students in mapping out their financial future while understanding that unexpected events occur in life that will create financial adjustments. Note: It is highly recommended that the student complete each section of this project IN PENCIL in order to easily make changes Nusenda Federal Credit Union. All rights reserved.

14 Day 1-Step 1: Life Stages Project Have the students complete the Pre-capstone Questionnaire (in the back of their Student Guide). After completion, collect this form from each student and retain until the end of the semester. This information will be required to compare and contrast the financial and life goals that they set out to achieve. First Name: Last Name: Pre-capstone Questionnaire Answer the following questions and turn in when completed. Question Answer What do you want to do for the first eight years after graduating from high school? What kind of job/career do you want to have in life? What kind of yearly income do you expect to make once you begin your career? Do you want to get married? Do you want to have children? If so, how many? How much education do you plan to achieve? Do you want to travel? If so, where? How do you want to invest your money? Where do you want to live? Do you want to buy or rent a house? 14

15 Adolescent Life Stage Life Stages Project Step 2 (within the first three weeks of the semester): Have the students complete the Adolescent (16-17) Life Stage Ledger, Columns B and D, (in the back of the Student Guide). Income: Indicate to the students that their income is based on working 15 hours per week at $8.50 per hour. They will need to compute the monthly amount and then multiply it by 12 to obtain the yearly income. Student Tip: Row 4 Expenses Pay for what you use: Have the students identify what expenses might pertain to them if they were living on their own. Have the students estimate how much they might pay for those expenses. Suggest that they might consider taking the ledger home to seek advice from their parents regarding an appropriate amount for each expense. Add Income and Expenses: Have the students total their Income and Expenses and subtract the Expenses from the Income to obtain the difference (Line 56). Note: The Income Less Expenses should be negative, because at this point, it is assumed they don t make enough money to pay the bills currently paid by their parents. Real Life Scenario Game Access the Adolescent PowerPoint Game. Purpose: Helps the students realize that they will encounter unexpected events in life that will affect their finances. Randomly assign or have students draw a number from a container to determine which life scenarios they will encounter. Upon encountering their life scenarios, have the students compute and list the amounts in Column F, Plus/Less Adjustments. Totals After Adjustments Have the students compute the new totals after the adjustments to Column H are complete (Column D ± Column F = Column H). Check for Understanding Ask the students to share their totals for Column H. Point out that Column H should be negative on Row 56, because they doesn t make enough money to pay for many of the expenses covered by their parents. 15

16 Young Adult Pre-career Stage Life Stages Project Step 3 (within 4 6 weeks of semester): Have the students complete the Young Adult Pre-career (18-25) Life Stage Ledger, Columns B and D, (in the back of the Student Guide). Have the students select one of the tracks listed below: School School and Job Military Workforce Have the students determine if they will live with their parents after high school. Note: This decision will affect the expenses they incur during this time period. Income: o Students choosing School they have no wages. Emphasize that their parents will be funding 100% of their spending habits. o Students choosing School and Job should compute their wages as working 20 hours per week at $8.50 per hour. o Students choosing the Military should compute their wages at $1,800 per month. o Students choosing the Workforce should compute their wages as working 40 hours per week at $10 per hour. Expenses Pay for what you use Have the students complete the Young Adult (18-25) column in the Estimated Percentage of Expense Table (in the back of the Student Guide). Note: The students should estimate what percentage of their income they will pay for each expense listed. They may refer to Topic 4, Budget, to determine appropriate percentages. Provide the flexibility, however, for each student to determine individual percentages (within reason). Essential questions for the students: o Based on your budget for each category, what can you get for that amount? o Is the amount you budgeted realistic based on the real cost of living in your area? o Might you consider reallocating your percentages to meet the needs that you have for this stage in your life? After completing the Estimated Percentage of Expense Table, have the students determine what expenses they will incur based on the decisions made above. Expenses will be computed by multiplying their incomes by the percentage listed in the Estimated Percentage of Expense Table. Note: Based on the track chosen, they will need to determine the incurred expenses. Add Income and Expenses: Have the students total their Income and Expenses and then subtract the Expenses from the Income to obtain the difference (Line 56). 16

17 Life Stages Project Real Life Scenario Game Access the Young Adult PowerPoint Game. Purpose: Helps the students realize that they will encounter unexpected events in life that will affect their finances. Randomly assign or have the students draw a number from a container to determine which life scenarios they will encounter. Upon encountering their life scenarios, have the students compute and list the amounts in Column F, Plus/Less Adjustments. Totals After Adjustments Have the students compute the new totals after the adjustments to Column H are complete (Column D ± Column F = Column H). Check for Understanding Ask the students to share their totals for Column H. Have them explain what the total amount implies to their overall budget and how it changed from the previous life stage. 17

18 Adult Career Stage Life Stages Project Step 4 (within 7 9 weeks of semester): Have the students complete the Adult Career (26-40) Life Stage Ledger, Columns B and D (in the back of the Student Guide). Note: At this point, indicate to the students that they are now on their own and must pay for all of their own expenses. Income: Have the students list their yearly income as the amount researched from Topic 3, Employee Smarts. If they are unsure of the yearly amount, they can go to the following website and determine pay for various jobs/careers/professions. Pay for what you use (Expenses) Have the students complete the Adult (26-40) column in the Estimated Percentage of Expense Table (in the back of the Student Guide). Note: The students should estimate what percentage of their income they will pay for each expense listed. They may refer to Topic 4, Budget, to determine appropriate percentages. Provide the flexibility, however, for each student to determine individual percentages (within reason). Essential questions for the students: o Based on your budget for each category, what can you get for that amount? o Is the amount you budgeted realistic based on the real cost of living in your area? o Might you consider reallocating your percentages to meet the needs that you have for this stage in your life? After completing the Estimated Percentage of Expense Table, have the students determine what expenses they will incur based on the decisions made above. Expenses will be computed by multiplying their incomes by the percentage listed in the Estimated Percentage of Expense Table. Add Income and Expenses: Have the students add up their Income and Expenses and then subtract the Expenses from the Income to obtain the difference. 18

19 Real Life Scenario Game Access the Adult PowerPoint Game. Life Stages Project Purpose: Helps the students realize that they will encounter unexpected events in life that will affect their finances. Randomly assign or have the students draw a number from a container to determine which life scenarios they will encounter. Upon encountering their life scenarios, have the students compute and list the amounts in Column F, Plus/Less Adjustments. Totals After Adjustments Have the students compute the new totals after the adjustments to Column H are complete (Column D + Column F = Column H). Check for Understanding Ask the students to share their total for Column H. Have them explain what the total amount implies to the overall budget and how it changed from the previous life stage. 19

20 Mature Adult Life Stage Life Stages Project Step 5 (within weeks of semester): Have the students complete the Mature Adult (41-60) Life Stage Ledger, Columns B and D, (in the back of the Student Guide). Income: At this stage, have the students estimate their early income as 25% more than the income in the Adult stage. Indicate that as they progress in their career, they should realize increases in pay. Note: To compute the 25% increase in pay from the previous stage, have the students multiply the amount by 125%. Pay for what you use (Expenses) Have the students complete the Mature Adult (41-60) column in the Estimated Percentage of Expense Table (in the back of the Student Guide). Note: The students should estimate what percentage of their income they will pay for each expense listed. They may refer to Topic 4, Budget, to determine appropriate percentages. Provide the flexibility, however, for each student to determine individual percentages (within reason). Essential questions for the students: o Based on your budget for each category, what can you get for that amount? o Is the amount you budgeted realistic based on the real cost of living in your area? o Might you consider reallocating your percentages to meet the needs that you have for this stage in your life? After completing the Estimated Percentage of Expense Table, have the students determine what expenses they will incur based on the decisions made above. Expenses will be computed by multiplying their income by the percentage listed in the Estimated Percentage of Expense Table. Add Income and Expenses: Have the students add up their Income and Expenses and then subtract the Expenses from the Income to obtain the difference. 20

21 Life Stages Project Real Life Scenario Game Access the Mature Adult PowerPoint Game. Purpose: Helps the students realize that they will encounter unexpected events in life that will affect their finances. Randomly assign or have the students draw a number from a container to determine which life scenarios they will encounter. Upon encountering their life scenarios, have the students compute and list the amounts in Column F, Plus/Less Adjustments. Totals After Adjustments Have the students compute the new totals after the adjustments to Column H are complete (Column D + Column F = Column H). Check for Understanding Ask the students to share the total for Column H. Have them explain what the total amount implies to the overall budget and how it changed from the previous life stage. 21

22 Senior Life Stage Life Stages Project Step 6 (within weeks of semester): Have the students complete the Senior (over 60) Life Stage Ledger, Columns B and D, (in the back of the Student Guide). Income: At this stage, have the students estimate their yearly income, which has decreased by 20% because they are now retired. Note 1: Explain that most people work well into their 60s before they retire and can begin receiving full Social Security benefits at age 66. Each year you wait, however, to receive benefits increases the monthly payout; thus, some people wait past age 66 before receiving benefits. Note 2: Emphasize to students that Social Security should not be their sole source of retirement income. Note 3: To compute the yearly income for this stage, the students will take the Total Income from the Mature Adult stage and multiply it by 80%. Pay for what you use (Expenses) Have the students complete the Senior (Over 60) column in the Estimated Percentage of Expense Table (in the back of the Student Guide). Note 1: The students should estimate what percentage of their income will be paid for each expense listed. They may refer to the Topic 4, Budget, to determine the appropriate percentages. Give them the flexibility, however, to determine individual percentages (within reason). Note 2: Remind students that at this phase of life, some expenses, such as a mortgage, may not exist because the home has been paid off. Also, health care expenses may increase if their health has deteriorated. In addition, food expenses may decrease, because they might not eat as much as they get older and children have moved out of the house. Essential questions for the students: Based on your budget for each category, what can you get for that amount? o Is the amount you budgeted realistic based on the real cost of living in your area? o Might you consider reallocating your percentages to meet the needs that you have for this stage in your life? 22

23 Life Stages Project After completing the Estimated Percentage of Expense Table, have the students determine what expenses they will incur based on the decisions made above. Expenses will be computed by multiplying their income by the percentage listed in the Estimated Percentage of Expense Table. Add Income and Expenses: Have the students add up their Income and Expenses and then subtract the Expenses from the Income to obtain the difference. Real Life Scenario Game Access the Senior PowerPoint Game. Purpose: Helps the students realize that they will encounter unexpected events in life that will affect their finances. Randomly assign or have the students draw a number from a container to determine which life scenarios they will encounter. Upon encountering their life scenarios, have the students compute and list the amounts in the Column F, Plus/Less Adjustments. Totals After Adjustments Have the students compute new totals after the adjustments to Column H are complete (Column D + Column F = Column H). Check for Understanding Ask the students to share their totals for Column H. Have them explain what the total amount implies to their overall budget and how it changed from the previous life stage. 23

24 Step 7 (Capstone Activity for the Life Stages Project): Life Stages Project Return the Pre-capstone Questionnaires to the students, which they completed the first day of class. Have the students reflect on the various stages they encountered during the Life Stages Project and compose a 2-3 page, typed report that contains the following information: What events turned out differently for you than what was indicated on the Pre-capstone Questionnaire? In the Adolescent Life Stage, what did you learn about your family finances? Do you appreciate the amount of money your parents or guardians spend on you? Why or why not? Could you survive on your own by working a part-time job at minimum wage? Why or why not? Explain. In the Young Adult Life Stage, what are some key expenses you look forward to having in your budget after graduating from high school? What specific things can you do to prevent getting into debt at this stage of your life? For the Adult Career Life Stage, Mature Adult Life Stage, and the Senior Life Stage, compare and contrast how you think your financial life will be the same or different from the Life Stages Project. For example, provide information regarding dollar amounts for Income, Housing, Auto, Other Living, and Personal expenses in addition to your budgeted amounts for Investing and Savings. Note: This report should be typed and double-spaced with a font size of

25 Life Stages Project Life Stages Project Student Instructions Nusenda Federal Credit Union. All rights reserved. 25

26 Life Stages Project First Name: Last Name: Pre-capstone Questionnaire Answer the following questions and turn in when completed. Question Answer What do you want to do for the first eight years after graduating from high school? What kind of job/career do you want to have in life? What kind of yearly income do you expect to make once you begin your career? Do you want to get married? Do you want to have children? If so, how many? How much education do you plan to achieve? Do you want to travel? If so, where? How do you want to invest your money? Where do you want to live? Do you want to buy or rent a house? 26

27 Estimated percentage of expense table Life Stages Project Indicate what percentage of your income will be used to pay each of the following expenses during each life stage. Note: Some categories might not pertain to you unless you incur an unexpected event (in which case, you need to adjust your percentages). Spending Category Example House Expenses Mortgage /Rent 20% 2 nd Mortgage Utilities: Electric/Gas/Water 3% Maintenance/Repair 6% Internet/Cable TV 1% Insurance 2% Auto Expenses Car Loan(s) 5% Gasoline and Motor Oil 5% Insurance 2% Repairs/Cleaning/Registration Fees 3% Other Living Expenses Health Care/Medical/Doctor/ Dentist/Health Insurance 4% Clothing 2% Personal Care Products and Services 1.5% Food/Groceries 10% Cell Phone 2% Entertainment/Eating Out/ Concerts/Movies, etc. 3% Vacations/Travel 2% Personal Expenses School Expenses-Tuition/Books/ Supplies, etc. 2% Financial Charges/ATM Fees, etc. 1% Credit Cards 8% Child Care/Child Allowance Charity/Donations 1% Child Support Alimony Personal Loans 3% Legal-Lawyer/Tickets/Fines/Fees Investing and Savings Saving 3% Retirement: 401(k)/403(b)/IRA 3% Stocks/Bonds/Mutual Funds 3% Life and Personal Insurance 2% Other 2.5% Total 100% Young Adult Adult Mature Adult Senior Over 60 27

28 x 12 months $ - x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months $ - $ - Life Stages Adolescent High School Young Adult - Pre-Career College-Military-Work Force Adult Career Post College-Military-Work Force Mature Adult Mid-Career-Military-Workforce Senior Over 60 Post-Career-Military-Workforce Income Amount x 12 Months Yearly Amount x 12 Months Yearly Amount x 12 Months Yearly Amount x 12 Months Yearly Amount x 12 Months Yearly Wages $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - Interest $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - Other $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - Total Income $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - $ - x 12 months $ - House Expenses Mortgage/Rent Home Equity/2 nd Mortgage Utilities: Electricity/Gas/Water Maintenance/Repair Internet/Cable TV Other Total House Expenses Auto Expenses Car Loan Gasoline and Motor Oil Insurance Repairs/Cleaning/ Registration Fees Total Auto Expenses Other Living Expenses Health Care/Medical/Doctor Dentist/Health Insurance Clothing Personal Care Products and Services Food/Groceries Cell Phone Entertainment/Eating Out/Concerts/ Movies, etc. Vacations/Travel Total Other Living Expenses Personal Expenses School Expenses/Tuition/Books/ Supplies Financial Charges/ATM Fees, etc. Credit Cards Child Care/Child Allowances Charity/Donations Child Support Alimony Personal Loans Legal/Lawyer/Tickets/Fines/Fees Total Personal Expenses Investing and Savings Savings Retirement: 401(k)/403(b)/IRA Stocks/Bonds/Mutual Funds Life and Personal Insurance Other Total Investing and Savings Miscellaneous x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - $ - $ - x 12 months $ - x 12 months $ - x 12 months x 12 months $ - $ - $ - $ - x 12 months $ - x 12 months x 12 months $ - x 12 months $ - x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - x 12 months $ - x 12 months x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - $ - $ - $ - x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - x 12 months $ - $ - $ - x 12 months x 12 months x 12 months $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months x 12 months x 12 months $ - $ - $ - $ - $ - $ - $ - x 12 months x 12 months x 12 months $ - $ - Total Expenses $ - $ - $ - $ - $ - $ - $ - $ - $ - Income Less Expenses $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

29 Life Stages Project Adolescent Life Stage Ledger A B C D E F G H 1 Adolescent Plus (+)/Minus (-) Totals After High School Adjustments Adjustments 3 Income Amount x 12 Months Yearly Yearly Yearly 4 Wages $ - x 12 months $ - $ - $ - 5 Interest $ - x 12 months $ - $ - $ - 6 Other $ - x 12 months $ - $ - $ - 7 Total Income $ - x 12 months $ - $ - $ - 8 House Expenses 9 Mortgage/Rent x 12 months $ - $ - $ - 10 Home Equity/2nd Mortgage x 12 months $ - $ - $ - 11 Utilities: Electricity/Gas/Water x 12 months $ - $ - $ - 12 Maintenance/Repair x 12 months $ - $ - $ - 13 Internet/Cable TV x 12 months $ - $ - $ - 14 Other x 12 months $ - $ - $ - 15 Total House Expenses $ - $ - $ - $ - 16 Auto Expenses 17 Car Loan x 12 months $ - $ - $ - 18 Gasoline and Motor Oil x 12 months $ - $ - $ - 19 Insurance x 12 months $ - $ - $ - 20 Repairs/Cleaning/Registration Fees x 12 months $ - $ - $ - 21 Total Auto Expenses $ - $ - $ - $ - 22 Other Living Expenses Health Care/Medical/Doctor/ 23 Dentist/Health Insurance x 12 months $ - $ - $ - 24 Clothing x 12 months $ - $ - $ - 25 Personal Care Products and Services x 12 months $ - $ - $ - 26 Food/Groceries x 12 months $ - $ - $ - 27 Cell Phone x 12 months $ - $ - $ - Entertainment/Eating Out/Concerts, etc. x 12 months 28 $ - $ - $ - 29 Vacations/Travel x 12 months $ - $ - $ - 30 Total Other Living Expenses $ - $ - $ - $ - 31 Personal Expenses School Expenses/Tuition/Books/ 32 Supplies x 12 months $ - $ - $ - 33 Financial Charges/ATM Fees, etc. x 12 months $ - $ - $ - 34 Credit Cards x 12 months $ - $ - $ - 35 Child Care/Child Allowances x 12 months $ - $ - $ - 36 Charity/Donations x 12 months $ - $ - $ - 37 Child Support x 12 months $ - $ - $ - 38 Alimony x 12 months $ - $ - $ - 39 Personal Loans x 12 months $ - $ - $ - 40 Legal/Lawyer/Tickets/Fines/Fees x 12 months $ - $ - $ - 41 Total Personal Expenses $ - $ - $ - $ - 42 Investing and Savings 43 Savings x 12 months $ - $ - $ - 44 Retirement: 401(k)/403(b)/IRA x 12 months $ - $ - $ - 45 Stocks/Bonds/Mutual Funds x 12 months $ - $ - $ - 46 Life and Personal Insurance x 12 months $ - $ - $ - 47 Other x 12 months $ - $ - $ - 48 Total Investing and Savings $ - $ - $ - $ - 49 Miscellaneous 50 x 12 months 51 x 12 months 52 x 12 months 53 $ - $ - $ - $ - 54 Total Expenses $ - $ - $ - $ Income Less Expenses $ - $ - $ - $ - 29

30 Young Adult - Pre-Career Life Stage Ledger Life Stages Project A B C D E F G H 1 Young Adult - Pre-Career Plus (+)/Less(-) Totals After Adjustments College-Military-Work Force Adjustments 3 Income Amount x 12 Months Yearly Yearly Yearly 4 Wages 5 Interest 6 7 Other 8 House Expenses Total Income $ - x 12 months $ - $ - $ - $ - x 12 months $ - $ - $ - $ - x 12 months $ - $ - $ - $ - x 12 months $ - $ - $ - 9 Mortgage/Rent x 12 months $ - $ - $ - 10 Home Equity/2nd Mortgage x 12 months $ - $ - $ - 11 Utilities: Electricity/Gas/Water x 12 months $ - $ - $ - 12 Maintenance/Repair x 12 months $ - $ - $ - 13 Internet/Cable TV x 12 months $ - $ - $ - 14 Other x 12 months $ - $ - $ - 15 Total House Expenses $ - $ - $ - $ - 16 Auto Expenses 17 Car Loan x 12 months $ - $ - $ - 18 Gasoline and Motor Oil x 12 months $ - $ - $ - 19 Insurance x 12 months $ - $ - $ - Repairs/Cleaning/ 20 Registration Fees x 12 months $ - $ - $ - 21 Total Auto Expenses $ - $ - $ - $ - 22 Other Living Expenses Health Care/Medical/Doctor/ 23 x 12 months Dentist/Health Insurance $ - $ - $ - 24 Clothing x 12 months $ - $ - $ - 25 Personal Care Products and Services x 12 months $ - $ - $ - 26 Food/Groceries x 12 months $ - $ - $ - 27 Cell Phone x 12 months $ - $ - $ - Entertainment/Eating Out/Concerts/ x 12 months 28 Movies, etc. $ - $ - $ - 29 Vacations/Travel x 12 months $ - $ - $ - 30 Total Other Living Expenses $ - $ - $ - $ - 31 Personal Expenses School Expenses/Tuition/Books/ 32 Supplies x 12 months $ - $ - $ - Financial Charges/ATM Fees, etc. 33 x 12 months $ - $ - $ - 34 Credit Cards x 12 months $ - $ - $ - 35 Child Care/Child Allowances x 12 months $ - $ - $ - 36 Charity/Donations x 12 months $ - $ - $ - 37 Child Support x 12 months $ - $ - $ - 38 Alimony x 12 months $ - $ - $ - 39 Personal Loans x 12 months $ - $ - $ - 40 Legal/Lawyer/Tickets/Fines/Fees x 12 months $ - $ - $ - 41 Total Personal Expenses $ - $ - $ - $ - 42 Investing and Savings 43 Savings x 12 months $ - $ - $ - 44 Retirement: 401(k)/403(b)/IRA x 12 months $ - $ - $ - 45 Stocks/Bonds/Mutual Funds x 12 months $ - $ - $ - 46 Life and Personal Insurance x 12 months $ - $ - $ - 47 Other x 12 months $ - $ - $ - 48 Total Investing and Savings $ - $ - $ - $ - 49 Miscellaneous 50 x 12 months 51 x 12 months 52 x 12 months 53 $ - $ - $ - $ - 54 Total Expenses $ - $ - $ - $ Income Less Expenses $ - $ - $ - $ - 30

31 Adult Career Life Stage Ledger Life Stages Project A B C D E F G H 1 Adult Career Post College-Military-Work Force Plus (+)/Less (-) Adjustments Totals After Adjustments 3 Income Amount x 12 Months Yearly Yearly Yearly 4 Wages $ - x 12 months $ - $ - $ - 5 Interest $ - x 12 months $ - $ - $ - 6 Other $ - x 12 months $ - $ - $ - 7 Total Income $ - x 12 months $ - $ - $ - 8 House Expenses 9 Mortgage/Rent x 12 months $ - $ - $ - 10 Home Equity/2 nd Mortgage x 12 months $ - $ - $ - 11 Utilities: Electricity/Gas/Water x 12 months $ - $ - $ - 12 Maintenance/Repair x 12 months $ - $ - $ - 13 Internet/Cable TV x 12 months $ - $ - $ - 14 Other x 12 months $ - $ - $ - 15 Total House Expenses $ - $ - $ - $ - 16 Auto Expenses 17 Car Loan x 12 months $ - $ - $ - 18 Gasoline and Motor Oil x 12 months $ - $ - $ - 19 Insurance x 12 months $ - $ - $ - 20 Repairs/Cleaning/ Registration Fees x 12 months $ - $ - $ - 21 Total Auto Expenses $ - $ - $ - $ - 22 Other Living Expenses Health Care/Medical/Doctor/ 23 Dentist/Health Insurance x 12 months $ - $ - $ - 24 Clothing x 12 months $ - $ - $ - 25 Personal Care Products and Services x 12 months $ - $ - $ - 26 Food/Groceries x 12 months $ - $ - $ - 27 Cell Phone x 12 months $ - $ - $ - Entertainment/Eating Out/Concerts/Movies, etc. x 12 months 28 $ - $ - $ - 29 Vacations/Travel x 12 months $ - $ - $ - 30 Total Other Living Expenses $ - $ - $ - $ - 31 Personal Expenses School Expenses/Tuition/Books/ x 12 months 32 Supplies $ - $ - $ - Financial Charges/ATM Fees, etc. 33 x 12 months $ - $ - $ - 34 Credit Cards x 12 months $ - $ - $ - 35 Child Care/Child Allowances x 12 months $ - $ - $ - 36 Charity/Donations x 12 months $ - $ - $ - 37 Child Support x 12 months $ - $ - $ - 38 Alimony x 12 months $ - $ - $ - 39 Personal Loans x 12 months $ - $ - $ - 40 Legal/Lawyer/Tickets/Fines/Fees x 12 months $ - $ - $ - 41 Total Personal Expenses $ - $ - $ - $ - 42 Investing and Savings 43 Savings x 12 months $ - $ - $ - 44 Retirement: 401(k)/403(b)/IRA x 12 months $ - $ - $ - 45 Stocks/Bonds/Mutual Funds x 12 months $ - $ - $ - 46 Life and Personal Insurance x 12 months $ - $ - $ - 47 Other x 12 months $ - $ - $ - 48 Total Investing and Savings $ - $ - $ - $ - 49 Miscellaneous 50 x 12 months 51 x 12 months 52 x 12 months 53 $ - $ - $ - $ - 54 Total Expenses $ - $ - $ - $ Income Less Expenses $ - $ - $ - $ - 31

32 Mature Adult Life Stage Ledger Life Stages Project A B C D E F G H 1 Mature Adult Plus (+)/Less (-) Totals 2 Mid-Career-Military-Workforce Adjustments After 3 Income Amount x 12 Months Yearly Yearly Yearly 4 Wages $ - x 12 months $ - $ - $ - 5 Interest $ - x 12 months $ - $ - $ - 6 Other $ - x 12 months $ - $ - $ - 7 Total Income $ - x 12 months $ - $ - $ - 8 House Expenses 9 Mortgage/Rent x 12 months $ - $ - $ - 10 Home Equity/2 nd Mortgage x 12 months $ - $ - $ - 11 Utilities: Electricity/Gas/Water x 12 months $ - $ - $ - 12 Maintenance/Repair x 12 months $ - $ - $ - 13 Internet/Cable TV x 12 months $ - $ - $ - 14 Other x 12 months $ - $ - $ - 15 Total House Expenses $ - $ - $ - $ - 16 Auto Expenses 17 Car Loan x 12 months $ - $ - $ - 18 Gasoline and Motor Oil x 12 months $ - $ - $ - 19 Insurance x 12 months $ - $ - $ - 20 Repairs/Cleaning/Registration Fees x 12 months 21 Total Auto Expenses $ - $ - $ - $ - 22 Other Living Expenses Health Care/Medical/Doctor/ x 12 months 23 Dentist/Health Insurance $ - $ - $ - 24 Clothing x 12 months $ - $ - $ - 25 Personal Care Products and Services x 12 months $ - $ - $ - 26 Food/Groceries x 12 months $ - $ - $ - 27 Cell Phone x 12 months $ - $ - $ - Entertainment/Eating 28 Out/Concerts/Movies, etc. x 12 months 29 Vacations/Travel x 12 months $ - $ - $ - 30 Total Other Living Expenses $ - $ - $ - $ - 31 Personal Expenses School Expenses/Tuition/Books/ x 12 months 32 Supplies $ - $ - $ - Financial Charges/ATM Fees, etc. x 12 months 33 $ - $ - $ - 34 Credit Cards x 12 months $ - $ - $ - 35 Child Care/Child Allowances x 12 months $ - $ - $ - 36 Charity/Donations x 12 months $ - $ - $ - 37 Child Support x 12 months $ - $ - $ - 38 Alimony x 12 months $ - $ - $ - 39 Personal Loans x 12 months $ - $ - $ - 40 Legal/Lawyer/Tickets/Fines/Fees x 12 months $ - $ - $ - 41 Total Personal Expenses $ - $ - $ - $ - 42 Investing and Savings 43 Savings x 12 months $ - $ - $ - 44 Retirement: 401(k)/403(b)/IRA x 12 months $ - $ - $ - 45 Stocks/Bonds/Mutual Funds x 12 months $ - $ - $ - 46 Life and Personal Insurance x 12 months $ - $ - $ - 47 Other x 12 months $ - $ - $ - 48 Total Investing and Savings $ - $ - $ - $ - 49 Miscellaneous 50 x 12 months 51 x 12 months 52 x 12 months 53 $ - $ - $ - $ - 54 Total Expenses $ - $ - $ - $ Income Less Expenses $ - $ - $ - $ - 32

33 Senior Over 60 Life Stage Ledger Life Stages Project A B C D E F G H 1 Senior Over 60 Plus (+)/Less (-) Totals 2 Post-Career-Military-Workforce Adjustments After 3 Income Amount x 12 Months Yearly Yearly Yearly 4 Wages $ - x 12 months $ - $ - $ - 5 Interest $ - x 12 months $ - $ - $ - 6 Other $ - x 12 months $ - $ - $ - 7 Total Income $ - x 12 months $ - $ - $ - 8 House Expenses 9 Mortgage/Rent x 12 months $ - $ - $ - 10 Home Equity/2 nd Mortgage x 12 months $ - $ - $ - 11 Utilities: Electricity/Gas/Water x 12 months $ - $ - $ - 12 Maintenance/Repair x 12 months $ - $ - $ - 13 Internet/Cable TV x 12 months $ - $ - $ - 14 Other x 12 months $ - $ - $ - 15 Total House Expenses $ - $ - $ - $ - 16 Auto Expenses 17 Car Loan x 12 months $ - $ - $ - 18 Gasoline and Motor Oil x 12 months $ - $ - $ - 19 Insurance x 12 months $ - $ - $ - 20 Repairs/Cleaning/Registration Fees x 12 months 21 Total Auto Expenses $ - $ - $ - $ - 22 Other Living Expenses Health Care/Medical/Doctor/ x 12 months 23 Dentist/Health Insurance $ - $ - $ - 24 Clothing x 12 months $ - $ - $ - 25 Personal Care Products and Services x 12 months $ - $ - $ - 26 Food/Groceries x 12 months $ - $ - $ - 27 Cell Phone x 12 months $ - $ - $ - Entertainment/Eating 28 x 12 months Out/Concerts/Movies, etc. $ - $ - $ - 29 Vacations/Travel x 12 months $ - $ - $ - 30 Total Other Living Expenses $ - $ - $ - $ - 31 Personal Expenses School Expenses/Tuition/Books/ x 12 months 32 Supplies $ - $ - $ - Financial Charges/ATM Fees, etc. x 12 months 33 $ - $ - $ - 34 Credit Cards x 12 months $ - $ - $ - 35 Child Care/Child Allowances x 12 months $ - $ - $ - 36 Charity/Donations x 12 months $ - $ - $ - 37 Child Support x 12 months $ - $ - $ - 38 Alimony x 12 months $ - $ - $ - 39 Personal Loans x 12 months $ - $ - $ - 40 Legal/Lawyer/Tickets/Fines/Fees x 12 months $ - $ - $ - 41 Total Personal Expenses $ - $ - $ - $ - 42 Investing and Savings 43 Savings x 12 months $ - $ - $ - 44 Retirement: 401(k)/403(b)/IRA x 12 months $ - $ - $ - 45 Stocks/Bonds/Mutual Funds x 12 months $ - $ - $ - 46 Life and Personal Insurance x 12 months $ - $ - $ - 47 Other x 12 months $ - $ - $ - 48 Total Investing and Savings $ - $ - $ - $ - 49 Miscellaneous 50 x 12 months 51 x 12 months 52 x 12 months 53 $ - $ - $ - $ - 54 Total Expenses $ - $ - $ - $ Income Less Expenses $ - $ - $ - $ - 33

34 Lesson Component and Description Purpose In the Building Wealth Topic, the students gain a fundamental understanding of the steps they can take to help their money grow and begin planning for life s financial events. Learning Objectives 1. Briefly describes the role of planning and maintaining a balanced budget. 2. Explains how goals, decision-making, and planning affect personal financial choices and behaviors throughout the various stages of life. 3. Formulates strategies for saving, investing, and transferring wealth. 4. Compares long, intermediate, and short-term investments. 5. Analyzes the power of compounding and the importance of early implementation of a saving and investment plan. Time Required 150 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the student follows along with the Student Guide. The guides are merely a framework for the teacher and students. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students discuss with their parents if they budget and how often. 2. Have the students write a 500-word essay on one or both: a. Why Is It Important to Build Wealth? b. What Are Your Short- and Long-Term Goals? 3. Have students complete a compounding interest table. 4. Have students write or type a letter to a friend about accumulating wealth. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Building Wealth Quiz Key 1.T 2.F 3. F 4.F 5.T 6.D 7.C 8.D 9.D 10.A

35 Alignment to Standards Common Core State Standards: Math 1. Uses units as a way to understand problems and to guide the solution of multi-step problems; chooses and interprets units consistently in formulas; chooses and interprets the scale and the origin in graphs and data displays (N-Q 1). 2. Defines appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Chooses a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 4. Explains each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Constructs a viable argument to justify a solution method (A-REI 1). 5. Demonstrates that the graph of an equation in two variables is the set of all its solutions plotted in the coordinate plane, often forming a curve (which could be a line) (A-REI 10). 6. Recognizes situations in which one quantity changes at a constant rate per unit interval relative to another (F-LE). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrates and evaluates multiple sources of information presented in different media or formats (RI 7). 2. Writes arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Writes informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produces clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (W 4). 5. Develops and strengthens writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrates multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source, and noting any discrepancies among the data (SL 2). 7. Acquires and uses accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college and career-readiness level; demonstrates independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determines the central ideas or information of a primary or secondary source; provides an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrates and evaluates multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determines the central ideas or conclusions of a text; summarizes complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrates and evaluates multiple sources of information presented in diverse formats and media (RST 7). 12. Produces clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (WHST 4) 13. Draws evidence from informational texts to support analysis, reflection, and research (WHST 9).

36 14. Writes routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determines central ideas or themes or a text and analyzes their development; summarizes the key supporting details and ideas (CCR Reading 2). 2. Writes arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Writes informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produces clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (CCR Writing 4). 5. Develops and strengthens writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5). 6. Writes routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepares for and participates effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapts speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrates command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrates command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determines or clarifies the meaning of unknown and multiple- meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquires and uses accurately a range of general academic and domain-specific words and phrases sufficient for reading, writing, speaking, and listening at the college and careerreadiness level; demonstrates independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Net Worth Statement Video Links None Life Smart Applications 1. Students complete a Net Worth Statement. 2. Students learn how to write out SMART goals. 3. Students reflect and write a description about themselves and how they deal with money.

37 Name Date True or False Questions: You are taking a financial literacy class in school. You want to explain what a budget is to your parents. You begin by saying a budget is an estimate, often listed out, of expected income and expenses for a given period in the future. This is the correct definition for a budget. 2. You spend money every day, and you believe in letting tomorrow take care of itself. Is this type of person called a struggler? 3. You live at home and work a part-time job. You only have to pay for gas. There is no reason for you to create a budget for yourself. 4. You work a part-time job as a server. You make an hourly wage plus tips and are saving your tip money ($7- $20 a shift) to buy a dependable car. This is not an example of creating wealth. 5. You are a sophomore in high school and occasionally house-sit for extra money. Saving your money to pay for a new iphone is an example of budgeting. Multiple Choice Questions: You want to start building wealth while you are young. How should you begin? a. Saving b. Controlling c. Protecting d. All of the Above 7. You work hard for your money and always prepare a monthly budget. This helps you avoid making poor decisions with your money. What is this called? a. Saving wealth b. Investing to create wealth c. Protecting wealth d. None of these 8. Because you haven t taken a financial literacy class, you don t realize that ignoring what you do with your money can cause problems later in life. What statement below best describes this type of behavior? a. Finds it difficult to budget b. Spends today and lets tomorrow and save take care of itself c. Budgets to save d. Refuses to see money problems and doesn t see a need to budget and save 9. You learned from your financial literacy class that a saving plan should include: a. How much you intend b. How much interest you make to save c. How often you d. Both how much you intend to save contribute and how often you contribute 10. You know that if you start to save and invest now, your money will compound much more quickly. What statement below best describes the concept of compounding? a. Money multiplies or grows based upon the type of investment or interest you earn b. A person who is a planner and lives on a budget, saves money for retirement, and automatically deposits money into a savings account c. Paying off a $1,500 credit card within one year is an example of a short term goal d. You want to earn $200 per week and to save 20%. The equation that helps you understand how much to save per check: $200 x.20 = $20; thus $20 should go into savings every week

38 Sequence: - Solicit class understanding of the topic. - Introduce vocabulary and definitions to provide purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Vocabulary: - Short-term goal that can be reached in one year or less. - Long-term goal that takes more than one year to reach. - Budget an estimate that includes expected income and expenses for a given time period in the future. - Income includes wages earned from a job, cash gifts, allowance, and other IN- coming money. - Expenses money owed or going out. - Debt something owed, such as money, goods, or services. Key Points: - Explain to students the difference between short-term and long-term goals with more examples. o Short-term concert tickets, new clothes, or a new car stereo. o Long-term senior trip, new car, or a new house. - Review the concept of income as incoming money. - Explain how expense and debt are one in the same and how it relates to a budget. - Review the meaning of a budget and show its relationship to short- and long-term goals. Teacher Tips: - Engage: Have students link their own experiences and ideas to wealth and realize that wealth is something that doesn t just happen; it needs a plan to happen. - Check for understanding Ask students to give personal examples of a short-term and a longterm goal. Have students give examples of expenses they would list in a budget. Large Group Discussion: - Ask students to discuss at what age they should begin to think about financial goals and building wealth. - Ask students to write down the difference between a need and a want. Continue the discussion by asking students how both affect their personal budgets. What is a budget? Why is it important to prepare a personal budget? Teacher Reflection:

39 Building Wealth Meeting Your Financial Money Goals Life Smarts: 1. Complete two Net Worth Statements 2. Write SMART financial goals 3. Identify your personality financial type The first step in building wealth is to determine and track how much money you are making and spending. Determining these amounts will allow you to set up a budget and identify how much money will be needed to pay your bills and save for the future. Of course, establishing goals will also help this process. There are two important time frames for establishing financial goals. The first is known as a short-term goal, which is reached in one year or less. Example: Save $200 in the next 10 months to purchase a cell phone. A long-term goal is any goal that takes more than bone year to accomplish. Example: Save $5,000 a year for two years in order to have $10,000 for a down payment on a house Nusenda Federal Credit Union. All rights reserved.

40 Building Wealth So what is a budget? A budget is an estimate, often listed by the type of expected income and expenses for a given time period in the future. Income includes wages earned from a job, birthday money received from your grandma, an allowance, or any other IN coming money. Expenses include any money owed or going out, for example, payments for your car insurance, buying clothes, or paying for your monthly cell phone bill. A budget will help you decide how much to save and invest. It allows you to determine how much money is available to pay off expenses, also known as debt. Preparing a budget provides an idea of how much money must be set aside to buy a car or pay the monthly rental on an apartment. A budget can also assist in planning for the purchase of a home and putting money away for retirement. 1. What is a budget? Answer: An estimate that includes expected income and expenses for a given time period in the future. 2. Why is it important to prepare a personal budget? Answers will vary. What does wealth mean to you? What does wealth mean to you? Most people think of wealth as tangible item such as a wallet full of money, valuable possessions, or property. Although having a big house and nice cars may indicate wealth; it doesn t mean you can afford to own them. Wealth can mean many different things. For example, it may include intangible items, such as having a happy family and lots of friends, or obtaining a good job. In financial terms, wealth can mean having more money than you know what to do with, living modestly (comfortably), or being able to pay your bills on time. When planning for wealth, you should save a minimum of eight months of expenses. For example, if your bills total $1,500 per month, you should have approximately $12,000 ($1,500 x 8 months) saved in an account that is easily accessible in case of emergency. 40

41 Slides 3 & 4 Building Wealth Vocabulary: - Wealth an abundance of valuable material possessions or resources; riches. - Intangible family, friends, job. - Tangible money, house, car. - Saving putting money in an account for later use. - Investing spending money in the hopes of receiving a future benefit. - Controlling ensuring that your money is growing based on your goals. - Protecting not losing money due to outside sources or to bad decision making. Key Points: - Explain to students that wealth can mean different things to different people. - Explain the differences between intangible versus tangible assets. - Explain to students that discipline is important to building wealth. - Share with students that consistent saving and investing is important in building wealth. Teacher Tips: - Engagement Solicit the students to share how much money they have in savings. - Check for understanding Ask students why they think it s important to build wealth and why they need to protect it. Large Group Discussion: - Ask students to identify famous people and estimate their net wealth. Teacher Reflection: 41

42 Building Wealth Some requirements for building wealth 1. What does wealth mean to you? Answers will vary. 2. Differentiate between tangible and intangible wealth. Answer: Tangible is physical and materialistic Intangible can relate to personal relationships. In order to build wealth, you need to be disciplined. Once your income and expenses are determined and a budget is prepared, you will have a better idea of how much money to save. In fact, this amount should be included as a line-item called Savings. Investing means spending money in the hopes of a future benefit. Savings may be used for investment purposes, but first, you must educate yourself about the different ways to invest money. Purchasing stocks, a mutual fund, or real estate are all examples of investment. Over time, you hope to make money on your original purchase. You might consider investing for the purchase of a home, a car, or investing for retirement. After determining how much to save and for what, you must control and protect that wealth. Controlling means periodically checking to see how much your investments are earning and if you are meeting your goals. If not, some adjustments in your budget may be required. Lastly, ensure you are protecting your wealth from creditors, fraud, poor decision-making, or a potential lawsuit. Net worth Life Smarts: Complete a Net Worth Statement - Attached As discussed above, setting financial goals is critical to building wealth. As you increase your wealth, your net worth increases. Net worth refers to how much you are worth. Net worth is calculated by subtracting what you owe (liabilities) from what you own (assets). Net Worth = Assets Liabilities 42

43 Slides 5-8 Building Wealth Vocabulary: - Assets physical items that you own; can be converted into cash. - Liabilities money or assets that are owed. - Net Worth refers to how much you are worth after subtracting your liabilities from your assets. - SMART Goals the process of setting goals so that they are specific, measurable, attainable, relevant, and have a realistic time frame. - Trade-off something you give up to get something else. - Opportunity Cost the cost of giving something up for the next best alternative. Key Points: - Explain to students how important it is to track your net worth if you wish to build wealth. - Explain to students the importance of setting goals. They should follow the SMART goal guidelines, so there is no vagueness in what they are trying to accomplish. - Review each key point in the SMART goal process. Teacher Tips: - Engagement (1) Ask students to brainstorm a list of assets; and (2) Ask students to share some of their goals for this school year. - Check for Understanding Have students determine what they would like their desired net worth to be for various stages of their life. Large Group Discussion: - Have students share one SMART goal they have for the year. Life Smart Activity: - Complete two Net Worth Statements. (Activity is at the end of this topic.) Teacher Reflection: 43

44 Building Wealth Assets are items you own that can be converted into cash; liabilities are considered monies owed, known as debt. Owning a home, property, and vehicles all increase your net worth. Staying away from debt (owing people and businesses) also increases your net worth. In the space below, indicate your desired net worth at various stages in your life. You may use the attached Net Worth Worksheet to guide you. Estimate your desired net worth at each of the following ages. Be prepared to explain your answers there is no wrong answer. Answers will vary. Age 25: Age 35: Age 45: Setting smart goals to build wealth Like budgeting, setting goals is crucial to building wealth. It provides a how to guide for reaching your financial goals. These financial goals, also known as SMART goals, should include the following characteristics: S Goals should be specific. Determine exactly what it is you want. M Goals should be measurable. Determine the value of your goal. A Goals should be attainable. Ask yourself: Is this a realistic goal that I can achieve? R Goals should be relevant. Is the goal something that is necessary, or can it wait? T Goals should be time-bound. Set a date as to when you intend to meet the goal. 44

45 Slides 6-8 (Continued) Building Wealth Teacher Tips: - Engagement Ask students how often they buy clothes or pay for entertainment. - Check for understanding Review students SMART goal development in their Student Guide. Large Group Discussion: - Ask students to explain the difference between a SMART goal and an ordinary purchase. Life Smart Activity: - Write a SMART goal. Teacher Reflection: 45

46 Building Wealth Developing a SMART goal involves gathering facts before actually writing your goal. For example, the facts for wanting to go to the prom might look like this: S = I want to go to the prom. M = Total costs for attending the prom are $250. I will save $25 per week for 10 weeks. A = Yes. My part-time job will provide more than enough income to cover prom expenses. R = Yes. I am a graduating senior. This will be my last chance to attend the prom. T = April 1st is the deadline for paying for all prom expenses. Following my proposed savings plan, I will save enough money to pay all my debts by the last week of March. Combining the facts, your short-term SMART goal would look like this: I want to attend prom. I will need to save $250 by April 1 to pay for everything. I will save $25 per week for 10 weeks. Life Smarts: Learn to write your goals! Write a SMART goal for one of the following events: 1. Purchasing clothes OR 2. Eating out SMART goal: Answers will vary. Determine the SMART elements of the goal you selected. List below: Answers will vary. S = M = A = R = T = 46

47 Building Wealth Vocabulary: - Planner someone who plans out their finances. - Struggler someone who doesn t plan or set budgets. - Denier someone who denies they have a money problem and lives paycheck to paycheck. This type of person normally falls deeper and deeper into debt. - Impulsive personality Someone who makes purchases on an impulse. This type of person rarely plans and purchases items without hesitation. Key Points: - Review the four types of financial personalities. Be sure the students are able to provide specific examples of each type of financial personality type. - Drive home the point that being SMART with your money is important. Identifying their personality type will help them to make better decisions regarding their finances. Teacher Tips: - Engagement Have students describe four different individuals based on their understanding of the four types of financial personalities. - Check for understanding Have students explain why they believe their financial personality type is a planner, a struggler, a denier, or an impulsive personality. Have students share what they can do to make wise choices concerning their money habits. Large Group Discussion: - Ask students why it is important to self-analyze when it comes to their own spending and saving habits. Life Smart Activity: - Have students write a five-sentence paragraph explaining their type of financial personality type. Teacher Reflection: 47

48 Building Wealth Lastly, when setting goals, we always think about what we are giving up to get something else. This is known as the trade-off. In the goal you chose to write above, what might you have given up to buy clothes or take a short trip? For example, you might have given up going to the movies with your friends so that you can save for the trip. If you choose not to go to the movies (so you can go on a trip), what value did you give up by choosing the trip over the movie? This is known as the opportunity cost. The opportunity cost is the price of the admission fee plus any food you might have purchased. 1. What would have been some of your trade-offs in the goal you selected above? Answers will vary. 2. What would have been the opportunity costs for making those trade-offs? Answers will vary Financial personality types Knowing your financial personality type will help you later in life. The four types consist of planners, strugglers, deniers, and impulsive personalities. A planner is someone who always plans out their finances. They set goals, prepare budgets, and try hard to follow them. A struggler is someone that doesn t plan or set budgets. They usually live paycheck to paycheck and most of the time struggle to get ahead financially. Deniers are somewhat similar to strugglers with the exception that they don t live paycheck to paycheck. Deniers normally fall deeper and deeper into debt, because they deny they have a money problem. They usually spend more than they can afford. When bills come due, they neglect to view them, put them in a drawer, or throw them away. Lastly, there is the impulsive personality. This individual makes impulse purchases. In other words, they rarely plan or budget. They purchase without hesitation. It s always wise to have a list when you shop to prevent impulse buying. 48

49 Building Wealth Tina is a single parent with two children. She has to budget to live on a modest income. She started putting her money in a mutual fund when her first child was born, for his education. She purchased a home and provides solely for her children. What is Tina s financial personality type? Tom likes to spend money on things that appeal to him without planning. He makes good money but his bank account tells a different story. He has no savings or investments, owns no property, and lives paycheck to paycheck. He has nothing that resembles a budget. What type of financial personality does Tom have? Life Smarts: What is your personality type? In the space below, write a five-sentence paragraph explaining your financial personality type. Give specific examples to support your selection. Tips on saving Here are a few tips you should consider as you think about building wealth. Write out a plan so you have access to it all the time. Save a certain amount every week, two weeks, or monthly. Have money electronically transferred automatically to a savings, checking, or retirement account. *Hint: o The first hour of pay you get from working should go into savings. (Pay Yourself First) o Try and save a minimum of 20% of what you make at work. o The earlier you begin saving, the more you will accumulate. 49

50 Slides Building Wealth Vocabulary: - Interest money that is added to an original amount that is saved or invested. - Principal the original amount of money that is deposited into an account. - Compound Interest money that is earned on both principal and interest. Key Points: - Review the tips on saving. - Review the chart on compound interest and indicate the differences in waiting to save or invest. Teacher Tips: - Engagement Show students the following video on compounding your money: - Check for understanding Show students the following website: - Provide several examples of principal and interest amounts. Have students explain what they see. Large Group Discussion: - Discuss as a class what the difference in net worth would be if you started saving at 18 years old compared to someone who started saving at 30 years of age. Teacher Reflection: 50

51 Building Wealth Compound effect The chart below shows the compound impact of saving. accumulate more wealth as you get older. Starting to save now allows you to As you begin to save money while you are young, your money will grow with interest. Interest is the amount of money that is added on to the original amount (principal) that you saved or invested. For example, if you deposited $100 into a savings account and left it there, in a year your savings account might have $ The $3.00 ($ $100) is referred to as the interest. At the end of year two, your account balance might be $ You earned another $5 on top of the $103 that you had in your account at the end of year one. As you can see, you begin to earn interest on interest. This is referred to as compound interest. Compound interest is interest earned on both principal and interest. As the years go by, your compound interest begins to multiply faster; thus, you begin to accumulate more wealth. The table below shows the compound impact of saving. accumulate more wealth as you get older. Starting to save now will allow you 51

52 Slides Building Wealth Vocabulary: - Rule of 72 a rule that allows you to compute how long it will take to double your money given an interest rate or number of years. - Trust legal way to have an independent party hold and manage a title to property or assets for the benefit of a beneficiary. - Trustor a person who sets up the trust. - Living Trust a trust that is in effect during the trustor s lifetime. - Testamentary Trust a trust that is created through a will of a deceased person. - Will a legal document that is set up prior to death that transfers a person s assets to a beneficiary upon death. - Estate refers to the value of all of your assets at any point in time. Key Points: - Rule of 72 allows you to compute how long it will take for your money to double. - It s a SMART idea to protect your wealth while you are alive and upon your death. - Trusts and Wills are smart legal documents to create as you build your wealth. - You should hire a lawyer to prepare a Will and a Trust. - Having Wills and Trusts intact allows you to transfer your wealth upon your death Teacher Tips: - Engagement Have students make the Rule of 72 computations in the Student Guide. - Check for understanding Check their answers for accuracy. Large Group Discussion: - Ask students if they know of anyone that has passed on and left either them or their family part of their wealth. Teacher Reflection: 52

53 Building Wealth The Rule of 72 The Rule of 72 is something that you should memorize when it comes to building wealth and letting your money work for you. The rule allows you to compute how long it will take to double your money given an interest rate or number of years. Here s how it works: If you are given an interest rate, divide the interest rate into 72 to compute how many years it will take to double your money. Example: If you invest some money earning 8% interest, it will take 9 years (72 8) to double your money. In contrast, if you know how long you want to take to double your money, simply divide the number of years into 72. Example: If you want to double your money in 4 years, you will need to invest it at 18% (72 4) Interest for it to double in 4 years. 1. How long will it take you to double your money if you invest it earning 3.5% interest? Answer: years 2. What interest rate must you earn in order to double your money in 10 years? Answer: 7.2% 53

54 Building Wealth Transferring your wealth wills, trusts, and estates A Trust is a legal way to have an independent party hold and manage title to property or assets for the benefit of a beneficiary (a named person who inherits your assets). A trust is usually set up if the trustor, person setting up the trust, wants their assets to be given to a beneficiary at some point in the future with certain guidelines. There are two types of trusts, a living trust and a testamentary trust. Living trusts are in effect during the trustor s lifetime; a testamentary trust is created through a will of a deceased person. A will is a legal document that transfers a person s assets to a beneficiary upon their death. If you die and don t have a will, your property will be divided up according to the state. This means that the people you would like to get your assets may not necessarily get them. Your estate refers to the value of all of your assets at any point in time. Prior to your death, you should legally determine who should receive your estate when you die. You should hire a lawyer to set this up so that your estate goes to the people that you want to receive it. You can divide up your estate and give certain things to certain people. Two ways to distribute your assets and/or estate is through a will or a trust. Having a sound strategy for protecting the assets you have built will ensure that the wealth you have created will be there for you and your loved ones. Activity: For each initial investment below, calculate the amount accumulated over time given the following factors for each. Use to determine the amount. Initial Investment Interest Rate Regular Investment (per month) Years Compounded Amount $1,000 5% $50 10 Monthly $9, $1,000 5% $50 20 Monthly $23, $1,000 5% $50 30 Monthly $46, $1,000 5% $ Monthly $32, $1,000 5% $ Monthly $85, $1,000 5% $ Monthly $171,

55 Building Wealth Net Worth Statement #1 A Net Worth Statement is a snapshot of your financial situation at any point in time. It allows you to track your progress financially. Just like a marathon runner running for their personal best, focus your attention on your financial numbers. Your net worth will change from year to year. By evaluating your net worth periodically (once per year), you can tell if you are accomplishing your financial goals or if some changes are in order. Recall from the section above that Net Worth = Total Assets Liabilities. Preferably your net worth is a positive number. This would imply that you own more than you owe. If it is a negative number, you might consider making some financial changes down the road. Using the information below, complete the attached net worth statement: Imagine you are in your late forties and have been working in a career of your choice for several years now. You have made some great financial choices and have accumulated lots of wealth. You are currently earning $120,000 per year. You re married with two children. One child is in middle school, while the other child is in the fourth grade. Your spouse also works and earns around $50,000 per year. You have accumulated lots of assets and some debts. You are considering getting a loan from a financial institution, and they requested you complete a net worth statement for them. After gathering all of the data below, you are now ready to prepare the net worth statement: You determined that you and your spouse have $350 in cash on hand. Your bank accounts are currently showing $3,200 in checking, $8,200 in savings, and $15,000 in a money market fund. You also have a cash value of $50,000 in a life insurance policy. As for Real Estate/Property values, your home is worth $350,000; however, you still owe $250,000 on it. (Hint: $100,000 of the home is considered an asset, while the $250,000 you owe is considered the mortgage.) You have no other real estate or land that you own. Because you learned a great deal about finances in school, you and your spouse were wise enough to begin investing at an early age. The following balances are the amounts you have in various investments: stocks - $42,000; bonds - $20,000; $35,000 in mutual funds; $12,000 in IRAs; $38,000 in a 401(k); and $8,000 in a pension plan. 55

56 Building Wealth Both you and your spouse have a vehicle. One of the vehicles was given to you by your brother; the other vehicle was purchased two years ago for $28,000 and you still owe $16,000 (Hint: this is considered an automobile loan.) All of your home furnishings were purchased when you first bought your home; however, you recently purchased a new refrigerator, dishwasher, washing machine, and dryer. These appliances totaled $2,800. Lastly, you and your spouse accumulated some jewelry worth around $7,200 and some art collections that have a total value of $12,200. In looking at what you and your spouse owe, you determined the following: medical bills, $2,400 and credit cards, $7,800. You have a mortgage on your house and the vehicle loan mentioned above. You took out a couple of loans, one from a bank and another from a credit union, to do some home remodeling that amounted to $4,500 and $2,800, respectively. Both you and your spouse also have college loans outstanding that you are paying back that total $18,200. You have no other outstanding debt. Net Worth Calculation, Worksheet #1 An important step in gaining financial control is to calculate your net worth (assets - debts). Every year, your net worth should be computed to review your progress and compare it with your financial goals. In addition, a net worth statement is a valuable aid in planning your estate and establishing a record for loan and insurance purposes. 56

57 Net Worth Calculation, Worksheet #1 Building Wealth Assets (What You Own) Cash: Cash On Hand Checking Account 2, Savings Accounts 8, Money Market Funds 15, Cash Value of Life Insurance 50, Other Real Estate/Property: Home 100, Land Other Investments: (Market Value) Certificates of Deposit Stocks 42, Bonds 20, Mutual Funds 35, Annuities IRAs 38, (k),403(b), 457 Plans 8, Pension Plan Other Personal Property: (Present Value) Automobiles 12, Recreational Vehicle/Boat Home Furnishings Appliances and Furniture 2, Collections 12, Jewelry and Furs 7, Other Total Assets 365, Liabilities (What You Owe) Current Debts: Household Medical Credit Cards Retail Store Cards Back Taxes Legal Other Mortgages: Home Land Other Loans: Bank/Finance Bank/Finance Automobile Recreational/Vehicle Education Life Insurance Personal Other Total Liabilities 2, , , , , , , , Total Assets Minus Total Liabilities = Net Worth 64,

58 Building Wealth Net Worth Statement #2 Current Financial Status in New Mexico The latest U.S. Census states that the median household income for New Mexico is $44,631. The average mortgage debt in Albuquerque is $157,537 (as of May 8, 2013) according to Albuquerque s Business and Economic website. In addition, CNN Money cites that the average New Mexico household owed $6,820 in credit card debt in In the following scenario, the couple does not own a home but exhibits many of the financial characteristics of a typical young couple in New Mexico. Using the attached worksheet, calculate their net worth. Joe and Susan are in their late twenties, have been married for two years, and have no children. Joe works for the local school district as a Level 2 Maintenance and Operations laborer and has worked for two different schools over the last seven years. He works 260 days per year at an annual salary of $34,817 and is paid bi-weekly. He invests $50 bi-weekly in a 403(b) account currently valued at $9,100. Susan works as a part-time hostess at a restaurant near the community college campus where she also attends school part time. She makes $9,690 per year with no benefits. She would like a better paying job, but her employer is flexible with her schedule as she completes a two-term, Phlebotomy Technician program. She charged $500 on her credit card recently to cover tuition, fees, and books. This is in addition to the existing balance of $6,325 (to cover unanticipated medical expenses and holiday gifts). Joe and Susan rent a one-bedroom apartment a few blocks from the community college campus, which enables Susan to walk to classes. Their rent is $655 a month with seven months remaining on their lease. They own bedroom and living room furniture valued at $1,895 and a sewing machine with cabinet valued at $2,025. Their sporting and camping equipment is valued at $1,250. Joe drives a 1995 Toyota 4Runner with 175,000 miles that is currently valued at $4,425 on NADA Guides. He secured a loan from the Nusenda Credit Union and currently owes $3,425. Susan walks and uses the city bus for her transportation needs. 58

59 Building Wealth Their remaining assets on hand include: Cash on hand = $75; cash in checking account = $532.32; and savings = $1, Compare and Contrast Net Worth Statements 1 & 2: After completing the Net Worth Calculation Worksheet #2, write a one-page paper comparing and contrasting the two scenarios. In your paper, explain the difference in income and expenses. Also elaborate on the difference in the standard of living for both families. Explain what it means to have a positive net worth balance and if having more income precludes you from having a negative net worth balance. Your report should be typed using a size 12 font. Notes: Net Worth Calculation, Worksheet #2 An important step in gaining financial control is to calculate your net worth (assets - debts). Every year, your net worth should be tabulated to review your progress and compare it with your financial goals. In addition, a net-worth statement is a valuable aid in planning your estate and establishing a record for loan and insurance purposes. 59

60 Net Worth Calculation, Worksheet #2 Building Wealth Assets (What You Own) Cash: Cash On Hand Checking Account Savings Accounts 1, Money Market Funds Cash Value of Life Insurance Other Real Estate/Property: Home Land Other Investments: (Market Value) Certificates of Deposit Stocks Bonds Mutual Funds Annuities IRAs 401(k),403(b), 457 Plans 9, Pension Plan Other Personal Property: (Present Value) Automobiles _1,000.00(4,425-3,425) Recreational Vehicle/Boat 1, Home Furnishings Appliances and Furniture _3,920.00(1,895+2,025) Collections Jewelry and Furs Other Total Assets 17, Liabilities (What You Owe) Current Debts: Household Medical Credit Cards Retail Store Cards Back Taxes Legal Other Mortgages: Home Land Other Loans: Bank/Finance Bank/Finance Automobile Recreational/Vehicle Education Life Insurance Personal Other Total Liabilities 4,585.00(655x7months) 6, , ,835 Total Assets Minus Total Liabilities = Net Worth 3,

61 Building Wealth Homework or Class Assignment: You have been talking with one of your friends about this class. Although this is only the first topic covered, you understand what wealth is and what you need to do to start building it. Type a letter to your friend explaining how to start to build wealth and what it will mean to him or her to start now. Your letter should include the following: 12 pt. font Date Greeting A plan on how to build wealth Closing You may use the format below to type your letter: Date Dear : In the first paragraph, explain to your friend what wealth is. In the second paragraph, explain to your friend ways to build wealth. In the third paragraph, summarize what you have learned to your friend. Sincerely, Your Name 61

62 Lesson Component Description Purpose In the Financial Services Topic, students gain a fundamental understanding of the types of financial institutions and the fundamentals of using bank accounts, including how checking accounts work, what fees they charge, and how to maintain an account. Learning Objectives 1. Identify the types of financial institutions. 2. Compare and contrast the characteristics of banks and credit unions. 3. Identify the types of services provided by financial institutions. 4. Explain the benefits of having a checking account. 5. Demonstrate ability to write and endorse a check. 6. Demonstrate ability to make deposits and withdrawals. 7. Describe the characteristics and uses of ATM and debit cards. 8. Recognize common fees and explain ways to avoid paying un- necessary fees. 9. Summarize the importance of keeping accurate records and reconciling an account. Time Required 250 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or Use the Teaching Guide as students follow along with the Student Guide. The guides are merely a framework for the teacher and students. Implementing additional resources to engage students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments 1. Have students discuss with their parents how they maintain and reconcile their financial accounts. Have them share with the class. 2. Have students write a two-page report summarizing different financial institutions including advantages and disadvantages of each. 3. Have students reconcile an account using an account register and bank statement. 4. Have students research online budgeting tools and share results with the class. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Financial Services Quiz Key 1.T 2.F 3.F 4.F 5.T 6.D 7.A 8.B 9.D 10.D

63 Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 3. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10).

64 Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Video Links Difference Between Banks and Credit Unions: Difference Between Banks and Credit Unions, Part 2: Difference Between Banks and Credit Unions, Part 3: Kghg A Brief History of Credit Unions A Brief History of Credit Unions: Life Smart Applications 1. Students fill out a check and record the transaction in a check register. 2. Students complete a deposit slip for cash and check deposits and record the transactions in a check register. 3. Students record an ATM withdrawal in a check register. 4. Students record a debit card purchase in a check register.

65 Name Date True or False Questions: The Federal Reserve is considered the central bank in the United States. 2. One of the reasons you should use a financial institution is because it will double your money. 3. There is only one type of financial institution. 4. Credit Unions operate as a for-profit entity. 5. Banks and credit unions offer many of the same financial services. Multiple Choice Questions: Which of the following is considered a Deposit Account? a. Checking Account b. CD c. Savings Account d. All of the above 7. You want your work paychecks directly deposited to your checking account. What information must you provide to your employer? a. Routing Number b. Mom s name c. Check Number d. None of the above 8. You write a check to your landlord and realize after it s mailed that, the number amount on the check is different than the written amount. How will your financial institution respond? a. Use the number amount b. Use the written amount c. Cancel the payment d. None of the above 9. You should always record your money transactions in a ledger or check register because: a. It will help you reconcile b. You will always know your monthly statement and your balance c. It helps you manage your money d. All of the above 10. Which of the following methods can you use to deposit and or withdraw money from your account? a. Direct deposit b. Your smartphone c. An ATM machine d. All of the above

66 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Key Points: - Today s financial institutions are known as banks, credits unions, savings and loans, etc. - The Federal Reserve Act, passed in 1913, established a central bank known as the Federal Reserve System (also known as the Federal Reserve or The Fed ). - It is composed of 12 regional districts located throughout the country. Teacher Tips: - Engagement Ask the students to name some banks and credit unions around town. - Check for Understanding Ask the students why regulating financial institutions is necessary. Teacher Reflection:

67 Financial Services Getting to Know Your Financial Institution Life Smarts: 1. Record transactions in a check register. 2. Write a check and fill out a deposit slip. 3. Reconcile a check register to a monthly statement. History of financial institutions Financial institutions serve a very important role in our economy because they manage and safeguard money for individuals, businesses, and the government. Today s financial institutions (now known as banks, credits unions, savings and loans, etc.) bear little resemblance to the unreliable organizations of the 1700s and 1800s. There were no guarantees in these early days for the businessmen who deposited their money that it would maintain its value or even be available for withdrawal. The U.S. banking system emerged from the chaotic, unstructured, and unregulated early days to the sound and safe banking system we have today. The Federal Reserve Act, passed in 1913, established a successful central bank known as the Federal Reserve System (also known as the Federal Reserve or The Fed ). It comprises 12 regional districts located throughout the country. Each district is responsible for regulating monetary policy set by the Federal Reserve System and the commercial banks within its own district. In addition, these 12 districts provide financial services to the U.S. government and to U.S. banking institutions Nusenda Federal Credit Union. All rights reserved.

68 Slide 3 Financial Services Key Points: - The earliest evidence of financial institutions began in 19th-century England as cooperatives. - Friedrich Raiffeisen took the cooperative notion one step further by establishing the Heddesorf Credit Union. Its purpose was to provide financial assistance to farmers to purchase cattle, farming machinery, and seeds to plant crops. This was the first financial cooperative designed to meet the credit needs of a specific group. - St. Mary s Cooperative Credit Union opened in Manchester, N.H., in This was the first official credit union established in the United States. - Edward Filene (a merchant) and Pierre Jay (the Massachusetts Banking Commissioner) united efforts that same year to enact the Massachusetts Credit Union Act of This law served as the template for many states credit union laws and provided the foundation for the Federal Credit Union Act of The Credit Union National Extension Bureau was also established to encourage the development of credit unions throughout the U.S.; by 1930, there were 1,100 in existence. - The Federal Credit Union Act was signed into law by President Franklin Delano Roosevelt in 1934, which established a national system for setting up and regulating credit unions in the United States. The goals of the agency were to offer credit and promote savings through a non-profit, cooperative means. - The National Credit Union Share Insurance Fund (NCUSIF) was created in 1970 (without the use of tax dollars) to guarantee member deposits in credit unions similar to the Federal Depositary Insurance Corporation (FDIC). Teacher Tips: - Engagement Ask the students to brainstorm specific groups of people that would large enough to support a credit union. - Check for Understanding Determine if the students understand the notion that credit unions meet the needs of a specific group of people. Teacher Reflection: 68

69 Financial Services The banking system in the United States has evolved for more than 200 years. This industry has moved from a decentralized, unregulated system to a highly controlled system. For many years, banking and financial service companies competed amongst themselves with little or no competition. All of this changed when non-bank financial institutions entered the market. They offered similar services and products as banks in addition to interest- bearing saving accounts. Today, there are a wide range of financial institutions that compete for your business. As of 2007, the American Bankers Association Banking Today, indicated there were 8,778 banks; 9,014 credit unions; 7,987 insurance companies; 7,713 mortgage and finance companies; and 7,483 investment and security brokerages. History of credit unions The earliest evidence of financial institutions began in 19th century England as cooperatives. The idea took hold when Herman Schulze-Delitzsch created the people s bank in Germany in His counterpart, Friedrich Raiffeisen, took the cooperative notion one step further by establishing the Heddesorf Credit Union. Its purpose was to provide financial assistance to farmers to purchase cattle, farming machinery, and seeds to plant crops. This was the first financial cooperative designed to meet the credit needs of a specific group. This enterprise provided an early blueprint for future credit unions in the United States. 69

70 Financial Services Significant events occurred in the decades that followed. Two credit unions were developed by Alphonse Desjardins: The first, La Caisse Populaire de Levis, was organized in 1900 in Canada to counteract the high interest rates charged to working families by loan sharks. The second, known as St. Mary s Cooperative Credit Union, opened in Manchester, N.H., in This was the first official credit union established in the United States. Edward Filene (a merchant) and Pierre Jay (the Massachusetts Banking Commissioner) united efforts that same year to enact the Massachusetts Credit Union Act of This law served as the template for many states credit union laws and provided the foundation for the Federal Credit Union Act of Credit unions proved popular, as the availability of credit was limited by banks and other financial institutions. In the 1920 s, the demand for cars and household appliances surged; credit unions took the opportunity to expand their membership by offering a source of credit. The Credit Union National Extension Bureau was also established to encourage the development of credit unions throughout the U.S.; by 1930, there were 1,100 in existence. The Federal Credit Union Act was signed into law by President Franklin Delano Roosevelt in 1934, which established a national system for setting up and regulating credit unions in the United States. The goals of the agency were to offer credit and promote savings through a non- profit, cooperative means. The number of credit unions grew steadily, and by 1960, membership had grown to more than six million members and 10,000 federal credit unions. In the 1970 s, expanded services were introduced including home loans and other types of savings accounts to compete with other financial institutions. In addition, the National Credit Union Share Insurance Fund (NCUSIF) was created in 1970 (without the use of tax dollars) to guarantee member deposits similar to the Federal Depositary Insurance Corporation (FDIC). The number of memberships and assets in credit unions grew significantly during this time. Restructuring occurred in the 1980 s due to the poor national economy. Severe unemployment and business failures created an uncertain environment. Members became fearful of losing their deposits. In 1985, federally-funded credit unions decided to fund the 70

71 Slides 3 (Continued) and 4 Financial Services Key Points: - Restructuring occurred in the 1980s due to the poor national economy. - In 1985, the federally-funded credit unions decided to fund the NCUSIF, and Congress agreed to protect and insure member deposits, thus, establishing confidence with its members once again. - In , the U.S. financial system suffered another crisis. A number of credit unions failed. In response, the NCUA proactively set up a yearly review system, whereby problems in individual federal credit unions can be detected early before becoming catastrophic. - More than 96% of credit unions met the funding requirements required by law by the end of Because of the ongoing partnership between the Credit Union system and the U.S. government today, credit unions continue to grow and remain strong. - Poverty, lack of growth, and income distribution are major problems worldwide. The benefits of a cooperative financial system are recognized worldwide, and access to this system (particularly in developing countries) is seen as a viable solution. - The concept of financial inclusion, which allows individuals and organizations the opportunity to set up businesses and save for the future while providing protection from risk, is difficult. - Multiple barriers to financial inclusion include but are not limited to: (1) the unbankable, including those with no income or who are considered high risk; (2) cash-only users, known in the financial world as non-users; (3) cultural and religious factors; (4) excluded groups, including women and those living in poverty; (5) lack of competition; (5) regulatory conflicts; (6) absence of financial services in rural areas; and (7) a lack of financial literacy education. Teacher Tips: - Engagement Ask the students to think of countries that have barriers or limited access to financial institutions. - Check for Understanding Determine if the students answers to the engagement activity are accurate. Teacher Reflection: 71

72 Financial Services NCUSIF, and Congress agreed to protect and insure member deposits, thus, establishing confidence with its members once again. In , the U.S. financial system suffered another crisis. According to the NCUA, the resulting cascade of job losses, bankruptcies, and home foreclosures exerted pressure on the entire American financial services sector including credit unions. As a result, a number of credit unions failed. In response, the NCUA proactively set up a yearly review system whereby, problems in individual federal credit unions can be detected early before becoming catastrophic. More than 96% of credit unions met the funding requirements required by law by the end of Because of the ongoing partnership between the credit union system and the U.S. government today, credit unions continue to grow and remain strong. Reference: A Brief History of Credit Unions International efforts Poverty, lack of growth, and income distribution are major problems worldwide. The benefits of a cooperative financial system are recognized worldwide, and access to this system (particularly in developing countries) is seen as a viable solution. The concept of financial inclusion, which allows individuals and organizations the opportunity to set up businesses and save for the future while at the same time providing protection from risk, is difficult. There are many barriers to financial access internationally and until recently, data collection has been limited. Multiple barriers to financial inclusion include but are not limited to: (1) the unbankable, including those with no income or who are considered high risk; (2) cash-only users, known in the financial world as non-users; (3) cultural and religious factors; (4) excluded groups, including women and those living in poverty; (5) lack of competition; (5) regulatory conflicts; (6) absence of financial services in rural areas; (7) a lack of financial literacy education. Efforts are being made, however, to target problem areas by: (1) reducing costs and red tape; (2) improving identification requirements; and (3) respecting cultural differences when designing product features; and (4) dealing with repayment issues. In addition, simplified processes are being put into place to open accounts and make deposits. 72

73 Slide 4 (Continued) Financial Services Key Points: - Efforts are being made, however, to target problem areas (such as loans) by: (1) reducing costs and red tape; (2) improving identification requirements; and (3) respecting cultural differences when designing product features; and (4) dealing with repayment issues. - Simplified processes are also being put into place to open accounts and make deposits. The World Council of Credit Unions (WOCCU) is well known for establishing access to financial services through a savings-based approach to clients in poor countries. Teacher Tips: - Engagement Have the students complete the activity in the Student Guide. - Check for Understanding Determine if the students thoughts appear to be accurate from the activity in the Student Guide. Teacher Reflection: 73

74 Financial Services The World Council of Credit Unions (WOCCU) is well known for establishing access to financial services through a savings-based approach to clients in poor countries. They work closely with policy makers, government officials, and credit union leaders; currently, they have assisted in more than 275 projects in 71 countries. More data is being collected about the access, availability, and success of financial services across the globe. The Financial Access Survey provides country-by-country banking access data through 2013, detailed at The Global Financial Inclusion (Findex) Database (funded by the Bill and Melinda Gates Foundation) uses 140 indicators to measure how people around the world handle their finances. The number of people worldwide with an account grew by 700 million between 2011 and Sixty-two percent of the world s adult population has an account, up from 51 percent in In 2011, 2.5 billion adults were unbanked. ( References: Global Financial Inclusion (Global Findex) Database: World Council (WOCCU)-Core capabilities: inclusion/core Global Financial Development Report: ~pagePK: ~piPK: ~theSitePK: ,00.html Write a 5-sentence paragraph explaining your thoughts on how limited access to financial institutions in developing countries impacts individuals and society as a whole. You may conduct an Internet search to gather information and statistics to support your thoughts. 74

75 Slides 5 7 Financial Services Vocabulary: - Banks are publicly or privately-owned corporations and chartered by the state and federal government. Banks allow deposits, make loans, and are commercial in nature, meaning operate as for-profit entities. - Credit Unions offer financial services to members who share a common bond, such as teachers or federal employees. Credit unions offer a wide range of services similar to banks. Usually their products and services are offered at a lower cost than banks. They are non-profit in nature; all profits are kept in the organization and benefit the members with lower costs. Key Points: - Key reasons to use a financial institution: o They are insured and provide safety for your money by guaranteeing funds to a certain amount. o They are convenient, and with today s electronic capabilities, you may withdraw funds, pay bills, make deposits, and transfer money without having to step into a building. o Your money remains secure. Financial institutions use security systems, such as video surveillance cameras, to prevent theft. o Financial institutions can help you plan what to do with your money. - Types of financial institutions include: banks, credit unions, trust companies, and savings and loan associations; also cash advance, pawn shops, payday loan, auto title loan, and checkcashing service companies. Teacher Tips: - Engagement Ask students to brainstorm reasons to use a financial institution. - Check for Understanding Ask students to describe the difference between a credit union and a bank. Large Group Discussion: - Ask the students which types of financial institutions they think are the most popular. Teacher Reflection: 75

76 Financial Services Why use a financial institution? Financial institutions provide many services to help you manage your money and finances. Four reasons to use a financial institution include: (1) They are insured and provide safety for your money by guaranteeing funds to a certain amount. (2) They are convenient, and with today s electronic capabilities, you may withdraw funds, pay bills, make deposits, and transfer money without having to step into a building. (3) Your money remains secure. Financial institutions use security systems, such as video surveillance cameras, to prevent theft. (4) Financial institutions can help you plan what to do with your money. Financial advisors are available to determine how to best invest your money. Types of financial institutions There are many types of financial institutions to service your money needs. Banks and credit unions offer many services to save, invest, pay bills, and obtain loans for homes and cars. Insurance companies may offer loans and provide coverage to protect individuals from being sued or someone taking your hard-earned assets. Other financial institutions, such as cash advance and pawn shops, provide check cashing services, payday loans, and auto title loans (refer to Topic 16, Predatory Lending, for additional information). Consumers should be leery, however, of the high cost of doing business with them. Working with credit unions and banks is preferable, as they provide many needed services and charge reasonable rates for their services. Banks and credit unions Banks and credit unions offer many of the best services and fees to handle your money; however, there are differences between the two. Banks are publicly or privately-owned corporations and chartered by the state and federal government. Banks provide a place to make deposits, offer loans, and are commercial in nature; they make loans to businesses and individuals. Banks also operate as for-profit entities, signifying that profits are paid to executives, employees, and the stockholders of record. Credit unions, on the other hand, offer financial services to members who share a common bond, such as teachers or federal employees. Credit unions offer a wide range of services similar to banks. Usually their products and services are offered at a lower cost than banks. They are non-profit in nature; all profits are kept in the organization and benefit the members with lower cost products. 76

77 Slides 8 9 Financial Services Vocabulary: - Checking account an account used to handle most financial transactions. Money is easily deposited, withdrawn, or transferred to other accounts. - Savings account an account used to deposit money and save for later use. - Money Market Account similar to a savings account; it pays a higher interest rate on your balance. Normally, a higher minimum balance is required to avoid a penalty. - Certificate of Deposit (CD) an account where money must be kept in the account for a specified amount of time (anywhere from 90 days to 10 years) in order to pay a fixed interest rate. If money is withdrawn prior to the account maturing (ending), a penalty is charged. - Stock a certificate of ownership for a company. - Bond an investment made by lending money to a governmental agency or company. - Mutual fund an investment made by purchasing stocks and bonds in different companies. Your money is diversified, thus spreading the risk across many companies rather than relying on one company to perform well. Key Points: - Deposit accounts have various restrictions that vary within financial institutions. - Minimum balances and the volume of transactions may involve a fee. - Non-deposit accounts will be talked about more in detail in the Investing and Saving topic. Teacher Tips: - Engagement Ask the students to share with the class what kind of account(s) they have with a financial institution. - Check for Understanding Ask the students to share some of the requirements that they have affiliated with their account. - Ask the students if they know about any of the non-deposit accounts. Teacher Reflection: 77

78 Financial Services Deposit accounts A checking account is used by most people to handle most financial transactions. Money is easily deposited, withdrawn, or transferred to other accounts. Personal checks can be used to pay bills instead of cash, and many banks offer online, electronic bill-pay services. This type of account may or may not have minimum balance requirements and may or may not be interest bearing. In addition, some financial institutions charge a fee for each check written. A savings account is the simplest type of deposit account. It is easily accessible, provides a safe place to keep your money, and pays interest on the balance. Like checking accounts, there may be fees assessed if the balance falls below a minimum amount. Money may be deposited or withdrawn at your convenience; most savings accounts include debit card access. This allows cash to be withdrawn from ATM machines anywhere. A money market account normally pays a higher interest rate than a savings account. Normally, a higher minimum balance is required. A Certificate of Deposit (CD) is an account where money must be kept in the account for a specified amount of time (anywhere from 91 days to 10 years) in order to earn a fixed interest rate. If money is withdrawn prior to the account maturing (ending), a penalty will be charged. Non-deposit accounts A stock is a certificate of ownership for a company. You may purchase as much stock as you can afford in a company. Money is made in stocks by buying low and selling high. You can also make money when a company declares dividends to its stockholders. When this occurs, the company takes profits and distributes them to the stockholders. A bond is an investment made by lending money to a governmental agency or company. In essence, a bond is like an IOU. The agency or company you are lending to promises to pay interest during the life (time) of the bond and repay the entire face value (the amount you lent) when the bond comes due (reaches maturity). A mutual fund is an investment made by purchasing stocks and bonds in different companies. Your money is diversified, spreading the risk across many companies rather than relying on one company to perform well. Mutual funds do have varying degrees of risk, so it is important to educate yourself 78

79 Slides Financial Services Vocabulary: - Auto Loan borrowed money to purchase an automobile. - Home Loan borrowed money to purchase a home. - Mortgage a home loan. - Business Loan borrowed money to open a business. - Direct Deposit an electronic way of putting money into an account at your financial institution. - Online Mobile Banking an electronic way of processing financial transactions. - Money Order a request for prepaid money from your bank or credit union account. - Cashier s check offered only by financial institutions; they are drawn from your account and signed by a bank or credit union representative. - Safety Deposit Box a box at your financial institution that allows you to store important financial information, documents, and valuables. Key Points: - Shop around to get the best deals on loans. - Setting up your financial life electronically can save you lots of time and convenience. - Consider paying all your bills electronically and having your paychecks directly deposited to your money accounts. Teacher Tips: - Engagement Ask the students if they process any of their financial transactions electronically. - Check for Understanding Ask the students why it is a good idea to organize their financial lives electronically. Is it safe to do so? Teacher Reflection: 79

80 Financial Services about where your money is invested. A factor to consider is that these funds have management fees associated with owning them. Loans An auto loan is applied for when money is borrowed to purchase an automobile. The amount of interest paid for borrowing the money will vary based on your credit score and other factors. Pay-off requirements on this type of loan are usually between three to seven years. A home loan is referred to as a mortgage. When you buy your first home, you will undoubtedly have to borrow money with loans varying in duration from years. You will be required to prove your income and a consistent work history to be approved for this type of loan. The interest rate varies, but in part is based on the interest rates set by the Federal Reserve. A business loan is a loan obtained to open a business. This type of loan normally requires some form of collateral (usually cash or securities), as well as submission of a business plan indicating projected revenue and expenses. A higher interest rate is often attached to this type of loan due to risk factors. Additional services As mentioned earlier, there are many types of services that financial institutions offer. Direct deposit allows the deposit of money electronically without having to be physically present at a credit union or bank. For example, most employees have their paychecks directly deposited to a checking or savings account by their employer each pay day. Online mobile banking allows the convenience of electronic bill-pay services and money transfers within accounts. For example, if your checking account has a low balance, money can be transferred online from your savings account to your checking account using your phone or computer. There are times you may be required to make payment with a money order or a cashier s check, rather than a personal check. A money order is a request for prepaid money from your bank or credit union account. It may be purchased at grocery and convenience stores and other retail outlets. A money order is issued for a limited amount, such as $500 or $1,000, depending upon the issuer. A cashier s check is offered only by financial institutions, is drawn from your account, and signed by a bank or credit union representative. Higher maximum limits apply, but the fees for cashier s checks 80

81 Slides Financial Services Vocabulary: - Automated Teller Machine (ATM) a device that allows you to electronically withdraw and deposit money with the use of a debit card. Key Points: - Shop around to locate an organization that you feel will help you manage your money the best. - Financial institutions require that you open a checking and or savings account before you can use their other financial services. - Keep in mind there might be fees associated with the balance and maintenance of your accounts. - A checking account allows you to manage your finances by tracking transactions and checking balances as frequently as you d like. - Usually after opening a checking account, the financial institution will provide an Automated Teller Machine (ATM) card (or debit card), which allows the electronic withdrawal of money from almost anywhere. In addition, a checkbook and register will be provided to write checks and track deposits and withdrawals. Teacher Tips: - Engagement Ask the students if they have ever written a check. If they have, ask how often. - Check for Understanding Ask the students why they think it might be a good idea to have a checking account. Teacher Reflection: 81

82 Financial Services are generally more expensive. Lastly, most financial institutions offer safety deposit boxes for storing important financial information and documents as well as valuables. There is a yearly fee for safety deposit box rental which varies dependent upon the size. Opening and maintaining an account Many financial institutions compete for business and offer promotions and enticements to get your business. Shop around to locate an organization that you feel will help you manage your money the best. Most places require that you open a checking and or savings account before you can use their other financial services. Your newly-opened account will allow you to begin making deposits and withdrawals immediately. In addition, the sooner you open an account, the sooner you earn interest on your money. Keep in mind that there might be fees associated with the balance and maintenance of your accounts. Lastly, it is important to track every transaction and be diligent in recording the amount of deposits and withdrawals from your account. Always check your balances on a regular basis and record the interest and fees earned or charged to your account. You will receive a monthly statement showing everything that occurs within your account. It is wise to reconcile (verify that all transactions and balances are correct) your accounts every month. Checking account As mentioned earlier, checking accounts offer many benefits. The convenience of writing checks or making electronic payments allows you to save time by not having to hand-deliver payments to creditors. A checking account allows management of your finances by tracking transactions and checking balances daily, if necessary. In addition, there is security in knowing that your money is insured and there are safety protocols in place to protect your money. Usually after opening a checking account, a financial institution will provide an Automated Teller Machine (ATM) card (or debit card) which allows the electronic withdrawal of money from almost anywhere. In addition, a checkbook and register will be provided to write checks and track deposits and withdrawals. 82

83 Slides (Continued) Financial Services Vocabulary: - Payee the recipient of a check. - Routing Number a nine-digit number that identifies your financial institution. - Account Number the number that identifies you as the owner of an account. Key Points: - Checks have several components that should be studied and understood. - The written amount on a check takes precedence over the number amount. - The routing number is located on the lower, left-hand corner of the check, followed by your account number. - Checks must be dated and signed. Teacher Reflection: 83

84 Financial Services Understanding the components of a check is important. The check below contains the required components: # Component 1 Date the check is written. 2 Depositor the person to whom the bank account belongs. It includes the person s address and sometimes their phone number. 3 Pay to the Order of this is the payee or the recipient of the check. The payee does not have to be a business or person. Checks can be made payable to cash or bearer which allows funds to be paid to the person or organization that presents the check for payment. 4 Your signature goes here. 5 Amount of the check. 6 Written amount of the check. 7 Check number (located in two places). 8 Banking information. 9 The first set of numbers is the routing number of your bank. It is nine numbers and identifies the financial institution s branch where your account is located. Entities need this number when you pay or deposit funds electronically. The second set of digits is your account number. Usually when you 84

85 Slides (Continued) Financial Services Vocabulary: - Check Register a device that allows you to electronically withdraw and deposit money with the use of a debit card. - Endorse signing the back of a check so that it can be converted to cash. Teacher Tips: - Engagement Have the students complete the activity in the Student Guide: Writing a Check and Recording it in a Check Register. - Check for Understanding Check the students work for accuracy. Teacher Reflection: 85

86 Financial Services When writing a check, include the name of the person or company (the payee) along with the dollar amount. In addition, you must write out the check amount, as this is what the financial institution will go by when drawing the money from your account. Lastly, always make sure to date and sign the check. Fill out the check below with the information that follows: You are writing a check to your landlord for this month s rent. The rent is $475. The date is August 1 of the current year. Your landlord s name is Vern Thomas. In the check register below, record the above transaction. *Hint: You paid your landlord, so record the amount in the Payment/Debit column. CHECK REGISTER Check Number Date Transaction Description Payment/ Debit (-) Deposit/ Credit (+) Balance 1025 Monthly Rent ,

87 Slides (Continued) and Financial Services Vocabulary: - Deposit putting money into an account. Key Points: - Your endorsement allows a check to be cashed. - Emphasize: every time you encounter a money transaction, it should be recorded in a check register or ledger." Teacher Tips: - Engagement Ask the students how often they deposit money into their savings accounts. - Check for Understanding Ask the students the process they use to deposit money into their accounts. Teacher Reflection: 87

88 Financial Services There are many requirements you should be aware of when dealing with checks (deposits and withdrawals). For example, when cashing a check, it is required that you endorse (sign) the check on the back where indicated. (Your signature must be written exactly as the name spelled on the front of the check). Your endorsement indicates that the check can be converted to cash and/or deposited into any of your accounts. Most financial institutions also require the account number to be written below your endorsed signature. Deposits When you place money into your checking or savings account, this is known as making a deposit. As discussed previously, when you deposit a check (made out to you), endorse the check on the back. This can occur without having to physically go to your financial institution. Checks can be deposited into your account via an ATM machine, your phone, or by electronic transfer. Currently, most people have their paychecks from work directly deposited electronically into their bank account; thus, never having to physically touch the check. In addition, income taxes and student loan disbursements can be directly deposited. 88

89 Slides (Continued) Financial Services Vocabulary: - Deposit Slip a form to record the money going into an account. Key Points: - Some financial institutions still require deposit slips to be filled out when making a deposit. - Review the various parts of a deposit slip. Teacher Tips: - Engagement Ask the students to complete the activity in the Student Guide: Making a Deposit and Recording the Transaction in the Check Register. - Check for Understanding Check the students work for accuracy. Teacher Reflection: 89

90 Financial Services If you decide to deposit a check(s) in person, you may have to fill out a deposit slip (especially if there are multiple checks). This procedure will vary based on the financial institution. Below are two different examples of deposit slips for placing money in a checking or savings account. Note that the payee has the option to receive a partial or full payment in cash. 90

91 Slides Financial Services Vocabulary: - Debit Card a card that allows you to withdraw, deposit, and make payments without cash. - Overdraft Fee a fee charged by your financial institution when your account balance goes below your required balance. - Debit cash is withdrawn immediately from your account. - Credit it takes two to three business days before cash is withdrawn. Key Points: - Automated Teller Machine (ATM) cards and debit cards are just like cash. - These cards can be used anywhere Visa or MasterCard are accepted. - If you misplace or lose them, notify your financial institution immediately so you are not responsible for unauthorized purchases made by someone other than yourself. - Your debit or ATM card has a Personal Identification Number (PIN) associated with it. - It is important to not share this number with anyone. Each time you make a transaction with this card, you will need to enter the PIN. Teacher Tips: - Engagement Ask the students if they have a debit card. - Check for Understanding Ask the students if they know the difference between using their debit vs. a credit card. Large Group Discussion: - Ask the class if they know what to do if they lose their debit card. Teacher Reflection: 91

92 Financial Services Using the check register and the deposit slip below, record the following transactions and fill out the deposit slip. The date is August 1, 20XX. Your account number is Received $100 for your birthday. You will deposit it into your savings account. 2. You received a tax refund check of $400 from the Internal Revenue Service. You will deposit it into your savings account. CHECK REGISTER Check Number Date Transaction Description Payment/ Debit (-) Deposit/ Credit (+) Balance N/A 8-1 Cash-Birthday Gift N/A 8-1 Tax Refund Deposit Slip Date: XX Cash Name: Student s First and Last Name Checks Account Number: Nusenda Credit Union Albuquerque, New Mexico Subtotal Less Cash Total

93 Financial Services ATM and debit cards Automated Teller Machine (ATM) cards and debit cards act just like cash. You can make purchases and withdraw money with these cards. Of course, you need to make sure you have money in your account if you plan to use a debit card to withdraw cash. These cards can be used anywhere Visa or MasterCard are accepted. It is important to store these cards in a secure place at all times. If you misplace or lose them, notify your financial institution immediately so you are not responsible for unauthorized purchases made by someone else. Your debit or ATM card has a Personal Identification Number (PIN) associated with it. It is important to not share this number with anyone. Each time you make a transaction with this card, you will need to enter the PIN. When using a debit card, you have the option of using other debit or credit. If you choose debit, the money will be taken out of your account immediately or within one business day. In addition, you also have the option of receiving cash back. If you choose credit, it takes two to three business days for the money to be withdrawn from your account and a signature may be required on the credit slip (to be retained by the vendor). Lastly, credit transactions do not offer a cash-back option but they do provide added fraud protection. It is important to record your transactions so you can verify your balances in your accounts. If you use your debit or ATM card at an ATM machine that is not affiliated with your financial institution, you will be charged an additional fee for withdrawing your own money. Also, if you attempt to withdraw money that you don t have in your account, you will be charged an overdraft fee. Keep in mind that there may be annual fees and minimum balance fees associated with your card. You used your debit card a couple of times this week. Record the following transactions in the check register on the next page: 1. On August 25, you used your debit card to put gas in your car: $50 2. On August 28, you used your debit card to purchase a $95 required textbook for school. 93

94 Slides Financial Services Key Points: - Today s technology provides the convenience to process financial transactions from almost anywhere there is Internet access. - You can pay bills, transfer money, and purchase items via your computer or phone. - When using electronic services, be sure to always use secure passwords; change them periodically; and never share this information with anyone. - Each month, your financial institution will provide a statement showing all of the transactions that occurred in your account during the month. - It is important to reconcile this statement with your ledger (or register) to ensure that it matches your records. - Save receipts and record transactions every time you deposit or withdraw money from your account. - Reconcile your account to the statement that you receive from your financial institution every month. Teacher Tips: - Engagement Have the students complete the activity in the Student Guide: Recording Debit Card Transactions in a Check Register. - Check for Understanding Check the students work for accuracy. Teacher Reflection: 94

95 Financial Services CHECK REGISTER Check Number Date Transaction Description Payment/ Debit (-) Deposit/ Credit (+) Balance Debit Card 8-25 Put Gas at Phillips Debit Card 8-1 Textbook Purchase More ways to pay bills As discussed throughout this section, today s technology provides the convenience to process financial transactions from almost anywhere there is Internet access. You can pay bills, transfer money, and purchase items via your computer or phone. When using electronic services, be sure to always use secure passwords; change them periodically; and never share that information with anyone. Your account Each month, your financial institution will provide a statement showing all of the transactions that occurred in your account during the month. It is important to reconcile this statement with your ledger (or register) to ensure that it matches your records. Some tips to help you manage your accounts: (1) Save receipts and record transactions every time you deposit or withdraw money from your account. (2) Reconcile your account to the statement that you receive from your financial institution every month. Be consistent with these procedures and manage your money appropriately. This will help you avoid paying late and unnecessary fees. 95

96 Slide 31 Financial Services Vocabulary: - Review the terms in the Student Guide. Key Points: - It is important that you consistently record financial transactions in your check register or ledger. - People who fail to track their finances on a regular basis are often unaware of the amount of money they have available to pay bills. - Reconciling your check register with your monthly bank statement every month will help you manage your money effectively, and you will always be aware of the exact amount in your account. Teacher Tips: - Engagement Ask the students if they know what a bank reconciliation is. - Check for Understanding Ask the students why their check registers should be reconciled to their monthly account statements. Teacher Reflection: 96

97 Financial Services Reconciling your account As indicated throughout this topic, it is important that you consistently record financial transactions in your check register or ledger. Establishing this habit will help you manage your money throughout your lifetime. People who fail to track their finances on a regular basis many times are unaware of the amount of money they have available to pay bills. Unintended debt can accumulate because of fees and penalties assessed when you attempt to withdraw or pay bills with money you don t have. Reconciling your check register with your monthly bank statement every month will help you manage your money effectively, and you will always be aware of the exact amount in your account. Outstanding Checks These are checks you have written and delivered for payment but they have not yet cleared your financial institution; thus, they do not show on your current monthly statement. Deposits in Transit These are deposits you have recorded in your check register. They do not show on your monthly statement because they have not been recorded yet by your financial institution. Service Fees/Charges These are fees shown on your monthly statement but not recorded in your check register, because you were unaware of the fees until you received your statement. NSF (Not Sufficient Funds) This can occur when you deposit a check that you received from someone but when your financial institution attempts to withdraw the money from their account, there s not enough. Ultimately, your financial institution will withdraw the money from your account. An overdraft (below) also results in an account with insufficient funds. EFT (Electronic Fee Transfer) This is a transaction that occurs when money is deposited or paid from your account electronically. Sometimes, people forget about these transfers and fail to record them in their check register. Overdraft Fees These fees occur when you attempt to withdraw money from your account and you don t have enough money to withdraw. 97

98 Slide 31 (Continued) Financial Services Key Points: - Go over the Bank Reconciliation formula in the Student Guide with the students. Teacher Tips: - Engagement Have the students complete the Bank Reconciliation in the Student Guide. - Check for Understanding Check the students work for accuracy. Teacher Reflection: 98

99 Financial Services The goal of reconciling your check register to your monthly statement is to get both balances equal. If they aren t equal, recheck each entry to see where the error or omission is. The table below provides a formula for reconciliation: Bank Reconciliation Formula Check Register Balance Bank Statement Balance Ending Balance Ending Balance - NSF + Deposits in transit - Overdrafts - Outstanding checks - Service charges = New Balance ± EFT = New Balance Below is your Check Register for the month of September. Check Number Date Transaction Description Payment/ Debit (-) Deposit/ Credit (+) Balance 53 2-Sep Paid Cell Phone Bill N/A 10-Sep Deposited Allowance N/A 15-Sep Direct Deposit of Paycheck Sep Paid for some Clothes , N/A 30-Sep Deposited a check from your mom , ,

100 Financial Services Below is your monthly statement: Nusenda Credit Union Albuquerque, New Mexico Account Statement Your Name Account #: Your Address Date: XX Beginning Total Total Service Ending Balance Deposits Withdrawals Charge Balance Transactions Deposits Date Amount Deposit XX Direct Deposit XX Charges Date Service Charge XX 5.00 NSF XX Checks Number Date Amount XX

101 Financial Services Step 1: Put a next to each amount in your check register that shows on your monthly statement. *Hint: The first three amounts are shown on your monthly statement. Step 2: Determine what amounts on your monthly statement are not showing in your check register. *Hint: The last two transactions are not showing on your monthly statement. Thus, you have an outstanding check and a deposit in transit. Also, there are two other amounts not shown in your check register that are shown on your monthly statement. Step 3: Use the formula below to reconcile the two balances. Note: Your check register balance should equal your monthly statement balance after you reconcile your account. Bank Reconciliation Formula Check Register Balance Bank Statement Balance Ending Balance 1, Ending Balance NSF Deposits in Transit Overdrafts Outstanding Checks Service charges = New Balance 1, ±EFT 0.00 =New Balance 1,

102 Lesson Component Description Purpose In the Employee Smarts topic, the students gain a fundamental understanding of working in a job vs. a career. They gain knowledge of the application process and the compensation process of an employee. Learning Objectives 1. Differentiate between a job and a career. 2. Complete a job application. 3. Write a Letter of Application (Cover Letter) 4. Fill out a W-4 5. Fill out an I-9 6. Make payroll computations Time Required 150 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework to guide the teachers and students. Implementing additional resources to engage the students is highly recommended. Homework Recommended, but feel free to develop your own Homework assignments. 1. Go to to research three careers and gather the following information about each. Be prepared to present it to the class: a. Median Pay b. Entry-level Education c. Work experience in a related occupation d. On-the-job training e. Number of jobs f. Job outlook Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Employee Smarts Quiz Key 1.F 2.T 3.F 4.F 5.T 6.D 7.C 8.C 9.A 10.A

103 Alignment to Standards Common Core State Standards: Math 1. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 2. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience 1. (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence

104 1. (CCR Writing 1) 2. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 3. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 4. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 5. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 6. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 7. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 8. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 9. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 10. Apply knowledge of language to understand how language functions in different contexts, to make effective choices for meaning or style, and to comprehend more fully when reading or listening (CCR Language 3) Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Employee Tax Forms W-4, I-9, W-2: Résumés, applications, and cover letters Bureau of Labor Statistics: Occupations: Video Links Understanding Your Paycheck: Filling out a W-4: Filling out a Job Application: Life Smart Applications 1. Completes a Job Application 2. Writes a Letter of Application 3. Produces a Résumé 4. Fills out a W-4 5. Fills out an I-9 6. Makes payroll computations

105 Name Date True or False Questions: A career is usually a place that you have to be to make money to pay bills; whereas, jobs end to be passions or a place that you want to be because you enjoy the work and get paid for doing something you love. 2. Frequency of pay is important because it helps you establish a budget. 3. The W-4 is a federal form required by the U.S. Citizenship and Immigration Services. 4. A gym membership card is a legitimate document that establishes identity. 5. A W-2 Form is a federal tax form issued by employers stating how much an employee was paid and the specific deductions made during the year. Multiple Choice Questions: Which of the following items should you have with you when applying for a job? a. Résumé b. Driver s license c. Cover letter d. All of the Above 7. Which of the following is considered time and a half compensation? a. Employer pays 50% of medical insurance b. Paid holidays c. Overtime pay d. Sick days 8. Which of the following is not a required payroll deduction? a. State taxes b. Federal taxes c. Health Insurance d. Medicare 9. Which of the following forms are not initiated or processed by the employer? a form b. I-9 form c. W-2 form d. W-4 form 10. Which of the following is a retirement benefit? a. ESOP s (Employee Stock Ownership Program) b. PTO (paid time off) c. Health Premium d.1040ez

106 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Vocabulary: - Rate of Pay the amount of money received per unit of time. - Income the monetary payment received for services performed or from other sources such as investments. - Compensation something given or received for services performed. - Retirement Benefits the money received from saving after your working years (k) a savings plan that allows employees to contribute a fixed amount of income to a retirement account; defers taxes until withdrawal. - IRA Individual Retirement Account; money saved for retirement. - Advancement promotion in rank or standing. Key Points: - Emphasize to the students that they will be working a majority of their lives. Choosing a job and/or career is something they should spend time thinking about so they will enjoy going to work every day. - It is important to enjoy your job, but other factors such as benefits should be considered. - There will come a time when you can t work anymore, so save for those non-working days. - It s important to think about how far you want to travel to work. - Moving up and advancing should always be a consideration. This leads to other opportunities and continuous learning. Teacher Tips: - Engagement Ask your students what they think is the best job in the world. Why? - Check for Understanding Have the students estimate what percentage of their lifetime will be spent at work. Large Group Discussion: - Ask the students who have a job: (1) to discuss their likes and dislikes of the job; and (2) to describe the key factors for choosing this job. Teacher Reflection:

107 Employee Smarts What You Want in a Job and How You Get Paid Life Smart Activities: 1. Complete a Job Application 2. Write a Letter of Application 3. Produce a Résumé 4. Fill out a W-4 5. Fill out an I-9 6. Make payroll computations What do you want in a job? Work schedules (the days and hours you work) vary greatly. Days? Nights? Weekends? When you consider any employment opportunity, it is necessary to coordinate school and/or family obligations with your work schedule. Rate of pay (how much money you make; otherwise known as, income or compensation) is another factor to consider. Retirement benefits are also important, but be aware that many employers are cutting or eliminating these benefits. They are placing the burden on the employee to handle their own retirement through company-sponsored 401(k) plans and/or IRA programs. Proximity to school and home should also be considered, as this will be a daily transportation concern. Advancement (promotions, additional training, more responsibility, etc.) is another important issue. As you grow professionally over time, you will want to make sure you are offered opportunities for additional responsibilities and compensation. Finally, if you spend eight hours (or more) a day at work, you want to find a job that is not only fun but challenging Nusenda Federal Credit Union. All rights reserved.

108 Employee Smarts Slides 3 and 4: Vocabulary: - Job a post of employment; may be a full-time or part-time position. - Career an occupation or profession; may require special training; also known as one s lifework. - Total value the worth of a job. This includes the compensation, benefits, and perks of being employed. - Overtime This normally refers to any hours worked over 40 during a week s time. Most businesses will pay time and a half for every hour worked over Salaried employees employees who are compensated a pre-determined amount no matter how many hours they work. - Insurance benefits the benefits employees receive for items such as medical, dental, health, and life insurance. - Paid time-off the amount of time off an employee receives for working. - This includes vacation time, sick leave, and/or holiday pay. - Retirement savings money put into various accounts (investments) to use in your nonworking, golden years. Key Points: - Emphasize a job is considered something that is necessary to survive financially. - A career is work you have a passion for and usually leads to financial stability and happiness. Careers usually require specific training and/or additional education. - When determining jobs and careers, it is imperative to consider all of the factors associated with the job/career: pay rate, hours, overtime, insurance benefits, retirement benefits, time off, and the amount you must contribute to receive these benefits. - Emphasize that a key to happiness is finding work you have a passion for and then figuring out how to get paid for it. Teacher Tips: - Engagement Brainstorm the different types of jobs a student might be interested in. - Check for Understanding Have the students complete the activity in the Student Guide to determine the importance of job benefits. Large Group Discussion: Ask the students: (1) what their parents do for a living, and have the class determine if it is a job or a career; (2) Do they think the parents enjoy their lines of work? Why or why not? Teacher Reflection: 108

109 Employee Smarts Did you know? If it takes 30 minutes to drive to work, you will spend approximately five hours per week in your car. That adds up to approximately 260 hours (10+ days) per year! Job vs. career Although the word job is used loosely to describe a place of work, in reality, a job is usually a shortterm means to an end. Jobs provide income to pay bills and provide support for you and your family in the here and now. Whether you like your job or not; most people consider it essential to survive. In contrast, a career is a stable, long-term pursuit that provides all of the benefits of a job. In addition, it offers the opportunity to develop personally by learning additional skills and knowledge that make you more valuable (worth more) in the workplace. A career also offers advancement possibilities within the company to positions of higher responsibility and higher pay. A job is usually a place where you have to be to make money to pay bills, whereas careers tend to be passions or a place where you want to be because you enjoy the work and get paid for doing something you love. Compensation Compensation is a term that refers to the total value of a position. The rate of pay is only one of many elements that make up compensation. Hourly employees are paid a set amount for every hour they work up to 40 hours. If they work additional hours, this is considered overtime, and they are paid 1.5 times that amount. Salaried employees are paid a pre-determined amount for every pay period no matter how many hours they work. Commission/Bonus refers to additional money paid to an employee based on performance. 109

110 Employee Smarts Slides 5 and 6 Vocabulary: - Job application a form filled out for an employer when attempting to get a job. - Résumé a brief, formatted, and written account of personal, educational, and professional qualifications and experience prepared for an employment opportunity; usually required for higher-salaried positions. - Cover letter/letter of application A written letter that conveys your interest in a position; provides a brief background about yourself; and describes how you found out about the employment opportunity. - References page a list of names and their contact information to enable an employer can verify your work history and personal characteristics. These references should be professional in nature and should exclude relatives and/or close personal friends. - Letter of recommendation a letter written by an acquaintance (preferably by a reference) that can attest to your employability skills and recommend you for a position. - Frequency of pay refers to how often an employee gets paid weekly, biweekly, semimonthly, or monthly. Key Points: - Explain the process that most people go through to obtain a working position. This might include completing a job application, submitting a cover letter, a résumé, and a list of references prior to an interview. - Convey the importance of error-free communications to increase the chances of being selected for employment. - Frequency of pay is a critical factor when budgeting. The less often you get compensated, the more imperative it is that you plan for future expenses. Teacher Tips: - Engagement Explain to the students the various ways you personally obtained employment. - Check for Understanding Have the students complete three Life Smart Activities: an Employment Application, a Cover Letter/Letter of Application, and a Résumé. (Examples are provided at the end of this topic). Large Group Discussion: - For the working students: Ask how they obtained their jobs and how often they are compensated. Teacher Reflection: 110

111 Employee Smarts Employers may or may not provide employees with a variety of insurance benefits, for example, medical, dental, and life insurance benefits. The amount the employer contributes toward the cost of your insurance is known as the premium and counts as compensation. Paid time off may include vacation time, sick leave, and/or holiday pay. Each day of paid time off is a form of compensation. Retirement Savings include 401(k) and 403(b) plans, pensions, and Employee Stock Ownership Plans (ESOPs). These plans allow a company to offer a match or a certain percentage to be added to an employee s retirement savings account. This could be considered free money, which is also counted as part of your total compensation. Determine which employee has the best benefits. - Each day of Paid Time Off (PTO) has a value of.4% of the rate of pay. - The weekly premium for Insurance (Life, Health, Dental, and Vision) is $ The retirement plan has identical value for both employees in this exercise. Employee A is paid an hourly rate of $30 per hour. He receives 6 holidays, 5 vacation days, and 3 days sick leave. His employer contributes 50% toward the cost of his insurance. Employee B is paid an hourly rate of $28.50 per hour. She receives 10 holidays, 10 vacation days, and no sick leave. Her employer contributes 80% toward the cost of her insurance. Applying for a job (pre-hire) Several documents are required from a prospective employee prior to being hired by a company. These include: a job application, a résumé, a cover letter, a references page, and a letter of recommendation. A job application is a fill in the blank form with your name, contact information, education, and work history for employers to gather basic information about potential employees. A paper application or completion of an online application will be specified in the job advertisement. 111

112 Employee Smarts Today, most employers require a résumé, which is a detailed document that includes the same information as an application (but in paragraph form) with more detail. A cover letter/letter of application should be included with your résumé specifically mentioning the position you are applying for, how you found out about the job, and how your unique education, experience, and related skills will benefit their company. Address the cover letter not only to the company, but also to the appropriate department manager. (Call the company s Human Resources Department if you are unsure where to send the résumé.) Lastly, include your telephone number, so you may be reached for further information or to schedule an interview. A references page is a separate sheet listing 3-5 professional references. A professional reference is an individual (not a family member) who can answer questions about your previous work history. If you have never been employed, include a teacher, a counselor, a club sponsor, and any other adult who can vouch for your character and positive traits. Be sure to include complete and accurate contact information (including full name, address, phone number, and address) for each reference. Your references may be asked about your attendance habits, the amount and quality of work produced, and your work ethic. NEVER list someone as a reference without first asking their permission. Letters of recommendation are written references that provide information about your work qualities and performance from the eyes of a previous employer. Hiring managers appreciate the honesty of an effective letter of recommendation, as past performance may be a strong indicator of future performance at their company. When leaving a company, always ask your supervisor to provide you with a letter of recommendation. Frequency of pay How often a company pays its employees varies widely ranging from once a week, to bi-weekly (every two weeks), to semi-monthly (twice a month), or to monthly (once per month). An employee working 40 hours per week is usually considered a full-time employee. On an annual (yearly) basis, the amount of pay is not affected by the frequency of pay. The most important factor to consider with respect to frequency of pay is your ability to budget. If you are paid on a bi-weekly or a monthly basis, you must create a budget that matches the pay cycle. You must also stick to your budget and pay your bills on time to prevent late fees and penalties. 112

113 Employee Smarts Vocabulary: - Job application a form filled out for an employer when attempting to get a job. Key Points: - Always fill out an application form in blue or black ink (unless completed electronically). - If a question does not apply to you, don t leave it blank; put N/A for not applicable. - Make sure to have dates and contact information for your references handy when completing a job application. It makes for an easier process. - Never submit a partially completed job application. Teacher Tips: - Engagement Ask students if they have ever filled out a job application. Did they hear back from the employer? Did they get the job? - Check for Understanding Have students complete the job application form and review it for accuracy. Resources: Video How to Fill out a Job Application: Teacher Reflection: 113

114 Employee Smarts Life Smarts: 1. Complete an employment application APPLICANT INFORMATION Last Name First M.I. Date Street Address Apartment/Unit # City State ZIP Phone Address Date Available Social Security No. Desired Salary Position Applied for Are you a citizen of the United States? YES NO Have you ever worked for this company? YES NO If so, when? If no, are you authorized to work in the U.S? YES NO Have you ever been convicted of a felony? YES If yes, explain? NO EDUCATION High School Address From To Did you graduate? YES NO Degree College Address From To Did you graduate? YES NO Degree Other Address From To Did you graduate? YES NO Degree REFERENCES Please list three professional references. Full Name Relationship Company Phone ( ) Address Full Name Relationship Company Phone ( ) Address Full Name Relationship Company Phone ( ) Address 114

115 Employee Smarts PREVIOUS EMPLOYMENT Company Phone ( ) Address Supervisor Job Title Starting Salary $ Ending Salary $ Responsibilities From To Reason for Leaving May we contact your previous supervisor for a reference? YES NO Company Phone ( ) Address Supervisor Job Title Starting Salary $ Ending Salary $ Responsibilities From To Reason for Leaving May we contact your previous supervisor for a reference? YES NO Company Phone ( ) Address Supervisor Job Title Starting Salary $ Ending Salary $ Responsibilities From To Reason for Leaving May we contact your previous supervisor for a reference? YES NO MILITARY SERVICE Branch From To Rank at Discharge Type of Discharge If other than honorable, explain: DISCLAIMER AND SIGNATURE I certify that my answers are true and complete to the best of my knowledge. If this application leads to employment, I understand that false or misleading information in my application or interview may result in my release. Signature Date 115

116 Employee Smarts Vocabulary: - Cover Letter/Letter of Application A written letter that conveys your interest in a position, provides a brief background about yourself, and describes how you found out about the employment opportunity. Key Points: - This letter must be free of spelling and grammatical errors. - This letter should contain all of the sections indicated in the sample provided. - A cover letter/letter of application should always be typed. Teacher Tips: - Engagement Ask the students if they have ever written a Cover Letter (otherwise known as a Letter of Application). - Check for Understanding Have the students type a Cover Letter/Letter of Application. Resources: Video Cover Letter/Letter of Application: Teacher Reflection: 116

117 Employee Smarts Life Smarts: 2. Write a cover letter/letter of application. Right and Left 1 Sample Cover Letter/Letter of Application Date 12-pt. Bold Font 4 Spaces Name of Contact Title of Contact Name of Business Address City, State Zip Code Dear (Name of Contact): Name Home Address City, State Zip Code Contact Phone Number Address Put as a header. First paragraph: What is your name? What is your grade level and when will you graduate? What is the job you are applying for? How did you learn about the job opening? Second paragraph: What work experience do you have? What are some of the classes you are taking? What activities/clubs are you involved in? How will the activities described above help you in the job you are applying for? 12-pt. Font Times New Roman Third paragraph: Why would you make a good employee for this company? Indicate that you have enclosed your resume for their review. Ask the business to consider you for this job. Indicate you are looking forward to hearing from them and include how to contact you. Thank them for their time and consideration. Sincerely, First and Last Name Enclosure 117

118 Employee Smarts Vocabulary: - Résumé a brief, formatted, and written account of personal, educational, and professional qualifications and experience prepared for an employment opportunity; usually required for higher-salaried employment. Key Points: - Verify that the contact information is correct. - It is crucial that a résumé is free from errors. - Spacing and formatting should be consistent throughout the document. Teacher Tips: - Engagement Determine how many students in the class have written a résumé. - Check for Understanding Have the students type a personal résumé. They may use the attached example as a sample. Resources: Video Resume Writing Tips, How to Write a Creative Résumé & Get a Job: Teacher Reflection: 118

119 Employee Smarts Life Smarts: 3. Write a résumé Sample Résumé 119

120 Employee Smarts Slides 7-11 Vocabulary: - W-4 a federal tax form that needs to be completed for your employer prior to working. This form indicates the amount of federal taxes you wish to be withheld at the end of each pay period. Key Points: - Explain to the students that when filling out tax forms, it is imperative to use their legal name as it appears on their Social Security card. This will prevent delay in processing the paperwork for tax Purposes. - Line 5 of W-4 For most teenagers (who plan on making less than the standard deduction of $6,100 in 2013), claim EXEMPT. This means that no taxes will be withheld; thus, you will not have to file a tax return at the end of the year. However, if you plan on making more than $6,100 during the year, it s advisable to claim single and 1 deduction. This implies taxes will be withheld, and you should file a tax return at the end of the year. Even if you make less than $6,100 and don t claim exempt, you should still file a tax return at the end of the year (to get a refund of the taxes that were withheld). Teacher Tips: - Engagement Show the students the W-4 form. - Check for Understanding Life Smart Activity Have the students complete the front portion of a W-4 in the Student Guide. For safety purposes, do not require them to write down their Social Security numbers. Large Group Discussion: - Ask the students if they had any problems completing the front portion of the W -4. Resources: W-4 Form Certificate-1 Video Teens and Taxes What s a W-4 Form? Teacher Reflection: 120

121 Employee Smarts Employment paperwork (post-hire) After you have accepted a position, you will be asked to fill out standard forms required by all U.S. employers (in addition to specific company paperwork). The most common forms required are: W-4 A federal tax form that calculates the tax withholding from an employee's paycheck. The amount depends on the number of people in his/her household and the employee's expected filing status for the year. Life Smarts: 4. Fill out a W-4 form 121

122 Employee Smarts Slides 7-11 Vocabulary: - I-9 a form required by the federal government. It is used by an employer to verify an employee s identity and to establish the worker is eligible to accept employment in the United States. Key Points: - Like the W-4, the legal name that appears on your Social Security card should be used on the I-9 form. - The I-9 form is used by an employer to verify an employee's identity and to establish the worker is eligible to accept employment in the United States. - See your school s career counselor if you are unsure about your eligibility to work in the United States. - Review Lists of Acceptable Documents on page 2 of the I-9 form with the students. Teacher Tips: - Engagement Show students the I-9 form, and state that they will have to complete this form when applying for a job. - Check for Understanding Life Smart Activity Have the students complete page 1 of an I-9 Form. For safety purposes, do not require them to write down their Social Security numbers. Large Group Discussion: - Ask the students if they have any questions regarding the I-9 form. Resources: PDF I-9 Form Video Filling out an I-9 Form: Teacher Reflection: 122

123 Employee Smarts I-9 (The Employment Eligibility Verification Form) A federal form required by the U.S. Citizenship and Immigration Services. This form is used by an employer to verify an employee's identity and to establish that the worker is eligible to accept employment in the United States. Specific, and sometimes multiple forms of identification, may be required (see page 2 of the sample I-9 form below Life Smarts: 5. Fill out an I-9 Form 123

124 Employee Smarts 124

125 Employee Smarts Vocabulary: - Time card a form that is filled out by you or your employer to record the hours worked during a time period. It can be completed manually or electronically. - W-2 a form mailed to you by your employer the last week in January (showing your amount of earnings and taxes withheld during the year). Key Points: - Time cards are used by most employers to track your time worked and to compute wages earned during a pay period. - The W-2 is an important form needed to complete your tax return every year. Teacher Tips: - Engagement o Inquire from the students who have jobs how they record their hours worked for their employers. o Ask the students who have a job if they recall receiving a W-2 from their employers. If they do, ask what they did with the form. - Check for Understanding Have the students review the Timecard and W-2 samples thoroughly, and ask the students if there are any questions. Resources: Video Teens and Taxes What's a W-2 Form?: Teacher Reflection: 125

126 Employee Smarts Timecards Hourly paid employees are required to complete a timecard for each pay period. Timecards are submitted manually or electronically to a supervisor for review and approval. W-2 A federal tax form issued by employers stating how much an employee was paid and their specific deductions in a year. Your employer will mail this to you in January. 126

127 Employee Smarts Vocabulary: - Paycheck amount of money earned for services rendered. Key Points: - Paychecks are issued to employees for the services provided during each pay period. - Paychecks show the amount earned, taxes withheld, and the net earnings. - Net Earnings are the amount of money earned after subtracting taxes and other deductions. It is also referred to as the take-home pay. - Common employee deductions include the following: o Federal taxes withheld o State taxes withheld o FICA Social Security (OASDI) taxes withheld (6.2% of wages). Employers must match the amount of the employee s contribution (an additional 6.2%) to be paid to the Social Security Administration. (The amount paid by the employer is not shown on your check). o FICA Medicare taxes withheld 1.45% of wages. Teacher Tips: - Engagement Ask the students who work if they recall the various deductions from their paycheck. Ask if they know how those computations are made. - Check for Understanding Have the students complete the Life Smarts activity Paycheck Computations. Resources: Video How to Understand Your Paycheck: Teacher Reflection: 127

128 Employee Smarts Understanding your paycheck The graphic below represents a typical paycheck. There are several computations to be made by an employer to determine the take-home pay. Most companies use a software package that makes the computations for them. A few of the typical paycheck deductions are shown below: Current Pay = Rate x Hours $1,020.00= $25.50 x 40 hours Overtime Pay = (Rate x 1.5) x Hours $ = (25.50 x 1.5) x 6.5 Hours OASDI is Social Security Employees pay 6.2% of their pay into social security OASDI = Total Earnings x6.2% $78.66 = $ x 6.2% Period Begin 02/18/2013 Period End 02/24/2013 Check Date 03/01/2013 Check # John Doe Employee #1234 ABC Company 1234 Main Street Anywhere, USA Earnings Deductions Description Location/Job Rate Hours Current Year to Date Description Current Year to Date Regular Federal Overtime OASDI Holiday Medicare NM Total Earnings Total Deductions NET PAY Total Direct Deposits Net Pay = Total Earnings Current Deductions $ = $ $ Employees are required to pay Federal and State taxes each pay period. These amounts are based on the W- 4 that you filled out when you were hired. Medicare Employees pay 1.45% of their pay into Medicare Medicare = Total Earnings x 1.45% $18.40 = $1, x 1.45% 128

129 Employee Smarts Life Smarts 6. Paycheck Computations Verify that your paycheck is correct. You make $11.50 per hour. You worked 40 hours. Your Federal Withholding is $46, and the State Withholding is $8.50. Compute Total Earnings = (11.50 x 40) Compute OASDI (Social Security) = (.062 x ) Compute Medicare = 6.67 (.0145 x ) Compute Net Pay = ( ) Assignments: Answer the following questions: 1. Brainstorm about financial planning. What is it and why is it important? After thinking about it, write out short- and long-term goals to achieve your dream career. 2. List a minimum of five strengths and five weaknesses about yourself. Get an opinion on them from someone who knows you well. 129

130 Employee Smarts 3. Write a five-sentence paragraph explaining why you would make a good employee. 4. Go to to research three careers and gather the following information about each. Evaluate this information pertaining to your future goals. Be prepared to present your findings to the class. Career: Median Pay: Entry-level Education: Work Experience in a Related Occupation: On-the-job Training: Number of Jobs 130

131 Lesson Component Description Purpose In the Budgeting topic, students gain a fundamental understanding of how to set up a budget and determine the importance of setting up a yearly financial plan. Learning Objectives 1. Distinguish between income and expenses. 2. Analyze spending behaviors. 3. Create a budget using income and expense amounts. 4. Examine the importance of financial planning and saving. 5. Produce a personal family budget. Time Required 350 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as students follow along with the Student Guide. The guides are merely a framework for the teacher and students. Implementing additional resources to engage students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have students take home a sample budget format and have them complete it with their Assessment guardian(s). Quiz 10 questions (5 True/False; 5 Multiple Choice) Budget Quiz Key 1.T 2.F 3.T 4.T 5.F 6.D 7.D 8.D 9.D 10.B Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3).

132 4. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). 5. Use probabilities to make fair decisions (S-MD 6). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 6. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 7. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 9. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 10. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 11. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 12. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 13. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W 10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5)

133 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Budget Templates: us/templates/results.aspx?qu=budgets&ex=1&av=zxl150&avg=zxl Video Links Needs vs. Wants: How to Budget: Tips for Teaching Your Child to Budget How to Set Up a Budget Money Management: Life Smart Applications 1. Create a budget for a family of three. 2. Create a family budget with your parents.

134 Name Date True or False Questions: You prepare a budget because you understand that it will help you stay out of debt. 2. Financial experts suggest that you spend your money in the following ways: 50% for Wants; 30% for Savings; and 20% for Needs. 3. Take-home pay is the amount of money you take home after deductions. 4. Income Variance is equal to the Actual Income minus the Budget Income. 5. Expense Variance is equal to the Budget Expense minus the Actual Expense. Multiple Choice Questions: Which of the following is not considered Other Living Expenses? a. Food b. Vacations c. Entertainment d. Mortgage Payment 7. In which category should you include a car expense when developing a budget? a. Income b. Savings c. Debt d. None of the above 8. Which of the following is the best way to save money? a. Go to the bank each time you get paid and make a deposit into savings b. Put it under your bed c. Have your parents save it d. Have it electronically transferred into various savings accounts every time you get paid 9. A positive number for the Total Variance implies which of the following: a. Over budget b. You didn t follow your budget c. Brought in less money than you spent d. Under Budget 10. Pay Yourself First refers to which of the following: a. Saving money for your siblings. b. Saving money for yourself to spend later on wants or needs. c. Setting money aside to make a car payment. d. Paying your rent above all other expenses.

135 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slides 2 5 Vocabulary: - Budget an estimate that includes expected income and expenses for a given period in the future. - Standard of living refers to the type of lifestyle you wish to lead. - Needs something you must have. - Wants something you can do without. Key Points: - Emphasize to the students that a budget can help them get where they want to go financially - Indicate to the students that budgeting can help them live the lifestyle they want if they can stay true to it. - Review the pie chart with the student so that they have an idea as to how they can break up their spending habits. Also, spend time on the PowerPoint slides showing more specific ways to spend one s money. Teacher Tips: - Engagement Ask the students to share with the class the types of lifestyle in which they wish to engage later in life. - Check for Understanding Solicit the class to share how they might want to divide up their spending habits. Large Group Discussion: - Ask the students if they have any idea how their parents divide up their spending habits. Ask the students if they know how much their parents earn. Teacher Reflection:

136 The Budget A Road Map to Financial Security Life Smarts: 1. Create a step-by-step budget for a family of three and for yourself. 2. Create a family budget with your parents/guardians. What is a budget? The creation of a budget allows you to track income (money coming in) and expenses (money going out). It can help you get out of debt by showing where you spend money and also help you determine how much money is available to save and invest. It can relieve stress by acting as a roadmap to achieving your money goals. This topic guides you through a comprehensive budget. 1. Should high school students prepare a budget? Explain. Answers will vary. 2. Should college students prepare a budget? Explain. Answers will vary Nusenda Federal Credit Union. All rights reserved.

137 Slide 6 Budget Vocabulary: - Consumer expenditures the amount of money spent on needs and wants. Key Points: - Review the Consumer Expenditure table in the Student Guide with the students. Teacher Tips: - Engagement Ask the students to share with the class some of their day-to- day spending habits. On what do they spend their money during the week and on weekends? - Check for Understanding Have the students answer the questions in the Student - Guide below the consumer expenditure table. Teacher Reflection: 137

138 Budget How should you spend your money? People spend their money in different ways. Only you can determine the type of lifestyle you wish to lead. This is known as your standard of living. You may want a big house with a swimming pool and other luxurious items, or you may be content with a small home that s just big enough to accommodate your family. Did You Know? Financial experts suggest that 50% of your money be spent on needs; 30% spent on wants; and 20% spent on savings. A need is something you must have to live. A want is something you can do without. How you spend your money is entirely up to you, since you are the one who earned it. Only you can decide whether to spend all of your money or choose to use extra money at the end of each month toward a goal. Financial experts have suggested how most people should spend their money (as a general rule). The key is to budget your income so that you have enough money to pay your bills on time and not accumulate debt. 138

139 Budget Consumer expenditures The spending categories below provide an idea of what a typical American family (averaging 2.5 persons) earn and spend during one year. In later sections, you will develop a budget based on the data in the tables obtained from the Bureau of Labor Statistics. Reference: Fill in the blanks below. How much do you think you or your parents spend on each of the following categories per year? Expenses: Spending Category Dollar Amount Percentage of Total Spent Dollar Amount Per Year Food $6, % Housing $16, % Clothing, Shoes, Services $1, % Transportation $8, % Healthcare $3, % Entertainment $2, % Personal Care Products and Services $ % Reading $ % Education $1, % Miscellaneous $ % Cash Contributions $1, % Personal Insurance and Pensions $5, % 139

140 Slide 7 Budget Vocabulary: - Take-home pay the amount of money that you take home after deductions. - Actual the amount that you actually spend on something. The real amount. - Income Variance the amount that reveals the difference between the actual and the budgeted amount. - Income Variance = Actual Budget Key Points: - Convey to students that they will work through a budget for a family of three. - Emphasize how to compute the Income Variance. - Indicate to the students that a negative Income Variance implies that they were over budget and a positive indicates that they were under budget. - Also indicate that a positive Income Variance indicates they are under budget. Teacher Tips: - Engagement Have the students complete the Income table in the Student Guide. - Check for Understanding Check the Income tables completed by the students for accurate amounts. Teacher Reflection: 140

141 Budget 1. Why do you think people spend more on housing and transportation than on other areas? Answers will vary. 2. Based on the table above list the top five categories where consumers spend their money. Housing, Transportation, Food, Personal Insurance and Pensions, Health care Income Let s plan a monthly budget for your family. First, determine how much income you are making. For purposes of this example, let s say you and your spouse both work and are raising a child. In the table below, insert the following amounts: You earn $25,000 and your spouse earns $38,000 annually (after deductions and taxes). This is known as the take-home pay. In addition, you have a part-time job that brings in another $5,000. Insert these amounts in the Budget column, and add them to obtain the Total Income. At the end of the year, your last paycheck stub shows that your actual take-home pay was $23,300 for you and $42,000 for your spouse. In addition, you made $9,000 from your part-time job. Post these figures and total them at the bottom of the Actual column. Last, in the Income Variance column, subtract the budget amount from the actual amount to determine the variance for the three incomes. The income variance reveals whether you are under (+) or over (-) the budget amount. The final step is to add the variance amounts to get the Total Variance of Income. Income Variance = Actual Budget 141

142 Slide 8 Budget Vocabulary: - Housing Expenses for purposes of this budget, the categories include: mortgage/rent, repairs, property taxes, utilities, and house insurance. - Expense Variance reveals the difference between the actual and the budgeted amount of expenses. - Expense Variance = Actual Budget Key Points: - Share with the students that housing expenses are normally the largest group of expenses that they will incur throughout their lives. The smaller the home, the likelihood that they will incur less expenses. - Emphasize that computing the Expense Variance is similar to the Income Variance. - Indicate to the students that unlike the Income Variance, a negative Expense Variance implies that they were under budget and a positive indicates that they were over budget. Teacher Tips: - Engagement Have the students complete the Housing Expense table in the Student Guide. - Check for Understanding Check the Housing Expense tables completed by the students for accurate amounts. Teacher Reflection: 142

143 Budget Family of Three Income Budget Actual Income Variance Salary 1 (take-home pay) 25,000 23,300-1,700 Salary 2 (take-home pay) 38,000 42,000 4,000 Other income 5,000 9,000 4,000 Other income Total Income 68,000 74,300 6,300 Use the following formula to calculate how much you earn in one year: A = Number of hours worked per week B = Rate of pay per hour C = 52 weeks in a year Yearly Pay = A x B x C Yourself Income Actual How much do you earn in a year? If you don t work, compute how much money your parents give you plus other occasions) $ How much do you think the average teenager earns in a year? $ 143

144 Budget Housing expenses Once you determine your yearly income, list your expenses. Since housing is normally a person s biggest expense, start with that. Housing expenses will include the following: Mortgage Payments, Repairs, Property Taxes, Utilities, and House Insurance. Housing expenses are estimated to be 35% of your budget. In the following table, compute the Budget amount by multiplying the total budget income by the percentage indicated for each category, i.e., mortgage or rent would be calculated as follows: $68,000 x.20 = $13,600 Complete each budgeted amount similarly; then total the Budget" column. At the end of the year, you determine the Actual amounts for each housing expense are as follows: Mortgage = $15,800; Repairs = $8,200; Property Taxes = $2720; Utilities = $1,700; and House Insurance = $1,500. Insert these amounts into the Actual column and add them to get the total. In the Expense Variance column, subtract the Budget amount from the Actual amount to get the Expense Variance. This will tell you whether your housing budget is over or under the budgeted amount. Add up the Expense Variance amounts to obtain the Total Expense Variance of Housing Expense. The expense variance reveals whether you are over (+) or under (-) the budget amount. Note: On the expense side, (+) implies over and (-) implies under (which is different from the Income Variance). Expense Variance = Actual Budget 144

145 Budget Housing Expenses 35% Budget Actual Expense Variance Mortgage/rent 20% 13,600 15,800 2,200 Repairs 6% 4,080 8,200 4,120 Property taxes 4% 2,720 2,720 0 Utilities 3% 2,040 1, House insurance 2% 1,360 1, Total Housing Expenses 23,800 29,920 6,120 Analyze the amounts on the Housing Expenses table and explain how you might allocate the percentages differently next year. Explain your thoughts in a five-sentence paragraph. 145

146 Slide 9 Budget Vocabulary: - Transportation Expenses for purposes of this budget, the categories include: car payments, gas and motor oil, insurance, and repairs. - Expense Variance reveals the difference between the actual and the budgeted amount of expenses. - Expense Variance = Actual Budget Key Points: - Share with the students that transportation expenses can amount to a lot if they choose to drive fancy cars. Their insurance will also be much more. - Emphasize that computing the Expense Variance is similar to the Income Variance. - Indicate to the students that unlike the Income Variance, a negative Expense Variance implies that they were under budget and a positive indicates that they were over budget. Teacher Tips: - Engagement Have students complete the Transportation Expense table in the Student Guide. - Check for Understanding Check the Transportation Expense tables completed by the students for accurate amounts. Teacher Reflection: 146

147 Budget Transportation expenses You estimate that transportation expenses will be approximately 15% of your annual household budget. After calculating this amount, determine the budget for each category: Car payments = 5%; Gas = 5%; Insurance = 2%; and Repairs = 3%. In the table that follows, compute the budgeted amount by multiplying the budgeted income ($68,000) by the percent budgeted for each category; then determine the total budget for transportation expenses. At the end of the year, you determine the Actual expenses for each category are as follows: Car payments = $3,400; Gasoline and motor oil = $5,450; Car insurance = $2,080; and Repairs = $720. Write these amounts into each appropriate category and add them together for the total. In the Expense Variance column, subtract the Actual amount from the Budget amount to calculate the Expense Variance for all expenses. This will tell you whether you are over or under your transportation budget amount. Lastly, add the Expense Variance amounts to obtain the Total Expense Variance of Transportation Expenses. The expense variance reveals whether you are over (+) or under (-) the budget amount. Expense Variance = Actual Budget Family of Three Transportation Expenses 15% Budget Actual Expense Variance Car payments 5% 3,400 3,400 0 Gas and motor oil 5% 3,400 5,450 2,050 Insurance 2% 1,360 2, Repairs 3% 2, ,320 Total Transportation Expenses 10,200 11,650 1,

148 Budget If your parents don t contribute, how much money would you spend for transportation (assume you have a car and drive)? Use the table below to compute how much it would cost you for all your transportation expenses per year? Yourself Transportation Expenses Actual Car payments $ Gas and motor oil $ Insurance $ Repairs $ Total Transportation Expenses Be prepared to explain your answers. Did You Know? Statistics show that parents pay on average $500-$1,000 per year to insure a child on their car insurance policy. 148

149 Slide 10 Budget Vocabulary: - Other Living Expenses for purposes of this budget, the categories include: healthcare, personal care products and services, food, cell phone, entertainment, vacations, life and personal insurance, and retirement. - Expense Variance the amount that reveals the difference between the actual and the budgeted amount of expenses. - Expense Variance = Actual Budget Key Points: - Of the items listed in this category, as a class, determine which are needs and which are wants. - Emphasize that computing the Expense Variance is similar to the Income Variance. - Indicate to the students that unlike the Income Variance, a negative Expense Variance implies that they were under budget and a positive indicates that they were over budget. Teacher Tips: - Engagement Have the students complete the Other Living Expense table in the Student Guide. - Check for Understanding Check the Other Living Expense tables completed by the students for accurate amounts. Teacher Reflection: 149

150 Budget Other living expenses The next category of expenses for which to budget is Living Expenses. You determine that living expenses will amount to 25% of your total budgeted income. You budget the following for each category: Healthcare = 4%; Personal Care Products and Services = 1.5%; Food = 10%; Cell phone = 2%; Entertainment = 3%; Vacations = 2%; Life and Personal insurance = 1%; and Retirement = 1.5%. In the Living Expenses table, compute the budget amount by multiplying the total budgeted income ($68,000) by the percent budgeted for each category, then determine the Total Other Living Expenses. At the end of the year, you determine your Actual expenses for each category are as follows: Healthcare = $2,500; Personal Care Products and Services = $950; Food = $6,000; Cell phone = $1,000; Entertainment = $1,900; Vacations $1,100; Life and Personal Insurance = $680; and Retirement = $1,020. Insert these amounts into the appropriate categories, and add them together to get the total. In the Expense Variance column, subtract the Budget amount from the Actual amount to get the Expense Variance. (This reveals how much you are over or under your budget amount). Lastly, add the amounts in the variance column to determine the Total Expense Variance of Other Living Expenses. The expense variance reveals whether you are over (+) or under (-) the budget amount. Expense Variance = Actual Budget 150

151 Budget Family of Three Other Living Expenses 25% Budget Actual Expense Variance Healthcare 4% 2,720 2, Personal care products and services 1.5% 1, Food 10% 6,800 6, Cell Phone 2% 1,360 1, Entertainment 3% 2,040 1, Vacations 2% 1,360 1, Life and personal insurance 1% Retirement 1.5 % 1,020 1,020 0 Total Other Living Expenses 17,000 15,150-1,850 How much do you think you spend on each of these per year? Fill in the table on the next page with the estimated amounts. Yourself Other Living Expenses Actual Personal care products and services $ Food $ Cell Phone Entertainment $ Vacations $ Total Other Living Expenses 151

152 Slide 10 (Continued) and Slide 11 Budget Vocabulary: - Debt for purposes of this budget, the categories include: student loans, credit cards, and personal loans. - Expense Variance reveals the difference between the actual and the budgeted amount of expenses. - Expense Variance = Actual Budget Key Points: - Emphasize to the students to try really hard not to accumulate debt. - Working through college can help them avoid large student loans. - Living with their parents while in college might allow them to save extra money and avoid debt. - Emphasize that computing the Expense Variance is similar to the Income Variance. - Indicate to the students that unlike the Income Variance, a negative Expense Variance implies that they are under budget and a positive indicates that they are over budget. Teacher Reflection: 152

153 Budget Debt As you mature and educate yourself about finances, you understand that it s not healthy to live beyond your means. Make it a priority to pay off any debt (money you owe) as quickly as possible. You will learn in a later topic not to use credit cards unless you: (1) can make more than the minimum payment or (2) pay off the balance each month. Let s say you decide to allocate 15% of your income each year to stay out of debt. You budget the following for each category: Student loans = 2%; Credit cards = 10%; and Personal loans = 3%. In the following table, compute the budget amount by multiplying the total budget income by the percent budgeted for each category; then determine the total budget to pay off debt. At the end of the year, you determine your Actual expenses for each category are as follows: Student loans = $1,000; Credit cards = $6,500; and Personal loans = $1,500. Insert these amounts into the appropriate Actual amount categories, and add them together to get the total amount of debt. In the Expense Variance column, subtract the Budget amount from the Actual amount to get the Expense Variance. (This reveals how much you are over or under your budget amount.) Lastly, add the amounts in the expense variance column to determine the Total Expense Variance of Debt. The expense variance reveals whether you are over (+) or under (-) the budget amount. Expense Variance = Actual Budget 153

154 Budget Teacher Tips: - Engagement Have students complete the Debt Expenses table in the Student Guide. - Check for Understanding o Check the Debt Expenses table completed by the students for accurate amounts. o Have the students complete the activity below the Debt table and review their answers for grammar and structure. Teacher Reflection: 154

155 Budget Family of Three Debt 15% of Budget Budget Actual Expense Variance Student Loans 2% 1,360 1, Credit Cards 10% 6,800 6, Personal Loans 3% 2,040 1, Total Debt 10,200 9,000-1,200 Analyze the amounts above. In a five-sentence paragraph, explain your thoughts about the Expense Variance and how you might allocate the percentages differently next year. Answers will vary. Why do you think it s important to pay off your credit card balance in full each month, or worst case, pay more than the minimum monthly balance? Answers will vary. 155

156 Slides 12 and 13 Budget Vocabulary: - Pay Yourself First determine how much you should put into an account each time you get paid, for your discretionary Purposes. Attempt to not use this money for paying bills. - Expense Variance the amount that reveals the difference between the actual and the budgeted amount of expenses. - Expense Variance = Actual Budget Key Points: - Emphasize to the students that although savings is not an expense, it is still an outlay of money. It should be part of the budget and treated as an expense since you can use savings at a later date to pay unforeseen expenses. - Emphasize that computing the Expense Variance is similar to the Income Variance. - Emphasize to the students the process of electronically transferring funds from their checking account to various other accounts to accumulate savings. Doing this automatically by setting it up electronically will provide a consistent approach to saving. - Indicate to the students that unlike the Income Variance, a negative Expense Variance implies that they are under budget and a positive indicates that they are over budget. Teacher Tips: - Engagement Have the students complete the Saving Expense table in the Student Guide. - Check for Understanding Check the Saving tables completed by the students for accurate amounts. Teacher Reflection: 156

157 Budget Savings There is a saying that you should always pay yourself first. This implies always putting money away for you and your family to enjoy the fun things in life. Of course, this is hard to do when bills arrive weekly. However, if you create the habit of putting money into a savings account each time you get paid, you will quickly see your savings account grow. You can then transfer this money into other types of investments where it will grow even faster! You will learn about investments in another section. At this point in life, you decide you are able to save 10% of your total income. In the table that follows, compute the budget amount by multiplying the total budget income by the percent budgeted for savings. At the end of the year, you determine you have saved $6,500. In the Expense Variance column, subtract the Budget amount from the Actual amount to get the Expense Variance. (This reveals how much you are over or under your budget amount.). Lastly, add the amounts in the expense variance column to determine the Total Expense Variance of Savings. The expense variance reveals whether you are over (+) or under (-) the budget amount. Expense Variance = Actual Budget 157

158 Slides 14 Budget Vocabulary: - Over Budget you spent more than you brought in. - Under Budget you brought in more money than you spent. Key Points: - Emphasize to the students that although savings is not an expense, it is still an outlay of money. It should be part of the budget and treated as an expense since you can use savings at a later date to pay unforeseen expenses. - Emphasize that computing the Expense Variance is similar to Income Variance. - Indicate to the students that unlike the Income Variance, a negative Expense Variance implies that they are under budget and a positive indicates that they are over budget. Teacher Tips: - Engagement Have the students complete the Income and Expense Totals in the table provided in the Student Guide. - Check for Understanding Check the Total Income and Expense table completed by the students for accurate amounts. Teacher Reflection: 158

159 Budget Family of Three Savings 10% Budget Actual Variance Savings 6,800 6, Total Savings 6,800 6, Now estimate how much money you save a year. Yourself Savings $ Total Savings $ Actual Of course, as your savings account grows, you should put some of it into emergency, investment, vacation, and any other desired funds. Ask your financial institution to automatically deduct money from each paycheck to be deposited into separate accounts. For example, let s say your bi-weekly paycheck is $1,600 and you request money be transferred to four different accounts. It would look something like this: Vacation Fund $100 Retirement Fund $200 Paycheck $1,600 Emergency Fund $100 Checking $

160 Teacher Tips: Budget - Check for Understanding o Have the students complete the activity in the Student Guide analyzing Total Variance. o Have the students complete the blank budget form with their guardian(s). Teacher Reflection: 160

161 Budget As you can see, most of your paycheck goes into your checking account; because that s the account you use to pay bills. Of course, you can always change the amounts that go into the other accounts. This is why it s a great idea to budget. It gives you a picture of what your income, bills, and savings look like, allowing you to track how and where you spend your money. Over or <under> The last step of budget preparation is the most critical. Did you follow your budgeted plan for the year? This next step will determine if you are over or under budget. Of course, you should hope you are under budget, because this means you brought in more money than you spent. If not, and you find yourself over budget, you must determine where you overspent and how to avoid letting it happen in the future. Let s see how your plan went. Complete the following table. You will need to go back to each section and transfer your total columns. Note: Total Variance: A positive number signifies Under Budget. This means you brought in more money than you spent. A negative number signifies Over Budget. This means you spent more money than you brought in. Total Income Income Budget Actual Variance 68,000 74,300 6,300 Expenses Budget Actual Variance Total Housing Expenses 23,800 29,920 6,120 Total Transportation Expenses 10,200 11,650 1,450 Total Other Living Expenses 17,000 15,150-1,850 Total Debt 10,200 9,000-1,200 Total Savings 6,800 6, Total Expenses 68,000 72,220 4,

162 Budget In the table below, subtract your total expenses above from the total income. Total Income Total Expenses Budget Actual Variance 0 2,080 2,080 If this is a positive number (+), you made more money than you spent. Great planning! If this is a positive number (+), you stuck to your budget and brought in more money than you spent. Determine, based on the Total Variance in the last column, if you are over or under budget. (Use the information from the Income and Expenses tables.) Compare your amounts with others in the class. Answers will vary. If you are under budget, explain what you would do with any leftover money. Answers will vary. If you are over budget, explain some things you could do to not be short the following year. Answers will vary. 162

163 Budget Assignment: Answer the following questions: 1. Determine how much you spend on food daily. Estimate the amounts as if you are paying for the meals. Compute how much you would spend weekly by multiplying your daily food budget by seven (7 days in a week). Then transfer the amounts to the following table: Expense Daily Week Food Breakfast Lunch Dinner Snacks 2. Determine how much you spend on meals and transportation, weekly and monthly. Transfer the Food and Transportation Expenses totals for the week from Table 1 to Table 2. Compute how much you spend monthly by multiplying the amounts by four (4 weeks in a month). Expense Week Month Food Breakfast Lunch Dinner Snacks Transportation Car payment Gas Auto Repair/Maintenance Rides from friends/bus 3. Determine how much you spend on each of the following items per month. (Transfer the monthly amounts from Table 2). Compute how much you spend on meals and transportation yearly by multiplying the weekly amounts by 52 (yearly total). 163

164 Budget Expense Week Year Food Breakfast Lunch Dinner Snacks Transportation Car payment Gas Auto Repair/Maintenance Rides from friends/bus Personal Movies Concerts Sports Cell Phone Music Gifts for family/friends Hobbies Clothing Grooming Other: (list below) Total 4. Add up your monthly and yearly expenses to determine the total amount of money you would spend if your parents were not funding these expenses for you. Be prepared to discuss the following with your classmates: What is your biggest expense? Are you surprised at how much you would spend in one year? Do you think your parents know how much they spend on you every year? If you were on your own, could you afford to pay for everything? Why or why not? After preparing this budget, are there items you would eliminate if you had to pay for them yourself? Why or why not? 164

165 Budget Homework Assignment: 5. On the attached page is a Budget Worksheet template (similar to the one you worked through in this section). Using the income you determined you would make for your chosen career in the Employee Smarts Topic, create your own budget. You may change the expense percentages for each line item to best meet your needs. Pay close attention to the line items that had variances in the sample budget completed in this topic to determine if those percentages were appropriate for you. Reflect on why you would change the percentage if you decide to do so. You have the choice to increase or decrease these percentages as long as they total 100%. (Be prepared to share your changes and budget with your classmates). 165

166 Budget Income Budget Actual Variance Salary 1 (take-home pay) Salary 2 (take-home pay) Other income Other income Total Income Expense Housing Expenses 35% of Mortgage/rent 20% Repairs 6% Property taxes 4% Utilities 3% Total Housing Expenses Transportation Expenses 15% of Car payments 5% Gas and motor oil 5% Insurance 2% Repairs 3% Total Transportation Expenses Other Living Expenses 25% of Healthcare 4% Personal care products and services 1.5% Food 10% Cell Phone 2% Entertainment 3% Vacations 2% Life and personal insurance 1% Retirement 1.5 % Total Other Living Expenses Debt 15% of Budget of Student Loans 2% Credit Cards 10% Personal Loans 3% Total Debt Savings 10% Savings 10% of Budget Total Savings Budget Total Expenses Total Income Total Expenses 166

167 Lesson Component Description Purpose The students gain a fundamental understanding of the various ways to invest and save money. Learning Objectives 1. Explores the importance of learning to start investing at an early age. 2. Analyzes the risk involved with various types of investments. 3. Computes and explains the Rate of Return. 4. Examines the concept of diversifying. 5. Compares and contrasts the various types of saving and investing methods. Time Required 150 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework for the teacher and the students. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students conduct Internet searches to investigate ways to buy and sell investments. Have each write a one-page paper conveying the information they collected. Have them prepare a PowerPoint presentation and share the information with the class. 2. Have the students research the Internet to determine how someone can transfer their wealth through wills and trusts. Have each write a one-page paper explaining how someone can do this. Upon turning in the assignment, conduct a Large Group Discussion based on their research. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Investing and Saving Quiz Key 1.T 2.T 3.T 4.F 5.F 6.C 7.A 8.A 9.D 10.C

168 Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 4. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10).

169 Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain-specific words and phrases sufficient for reading, writing, speaking, and listening at the college and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Video Links Saving Money 401http:// How the Stock Market Works What s a Mutual Fund? What is a Bond? US Treasury Bills: A Better Way to Save? Life Smart Applications Stock Market Game Investing in stocks, bonds, and mutual funds.

170 Name Date True or False Questions: Owning your own home will probably be the biggest and wisest investment you make throughout your lifetime. 2. Owning your own business and continuing your education can open many opportunities for you. 3. Purchasing a home might be the wisest investment you make throughout your lifetime. 4. Retired people should take a great deal of risk when investing. 5. Bonds are considered a risky investment. Multiple Choice Questions: Which age group should consider the least amount of risk when investing? a. Parents without children b. Persons nearing retirement age c. Teenagers d. Single people in their thirties 7. For which of the following accounts might you have to pay a penalty upon early withdrawal? a. Certificate of Deposit b. Checking c. Savings d. None of the above 8. When purchasing a share of stock from a company, you are: a. Purchasing ownership in the company b. Diversifying c. Opening a business d. None of the above 9. Which of the following is not considered an investment: a. Stocks b. Bonds c. Mutual Funds d. Credit card payment 10. Which of the following statements is correct? a. The higher the risk, the lower the return. b. The lower the risk, the higher the return. c. The lower the risk, the lower the return. d. None of the above.

171 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slides 2 3 Vocabulary: - Risk the potential of losing your money by investing. Key Points: - The longer you invest, the more you can accumulate. - Identify your goals for investing. - How much do you want to earn? - When do you want to have the money available? - Risk is something that is inherent in investing. - The best time to take risk is now, when you are young. If your investments don t pan out, you have time to recover. - The older you get, the less risk you want to take. - The lower the risk, the lower the return. The more risk, the higher the return. Teacher Tips: - Engagement Have the students answer the questions in slide 2 of the Student Guide and have a few share their answers. - Check for Understanding Determine if the answers given appear to be realistic. Teacher Reflection:

172 Investing and Saving Make Your Money Work for You Investing goals The best time to start investing is when you are young. In this section, we will explore different ways to invest your money. The longer you invest, the more money you can accumulate. First, identify your goals for investing. How much money do you want to make? When do you want to have the money available? What will you use the money for? These are all valid questions to ask yourself as you enter the world of investing. Risk Once you decide what your goals are for investing, determine the amount of risk you are willing to take. Just like everything in life, risk implies there is the potential to lose, in this case, your money. Most investors agree that the time to take the most risk is when you are young. If you invest early in life and your investments don t pan out as intended, you have time to recover. However, if you are near retirement age and lose money in your investments, there is no time to start over. Two general rules to remember regarding risk: 1. Take more risk in investing when you are young and less risk as you get older. 2. Usually, the lower the risk, the lower the return on your investment; the higher the risk, the higher the return on your investment Nusenda Federal Credit Union. All rights reserved.

173 Slide 4 Investing and Saving Vocabulary: - Rate of Return (ROR) measures the amount of money you make based on your initial (principal) investment. o ROR = ((Return Capital)/Capital) x 100% - Diversification spread your money among various types of investments so as to balance the risk. - Longevity the duration or time you are willing to invest your money. - Compound Effect the effect of having money earned on both principal and interest. - Interest Rate money added to an original amount that is saved or invested. Key Points: - The longer you invest, the more you can accumulate. - Identify your goals for investing. - How much do you want to earn? - When do you want to have the money available? - When investing, spread your money among various investments to lessen the risk. - The compound effect will be greater the earlier you start in life. - When investing, you should think long-term. Teacher Tips: - Engagement Ask the students what they think a great rate of return is. Example: Share with the students that the restaurant business usually has a 20% rate of return. - Check for Understanding Have students complete the questions in the student guide (Compute Rate of Return) and check for accuracy. Large Group Discussion: - Ask for volunteers to demonstrate how they got their answers. Teacher Reflection: 173

174 Investing and Saving Investing basics Two important things to know about investing are goals and risk, but there are other considerations. The Rate of Return (ROR) measures the amount of money that you make based on your initial investment. The formula to calculate ROR is: ((Return Capital)/Capital) x 100% For example, if you invest $1,000 over the course of six months, and that $1,000 grows to $1,200, your ROR would be computed as follows: = (($1,200 - $1,000) / $1,000) x 100% = ($200 / $1000) x 100% =.20 x 100% = 20% Diversification is another aspect to consider. You may have heard the phrase, Don t put all your eggs in one basket. In this use, it means don t put all your money in one account. Spread your money to various investment types so as to balance the risk and reward. It is also important to consider the longevity of your investments. Are you investing for retirement or for some big purchase in the future? The longer your money is invested, the more potential it has to grow. Lastly, there is the compound effect and interest rate that need consideration. The higher the interest rate on your investments, the more they will grow. Likewise, the longer the interest rate is compounded, the higher your return, or the bigger the compound effect. Compute the Rate of Return (ROR) for each of the scenarios below: 1. You loan a friend $200. One month later, your friend pays you back $220. What is your ROR? Answer: (($220 $200) / $200) x 100% = 10% 2. You invested $10,000 in a retirement account. At age 60, the $10,000 grew to $100,000. What is your ROR? Answer: (($100,000 $10,000) / $10,000) x 100% = 900% 174

175 Slides 5 8 Investing and Saving Vocabulary: - Savings Account putting money into an account that earns interest. - Certificate of Deposit (CD) a time deposit where you put your money into an account for a specified period of time and earn interest on it. Early withdraw will result in a penalty. - Money Market Fund similar to a savings account; however, you normally keep a minimum balance of $1,000 in the account, and it earns more interest than a standard savings account. - Stock the purchase of a share of a corporation. - Dividend money distributed by a corporation to the stockholders due to profits. Key Points: - Saving accounts don t earn much interest, but they are a great way to start saving your money. In addition, they are easier to start than other types of saving accounts. - A certificate of deposit or CD will earn more interest than a savings account; however, you must keep the money in until the CD matures or you will incur a penalty for taking it out early. Most financial institutions offer CDs from 3 months to 5 years. - A money market fund is a great way to save money. It pays more interest than a savings account and sometimes pays more than a CD; however, you must maintain a larger balance. - Stocks are a great way to make money. The key is to buy stocks when they are selling at a low point and sell them when they are at a high point. Buy low and sell high. - Another advantage to owning stock is that periodically you can receive dividends or income if the company decides to pay out some of its reserves to its stockholders. Teacher Tips: - Engagement Ask the students if they know someone who has purchased stock in a company. - Check for Understanding Ask the students where they think the best place is in which to put their money CD, money market fund, or stocks? Large Group Discussion: - Brainstorm companies that the students think would be a company to buy stock in. - Have them explain their reasoning. Teacher Reflection: 175

176 Investing and Saving Types of investments There are several ways to invest money, including savings accounts and certificates of deposit (CDs), mutual funds, bonds, stock, and real estate. As company-sponsored pensions dwindle, Individual Retirement Accounts (IRAs), 401(k)s, and 403(b)s are becoming more popular. Taking education seriously and starting and owning a successful business are other ways to invest for the future. Savings Putting money into a savings account at a financial institution (bank, credit union, etc.) is the quickest and easiest way to start saving money. The drawback is that you won t earn much interest on your deposits. It s a safe and secure way to save and invest your money, however; most financial institutions insure your money up to $250,000. Another savings vehicle similar to a savings account is called a Certificate of Deposit, or CD. A CD is known as a time deposit. It acts like a savings account but you must keep the money in the CD for a duration of time, usually from three months to five years. The longer the duration of the CD, the higher the interest rate, and the more you can earn. The drawback to a CD is that your money can t be pulled out until the CD matures (comes due); otherwise, you must pay a penalty to take out the money. A third savings option is a Money Market Fund. This type of account normally requires a minimum balance in the account, usually $1,000. You may take money out or deposit money at any time as long as you maintain the minimum balance. The advantage of a money market account is that the financial institution normally pays you a higher interest rate on your money than a regular savings account. Stocks and mutual funds The purchase of stock is another way to invest. When you buy a stock, you become part owner of the company and are known as a stockholder or shareholder. There are two ways to make money as a stockholder: 1. The first way is by receiving dividend payments. A dividend is a money distribution by a corporation to its stockholders. Usually, companies declare dividends every quarter (every three months). The stockholder receives the amount declared for every share of stock owned. For example, if the company declares $.25 per share and you owned 10 shares, you would receive $2.50 ($.25 x 10 shares). 176

177 Slide 8 (Continued) 9 and 10 Investing and Saving Vocabulary: - Mutual funds money is invested into the stocks of many different companies instead of investing in stocks from one company. - Dow Jones Industrial Average stock market indicator of 30 blue chip stocks. - New York Stock Exchange the largest stock exchange where stocks are traded. - National Association of Securities Dealers Automated Quotations (NASDAQ) a computerized stock exchange where stocks are traded (bought and sold). - Standard & Poors (S&P) an American financial services company that publishes financial research and analysis on stocks and bonds. - Securities Exchange Commission (SEC) a government commission set up to regulate the security (stock) markets and protect investors. Key Points: - Mutual Funds are a great investment to diversify your money. The potential to make money is not as good as stocks but still very high with less risk. - The Dow Jones is a good indicator of how the economy is doing because it represents the largest companies in the United States. - There are several stock exchanges in the United States where brokers can buy and sell stocks. - The SEC or Securities and Exchange Commission is an organization that protects investors from being taken advantage of by big business and others who attempt to influence the stock markets. Teacher Tips: - Stock Market Game: Enroll your classes in the New Mexico Stock Market Game. It s free, and the students can begin experiencing what it s like to buy and sell stocks, bonds, and mutual funds. Obtain additional information here: and - Engagement Ask the students if they can name companies that might be on the Dow Jones Industrial Average. - Check for Understanding Ask the students why they think it might be important to have a federal organization monitoring the stock market exchanges. Teacher Reflection: 177

178 Investing and Saving 2. The second way to make money on a stock investment is to hold onto it until the stock appreciates (goes up) in value, and then sell it. For example, if you purchase a share of stock for $10 and sell it for $110, you will make $100 profit on the sale. Keep in mind that stocks can also depreciate (go down) in value. There is no guarantee that stocks will appreciate in value. The key to investing in stocks is to do your research and learn about the company to predict how successful it will be in the future. If you feel that the company will continue to grow and increase profits, then it might be a good idea to buy stock in that company. One last note about buying stock: Always try to buy at a low price and sell at a high price. (More on the stock market, below.) Mutual funds are another way to invest your money. In essence, when you buy a mutual fund, you become a shareholder in a fund that has invested in many different companies. By investing in a mutual fund, you diversify your money, or spread the risk across many companies rather than relying on just one company to perform well. Mutual funds do have varying degrees of risk, so it is important to educate yourself about where your money is being invested. These funds have costs, like management fees. Stock market If you re going to invest in stocks, you should know a little about the stock market and how it works. First, there is the Dow Jones Industrial Average, which is a stock market indicator of 30 blue-chip stocks on the New York Stock Exchange. Blue-chip stocks are companies that have been in business for a long time and represent several industries throughout the United States. There are no pre-determined criteria to be a blue-chip company except that components should be established U.S. companies that are leaders in their industries; however, companies considered for inclusion in the Dow are subjected to rigorous analysis before they join. The NASDAQ stands for the National Association of Securities Dealers Automated Quotations. It is a computerized stock exchange where stocks are traded (bought and sold). Most major companies can be found on this stock exchange. Standard & Poor s (S&P) is an American financial services company that publishes financial research and analysis on stocks and bonds. Lastly, there is the Securities Exchange Commission (SEC), which is a government commission that regulates the security (stock) markets and protects investors. 178

179 Slides Investing and Saving Vocabulary: - Bonds a loan to a government agency or to a company in the form of an investment. The government or company promises to pay you back plus interest. - U.S. Savings Bonds bonds issued by the federal government. - Treasury Bonds bonds backed by the federal government that are usually issued in terms of 10 years; interest is paid twice a year. - Treasury Bills federal short-term investments with maturities of three months, six months, or one year. - Treasury Notes federal investments that have maturities of two to 10 years, and interest payments are made every six months. Key Points: - Bonds normally don t get as high returns on your investment as stocks and mutual funds. - Bonds are considered conservative investments. - Bonds are rated for their likelihood of paying you back. AAA is the best rating a bond can have. Teacher Tips: - Engagement Ask students at what age they would like to stop working. - Check for Understanding Ask students to explain what would be a better investment for retirement purposes bonds or investing in a 401(k)? Resources: Website to purchase Federal Bonds and Notes Teacher Reflection: 179

180 Investing and Saving Bonds Investing in bonds is different from investing in stocks and mutual funds. When you invest in a bond, you are lending money to a governmental agency or to a company in the hope that they will pay you back, plus interest, once the bond matures (comes due). In essence, a bond is like an IOU. The government or company that you are lending the money to promises to pay interest during the life (time) of the bond and repay the entire face value (the amount you lent) when the bond comes due or reaches maturity. Bonds are rated so that investors know the likelihood of getting their money back after maturity. The best rating for a bond is AAA; the worst rating for a bond is C. Usually, government bonds are considered to have the best ratings. U.S. Savings Bonds, for example, are issued and backed by the government. There are different types of savings bonds, each with slightly different features and advantages. Treasury Bonds (T- Bonds) (also backed by the federal government) are issued with terms of more than 10 years. Interest is paid semi-annually (twice a year) on Treasury Bonds. Last, there are Treasury Bills (T-Bills) and Treasury Notes (T-Notes). Treasury bills are short-term investments with maturities of three months, six months, or one year. Treasury notes have maturities of two to 10 years, and interest payments are made every six months. Bonds, bills, and notes are sold in $1,000 increments. These investments may be purchased directly from the Treasury through Treasury Direct at: Retirement investments Next to the purchase of your home, investing for retirement will be one of the best investments you can make. Picture yourself in your 60 s, 70 s, and 80 s. As we age, most of us will become restricted in what we can do, which may limit what kinds of work we can do. If you start planning now for retirement, you might be able to live comfortably and maintain a decent standard of living without having to work into old age. Investing in your own retirement is something all Americans should do. There are many different types of investments that you can begin now in preparation for retirement. In the next section of the reading, we will cover several retirement investments, such as 401(k), 403(b), Roth IRA s, and Traditional IRA s, in more detail. 180

181 Slides Vocabulary: - Real Estate investment in property or land. - Entrepreneurship the process of owning your own business. - Education the process of learning. Key Points: - Buying a house will probably be the your biggest and most expensive investment. A commonality of all millionaires is that they own their own homes. - Houses usually appreciate in value. - Owning your own business is the no. 1 dream job of Americans because you make all the decisions. - Having a formal education can open many job opportunities for you in life. Teacher Tips: - Engagement Ask the students if they have any ideas for starting their own business and if they consider owning their own business a great alternative for retirement Purposes. - Check for Understanding Ask the students to rank the various types of retirement investments in this topic and explain their reasoning for how they ranked them. Teacher Reflection: 181

182 Real estate (housing) Owning your own home will probably be the biggest and wisest investment you make throughout your lifetime. This would be considered a real-estate investment. Interestingly, one common trait of most millionaires is that they own their homes. Once the mortgage is paid off, it is one gigantic expense you no longer have to worry about. No one can take your home away from you, which provides security and less stress in your retirement years. Traditionally, home values tend to appreciate (go up) in value over time. If you decide to sell your home, you will most likely get more than what you paid for it originally. You can deduct the interest you paid on the loan on your federal tax return (check with your tax adviser for details). Entrepreneurship and education Most of us will spend the rest of our lives working for a company or for someone else. Starting your own business (entrepreneurship) would be considered an investment if you choose to open a business and be your own boss. Also, investing in your own education will open many doors for you during your working years. Although you may not reap immediate satisfaction while going to school, the fruits of your labor as a student will multiply many times over with an education. Research tools for investing Throughout this section, it has been emphasized to educate yourself about investing. With today s technology and the Internet, everyone can be on the same playing field when it comes to investing. Researching the Internet for financial information or looking for brokers to assist in investing your money is simpler than ever. Reading the newspaper, business magazines, and anything you can, will help you learn about money and live a financially-secure, worry-free life. Conduct Internet research to determine interest rates on the following CDs. Apply this interest rate to your goal amount of savings and find out how much your return would be. CD 3-month CD 6-month CD 12-month CD 18-month CD 24-month CD 30-month CD 36-month CD Interest Rate 182

183 Lesson Component Description Purpose The students gain a fundamental understanding of the various investment vehicles for retirement. Learning Objectives 1. Examines the importance of starting to invest for retirement at a young age. 2. Explores the risk involved with various types of investments. 3. Analyze the necessity to invest for retirement. Time Required 250 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the student follows along with the Student Guide. The guides are merely a framework for the teacher and the student. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students research the Internet to determine how someone can transfer their wealth Assessment through wills and trusts. Have each write a one-page paper explaining how someone can do this. Upon turning in the assignment, conduct a Large Group Discussion based on the research by each student. Note: Remind students that Wills and Trusts were covered in the Building Wealth topic. Quiz 10 questions (5 True/False; 5 Multiple Choice) Retirement Quiz Key 1.F 2.T 3.T 4.F 5.T 6.D 7.C 8.A 9.D 10.B Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3).

184 4. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). 5. Recognize situations in which one quantity changes at a constant rate per unit interval relative to another (F-LE). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2).

185 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Video Links What is an IRA? Traditional IRA vs. Roth IRA vs. 401K Pros and Cons and Tax Benefits Life Smart Applications 1. Computes the value of a retirement portfolio given a scenario. 2. Stock Market Game Invests in stocks, bonds, and mutual funds.

186 Name Date True or False Questions: You should wait to begin saving for retirement until you start a family. 2. Based on studies, you should estimate that you will need 80% of pre-retirement income when you do retire. 3. A basic savings account, money market account, and a CD can all be considered as components of retirement savings. 4. There are two types of IRAs; one is referred to as a Roth IRA and the other is referred to as an Antiquated IRA. 5. Bonds can be considered a component of a retirement investment portfolio. Multiple Choice Questions: Which of the following below is least likely to be used for retirement savings? a. 401K(k) b. 403(b) c. IRA d. Checking Account 7. Which of the following accounts are most similar in nature? a. 403(b) and an IRA b. 401(k) and a Roth IRA c. 401(k) and an 403(b) d. None of the above 8. Which of the following should not be your main source of income when you retire? a. Social Security b. 401(k) c. Medicare d. None of the above 9. Which of the following is not considered an investment in retirement? a. Stocks b. Bonds c. Mutual Funds d. Credit card payment 10. Which of the following statements is correct when investing for retirement? a. Wait until you graduate from college. b. Start investing now that you are young. c. Start investing when you reach your fifties. d. None of the above.

187 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Vocabulary: - Retirement voluntary removal from the work force due to age or years of service. Key Points: - If you start planning now for retirement, you might be able to live comfortably and maintain a decent standard of living without having to work well into old age. - Only 14% of American workers are confident they will have enough money in retirement to live comfortably. - Indications are that only 58% of Americans are even saving for retirement. Teacher Tips: - Engagement Ask the students how old each would like to be when they don t have to work anymore and can survive on what was saved for the remaining part of their life. - Check for Understanding Determine if the answers the students gives appear to be realistic. Teacher Reflection:

188 Retirement I Love Not Having to Work Anymore Life Smarts: 1. Compute a retirement portfolio given a specific scenario. Retirement statistics Retirement is the voluntary removal from the workforce due to age or years of service. Next to the purchase of your home, investing for retirement will be one of the best investments you can make. Picture yourself in your 60 s, 70 s, and 80 s. As we age, most of us will become restricted in what we can do which may limit us to certain types of work. If you start planning now for retirement, you might be able to live comfortably and maintain a decent standard of living without having to work well into old age. Many books and articles have been written on retirement. There are calculators that will tell you how much you need to invest for your individual retirement needs. However, every person and situation is unique, and there is no magic formula or calculation that will answer all of the questions concerning retirement Nusenda Federal Credit Union. All rights reserved.

189 Slides 2 (Continued) and 3 Vocabulary: - Savings retaining money for unexpected or future use. - FDIC (Federal Deposit Insurance Corporation) and NCUA (National Credit Union Administration) insures deposits up to $250,000. FDIC insures deposits in banks. NCUA insures deposits in credit unions. Key Points: - Individuals who retire will need about 80% of their pre-retirement income for retirement. - Basic Savings Account Low or no minimum balance. Very low interest return on investment. - Money Market Account Requires an individual to have more money in the account than a basic savings account and returns a slightly higher rate of interest. - Certificate of Deposit (CD) A Certificate of Deposit is a timed deposit often being one month, three months, six months, one year, three years, or five years in duration. A CD can have a fixed (stays the same) or variable (changes based on market conditions) interest rate. Teacher Tips: - Engagement Have the students complete the activity in the Student Guide computing preretirement income. - Check for Understanding Determine if the students computations are accurate. Teacher Reflection: 189

190 Here are some quick facts regarding retirement. According to the Employee Benefit Research Institute, only 14% of American workers are confident that they will have enough money in retirement to live comfortably. They also reported in a survey conducted in 2012 that 30% of workers had less than $1,000 in savings and investments. Sixty percent of workers have savings and investments of less than $25,000 (excluding home values and defined benefit pensions). Indications are that only 58% of Americans are even saving for retirement. Fidelity Investments indicates that a retired couple of age 65 that retires now will need about $240,000 just to cover medical expenses throughout their retirement years. The Center for Retirement Research indicates that only 42% of private sector workers aged 25 to 64 have any pension coverage in their current job. They also indicate that about one- third of households end up entirely dependent on Social Security. In addition, 21% of workers offered a 401(k) plan do not participate. They also indicated that one-third of all households end up with no employee-sponsored retirement plan at all. According to the federal government several years ago, the typical household had 401(k)/IRA balances of about $120,000 as they approached retirement. This number is far short of what many will need for their retirement. 190

191 Consider all the above facts and realize that studies indicate that individuals who retire will need about 80% of their pre-retirement income for retirement. Now, let s discuss sources for that income. If you were earning $75,000 per year before you retired, how much would you need in retirement income to live comfortably? Answer: $60,000 (75,000 x.80) Saving and retirement Let s review some of the information from the Investing and Savings topic earlier, because it is a component of retirement. Savings Throughout an individual s working life, he/she should set a goal for saving part of his/her earnings not only for retirement but for that Rainy Day that will occur. Basic Savings Accounts, money market accounts, and certificates of deposits are usually insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions. Basic Savings Account Low or no minimum balance. Very low interest return on investment. Money Market Account Requires an individual to have more money in the account than a basic savings account and returns a slightly higher rate of interest. Certificate of Deposit (CD) A Certificate of Deposit is a timed deposit of one month to five years in duration. A CD can have a fixed (stays the same) or variable (changes based on market conditions) interest rate. 191

192 Slides 4 and 5 Vocabulary: - Investing using money with the intent of compounding your money. - Defined Benefit Plan employer-sponsored plan that guarantees a set monthly payment for retirement. Key Points: - Diversifying one s investing strategy will help with risk and return. - Stocks Investors will invest in the stock market. Purchasing a stock gives you partial ownership in the company that you invest in. Dividends that are declared and paid by certain companies can be a good source of income and provide a good rate of return on your investment. - Bonds Offers investors a specific interest rate of return; a maturity date with return of the investor s principal; and acts as a loan to a company to use the capital for specific projects. - Mutual Funds A pool of money from investors to be invested in stocks, bonds, treasury bills, real estate, etc. - Real Estate From the end of World War II in 1945 until 2007, real estate investing was a means for appreciation and significant return on one s investment with little risk for the longterm investor. However, for the past few years, it was proven that real estate investments can depreciate, lose value, or stay stagnant. Teacher Tips: - Engagement Determine if any students in the class have encountered any of the investment options mentioned in the Student Guide. - Check for Understanding Have the students explain their encounter and determine if their explanation appears to be accurate. Teacher Reflection: 192

193 Investing and retirement Investing can be an important ingredient in saving for retirement. An investor wants to reduce risk and strive for the highest rate of return. Diversifying one s investing strategy helps with risk and return. Review the following investments that were discussed in the Investing and Savings topic: Stocks - Investors will invest in the stock market. Purchasing a stock gives you partial ownership in the company that you invest in. Dividends that are declared and paid by certain companies can be a good source of income and provide a good rate of return on your investment. Bonds Offer investors a specific interest rate of return; a maturity date with return of the investor s principal; and act as a loan to a company to use capital for specific projects. Mutual Funds A pool of money from investors to be invested in stocks, bonds, treasury bills, real estate, etc. Real Estate - From the end of World War II (1945) until 2007, real estate investing was a means for appreciation and significant return on one s investment with little risk for the long-term investor. However, since 2007, we ve seen that real estate investments can easily depreciate and lose value or stay stagnant. Defined-benefit plan Defined-benefit plans About 20% of Americans today participate in a traditional pension plan. This percent is half of what it was in the mid-1970 s. This benefit is calculated from a worker s salary and the number of years the individual works for a particular employer. It guarantees a set monthly payment for retirement. Investment risk and portfolio management are entirely under the control of the company. Many employers offer a retirement savings plan. The most common of these plans is a 401(k) plan. This type of investment is offered by private employers that offer you, the employee, to authorize a certain percentage of before-tax earnings to be deducted from your paycheck. Most 401(k) plans are professionally managed and offer choices from a variety of investments. 193

194 Slides 6 and 7 Vocabulary: - 401(k) a retirement investment opportunity by an employer authorizing a certain percentage of before-tax earnings to be deducted from your paycheck. A plan administrator usually oversees how the money is invested (b) similar to a 401(k), a 403(b) retirement account is usually an option if you work for a public school, hospital, or other non-profit organization. - Individual Retirement Account (IRA) a type of investment that has various tax advantages. - Traditional IRA an investment account where you contribute to it now and deduct the contribution from your taxes. Taxes will be paid later when the money is withdrawn. - Roth IRA a type of investment that has various tax advantages; similar to a Traditional IRA with the tax advantages occurring when you withdraw the money. Key Points: - A 403(b) account is very similar to a 401(k) account. - Most retirement accounts such as 401(k)s, 403(b)s, and IRAs allow you to take out money at age 59½ without penalty. - Traditional IRAs have tax advantages at the time you make the contribution. - There are limitations on the amount you can contribute to most retirement accounts during the year. This amount changes yearly as determined by the Internal Revenue Service. For example, contributions to a Traditional IRA for 2013 are limited to $5,500 for a single person and $11,000 for a married couple. Other restrictions might apply (e.g., working status and amount of earnings). Teacher Tips: - Engagement Ask the students if they know if their parents contribute to a Traditional IRA, 401(k), or a 403(b). - Check for Understanding Ask the students to differentiate between a 401(k), 403(b), and an IRA. Teacher Reflection: 194

195 Some employers will match a portion of every dollar invested in your own 401(k). For example, if you choose to deduct $200 from your paycheck for your 401(k) every pay period, and your employer matches 20%, they will add $40 ($200 x 20%) to your 401(k) account. Free money what a great deal! Your employer adds $40 every pay period to your retirement account. Good questions to ask when interviewing with a company are: (1) Does your company offer a retirement package such as a 401(k)? (2) If so, do you contribute to the plan, and by how much? Four things to keep in mind regarding a 401(k) plan: (1) You cannot take money out of this account until you reach the age of 59½; otherwise, you pay a penalty. (2) If you change companies, you may roll the account over into another 401(k) offered by your new employer or into another retirement account within a specified time period. (3) When making changes to your 401(k), bear in mind that retirement accounts are governed by the IRS, check at to be sure you adhere to the most recent guidelines for 401(k) withdrawals and rollovers. If you don t, there may be serious penalties! You may borrow up to 50% of the balance that you contributed, but it must be paid back with interest within five years. (4) There are limits on the amount of money you can contribute yearly. Similar to a 401(k) is a 403(b) retirement account. A 403(b) retirement account is usually an option if you work for a public school, hospital, or other non-profit organization. Similar to a 401(k), you have the choice to participate or not. Also, like a 401(k), if you withdraw the money prior to the age of 59½, you will incur a penalty and pay additional taxes on the withdrawal. Individual Retirement Accounts Individual Retirement Accounts (IRAs) are yet another way to save for retirement. This type of account allows your money to grow tax deferred (pay taxes later) and are sometimes tax free. There are two different types of IRAs. One type is known as a traditional IRA, which allows you to contribute a certain amount each year to the account. For 2013, the maximum contribution to a traditional IRA was $5,500 or $11,000 if you are married and one spouse works outside the home. An advantage to this type of IRA is that you may deduct the amount contributed from your tax return, thus, lowering your taxable income. In turn, you will pay less tax. Like the previous retirement accounts, you may begin withdrawing your money at age 59½ without penalty. However, once you begin withdrawals, you must report it on your tax return and pay tax on the amount taken out. 195

196 Slide 8 Vocabulary: - Federal Insurance Contributions Act (FICA) a federal insurance program that requires taxes (Social Security and Medicare) to be withheld from the employee s paycheck that is matched by the employer. - Social Security a federal government program that provides payouts to people based on age, disability, and employment status. People must contribute 6.2% of their wages to this account during their working lives. - Medicare Medicare is a federal insurance program that is administered by the United States government. It guarantees access to health insurance for Americans age 65 and older and Americans under age 65 with disabilities. All employees and employers by law must contribute 1.45% to Medicare. Key Points: - Currently, the employee's share of the Social Security tax is 6.2% of gross compensation up to a limit of $113,700 of gross wages. - The Medicare tax amounts to 1.45% for both the employee and the employer. - In total, you contribute 7.65% (6.2% %) of your wages to Social Security and Medicare. Your employer matches this amount. To summarize, 15.3% (7.65% %) is contributed each time you are paid. - In order to receive full Social Security benefits, you must work for 40 quarters throughout your work life. Teacher Tips: - Engagement Ask the students to share what they know or what they have heard about Social Security. - Check for Understanding Have the students complete the activity in the Student Guide for determining the number of Social Security Quarters. Teacher Reflection: 196

197 There is also a Roth IRA. In a Roth IRA, you may contribute to the account but cannot take a tax deduction for the year of contribution (unlike a traditional IRA). The advantage, however, is that once you begin withdrawing money (at age 59½,) you don t report it on your tax return and don t pay taxes on any of the earnings. Social Security Social Security is a federal government program that provides payouts to people based on age, disability, and employment status. The Social Security Act established it in The program is based on contributions that employees make into the system. The Federal Insurance Contributions Act (FICA) requires taxes to be withheld from the employee s paycheck and is matched by the employer. Medicare is also a federal insurance program that is administered by the United States government. It guarantees access to health insurance for Americans age 65 and older and Americans under age 65 with disabilities. It is associated with Social Security because it is also withheld from the employee s paycheck and matched by the employer. Currently, the employee's share of the Social Security tax is 6.2% of gross compensation up to a limit of $113,700 of gross wages. This results in a maximum Social Security tax of $7, and is referred to as the ceiling. The employer and employee are both liable for 6.2% of the Social Security tax and 1.45% of the Medicare tax. You (the employee) and your employer each pay 7.65% into these taxes each time you are paid. Social Security benefits are typically computed using "average indexed monthly earnings." This average summarizes up to 35 years of a worker's indexed earnings. Social Security applies a formula to this average to compute the primary insurance amount (PIA). The PIA is the basis for the benefits that are paid to an individual. Old-age benefit amounts are generally related to the amount of Social Security payroll taxes paid by workers over the course of their lifetimes. The Social Security Administration has an online calculator that provides an estimate of monthly old-age benefits based upon earnings, birth date, and expected retirement age. The results can be delivered in either today's dollars or in future (inflated) dollars. In order to receive full Social Security Benefits, you must obtain 40 quarters throughout your work life. 197

198 Slide 8 (Continued) Key Points: - There is speculation that Social Security might not be around in a few decades due to it paying out more than what is contributed to the program. - If you save and invest while you are young, it will help you solve many potential problems later in life. - It makes sense to save for retirement now, so that if Social Security disappears, you have other funds to draw from. - Educating yourself about retirement will also help you make smart employment decisions. - Look for a company that matches or contributes a portion to your retirement account. - If you start investing in your retirement now, you will achieve tax benefits and at the same time, provide security for your golden years. Teacher Reflection: 198

199 Go to the following website and answer the following questions: 1. What does (QC) stand for? Answer: Quarter of Coverage 2. What is the maximum number of QCs you can accumulate in one year? Answer: 4 3. Can you accumulate more QCs in a year when your earnings increase? Answer: No Although Social Security has been in existence for many decades, there is speculation that it might not be around by the time you are eligible to receive it. Thus, it is wise to invest in other types of retirement accounts as discussed in previous sections. Why are retirement accounts important to you? You might ask, Why should I think about retirement now when I haven t even started working fulltime? The answer to this is quite simple. If you save and invest while you are young, it will help you solve many potential problems later in life. Investing in your future is the right thing to do. Social Security may not exist or may be reduced by the time you are eligible to begin receiving it. And don t forget about compound interest; saving early will pay off for you later. Educating yourself about retirement will also help you make smart employment decisions. Look for a company that matches or contributes a portion to your retirement account. Lastly, if you start investing in your retirement now, you will achieve tax benefits, and at the same time, provide security in your golden years. 199

200 Assignment: Life Smarts: Compute the value of retirement portfolio given the following information. 1. Go to the following website and determine if a person in the following situation is saving enough for retirement: You are 25 years old. You earn $40,000 per year. You save 10% of your salary. You have $10,000 in retirement savings, which consists of the following: $5,000 in a 401(k); $2,000 in a Roth IRA, $2,000 in stocks and bonds; and $1,000 in a CD. Estimate that you will begin receiving Social Security at age 62, and your monthly payments will be $1,600 per month. Your lifestyle will stay the same upon retiring. Write your answer in the space below. Be prepared to share your results with the class. 200

201 Lesson Component Description Purpose In the Cost of College topic, the students gain a fundamental understanding of the cost of going to college. Learning Objectives 1. Examines the various expenses of going to college. 2. Explores ways to pay for college. 3. Analyzes the costs of two- and four-year colleges and universities. 4. Identifies ways to save for college. 5. Researches the correlation between education and earnings. Time Required 250 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or utilize the Teaching Guide as the student follows along with the Student Guide. The guides are merely a framework for the teacher and the student. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Using research the cost of tuition, room and board, and the average GPA necessary to enroll at three different universities. Have the students share their findings with the class. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Cost of College Quiz Key 1.F 2.T 3.T 4.F 5.F 6.D 7.A 8.C 9.D 10.B Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3).

202 3. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 6. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 7. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 9. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 10. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 11. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 12. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 13. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10).

203 6. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 7. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 8. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 9. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 10. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 11. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Federal PLUS Loan Website: Perkins Loan Website: Types of Grants Available: Lottery Scholarship Search for scholarships - FASFA Website: Profile Website: ACT Resources and Tools The College Navigator 25 useful sites for students and parents portal.com/articles/25_legitimately_useful_sites_for_college_students.html Video Links None Life Smart Applications 1. Researches the cost to attend various colleges and universities.

204 Name Date True or False Questions: Travel should not be considered when budgeting for your college expenses. 2. Room and Board is something to consider when budgeting for college expenses. 3. Not having money to go to college is a poor excuse for not attending. 4. The Bridge to Success Scholarship only covers your last semester of college. 5. The Lottery Scholarship only covers tuition for your first semester of college. Multiple Choice Questions: Which of the following investments can be considered savings for college? a. A 529 Savings Plan b. Mutual Funds c. Certificate of Deposit d. All of the above 7. According to statistics, which of the following workers will have the lowest weekly earnings? a. Someone with an Associate s degree b. Someone with a Professional degree c. Someone with a Doctoral degree d. Someone with a Bachelor s degree 8. Statistics indicate that as your level of education increases, so does your: a. Spending b. Debt c. Earnings d. None of the above 9. Working a part-time job while in college might help you pay for: a. Tuition b. Books c. Transportation to school d. All of the above 10. Which of the following scholarships can help you pay for tuition and books for eight semesters, assuming that you meet all of the requirements: a. Bridge b. Lottery c. Merit d. None of the above

205 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Vocabulary: - Tuition and Fees Tuition is the charge for instruction by an educational institution. Fees are additional expenses to cover the cost of Materials required in a course (e.g., lab equipment/material). - Room and Board The charge for lodging, utilities, and food provided during the school year/term. - Books and Supplies Each class in which you enroll will require one or more books and/or additional supplies such as paper, pens, binder, specialized calculators, etc. A single book required for a college course can cost well over a $100. Key Points: - Emphasize to the students that college is an expensive venture. Tuition is only one component of the cost of college and, cumulatively, these costs can become monumental. Teacher Tips: - Engagement Ask each student if they plan on going to college. Why? Why not? - Check for Understanding Determine if the students answers indicate any correlation to financial security. Teacher Reflection:

206 The Cost of College Education Pays Life Smarts: 1. Research the cost to attend various colleges and universities. Expenses to consider While the total cost of college depends on where you go, how you budget, and if you receive financial aid, there are six standard expenses you should consider. 1. Application process Application and testing fees should always be considered when deciding to go to college. Application fees vary between $50 and $100. Testing fees (ACT and SAT) vary between $30 and $50 each time you take the test. Don t forget, you might also spend up to $5,000 to visit a campus, depending on its location. 2. Tuition and fees Tuition is the cost of your education. According to the National Center for Education Statistics, which tracks higher education trends, the average cost for a public four-year college is $7,136 per year. Average undergraduate tuition in 2013 for a 4-year degree was $14,101; for a 2-year degree, $3,322. Keep in mind that if you choose an outof-state public four-year college, the tuition will be significantly higher Nusenda Federal Credit Union. All rights reserved.

207 Slide 3 Cost of College Vocabulary: - Financial Aid Money given to students to help pay for college. - Loans Money that is expected to be paid back later. - Grants Money that is not expected to be paid back. Key Points: - Emphasize to the students that there are many ways to defray the cost of college for those willing to do the research and put forth the effort to apply for financial aid, grants, scholarships, etc. - Merit-based financial aid is awarded to students with good grades or who excel at sports, music, or other special skills. - Need-based financial aid is given to students who show that they cannot afford to pay the full cost of college on their own and need financial help. - Loans are widely used because they allow the students to pay their own way through college. They typically have no requirement to be paid back until one year after graduation (this applies for both undergraduate and graduate school). Teacher Tips: - Engagement Ask the students if they already have a college savings plan started. - Check for Understanding Ask the students which methods mentioned in the Student Guide appear to be the best way to pay for college and give a reason for each. Teacher Reflection: 207

208 Cost of College 3. Room and board Whether you are living on campus or off, your room and board is a substantial expense. It includes housing, meal plans, utilities, parking expenses, and anything else included in the cost of living. The 2013 average cost for room and board was $10,404 for a student attending a public four-year college and $10,549 for a student attending a private four-year college. 4. Books and supplies This is the cost of course materials. Prospective students usually overlook this cost category, but it is one that s growing. The 2013 average cost for books and supplies was $1, Travel Attending a college far from home can result in high travel expenses. Even when attending a college close to home, if you plan to live off campus and commute to school, you need to factor in transportation costs between home and classes. 6. Miscellaneous expenses This is the cost of that morning coffee, late-night pizza, and the monthly cell phone bill. Personal expenses can add up (especially in metropolitan areas). It's very conceivable that these expenses can be in excess of $2,000 per year. How to pay for college Financial aid Financial aid is money given to students to help them pay for college. You can receive financial aid by way of merit or need. Merit-based financial aid is awarded to a student with good grades or who excels at sports, music, or any other special skill. Need-based financial aid is given to a student who shows he or she cannot afford to pay the full cost of college on his or her own and needs financial help. The qualifications for both vary greatly, so be sure to check if you qualify. Both kinds of financial aid can come from a variety of sources: the government, schools, charities, or businesses. They also come in various different forms: 208

209 Slide 3 (Continued) Cost of College Vocabulary: - Scholarship Money that is not expected to be paid back but is earned by merit such as academic, athletic, or artistic performance. - Bridge to Success Scholarship offered to students who are in the process of qualifying for the Legislative Lottery Scholarship. The Bridge to Success Scholarship is good for the first fall college term. It covers the cost of tuition and registration fees for your first semester only. - Lottery Scholarship pays 100% of your tuition assuming that you graduate from a - New Mexico high school and attend a public college or university in New Mexico. It is a renewable, full-time tuition scholarship that can be received for up to eight consecutive semesters (starting in your second semester in college). - Work Study Work-study is a program funded by the federal government that allows students to receive financial aid in exchange for working on campus. Key Points: - When available, work-study can be a convenient form of aid. Students in the program usually work a set number of hours per week on or around campus and are able to schedule their hours around classes. - FAFSA is the single most important form to complete in the search for financial aid for college. Teacher Reflection: 209

210 Cost of College Loans A loan is money that you are expected to pay back later. Loans are widely used because they allow students to pay their own way through college. They typically have no requirement that they be paid back until one year after graduation (this applies for both undergraduate and graduate school). There are both federal and private loans available to students. Federal loans don t require a credit check, and the government regulates the associated fees and interest rates, which usually means they re lower. There is a limit to how much money a single student may receive. Private loans, however, can be taken out for any amount, but they are creditbased and can be denied based on credit score. Either type of loan can be a good choice, depending on your circumstances. Two common types of college loans are the Federal PLUS Loan and the Perkins Loan. References: Federal PLUS Loan Website: Perkins Loan Website: Reality Check: Reflect on the salary that you determined you will be making in your chosen career in the Employee Smarts Topic. Does it make sense to borrow money for your college education if that amount exceeds what you will make after you graduate? Be prepared to explain your thoughts with your classmates in a large group discussion Grants A grant is money that you are not expected to pay back. For this reason, grants are a highly sought after form of financial aid. There are four common types of grants: 1. Pell Grant 2. Federal Supplemental Educational Opportunity Grant (FSEOG Grant) 3. Teacher Education Assistance for College and Higher Education Grant (TEACH Grant) 4. Iraq and Afghanistan Service Grant Types of Grants Available: 210

211 Slide 3 (Continued) Cost of College Vocabulary: - Free Application for Federal Student Aid (FAFSA) The FAFSA is a form that provides the federal government with all of your financial information and helps the government determine what kind of financial aid for which you qualify. Teacher Reflection: 211

212 Cost of College Scholarships Scholarships are like grants in that you are not required to pay them back. While scholarships can be given based on either need or merit, they re often awarded for academic performance. Organizations of all types and sizes sponsor scholarships, including colleges and universities themselves, and often all you have to do to be considered for one is submit an application. o You may take advantage of the Bridge to Success Scholarship that is offered to students who are in the process of qualifying for the Legislative Lottery Scholarship. The Bridge to Success Scholarship is good for the first fall college term. It covers the cost of tuition and registration fees for your first semester only. o In New Mexico, the Legislative Lottery Scholarship pays 100% of tuition assuming you graduate from a New Mexico high school and attend a public college or university in New Mexico. It is a renewable, full-time tuition scholarship that can be received for up to eight consecutive semesters (starting in your second semester in college). Eligibility is determined during your first semester in college. References: Lottery Scholarship - Search for scholarships - Work-study Work-study is a program funded by the federal government that allows students to receive financial aid in exchange for working on campus. When available, work-study can be a convenient form of aid. Students in the program usually work a set number of hours per week on or around campus and are able to schedule their hours around classes. Full or part-time jobs Working a full or part-time job is the most basic way to pay for college. It may be difficult to work, attend classes, and study, but it is possible, and many people have completed college while working. 212

213 Slides 4 and 5 Cost of College Key Points: - There are numerous programs designed to help service members receive an education before, during, and after their service commitments. From officer training programs to the Post-9/11 GI Bill and on-base educational opportunities, the military spends millions of dollars annually educating its troops. - Highlights of various two and four-year colleges in New Mexico. Teacher Tips: - Engagement Ask the students to determine which schools are the most expensive to attend in New Mexico. - Check for Understanding Determine if the students are able to indicate why some schools might be more expensive to attend. Teacher Reflection: 213

214 Cost of College Free Application for Federal Student Aid (FAFSA) To qualify for financial aid, first you must complete a form called the FAFSA (Free Application for Federal Student Aid). It begins the financial aid process. The FAFSA provides the federal government with all of your financial information and helps them determine what kind of financial aid for which you qualify. The FAFSA also requires information from your parents or guardian, so make sure you have access to their tax information before you apply. o Another online financial aid application that has become popular with private colleges and scholarship programs is PROFILE (CSS/Financial Aid PROFILE). The PROFILE is similar to the FAFSA in that it collects your financial information. The PROFILE goes more in-depth and costs at least $25 to fill out. A limited amount of fee waivers, however, are available to low-income students. References: FASFA Website: Upon completing the FAFSA or PROFILE, start looking into specific financial-aid opportunities and corresponding payment plans. The different forms of financial aid described above can often be combined with whatever you receive through FAFSA for additional help. With a little determination and research, financial aid can allow you no matter what your income is to meet the costs of college. Family A 529 College Savings Plan is an educational investment plan operated by a state or educational institution designed to help families set aside funds for future college costs. Check with your parents, grandparents, or guardian to see whether there is a 529 set up for you. You can continue to make contributions through high school. Another option is serving in the military for a set amount of time. For decades, Americans have enjoyed educational benefits in return for military service. There are numerous programs designed to help service members receive an education before, during, and after their service commitments. From officer training programs to the GI Bill and on-base educational opportunities, the military spends millions of dollars annually educating its troops. 214

215 Slides 6 9 Cost of College Vocabulary: Saving Plan a tax-free educational savings fund that can be started years before it is needed. Key Points: - There are many resources that are available to students and their families. Research and determine the usefulness of these resources. Emphasize to the students that there are many ways to defray the cost of college for those willing to do the research and put forth the effort to apply for financial aid, grants, scholarships, etc. - College is more important than ever before because of the ultra- competitive world we live in. - It is NEVER too early to start saving for college. - Statistics show that as the level of education increases, the unemployment rate decreases. Data further shows that as the level of education increases, the earnings increase as well. Teacher Tips: - Engagement Have the students brainstorm a list of reasons why it might be an excellent idea to attend college. - Check for Understanding Have the students complete the activity in the Student Guide and check their work for accuracy. Teacher Reflection: 215

216 Cost of College Checklist: financial aid application Applying for financial aid requires attention to detail. There are specific forms to be filled out, deadlines to meet, and eligibility requirements to consider. Stay organized and informed by following a step-by-step Financial Aid Application Checklist. References: Aid Application - checklists/checklist-financial-aid-application Saving for college It is never too early to start saving for college. A 529 College Savings Plan is a tax-free educational savings fund that can be started years before it is needed. Whole life insurance policies, stocks and mutual funds, certificates of deposit (CDs), or a separate savings account with weekly or monthly deposits are all common vehicles to save for college. Some 401(k) programs allow you to borrow money from yourself to go to school, though that is not advisable. Costs of two-year colleges in New Mexico CNM Albuquerque, NM Tuition $1,200 per year (2014) New Mexico Military Institute Roswell, NM Tuition ~ $1,452 per year (2014) Santa Fe Community College Santa Fe, NM Tuition ~ $1,410 per year (2014) Costs of various four-year colleges in New Mexico UNM Albuquerque, NM Tuition & Fees $6,846 per year (2014) New Mexico State Las Cruces, NM Tuition & Fees $5,950 per year (2014) New Mexico Tech Socorro, NM Tuition & Fees ~ $6,256 per year (

217 Cost of College Why go to college? It pays! In today s ultra-competitive world, it is important to gain as much education and knowledge as you can. College can help you find a career path and a passion; obtain a better paying job; and make yourself more marketable. The relationships that you create in college can significantly enhance your network circles throughout life. College can help you establish credibility and broaden your horizons. Statistics show that as the level of education increases, the unemployment rate decreases. Data further show that as the level of education increases, the earnings increase, as well. Look at the chart Education Pays and write a five-sentence paragraph explaining the findings. Resources for students and their families: The College Navigator useful sites for students and parents

218 College Name City College & State Percent Admitted # Students Applied Tuition $ NM = Resident Other = Non.- Res. $ Room & Board Avg. HS GPA Enrollment (Undergraduat e) Student/ Faculty Ratio Website Address UNM NMSU CNM ENMU WNMU NMHU NM Tech Using find the following information about 15 colleges or universities. - The 7 NM colleges listed below are required (use resident tuition meaning you live in the state of NM). - All other schools can be from anywhere within the U.S. (If outside NM, use nonresident tuition). 218

219 College Name City College & State Percent Admitted # Students Applied Tuition $ NM = Resident Other = Non.- Res. $ Room & Board Avg. HS GPA Enrollment (Undergraduat e) Student/ Faculty Ratio Website Address 219

220 Lesson Component Description Purpose In the renting an apartment topic, the students gain a fundamental understanding of the process of renting an apartment and living on their own. Learning Objectives 1. Identifies the terminology associated with renting an apartment. 2. Evaluates the costs of renting an apartment. 3. Examines the paperwork necessary to rent an apartment. 4. Compares the costs of living on your own vs. living with parents. Time Required 250 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework for the teacher and students. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students complete a rental application. 2. Have the students review a lease agreement for the information contained within and research Assessment key terms that are not understood. Quiz 10 questions (5 True/False; 5 Multiple Choice) Renting an Apartment Quiz Key 1.T 2.F 3.F 4.F 5.T 6.C 7.D 8.D 9.C 10.C Alignment to Standards Common Core State Standards: Math 1. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 2. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1).

221 Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 3. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 4. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 5. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 6. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 7. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 9. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 10. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 11. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 3. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 4. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 5. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 6. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 7. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 8. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 9. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6).

222 Web Resources None Video Links Renting vs. buying a home: What you need to know: Renting vs. Buying: Life Smart Applications 1. Complete a rental application. 2. Review a lease for renting an apartment. 3. Research the costs of renting an apartment/house.

223 Name Date True or False Questions: Most people rent because they don t have the financial means to cover a down payment and closing costs on the purchase of a home. 2. If you decide to rent an apartment, chances are you will not have to pay a security deposit. 3. It s a good idea to purchase collision insurance when renting an apartment. 4. A lease refers to something that contributes to a physical or material comfort. 5. A rental application is used by landlords to collect information to make a decision to accept or decline a prospective tenant. Multiple Choice Questions: When you rent an apartment, you are referred to as a: a. Landlord b. Lease c. Tenant d. None of the above 7. You decide to rent an apartment. What are good reasons to rent? a. You can afford it b. You re not locked into a 30-year mortgage c. You might have to relocate within the next six months d. All of the above 8. If you decide to rent an apartment, the landlord most likely will require you to: a. Pay the first month s rent b. Pay for six months in advance c. Pay a security deposit d. a and c 9. If you find an apartment to rent, you will more than likely have to a. Put your car up as collateral b. Complete a rental application c. Sign a lease d. b and c 10. You rent an apartment, and one of your friends comes over, trips over your backpack, and breaks an arm. For this reason, it s a good idea to have what type of insurance? a. Home b. Collision c. Renter s d. None of the above

224 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slides: 2 and 3 Vocabulary: - Landlord - Tenant - Rental Application - Lease - Amenities - Security Deposit Key Points: - Emphasize to the students that they have options when it comes to living on their own. Different factors, including financial resources; credit; temporary living conditions, such as outof-state college; changing locations for work or possibly the loss of a job; might make renting a better choice for housing than buying a home. Teacher Tips: - Engagement Ask the class to create a plus and minus comparison between living in an apartment over owning a home. - Check for Understanding What are some of the benefits you get from owning a home that you won t get when renting? Teacher Reflection:

225 Renting an Apartment/House Living on Your Own Life Smarts: 1. Research the cost of renting an apartment/house. Key terms The following are key terms you will need to know in order to determine whether renting an apartment is the best choice for you. Landlord and Tenant A landlord is an owner of property who agrees to rent all or part of a property to another party, called the tenant, for some period of time. Rental Application A document used by landlords to collect information to make a decision to accept or decline a prospective tenant. This form usually authorizes the landlord to run a credit/criminal history report. Lease An agreement that states the landlord maintains ownership of the property, and the tenant has the right to use the property as established in the terms of the agreement. Amenities Something that contributes to physical or material comfort. Examples: Swimming pools, spas, fitness centers, game rooms, theater screening rooms, etc Nusenda Federal Credit Union. All rights reserved.

226 Renting an Apartment/House Security Deposit Monetary deposit given to a landlord; may be refundable or nonrefundable, depending on the terms. Landlords generally apply security deposits as compensation from tenants who cannot otherwise pay or use them to repair damage caused by tenants. Why rent? Why would you want to rent rather than purchase a home? Perhaps you are a college student going to school in a town far from home, or you were sent by an employer to a location in another state temporarily. Many people rent because purchasing a home is not an option, at least not yet. They do not have the financial means to cover down payments and closing costs required when purchasing a home, or they aren t sure where they want to put down roots. Renting can offer amenities, like swimming pools, spas, workout rooms, etc. Renting is flexible; transitioning to a larger or smaller apartment is a much easier process than selling and purchasing another home. Apartments, condominiums, townhomes, and other multi-family housing units can all be rented; however, people most often are referring to apartments when discussing rental property. A 25-year old rookie reporter from Albuquerque has accepted her first assignment at a television station in San Diego, Calif. She has no family or friends in San Diego. 1. Which would make more sense renting an apartment, or purchasing a home? Why? Answers will vary. 226

227 Slides 4 and 5 Renting an Apartment/House Key Points: - Renting equals flexibility - Amenities: Swimming pools, gyms, security - Lower monthly expenses - Multiple location options Teacher Tips: - Engagement Have the students make a list of the expenses related to owning a home vs. renting an apartment. o Possible expense items for either one or both can include: Insurance Taxes Utilities Maintenance Damage Deposits Pet Deposits Parking Fees (for a covered spot) Furniture - Check for Understanding Ask the students why renting becomes a better choice for young people just starting out living on their own or with a couple friends. o Possible answers might be: Short-term commitments Less expensive to rent Some apartments come furnished Large Group Discussion: - Have the class separate into groups of renters and owners and discuss why they feel their choice is better than the other. Come together and share discussions with the class. Teacher Reflection: 227

228 Renting an Apartment/House Benefits of renting Career flexibility is one of the major benefits of renting. If you are in the early stages of a career, you may be relocated by your company. If you are searching for a new career, you may move several times before you are in a position to settle down long term. Many rentals offer social activities that offer a sense of community and enable neighbors to socialize. Landlords may offer movie nights in the clubhouse theater, pool parties, or barbecues for their tenants. Renting provides cost stability because monthly costs are predictable. Rent is a fixed rate; utilities are generally the same or included in the rent; and maintenance costs such as a leaky roof, servicing the furnace, etc., are the responsibility of the Landlord. Rentals do not require a down payment or closing costs; the first month s rent and a security deposit are the most common requirements. Renting allows a person to avoid the market risk due to fluctuations in the value of homes during periods of recession and prosperity. Considerations Location is one of the biggest considerations when renting. You should think about your daily commute to work or school and search for rentals in close proximity. Conveniences like grocery stores, restaurants, hospitals, etc., are important to have in your chosen neighborhood. Your lifestyle is another factor to take into account when comparing rentals. If you are a full-time student, working a full-time (or near full-time) job and are only at home to eat, sleep and shower, it doesn t make sense to choose an amenity-rich rental. If you have free time built into your schedule, however, amenities would more likely play a role in your decision. Cost of rent varies depending on many factors, and some rentals offer discounts for military, police, and their families, or to certain employers. A huge consideration in renting is roommates. Interested in a quiet home life, loud music and parties, or something in between? It is important that all roommates share common goals; otherwise, the living situation can quickly turn bad. On the plus side, a roommate can help you defray (save) rent costs. Do you have pets? Some rentals prohibit pets, while others allow them with a pet deposit and additional monthly fees. Other fees to consider when renting an apartment include: pest control, trash, processing payments, application and background checks. Lastly, you need to consider what utilities (gas, water, electricity) you will be responsible for paying. 228

229 Slides 6 and 7 Renting an Apartment/House Vocabulary: - Rental Application a form that is filled out with personal information. It might include an authorization for a background check and a credit card. - Lease a document stipulating the terms of renting an apartment. - Security Deposit a money payment made in advance of renting for use by landlord in the case of evacuation or damage by tenants. Key Points: - Emphasize to the students that they will need to fill out a rental application that might require authorization for a credit and background check. - First month s rent and a security deposit may be required prior to moving in. - Utility companies will need to be contacted to begin service. - A lease can be complicated to understand. There are many technical terms that might need to be defined for clarification. Teacher Tips: - Engagement Ask students to share stories regarding any experiences they had with friends or relatives renting an apartment. Ask them if they recall the process they went through. - Check for Understanding Have the students review the lease agreement at the end of the Student Guide for the information contained within and research key terms that are not understood. Large Group Discussion: - Ask the students to share their research from the lease agreement. Teacher Reflection: 229

230 Renting an Apartment/House 1. On a separate sheet of paper, write down all of the expenses that you might incur renting an apartment. Beside each expense, list the dollar amount that you think it will cost. Answers will vary. 2. How might having a roommate save you money? Answers will vary. (Be prepared to share your answers with the class) Reality Check: Conduct an Internet search to determine apartment rents in various parts of the country and in New Mexico. On a separate sheet of paper, list the rent amount, location, and size of the apartment. Use this website to conduct your search: (Be prepared to share your findings with the class) The rental process The process of renting consists of visiting properties. To do this, make appointments to see individual units as well as the overall properties. Once you have chosen a property, fill out a rental application, which may include an authorization for a credit and background check. After your application is approved, you will be given a lease, which you should read carefully and thoroughly. If you have questions, ask for clarification. When you are comfortable with the terms of the lease, sign, date, and return it to the landlord along with the first month s rent and security deposit (and/or any other required information/funds). Finally, before moving in, you need to contact utilities not provided by the landlord and apply for service to begin on or before your move-in date. Fill out the renter s application at the end of the section. Be prepared to discuss the contents contained within the document with the class. 230

231 Slides 8 and 9 Renting an Apartment/House Vocabulary: - Renter s Insurance a specific type of insurance that covers your personal property (and liability claims for injuries occurring on the premises wherein, the landlord may not be responsible). - Liability coverage that provides protection if someone is injured while in your rented unit. - Key Points - Protect your property with Renter s Insurance. - Landlord usually is not responsible for the contents of your apartment. - Landlords might require proof of renter s insurance prior to your moving in. Teacher Tips: - Engagement Have the students make a list of everything they would have to replace if their apartment burned during a fire. Have them place a dollar value to those items. Explain that renter s insurance may cost an additional $25 to $50 per month depending on the amount of the coverage. - Check for Understanding Have the students multiply the cost of renter s insurance for a typical one-year lease period. Does the cost of the insurance equal the amount they would need to replace the contents of their apartment? Large Group Discussion: - Start a class discussion related to the value of having various types of insurance. What are some of the catastrophic events that can happen that would be covered by insurance? What other kinds of situations are covered? Teacher Reflection: 231

232 Renting an Apartment/House Types of leases There are many types of leases, but the most common for rentals is the Tenancy for Years lease. In this type of lease, a definite term is specified for the agreement, such as one month, six months, or one year. Below is a list of other types of leases you should be aware of: Tenancy for Period to Period A lease that specifies a definite initial time but is automatically renewed unless terminated by either the landlord or tenant. Tenancy at Will A lease that is in force until either the landlord or tenant terminates the agreement. Tenancy at Sufferance A lease that is never intentionally created and exists as the result of circumstances. This type occurs when a tenant remains on a property after a lease has been terminated or expired. The only difference between a tenant at sufferance and a trespasser is that the former had at one time a right to occupy the property. Review the lease form provided at the end of the section. What are some of the expenses associated with leasing an apartment? Research some of the terms not understood and be prepared to share with the class. Renter s insurance It is important to protect yourself and your property while renting. A good way to do this is with Renter's Insurance, a specific type of insurance that covers your personal property (and liability claims for injuries occurring on the premises wherein the landlord may not be responsible). Proof of renter's insurance may be required by some landlords, since their property insurance will not cover losses to your belongings or certain liability cases. Example: If there were a fire and the entire building burned down, the landlord's insurance would cover the structure; your renter s insurance would cover the personal contents of your rented unit. 232

233 Slides 10 and 11 Renting an Apartment/House Key Points: - Actual Cash Value (ACV) refers to what the items are worth at the time of loss. - Replacement Value refers to the original value of the lost items. - Deductible refers to the amount paid before receiving an insurance claim. Teacher Tips: - Engagement Ask the class to list some common items you might find in an apartment whether as a necessity, recreation, or entertainment. Have them look up the cost for a few of these items if purchased new. Now have them find similar items for sale on ebay or Craigslist. - Check for Understanding With their list of items in hand, ask the class how much money they could expect to receive from an insurance to settle a claim for those items lost in a fire. Large Group Discussion: - Have students discuss why many individuals of retirement age choose to rent apartments and condominiums instead of owning a home. Teacher Reflection: 233

234 Renting an Apartment/House What s covered Renter's insurance protects your personal property, including items such as clothes, luggage, computers, furniture, and electronics. A standard policy designed for renters covers losses to personal property from events such as: Fire or lightning Windstorm or hail Explosion Riot or civil commotion Smoke Vandalism or malicious mischief Theft Weight of ice, snow, or sleet Accidental water damage from sources including household appliances, plumbing, heating, air conditioning, or fire-protective sprinkler systems Accidental damage from power surge of electrical current Loss from floods and earthquakes are not covered in standard policies. Separate Policies, called riders, are required for these events. If your unit is damaged by a covered event to the extent that you cannot live in it, some renter s policies may cover some or all of the costs of living somewhere else temporarily. Renter s insurance also includes Liability coverage that provides protection if someone is injured while in your rented unit. It pays court judgments, as well as legal expenses, up to the policy limit. Options in Renter s insurance Renter's insurance can be obtained by contacting a reputable insurance company. Contact several insurance companies to compare policies and prices. You will need to complete a separate application for each company, but many companies give you the option of completing the entire application process online. 234

235 Renting an Apartment/House There are several options available based on the type of policy you choose. Some policies are replacement cost coverage, and some are actual cash value (ACV) coverage. Replacement cost coverage pays the actual costs to replace damaged or lost items, and ACV pays based on what the item was worth at the time of the loss. You can also select a deductible based on your specific situation, which will affect your premium and your exposure in the event you file a claim. Some items like jewelry, musical instruments, and photography equipment, are not covered under a basic policy. If you want to cover such items, you will need to purchase riders that specifically protect these items. Example: Replacement Value vs. Actual Cash Value (ACV). A laptop that you bought for $1,000 two years ago is stolen from your apartment. Replacement cost coverage will pay for a new, comparable laptop. An ACV policy, however, will only cover the estimated value of the computer, which is much less than the cost to buy another laptop. Replacement cost coverage policies have higher premiums but will pay out more if you file a claim. Conclusion Retirees, college students, singles, young couples, and small families make up today s renters. Some people rent property out of necessity, and others rent by choice. A large number of properties now offer a multitude of amenities to attract and keep renters. You must consider many factors when looking for the best rental property, such as location, commute, conveniences, and whether or not pets are permitted. When you decide on a property, a lease will be written and signed that defines your legal rights and responsibilities. Many people rent happily for years, while others trade rent for mortgage payments. There are many personal and financial factors you must measure before making your decision. 235

236 Renting an Apartment/House Assignment: Research the cost of renting an apartment in Albuquerque. Include three separate apartments/houses with the following information and be prepared to share with the class. Location: Location: Size: Square footage: Size: Square footage: Number of rooms: Number of rooms: Number of bathrooms: Number of bathrooms: Amount of monthly rent: Amount of monthly rent: Amount of deposit: Amount of deposit: Utilities included: Utilities included: Renter s insurance cost: Renter s insurance cost: Total estimated monthly expense: Total estimated monthly expense: Location: Size: Square footage: Number of rooms: Number of bathrooms: Amount of monthly rent: Amount of deposit: Utilities included: Renter s insurance cost: Total estimated monthly expense: 236

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245 Lesson Component Description Purpose In the Credit Card topic, the students gain a fundamental understanding of how credit cards work and the best ways to use them. Learning Objectives 1. Defines credit card. 2. Identifies reasons for having a credit card. 3. Explains the disadvantages of credit cards. 4. Determines how to read credit card statements. 5. Discusses how credit cards can be good if used appropriately. Time Required 250 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework for the teacher and students. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Go to the following website: and research 3 credit cards that you think offer the best deal. For each card, write down the following characteristics: a. Name of Issuer b. APR for purchases c. Other APR c. Annual fee d. Minimum finance charge e. Transaction fee for cash advances g. Late-payment fee f. Over-the-credit limit fee g. Cash back on purchases h. Rewards offered for purchases

246 Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Credit Cards Quiz Key 1.F 2.F 3.T 4.T 5.F 6.C 7.D 8.D 9.C 10.D Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 4. Recognize situations in which one quantity changes at a constant rate per unit interval relative to another (F-LE). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 3. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 4. Acquire and use accurately general academic and domain- specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 5. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 6. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 7. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 9. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 10. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 11. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10).

247 Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 3. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 4. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 5. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 6. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 7. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 8. Determine or clarify the meaning of unknown and multiple- meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 9. Acquire and use accurately a range of general academic and domain-specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources All You Need to Know About Credit Cards: Credit Card Benefits: Center for Student Credit Card Education Inc.: Credit Card Comparison Website: Video Links Taking Control of Your Credit: The Card Game and Secret of the Credit Card: The%20Card%20Game Care Program: Life Smart Applications 1. Reading a credit card statement. 2. Computing interest and length of time to pay off credit card balances.

248 Name Date True or False Questions: There is no limit as to how much you can purchase on a credit card. 2. A credit card cannot help establish a good credit rating. 3. The Schumer box can be used to compare credit card offers. 4. APR stands for Annual Percentage Rate. 5. Convenience checks normally don t have additional fees attached to them. Multiple Choice Questions: Which of the following does not have to be shown on a credit card statement? a. Annual Fee b. APR c. Bank name d. Finance Calculation 7. Which of the following are advantages of having a credit card? a. Convenience b. Builds credit c. Rewards d. All of the above 8. Which of the following are disadvantages of having a credit card? a. Interest fees and penalties b. Enables impulse spending c. Increases debt d. All of the above 9. Which of the following describes the best method for making payments on a credit card? a. Pay the minimum balance due at the end of each month b. Pay an extra $50 over the minimum balance each month c. Pay the balance in full each month d. Don t pay anything until the balance reaches more than $1, Which of the following is not a good reason to have a credit card? a. It helps establish good credit. b. Credit cards can be useful in times of emergency c. Credit cards are often required to complete online purchases d. None of the above

249 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slides 2 3 Vocabulary: - Credit Card a plastic card that is issued by an organization that allows consumers to make real-time (immediate) purchases without cash. - Credit Limit the maximum dollar amount that can be purchased on the credit card. Key Points: - Credit cards are issued by banks, credit unions, financial institutions, department stores, airlines, and even universities. - Credit cards can help establish credit. - Credit cards can be beneficial if used appropriately. Teacher Tips: - Engagement Ask the students if they have a credit card. Ask them how they got it. - Check for Understanding Ask the students if they know how a credit card works. Teacher Reflection:

250 Credit Cards Making Good Choices Life Smarts: 1. Analyze the required information on credit card statements. What is a credit card? A credit card is a card issued by a merchant (such as The Gap or REI) or a financial institution (e.g., credit union or bank). This card, sometimes referred to as plastic, identifies an individual and allows that individual to make real-time (immediate) purchases without cash. This card has a fixed-dollar amount, otherwise known as the credit limit. The issuer determines the maximum dollar amount a user may spend based on the individual s unique credit profile (how well he/she pays his/her bills). The amounts of the purchases, plus an interest rate, are repaid over time. Many card issuers also charge additional costs and fees for the privilege of their services. Did You Know? CBS Money Watch reported that in 2012, MasterCard reported $2.8 billion in profits, up 45% from a year earlier. According to Michael M. Thomas, Last year, credit card companies earned more than $14 billion from interest. Card-and-Personal-Debt&id= Nusenda Federal Credit Union. All rights reserved.

251 Credit Cards Slides 3 (Continued) 4 and 5 Key Points: - Credit cards offer a convenient way of paying for things without having to carry cash around. - Credit cards may offer insurance on your purchases. - Credit cards can offer incentives the more you use it. For example, they might offer accumulation of points that can later be used to purchase travel, accommodations, consumer products, or they might offer cash back on purchases periodically. - If not used wisely, credit cards can cause serious financial ramifications, such as high interest fees, penalties, or credit score damage. - Credit cards can also lead to identity theft if not securely protected by the cardholder. - Your credit score can prevent you from getting a job or renting an apartment, or even taking out a loan for a car. Teacher Tips: - Engagement Have the students complete the activity at the top of the page in the Student Guide. - Check for Understanding Have the students list the advantages and disadvantages of having a credit card in the Student Guide. Teacher Reflection: 251

252 Credit Cards Why do you need a credit card? Credit cards serve many positive and useful functions. They help establish a credit history and are often required as an additional form of identification. Credit cards can save the day when you encounter an emergency situation such as a medical crisis or travel breakdown. Credit cards are often required to complete telephone or online purchases. They are also necessary in order to make lodging and/or rental car reservations. 1. For what purposes have you seen your parents or others use their credit cards? Answers will vary. 2. List three situations in which it is better to pay with cash vs. a credit card. 1. Eating out 2. Small purchases $40 or less 3. Donations to charity Students might have other answers Advantages of a credit card Credit cards are convenient, provide insurance on purchases, and also offer security by reducing the need to carry large amounts of cash. Another benefit is if you rent a car and use a credit card to pay for it, the credit card company may also insure you in case of an accident. (Be sure to verify this coverage with your credit card company). Also, if you purchase a defective product with a credit card, the credit card company may compensate you directly if you have difficulty obtaining a refund from the company where you purchased it. In addition to building your credit (which is very important when borrowing money), credit cards sometimes offer cash back on purchases and rewards programs for airline travel, lodging, rental cars, and other services. Some discounts can only be realized through the use of a credit card. 1. List three advantages of using a credit card. Answers may include: Convenience, Build up credit, Rewards, Cash back, Discounts, Secuity 252

253 Credit Cards Slides 6, 7 and 8 Key Points: - Go over the 5 tips for using your credit card. 1. Make timely payments 2. Remain under your credit limit 3. Steer clear of unnecessary fees 4. Pay greater than the minimum due 5. Review regularly and beware of changes to the terms of your account 6. Making timely payments helps avoid late fees and interest penalties. It also helps your credit score. - Know that you can always adjust your billing cycle if you encounter changes in the way you get compensated from work. Contact your credit card company to determine how they can work with you to make an adjustment. - Pay attention to your dollar limit. Exceeding this limit will cost you additional fees and interest. - Check your balance periodically every month. - When using your card for travel arrangements, verify with the merchant if the transaction will be posted immediately or if the card is only used to put the reservation on hold until you arrive. Teacher Tips: - Engagement Ask the students if they have ever seen anyone paying with a credit card at the store and the card is rejected for processing. Ask them if they know the possible reasons it was rejected. - Check for Understanding Have the students recite the tips for using credit cards. Teacher Reflection: 253

254 Credit Cards Disadvantages of a credit card If not used responsibly, use of credit cards can have serious consequences. Credit card interest, fees, and penalties can be quite high if your bill is not paid in full and on time. It can also result in a negative impact on your credit history and credit score. In addition, credit cards enable impulse spending, which may lead to large amounts of debt. Identity theft is also a major concern, and recovery from identify theft can be a painful and drawn-out experience. Without proper management of credit card use, large amounts of debt can impact getting hired for a job, renting an apartment, or taking out a loan to purchase a home or a car. 1. List three disadvantages of using a credit card. Answers may include: 1. Interest, fees, and penalties 2. Enables impulse spending 3. Increase debt 4. Identity theft Five tips for using credit cards 1. Make timely payments. 2. Remain under your credit limit. 3. Avoid unnecessary fees. 4. Pay more than the minimum monthly payment. 5. Review your account regularly and beware of any changes. Making timely payments Late fees and interest penalties can be avoided by paying your credit card balance on time. Making timely payments is the single biggest key to maintaining a good credit record, which may also result in a higher credit score and lower interest rates. When qualifying for a credit card, contact your credit card company to arrange for the billing cycle that most favors your cash flow. If you change jobs and your pay cycle or frequency changes, discuss this with them, as they will most likely adjust your billing cycle to coincide with your pay cycle. 254

255 Credit Cards Slides 9, 10, 11 Vocabulary: - Over-the-Limit Fees fees charged for exceeding the dollar amount of purchases on your credit card. - Additional Fees other fees charged to your credit card that include cash advances, convenience checks, and transferred balances. You might also incur fees for using your credit card for online purchases to various online merchants. - Cash Advance using your credit card to receive additional cash at the time of purchasing something or using it at an ATM machine to withdraw cash. - Convenience Checks a check that is written to pay a merchant. When the merchant cashes the check, the credit card company bills you. Key Points: - Discuss the ways that you can avoid unnecessary fees: 1. Avoid cash advances. 2. Avoid convenience checks. - Pay more than the minimum payment when it s time to pay your bill. If possible, attempt to pay off your bill in full each month. - The less you owe on your card, the less interest you are charged and the quicker you can pay off your balance. - Review your statement every month to ensure that your terms and conditions haven t changed. - Issuers of credit cards are required by law to notify you of any changes prior to them occurring. - Interest rates are required to be listed on your statement. Teacher Tips: - Engagement Ask the students to give their opinion on why credit card companies sometimes earn more money from fees than from interest payments. - Check for Understanding Have the students complete the activity on the page in the Student Guide and check for accuracy. Teacher Reflection: 255

256 Credit Cards Remain under your credit limit If you exceed your credit card limit, the credit card company will charge a fee and increase your interest rate as a penalty. If you own a smart phone, many credit card companies offer apps that make it easy to check your balance frequently. This provides current information about your charges so as to avoid going over your credit limit. Keep in mind that it is common for hotels, rental cars, etc., to place a hold amount equivalent to more than the estimated amount of your purchase. For example, when reserving a car, the car rental agency may place a $500 hold on your card until you return the car and settle the transaction. This $500 counts towards your credit limit. Not knowing this could cause you to unknowingly exceed your limit. It is always good to ask in advance when making reservations what the hold amount will be. Avoid unnecessary fees Late payment and over-the-limit fees are not the only fees or penalties that credit card companies charge. Additional fees include cash advances, convenience checks, transferred balances, or having a payment returned. In addition, it is important to know that some companies charge a fee when you pay your bill by phone instead of mailing it or paying it online. Pay more than the minimum monthly payment You should pay as much as possible toward your total balance each month. If you pay the minimum monthly payment, the majority of the payment goes toward the interest with very little paying down the principal (the original amount owed). Paying greater than the minimum reduces the principal much faster and the total amount you repay. Remember, as your principal decreases, so do your interest charges. The lower your principal and interest charges, the faster you can pay off the balance. Review your account regularly and beware of changes Credit card companies can and do change the terms and conditions of your account. It is important to carefully read your monthly statement and to look for any changes to your account. Credit card companies are required by law to list your interest rate on the monthly statement, to disclose the fees on your agreement, and provide an explanation of what generates those fees. Changes to the agreement must be provided in writing on your monthly statement or in a new agreement prior to going into effect. These agreements and change notifications are usually printed in a very small font 256

257 Credit Cards Web Resources: All You Need to Know About Credit Cards Credit Card Benefits 257

258 Credit Cards and placed at the bottom or on the back of your statement. This is commonly referred to as the fine print. Don t let the de-emphasis of the words fool you! This is extremely significant information, and it is essential that you review your account to learn about the fees and/or penalties imposed by your credit card company. In addition, if you don t read your statement carefully, you won t know if your interest rate has increased or if new penalties are in place. Being aware of these changes allows you to adjust how you use your credit card and avoid these increases. Useful websites: All You Need to Know About Credit Cards - Center for Student Credit Card Education Inc. - Find information to answer the following questions at: 1. What is the Schumer Box? Answer: A regulation created by Sen. Charles E. Schumer under the 1988 Truth-in- Lending Act (TILA). It went into effect in 2000 and requires all credit card companies to present borrowers with key facts and figures about the lending agreement in a clear and concise manner, set out in a table. 2. What items must be listed in the Schumer Box? Answer: - Annual fee (if applicable) - Annual Percentage Rate (APR) for purchases - Other APRs (balance transfers, cash advances) - Grace period - Finance calculation method - Other transaction fees (such as balance transfers, cash advances, late payments, going over the agreed credit limit, etc.) Assignment: Find information to answer the following questions at: /default.htm# 1. What does APR stand for and what does it mean? Answer: Annual Percentage Rate the interest rate charged on your credit card 2. For what reasons will the APR go up and by how much might it increase? Answer: Balance Transfers, Cash Advances, Penalty The increase could go as high as 28.99% 3. When determining to open a credit card account, what should you consider in determining which card is the best offer? Answer: Lowest APR, Nno annual fee, late fees 258

259 Credit Cards Reading a credit card statement You can find information to answer the following questions at: fault.htm# 1. What part of the credit card statement will show how much you owe? Answer: Summary of Account Activity section 2. What part of the credit card statement will show late fees and interest charged? Answer: Summary of Account Activity section 3. Where will you find the New Balance that must be paid? Answer: Payment Information Section 4. What kind of information is given in the Late Payment Warning section? Answer: The late fee amount and the interest rate charged for paying late 5. On the credit card statement listed, what is the late fee that is charged if payment is not received on time? Answer: $ What will happen if you only make the minimum payment required? Answer: You will pay more in interest and it will take longer to pay off your balance 7. On the statement shown, how much can you save if you were to pay an extra $9 over the minimum payment? Answer: $ What transaction occurred on February 25 of the statement? Answer: A payment of $ was made 9. How much was charged for fees? Answer: $ How much were the Year-to-Date fees? Answer: $

260 Credit Cards 11. How long will it take to pay off a credit card balance given the following information: Balance APR Minimum Payment Interest Charged Length of Time to Pay Off $1, % $20 $ years $2, % $40 $1, years $4, % $80 $4, years $8, % $160 $12, years 12. What are five things you can do to improve a credit score? - Get copies of your credit report then make sure information is correct. - Pay your bills on time. - Understand how your credit score is determined. - Learn the legal steps you can take to improve your credit report. - Beware of credit-repair scams. 260

261 Lesson Component Description Purpose In the Home and Auto Insurance topic, the students gain a fundamental understanding of how to use appropriate and cost-effective insurance policies to protect their major assets such as home and auto. Learning Objectives 1. Examines what insurance is and how it works. 2. Explains what a deductible is. 3. Identifies what home and auto insurance policies cover. 4. Analyzes insurance savers for both home and auto. 5. Explores the basics of health insurance. Time Required 250 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the student follows along with the Student Guide. The guides are merely a framework for the teacher and the student. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Conduct an Internet search and come up with 3 quotes for home insurance and auto insurance. For each quote, specify how much the insurance will cost per month and what is included in the policy. 2. Research information about Medicare ( and determine what type of medical/hospital/surgical and major medical coverage Medicare provides, what the eligibility requirements are, what costs the patient must pay, and what conditions and services are excluded. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Insurance Quiz Key 1.T 2.T 3.F 4.F 5.T 6.B 7.D 8.D 9.A 10.C

262 Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 4. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 6. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 7. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 9. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 10. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 11. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (WHST 4) 12. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 13. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2).

263 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1). 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 6. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 7. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 8. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 9. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 10. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 11. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources The following sites allow you to check the financial stability and soundness of the insurance company: Consumers can rate homeowner insurance at: If you suspect insurance fraud, you can access information on what to do at: You can research insurance companies that have had complaints in your state at: Video Links Understanding the Importance of Auto Insurance: insurance-costs_lifestyle#.udxyzlrnbiu Home Insurance: Life Smart Applications 1. Research the cost of home and auto insurance 2. Discuss what your parents pay for home, auto, and health insurance

264 Name Date True or False Questions: The amount you pay for homeowner s insurance is based on the value of your home. The more your house is worth, the more you pay for your insurance. 2. The co-pay for a visit to a doctor is similar in nature to a deductible. 3. You are a 23 year old junior and a full-time student in college. You are no longer eligible to stay on your parent s health insurance policy. 4. Insurance is an added expense and is not necessary. 5. The higher the deductible, the lower the premium. Multiple Choice Questions: Which of the following is true about deductibles? a. They are unnecessary b. They are out-of-pocket expenses that are paid when you make a claim c. They relate only to house insurance d. None of the above 7. Which of the following are ways to save on auto insurance? a. Having a car with an alarm b. Having good grades in school c. None of the above d. a and b above 8. Which of the following are ways to save on homeowner s insurance? a. Shop around to get the best deal b. Go direct with an insurance provider c. Raising the amount of the deductible d. All of the above 9. What type of homeowner s insurance is necessary to protect you and your assets in case someone gets injured on your property? a. Liability b. PMI c. Escrow d. None of the above 10. What type of auto insurance coverage should you have in the event the other driver is at fault and does not have insurance? a. Comprehensive b. Liability c. Uninsured motorist d. Gap

265 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slides 2, 3 and 4 Vocabulary: - Insurance a purchased form of protection. - Premium a dollar amount that is periodically paid to an insurance company for personal protection. - Deductibles upfront costs that you pay each time you make a claim to receive benefits from your insurance company. Key Points: - Having insurance can protect you from unexpected events that could hurt you financially. The last thing you want is for someone to sue you and take your assets that you worked hard to accumulate. - Insurance companies profit from enrolling large numbers of people who pay monthly premiums; only a small percentage of those people ever file claims. - The higher the deductible, the less you pay in premiums; in contrast, the lower the deductible, the more you pay in premiums. Teacher Tips: - Engagement Ask the students if they know how much their car insurance is. - Check for Understanding Have the students brainstorm the reasons for buying insurance. Teacher Reflection:

266 Insurance Protecting Yourself from Financial Risks Life Smarts: 1. Research the cost of home and auto insurance. What is insurance? Life is full of unexpected events, from accidents to theft; natural disasters to fraud; and unemployment to death. Buying insurance is a way to protect your assets (property / belongings) from these unfortunate circumstances. Insurance is just a purchased form of protection. How does insurance work? Insurance companies enroll a large number of people who each pay a monthly premium (fee) to be a part of the group. The insurance company uses this pool of money to pay for eligible losses (known as claims) that are incurred by any member of the group. The premiums collected by the insurance companies are generally much greater than the losses they pay out; this is how they make money. Deductibles Deductibles are upfront, out of pocket costs that are paid each time you make a claim to receive benefits from your insurance company. Insurance policies vary from policy to policy and from company to company. One area they may differ is the deductible. In most cases, the higher the Nusenda Federal Credit Union. All rights reserved.

267 Slides 4 (Continued) and 5 Insurance Vocabulary: - Homeowner s Insurance an insurance that is mandatory if you have a mortgage. - Escrow an account that holds monies to pay recurring liabilities such as property taxes and homeowner s insurance. - Homeowner s policy an insurance policy that covers the land, structure, and personal property inside the home. - Liability part of an insurance policy that covers you if someone gets injured on your property. Key Points: - Continue to emphasize that you will need to make a choice between high deductible low monthly premiums vs. low deductible high monthly premiums. - Homeowner s insurance is mandatory if you have a mortgage. - You should always have liability insurance for your house in case someone gets hurt on your property. Teacher Tips: - Engagement Ask students if they know how much their parents pay on home or renter s insurance. - Check for Understanding Have students complete the activities in the Student Guide and check for accuracy and explanations. Resources: Teacher Reflection: 267

268 Insurance deductible, the lower the monthly premium. If you have two policies that offer the same coverage but one has a $500 deductible and the other has a $1,000 deductible, the higher deductible policy will cost less. The reason is that if you pay a higher deductible, the remaining amount that the insurance company has to pay on a claim is less. Additionally, anyone that has a $1,000 deductible and suffers an event that results in damages greater than $500 (but less than $1,000) will not make a claim. It wouldn t make sense to pay the $1,000 deductible when you can pay the damage yourself rather than going through the insurance company. Explain which insurance option below you would choose. Why? Option 1: Your deductible is $1,000 for a claim; and your premium is $200 per month. Option 2: Your deductible is $500 for a claim; and your premium is $250 per month. Answers will vary based on the amount of deductible they are willing to pay. This Web address contains detailed information about homeowner s insurance coverage and cost. Using the website above, list the categories you would choose to insure your home: Answers will vary: Structural Coverage, Individual Property Coverage, Home Warranty Protection, Flood Insurance 268

269 Slides 6-10 Insurance Vocabulary: - Personal Liability a component of Homeowner s Insurance that protects you for accidents that occur on your property. - PMI (Private Mortgage Insurance) extends the standard coverage to include damage due from earthquakes, floods, hurricanes, etc. PMI is mandatory unless you pay 20% or more toward the purchase price of a home. Key Points: - Most insurance policies will cover between 50% and 70% of household items. - Personal liability insurance protects you from accidents that occur on your property. Teacher Tips: - Engagement Ask the students to brainstorm all of the personal belongings in a house that they would want to insure. - Check for Understanding Have the students complete the activities in the Student Guide and check for accuracy and explanations. Teacher Reflection: 269

270 Insurance Homeowner s insurance If you have a mortgage, it is mandatory in most states to have Homeowner s Insurance. Homeowner s Insurance, like other insurance policies, includes deductibles. Escrow simply means an account that is created by a third party to hold, in trust, monies to guarantee the prompt payment of recurring liabilities like property taxes and homeowner s insurance. A homeowner s policy is based on the value of your home and covers the land, structure, and personal property inside the home. Liability is a component that covers you if someone gets injured on your property. Homeowner s insurance what it covers Homeowner s insurance provides coverage for loss or damage to personal belongings such as clothing, furniture, and some appliances. Most insurance companies will cover 50% to 70% of household items. Example: If you own $200,000 of personal belongings, your insurance will only cover up to $140,000 ($200,000 x 70%) Compute the personal coverage amounts below if insurance covers 50% and 70% of your personal belongings: 1. You own $100,000 in personal belongings Answer: Between $50,000 and $70, You own $125,000 in personal belongings Answer: Between $62,500 and $87, You own $175,000 in personal belongings Answer: Between $87,500 and $122,

271 Slides 9 and 10 (Continued), 11 and 12 Insurance Vocabulary: - Comprehensive part of an insurance policy that covers most types of direct and accidental damage not related to a collision. - Collision part of an insurance policy that covers damages related to an actual collision/accident. - Liability part of an insurance policy that is state mandated, and it covers you for injury or damage to others. - Uninsured Motorists coverage that protects you when an at fault party does not have insurance. - Gap Insurance an optional component of car insurance that pays the difference between the actual cash value of the vehicle and the current outstanding balance on your loan or lease. This insurance is usually smart to have when you purchase a new or leased car because it is not worth the price you purchased it for once you drive it off the lot due to depreciation. Key Points: - Shop around with various insurance companies to get the best prices. - Consider buying insurance directly from a provider, such as Geico or Progressive. - Consider changing the deductible based on your cash flow. - Consider combining all of your insurance policies with one insurance company to save money. - Auto insurance in New Mexico is mandatory. - Auto insurance is more expensive for teenagers. Teacher Tips: - Engagement Ask the students to share personal stories they have regarding car accidents and the need for having insurance. - Check for Understanding Have the students complete the activity in the Student Guide and check for accuracy. Large Group Discussion: - Go around the room and ask students who pay their car insurance and if they know how much it is. Ask each student if they can afford paying for it themselves. Teacher Reflection: 271

272 Insurance Personal liability is a component of homeowner s insurance that protects you for accidents that occur on your property. This coverage includes injuries caused by your pets. Most policies start at $100,000, but many experts recommend having $300,000 coverage at a minimum. If you purchase a home and put less than 20% down, you will hear the term PMI. PMI stands for private mortgage insurance, and it extends standard coverage to include damage from earthquakes, floods, hurricanes, etc. PMI is mandatory unless you pay 20% or more towards the purchase price of a home. 1. If you purchase a home for $185,000, how much would your down payment be if you don t want to pay the PMI? Answer: $37,000 (185,000 x.20) Homeowner s insurance savers It is up to you to find the best rates, and the only way to do that is to shop around and obtain several quotes for home insurance. Compare the coverage and the premiums to see which offers the best value. You can also save money by getting insurance direct from a provider, not through an agent. Some additional ways to save on insurance are by combining all of your policies with one carrier. If you cover your home, auto, and life insurance with a single carrier, they will usually provide multiple policy discounts. Avoid claims by paying for the smaller damages out of your own pocket, and you will save in the long run. In addition, the frequency you pay your premiums can affect the cost. Paying monthly is costlier than if you pay every six months or once a year. Auto insurance There are important things to know about automobile insurance: (1) It is mandatory in most, if not all, states; (2) It has a deductible which varies from policy to policy; and (3) It includes three main components of coverage: comprehensive, collision, and liability. 272

273 Slides Insurance Vocabulary: - Personal Injury the portion of the policy that pays for medical and funeral expenses resulting from injuries sustained in an accident (no matter who is at fault). - Medical Payments coverage that provides protection for passengers and family members in your vehicle at the time of an accident. It also covers you when you are in another person s vehicle or if you are hit by a car while walking. - Uninsured and Underinsured Motorists covers bodily injuries to the policyholder when the injury results from uninsured, underinsured, or hit-and-run motorists. - Auto Rental coverage reimburses you for the cost of renting a car while yours is in the shop. - Gap Insurance an optional component of car insurance that pays the difference between the actual cash value of the vehicle and the current outstanding balance on your loan or lease. This insurance is usually smart to have when you purchase a new or leased car because it is not worth the price you purchased it for once you drive it off the lot due to depreciation. Key Points: - The value of auto insurance is contingent on many factors such as value of car, distance to work and school, age, gender, marital status. - Emphasize to always ask for discounts for good grades, multiple cars insured, and combining policies. Teacher Tips: - Engagement Ask the students why they think insurance is higher for male teenagers than female teenagers. - Check for Understanding Have the students complete the activity in the Student Guide and check for accuracy. Teacher Reflection: 273

274 Insurance Comprehensive covers essentially most types of direct and accidental damage not related to a collision. Collision covers damages related to an actual collision / accident. Liability is the component that is state-mandated, and it covers you for injury or damage to others. Additional components of automobile insurance include uninsured motorist coverage, which protects you when an at fault party does not have insurance. Gap insurance is an optional component of car insurance. In the early years of a loan, many people owe more on a vehicle than it is worth (due to depreciation). Gap insurance pays the difference between the actual cash value (ACV) of the vehicle and the current outstanding balance on your loan or lease. The cost of this insurance is calculated per individual. The factors that influence the cost include age, gender, and grades, as well as the specific vehicle being insured. Using the Internet, research what the average price might be to insure a teenager with auto insurance for one year. 1. How much do your parents pay for your automobile insurance? Answers should vary between $500 and $2,000 per year. Be ready to discuss your answers. Auto insurance what it covers Who is covered under an automobile insurance policy? Most policies cover all relatives living in the home of the policyholder (and any additional licensed drivers listed on the policy). This coverage includes bodily injury and physical damage to your vehicle. It also covers physical damage to the other person s car. 274

275 Insurance Common types of coverage In addition to the three main components of automobile insurance, there are many subcomponents. Personal injury is the portion of the policy that pays for medical and funeral expenses resulting from injuries sustained in an accident (no matter who is at fault). Medical Payments coverage provides protection for passengers and family members in your vehicle at the time of an accident. It also covers you when you are in another person s vehicle or if you are hit by a car while walking. Uninsured and underinsured motorist coverage covers bodily injuries to the policyholder when the injury results from uninsured, underinsured, or hit-and-run motorists. Auto rental coverage reimburses you for the cost of renting a car while yours is in the shop. Emergency roadside assistance covers the unexpected cost of towing and other basic roadside-assistance expenses. Auto insurance rate factors Insurance rates are complex and determined by many factors. Insurance companies gather this information in order to build a profile to help them determine habits, tendencies, and potential risks. Past driving history is one of the primary indicators used by insurance companies to determine rates. The value of the vehicle is also a factor. (It costs much more to insure a Ferrari Testarossa than it does to insure a Ford Focus). Where you live also affects your rate; some areas have conditions that are prone to produce a higher percentage of accidents than others. How far you commute to work and school is another factor in determining your rates, as is age, gender, marital status, credit history, and grades (if you are a student). The specific policy and coverage you select are also factored into your rate. 1. Why do you think insurance companies might give you a discount for having good grades? Answers will vary. 2. Why do you think insurance companies offer a discount for being married? Answers will vary. 275

276 Slides (Continued) 17 Insurance Key Points: - Keep a clean driving record to avoid paying more for insurance. - Driving less can decrease the price of your insurance. - Where you choose to live can have an impact on the price you pay for auto insurance. Teacher Tips: - Engagement Ask the students who drive if they get a discount for having good grades. Ask the students who they have their insurance through. - Check for Understanding Have the students complete the activity in the Student Guide and check for accuracy. Teacher Reflection: 276

277 Insurance Auto insurance savers Insurance companies quote their standard rates based on the information you have provided. You have two choices: You can pay what they quote, or you can ask your agent how to qualify for discounts. Discounts include multiple car and driver discounts and good grade discounts, among others. Keeping a clean driving record is the most important thing you can do to get the best rates. Drive defensively like they teach at driving school. Some insurance companies give a discount after completion of a defensive driving course. Rates vary greatly, so it is important to obtain quotes from several companies before making a decision. If you have the option to take mass transit (a bus or train) or to walk or ride a bike to work or school, this will greatly reduce the number of miles driven each week. This, in turn, also reduces the cost of car insurance. The type of car you own affects your rates. It is important to do your research and factor the cost of insurance prior to purchasing a vehicle. Get quotes with low, mid, and high deductibles. Compare the premiums to see which might be the best option for you. A good credit rating can lead to better rates, so keep your financial situation in good standing! Life Smarts: Read the example on the next page. 1. What option would you choose? 2. Why? 277

278 Slides Insurance Vocabulary: - Major Medical/Hospital/Preventive Insurance insurance policy that covers your basic medical needs from check-ups and doctor visits to emergency room, hospital stays, surgery, etc. - Dental Insurance covers basic and advanced dentist services (orthodontics might not be covered). - Vision Insurance covers annual visits to the eye doctor as well as partial benefits for eyeglasses (frames and lenses). Contact lenses might not be covered. - Traditional plans allow you the freedom to use any doctor and any medical facility/institution that you want. - HMO plans are controlled by large organizations that contract with medical providers that agree to specific cost models for their services. - PPO plans allow you to see in-network medical providers and receive benefits but they also allow you to see out-of-network medical providers and still receive benefits at a reduced amount. Key Points: - Auto insurance discounts are usually given for military service, getting good grades, or working for certain companies. - The average hospital stay in the United States cost approximately $15,734. Teacher Tips: - Engagement Ask the students why they think it might be important to have health insurance coverage. - Check for Understanding Have the students complete the activity in the Student Guide and check for accuracy. Teacher Reflection: 278

279 Insurance Example: Joe has a 2007 Toyota RAV4, a car that depreciates slowly compared to other similar models. Joe narrowed his insurance options and has to make one final decision. Option 1: $1,000 deductible = $130/month Option 2: $500 deductible = $170/month 3. Which of the options should he choose? Why? Answer: Option #1 would save him $40/month over option #2, or about $500/year ($2,500 over next five years). However, if he were to have even one claim a year, he would lose his entire savings for that year. Auto insurance savers continued Where you live can also impact your insurance rates. If you live in a high-crime neighborhood, you may be charged higher rates. Make realistic decisions when selecting coverage for your vehicle; don t over insure! Installing alarms and other anti-theft devices, such as LoJack and others, can reduce the cost of your insurance. Example: The value of your car is $1, and you pay $ per year for collision. Is it worth it to insure your car with collision coverage? Would liability be a better option? Answers will vary. Other auto insurance savers Insurance companies, like many other companies, offer discounts for military service, getting good grades, or working for certain companies. The only way to get these discounts is to ask. 279

280 Insurance Why do I need health insurance? According the website Becker s Hospital Review, United States hospital costs outpace other countries threefold. In 2011 the average hospital stay in the United States cost $15,734; in Germany at $5,004; in Chile at $4,948. Types of health insurance Major Medical/Hospitalization/Preventative insurance covers basic medical needs from check-ups and doctor visits to emergency room visits, hospital stays, surgery, etc. Dental insurance covers basic and advanced dentist services (orthodontics may or may not be covered). Vision insurance covers annual visits to the eye doctor, as well as partial benefits for eyeglasses (frames and lenses). Contact lenses may or may not be covered. Types of health insurance plans Major Medical/Hospitalization/Preventative is offered in a variety of plans/styles. The three most common are Traditional, HMO (Health Maintenance Organization) & PPO (Preferred Provider Organization). Traditional plans allow you the freedom to see any doctor and any medical facility/institution that you want. There is a pre-determined deductible usually $100, $250, $500, or $1,000. No benefits are received until your out of pocket deductible is satisfied. After you meet your deductible, plan benefits begin and you pay a pre-determined percentage of all costs thereafter. Common percentages range from 60 to 80%. You are responsible for paying the remaining percentage of the bill. HMO plans are controlled by large organizations that contract with medical providers that agree to specific cost models for their services. Since the cost of every service is known in advance, the plan provides you with a list of co-pays (the amount that you are responsible for paying) for the services offered. This is similar to a deductible, but rather than paying the entire amount before benefits are received, you pay a small portion each time a service is received. With this style of plan, you are limited to seeing only the doctors and medical facilities/institutions that are members of your HMO. PPO plans are much like HMO plans but with more flexibility. PPO plans allow you to see innetwork medical providers and receive benefits but they also allow you to see out-of- network medical providers and still receive benefits at a reduced amount. In a PPO plan, you do not have to have a primary care physician, nor do you need referrals to see specialists. 280

281 Slides Insurance Vocabulary: - Co-pay similar to a deductible in that you pay a minimum amount for medical services rendered. This amount will vary by health plan and type of medical service provided. It usually ranges between $5 and $500. Key Points: - You can stay on your parents employer sponsored health insurance plan until the age 18 or 26 if you are a full-time student. - Organizations that offer health insurance in New Mexico include but not limited to Blue Cross Blue Shield, Humana, Lovelace Health Plan, Presbyterian Health Plan, and United Health Care - Health insurance premiums are usually deducted from your paycheck. Teacher Tips: - Engagement Ask the students to share with the class amounts that they recall their parents paying for medical attention (i.e., doctor visits, emergency room visits, and urgent care visits). - Check for Understanding Go around the class and ask students to volunteer medical situations that each has encountered and what they think the total cost of the services provided were. Teacher Reflection: 281

282 Insurance Who provides health insurance? Most of you probably have insurance provided by your parents. Parents can provide insurance through their employers for their children up to the age of 18, and up to the age of 26 if the child is a full-time student. If you are employed you may be eligible to enroll in your employer s group plan. Military provides insurance for all of its members. Some schools offer insurance programs. Government organizations also provide insurance coverage through Medicare/Medicaid, state insurance pools. Private for profit organizations offer insurance programs, including Blue Cross Blue Shield, Humana, Lovelace Health Plan, Presbyterian Health Plan, and United Health Care, just to name a few. Employer-based Health Insurance Employee Yearly Cost (2011) NM US Individual Coverage $1,271 $1090 Family Coverage $4,724 $3,962 Individual Based Health Insurance Individual Coverage N/A $2,580 Hospital Stay Cost Per Day $2,058 $1,910 Data obtained from: How does health insurance work? Health insurance works in much the same way as other insurance programs. You enroll in a plan, and once you are accepted you begin paying a premium (monthly fee) for the coverage you select. The two most basic programs are Individual for single people and Family for married couples with or without children. Depending on the type of insurance you are enrolled in, you will either pay a deductible (a predetermined out of pocket amount that you are responsible for before benefits begin) or a co-pay (a predetermined portion of the cost of the service you are receiving) every time you have a covered service. Co-pays vary depending on the service you are receiving (i.e., doctor visit, urgent care visit, emergency room visit, hospital stay or inpatient/outpatient surgery). Health insurance pays for the costs above the co-pay, or a predetermined percentage of the cost of service. Health insurance plans usually cover a portion of the cost of prescribed medications. Tip: Coverage varies greatly for generic vs. non-generic equivalents. You can enjoy significant savings by requesting generic equivalents. 282

283 Slides Insurance Vocabulary: - Disability Insurance insurance paid to you due to a long-term injury or sickness that prevents you from working. - Life Insurance an insurance policy that pays money to a beneficiary due to a death. - Beneficiary insurance money paid to someone that you list on a life insurance policy. Key Points: - There are various ways to get health insurance for children if you can t afford it. - Disability insurance is good to have because you never know when you might get sick or injured and not able to work due to these circumstances. - Life insurance can help your family maintain their standard of living in case of your death. - Insurance should be a necessity to protect your wealth. - Take advantage of insurance that is offered to you by an employer. - Consider changing your deductible to save on premiums. - Try not to over-insure your assets or yourself. - Always shop around for insurance to get the insurance that is the best fit for you and your family. - Always ask for discounts when shopping for insurance. - Review your insurance policies periodically to ensure their accuracy and appropriateness to your needs. - Another option for obtaining health insurance is to apply under the Affordable Care Act; review your options at or Teacher Tips: - Engagement Ask the students if they know anyone that receives disability insurance. If they don t know anyone, ask them to brainstorm situations that they think could lead to collecting disability insurance. - Check for Understanding Solicit the class regarding ways to protect their wealth and save on insurance costs. Teacher Reflection: 283

284 Insurance Health insurance for children Every state provides low-cost or free insurance for children in low-income households. To obtain additional information about these state programs, call the U.S. Department of Health and Human Services at 877-kidsNow ( ). Disability insurance Disability insurance will help you pay for your living expenses if you become injured or sick and unable to work for a long period of time. Some employers offer this type of insurance. It s a good idea to purchase this type of protection even if you have to pay for part of the premium. Statistics show that people have a higher risk of becoming disabled before age 65 than dying. Life insurance As you begin to develop wealth in your life, your net worth begins to increase. Life insurance is a way to help protect your family in the event of your death. A life insurance policy will pay money to the person or persons you choose, known as a beneficiary. As with most insurance policies, the type and amount of life insurance depends on your circumstances. Some employers might offer low-cost term insurance that can offer protection for young families. Tips for protecting your wealth and saving on insurance As discussed in this topic, insurance is important and a necessity to have in life. Here are a few reminders to consider to help you protect your wealth. Take advantage of insurance through your employer if it is offered. Consider changing your deductible periodically to reflect what you can afford. Don t over insure your assets or yourself. Always shop around and get at least between three and five quotes. Always ask for discounts that may be available (good driving record, good grades, safety equipment, and multiple policies with the same provider etc.). Lastly, review your insurance coverage periodically to ensure that it is appropriate as changes occur in your life. 284

285 Insurance Assignment: Conduct an Internet search and write down three quotes for both home insurance and auto insurance. For each quote, specify how much the insurance will cost per month and what is included in the policy. 285

286 Lesson Component Description Purpose In the buying a car topic, the students gain a fundamental understanding of purchasing and the cost of owning a car. Learning Objectives 1. Explains the cost of owning a car. 2. Evaluates methods of purchasing a car. 3. Determines if owning a car is affordable. Time Required 250 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework for the teacher and the student. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Research 3 different types of cars that you might be interested in purchasing. Provide the Assessment following information: Make and model of car, MPG, cost of maintaining (use the tables in this section for this information), reference the sites you used to gather your information. Quiz 10 questions (5 True/False; 5 Multiple Choice) Buying a Car Quiz Key 1.T 2.T 3.T 4.T 5.F 6.D 7.D 8.A 9.C 10.D Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3).

287 4. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). 5. Recognize situations in which one quantity changes at a constant rate per unit interval relative to another (F-LE). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2).

288 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain-specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources identifies fuel-efficiency and clean running engines compares miles per gallon ratings, hybrids, electric vehicles, alternative fuels, and tax incentives information calculates annual fuel estimates provides vehicle performance, service, and safety information provides vehicle performance, service, and safety information provides vehicle performance, service, and safety information provides vehicle performance, service, and safety information provides manufacturer rebate information provides manufacturer rebate information makes available paperwork you need to register a vehicle checks prices of similar models checks prices of similar models lists VINs of its crash-test vehicles and will let you search online database of manufacturer service bulletins sells information on the history of vehicles sells information on the history of vehicles provides information on safety defects, recalls and lemons and service bulletins. provides information on leases and current guides provides information on leases and current deals Video Links Buying A Car Get Smarter About Money How To Buy a Used Car:

289 Name Date True or False Questions: Most car loans need to be paid back within 3-5 years (36-60 months). 2. The MPG should not be a consideration when purchasing a car. 3. You should always consider purchasing uninsured motorist insurance if you drive. 4. You can save thousands of dollars by purchasing a used car instead of new car. 5. The amount you can afford should not be a consideration when purchasing a car. Multiple Choice Questions: Which of the following is a huge expense of owning a car? a. Gas b. Insurance c. Financing d. All of the above 7. Which of the following can save you money on car insurance? a. Driving fewer miles b. Being a teenager c. Having good grades in school d. a and c 8. When you take out a loan to purchase a car, you are: a. Paying more for than the car is worth because you have to pay interest b. Paying less than the car is worth because you pay it off over several years c. Both a and b d. None of the above 9. The average cost of maintaining a vehicle on a yearly basis varies between: a. $5 and $6 per mile b. $1 and $2 per mile c and 63.3 cents per mile d. None of the above 10. Which of the following should be considered as the cost of owning a car? a. Maintenance b. Loan payment c. Insurance d. All of the above

290 Sequence: - Teaching Guide - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide(s) 2 4 Vocabulary: - MPG (Miles per Gallon) A ratio to determine the fuel efficiency of a vehicle. - Determined by dividing the miles driven by the number of gallons of fuel consumed. Key Points: - Emphasize to the students that owning a car requires much more than just the cost of the vehicle. Insurance, gas, and maintenance must all be factored in to get a true cost of vehicle ownership. - Most car loans need to be paid back within 3 to 6 years. Teacher Tips: - Engagement Ask each students what their dream car is and why. - Check for Understanding Have students complete the MPG activity in the Student Guide and check for accuracy. Large Group Discussion: - Ask the students who have owned a vehicle to discuss any unexpected costs they encountered after getting their car (e.g., unexpected repairs, insurance increase after a citation). Teacher Reflection:

291 Buying a Car Getting Around Town Life Smarts: 1. Determine the affordability of purchasing and owning a vehicle. Costs of owning a car There are many factors to consider when owning a car. Gas prices take a huge chunk of a driver s budget on a weekly basis. According to AAA, the average driver spends about $8,776 per year (based on 15,000 miles of annual driving). Insurance is another huge expense of owning a car. To purchase a car, you will probably need to get a loan. Most car loans last three to six years, and if you miss your monthly payments, you run the risk of having your car repossessed. Regular maintenance is also imperative when owning a car. Items such as oil changes, tire rotations, and tune-ups all add to the longevity of your vehicle; thus, it s a good idea to have these things done on a routine basis. Finally, you might consider spending money on safety features; items like car alarms, however, add to the cost of the vehicle. Assuming you own a car, indicate how much you might spend on each of the following items per month. Answers will vary. Gas Maintenance Loan payment Insurance Safety Nusenda Federal Credit Union. All rights reserved.

292 Buying a Car Gas cost comparisons As mentioned above, gas is a huge expense of operating a vehicle. High gas prices force many people to live close to work and school to save on gas costs. Living near a grocery store and with relatives might also be considerations. Choosing the right car to fit your needs is very important. When choosing a vehicle, consider how many miles you will be driving and the expected miles per gallon (MPG). To compute the MPG, determine how many gallons are required to fill up at the gas pump. Next, track the number of miles driven with the number of gallons of gas used. For example, if your car takes 15 gallons of gas and you drive for 350 miles until your tank is empty, your MPG will be computed as follows: 350 miles/15 gallons = (MPG) The higher the MPG, the farther you can drive without having to fill up your tank. In essence, you will be able to save money throughout the lifetime of owning the car by putting gas in less often. In some cases, you may be able to save thousands of dollars over several years. The money you save in gas costs can be put toward other investments to help build wealth. Compute your Miles Per Gallon (MPG): - You drive to work and school five days per week. - You fill up your tank with nine gallons of gas and can drive it approximately 380 miles before having to re-fuel. Answer: 380 / 9 = MPG 292

293 Slides 5-6 Buying a Car Vocabulary: - Deductible The out of pocket amount that you are responsible for paying before benefits for any claim are provided. - Bodily Injury Insurance piece that covers injuries to you and/or your passengers as a result of an accident. - Property Damage Insurance piece that covers property that is damaged or lost as a result of an accident. - Liability Insurance piece that covers another person s vehicle as a result of an accident where you are at fault - Medical Payments Insurance piece that covers passengers and family members in your vehicle at the time of an accident. It also covers you when you are in another person s vehicle or if you are hit by a car while walking. - Uninsured Motorist Insurance piece that covers bodily injuries to the policyholder when the injury results from uninsured, underinsured, or hit-and-run motorist. Key Points: - It is mandatory for drivers to have insurance in the state of New Mexico. - Emphasize to the students that insurance plans vary greatly depending on deductibles, coverage levels, etc. It is important to consider the impact and repercussions of low vs. high deductibles. - Shop around with various insurance companies to try and get the best rate. - When you get a loan, you will have to pay interest for borrowing the money. - This means that you will pay more than it s worth, because you will be paying interest in addition to the principal. Teacher Tips: - Engagement Ask students how much they or their parents pay for a loan on a car. - Check for Understanding Ask students to explain what kind of loan they would prefer and why among 3-, 5-, 6-, or 7-year loans. Determine if their reasoning is accurate. Teacher Reflection: 293

294 Buying a Car Cost of insurance Another expense of owning a car is car insurance. Like other types of insurance, the process of obtaining car insurance can be complicated because of the different types of coverage. Some key features to consider when purchasing insurance is the amount of the deductible and the type of coverage. Keep in mind that the higher the deductible, the lower the monthly payment will be. As for types of coverage, the basic coverage needed includes: Bodily Injury, Property Damage, Liability, Medical Payments, and Uninsured Motorist. Bear in mind that in the state of New Mexico, it is mandatory to have car liability insurance. Call and ask questions of several insurance agents; compare policies to obtain quotes. This will ensure that you receive the best terms and rates for you. Insurance rates for drivers under 25 (particularly males) will be higher, so make sure to ask for possible discounts. Refer to the Homeowner s and Auto Insurance unit for additional information. Car payment examples Most people who purchase a car do not have enough money to purchase it without obtaining a loan from a credit union, bank, or other source. Most car loans range between three to five years. This means that if you are approved for a five-year loan, you will make 60 payments computed as follows: (12 months per year x 5 years = 60 months) This is quite a burden, so it is important to have continuous income in order to make the monthly payment. Keep in mind that by taking out a loan to purchase the car, you will also have to pay interest on the loan. Thus, you will be paying more than the price of the car (principal plus interest). Purchase Price of Car $10, $10, $10, Loan Term in Months Interest Rate 2% 2% 2% Monthly Payment $ $ $ Total Amount Paid $10, $10, $10,

295 Slide(s) 6 (Continued) 7, and 8 Buying a Car Key Points: - Review the table in the Student Guide that lists three cars and the monthly payment and the amount paid over 60 months. Determine if students understand the table. - Based on information from AAA, you can determine the average amount that it costs to maintain a vehicle on a yearly basis. - According to AAA, it costs between 45.1 cents and 63.3 cents per mile to maintain a vehicle during the year. Teacher Tips: - Engagement Ask students to review the table put out by AAA and compare the costs of maintaining various types of vehicles on a yearly basis - Check for Understanding Solicit students with questions that they might have regarding the cost of maintaining a vehicle. Teacher Reflection: 295

296 Buying a Car As you can see from the table, the longer your loan is, the lower your monthly payment, but, the more interest you end up paying over the length of the loan. In the example, you end paying $240 ($10, $10,656.00) more in interest for a 72-month loan vs. a 48-month loan. Thus, when obtaining a loan to purchase a vehicle, you must decide if you want to pay less interest or make a larger monthly payment. Average cost of maintaining a vehicle To maintain a vehicle, an owner must pay for fuel, repair, maintenance, and tires. Additional costs include insurance, license and registration fees, taxes, and finance charges. All of these costs must be paid over the life of the vehicle. According to AAA, the average cost of maintaining a vehicle varies from 45.1 cents to 63.3 cents per mile. For example, if you own a minivan, AAA estimates that on average, it will cost 63.3 cents per mile to maintain. If you drove the minivan 15,000 miles, it will cost ($.633 x 15,000 miles) or $9, to maintain on a yearly basis. The table below provides estimated costs per mile of maintaining certain types of vehicles. Data obtained from: AAA s Your Driving Costs study analyzes the cost to own and operate a vehicle in the U.S. Ownership cost factors include: the cost of insurance, license and registration fees, taxes, depreciation, and finance charges. Operational costs include: fuel, maintenance, and tires. Based on driving 15,000 miles a year Small Sedan Medium Sedan Large Sedan Sedan Average 4WD SUV Minivan Cost per mile 45.1 cents 57.3 cents 73.2 cents 58.5 cents 74.9 cents 63.3 cents Cost per year $6, $8, $10, $8, $11, $9,

297 Slide(s) 9-14 Buying a Car Key Points: - Always negotiate the sticker price on a car. Normally, dealerships will come down on the price if they want your business. - Once you drive a car off the lot, it will decrease or depreciate in value. - You can find many used cars that are fairly new that are thousands of dollars less than a new car. - Ask family and friends first if they know of anyone selling a car. You might be able to get a great deal. - When looking for a car, determine what kind of car you want and whether you can afford it. - Always do a complete check on the vehicle before you decide to purchase it. - Look for leaks, connections, tires, wear and tear, electrical system, braking, weird noises, steering control, transmission, wipers, air conditioner, heater, and controls on the panel. - Write down the Vehicle Identification Number (VIN) located on the dashboard to research the vehicle on the Internet. - Check with your credit union or financial institution to determine where you can get the best loan. Teacher Tips: - Engagement Ask students to share stories of where they got their car or where their parents got the car. - Check for Understanding Have students write on the board things to consider when buying a car. Teacher Reflection: 297

298 Buying a Car Should you buy a new or used car? There are several decisions to make before buying a car. Should you buy new or used? First, never pay the sticker price for a new car. Most car dealerships are open to negotiation in order to get your business. Remember, you can always tell them you are willing to go elsewhere to find a better price. Keep in mind when purchasing a new car that it decreases in value immediately upon leaving the lot. For example, a new car purchased for $21,000 will normally decrease in value anywhere from $1,000 to $5,000. If you were to sell the car even a short time later, it would be worth that much less than what you originally paid. You can save lots of money by purchasing a used car. There are many places to find vehicles with less than 12,000 miles that are very close to being new. Do your research, and save yourself thousands of dollars. Where to find used cars When looking for a used car, ask family or friends first. They might be willing to sell their car, and you might get an outstanding deal. You can usually find cars for sale around town. Look in the newspaper, dealership websites, and message boards. Another good source is autotrader.com. Like anything else, taking your time and doing your homework can lead to the purchase of a car that meets your needs while saving money. Considerations when buying a car There are two important items to consider when buying a car. First, what kind of car do you want; and secondly, can you afford it? The fancier the car, the more you will pay. Once you determine what kind of car to purchase and you find one you can afford, make sure to inspect the vehicle, preferably with a mechanic. Check under the hood for leaks and connections and underneath the car for rust and/or other possible damage. Check for tire wear and the body of the car for possible repairs. Of course, you should test the lights and electrical devices. Start the engine and check for smoke out of the tail pipe. Write down the Vehicle Identification Number (VIN) located on the dashboard to research the vehicle on the Internet. Test drive the vehicle and check for odd noises, steering control, braking, operation of the transmission, windshield operation, air conditioner, heater, and all of the controls on the panel. 298

299 Slide 15 Buying a Car Key Points: - If you have access to the Internet, have students conduct an Internet search of the sites listed in the Student Guide. Teacher Tips: - Engagement If you have access to the Internet, have students search the Internet sites listed in the Student Guide. - Check for Understanding Have students share with the rest of the class what kind of information they found on the sites they surfed. 299

300 Buying a Car It is also advisable to set your priorities before looking for a car. Check with your credit union or bank for financing the loan. What interest rate will they charge? Will they lend you the money? Always attempt to negotiate the price. If an owner or dealership wants the sale, they may consider lowering the price. It never hurts to attempt to get a better deal. Resources to help your decision-making when buying a car Government fuel economy web pages is a green vehicle guide that identifies vehicles that are fuel-efficient and have clean running engines. compares the miles-per-gallon ratings of different vehicle models manufactured since the mid-1980s. calculates annual fuel estimates. Life Smarts: Determine the affordability of purchasing and owning a vehicle. Assume you have worked at the same job since graduating high school two years ago. You work approximately 25 hours per week and make $12.50 per hour. You take three weeks off during the year for vacation, and your take home-pay is approximately 80% of your gross wages. 1. What are your gross wages for the entire year? Answer: (25 hours x $12.50 x 49 weeks) = $15, What will your net wages (take home pay) be for the year? Answer: ($15, x.80) = $12,

301 Buying a Car You decide you want to buy a car and have approximately $1,500 in savings. You meet with a loan officer at your financial institution to determine if you qualify to purchase a car. Based on the information provided by you about your job, salary, and savings account balance, the loan officer concludes you are eligible for a $22,000 loan at 3.2% for five years. Using the recommended websites, find a car that is equal to or less than $22, Determine how much it will cost to purchase and maintain the vehicle of your choice following the steps below: Answers will vary. 1. What is the make and model of the car you chose to buy? 2. What is the MGP for this vehicle? 3. What is the monthly payment for this car? 4. How much will you pay (in total) over the five year period? Hint: Multiply the monthly payment by 60 months) 5. Based on the chart in Sections 7 and 8, determine the cost to maintain this vehicle on an annual basis? 6. Can you afford to purchase this vehicle? Explain why or why not. 301

302 Lesson Component Description Purpose In the buying a home topic, the students gain a fundamental understanding of purchasing a home. Learning Objectives 1. Understands that buying a home could be the biggest investment and purchase in one s life. 2. Explains the process of purchasing a home. 3. Identifies key features to consider when purchasing a home. 4. Evaluates the costs of owning a home. 5. Computes the interest for a home loan. 6. Learns the various method of paying on home loans and ways to save. Time Required 300 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the student follows along with the Student Guide. The guides are merely a framework for the teacher and the student. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students conduct an Internet search and identify three homes that they would like to purchase if they had the resources. Have the students compute or develop the following for each home: a. Monthly payment b. Amortization schedule c. Total interest paid over the life of the loan d. Total amount paid over the life of the loan e. Savings if paid biweekly instead of monthly Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Buying a Home Quiz Key 1.T 2.F 3.T 4.F 5.T 6.A 7.D 8.C 9.D 10.B

303 Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 4. Interpret expressions that represent a quantity in terms of its context (A-SSE1). 5. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). 6. Recognize situations in which one quantity changes at a constant rate per unit interval relative to another (F-LE). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 3. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 4. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 5. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 6. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 7. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 8. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 3. Integrate and evaluate information presented in diverse media and formats, including visually, quantitatively, and orally (CCR Speaking and Listening 2). 4. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 5. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1).

304 6. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 7. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Homes for sale Biweekly vs. Monthly Mortgage Calculator: Video Links Home Buying Tips: Biweekly Payments: Life Smart Applications 1. Determines the costs of owning a home. 2. Understands amortization and methods for paying off a home loan early. 3. Researches the cost of homes.

305 Name Date True or False Questions: You decide to borrow money to purchase a home. More than likely, the length of your loan will be for 30 years. 2. You find your dream home and want to purchase it immediately. For this reason, you should not have it appraised and pay whatever the seller is asking for it. 3. FHA and the VA are organizations that help people obtain loans to purchase a home. 4. You ve been looking for a home to buy. The price you can afford is $150,000. You find one you really like for $250,000. The smart thing to do is buy it now so that no one else makes on offer on it. 5. An amortization schedule breaks down the amount of interest and principal paid during the course of a loan. Multiple Choice Questions: Which of the following methods can save you thousands of dollars when paying on a mortgage loan? a. Biweekly payments b. Monthly payments c. a and b d. None of the above 7. Which of the following is included in your monthly mortgage payment? a. Property taxes b. Home insurance c. Interest d. All of the above 8. The amount you end up paying for a house usually ends up being: a. About the same as the original price of the home b. Less than the original price of the home c. More than the original price of the home d. None of the above 9. When buying a home, you should consider which of the following: a. Age of the home b. Square footage of the home c. Number of bathrooms in the home d. All of the above 10. The last step in obtaining keys to the home you are purchasing is: a. Meeting the seller at a restaurant to obtain the keys b. Going to the closing at a title company and signing all of the paperwork c. Getting an appraisal d. None of the above

306 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Vocabulary: - Agent a person who acts as an intermediary ( middleman ) between sellers and buyers of real estate (homes or commercial buildings) or real property (land). - Appraisal the practice of determining the value of real property. - Comps, or Comparables refers to properties with similar characteristics; for example, homes approximately the same size and price to a potential seller s home. - Title Legal Title the actual ownership of the property. - Escrow Real Estate Escrow refers to money held by a third-party on behalf of an intermediary ( middleman ) between sellers and buyers. - HOA Homeowners Association provides people with shared values, an opportunity to enforce regulations within their neighborhood. - Amortization refers to the process of paying off a debt (often from a loan or mortgage) over time through regular payments. Key Points: - Purchasing a home might be the biggest investment purchase of your life. - Key terms are important to know when purchasing a home. - A commonality of all millionaires is owning a home. Teacher Tips: - Engagement Ask the students how many want to own a home rather than renting a place to live. Why? - Check for Understanding Determine if the students understand the pluses to owning a home rather than renting from the answers above. Teacher Reflection:

307 Buying a Home An Investment to Live In Life Smarts: 1. Determine costs of owning a home. 2. Understand amortization and methods for paying off a home loan early. One of the most important money decisions to you ll make relates to the choice to own a home. Home ownership has several important advantages for the smart money investor. In this module, you will learn the process of purchasing and selling a home or real property. Each important step in this process will be discussed in detail so you will be confident when making this vital money management decision. Key terms Agent a real estate agent is a person who acts as an intermediary ( middleman ) between sellers and buyers of real estate (homes or commercial buildings) or real property (land). The agent attempts to find people who wish to sell and buy. HOA a Homeowners Association (HOA) provides people with shared values, an opportunity to enforce regulations within their neighborhood. An HOA s rules may surpass city codes (rules). For example, the Homeowners Association s regulations could include conformity in the exterior appearance of homes within the neighborhood; landscape requirements; or time limits on activities generating noise. HOAs typically require monthly fees by the members of the association to maintain shared structures and areas Nusenda Federal Credit Union. All rights reserved.

308 Slide 3 Buying a Home Vocabulary: - Interest the amount of money you pay the lender above the principal - Principal the amount you pay the lender that relates exclusively to the price of the home. It does not include additional charges such as interest. - Fixed Interest Rate interest rate stays the same throughout the time of a loan. - Adjustable Rate Mortgage (ARM) or Variable Rate Mortgage interest rate changes during the term of the loan based on market conditions. - Amortization Schedule a schedule showing each payment on an amortizing loan; including the amount of the payment, interest, and the amount towards the principal balance. Key Points: - Adjustable Rate Mortgages (ARM) or Variable Rate Mortgages might be good to have in times when interest rates are low. However, if interest rates begin to rise, so will your monthly payments. Therefore, more people feel more secure by utilizing a fixed interest rate rather than one that changes. - Location is very important in choosing whether or not you want to purchase a home. - The size of the home is just as important. This includes the number of rooms, garage, kitchen, number of bathrooms, and size of backyard. - Determine if you have the income to afford what you are looking for in a home. - You will need to get a loan to purchase the home; therefore, it s important to have good credit and a steady job with consistent income. - You will need to provide tax returns, check stubs, and other financial information to the lender so that it can determine if you have consistent financial resources so that you don t default on the loan if they decide to lend you the money. Teacher Tips: - Engagement Ask the students what they might be looking for in the purchase of their own home. - Check for Understanding Have the students complete the activities in the Student Guide and check their answers for accuracy. Teacher Reflection: 308

309 Buying a Home Appraisal the practice of determining the value of real property Comps or Comparables - refers to properties with similar characteristics; for example, homes approximately the same size and price to a potential seller s home. This can be accomplished either by a real estate agent or a certified appraiser or surveyor who will establish the value of a potential client's home or property (through a market analysis). Legal Title the actual ownership of the property. When a contract for the sale of land is executed, equitable title passes to the buyer (prior to closing). When the conditions of the sales contract are met, legal title passes to the buyer, in what is known as the closing. Real estate escrow refers to money held by a third-party on behalf of the transacting parties (the buyers and sellers). Appreciating Asset real property or other possessions you own that grow in value over time. Amortization refers to the process of paying off a debt (often from a loan or mortgage) over time through regular payments. A portion of each payment is for interest, while the remaining amount is applied towards the principal balance. Most home loans come with a fixed interest rate, meaning it never changes. An alternative to a fixed rate is an Adjustable Rate Mortgage or ARM. It is also known as a Variable Rate Mortgage because the interest rate changes throughout the life of the loan based on market conditions. The percentage of interest vs. principal in each payment is determined in an amortization schedule. Important things to consider When making a choice about owning a home, it is important to consider where the home is located. There are different reasons for choosing one house over another. Establishing a list of your daily activities can help in the decision of where to live. How close your home is to work, school, recreation, shopping, other family members, etc., can make living in the home more rewarding. 1. List three things you would consider important when deciding where you would like to live. Answers will vary. 309

310 Slide 3 (Continued) Buying a Home Key Points: - Selecting a real estate agent is important; they have access to many databases and information that most of us don t. Trusting who you select will be a very important step in the process. - A good agent will give you lots of homes to consider. - An appraisal of the home will tell you the going price for that home. - Once you find a home that you like and think you can afford, always negotiate the price. This process can go on for several weeks, as the seller might counter offer. - Once a price is determined, contracts are drawn up by your agent. - The location of your home is important. You should consider proximity to your work and schools that you might want your children to attend. Teacher Tips: - Engagement Ask the students if they know how much a real estate agent makes for selling a home. Answer: Between 3 and 6% of the selling price of the home. - Check for Understanding Review with the class the importance of finding a real estate agent that they can trust and the importance of that relationship. Large Group Discussion: - Ask the students where they would like to buy a home in Albuquerque and have them explain why. Teacher Reflection: 310

311 Buying a Home Once you have determined where you would like to live, other factors about the home come into play. The overall size of the home, details on the bedrooms, bathrooms, living room, offices, kitchen specifics, garage, and back yard all contribute to the final decision about purchasing a particular home. 2. In which part of your home do you spend the most time? Answers will vary. After you have determined your housing requirements, make a realistic evaluation of your current expenses and annual income to decide if you can afford everything you are looking for in a house. Having a good relationship with your credit union or bank is a vital component to the home ownership process. Most people do not have the cash on hand to pay for a home outright. Because of this, borrowing money from a lender has become the most common method for purchasing a home today. Lenders require a buyer to provide evidence of the ability to repay a loan. Examples include copies of paychecks from a steady job and proof of income from investments. Working with your own credit union or bank may be a convenient place to obtain a loan; however, there are many options available, so it is wise to shop around. Compare the mortgage lending rates offered by three local banks in your area. Find the rates for a: 30-year, fixed loan: Lender 1 - Lender 2 - Lender 3-15-year, fixed loan: Lender 1 - Lender 2 - Lender 3-311

312 Slides 4 and 5 Buying a Home Vocabulary: - Square Footage the size of a home computed by taking the measurement of each room (length x width) and adding all the room measurements together. Key Points: - Buying a new home vs. an older home is something you will need to consider when you buy a home. Newer homes might look prettier and have nicer amenities; however, an older home might be better built. - The cost of the home will be based on location, actual size, and other factors such as front and backyard landscaping, fireplaces, high-end kitchen appliances, hardwood or tile flooring, and expensive bathroom fixtures can dramatically change the value of a house. - Determining the price per square footage of the home will help you compare the prices of other homes. The more square footage, the more you might be paying. Teacher Tips: - Engagement Ask the students to share with each other the number of rooms and various amenities each would like in a home. - Check for Understanding Have the students complete the calculation of square footage activity in the Student Guide and check for accuracy. Teacher Reflection: 312

313 Buying a Home In addition to shopping for a loan, it is crucial to select the right person as your real estate agent. This person must understand your wants and needs and be willing to represent your interests during this process. There are times when the agent will represent you when you are not present. It is important there is a good line of communication between the two of you and a relationship based on trust. A lack of communication or untimely information can make the difference between getting the home you want and possibly losing out to another buyer. Once again, shop around, and select someone you believe you can work with who will help you get the best deal for the home you want. Once you have secured an agent to assist you in purchasing a home, begin the task of finding a home to buy. This is where the agent now earns his/her pay. Many agents work with a network of other agents, locally and nationally, to generate a database of available homes to buy and sell. They can easily access this list and narrow the different choices based on location, size, price, amenities, or other criteria to provide a place to begin your home search. After you have narrowed your home choices and have decided on one, the next step is to negotiate a price. There are several components that go into this negotiation. First, the seller will establish a price for their home. An appraisal of the home s value will be determined according to home s age, size, location, condition; and most importantly, the value of other similar homes recently sold in the area. If the appraisal is close to the asking price of the seller, you (the buyer) can make an offer on the home. It is up to you, with the advice of your real estate agent, to determine an appropriate offer for the home. You may choose to offer less than the asking price. At this time, the agent will deliver the offer and counter offers from the buyer and the seller. When a price is agreed upon by the buyer and seller, contracts are drawn up by the agent to be signed by both parties. This transaction usually involves a title search, a mortgage, and an escrow company. Location, location, location Of the many variables that go into selecting a home, choosing the location is an important first step. Knowing how far your commute will be to and from work; how much time you will spend stuck in traffic; and whether you may need to leave earlier to make it to work on time, will help you decide whether your quality of life will be impacted by your choice. 313

314 Buying a Home You may or may not want to start a new family and have children in the home you buy. If you are planning to have children, the location and quality of the schools in the area become a concern. Just like your commute to work, forcing your children to ride a bus or walk a long distance to and from school can lead to potential problems that could be avoided if the school were closer to home Remember, we are talking about choosing a place to live. If you can have all the things you want to enhance your quality of life, you owe it to yourself to add them to the list of what you want in a home. How far is it to the grocery store? Where are the shopping malls? How about movie theaters? Are you an active individual? Do you enjoy hiking, camping, swimming, bike riding, etc.? Where would you go for those things? What about pets? Is there a park nearby? All these things should be thought about before you make your pick. Once you have worked through these considerations, one more question remains: How much are you willing to pay to live in a better place? This does not mean, How much house can you afford? It relates to spending money on a monthly basis to live in a community with gated entrances, security patrols, restrictive covenants, and homeowners associations. What do you want in a home? Everyone enjoys getting something new. We are told each day we need new clothes, a new car, and even the newest technology in cell phones. When it comes to owning a home, this is no exception. An argument could be made, however, with regards to a new versus an older home, as to which one is more valuable. Ultimately, it becomes a matter of personal preference depending on the homes you are comparing. Sometimes, an older home is a better option. Modern construction technology and materials can bring the cost of a new home down in the short run. In many cases, however, the older, established house might have been better built by well-trained craftsmen. Don t allow yourself to be fooled by the shiny exterior of a newer home. What you need to look for is a house with a solid structure, built by a reputable contractor. The cost of a home is based on three factors: The first factor is location, as discussed previously. The second factor is the actual size of the home. The price of a home is determined by the amount of living space in the home. 314

315 Buying a Home Key Points: - Although the diagrams look the same size, the size of each home is considerably different Teacher Reflection: 315

316 21 4 Buying a Home This is referred to as the Square footage. Calculating the square footage is done by taking the measurement of each room (length x width) and adding all the room measurements together. This normally includes only heated spaces and does not factor in garage size or storage space outside the house. Understanding that adding square footage will drive up the cost of the home will help you decide what you can ultimately afford House Plan 1 House Plan 2 1. In the above floor plans, calculate the square footages of each house. Answer: House Plan square feet (44-0 x 27 0 ) House Plan square feet (31-0 x 21 4 ) 316

317 Slides 6 and 7 Buying a Home Vocabulary: - FHA or Federal Housing Administration offers government-insured loans with flexible credit guidelines. - VA or Veterans Affairs offers loans to help veterans and their families obtain home financing. - Amortization the practice of separating principal and interest and applying a greater portion of your monthly payment toward the interest during the first half of the loan period. Key Points: - Credit unions, banks, and lending companies are financial institutions that can lend you money to buy a home. - FHA is a government-insured loan with flexible credit guidelines. - VA is a loan offered by the Veterans Affairs to help veterans buy their homes. - The concept of amortization forces you to pay more in interest up front during the course of a mortgage loan. - You can expect to pay considerably way more than the price of the home after adding all of the interest you end paying over the length of the loan. Teacher Tips: - Engagement Conduct an Internet search to locate some homes around the surrounding area so that the students can see the prices that homes are selling for. - Check for Understanding Have the students complete the activity in the Student Guide, calculating a mortgage payment, and check their answers for accuracy. Web Resources: - Homes for sale Teacher Reflection: 317

318 Buying a Home 2. If the cost of the two houses is the same, say $158,000, which home is the better value? Explain: The third and final factor to the cost of a house relates to optional items. Front and backyard landscaping, fireplaces, high-end kitchen appliances, hardwood or tile flooring, and expensive bathroom fixtures can dramatically change the value of a house. Establishing a budget and a musthave option list prior to shopping for a house will help you determine the extras you must absolutely have and the items you could potentially live without. Find a loan One of the major obstacles you face when deciding to buy a home is finding the money to pay for it. Today, there are several places to secure the financing needed to purchase your dream home. The most common place to get a home loan is a bank. Banks make money by lending money. Historically, banks were eager and willing to give loans to just about anyone who wanted one. Instability in the housing industry, however, has forced banks to become more cautious when approving loans. Individuals asking to borrow money must now provide documentation proving their eligibility for a loan. Other institutions that offer loans are credit unions and lending companies that can be accessed through the Internet. Regardless of the source of financing for your loan, the two most common types of mortgages are FHA and VA. FHA stands for the Federal Housing Administration which offers government-insured loans with flexible credit guidelines. VA stands for Veterans Affairs, which offers loans to help veterans and their families obtain home financing. 318

319 Slide 7 (Continued) Buying a Home Vocabulary: - Amortization Table a table or chart showing each payment on an amortizing loan; including the amount of the payment, interest, and the amount toward the principal balance. Key Points: - The average length of a mortgage loan is 30 years - The number of payments you will make for a 30 year loan is 360 (12 months x 30 years) - There is a standard formula to determine your monthly payment. The formula encompasses the amount of the loan, the interest rate, and the total number of payments. A = monthly payment P = amount of the initial loan i = monthly interest rate i = monthly interest rate n = total number of payments Teacher Tips: - Engagement After going over the above formula with the students, see if they can determine the monthly payment given in the example in the Student Guide. - Check for Understanding Most students will struggle with the above problem. - Determine how many of the students were able to solve the problem and assist those who struggled. Web Resources: Amortization Calculator: Teacher Reflection: 319

320 Buying a Home How much home can you afford Now that you have chosen everything you want in a home, it s time to calculate how much you can afford. In most cases, people wanting to own a home must borrow the money to pay for it. The term used to describe this borrowed money is called a Mortgage. In its simplest form, a mortgage is defined as principal (actual amount borrowed) times interest (usually an annual percentage rate) times the length in years of the loan. 1. Calculate what your mortgage would be for a home costing $275,000 with an interest rate of 4.5% for 30 years. Answer: ($275,000 x.045 x 30 years) = $371,250 Once you know the amount of the mortgage, determine how much your monthly payment will be by multiplying the number of years of the loan by 12 and dividing the mortgage by this number. The resulting monthly payment is a combination of the principal and interest of the loan. Simply stated, each month you pay off a portion of the principal and a portion of the interest for the life of the loan. However, there is one more wrinkle added to this process. Lending institutions want more of their interest paid back during the first years of the loan as a safeguard against borrowers not honoring their debts. This is accomplished using a payment schedule that separates the payments based on principal and interest and applying a greater portion of your monthly payment toward the interest during the first half of the loan period. This is amortization, as defined earlier. How is an Amortization Schedule Calculated? An amortization schedule is a table or chart showing each payment on an amortizing loan and including the amount of the payment, interest, and the amount toward the principal balance. Thankfully, there are many free websites and calculators that create amortization schedules automatically. The downside to this is that people are less informed on the mathematical calculations involved in creating the schedule. The following example below provides step-by-step calculations for a simple, fixed-rate mortgage. 320

321 Buying a Home Let's say you are purchasing a new home for $280,000 with a $30,000 down payment. Your bank agrees to provide you with a $250,000 mortgage at a fixed interest rate of 5% for 30 years. What is your monthly payment? How much money are you paying toward interest and principal each month? Let's find out. Determine the total number of payments In this example, you must make one payment per month for 30 years. This means you will make 360 payments over the course of the mortgage (12 x 30 = 360) Determining a monthly payment If there were no interest rate, determining your monthly rate would be simple. Divide the loan amount by the number of payments: $250,000 / 360 = $ Obviously, the bank has to make money, so the mortgage includes a 5% interest rate (to provide profit for the bank). It is important to note that 5% is an annual interest rate. Since all of the following calculations are based on a monthly payment schedule, the annual rate needs to be converted to a monthly rate as follows: 5% / 12 = 0.416% Determining the monthly payment to account for interest requires a complicated formula shown below. 321

322 Slide 7 (Continued) Buying a Home Key Points: - After determining how much your monthly payment will be, you can now determine how much you will pay for the home over the length of the loan as well as the total interest paid. o Total Paid for House = (Monthly Payment) x (# of payments) o Total Interest Paid = (Total Paid for House) (Loan Amount) - Although the monthly payment will stay the same every month, the amount of money that goes to interest will vary. - Go over the Amortization table in the Student Guide to show students how the interest varies from month to month and how a larger portion of the monthly payment goes toward interest in the beginning of the loan. Teacher Tips: - Engagement Ask the students to determine why they pay so much on interest over the term of a mortgage loan. - Check for Understanding Ask the students if they have any questions regarding the way amortization works. Teacher Reflection: 322

323 Buying a Home A is the monthly payment; P is the loan's initial amount; i is the monthly interest rate; and n is the total number of payments. Using our numbers (P = $250,000; i = 0.416%; and n = 360), the formula yields a monthly payment of $1, Determining the total interest The total cost of the loan can now calculated, since there will be 360 payments of $1, The total cost is approximately $483,139 (actually $483, if you don't round the monthly payment to two decimals). Subtracting the original loan amount ($250,000) leaves the amount of interest: approximately $233,139. Even though the interest rate is only 5%, the interest paid is almost as much as the purchase price! Determining the breakdown of each monthly payment Even though the monthly payment is fixed, the amount of money paid to interest varies monthly. The remaining amount is used to pay off the loan itself. The complicated formula above ensures that after 360 payments, the mortgage balance will be $0. For the first payment, we already know the total amount is $1, To determine how much goes toward interest, multiply the remaining balance ($250,000) by the monthly interest rate: $250,000 x 0.416% = $1, The rest goes toward the mortgage balance: $1, $1, = $ After the first payment, the remaining amount on the mortgage is $249, ($250,000 - $ = $249,699.61) The second payment's breakdown is similar except the mortgage balance has decreased. The portion of the payment going toward interest is now slightly less: $1, ($249, x 0.416% = $1,040.42) 323

324 Buying a Home This process of calculating interest based on the remaining balance continues until the mortgage is paid off. Each month, the amount of interest declines, and the amount paid towards the loan increases. After 360 payments, the mortgage is paid in full. It is important to note that our calculations do not include any additional fees, such as closing costs. Create an amortization schedule for purchasing a motorcycle. The cost of the motorcycle is $ 6,000. The loan is for four years at an interest rate of 5%. Search the Internet for an amortization calculator to assist you in this problem. Be prepared to share with the class. To honestly know how much you can afford to pay for a house, additional expenses must be added to your monthly mortgage payment. Other expenses include Homeowner s Insurance, Property Taxes, and Utilities (gas, electric, and water). Property taxes are paid annually and are based on the assessed value of the property and improvements. In addition, other costs must be considered including maintenance and repair and possibly monthly or annual fees paid to housing associations if you live in a gated or protected community. 324

325 Slides 7 (Continued) and 8 Buying a Home Vocabulary: - Property Taxes mandatory taxes that are paid to the county that you live in based on the value of your house and the land it sits on. - Utilities gas, electricity, and water, etc. Key Points: - Other expenses of owning a home include Homeowner s Insurance, Property Taxes, and Utilities (gas, electric, and water). You will also have to consider maintenance and repair and possibly monthly or annual fees to housing associations. - Finding a real estate agent can be critical to finding the home that you want to live in. - Real estate agents work for you. They in some respects can be considered as your employees. If you don t feel like they are helping you, you might consider finding another agent. - You may want to consider interviewing your agent and asking for his or her track record and recent sales over the last six months prior to beginning your house search. - Real estate agents have access to national databases and can sort home listings by many different categories including prices ranges, locations, styles, square footage, amenities, etc. - Real estate agents can also give you price comparisons of other homes in the area, so that you have something to base your decision on. These comparisons are known as comps. Teacher Tips: - Engagement Ask the class if they know anyone who is a real estate agent, or if they can name some common real estate companies. - Check for Understanding Ask the students to list some attributes that they feel a real estate agent should have. Have them explain why. Teacher Reflection: 325

326 Buying a Home Real estate agents In today s real estate market, finding the right person to represent you during the various stages of buying a home can be the difference between a good experience and a bad one. The people who do this work are a very diverse group with differing approaches to their jobs. Try to find someone you believe to be honest and a good communicator. Remember, real estate agents work for you and are contractually obligated to represent your interests. This means they are your paid employees throughout the purchasing process. How do you decide which agent to contract to help buy or sell your home? Investigate the track record of the agents you select. Ask them to provide a list of their recent house sales from the past six months. It doesn t matter whether the agent works for a large national real estate firm or is a part of a small local office. The agent should have a strong understanding of the housing market in the area you are interested in living to get the results you are looking for at a price you can afford. Real Estate Agents use several tools in locating homes for a potential buyer. Almost all agents are part of or have access to national databases that track home sales in the U.S. This is a huge advantage when trying to locate homes that are selling in your area. Available houses can be sorted based on a price range or other attributes like square footage, garage space, or style of the home. Agents also gather data related to recent home sales to use as a comparison to the available homes for sale to provide an idea of the true value of the houses in a certain area. These comparisons, or Comps, help buyers and sellers settle on a reasonable price for their homes. Of course, this does not mean a seller won t ask a high price. The comps will help you as a buyer, however, from paying too much for a house based on the average price of other recently sold homes in your area. The services that a real estate agent provide make the process of finding, negotiating a price, and closing on a house easier and quicker for you as a buyer. However, this service is not free. Agents charge a fee based on the final sale price of the house. This fee is usually split between buyer and seller and is paid at the time of final signing of all the mortgage and title documents (also known as the time the sale is closed or at Closing ). 326

327 Slides 8 (Continued) 9 and 10 Buying a Home Vocabulary: - Closing refers to when you sign all the documents to purchase your home. - Buyer Inspection Services are involved in home sales/purchases to protect consumers from major defects/deficiencies such as structural, roof, plumbing, and HVAC issues that could result in major repair or replacement costs. Key Points: - Once the price is agreed for your home, the real estate agent will schedule a time for you to sign all of the paperwork. This date is referred to as the closing. It usually occurs at an escrow company with a real estate broker. - Again, real estate agents normally charge between 3% and 6% for their services. Sometimes if the seller has an agent, and you have an agent, they will split the fee with each receiving 3% on the sale. - You can do some legwork on your own to find a house for sale by driving up and down neighborhoods, searching the Internet, and looking in the newspapers. You can even find real estate for sale in magazines at grocery stores and other convenience stores. - Appraisal companies are in the business of viewing homes and evaluating them against a defined set of criteria to better define their worth. Teacher Tips: - Engagement Have the students conduct research and find a minimum of three homes that they would like to purchase if they had the resources to do so. - Check for Understanding Have the students explain their selections above to the class. Teacher Reflection: 327

328 Buying a Home Typically, agents charge a 6% fee for their services. This fee can be negotiated (under certain conditions) but as a buyer, you can expect to pay at least 3% to an agent once the house is bought. Be diligent with your agent, and make sure they are working hard for their money. As an industry, realtors have established a fixed rate for their services; therefore, it is possible to employ an agent who is not as motivated as others might be. As a buyer, it is important to know how long an agent has been working as a realtor and his/her home sales record. Any prior client referrals would also be helpful. The last thing to know about real estate agents is that they perform only one function in the overall process of buying a home. Real estate brokers are required to complete the legal documents necessary for a closing to be legitimate and final. Find your dream home Finding your dream home takes a lot of time and leg work. The easiest way to do this is to drive around the area you wish to live and look for homes for sale in the neighborhood. You can do this efficiently by searching the Internet and newspapers. Professional marketing materials, available in stands at many grocery stores, restaurants, etc., will help target homes before you ever get in the car. What is the home worth? What is a home worth? This is not an easy question to answer. The seller of the home will have an asking price, but that is not necessarily the actual worth of the home. The age, condition, and size are components in determining a home s worth. Appraisal companies are in the business of viewing homes and evaluating them against a defined set of criteria to better define their worth. Another way to evaluate a home is to compare it to other homes of similar age, size, and in close proximity; this process is known as comps. Buyer inspection services are involved in home sales/purchases to protect consumers from major defects/deficiencies such as structural, roof, plumbing, and HVAC issues that could result in major repair or replacement costs. Purchasing a home will almost always involve negotiation which is why it is smart to work with a competent and trustworthy real estate agent that can negotiate effectively on your behalf. Just like any item for sale, the worth of a home is what someone is willing to pay for it. 328

329 Slides 11, 12, 13 and 14 Buying a Home Key Points: - Homeowner s insurance is mandatory if you are borrowing money from a financial institution. The premiums are usually paid monthly and are included in your monthly mortgage payment. - Real estate taxes are also required and are normally included in your monthly mortgage payment. - At the closing, you are required to produce funds for a down payment, appraisal reports, escrow, and the fees for closing your loan. - Once all the paperwork is signed, you will be given the keys and you officially take ownership of the home. - Verify with the Title Company that you have three days after the signing of the paperwork to change your mind. - If you make extra payments, you can save thousands of dollars in interest and pay off your loan early. - Consider setting up a biweekly payment schedule instead of a monthly payment schedule. - You will need to notify your lender that you want to set up your payment schedule biweekly. Another option is to make an extra payment at the end of each year if you choose not to pay biweekly. Both these methods will save you thousands of dollars in interest. Teacher Tips: - Engagement Have the students go to the following website and compute various loan amounts and compare biweekly payments vs. monthly payments. - Check for Understanding Ask the students to review Slide 14 in the Student Guide and solicit each for understanding. Teacher Reflection: 329

330 Buying a Home Insurance and taxes Homeowner s insurance is often required; and it covers the house (structure) replacement due to fire or other hazards. It also covers belongings inside the home in the event of disaster or burglary. The premiums for this insurance are usually paid monthly along with the mortgage payment. Real estate taxes will also be required and are computed and held in escrow as a part of your monthly mortgage payment. Closing on a home Closing on a home involves a meeting at the Title Company. It is during this meeting that you are required to produce any funds for a down payment, appraisal reports, escrow, and the fees for closing your loan. The title company representative will review the details of the loan including your monthly mortgage payment and all of the components that make up that payment. At the end of this meeting, you will be given the keys, and you officially take ownership of your dream home! Last things to know Many of the fees associated with purchasing a home, such as closing costs, appraisal reports, etc., can be paid by either the seller or the buyer or even split between the two parties. You do not need a real estate agent to buy a home, but a good agent can be extremely helpful in negotiating the price of the home; determining who pays the costs/fees; and in the end, help you realize a significant savings. A home is usually an appreciating (goes up in value) asset in contrast to renting an apartment, where you pay a monthly rent. Regardless of how long you stay in an apartment, however, you never build equity. The biggest saving tip when buying a home As mentioned earlier, the length of a mortgage is normally 30 years. You can even negotiate a 15- year mortgage. The difference is that your monthly payment will be higher for a 15-year mortgage because you are borrowing the same amount but paying it off in less time. Borrowers who pay monthly are required to make at least 12 payments a year. Another option is to pay bi-weekly (every two weeks), where you make 26 payments but each payment will be half of what you pay on a monthly basis. You end up making one extra payment per year by paying bi-weekly. 330

331 Buying a Home Example: Let s say your monthly payment is $1,000 per month and the loan is for 30 years. In a year, you will pay: $12,000 = ($1,000 x 12 months). For 30 years, you will pay $360,000 = ($1,000 x 12months x 30 years). Now let s say you pay bi-weekly. In a year you will pay $13,000 = ($500 x 26 bi-weekly periods in a year) Note: Every two weeks, you will pay half of what you would ve paid during the month; however, there are 26 two-week periods in a year (52 weeks / 2 weeks). This extra payment made every year means that you will pay off the house sooner, thus saving thousands of dollars in interest. The next table shows that if you borrowed $100,000 at 5% interest for 30 years and made bi-weekly payments, you will pay off the loan in 303 months instead of 360 months (4.75 years earlier) and save $17, in interest. Tip: Make bi-weekly payments or make an extra payment at the end of each year to save thousands of dollars in interest. 331

332 Buying a Home Enter the principal balance owed: Enter the annual interest rate percentage: 5% Enter the number of months: 360 Here is your monthly payment amount: $ Here is your bi-weekly payment amount: $ This is how much interest you will pay using monthly payments: $93, This is how much interest you will pay using bi-weekly payments: $76, Bi-weekly Mortgage Interest Savings: $17, Assignment: In the table below, list all of the expenses that you might incur with owning a home. Use the following website to determine your monthly/bi-weekly payments. Cost of Home $200,000 Interest rate on loan 4% 30 Year Loan Expenses: Monthly payment amount Bi-weekly payment amount Other Expenses: (list and estimate each amount) 332

333 Lesson Component Description Purpose In the taxes topic, the students gain a fundamental understanding of taxes and how to prepare a basic income tax return. Learning Objectives 1. Examines the importance of filing a tax return. 2. Completes a basic income tax return. 3. Deciphers a 1040 tax form. Time Required 350 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework to guide the teacher and the student. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students complete a basic tax return using a 1040 given a W- 2 and a tax scenario. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Taxes Quiz Key 1.F 2.F 3.T 4.T 5.F 6.A 7.C 8.C 9.D 10.D Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 3. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1).

334 Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 3. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 4. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 5. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 6. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 7. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 9. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 10. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 11. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 3. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 4. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 5. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 6. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 7. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 8. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 9. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6).

335 Web Resources IRS Tax Tutorials: Video Links Understanding Taxes: Life Smart Applications 1. Completes a basic tax return using a 1040 tax form.

336 Name Date True or False Questions: You must file your tax return by January 15 at midnight. 2. If you are a single parent and support your children, your filing status will be considered Single. 3. If you are married, you have the choice of filing Married Filing Jointly or Married Filing Separately. 4. You plan to prepare your own tax return for the first time. You have a basic tax situation. Because of this, you can file a 1040EZ. 5. You had three different jobs with different employers. You only need to include wages from one of your W-2s when completing your tax return. Multiple Choice Questions: When completing the contact information on your tax return, you should use what name? a. The name on your Social Security card b. The name on your school ID c. The name on your driver s license d. None of the above 7. Which of the following is true in regards to filing a tax return? a. You shouldn t file a tax return because you are a teenager b. You shouldn t file a tax return because your parents are claiming you on theirs c. You should file a tax return if you had taxes withheld d. None of the above 8. You are a college student living in the dorms. Which of the following is important information that you need to file a tax return? a. The amount that you pay for books b. The amount that you pay for tuition and fees c. Both a and b d. None of the above 9. You prepared your own tax return. What methods can you use to send it to the IRS? a. Mail b. Electronically c. Hand-deliver it d. a and b 10. Which of the following must you include in the signature section of your tax return? a. Date b. Occupation c. Contact phone number d. All of the above

337 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide the Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Vocabulary: - Internal Revenue Service (IRS) The organization responsible for collecting taxes and enforcing the tax codes in the United States. - Tax Code Federal laws that explain the rules of taxation. - Certified Public Accountants (CPA) Professionals hired to complete and file your tax return. - Tax Software Packages Software purchased to assist in the preparation of your tax return. Key Points: - You are required to file your taxes by April 15th at midnight every year. - In New Mexico, you are required to file a state tax return in addition to the federal tax return. - If you claim exempt on the W-4, no taxes will be withheld from your paycheck. - As a teenager, you should file a tax return if you had taxes withheld from your paycheck. - You can file a tax return even if your parents are claiming you on their tax return. - Going to college is considered a temporary absence from home. Your parents can continue to claim you on their tax return. Teacher Tips: - Engagement Ask the students what they know about taxes. - Check for Understanding Ask the students to recall what they know about the W- 4 form. Ask each if they understand why they would want to file a tax return as a working teenager. Teacher Reflection:

338 Taxes Your Duty, You Can t Escape Them Life Smarts: 1. Complete a basic federal income tax return. Basic tax information All of us should pay our fair share of taxes as United States citizens. We are all required to pay federal taxes and file a tax return every year in April. Returns are filed with the Internal Revenue Service (IRS), the organization that is responsible for collecting taxes and enforcing the tax code in the U.S. In addition, most of us also pay state taxes. The states of Nevada and Texas do not require their citizens to pay state taxes. New Mexico residents are required to pay state income tax. Tax code has become complicated; thus, forcing many citizens to hire other people such as Certified Public Accountants (CPAs) to complete their tax returns. This section will highlight the basics of taxes and filling out a simple return. There are many tax software packages that can assist in completing your tax return. Many are user-friendly and walk you through the process step by step and can be filed electronically. Packages range from $50-$200 and must be purchased anew every year, because the laws and amounts change Nusenda Federal Credit Union. All rights reserved.

339 Slide 3 Taxes Vocabulary: - Filing Status Defines the type of status you will use to file your tax return. Your filing status is tied to your marital status and is important in determining the tax regulations that apply to you. Key Points: - Your employer is required to mail your W-2 by January 31 each year. - The information on the W-2 is necessary to complete your tax return. - The various filing statuses include: o Single o Married Filing Jointly o Married Filing Separately o Head of Household o Qualifying Widower Teacher Tips: - Engagement Ask the students if they know what status their parents use to file their tax return. - Check for Understanding Develop several relationship scenarios and ask the students to determine the correct filing status for each. Teacher Reflection: 339

340 Taxes Educating yourself about personal income taxes will help you as your life becomes more complicated financially. Having a fundamental understanding of taxes will empower you to make wise decisions regarding saving and investing for the future. The following guidelines are important as we work through a sample tax return for a young, single adult: 1. Working teenagers do not necessarily have to file a tax return if they claim exempt on a W-4 and earn less than the amount indicated on Chart A (see Section 3). 2. Working teenagers who do not claim exempt on their W-4 should file a tax return, so they receive a refund for taxes withheld during the year. 3. Your parents may claim you on their tax return (because you live with them and they pay your expenses). You may also file a tax return (if you had taxes withheld from your job). Note: When you file your return, be sure to indicate whether your parent(s) are claiming you on their tax return. 4. Going away to college is considered a temporary absence from home, so your parents can still claim you on their return. Follow Steps 1, 2, and 3 above. Who must/should file a tax return? In the Employee Smarts topic, you learned about the W-4 and the W-2 forms. If you recall, the W-4 is a form that must be filled out and given to your employer so they can withhold required taxes from your paycheck. A W-2, on the other hand, summarizes the total amount of wages earned and the total amount of taxes paid during the year. Your employer is required to mail you a W-2 by January 31 following the tax year that just ended on December 31. The W-2 is important, because it provides the information necessary to determine whether you should file a tax return. 340

341 Slide 4 Taxes Vocabulary: EZ The easiest tax form to file A The tax form used if you are unable to file a 1040EZ The tax form that encompasses all possible tax situations. Key Points: - The 1040EZ is used if you are single or married and have taxable income of less than $100, The 1040 encompasses all tax situations. Use this form, also referred to as the long form, in lieu of the 1040EZ and 1040A. Teacher Tips: - Engagement Inform the students they will complete a tax return in this section and will also complete a second one at the end of the topic. - Check for Understanding Determine if the students can distinguish between the three tax forms: 1040 EZ, 1040, and 1040A. Teacher Reflection: 341

342 Taxes The box below (Forbes.com) shows who should file a tax return for the 2014 tax year. The amounts in the table will change yearly. An interactive questionnaire is at This shows the five tax filing statuses: Single; Married Filing Jointly; Married Filing Separately; Head of Household; and Qualifying Widower. Each category is explained in detail below: Single Never been married; legally divorced or separated; Widowed before Jan. 1 and not remarried. Married Filing Joint Married and living together; living together in a common-law marriage recognized in the state where they live or the state where the marriage began; married and live apart but not legally divorced or separated; or separated under an interlocutory (not final) divorce decree. Married Filing Separately Married taxpayers choosing to file separately. New Mexico is a community property state, meaning assets are divided equally between spouses. Both incomes need to be considered. Head of Household Unmarried as of the last day of the tax year and paid more than half the cost of keeping up a main home (for more than half the year); also for unmarried children, foster children, certain relatives, and certain married children. Qualifying Widower with Dependent Child Spouse died in the previous year and maintains a household with a qualified dependent child, foster child, adopted child, or stepchild. Note: The widower files a married filing joint return in the year the spouse dies and must file as a qualifying widower two years after the spouse s death. 342

343 Slides 5 and 6 Taxes Key Points: - Point out to the students they can learn more about the process of filing a tax return by reviewing the tutorials offered by the IRS at the following website: - Complete the first section of the 1040, which consists of filling in your contact information. - The name used on your tax return should be the exact name as it appears on your Social Security card; otherwise, it will be rejected by the IRS. - You must indicate if you want $3 to go to the presidential campaign. This does not mean you have to pay the $3. It only implies that the IRS will transfer $3 into the fund for use by those candidates running for president. Teacher Tips: - Engagement Have the students look at the W-2 in the Student Guide and ask them what kind of information is included in the form. - Check for Understanding Ask the students if they understand why they must use the name on their Social Security card on their tax returns. Also, ask the students the significance of the W-2. Teacher Reflection: 343

344 Taxes Which form do I use? There are three types of federal tax forms you can use to file your tax return. One is the 1040EZ. Many single or married taxpayers with taxable income of less than $100,000 are eligible to use this form. The 1040A, a bit longer form, includes other forms of income such as pensions, annuities, unemployment, etc. The 1040 is the longest form and encompasses all financial tax situations. You may use the 1040 even if you are eligible to use the 1040EZ or 1040A. Your refund or payment will be the same. For purposes of this topic, we will use the 1040 because it encompasses all tax situations. Completing a tax return using a 1040 In the sections below, you will be guided to complete a basic tax return using the included W-2. In addition, the following information pertains to your filing status: - You are single and in school. - Your parents claim you on their tax return as a dependent. - You received a 1099-INT from your bank showing that you earned interest of $45. - You want $3 to go to the Presidential Campaign Fund The Sandwich Shop 1234 Main Street Albuquerque, NM , , , Your Name 1234 Semis Ave Albuquerque, NM NM XX 344

345 Slides 6 (Continued); and Slides 7 and 8 Taxes Key Points: - Continue to emphasize that the students need to fill in their names as they appear on their social security card. - Use the information from the W-2 to fill in the first section of the For purposes of this example, the students should not put their real Social Security number. They should use the social security number shown on the sample W-2: Filing status should be single. - In the Exemptions section, line 6a should not be checked, because their parents claim them. If their parents were not claiming them, they would check box 6a. - Thus, there should be zero boxes checked in the Exemptions section. Teacher Tips: - Engagement Have the students complete the contact information on the W-2, their filing status, and the Exemptions sections of the Check for Understanding Check students work for accuracy. Teacher Reflection: 345

346 Taxes The first section of a 1040 tax return Note: The following website provides additional information and tutorials: The first section of a 1040 consists of contact information including the first, middle, and last name; address including city, state, and zip code; and Social Security number. When filling in your name, make sure to use your complete name as it appears on your Social Security card. The Internal Revenue Service links its database to the Social Security Administration. If a name does not match, the return will be rejected and returned to the taxpayer. You must check yes or no as to whether or not you want $3 to go to the Presidential Election Campaign Fund. Checking yes does not mean you owe $3 out of your own pocket. It means that $3 will be contributed to the presidential campaign fund for use by those candidates running for president. Complete the section below using the information from the example W

347 Taxes Filing status The next part of the 1040 indicates your Filing Status (see Section 3). Complete the section below using the information from the example W-2. Exemptions Exemptions refer to the number of people in the household that meet certain tests. For the purposes of this section, we will assume you meet all five tests to be claimed as a dependent on your parent s return. Note: Students who go away for college are considered dependents of their parents if they meet all five tests. Going away for college is considered a temporary absence; thus, this does not exclude you from being claimed as a dependent. Note: If you are filing a return, you would not check box 6a if your parents are claiming you on their return. Even though you do not check this box, you may still file a return. The box in the lower right hand corner will show 0. Complete the section below using the information from the example W

348 Slide 9 Taxes Key Points: - Have the students complete the Income section of the The amount on Box 1 of the W-2 should be listed on Line 7. Always round to the nearest dollar. - Line 7 also includes any scholarship income that is taxable and tips (if you receive tips as part of your compensation at work). These two items do not apply in our example. - Enter the $45 you received in interest income on Line 8. Recall that in Section 5, you received a 1099-INT showing you earned $45 in interest. This is considered taxable income. - Students should complete line 22. No other lines apply to them at this time. - Each line in the Income section should be reviewed, however, so the students see all of the various types of income that they might include in a tax return later in life. Key: Line 7 3,501 Line 8a 45 Line 22 3,546 Teacher Tips: - Engagement Have the students complete the Income section of the Check for Understanding Check student s work for accuracy. Teacher Reflection: 348

349 Taxes Income You are required by law to report all of your income for taxable purposes. Lines 7-21 of the Income section include those forms of income. Lines 7 and 8, are typical types of income for high school and college students (several of the other lines may pertain). Line 7 is your total wages. Your W-2 (s) should be mailed to you by January 31. You will need the W-2 to complete your tax return (see the Employee Smarts topic). Box 1 of the W-2 includes the total amount of wages needed to include on line 7 of the If you have more than one W- 2, combine (add) each Box 1 of each W-2, and report the total on line 7. Line 7 is used to report scholarship income while you are in college (as well as tips if you receive tips as part of your compensation at work). Line 8 is taxable interest. Hopefully, by this time in your life, you already have one or more savings account(s). If you do, your financial institution will send a 1099-INT indicating how much interest is earned on your account(s) during the year. Those earnings must be reported on line 8 of the 1040 and are taxable. Complete the next section using the information from the example W-2. Hint: you should complete Lines 7, 8a, and

350 Slide 10 Taxes Vocabulary: - Adjusted Gross Income (AGI) Refers to your Gross Income less any adjustments that apply. Key Points: - The Adjusted Gross Income (AGI) section includes adjustments to the Income section completed on Lines In essence, this section lowers your income with the applied adjustments. o Point out that Unemployment Income (Line 19) is taxable. - For purposes of our example, none of these adjustments apply. - Point out that Lines 33 and 34, Student Loan Interest and Tuition and Fees, might apply in future years for those who wish to attend college. - Have students complete Lines Key: Line 36 0 Line Teacher Tips: - Engagement Have the students complete the Adjusted Gross Income section of the Check for Understanding Check students work for accuracy. Teacher Reflection: 350

351 Taxes Below is the Income section of the Go though each of the line items in the Income section and determine which items were discussed in class. This will help you understand the various types of income you might receive during your lifetime and what items must be reported on your yearly tax return. Adjusted gross income (AGI) The Adjusted Gross Income section of the 1040 lists items to be subtracted from your income. In essence, it is like a tax break. Add the adjustments in this section (Lines 23-35); place the total on Line 36; and subtract the total on line 36 from line 22 to get the Adjusted Gross Income (or AGI), as it is known. Although most of these items will not pertain to you, they might later as your financial life becomes more complicated. Possible items that may impact you when you are young are lines 33 and 34; Student Loan Interest and Tuition and Fees, respectively. If you obtain student loans, they will eventually have to be paid back with interest. This interest should be included on line 33 as an adjustment (subtraction) to income. In addition, tuition and fees paid to go to college may be included as an adjustment to income. 351

352 Slide 11 Taxes Vocabulary: - Standard Deduction The amount that you are allowed to deduct from your AGI, based on your filing status. - Exemption The amount that you are allowed to deduct from your AGI based on the number of exemptions claimed in the Exemption section of the Itemized Deduction The amount deducted from your AGI based on itemized deductions allowed by the IRS. - Taxable Income Refers to the amount of your income that is taxed. - Tax Credits Refers to the reductions allowed from the taxes owed. These credits reduce your taxes dollar for dollar. Key Points: - Have the students complete the Tax and Credit section of the Distinguish the difference between the Standard and Itemized deductions. - Taxpayers have a choice of taking either the Standard Deduction or Itemized Deductions. They want to use the higher amount, because it lowers their taxable income. They cannot take both. o The Standard Deduction is a set amount based on your filing status. o Itemized Deductions vary and include the sum of medical expenses, state taxes, mortgage interest, property taxes, charitable donations, and unreimbursed employee expenses, to name a few. Key: Line Line Line 41 0 (can t have a negative number) Line 42 0 (no exemption allowed because parents are claiming you) Line 43 0 (no taxable income) Line 44 0 (no tax because taxable income is zero) Line 46 0 Lines (none of these credits apply in this example) Line 54 0 Line 55 0 Teacher Tips: Engagement Have the students complete the Tax and Credits section of the Check for Understanding Check students work for accuracy. Teacher Reflection: 352

353 Taxes Complete line 37, Adjusted Gross Income based on the information given in the example W-2. Hint: Complete Lines 36 and Line 37. The items below are subtracted from line 22 of the Income section, which results in your AGI. Tax and credits (page 2 of your 1040) The items in the Tax and Credits section refer to the various taxes and credits that might pertain to you now. 353

354 Taxes In this section, you will determine the taxable income as well as any tax credits you might be eligible for. Taxable income is the amount of your income that will eventually be taxed. Tax credits are reductions from the amount of tax you are required to pay. This means the government provides you another tax break by allowing the tax credits shown on lines Line 38 - This is your AGI transferred from line 37 of the Line 40 Taxpayers have a choice of either itemizing or taking a standard deduction. Most people who itemize own a home because the interest paid on a home loan is considered an itemized deduction. Other itemized deductions include property taxes, charitable contributions, and medical deductions. It is only advantageous to itemize if the deductions total more than the standard deduction. Each taxpayer receives the maximum standard deduction amount based on their filing status (see Section 3, Chart A). Note: The standard deduction amount changes yearly. In the section, look in the left-hand column above and determine what the standard deduction is for a single person. Write this amount on Line 40. (Remember this amount will change every year). To determine what the standard deduction is for the current year, go to irs.gov. 354

355 Slide 11 (Continued) Taxes Key Points: - Emphasize that you cannot have a negative amount on a tax return unless it refers to a capital loss. - Line 40 Standard Deduction amounts change every year. - Line 42 Exemption amounts change every year. - Lines Credits that reduce the amount of taxes you owe. o Parents get a $1,000 credit for every child under the age of 17. Tuition and Fee credits might apply while you are in college. o Child Care credits might apply if you are paying someone to watch over them. o Retirement credits might apply if you are contributing to a retirement account. o Energy credits might apply if you are installing energy-efficient items in your house. Key: Line Line Line 41 0 (can t have a negative number) Line 42 0 (no exemption allowed because parents are claiming you) Line 43 0 (no taxable income) Line 44 0 (no tax because taxable income is zero) Line 46 0 Lines (none of these credits apply in this example) Line 54 0 Line 55 0 Teacher Reflection: 355

356 Taxes Line 41 = Line 38 Line 40 (Hint: this amount can t be negative; if it is, enter 0.) Line 42 Taxpayers receive an exemption amount for each dependent listed on the first page of the Remember, your parents are claiming you, so you don t get the exemption. However, if your parents were not claiming you, you would get the exemption amount (assuming you are filing single and no one else claims you as a dependent.) Like the standard deduction, the exemption amount changes yearly. What is the exemption amount indicated on line 42 of the form? You will enter 0 here since your parents are claiming you. You can go to irs.gov to determine what the exemption amount is for this current year. Line 43 = Line 42 Line 41: This amount is your taxable income. It is the amount that the government is taxing you before any credits or reductions. The amount of the tax can be computed using tables provided by the IRS. In addition, tax software packages (e.g., TurboTax, TaxAct, and H&R Block, and more) are updated yearly with the new tax rates. Line 44 = the tax computed from the IRS tax tables. The government gives you additional opportunities to lower your tax with various other tax credits that might apply. Hint: Based on the computations above, you should show 0 on line 43. This means that no taxes apply, since you can t have taxes on a zero amount. Line 46 Add lines 44 and 45. Hint: Line 45 does not apply and should be zero. Complete Line 46. Lines 47 through 53 are other credits that might pertain to you that could lower your tax amount. For example, parents get a $1,000 tax credit for each child under the age of 17. You are allowed a tax credit for your educational expenses while in college. You can even get a tax credit for child care expenses. There are limitations on these credits, however. You will need to take a more advanced class to determine the specifics of these credits. For purposes of this example, none of the credits apply. Complete Line 54. Line 55 This line sums your tax and credit reductions for this section. 356

357 Slides 12 and 13 Taxes Key Points: - Have the students complete the Other Taxes and Payments sections of the In the Other Taxes section, none of the lines apply to our example, so the amounts should all be zero. - In the Payments section, line 62 asks for the amount of income tax withheld during the year. This amount is obtained from Box 2 of the W-2. - People who are self-employed or who increase their income considerably from the previous tax year can make estimated payments throughout the year. If they do, the amount paid goes on line Line 64 People with low income may qualify for the Earned Income Credit. There are many restrictions and thresholds to qualify for this credit. You can obtain more information on this credit in the IRS tutorials or at the website. - Lines 63 through 71 don t apply to our example. Key: Lines (none of the lines apply to our example) Line 61 0 Line (amount obtained from W-2) Line Teacher Tips: - Engagement Have the students complete the Other Taxes and Payments section of the Check for Understanding Check students work for accuracy. Teacher Reflection: 357

358 Taxes Note: You can never have a negative number on your tax return. Any amount computed that would result in a negative number should be replaced with a zero. Complete Line 55. Other taxes The Other Taxes section includes additional taxes that might apply. The total of these additional taxes (Lines 56-60) are added to line 55 to determine the amount of tax owed. This is before taking into consideration the amount of taxes paid during the year. Note: Lines 56 through 60 don t apply to you at this time. Complete Line 61. Payments The Payments section includes any tax payments that were made during the year. The U.S. tax system requires we pay taxes throughout the year as we get paid. This is the reason for filling out a W-4 when first hired. Although several of the lines below might pertain to you later in life, the line that matters the most to you now is Line 62. Line 62 shows the amount of federal income taxes paid during the year. This amount is located in Box 2 of your W-2(s). Line 72 below summarizes this section and indicates what your total payments were during the year. Complete Line 62 through 72. Hint: The only lines that should show amounts are Lines 62 and

359 Slides 14 and 15 Taxes Key Points: - Have the students complete the Refund and the Amount You Owe sections. - Getting a refund implies that too many taxes were withheld during the year. - Owing implies that not enough taxes were withheld. Key: - Line 73 $126 = REFUND (You are entitled to a refund, because Line 72- Total Payments is more than Line 61-Total Tax) - Line 74 (a-d) Complete this part if you want your refund directly deposited. - Line 76 Does not apply, because you can t have a negative number; thus, the amount would be 0 (meaning you don t owe any taxes). Teacher Tips: - Engagement Have the students complete the Refund section of the Check for Understanding Check students work for accuracy. Teacher Reflection: 359

360 Taxes Refund or amount you owe The Refund section finalizes whether you owe or are getting money back. If you owe, this means you didn t pay enough taxes during the year. If you get a refund, this means you overpaid your taxes during the year. Most people prefer to get a refund. Wouldn t you rather have the extra money during the year? The best scenario after filing your tax return is to not get a refund nor owe anything. Although this is hardly ever the case, coming close to zero is always the best situation in regards to your tax situation at the end of the year. Complete Line 73 through Line 77. Hint: The only line that should have an amount is Line 73. As you can see, Lines guide the computation of either your refund or the amount you owe. If you get a refund, the amount will show on Line 73. If you owe, it will show on Line

361 Slides 15 (Continued) Taxes Key Points: - Students should complete the Sign Here section. - The Third Party Designee only needs to be completed if someone else (other than the taxpayer) is allowed to discuss the return. - You must sign, date, and list your occupation and phone number. - You may put Student for occupation. - Point out that a signature implies the signer is responsible for the information in the tax return (even if someone else prepares it for them). Have the students read the statement above their signature to reinforce their responsibility for the information within. - The Paid Preparer Use Only applies to the person that prepared the return if you paid someone else to prepare it; otherwise, it stays blank. - Consider writing the following on the board to summarize the computations within the 1040: - AGI = Income Adjustments - Taxable Income = AGI Standard/Itemized Deductions Exemptions - Taxes = Taxable Income x Tax Rate - Refund/Owed = Taxes Credits + Other Taxes Payments Teacher Tips: - Engagement Have the students complete the Sign Here section of the Check for Understanding Check students work for accuracy. Teacher Reflection: 361

362 Taxes In regards to refunds: (1) the fastest way to get a refund is to have it directly deposited into your checking or saving account; (2) More and more people are using this method to obtain their refund. (3) You must complete Lines 74a, 74b, 74c, and 74d for this to occur. Note: If you select this option, be sure your name appears on the account or the money will not be deposited and the refund will be mailed to your home. What was your refund amount? Completing the return You are almost finished. The remaining section requires you to fill in information if you want to allow someone other than yourself to discuss your return. If so, complete the Third Party Designee section. For purposes of this example, you will leave this blank. In the Sign Here section, sign your name and date. List your occupation and phone number. Since you are currently in school, list your occupation as Student. Note: Before signing the return, be sure to read the section above your signature. It is important to know you are responsible for all of the information contained within the tax return. You can leave the Paid Preparer Use Only blank since you did not pay someone else to complete the return. 362

363 Taxes Sending it off There are two ways to submit your tax return: (1) mail it to the IRS. (2) send it electronically. If you purchase a software package to complete your return, the software will ask you if you want to e-file your return, meaning send it electronically. If you do, the software will walk you through the process. If you don t, the software allows you to save and print out your return to be mailed. State tax return In addition to the federal tax return, New Mexico also requires that you file a state tax return. The state return is usually completed after completing the federal return. Most tax software packages transfer your federal tax information to the state return, so the process is fairly straightforward if you are completing your return electronically. Need help? There is lots of assistance available if you need help completing your tax return. Most places offer free assistance (if you are eligible). Eligibility is usually related to your income. Tax Help New Mexico (through CNM) and The American Association of Retired People (AARP) are organizations that offer free assistance. The irs.gov website also provides information on how to file for free (if you qualify). You can always hire a professional such as a Certified Public Accountant (CPA) or a private tax service company ($75 per hour or more) to complete your return. Tax preparation is no simple matter, so educate yourself when it comes to your tax return. 363

364 Taxes Life Smarts: Complete a basic federal income tax return using a Given the following information, complete the tax return using the attached 1040 form. - You are single and attending college out of state. - Your parents will claim you on their tax return as a dependent. - You received a 1099-INT from your bank showing you earned $ in interest. - You want $3 to go to the Presidential Campaign Fund.(It is a donation.) 364

365 Taxes 365

366 Lesson Component Description Purpose In the Financing a Family topic, the students gain a fundamental understanding of the financial obligations of having a family. Learning Objectives 1. Identifies the costs of raising a family. 2. Evaluates the cost of getting married and divorced. 3. Analyzes the various expenses of raising children. 4. Examines the importance of saving for a child s college education. Time Required 200 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework for the teacher and the student. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students research the costs that it takes to raise a family. Have the students share Assessment their research with the class. Quiz 10 questions (5) True/False; (5) Multiple Choice Financing a Family Quiz Key 1.T 2.T 3.T 4.F 5.T 6.B 7.D 8.B 9.D 10.A Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Define appropriate quantities for the purpose of descriptive modeling (N-Q 2). 3. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3).

367 4. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). 5. Understand that the graph of an equation in two variables is the set of all its solutions plotted in the coordinate plane, often forming a curve (which could be a line) (A-REI 10). 6. Recognize situations in which one quantity changes at a constant rate per unit interval relative to another (F-LE). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 3. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 4. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 5. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 6. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 7. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 9. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 10. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 11. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 12. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 13. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 3. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4).

368 4. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 5. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 6. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 7. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 8. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 9. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 10. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 11. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources None Video Links Cost of Raising Kids: Cost to Raise a Child Life Smart Applications 1. Computes the cost of financing a family.

369 Name Date True or False Questions: The total average cost of raising a child from birth to age 18 is $389, When starting a family, you should take into account childcare expenses as part of the cost of financing a family. 3. If you decide to have children, you should take into account the cost of a college education for them and begin saving for that Purpose. 4. If things don t work out in a marriage and divorce occurs, it would be safe to say that there are no costs involved when getting a divorce. 5. Things don t work out in your marriage, and you end up getting divorce. The court rules that you need to pay child support. You can expect to pay anywhere from $200 to more than $1,000. Multiple Choice Questions: Which of the following is not considered a cost in raising children: a. School b. Employment c. Education d. Day care 7. Expenses in raising a child include: a. Health care and child care b. Housing, food, and clothing c. Schooling d. All of the above 8. You decide to get married and have a wedding. Which of the following decisions is the most financially sound: a. Have the biggest and most expensive wedding you can afford b. Consider having a smaller wedding so as to not create lots of debt c. Have a gigantic wedding because you never know how long you will stay together d. Take out a loan from a financial institution to finance it 9. In planning for your child s education, you should consider which of the following: a. The cost of tuition for Ivy League schools b. The cost of tuition for private schools c. The cost of tuition for public schools d. All of the above 10. The cost of raising children will vary based on: a. Your income b. College education c. The amount your neighbors spend on their children d. None of the above

370 Sequence: - Solicit class understanding of the topic. - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Key Points: - Weddings can be expensive. - According to Association of Bridal Consultants, the average cost of a wedding is $28,082. Teacher Tips: - Engagement Have the students go through the wedding planning list in the Student Guide. - Check for Understanding Ask the students if they agree or disagree with the costs associated with a wedding. Have them explain their answers and determine if they are providing accurate statements. Large Group Discussion: - Ask the students what kind of wedding they want (if they plan on getting married). Who will pay for it? Teacher Reflection:

371 Financing a Family Lots to Think About Life Smarts: 1. Based on information provided, compute the cost of financing a family. The wedding There have been many romantic comedies written about this important event. Getting married, for many couples, represents the culmination of a lifetime spent planning and dreaming about a day that is a statement about their devotion to each other and an example of how their lives together will be going forward. For most couples, this day never comes off without at least one minor mishap. Even if everything goes according to plan, one looming reality is left for the newlyweds: the outrageous expense! The following list represents a possible list of items that are included in an average wedding: Nusenda Federal Credit Union. All rights reserved.

372 Financing a Family Key Point: - Review the wedding planning list in the Student Guide with the students. Teacher Reflection: 372

373 Financing a Family Average Cost of Wedding Attire & Accessories $1,640 Wedding Dress Dress Accessories Headpiece and or Veil Tuxedo / Suit / Other Accessories Tuxedo / Suit / Other Rent / Purchase Beauty & Spa $120 Makeup Service Hair Service Manicure & Pedicure Entertainment $1,150 DJ Live Band Musician / Soloist / Ensemble Flowers & Decorations $1,430 Boutonnieres, Corsages Bridal Bouquets Bridesmaid Bouquet Ceremony Decorations Ceremony Flower Arrangements Flower Girl Flowers Flower Petals Reception Decorations Reception Flower Arrangements Reception Table Centerpieces Gifts & Favors $613 Gifts for Attendants Gifts for Parents Tips (for all services) Wedding Favors Invitations $800 Ceremony Programs Engagement Announcements Guest Book Invitations & Reply Cards Postage Reception Menus Save the Date Cards Table Name and Escort/Place Cards Thank You Cards Jewelry $3,730 Engagement Ring 373

374 Slide 2 (Continued) Financing a Family Key Points: - Review the wedding planning list in the Student Guide with the students. - Point out that spending less on a wedding might entail a better start financially together as a couple, because debt is kept at a minimum. Teacher Reflection: 374

375 Financing a Family Wedding Band Photography & Video $2,500 Digital or Photo CD/DVD Engagement Session Prints and/or Enlargements Traditional Leather-bound Album Wedding Photographer Wedding Videographer Planner Consultant $1,500 A La Carte Services Day of Coordinator For Getting Started Full Service Month of Direction Transportation $400 Limo Rental Other Transportation Venue, Catering & Rentals $10,200 Ceremony Accessories Ceremony Location Ceremony Officiator Hotel Room for After Reception Reception Accessories Reception Bar Service Reception Food Service Reception Location Reception Rentals Rehearsal Dinner Wedding Cake/Dessert Marriage License $70 Honeymoon $3,700 Average Total Cost of Wedding $23,478 Depending on the level of extravagance you choose, expect to pay somewhere in the range of $28,000 for that dream wedding. Keep in mind; this is the cost of an average wedding. People who choose to pay the $70 for a marriage license and get married at the local courthouse by a judge are averaged in with the wealthy people who spend tens of thousands of dollars on over the top celebrations. Whichever category you choose for your special day, remember that proper budgeting can help make the occasion a memorable one. Overspending, debt, and regret are difficult circumstances for any couple beginning a life together. 375

376 Slide 3 Financing a Family Key Points: - The total average cost of raising a child from birth to age 18 will be $389,670 using a 3% rate of inflation. - Expenses to raise a child include housing, food, clothing, health care, child care, and schooling. Other expenses to be considered are family vacations, birthday gifts, music lessons, and other activities. Teacher Tips: - Engagement Have the students go through the Cost of Raising Children table in the Student Guide. Notes: One table is based on a dual-parent family; the other is based on a single-parent family. In addition, each table is divided by costs based on income level. - Check for Understanding Ask the students to give their opinions on the expenses in the table. Do they agree or disagree? Have them explain their answers. Teacher Reflection: 376

377 Financing a Family The cost of raising children According to the Department of Health and Human Services, the basic cost of raising a child in 2015 is $4,020. The total average cost of raising a child from birth to age 18 will be $389,670 using a rate of 3% inflation. Expenses in raising a child include housing, food, clothing, health care, child care, and schooling. Other expenses to be considered are family vacations, birthday gifts, music lessons, and other activities. 377

378 Slides 3 (Continued) and 4 Financing a Family Key Points: - Cost estimates on raising a child born in 2011 does not account for college savings. - Lower income groups will spend an average of $212,000; higher earners will average $490,000 to raise a child. - The greatest share of these expenses include: 30% for housing; 18% for child care; and 1% for food. Teacher Tips: - Engagement Ask the students if they have ever been in child care. If so, do they know how much it costs their parents? Ask if they have ever taken care of children for relatives or neighbors? How much did they receive in pay for that? - Check for Understanding Ask the students if they think the amount given in the tables for child care is accurate. Have them explain their reasoning. Teacher Reflection: 378

379 Financing a Family The U.S. Department of Agriculture states that parents will spend an average of $245,340 to raise a child that was born in 2013 until the age of 18, not accounting for college savings. Lower income groups will spend an average of $145,500; higher earners will average $455,000 to raise a child. The greatest share of these expenses include: 30% for housing; 18% for child care; and 1% for food. In summary, several factors influence how much is spent to raise a child. The largest factor is clearly the family income. Child care: taking care of children The high cost of child care is difficult for many families. Nearly 11 million children under the age of five are averaging 35 hours a week in some kind of child care setting. The U.S. Department of Health and Human Services (HHS) recommends that families spend no more than 10% on child care expenses. In 2013, in 35 states, the average annual cost of child care for an infant was higher than a year s tuition and fees at a four-year public college. In 2014, child care fees for two children (an infant and a four-year old) in a child care center exceeded the annual median rent payments in every state. 379

380 Slide 4 (Continued) Financing a Family Key Points: - The average annual cost of child care for an infant can be higher than a year s tuition and fees at a four-year public college. - In New Mexico, the average annual cost of full-time care child care for an infant is $6,483; for a four-year old is $6,145; and a school-aged child is $3,877 (according to a report by Child Care Aware of America). Teacher Reflection: 380

381 Financing a Family In New Mexico, the average annual cost of full-time care at a child care center for an infant is $7,523; a four-year old is $6,868; and for a school-aged child is $3,366 (according to a report by Child Care Aware of America). Also, New Mexico ranks 35th in affordable child care for an infant in a center based on the percentage of state median income for a two-parent family. New Mexico ranks 27th for a four-year old in a center and 25th for a school-aged child. 381

382 Slides 5 and 6 Financing a Family Key Points: - Ivy League school tuition averages $40,000 per year; private college tuition averages $31,750 per year. - Public university with in-state resident tuition averages $9,450 per year, nationally. - The historical rates of college tuitions have increased 6% annually over the last 10 years, according to the College Board. - Projections in about 18 years: Tuition for a private college will run about $90,700 and $27,000 for a public university for a year of tuition for an in-state resident. - If you plan on having children, start thinking early about the cost of their education. - The No. 1 reason for divorce in our country is disagreement over finances. - Although no one intends to divorce when getting married, today s statistics indicate there is around a 50% divorce rate in the United States. - Getting divorced costs money; it s not free and can lead to many financial setbacks. Teacher Tips: - Engagement Ask the students to recall from the Cost of College topic how much their college educations will cost. - Check for Understanding Determine if their answers are accurate based on where they will attend college. Teacher Reflection: 382

383 Financing a Family Cost of college The cost of a college education varies widely. Will your child attend an Ivy League School, where one year s tuition could cost $40,000? A private college, where tuition averages $31,750 for the year? Or a public university, where an in-state resident will pay annual tuition costs of $9,450? Or another option? If you are planning for the future, keep in mind a key factor. The historical rates of college tuitions have increased 6% annually over the last 10 years, according to the College Board. That figure is higher than the rates of inflation and personal income have risen in the same period. This is based on a projection that in 2031, tuition for a private college will run about $90,700, or $27,000 for an in-state public university. These costs do not include items such as books, supplies, room and board, equipment, and transportation. Based on the above facts, consider saving early for a college education for your children. What if things don t work out? The next time you are standing in the checkout line of your local grocery store, check out one of the magazines. It will confirm for you that American culture is obsessed with the lives of movie stars, athletes, and politicians. We are never surprised that these people who spend so much of their time in the public eye never seem to have the time to work out their marital troubles. What is shocking is the cost of divorce for these celebrities. Even for the rest of us, the costs associated with divorce can be staggering. For the average couple seeking a divorce, it is not unreasonable to expect to pay at least $1,500 for an uncontested divorce. This is a divorce in which both husband and wife agree to separate without fighting over assets or child custody. The costs included in this type of divorce are usually for court costs and filing paperwork to complete the divorce process legally. Unfortunately, most divorces are contested, with one or both parties locked in an emotional war against one another. When this situation arises, the costs can be ridiculously inflated. 383

384 Financing a Family Key Points: - For the average couple seeking a divorce, it is not unreasonable to expect to pay at least $1,500 for an uncontested divorce. - The costs included in this type of divorce include court costs and filing paperwork to complete the divorce process legally. - A large portion of the expense often is lawyer s fees, which can range from $75 to $400 per hour (depending on the area of the country in which you live). - Additionally, the cost of selling a family home (in which both individuals have equity ownership) can be in the tens of thousands. - Payments for child support can be as little as $200 to more than $1,000 per child (depending on the agreements made by the parents during the divorce hearing). Teacher Tips: - Engagement Ask the students what percentage of the population they think intends to get married and never divorce. - Check for Understanding Ask the students if they understand the financial complications of getting divorced and the financial obligations if children are involved. Determine the accuracy of their answers. Teacher Reflection: 384

385 Financing a Family A large portion of the expense often goes to pay for lawyer fees, which can range from $75 to $400 per hour (depending on the area of the country in which you live). The cost of selling a family home (in which both individuals have equity ownership) can be in the tens of thousands. Therapy may be necessary for either spouse or the children, if there are any; this can be $45 to $350 per hour. Sometimes, if the couple owns a family business, an accountant must make a financial analysis of the value of the business and other assets so a proper split can be made. These costs vary but can be up to $7,500 for a small business. Everything is taken into consideration during this process. Pensions, life insurance policy, property, cash savings, and equity in property become part of the community property of the married couple. It is easy to see that the costs add up quickly; the longer the dispute over stuff goes on, the more expensive the final divorce will cost. Child support On the subject of child support and divorce, cost rules are set by the state in which you live. These costs can vary greatly but are normally tied to the amount of time each child spends with each parent during a given month and how much money each parent makes. This added expense can add a large financial burden to each parent. Payments for child support can range from $200 to more than $1,000 per child per month, depending on the agreement made by the parents during divorce hearings. You must take all these factors and expenses into consideration, as life might throw you a curve ball that you never saw coming. Based on the information covered in this topic, determine how much you think it would cost for each of the following items and in total. Compare your answers with other students in the class. Cost of wedding: Cost of raising two children from birth to age 17: Cost of sending two children to a public college: Total costs: 385

386 Lesson Component Description Purpose In the Identity Theft topic, the students gain a fundamental understanding of what identity theft is and how to protect themselves from becoming a victim. Learning Objectives 1. Explores what identity theft is. 2. Assesses how to repair your identity after it s been stolen. 3. Identifies how to minimize risk of identity theft. Time Required 150 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the student follows along with the Student Guide. The guides are merely a framework for the teacher and the students. Implementing additional resources to engage the students is highly recommended. Homework 1. Write a two-page report that teaches your friends about identity theft. Feel free to conduct an Assessment Internet search and use the websites in this section to gather your information. Your report should include the following: 12 font, double spaced, title, and proper grammar. Quiz 10 questions (5 True/False; 5 Multiple Choice) Identity Theft Quiz Key 1.F 2.T 3.F 4.F 5.F 6.D 7.C 8.D 9.D 10.A Alignment to Standards Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2).

387 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2).

388 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources Video Links Identity Theft Speaker and Privacy Expert: Identity Theft Speaker John Sileo: Protecting Your Identity Life Smart Applications 1. Research paper explaining what identity theft is and how to protect yourself from it.

389 Name Date True or False Questions: Your financial institution sends you a text message requesting your Social Security number. You should text it back immediately. 2. Your doctor s office calls to schedule a check-up. The person on the phone asks you for your Social Security number. You should tell them you don t feel comfortable giving that information over the phone. 3. It s not necessary to check your credit card transactions periodically throughout the month. 4. It s not wise to download apps to your phone that alert you of any personal financial transactions that occur. 5. If your credit card gets denied from a merchant, you should shred it rather than call the credit card company to find out why it got rejected. Multiple Choice Questions: Which of the following is considered a nationwide consumer credit reporting company? a. TransUnion b. Equifax c. Experian d. All of the above 7. You suspect your identity has been stolen. What s the first step you should take? a. Obtain a free credit report b. File a report with the local police department c. Contact all of the credit providers d. None of the above on your credit report 8. You are explaining to a friend that there are steps to protect one s identity from being stolen. Which of the following are some key points to mention? a. Order a free credit report at least once a year b. Pay attention to billing cycles and review monthly statements for inaccurate information c. Shred or destroy sensitive documents rather than throw them in the trash d. All of the above 9. You decide to set up electronic bill paying. It s advised that you: a. Protect each account with a password b. Change your passwords periodically c. None of the above d. a and b 10. The FACT Act was signed into law allowing you to: a. Obtain a free credit months b. Take discounts from credit report once every 12 card companies if you pay on time c. Check your credit report as many d. None of the above times as you want during the year

390 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slides 2 3 Vocabulary: - Identity theft Stealing another person s identity for the purpose of establishing new credit using their name. - Credit report Every person s credit is tracked by Equifax, Experian, and TransUnion, which are the three (3) nationwide consumer credit reporting companies that work in conjunction with every financial institution, creditor and lender. - Credit Score Your personal score that relates to your creditworthiness that is used by lending institutions, employers, and other agencies to determine the likelihood that a person will repay his or her debts. Your score ranges from 300 to 850 with 850 being the best score you can have. Key Points: - Emphasize to the students that protecting their identity is one of the most important things they can do in this age of technology. - Let the students know that they can obtain a free credit report once every 12 months from each of the three consumer credit reporting companies. Teacher Tips: - Engagement Ask the students if they, their parents, or anyone they know has ever been a victim of identity theft. - Check for Understanding Have the students brainstorm ways that they can maintain a good credit score. Teacher Reflection:

391 Identity Theft Take Measures to Protect Yourself from Being a Victim Identity theft Identity theft is one of the worst types of thefts that can occur. When someone steals your identity, they take away your financial life and trust. People who steal your identity want to establish new credit using your name. The problem is the stolen credit turns to bad credit because of excessive purchases that are not paid when due. Your account information becomes tied to the mailing address of the thief; you may be unaware of the transactions taking place. Early detection is difficult because you don t receive account information immediately. This is one of the reasons why it is important to keep track of your monthly statements (banks/credit unions, credit cards, utilities, etc.) to ensure that you are receiving all of your bills in a timely manner. It s also recommended that you check your credit card statements regularly for any unfamiliar transactions. With today s technology, you should have access to all of your accounts electronically. You might consider setting alerts to notify you of transactions as they occur Nusenda Federal Credit Union. All rights reserved.

392 Identity Theft Becoming aware of identity theft and your credit score As mentioned above, it is important to track your purchases throughout the month. Reviewing your credit report is also vital in detecting identity theft. Many people whose identity has been stolen will begin receiving calls from collection agencies. Worse, they will be denied credit when attempting to make purchases. If you conduct a transaction with a credit card that is denied, consider researching why your card was not valid. If your identity is stolen, it could affect your credit score. Having a good credit score is crucial to your financial success. The better your score the more trust there is from financial institutions and the likelihood to lend you money. Employers might even consider your credit score in hiring you. They feel that if you have a good credit score, you do a good job of managing your finances, which translates into a productive employee. Your credit score ranges between 300 and 850, with 850 being the most creditworthy. The best way to maintain a high credit score is to manage your debt responsibly. In addition, here are some other ways to develop a good credit score. 1. Pay your bills on time. 2. Pay more than the minimum balance to lower your debt. 3. Use debit cards rather than credit cards. 4. If you find yourself in debt, contact your lenders to negotiate a payment plan that you can afford. Most lenders are willing to work with you because it might be cheaper for them to work with you than to hire a collection agency. They could also run the risk that your debts end up being declared in a bankruptcy proceeding, in which case they may never get their money. 392

393 Slides 4 8 Identity Theft Vocabulary: - Fair and Accurate Credit Transaction Act (FACT Act) a federal law signed into law in 2003 that allows you to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies: Equifax, Experian, and TransUnion. Key Points: - What to do if you realize that your identity has been stolen: o Contact all credit providers. o Dispute fraudulent transactions. o File a report with the local police. o Obtain your credit score report. Teacher Tips: - Engagement Have the students complete the activity in the Student Guide. - Check for Understanding Check students answers for accuracy. Teacher Reflection: 393

394 Identity Theft Repairing your identity What happens if you find out that your identity has been stolen? There are several steps required to repair your identity once this occurs. First, contact all of the credit providers on your credit report. Inform them you suspect your identity has been stolen and that you are working towards reversing any fraudulent transactions. Next, dispute fraudulent accounts and transactions that appear on your statements. Normally, there are contact numbers listed next to each transaction. File a report with the local police department, so there is record of your stolen identity. By doing so, the police may be able to find the thieves. In addition, you will be able to provide an official record to creditors that your identity was compromised. Lastly, the Fair and Accurate Credit Transaction Act (FACT Act), a federal law signed into law in 2003, allows you to request and obtain a free credit report once every twelve months from each of the three nationwide consumer credit reporting companies: Equifax, Experian, and TransUnion. These agencies can be contacted for free through the AnnualCreditReport.com website that was set up in cooperation with the Federal Trade Commission (FTC). Answer the following questions by accessing the following website: 1. How long does an official fraud alert stay on your account? Answer: Initial Alert stays on file for 90 days. 2. How long will an extended alert stay in your file? Answer: 7 years 3. What kind of information does your credit report contain? Answer: Credit Inquiries (every time you apply for credit) Credit Information (loans you have, credit card balances, if you make payments on time or pay late) Collections Information (old unpaid credit cards, unpaid medical bills, unpaid utility bills) 394

395 Slides 6 8 (Continued) Identity Theft Key Points: - Ways to prevent identity theft: o Order a copy of your credit report every year. o Pay attention to billing cycles. o Destroy sensitive documents. o Don t provide sensitive information over the phone. o Never give your Social Security number over the phone. o Keep personal information in a safe place and locked up. o Guard from mail theft. o Regularly change your passwords to personal accounts. Teacher Tips: - Engagement Have the students research the Internet to determine public figures who have had their identity stolen. - Check for Understanding Have the students prepare a two-page report on identity theft. (see Student Guide assignment) Teacher Reflection: 395

396 Identity Theft Minimizing your risk of identity theft Hopefully, you will never have to repair your identity because someone has stolen it. It s better to err on the side of caution, however, than to risk someone taking your identity. For this reason, there are a few preventive measures you can take: (1) First, order copies of your credit report from each of the three national credit bureaus, mentioned above, every year; (2) Pay attention to your billing cycles, and review your monthly statements for inaccurate information; (3) Always destroy sensitive documents prior to throwing them away. Invest in a home shredder and shred them; (4) Never provide personal information on the phone, through the mail, or over the Internet. Be prepared to tell someone on the phone that you feel uncomfortable giving them that information. Also, never give your Social Security number to anyone over the phone; (5) Keep items with personal information in a secure place (e.g., a safe or filing cabinet that locks). (6) Guard your mail. This is difficult for most people because they work during the day when mail is delivered. Thus, it s wise to have statements and bills sent to you electronically. Make sure the organizations you need to give personal information to are credible, and ask why and how your information will be used. Personal accounts that can be accessed electronically should be protected with passwords. (These passwords should be changed regularly). Lastly, it s wise to limit the amount of personal information carried in your wallet, purse, and vehicle. Important contact information Equifax: P.O. Box Atlanta, Georgia Experian: P.O. Box 9554 Allen, Texas TransUnion: P.O. Box 6790 Fullerton, CA

397 Identity Theft Did you know? Will Smith (actor) and Tiger Woods (pro golfer) were both victims of identity theft? Unlike them, you are still young and probably don t have nearly the assets and fortune that they have. However, what you do have in common is a Social Security number that identity thieves would like to get their hands on. Assignment: Now that you have educated yourself about identity theft, write a two-page report that teaches your friends about identity theft. Feel free to conduct an Internet search and use the websites in this section to gather your information. Your report should be 12-pt. font, double spaced, have a title, and employ proper grammar. 397

398 Lesson Component Description Purpose In the Predatory Lending topic, the students gain a fundamental understanding of what predatory lending is and how to protect themselves from becoming victims. Learning Objectives 1. Identifies what predatory lending is. 2. Assesses how to stay away from predatory lending and payday loan companies. 3. Examines how predatory lending practices can financially hurt borrowers with their extraordinary high interest and fee charges. Time Required 150 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follows along with the Student Guide. The guides are merely a framework for the teacher and the students. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students type or write a one-page report on predatory lending and payday loans. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Predatory Lending Quiz Key 1.F 2.F 3.F 4.F 5.T 6.D 7.A 8.C 9.D 10.D Alignment to Standards Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 3. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1).

399 Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10).

400 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources None Video Links Predatory Lending: id=07c1029d920aade72aa307c1029d920aade72aa3&first=0&form=nvpfvr&qpvt=video+pre datory+lending Payday Loans Trap Borrowers: Life Smart Applications 1. Determines the federal laws that assist consumers from becoming victims of predatory lending.

401 Name Date True or False Questions: You are feeling strapped for money. You should go to a payday loan company to borrow the amount you need. 2. You overhear someone explaining that predatory lending is a fair practice. Is this statement correct? 3. Most payday lenders don t make much money because they charge very little interest. 4. When you are borrowing money, you should not pay attention to the APR. 5. You have an emergency fund set up for a rainy day. This should help you stay away from a payday loan company. Multiple Choice Questions: Predatory lenders take advantage of those people who have: a. No credit b. Poor credit c. Financial difficulties d. All of the above 7. Payday loan companies are normally located in: a. Poor neighborhoods b. Rich neighborhoods c. Near schools d. None of the above 8. The best way to never become a victim of predatory lending is to: a. Educate yourself about financial matters b. Stay out of debt c. Both a and b d. None of the above 9. Which of the following laws protect consumers from unfair lending practices? a. Equal Credit Opportunity Act b. Fair Credit Reporting Act c. Fair Credit Billing Act d. All of the above 10. If you find yourself in a situation to borrow money, you should consider which of the following: a. Credit union b. Bank c. Emergency fund d. All of the above

402 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Vocabulary: - Pay Day Loans A short-term loan given in advance of your next paycheck. - They usually have a higher interest rate and fees associated with the loan. Key Points: - Predatory lenders target those who live beyond their means while carrying a large amount of debt. Teacher Tips: - Engagement Ask the students to list situations where most people get into trouble with debt. - Check for Understanding Have the students complete the activity in the Student Guide and check for accuracy. Large Group Discussion: - Where do all the billions of dollars that people pay in interest and fees on debt really go? Teacher Reflection:

403 Predatory Lending Don t Become a Victim Life Smarts: 1. Determine the federal laws that assist consumers from becoming victims of predatory lending. What is predatory lending? Predatory lending is the unfair, deceptive, and possibly fraudulent practice of some lenders during the loan process. A predatory lender entices a borrower into taking a loan with high fees and interest rates and strips you of your equity. Predatory lenders take advantage of consumers who have no credit, poor credit, and who might have temporary financial difficulties. They need cash and are desperate to make a purchase, causing financial hardship. Loans offered by predatory lenders are usually referred to as Payday Loans. According to a survey by The Pew Charitable Trust, 5.5% of adults nationwide have used this type of service. Most payday loan borrowers are white females 25 to 44 years old. The survey also found that 8% of renters earning between $40,000 and $100,000 have used payday loans. People from all demographics use these types of services as a way to cover an unexpected emergency, such as a car repair or medical expense, until the next check comes in. In simple terms, payday loans exist to help people who don t have enough money to get by until their next paycheck Nusenda Federal Credit Union. All rights reserved.

404 Slide 3 Predatory Lending Key Points: - A small fee placed on a loan given until the next paycheck can add up to a sizable amount if extended over a year. Teacher Tips: - Engagement Have each student pick a number from 1 to 10. Multiply that number times 100 and get an amount of loan they will borrow. Have the students use their birthdays as the number of months they will pay interest on the loan. Finally, their birth month from1 to 12 will be the interest they will pay monthly for the term of the loan. Let the students swap calculations to check each other s work. - Check for Understanding Ask the students what each learned from the above engagement activity. Large Group Discussion: - Discuss with the class whether it now makes sense that they should pay close attention to the terms of any contract for a loan prior to agreeing to borrow money from one of these lenders. Teacher Reflection: 404

405 Predatory Lending Predatory practices exist in almost every area of finance: mortgage lending, credit cards, student loans, and auto loans. Many working families struggle to manage debt while coping with mostly stagnant incomes. Many have had a substantial decrease in wealth. In recent years, foreclosures have wiped out nearly $2 trillion in family wealth. Automobile interest rates have cost consumers nearly $26 billion each year. Private student loans vs. safer federal loans have cost lower credit tier individuals up to 68% more. Your best defense against this type of practice is to educate yourself about financial matters so as to stay out of debt, thus never having to succumb to lenders that will take advantage of you, your money, and your future. 1. Name three ways to prevent yourself from having to borrow money from a payday lender. Answers will vary: Develop an emergency saving fund; budget; if you can t afford it don t buy it; don t impulse -buy, determine if the purchase is a need or a want. How does predatory lending work? A person needs money, so he walks into a payday loan business and postdates a personal check for up to 14 days ahead of his next paycheck. The check amount is for the amount of money borrowed plus the fees charged by the lender making the loan. He receives the amount of the loan in cash or check. The payday loan business agrees not to deposit his check until an agreed-upon date. Example: You decide to take out a two-week payday loan for $200. You write a postdated check for $220 to cover the loan amount and associated fees charged by the business. The payday loan business gives you $200 in cash knowing that in two weeks, they can cash your check for $220. If we break down the $20 fee per day, it comes to $1.43 per day: $20/14 days = $

406 Predatory Lending Although this doesn t seem like much, what happens if you can t afford to pay the loan off in two weeks, because you used the money to pay other bills? After two more weeks in fees, (a total of four weeks), you owe a total of $240: $1.43 x 28 days = $ $200 in principal = $240 As each pay period comes and goes, you have trouble paying off the loan. You are living paycheck to paycheck and bills keep popping up that need to be paid. Eventually, an entire year goes by, and you still haven t paid off the loan balance. How much will you owe after one year? $1.43 x 365 days = $ Wow!!!! Let s break this down to an Annual Percentage Rate (APR) on the loan: ($521.95/$200) x 100 equals approximately 261% Ouch! As you can see, the payday loan business profited more than twice what you owed them originally. Most states regulate how much a payday lender can hold you accountable for over a long period of time. It can be extremely expensive for borrowers if they continue to roll over the loans for several pay periods. 1. Let s say you want to borrow $500 for two weeks from a payday lender that charges a $100 fee for the loan. It takes you a year before you are able to pay them back. Compute the APR below: Answer: $100/14 days = $7.14 per day; $7.14 x 365 days = $2,606.10; ($2,606.10/$500) x 100) = % 406

407 Slides: 4, 5, & 6 Predatory Lending Vocabulary: - Balloon Payment A larger-than-normal payment on a loan usually paid at the end of the loan term. Key Points: - It often costs more than double the amount borrowed to pay back a payday loan. - Car title loans can charge as much as 300% the APR of the car used as collateral for the loan. - A mortgage loan can have a higher than usual interest rate as well as a longer payoff time frame. Teacher Tips: - Engagement Have the class compare the amount they would receive if they saved $100 at 3% interest a month for a year to the amount they would owe making payments on $100 at 30% interest for a year. - Check for Understanding Does it make sense to borrow money at the high interest rates charged by these predatory lenders? Explain. Large Group Discussion: - Ask students what they think being a slave to interest means. Teacher Reflection: 407

408 Predatory Lending Background on pay day loans The payday lending industry operates about 22,000 locations and makes loans at an estimated amount of $27 billion each year. There are more payday lender outlets than McDonald s. Their interest rates range from 300 to 500%. These loans result in about $3.5 billion in fees each year. The average payday lender customer will make five or more loans in a year. A typical payday loan of $325 is flipped about eight times, which results in about $468 in interest. Therefore, to fully repay the loan, it takes $793. The borrower is in debt for about 212 days each year. Payday lenders offer convenience for their customers. Although you may be able to apply for a loan through a payday lender online, most people go to stores in their neighborhood. These lenders don t request much information; the application usually consists of just your employment, banking (if possible some payday loan users do not have banks), and contact information. They might request contact information for family and friends, too, in case you don t pay. Payday lenders rarely check your credit, which is another reason why some people rely on them. Payday loans also stay open in the evenings and on weekends. This makes it easy for customers to visit their sites rather than more reputable credit unions and banks. Car-title loans Car-title loans cost consumers about $3.6 billion in interest each year. These loans are similar to those of payday lenders, except their term is usually 30 days and secured by the title of a vehicle owned by the borrower. They share a triple-digit interest rate and many times have a balloon (large) payment at the end of the loan period. About 7,730 car title lenders operate in 21 states and make about 1.7 million loans annually. Borrowers often renew loans about eight times and pay $2,142 in interest on a principal loan of $951. This is because the borrower usually receives a loan for one quarter of the car s value but pays 300% APR. 408

409 Slides: 7 & 8 Predatory Lending Vocabulary: - Bill Consolidation Loans borrowers take out loans to pay off many bills. The money borrowed becomes a long-term loan, where interest is paid over 15 or more years. Some of these loans share many of payday loans predatory features: a triple-digit interest rate; a balloon payment at the end of the loan s term; and critically a failure by the lender to evaluate a borrower s ability to repay. Key Points: - Having an emergency fund will help you avoid the traps set by predatory lenders. - There are laws that protect you if you feel you have been victimized by a lender. Teacher Tips: - Engagement Divide the class into four groups and have each group research one of the four separate consumer protection acts and give a presentation to the class. - Check for Understanding Ask the students: Who is responsible for protecting them from consumer fraud? Answer: It is their responsibility. Teacher Reflection: 409

410 Predatory Lending Mortgage loans Some consumers with low or irregular income, poor credit reports, or limited financial knowledge may turn to sub-prime sources for mortgage loans. Subprime mortgage brokers charge high fees and interest rates so they receive a higher commission than brokers affiliated with reputable financial organizations. Points (prepaid interest) can range from 8-10, meaning an individual will pay $8,000- $10,000 in prepaid interest on a loan for each $100,000 of principal. These brokers and lenders also offer bill consolidation loans as home equity loans. Their target consumers convert short-term debt into 15 or more years of obligation. These loans share many of payday loans predatory features: triple-digit interest rate; a balloon payment at the end of the loan s term; and critically failure by the lenders to evaluate borrowers ability to repay. Tips for staying away from payday loans Stay away from payday lenders. If you are in desperate need of a loan, go to a credit union or a bank. In response to consumers financial difficulties, credit unions have created short-term loans with low interest fees to help people avoid using payday lenders. Set up an emergency fund where a percentage of your wages or salary is deposited into the account every pay day. You ll be amazed at how quickly that emergency fund grows. You probably won t miss the money if you never see it. You will be pleasantly surprised when you need to dip into this account for an emergency without having to borrow money. Start now when you are young, and keep this great habit throughout your life. Resources available when dealing with payday lenders Federal laws protecting consumers specify the rights and responsibilities for finding appropriate credit and signing credit agreements and contracts. The Consumer Credit Protection Act is divided into four other acts: (1) the Equal Credit Opportunity Act (2) the Fair Credit Reporting Act (3) Fair Credit Billing Act (4) Truth in Lending Act. 410

411 Predatory Lending Research each of the following acts and explain how they might keep consumers from becoming victims of payday lenders: Equal Credit Opportunity Act Equal Credit Opportunity Act Answers will vary: prohibits discrimination in credit transactions on the basis of certain personal characteristics, such as race, color, religion, national origin, sex, marital status, age, because you receive public assistance, or because you've exercised your rights under the Consumer Credit Protection Act. Fair Credit Reporting Act Fair Credit Reporting Act Answers will vary: requires that a credit card company promptly credits your payments and corrects mistakes on your bill without damage to your credit score. It also lets you dispute billing errors on your credit card and withhold payment for damaged goods. Fair Credit Billing Act Fair Credit Billing Act Answers will vary: protect consumers from unfair billing practices. Truth in Lending Act Truth-in-Lending Act Answers will vary: inform consumers of their credit by requiring disclosures about terms and cost and how they are calculated. 411

412 Lesson Component Description Purpose In the Online Purchases topic, the students gain a fundamental understanding of the advantages and disadvantages of shopping online. Learning Objectives 1. Examines various items that are advantageous to purchase online and the items that are not. 2. Identifies ways that online purchasing can hurt a budget. 3. Analyzes the process of online purchasing and how it works. 4. Determines methods for protecting personal information when shopping online. Time Required 150 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the student follows along with the Student Guide. The guides are merely a framework for the teacher and the students. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students develop a list of 10 items, the websites used, and the amount spent for 10 Assessment items that they, their parents, or their friends purchased online in the last year. Have each share the list with the class. Quiz 10 questions (5 True/False; 5 Multiple Choice) Online Purchases Quiz Key 1.F 2.T 3.F 4.F 5.T 6.D 7.B 8.C 9.D 10.D Alignment to Standards Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d).

413 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 6. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 7. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 8. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 9. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 10. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 11. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 12. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 13. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 6. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 7. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 8. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 9. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 10. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4).

414 11. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources None Video Links None Life Smart Applications None

415 Name Date True or False Questions: Books are not advantageous items to purchase online. 2. Electronics are usually cheaper online because the merchants have less operating costs. 3. Purchasing groceries online is a good idea because overall it s cheaper. 4. Purchasing large and heavy items such as appliances online is a good idea because shipping costs are relatively cheap to transport these items. 5. Making purchases online can hurt your budget, especially if you store your credit card information online for convenience Purposes. Multiple Choice Questions: When you make purchase online, you should determine: a. Can you afford it b. Do you need it c. Can you live without it d. All of the above 7. When making purchases online, you should: a. Not be concerned with identity theft b. Place it as a line item in your budget c. Both a and b d. None of the above 8. The least common method of paying for items online is: a. Using a credit card b. Through PayPal c. With an E-Check d. None of the above 9. Which of the following are considered disadvantages of purchasing online: a. Difficulty returning defective items b. Potential identity theft c. Potential fraud by merchants d. All of the above 10. Some of the steps you should take when purchasing online include: a. Be cautious in the personal information you offer b. Always check for an SSL logo c. Use a computer that has an antivirus and anti-phishing program d. All of the above

416 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slide 2 Key Points: - Online purchases are becoming more popular due to the simplicity of shopping from home. - Searching for the lowest rates for travel and accommodations are also very popular for consumers today. - Buying and selling used items via the Internet is becoming more and more commonplace. Teacher Tips: - Engagement Have the students search for the lowest price ticket for a plane trip to Bora Bora. - Check for Understanding Determine any difficulties the students had in completing the engagement activity. Large Group Discussion: - Discuss with the class if they believe it would be wise to pursue a career as a travel agent and have them provide rationale for their opinions. Teacher Reflection:

417 Online Purchases The Smart Way Suggested products to buy online Most of us have made a purchase online. Whether you have or not, this topic provides tips to guide you during your next online purchase. An item that might be advantageous to purchase from the Internet is books. Online collections normally surpass what a bookstore has in inventory. You can purchase used books at huge discounts. Plus, ebooks tend to be cheaper than the paper versions. You can download an ebook purchase to your laptop, home computer, touchpad, and/or smart phone. Doing so enables you access at different locations. Another suggestion is to purchase traveling accommodations and transportation online. There are many travel websites that offer great deals and compete for the best price. Some common travel sites include: Nusenda Federal Credit Union. All rights reserved.

418 Slides 3 & 4 Online Purchases Key Points: - There are some items that you may not want to purchase online. Large or heavy items may prove costly to ship to you from across the country. - Grocery shopping can present other challenges for online shoppers. - Online purchases can add up quickly and cost consumers more money in the end because it s simple to add to the online cart. Teacher Tips: - Engagement Ask the students to add up all the songs they have purchased on itunes. - Check for Understanding Ask the students about how the ability to buy a single song versus an entire CD revolutionized the way we now purchase music. Large Group Discussion: - In the future, how much time do you think we will spend as a society buying things online vs. physically going to a store to get the things we want? Teacher Reflection: 418

419 Online Purchases Purchasing electronics online is another moneysaver. Be careful, however, when purchasing electronics online, because they are fragile. Make sure to check the return policy, as it may be inconvenient if you have to return the item. Last, used goods are becoming more popular to purchase online. There is usually a wider selection to choose from than going to a thrift store. Used items such as books, magazines, designer bags, and furniture are a few items to consider purchasing online. Some sites that offer used items include: What are some things you have purchased online? Answers will vary. Be prepared to share with the rest of the class. Suggested products not to purchase online There are items you probably shouldn t purchase online, including large and/or heavy items and appliances. Shipping costs can be enormous when attempting to ship these items cross-country. It might be easier to purchase from a local store that may deliver for free or negotiate a lower price. For example, you might pay less for a floor model with a few scratches. Groceries are another item you might not choose to purchase online. They are normally cheaper in local stores, and coupons allow you to purchase many food items and toiletries cheaper. Ways online purchases can hurt your budget Using technology, you can sit in the comfort of your own home (or for that matter anywhere you have access to the Internet) to make a purchase. The days of having to get in a car to go to the store during business hours no longer exists. You can shop in the middle of the night and never have to face anyone. You re not restricted to a no shirt, no service policy. Shopping during your leisure time and within your own home has never been easier. 419

420 Slides 5 & 6 Online Purchases Key Points: - There are several online industry leaders that control a large percentage of the online sales business (e.g., Amazon, Yahoo, ebay). - Some purchases are auction-style that allow buyers to bid on items they wish to buy. - Several different methods of payment have become popular for online purchases (e.g., Paypal, E-check). Teacher Tips: - Engagement Have the students discuss and provide rationale for some of the advantages and disadvantages to using online payment services. - Check for Understanding Determine the accuracy of the students answers from the engagement activity. Teacher Reflection: 420

421 Online Purchases While this convenience might save us time and energy, does it really save us money? Let s look at some important money characteristics of online shopping. A majority of online stores keep your credit card information on file so they can set up your account with ease the next time you make a purchase. They assume you are more likely to purchase something a second and third time because you don t have to re-enter the information. Once you decide to make a purchase, you are one click away with less time to change your mind. Because music devices and ebooks are mainstream, it s easy to purchase downloaded songs and books. These items don t seem expensive; however, as time goes on, and you purchase more of them, the price adds up. For example, let s say you purchase 100 songs within a month; that s $99 without even realizing. Because you don t have to drive somewhere to purchase something, shipping costs become an added price for online purchases. Thus, the more often you make online purchases, the more shipping and handling fees are added; before you know it, the money you could have used to pay down debt or increase your savings is no longer available. Last, many online stores offer monthly subscriptions that offer discounts on purchases and shipping. If you decide to take advantage of these plans, make sure you re not buying more than needed to take advantage of the discounts; otherwise, you re throwing your money away. In summary, online purchases can be very beneficial. They save time and money if purchased appropriately. But it is wise to track your online purchases so you are fully aware of the total amount of money you re spending. Tip: Plan to put online purchases as a line item in your budget. The process of online purchasing The first step in online purchasing is determining what you want. Next, begin your search to find the product or service with the best deal. Smaller companies and individuals that don t have the resources to create a website use sites like Amazon and Yahoo, where they can display their own goods for a monthly transaction fee. Sites like ebay and Bidz provide an auction format where sellers display items for a minimum price and buyers bid on the items. Many online businesses have customer service centers on their websites where you can either call, , or chat with a live customer service representative with any questions you might have. 421

422 Online Purchases After you find the product you are looking for, retail websites have an add to cart option as well as a checkout option. Once you are ready to check out, you will see shipping and handling options that include standard, 2-3 day delivery, and overnight. Some offer free shipping with membership perks but be wary of the terms and conditions. Paying for online purchases Once you begin the checkout process, the website will require you to input the method of payment. There are several payment options; the most common payment type is by credit card. As mentioned earlier, when you enter the credit card information, you get an option to store your information. The next time you make a purchase from this website, you can bypass inputting all of your information again. Many consumers use a payment vendor such as PayPal. This process requires you to set up payment information (credit card information) with the payment vendor. Many online businesses have partnered with a business such as PayPal so that with a click of a button, the business receives their money from the payment vendor selected, and your information remains hidden from the merchant. Another form of payment is Apple Pay. The least common method of payment is with an E-Check. This option pays directly from your bank account. Your routing and account numbers are required in order to make a payment. 1. Do you think it s a good idea to save your credit card information online to make it easier to check out the next time you purchase something from the same website? Answers will vary. Be prepared to explain your opinion. 422

423 Slide 7 Online Purchases Vocabulary: - Encrypted the process of encoding messages (or information) so that eavesdroppers or hackers cannot read it but authorized parties can. Key Points: - Advantages to online purchases can include: o Convenience o Cost savings o Variety o No-pressure atmosphere o Easy comparisons of like products - Disadvantages to online purchases include: o Identity Theft o Fraud - Secure websites are identified by HTTPS Teacher Reflection: 423

424 Online Purchases Advantages and disadvantages of online purchasing The major advantage of online purchasing is convenience. You can shop anytime and anywhere you like, but be careful not to impulse purchase. Purchasing online can save money if you track your purchases and don t overspend by purchasing unnecessary items. At times, you might find more variety with online purchases and the ability to compare prices more readily than walking into a store (where limited brands might be in stock). Online purchasing also provides a no pressure atmosphere. Unlike some retail outlets where salespeople convince you to purchase something, online stores have no way to verbally force you to make a purchase. Last, online purchasing allows you to compare many products and stores by simply jumping from site to site. You don t have to hop in your car and drive from store to store to get the best deal. Some sites, like do the comparing for you to review product details on one page. There are also several disadvantages to purchasing online. First, you run the risk of identity theft. Although many sites fight this issue with security walls, there is still a chance someone can steal sensitive information such as credit card information, address, phone number, and account information. Some online merchants, unfortunately, still commit fraud. They might accept your payment and then refuse to send your item or send the wrong or a defective item. Attempting to fix your purchase with the merchant becomes quite difficult via the Internet. Thus, be wise, and attempt to purchase from reputable vendors. Tip: When entering personal information on the Internet, always make sure the Web address begins with https. The s at the end of http indicates it s a secure website, meaning that information entered will be encrypted (distorted in a coded form that is unique and difficult to interpret) when sent. Look for the https at the point of checkout when entering personal financial information. 424

425 Slides 8 & 9 Online Purchases Vocabulary: - Phishing the act of attempting to acquire information, such as usernames, passwords, and credit card details (and sometimes, indirectly, money) by masquerading as a trustworthy entity in an electronic communication. Key Points: - There are companies that provide online shopping protection. - Read the online policies of the companies you buy from before you click the submit button. - Invest in antivirus and anti-phishing programs to protect you from online fraud. Teacher Reflection: 425

426 Online Purchases Research five websites that indicate it is a secure website. List the Web address below: 1. Answers will vary Online shopping protection How else can you protect yourself when shopping online? One rule is to always be careful what type of information you are providing. For example, make sure you research the company if they ask for your Social Security number. You should almost never provide this information unless you are 100% sure it is a secure site and that the information is necessary to process your transactions. Online financial sites might require your Social Security number when you are depositing and spending money. It may also be necessary when making financial transactions, such as investing in stocks, retirement accounts, etc. Always check for an SSL logo bottom of a website when checking it out. This is a standard security symbol that establishes an encrypted link between a Web server and a browser. An SSL connection requires an SSL certificate. Below are a few examples of an SSL certificate: Always read the shipping polices prior to clicking the submit button to process your purchase. Some sellers might allow you to return the item within a specific period of time, while others may not. Last, invest in antivirus and anti-phishing programs. Antivirus software can protect your computer from viruses, and anti-phishing software protects you from sites that look reputable but actually collect personal information for illegal activities. They look like the real deal but are not. 426

427 Online Purchases Online purchasing summary Purchasing and selling online is convenient and rewarding when you find a great deal. However, always be cautious and protect yourself when purchasing online. It is wise to use a personal computer that has antivirus and anti-phishing programs installed rather than use a public or community computer to purchase items online. If something looks too good to be true, it probably is. If you don t feel 100% confident that a site is secure, leave the site immediately, and look for the product elsewhere. In addition, take steps to ensure your computer is well protected prior to submitting personal information for a purchase or sale. There are many scams out there attempting to steal your identity that could affect your credit score and cost lots of money in the long run. Be diligent and proactive in researching how to get the most out of your shopping online. 427

428 Lesson Component Description Purpose In the Avoiding Financial Mistakes topic, students gain a fundamental understanding of how to avoid financial mistakes during their lifetimes. Learning Objectives 1. Explores strategies for staying out of debt. 2. Examines methods for staying away from financial disaster. 3. Develops a plan for making wise financial choices. Time Required 150 Minutes Materials Student Guide, Teacher Guide, PowerPoint, Quiz Procedure Follow the PowerPoint and/or use the Teaching Guide as the students follow along with the Student Guide. The guides are merely a framework for the teacher and students. Implementing additional resources to engage the students is highly recommended. Homework Recommended but feel free to develop your own Homework assignments. 1. Have the students type a one-page report on avoiding financial mistakes. They should reinforce the methods outlined in this topic. 2. Have students write a one-page report about financial schemes that they should avoid. Assessment Quiz 10 questions (5 True/False; 5 Multiple Choice) Avoiding Financial Mistakes Quiz Key 1.T 2.T 3.T 4.T 5.T 6.A 7.D 8.D 9.D 10.D Alignment to Standards Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d).

429 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college- and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of disciplinespecific tasks, purposes, and audiences (W10, WHST 10). Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, Purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1).

430 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college- and careerreadiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources None Video Links None Life Smart Applications 1. Compose a report on how to avoid financial mistakes.

431 Name Date True or False Questions: A good way to avoid making financial mistakes is to educate yourself about money matters. 2. Once you begin working and saving money, you should always pay yourself first. 3. Avoiding financial mistakes implies that you should always determine if your spending is for needs vs. wants. 4. The latte factor refers to spending money frivolously, which can lead to financial disaster. 5. You should consider not buying another car for a few years after you finish paying off a car loan so that you can build up your savings. Multiple Choice Questions: Keeping up with the Joneses implies: a. Buying what everyone else is buying b. A race to the finish line c. Saving for a rainy day d. Buying a new house 7. Habitual spending implies: a. Spending habits that hinder your ability to build wealth b. Consistently spending money on gambling c. Always spending money on items that you don t need d. All of the above 8. Using your credit card excessively for purchases can lead to: a. A huge amount of debt b. Inability to pay off the balance c. Financial disaster d. All of the above 9. When first preparing a budget, you should: a. KIS b. Use SMART goals c. Use an app for your phone to assist you d. All of the above 10. Many people get into financial disaster because: a. They are uneducated when it comes to finances b. They don t save c. They don t know the difference between needs and wants d. All of the above

432 Sequence: - Solicit class understanding of the topic - Introduce vocabulary and definitions to provide Purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions Slides 2 and 3 Key Points: - The key to your financial security, as indicated throughout this class, is to educate yourself! - Knowledge is power that no one can ever take from you, so, learn, learn, and learn! - The more you save now, the more it grows into your retirement years. - Pay yourself first take the first hour of pay from work every day and save that amount. - Have an account that equals between six and nine months of living expenses. - Open a retirement account. Don t wait. The longer you do, the harder it is to catch up, and the slower your money grows. - Create a vacation account. Teacher Tips: - Engagement Ask the students to share stories about money problems that they have had. Emphasize that those mistakes might help someone else from making the same mistakes. - Check for Understanding Ask the students how they might have prevented the money problem they shared with the class. Teacher Reflection:

433 Avoiding Financial Mistakes Leads to Financial Prosperity Educating yourself about money This class has covered many financial topics you will encounter throughout your life. This knowledge provides the skills necessary to map out your future and begin planning for financial security. There will be many bumps and obstacles along the way that may blindside you. This section discusses some of the more common financial mistakes people make. The awareness you gain ahead of time about financial errors will enable you to make wise financial decisions. The key to your financial security, as indicated throughout this class, is to educate yourself! The more you read about financial information and apply it to what you have learned, the easier it will be to reach your financial goals. Knowledge is power that no one can ever take from you, so, learn, learn, and learn! Save! Save! Save! Start creating positive habits while you are young. Stash money away in an interest-bearing account every time you earn it or it is given to you. You ll be amazed at how quickly it grows. Savings, investments, or stock market accounts will make money on your money. Remember the concept of compound interest? The more you save now, the more it grows into your retirement years Nusenda Federal Credit Union. All rights reserved.