Lesson Description Where shall the children in Mr. Cash s class put the funds they raised for the playground equipment? This lesson presents various savings options: a basic savings account, a certificate of deposit, a money market account or a school safe. After a brief introductory slide show, students explore the advantages and disadvantages of each of the options and then choose the one they think is best. Students must justify their choice. At the end of the lesson, each student votes for the best savings option. Texas Essential Knowledge and Skills (Target standards) Texas Essential Knowledge and Skills (Prerequisite standards) National Standards (Supporting standards) CEE Council for Economic Education CCSS Common Core State Standards PFL Math 4.10C: compare the advantages and disadvantages of various savings options Math 4.1: Mathematical process standards Math 4.2C: compare and order whole numbers to 1,000,000,000 and represent comparisons using the symbols >, <, or = CEE Saving 4.3: People can choose to save money in many places, for example, at home in a piggy bank or at a bank, credit union, or savings and loan. CEE Saving 4.4: People set savings goals as incentives to save. CEE Financial Investing 4.1: After people have saved some of their income, they must decide how to invest their savings so that it can grow over time. Time Required Two 45 minute class periods PFL Terms Basic savings account Certificate of deposit Money market account Financial institution Bank Credit union Materials Required Slide show: Savings Options A copy of Activity 4.3 1a c for each student A copy of Visual 4.3 1 Chart paper and markers or interactive white board Procedure Engage 1. Remind students that Capital Elementary just finished a fundraiser to buy new playground equipment for their school. Money has been donated through many projects, including projects done by Mr. Cash s class. The boys and girls have to make a decision where to keep the money until it is needed. Ask: Where should the school place the fundraiser Page 1
money? (Consider all suggestions.) Explore/Explain 2. Tell students that Mr. Cash shared the following slide show with his students. Share slide show Savings Options about making choices among the different kinds of financial institutions as well as various saving options. Slides include an example of various interest rates and their return on a $100 investment. 3. Tell students that Mr. Cash s students were still a bit confused about interest. How would the bank get money to pay you money for using your money? Choose students to act out the parts of a scenario with Buck (The Saver), Penny (The Borrower), and Bill (The Bank). Each student participating in this scenario should wear a sign with the title of their role The Saver, The Bank, The Borrower. a. Buck (The Saver) has $60 to deposit in a savings account. (Give Buck $60 in play money.) He decides to put it in the bank so that his money will be safe. b. Buck (The Saver) deposits his money by handing it to Bill. c. Penny (The Borrower) needs to borrow $60 so that she can pay a doctor s bill. She promises the bank that she will pay the money back in 2 months or the bank will take her ipod. d. Bill (The Bank) hands the $60 to Penny. Penny (The Borrower) is now able to pay her doctor s bill. e. Two months pass and Penny (The Borrower) comes to the bank to pay back the $60 she borrowed. f. Ask: Is it that easy to borrow money? Why not? (Students should explain that there is a fee for borrowing money.) If students do not know this, the teacher must explain it to them. What is this fee called? (Interest) g. Ask the class what they think should be an appropriate amount of interest to pay for borrowing $60 for two months. If students need guidance, help them determine a reasonable amount. A reasonable amount may be $3. h. Penny (The Borrower) pays back the $60 she borrowed from the bank plus $3 in interest. Penny (The Borrower) gives Bill (The Bank) $60 plus three one dollar bills. i. Buck (The Saver) decides that he wants to withdraw the money he put in the bank to purchase a new video game. Bill (The Bank) gives Buck $60. j. Ask: Is that all Buck gets? (No) What else does Buck get? (Interest) k. Ask the class what they feel would be an appropriate amount of interest for leaving $60 in the bank for two months. Help students understand that this amount must be less than $3 as the bank must make money to pay its employees, pay for the building, pay for utilities, etc. Students may decide that one or two dollars is reasonable. l. Bill (The Bank) hands this amount of money to Buck. Page 2
m. Ask: When someone borrows money from a bank and then they pay that back to the bank later, they must also pay a little more for borrowing the money. What is this called? (Interest) The person who deposits money into a bank savings account also gets interest. What is this kind of interest? (This is a lesser amount of money that the bank pays someone for letting the bank use their money while the bank keeps it safe for them.) Explain Elaborate 4. Display Grade 4 Lesson 3 PowerPoint. Read each slide to the students. This presentation will serve as an introduction to savings. 5. Distribute Activity 4.3 1a, Activity 4.3 1b, and Activity 4.3 1c to each student. 6. Read and discuss the first section Activity 4.3 1b titled Basic Savings Account. Clarify any terms that are not familiar to students. 7. Using student input, complete the first row of the graphic organizer on Activity 4.3 1a. Instruct students to fill in the information as the teacher models. 8. Have students look carefully at the other three savings options. Allow time for any questions about the information given. Now students are ready to work with a partner to complete the comparison chart. Evaluate/End 9. Once students have completed the graphic organizer on Activity 4.3 1a, discuss the plans for purchasing the playground equipment for Capital Elementary School located on Activity 4.3 1c. Capital Elementary School has raised $4,200 toward their goal. They plan to purchase the playground equipment 7 months from now. More fund raisers are planned for the spring. The final goal is to raise $10,000. 10. Using this additional information, conduct a class discussion on the advantages and disadvantages of each savings option. 11. Direct students attention back to the completed graphic organizer on Activity 4.3 1a. Have students work with either a partner or their group to select the best savings option(s) for Capital Elementary School. Students should be ready to justify their choices by explaining why they think their choices are the best options. Students may choose a single option or a combination. Considerations when making choices: o Once the CD is purchased, additional money cannot be added within the 7 months. o Money cannot be withdrawn from a CD for preliminary work that must be done early on. o If a CD is purchased, additional money raised may be secured in a basic savings account. Therefore, a combination of the options is possible. o The principal may decide to use the money for something other than the playground equipment. Page 3
12. List all student suggested savings options for the playground equipment money on chart paper or on the board. Students should provide a convincing argument to justify their choice when sharing their selection. 13. After all choices are listed, have students vote by secret ballot on the choice they feel would be the best savings option for Capital Elementary School. EXTENSIONS 1. Students may research current interest rates of basic savings accounts and/or money market accounts at 3 6 local banks. They can compare rates of adult savings accounts and also those designed for students. 2. Students may also research current interest rates at credit unions. They should make note of which credit unions they (or their families) would be eligible to join. 3. Invite a speaker from a local financial institution visit the class to discuss available savings options. Page 4
Activity 4.3 1a Name Class Period Where should we save our money? Directions: Use the information on Activity 4.3 1b to complete the chart below. Yearly Interest Rate Time Restrictions Minimum Deposit Is it insured? Basic Savings Account Money Market Account 6 month Certificate of Deposit School Safe Page 5
Activity 4.3 1b Savings Options Basic Savings Account Ready Money Certificate of Deposit (CD) Time = Money Earns less than 0.5% interest a year Less than $10 can get you started Interest paid monthly Easy to deposit and withdraw funds Interest rates are subject to change Does not earn much interest Can use online banking for convenience FDIC Insured for banks and NCUA for credit unions Purchase CD at local financial institution $1000 minimum deposit Money stays in account for 6 months Penalty for early withdrawal Locked in interest rates ranging from 1.00% to 2.00% FDIC Insured for banks and NCUA for credit unions Money Market Account More Time = More Money Open at local financial institution Easy to deposit and withdrawal funds No time restriction Balances of $2500 or more earns between 0.5% and 1% interest Balances below $2500 will earn no interest Some financial institutions place a limit on the number of withdrawals per month FDIC insured for banks and NCUA for credit unions School Safe Time = Money Every day convenience Monitored by the school secretary, the principal, and/or the assistant principal Approval for spending given by the principal No time restrictions What you put in is what you get out no interest earned No penalties No insurance if money is taken Page 6
Activity 4.3 1c Directions: Read the additional information. Discuss with your class both the advantages and disadvantages of each savings option. Capital Elementary School has raised $4,200 toward their goal. They plan to purchase the playground equipment 7 months from now. More fund raisers are planned for the spring. The final goal is to raise $10,000. After discussing the advantages and disadvantages of each savings option, return to the completed chart of Activity 4.3 1a. Work with your partner to select the best savings plan for Capital Elementary School. Justify your thinking by explaining why you think this is the best plan. Page 7
Key 4.3 1 Name Class Period Directions: Use the information on the following page to complete the chart below. Where should we save our money? Yearly Interest Rate Time Restrictions Minimum Deposit Is it insured? Basic Savings Account less than 0.5% none $10 yes Money Market Account Between 0.5% and 1% none at least $2500 to earn interest yes 6 month Certificate of Deposit 1% to 2% 6 months (no additional deposits or withdrawals) $1000 yes School Safe none none none no Page 8