Chapter 3: Economic Security Why do people need economic security?

In this chapter you will learn about: The difference between a need and a want The Canadian economy today Capitalism and socialism Businesses Causes and effects Poverty How to use capital How to break the poverty cycle

You are economically secure if you are empowered with your money. Economic security Economic security: to have enough money to satisfy basic needs as well as a few wants. (needs are more easily determined than wants – depending on your personal experience, wants can vary greatly). In other words You are economically secure if you are empowered with your money.

The difference between needs and wants Need: a good that is necessary for survival. Ex. food, water, shelter. Want: something that helps to improve one’s life. Ex. Name-brand clothes, electronics.

Today’s Canadian economy In Canada, we live is what is called a capitalist economy. HOWEVER, we incorporate some ideas from another economic structure called socialism. Capitalism: An economy in which people can create their own wealth. Socialism: An economy in which people depend on the government to meet their needs.

An explanation of Capitalism and Socialism https://www.youtube.com/watch?v=B3u4EFTwprM

The Private sector: Businesses Big, or small, the goal of any business is the same: To produce a good or a service To distribute the good or service To make money off of distribution. – This notion is called making a profit.

Businesses There are extremely large, well-known businesses (ex. McDonald’s). These business are found in many nations around the world and are therefore called multinationals There are also smaller businesses. They may be in more than one location, but do not have multinational standing. These are called family businesses. ex. Bidgood’s Someone can also be self-employed. This means he/she simply produces and distributes by himself/herself.

Businesses Terms to know Capital: Usually considered money, but can be anything that can be invested in order to create wealth (create a business, in this sense). Profit: Money the business owner makes after repaying all outstanding expenses, repaying on borrowed capital, etc. Entrepreneur: The business owner

A new business When a new business starts up, it creates a chain effect of wealth for the community: People get hired to work (and therefore earn a salary) People spend their money on other businesses in that community The new business owner will hopefully make a profit eventually Other business owners see more money in their business due to more spending If everything is successful, this cycle continues!

The cycle of wealth in a community Workers use their salary to buy goods and services Workers get their money (salary) Money goes to businesses Businesses make the good or service

The cycle of wealth Come up with an example of how money flows through the economy in the Goulds! Use the explanation as your template, but be specific about who the worker is, what business he or she is working for, etc.…

Causes and Effects Cause: Something that triggers an idea. Ex: you want to go on the trip to Quebec with Ms. Potter. Effect: The result of this trigger. Ex. You work hard at home and babysitting in order to save up some money to pay for the trip.

Examples of cause and effect A worker loses his/her job Effect: The worker cannot pay rent Effect: The worker loses his/her apartment Effect: The worker moves back home and goes back to school

Now it’s your turn! Cause: A new store opens in the mall Effect: Ms. Collins loses her job Effect: Effect:

poverty Standard of living: The buying power that a household has (be it an individual or a family). Poverty: If the standard of living for a household is not enough to satisfy the household’s needs. Income: Money that is earned through employment or through government programs. Expenses: Money that must be paid in order to meet the needs of the household.

POverty Let’s look at some poverty statistics in Canada http://www.cwp-csp.ca/poverty/just-the-facts/ Open your books to page 51 and look at the three diagrams which demonstrate those living in poverty, getting by, and having a chance to save a grow (getting ahead).

The cycle of poverty If a household is living in poverty, there is no simple way to escape. Poverty is a cycle. For example: A household is living in poverty (its standard of living is too low to meet its basic needs) The person cannot work because he/she is sick, therefore he/she cannot make money Someone gets sick but the household cannot afford to pay for medication

Your turn! Create an example of the poverty cycle which demonstrates the difficulty of escaping the cycle:

Breaking the cycle of poverty 1. EDUCATION! - The individual who finds themselves in poverty can break that cycle by creating aptitudes in order to succeed economically. Aptitude – a learned talent, an ability The more aptitudes one has, the greater the chance of economic success! If you can not pay to educate yourself (post secondary), you can work very hard in high school and possibly qualify for scholarships (money given to those who achieve high academic results). If not, you can always borrow money from the provincial and federal government to pay for your education. This is called a student loan. This money must be repaid once you finish your studies.

b) Support socialist programs: ex. pay taxes when required. 2. WORK TOGETHER – The entire community must work to help those who are struggling to meet their needs and better their situations. a) Volunteer: People who find themselves in better economic situation can give of their time, their money or other supplies to help out those in need. b) Support socialist programs: ex. pay taxes when required. c) Be responsible: if you are availing of socialist programs, do not abuse them by falsifying claims.

Buying a house The purchase of a house is likely the largest financial investement for a household. Here are the steps it takes to purchase a house:

~ $12, 500 is the down payment for this house in question If the house costs $250, 000, the household must provide a down payment – a sum of money which proves you have enough money to be able to borrow the rest from a bank. In Canada, your down payment is usually about 5% the cost of the house. ~ $12, 500 is the down payment for this house in question 2. The rest of the money needed to purchase the house is borrowed from a bank. This loan from the bank, specifically for the purchase of a house, is called a mortgage. ~ The household needs to borrow $237, 500 from the bank to purchase the house.

So, at the moment or purchase, the average family only owns 5% of their house! 3. But, over time, and after equal monthly (or bi-weekly) payments to the bank, the family can own the whole house. Average mortgage agreements take approximately 20 years to pay off. As well, because the bank took on a financial risk by loaning this family a large sum of money, the bank takes extra payment so it too, can make a profit. This extra amount it charges the home-buyer is called interest.

Personal capital Personal Capital: Everything that can help improve an economic situation. Money in savings or in investments Personal belongings Aptitudes (the skills learned through training) Work availability Risk-taking abilities Thoughts on economic opportunities Positive attitude