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

2. 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

3. 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.

4. 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.

5. 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.

6. An explanation of Capitalism and Socialism

7. 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.

8. 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.

9. 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

10. 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!

11. 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

12. 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.…

13. 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.

14. 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

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

16. 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.

17. POverty Let’s look at some poverty statistics in Canada
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).

18. 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

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

20. 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.

21. 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.

22. 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:

23. ~ $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.

24. 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.

25. 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