1. Personal Finance Benchmark 4.01

2. Demonstrate an understand that personal spending, saving, and credit decisions have significant implications for the future

3. Competencies 4.01.03 Explain the role and utilization of credit in a market economy Sample indicators: Give examples of different types of credit Explain how credit systems operate or function Indentify potential costs and benefits of using credit

4. Lesson 14 Credit: Your Best Friend or Your Worst Enemy? Indicators for benchmark 4.01.03: Explain how credit systems operate and function Identify potential costs and benefits of using credit Terms  Choice  Cost and benefits  Credit  Debt  Interest  Revolving credit

5. Lesson 14 Credit: Your Best Friend or Your Worst Enemy? Objectives: 1.Calculate interest payments, minimum balances and the cost of credit. 2.Develop and apply criteria for determining when the use of credit is appropriate.

6. Before starting lesson 14 Ask students to define: Credit: Revolving credit: Contrast use of credit cards with debit cards

7. Before starting lesson 14 Ask students to define: Credit: is the ability to obtain goods or services before paying for them, based on a promise to pay later. Thus, each time a person uses credit, he or she is borrowing money. Credit cards are merely short term loans Revolving credit: is credit that is available up to a limit and automatically renewed as debts are paid off or paid down. People who use revolving credit often make partial payments on their unpaid balances at regular intervals. (credit cards offer revolving credit)

8. Begin Activities for lesson 14 Activity 1 and 2 5 to 10 minutes Read activity one Complete activity two Look at answers to activity two If Justin pays $55 per month how long will it take him to pay off is balance?

9. Problems with the use of credit Cost versus benefit of using credit

10. Problems with the use of credit Key is to look at the cost of using credit versus the benefits gained Advantages  In an emergency  To take advantage of opportunities such as sales  Purchase valuable assets Disadvantages  Increases cost of purchase  Late fees  Reduces capabilities to make other purchases in the future  bankruptcy

11. Activity 3 5 to 10 minutes In groups Discuss the scenarios and decide whether the use of credit is a good idea in each case.

12. Competencies 4.01.02 Define money, explain the role of banks and contrasting them with security exchanges. Sample indicators: Explain how banks and other depository institutions create money they lend. Identify a security and how it might fit in a financial system (e.g. a stock, bond) Define the role of financial institutions (e.g. Federal Reserve, banks, capital markets, etc.)

13. Lesson 34 Money and Monetary Policy Indicators for Benchmark 4.01.02 Explain how banks and other depository institutions create money when they lend Terms:  Federal Reserve  Fractional reserve banking system  Money  Monetary policy  Money supply

14. Visual 1 Money: anything that is generally accepted as final payment for goods and services Money serves these purposes: Medium of exchange: used to purchase goods and services Unit of account: it can be used to compare the value of different goods and services. Store of value: It can be held to buy something in the future (does not guarantee equal purchasing power)

15. Money Supply: Narrow definition: currency (coins and paper money) in the hands of the public  Currency is 48% of total and checking –type accounts about 52% Supply of money is important for price stability and economic growth  To much money in the economy can cause inflation  To little money in the economy can lead to falling prices and falling production Federal Reserve controls the money supply by encouraging or discouraging banks to make loans  When a bank makes a loan the money supply increases by the amount of the loan

16. Activity: How banks create money and the affect the money supply. Materials required:  Handout cut in to pieces  50 dried beans  Visual 2 (minus answers)

17. Visual 2 (minus answers) Round 1 Money supply = Round 2 Money Supply = Round 3 Money Supply =

18. Activity Distribute 50 beans to the class (not an equal distribution)  Beans are accepted for payment (coin or currency) the money supply is 50 Instructor opens a bank where students can deposit their beans. Ask: Why might people deposit money in a bank? Collect deposits replacing the beans with the bank deposit receipts (handout)  Receipts can be turned into the bank for a bean (e.g. Check)

19. Activity continued: Have a student use the receipt to buy an items from another student. What is the money supply now? What is its composition? (hint: only money in circulation is counted in the money supply) Tell students that the bank has decided to go into the lending business.  Ask who would like to borrow money  Explain fractional reserve system  Give the student five bank receipts What is the money supply now? How many beans and bank receipts are in circulation?

20. Visuals 3 and 4 Visual 3  Structure of Federal Reserve Why 12 Regional Federal Reserve Banks? Visual 4  Totals used by the Federal Reserve to control the money supply

21. Activity: How banks create money and the affect the money supply. Materials required:  Handout cut in to pieces  50 dried beans

22. Activity: How banks create money and the affect the money supply. Materials required:  Handout cut in to pieces  50 dried beans

23. Lesson Seventeen Saving, Investing, and The Invisible Hand Indicators for benchmark 4.01.02: Identify a security and how it might fit in a financial system (e.g. a stock, bond) Define the role of financial institutions (e.g. Federal Reserve, banks, capital markets, etc.) Terms:  saving  investment  the stock market  the bond market  primary and secondary markets for financial securities  banks

24. Lesson Seventeen Saving, Investing, and The Invisible Hand Visual 1  Savings means not consuming Questions that can be asked: What are some reasons that some people save? When people save, they are usually trying to make themselves better off in the future. But can this saving help others as well? (banks and other financial instructions loan savings to others, thereby increasing the money supply

25. Visual 1  Investment production and purchase of machines, buildings, and equipment that can be used to produce more goods and services in the future Man made tool that goes back into production of other goods and services

26. Visual 1  Personal investment purchase financial securities such as stocks, bonds More risky than savings accounts because they may fall in value, but in most cases will pay a higher rate of return in the long run than the interest paid on savings accounts

27. Stocks vs. Bonds What is a bond? (a legal promise to repay money loaned to a business or government agency, with interest, on a specific date or dates) What is a stock? (purchasing shares of ownership in a corporation, hoping that the shares value will increase resulting in a financial gain)

28. Visual 2 Two Kinds of Markets for Financial Securities Primary Markets: new issues of bonds and corporate stocks are offered for sale to the public by companies and investment banks. (initial public offering): funds used by business for investment in new plants and equipment. Secondary Markets: markets where previously issued stocks and bonds can be bought and sold by individuals and institutions: funds to the individual investors. (example: New York Stock Exchange, NASDAQ)

29. Activity 1 5 minutes Work in groups For each scenario indicate whether it represents  S (savings)  I (investment)  P (personal investment)  N (neither saving or investment)

30. Competencies 4.01.01 Explain the role and impact saving has on building wealth.

31. End of slides