1. Consumers, Savers and Investors Chapter 6
JA Economics
Consumers, Savers and Investors
Chapter 6

2. Building on what you know
Page 78
Building on what you know
Teens spent $159 billion in 2005
What do you do with your paycheck?
Spend it?
Save part of it?
Save all of it?

3. Gross Domestic Product
Page 78
Gross Domestic Product
Final value of all goods and service produced in the country in one year.
Gross Domestic Product was almost 12 trillion dollars in 2004

4. Sources of Income Page 79 Teens’ major source of income are: Parents
Odd jobs
Part time jobs
Full time jobs
Gifts

5. Sources of Income - work
Page 79
Sources of Income - work
Wage – by the hour
Salary – by the week, month or year
Depends on:
Skill
Job
Education
Performance
Entrepreneurial drive
Look at page 79 at the chart for median monthly income

6. Sources of Income - wealth
Page 80
Sources of Income - wealth
The value of things you own
Add together the value of:
Possessions
Bank account
Savings
Investments
Equals your “net worth”

7. Influences of Wealth Page 81 Disposable income – money after taxes
Savings depends on:
Income
Earn more, save and invest more
Expectations
Confidence = spending
Concern = saving
Current Interest Rate
higher rate=incentive to save
Taxes

8. Personal Budget Page 82 Write down your desired career.
Look on page 79 and find the category that career falls under.
Create a budget using the following slides equations.

9. Average consumer budget
Page 82
Average consumer budget
Housing – 33%
Transportation – 17%
Food – 12%
Retirement – 8%
Personal taxes – 6%
Health care – 5%
Entertainment – 5%
Apparel – 4%
Other – 10%

10. Budget’s Influences Page 83 Setting Financial Goals Estimating Income
Goal to increase income
Goal to save money
Estimating Income
Be honest
Be certain
Planning Expenditures
Prioritize your wants

11. Saving and Investment Decisions
Page 85
Saving and Investment Decisions
Safety
FDIC
Federal Deposit Insurance Corporation
Rate of return
% of interest
> rate = > risk
Liquidity

12. Where to put your savings
Page 87
Where to put your savings
Savings deposits - safe
Certificate of Deposit
Higher interest rate
Non liquid
Money market - safe
Lower % than CD
Pensions and retirements fund
Tax deferment

13. Where to put your savings
Page 88
Where to put your savings
Corporate stock
High risk
Corporate bonds
Certificate of indebtedness
Mutual funds
Buy a share of a fund
Fund owns a pool of assets
Savings bonds

14. Page 90
Consumer Credit
Borrowing money to buy now what you can’t afford
Principal and interest must be paid back
Shop around for better terms
Finance charge
Annual percentage rate
Monthly rate of 2.5%
Equals 30% APR

15. Advantages of Credit Page 90 Immediate possession Flexibility Safety
“I want it NOW!”
Flexibility
Time your purchase for sales
Safety
Not carrying cash
Emergency funds
Financial cushion
Character reference
Credit history

16. Disadvantages of Credit
Page 90
Disadvantages of Credit
Overspending
Easy to spend money
Higher cost
Merchants pay a fee to credit card companies = higher marginal costs
Impulse buying
Ignore future sales

17. Obtaining and using credit
Page 93
Obtaining and using credit
Character
Personal qualities
Willingness
Honesty
Capacity
Ability to repay
Capital
Money in bank, property, house
Collateral – used to secure the loan

18. How to establish credit
Page 93
How to establish credit
Open a savings account
Have a telephone bill
Co-signer for first loan

19. Consumer Protection Right to safety Right to be informed
Unsafe products
Right to be informed
What, terms, and risks of purchase
The right to choose
Illegal to restrict market competition
The right to be heard
Ability to contact producers
1962

20. Better Business Bureau
Sets standards in business ethics