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87LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
88DAVE RAMSEY
89RAMSEY EDUCATION SOLUTIONSâ„¢
90LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
91DAVE RAMSEY
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116LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
117Acknowledgements
118The Ramsey Education Solutions team would like to give special thanks to the
119following people for their contributions to this product. Their input was essential
120for creating a financial literacy curriculum that empowers high school students
121to make sound financial decisions for life.
122Educators
123Len McKnatt
124ACCOUNTING/ECONOMICS TEACHER
125Battle Ground Academy
126Franklin, Tennessee
127Leah Zimmer
128FINANCIAL LITERACY TEACHER
129Bremerton High School
130Bremerton, Washington
131Brittany Sampson
132TEACHER
133Lakeland High School
134Lakeland, Florida
135Ramona Harper
136BUSINESS TEACHER
137Lake Highlands High School
138Richardson, Texas
139Kathy Jarman
140TEACHER
141Helias Catholic High School
142Jefferson City, Missouri
143LeAnn Dinsdale
144CTE TEACHER/ACTE VP
145Brackenridge High School
146San Antonio, Texas
147Lynn Isaacks
148SOCIAL STUDIES TEACHER
149Academy of Creative Education
150San Antonio, Texas
151Eric Lambert
152TEACHER
153North Bullitt High School
154Shepherdsville, Kentucky
155Linda Brown
156CTE TEACHER
157Sanderson High School
158Raleigh, North Carolina
159Terri Winkle
160TEACHER
161Western Heights High School
162Oklahoma City, Oklahoma
163Credits
164Executive Vice President
165Jack Galloway
166Chief Marketing Officer
167Jennifer Sievertsen
168Vice President of
169Education Solutions
170Jim King
171Curriculum Design
172Michelle Scott
173Product Management
174Brett Kozimor
175Sales/Marketing/PR
176Herb Jenkins
177Beth Tallent
178Jacqueline Garneau
179Jamie Moorer
180Christy Richardson
181Christy Wright
182Project Management
183Josh Campbell
184Kassidy Slamer
185Lisa Mays
186Content Editing/Proofing
187Allen Harris
188Darcie Clemen
189Stephanie Thomas
190Brandon Brison
191Jennifer Gingerich
192Danielle Britt
193Jennifer Norton
194Molly Pinkley
195Creative Design
196Brian Williams
197Marcus Meazzo
198Jason Miller
199Steve Rupp
200Video/Audio Production
201Jon Melton
202Diana Key
203Megan Hill
204Josh Fulton
205Dave Oglesby
206Dave DiCicco
207Megan Ledford
208Sara Zellner
209Chris Wright
210Ian Collins
211Colin Fatke
212Bobby Robertson
213David Wilkinson
214Josh Hancock
215Chris Blaylock
216Interactive/Web Development/UI
217Ash Harris
218Jon Wolski
219Andrew Kallemeyn
2203
221LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2224 Foundations in Personal Finance High School Edition
223LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
224Meet the Experts
225Dave Ramsey
226Dave Ramsey is America’s trusted voice on money and business. He’s
227authored four New York Times best-selling books: Financial Peace,
228More Than Enough, The Total Money Makeover and EntreLeadership.
229The Dave Ramsey Show is heard by more than 6 million listeners
230each week on more than 500 radio stations. By age twenty-six he had
231established a four-million-dollar real estate portfolio, only to lose it by
232age thirty. Using the wisdom he gained, Ramsey rebuilt his financial
233life and now teaches others how to be responsible with their money, so
234they can acquire enough wealth to take care of loved ones, retire with
235dignity, and give generously to others.
236Rachel Cruze
237Rachel Cruze is a seasoned communicator and presenter, who has
238been speaking to groups as large as 10,000 for more than a decade.
239The daughter of Dave Ramsey, today she uses the knowledge and
240experiences from growing up in the Ramsey household to educate
241America’s students and young adults on the proper ways to handle
242money and stay out of debt.
243Chris Hogan
244A popular and dynamic speaker on the topics of financial education
245and leadership, Chris Hogan also works with businesses and highprofile
246clients across the country, helping them develop strategies to
247increase revenues, protect wealth and secure their financial futures.
248Chris is also the host of the popular EntreLeadership podcast, one
249of the leading podcasts on business and leadership.
250Introduction 5
251LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2526 Foundations in Personal Finance High School Edition
253LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
254UNIT 1: SAVING AND BUDGETING
255Chapter 1: Introduction to Personal Finance 8
256Chapter 2: Saving 28
257Chapter 3: Budgeting 48
258UNIT 2: CREDIT AND DEBT
259Chapter 4: Debt 72
260Chapter 5: Life After High School 100
261Chapter 6: Consumer Awareness 126
262UNIT 3: FINANCIAL PLANNING AND INSURANCE
263Chapter 7: Bargain Shopping 142
264Chapter 8: Investing and Retirement 160
265Chapter 9: Insurance 184
266UNIT 4: INCOME, TAXES AND GIVING
267Chapter 10: Money and Relationships 208
268Chapter 11: Careers and Taxes 222
269Chapter 12: Giving 250
270GLOSSARY 270
271Contents
272Introduction 7
273LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
274What do other high
275school students know
276about spending?
277We asked other high school students
278if they or someone they know has
279ever bought something they could
280not afford.
281“I haven’t, but my younger sister
282always seems to need the latest
283and greatest technology, and she
284spends her college money on it!”
285Sophomore, Louisiana
286“No. But I have a family member
287who once bought a house that they
288ended up not being able to afford.”
289Junior, New Jersey
290“My dad bought a car that he could
291not afford, and he ended up getting
292it repossessed.”
293Junior, Wyoming
294“Yes. My parents buy things they
295can’t afford all the time. That’s
296why we’re in debt. That’s why I
297need this course.”
298Senior, Utah
2991
300CHAPTER
301LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
302Introduction
303to Personal
304Finance
305WELCOME TO A CLASS that is going to give
306you a head start on your future! Learning
307how to manage your money is one of the most
308important skills you can have. Why? Because
309your financial decisions will have long-term
310consequences, either good or bad. We’ll give
311you the tools and knowledge that will help you
312win with money right from the start. When it
313comes to your financial future, we want you to
314aim high and dream big. There’s a lot to learn,
315so let’s get started!
316*National Foundation for Credit Counseling, Inc.
317of parents feel it is
318their responsibility
319to teach their kids
320about money and
321savings.*
32281%
323of American parents
324surveyed thought
325that a course in
326personal finance
327should be a high
328school graduation
329requirement.*
33085%
331UNIT 1: CHAPTER 1
332LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
333Key Terms
334Get to know the language of money.
335»» Consumer: A person or organization
336that uses a product or service
337»» Credit: The granting of a loan and the
338creation of debt; any form of deferred
339payment
340»» Debt: An obligation of repayment owed
341by one party (the debtor/borrower) to
342a second party (the creditor/lender); in
343most cases this includes repayment of
344the original loan amount plus interest
345»» Economy: A system by which goods and
346services are produced and distributed
347»» Financial literacy: The knowledge and
348skillset necessary to be an informed
349consumer and manage finances
350effectively
351»» Interest: A fee paid by a borrower to the
352lender for the use of borrowed money;
353typically interest is calculated as a
354percentage of the principal (original
355loan amount)
356»» Loan: A debt evidenced by a “note,”
357which specifies the principal amount,
358interest rate and date of repayment
359»» Personal finance: All of the decisions
360and activities of an individual or family
361regarding their money, including
362spending, saving, budgeting, etc.
363Learning Outcomes
364Once you’ve completed this chapter’s videos, you will be asked
365to return to this list and place a checkmark next to the items
366you’ve mastered.
367Section 1: What Is Personal Finance?
368Â…Â… Describe what personal finance is.
369Â…Â… Outline the components of effective financial planning.
370Â…Â… Identify focuses of study throughout this course.
371Section 2: Money, the American Way
372…… Understand the evolution of America’s dependence
373on credit.
374…… Observe and analyze the “normal” American family
375as it relates to personal finance.
376Section 3: You and Money
377Â…Â… Develop communication strategies for managing money
378and discussing financial issues.
379Â…Â… Evaluate your own money personality; identify your
380money strengths and weaknesses.
381
382Before You Begin
38310 Foundations in Personal Finance High School Edition
384INTRODUCTION
385LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
386Measure Your Progress
387Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
388column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
389on any statement.
390JOURNAL QUESTION: INTRODUCTION
391Can you think of a financial goal you have at this moment? Is this a long-term or a short-term goal?
392Describe how you plan to achieve this financial goal.
3931. I already have a strong working knowledge of
394personal finance.
3952. I think I have a lot to learn when it comes to
396managing money.
3973. Because I am a teenager, what I do now with my
398money will have little effect on my financial future.
3994. My parents have taught me a lot about how to
400manage money.
4015. Most Americans are very wealthy and will have
402financial security when they retire.
403Agree Disagree Agree Disagree
404BEFORE AFTER
405Chapter 1: Introduction to Personal Finance 11
406LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
40755% of teens surveyed
408say that they want to
409learn more about how
410to manage their money—
411particularly learning
412about: investing (88%),
413saving (87%), budgeting
414(82%), checking accounts
415(80%), and financing for big
416purchases like a car or a
417home (79%).
418National Foundation for Credit
419Counseling, Inc.
420$
421This is one of the most
422important classes you will
423ever take. We’re excited
424you are joining us. Now
425let’s begin!
426+
427“Wealth is more
428often the result of
429a lifestyle of hard
430work, perseverance,
431planning and, most
432of all, self-discipline.”
433The Millionaire Next Door
434“ 1 CHAPTER
435Section 1:
436What Is Personal Finance?
437MOST HIGH SCHOOL students don’t
438spend their time worrying about
439mortgages and investments, but they
440are at an age when smaller financial
441responsibilities start creeping into
442their lives. Many of you are earning
443allowances or have already begun
444working a part-time job. So what do
445you do with your money? If you’re
446just putting it in your pocket and
447spending without a plan, living
448payday to payday could become your
449normal. You need to make decisions
450about what to do with your money.
451Have a money plan. Set money
452goals. Learning to manage money
453at this stage can eliminate financial
454mistakes and promote huge financial
455benefits for the future.
456What is personal finance? Personal
457finance refers to all the financial
458decisions an individual or family
459must make in order to earn, budget,
460save and spend money over time.
461These decisions are generally based
462on a variety of financial risks and
463planning for the future.
46412 Foundations in Personal Finance High School Edition
465SECTION 1
466LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
467Two in five U.S. adults gave
468themselves a C, D or F on
469their knowledge of personal
470finance.
471National Foundation for Credit
472Counseling, Inc.
473$
474“Wealth building isn’t
475rocket science, which
476is a good thing for me
477(and probably you).
478Winning at money
479is 80% behavior and
48020% head knowledge.
481What to do isn’t the
482problem; doing it is.
483Most of us know what
484to do, but we just
485don’t do it. If I can
486control the guy in the
487mirror, I can be rich.
488Find a mirror!”
489DAVE RAMSEY
490“
491If you put into practice what
492we teach, you truly can win
493with money!
494+
495VIDEO 1.1
496Key Components of Financial Planning
497Directions: As you see words pop up on the left side of the
498video screen, write them into the workbook blanks.
499Assess your
5001
501situation (your income,
502assets and liabilities).
503Set money
5042
505! Make sure you have a mix of both
506short-term and long-term goals.
507You must write out a detailed
5083
509for accomplishing
510your goals. This begins with your budget.
5114
512your plan! This involves discipline and
513perseverance.
514Know your money
5155
516.
517Regularly
5186
519and reassess your financial plan.
520Replace money
5217
522with money truths.
523JOURNAL QUESTION: VIDEO 1.1
524In what ways could you do better when it comes to managing
525your money?
526Chapter 1: Introduction to Personal Finance 13
527LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
528Section 2: Money, the American Way
529VIDEO 2.1
530A History of Credit and Consumerism
531It is impossible to discuss the history of personal finance in America without
532highlighting the evolution of the credit industry. Think, for a moment, about
533the most recent commercial you’ve seen advertising a big ticket item like a
534new car or new furniture. Do those ads target people who have “budgeted,
535Credit Prior to 1917
536»»Before 1917, buying things on credit was
537not common. Why? Because it had never
538been legal for lenders to charge interest
539rates high enough to turn a profit.
540»»Lending money to others was not a
541money-making business. Only wealthy
542people could get personal loans. Without
543the possibility of profit, lending money
544to the middle and lower class was not
545worth the risk.
546»»Small-time loan sharks (people who
547offered loans at extremely high interest
548rates, which was an illegal activity at the
549time) existed for people in desperate
550financial positions, but they were shady
551operations on the fringes of society.
552»»The highly evolved, highly accepted
553consumer credit as we know it today
554did not exist.
555Credit Takes Root
556»»After 1920, consumer demand for bigticket
557manufactured products was on
558the rise.
559»»Credit laws were relaxed in an attempt to
560create a mainstream, profitable alternative
561to loan sharks for the working class.
562»»Installment credit (type of credit that
563has a fixed number of payments, also
564known as revolving credit) and legalized
565personal loans became big business.
566»»This era made consumer credit legal
567and more socially accepted.
568Leveraging Credit to Escape
569the Great Depression
570»»In an attempt to help Americans regain
571their financial footing, New Deal policymakers
572came up with mortgage (home
573loans) and consumer lending policies
574that convinced commercial banks that
575consumer credit could be profitable
576despite bankers’ long-held reluctance
577to lend to the working class.
578“In 1917, one popular historian
579described debt as ‘semislavery’
580. . . (which) existed
581before the dawn of history, and
582it exists today.”
583Debtor Nation: The History
584of America in Red Ink
585“
586The New Deal was the legislative and
587administrative program of President
588F. D. Roosevelt designed to promote
589economic recovery and social reform
590during the 1930s.
591+
592PRIOR TO 1917 1929 1939
5931 2 3
59414 Foundations in Personal Finance High School Edition
595SECTION 2
596LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
597saved, and are ready to go make that large purchase”? Or are they more likely
598to suggest that you “Buy NOW, pay LATER”? Which phrase is more familiar?
599Sadly, borrowing money is so ingrained in our culture that we can’t imagine
600life without it. So how did we get here? Let’s take a look.
601WWII Fuels an
602Economic Recovery
603»»After the Great Depression, WWII
604proved to be the most important economic
605event of the 20th century. The war
606ended the Great Depression by reviving
607American industry through government
608spending and consumption. In short,
609the economy improved because the
610war created a ton of new jobs. These
611jobs provided considerable increase
612in personal income and led Americans
613to predict permanent improvements to
614their standard of living.
615The Decline Into Debt:
6161970–Present
617»»After 1970, consumer debt skyrocketed
618not because people were borrowing
619more, but because they continued
620to borrow as their parents had done
621since WWII. The difference was they
622didn’t have the postwar period’s wellpaying
623jobs.
624»»Banks were willing to lend even more
625because they were now making huge
626profits off consumer debt. The credit
627industry had become smarter than
628borrowers.
629»»As consumers borrowed to deal with
630unexpected job losses and medical expenses,
631as well as to live “the good life,”
632banks were willing to continue lending.
633»»Due to the clever structuring of financial
634institutions, the credit world now
635resembles the pre-1920s loan sharks
636more than the 1950s banks.
637»»In short, an old credit system premised
638on rising wages and stable employment
639(low-risk borrower) was reformed to accommodate
640uncertain employment and
641income instability (high-risk borrower).
642Post World War II
643Consumerism
644»»Ah, the birth of the suburbs! The postwar
645middle class bought the American
646Dream with consumer credit. Americans
647“learned” to borrow in the midst
648of prosperity.
649»»They borrowed because they believed
650their incomes would continue to grow
651into the future . . . and they were right.
652Incomes rose steadily from 1945 to 1970.
653»»Financial institutions lent more money,
654and borrowers paid it back. Borrowing
655became a post-war normalcy.
656“If you will happen to your
657money, then you will have
658some. If you just let all your
659money happen to you, you’ll
660never win.”
661DAVE RAMSEY
662“ “Americans left governmentmortgaged
663homes in
664installment-financed cars to
665shop on revolving credit at
666shopping centers.”
667Debtor Nation
668“
669Source: Debtor Nation: The History of America in Red Ink
6701945 1970 TO THE PRESENT
6714 5 6
672Chapter 1: Introduction to Personal Finance 15
673LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
674“When we participate
675in what the crowd
676identifies as normal,
677even if it is stupid, we
678gain acceptance into
679the club. Sometimes
680we don’t even realize
681what we are doing
682is stupid because
683we have been taught
684that it’s just ‘the way
685you do it,’ and so we
686never ask why.”
687DAVE RAMSEY
688“
689Today’s American Reality
690Unfortunately, many American
691families only have the appearance of
692being financially secure. If you drive
693through a middle-class neighborhood,
694you might look at the manicured lawns,
695nice houses and new vehicles in the
696driveways and think, Wow, they’re
697doing all right. I want to live like that
698when I’m an adult.
699The sad reality is that most of the
700people in those houses are struggling
701with debt in the form of mortgages, car
702loans, student loans and credit cards.
703Based on statistics, Americans are
704horrible at saving money and planning
705for retirement. They are so conditioned
706to think debt is normal, they can’t
707envision paying cash for a car or
708even a dining room table! Americans
709often spend more money than they
710make. Most Americans don’t have an
711emergency fund. Saving, budgeting,
712retirement planning and staying out
713of debt are all basic money principles,
714not complex economics.
715So why aren’t Americans better at
716managing money? They were never
717taught the right way. As you go
718through this course, we will focus on
719teaching you what to do with money
720and then show you how to do it. Money
721math is easy. It’s controlling your
722money behavior that’s the challenge.
723As you evaluate the “normal”
724American family, consider your own
725financial future.
726The fact is, this doesn’t have to be your future reality.
727»»You don’t have to spend more
7288
729than you
730make just to look good in front of your friends. You can
731learn basic money principles and put them into practice.
732»»When you manage money well, you’ll experience deeper
7339
734.
735»» It’s really simple! Personal finance is 80%
73610
737and 20% head knowledge.
738»»Money
73911
740is easy—it’s controlling your
741behavior that’s the real challenge.
742»»As you think about the “
74312
744” American
745family, remember that normal is broke. You don’t have to
746be normal!
74716 Foundations in Personal Finance High School Edition
748SECTION 2
749LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
750Dave’s Story
751With more than 20 years of experience counseling people on
752how to manage their money, Dave knows what it takes to get
753control of your cash.
754More than 20 years
755ago, my wife, Sharon,
756and I went broke. We
757lost everything due
758to my stupidity in
759handling money, or
760not handling it, as the case may be.
761Hitting bottom and hitting it hard was
762the worst thing that ever happened
763to me and the best thing that ever
764happened to me.
765We started with nothing, but by the
766time I was 26 years old, we held real
767estate worth more than $4 million. I
768was good at real estate, but I was better
769at borrowing money. Even though I
770had become a millionaire, I had built
771a house of cards. The short version of
772the story is that debt caused us, over
773the course of two and a half years of
774fighting it, to lose everything. We were
775sued, foreclosed on, and, finally, with
776a brand-new baby and a toddler, we
777were bankrupt. Scared doesn’t begin
778to cover it. Crushed comes close, but
779we held on to each other and decided
780we needed a change.
781A Snapshot of the “Normal” American Family
782Don’t be fooled by outside images of new cars and expensive homes. Most Americans
783are struggling financially and drowning in debt.
784DEBT PROFILE OF THE AVERAGE AMERICAN FAMILY*
785Average Credit Card Debt (of households with credit card debt) $15,799
786Average Mortgage Debt $149,667
787Average Student Loan Debt $32,559
788Average Car Loan Debt $13,125
789This does not have to be your future reality. If you manage money well from the start and
790make the decision not to use debt as a financial tool, you can avoid the stress of living paycheck
791to paycheck.
792* NOTE: Average credit card debt of all American households is $7,000, source: Nerd Wallet
793*Federal Reserve, U.S. Census Bureau, Internal Revenue Service, manilla.com
794Chapter 1: Introduction to Personal Finance 17
795LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
796“Today there are
797three kinds of people:
798the haves, the havenots,
799and the havenot-
800paid-for-whatthey-
801haves.”
802EARL WILSON
803American columnist
804“
805Dave’s Story (Continued)
806After losing everything, I went on a
807quest to find out how money really
808works, how I could get control of
809it, and how I could have confidence
810in handling it. I read everything I
811could get my hands on. I interviewed
812older rich people, people who made
813money and kept it. That quest led
814me to a really, really uncomfortable
815place: my mirror. I came to realize
816that my money problems, worries
817and shortages largely began and
818ended with the person in my mirror.
819I also realized that if I could learn
820to manage the character I shaved
821with every morning, I would win
822with money.
823The stuff we teach in this class
824represents everything I’ve learned
825about money since then, from
826savings and debt, to insurance and
827investing. And I’m excited that my
828daughter Rachel has joined me to
829get this information to you before
830you graduate high school. Trust me,
831knowing this stuff then would have
832saved me a whole lot of trouble!
833What’s Your Money Personality?
834StageofLife.com conducted a writing contest to
835evaluate students’ attitudes toward money and
836the role of money in their lives. The following was
837the contest writing prompt:
838“What is your relationship
839with money? How do you spend
840(or save) and why?”
841More than 3,335 students from all 50 U.S. states
842contributed a 500-word essay response. From
843the essay submissions, several themes emerged:
8441. FRUSTRATION: Many teens expressed negative
845emotions about money: anger, frustration,
846stress, distrust and even hatred.
8472. ROLE MODELS: Teens are watching how their
848parents treat money. In several of the essays,
849the teens made a point to criticize how their
850parents handle money and vowed not to “be
851like them.”
8523. PRAGMATIC: There was a minority voice that
853did approach the topic with a more pragmatic
854point of view and in some rarer cases, even
855positivity. Students shared their personal
856saving tips, budgeting experience and more.
8574. MONEY ISN’T EVERYTHING: A good percentage
858of the essays address a more universal truth:
859that money isn’t everything. Yes, it’s needed to
860survive, but it’s not a requirement in making
861people happy.
86218 Foundations in Personal Finance High School Edition
863SECTION 2
864LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
865Teen money attitudes
866shifted with the recent
867recession.
868• Nine in 10 teens say they
869were affected by the
870recession.
871• Nearly two-thirds of
872teens (64%) are more
873grateful for what they
874have.
875• The majority (58%) of
876teens say they are less
877likely to ask for things
878they want.
879• The majority (56%) of
880teens have a greater
881appreciation for their
882parents’ hard work.
883• More than a third (39%)
884of teens appreciate their
885families more.
886• Nearly three-quarters
887(73%) of teens say it is
888important to have an
889emergency fund.
890• More than half (51%) of
891teens say it is important
892to understand debt.
893CBS Money Watch
894$
895Americans Are Being Outsmarted
896Ultimately, what made our current
897indebtedness possible was that it
898became profitable. Yes, a debt system
899that keeps Americans from achieving
900wealth and makes us “slaves” to the
901lender exists because it became a
902profitable industry. Today, with
903Americans charging more than a
904trillion dollars each year on their
905credit cards, one can understand
906why the credit card companies are
907so profitable. There is nothing wrong
908with a business turning a profit; what’s
909wrong is that these companies are
910outsmarting Americans. That should
911bother you!
912Why do we allow ourselves to be outsmarted when it
913comes to our own money?
914»»We like
91513
916—lots of stuff!
917»»We are told that debt is
91814
919. It has become
920acceptable in our culture to use credit to buy things.
921»»We are taught that we can
92215
923.
924This is simply not true!
925»»Our debt system keeps us from building
92616
927because we are constantly giving our money away to pay
928for things we bought years ago.
929»» In America, we are bombarded with marketing ads that
930push us to buy things. “You can buy it today with no money
931down and no interest for 90 days!” Sound familiar?
932»»We want you to be
93317
934of the financial
935condition of our country—and we want you to
93618
937it!
938We will talk more about consumerism and debt in later
939chapters. Right now, our focus is to be aware of the
940financial “condition” of America and begin to question it.
941Chapter 1: Introduction to Personal Finance 19
942LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
943“You will either
944manage your money,
945or the lack of it will
946always manage you.”
947DAVE RAMSEY
948“
949Section 3: You and Money
950VIDEO 3.1
951Learn the Language of Money
952No one is born financially smart!
953Learning the language of personal
954finance is the first step in becoming
955money smart. The language of
956money is spoken in the vocabulary
957of accounting: understanding what
958credits, debits, assets and liabilities
959are. You’ve got to learn enough to
960understand your personal financial
961statements and communicate
962effectively about your finances.
963How smart you are with your money
964will determine your financial wellbeing
965in life.
966»»Knowing the
96719
968of money allows you to
969tell your money what to do.
970»»That means deciding where your money is going to go
97120
972you get your paycheck.
973»»You’ll be able to communicate effectively with
97421
975, financial planners and insurance agents.
976»»Focus on understanding the
97722
978as you
979move through this course.
980»»You’ll become the
98123
982on your money. Winning
983with money is not complicated, but it does involve some
984basic knowledge.
985JOURNAL QUESTION: VIDEO 2.1
986What was Dave’s biggest lesson when it came to managing money and
987building wealth?
98820 Foundations in Personal Finance High School Edition
989SECTIONS 2 & 3
990LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
991“Ignorance is not lack
992of intelligence; it is
993lack of know-how.”
994DAVE RAMSEY
995“
996Learning the language is the key to the game.
997Learning the language of money is a
998little bit like learning the language
999of sports. You can’t really follow—
1000much less enjoy—a football game if
1001you don’t know what the ref is talking
1002about when he uses words like “blitz,”
1003“option” or “stunt.” But once those
1004terms are explained to you and you
1005grasp their meaning in the context of
1006the game, you can easily get into it and
1007shout for your team.
1008It’s the same way with money. Being
1009financially literate allows you to
1010participate in the game. And if you
1011really put what you learn into practice,
1012you can even become a coach—and
1013tell your money what to do! Of course,
1014that doesn’t mean talking to your
1015Benjamins. It’s about effectively
1016communicating with bankers,
1017financial planners and insurance
1018agents—people who provide the money
1019services you need in order to grow
1020wealth. It’s also about knowing how
1021to budget and what to budget for.
1022Understanding the language of
1023money will allow you to manage
1024your own finances effectively. You
1025don’t want to be dependent on outside
1026influences to control, shape or coerce
1027your financial behavior. Instead,
1028you will determine which level of
1029financial well-being you will achieve.
1030It’s simple. If you’re going to tell your
1031money what to do, you need to first
1032speak the language!
1033Become Money Smart
1034You don’t have to be a financial or
1035accounting genius to win with money.
1036Financial success isn’t reserved
1037just for the select few who actually
1038enjoy running spreadsheets or earn
1039accounting degrees. But you do need to
1040be what we call “money smart.” That
1041just means you need to understand
1042some basic principles.
1043»» First, you need to be comfortable with
104424
1045.
1046»»Second, you must start learning the
104725
1048of money.
1049»»Third, and this is the hardest part, you need to learn how
1050to manage your
105126
1052with money.
1053Chapter 1: Introduction to Personal Finance 21
1054LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1055Some people make more
1056than $100,000 per year
1057but are living at survival
1058level because they spend
1059everything they make
1060(and then some). There
1061are others who make
1062$40,000 per year but live at
1063a secure level. How is this
1064possible? They live on less
1065than they make!
1066+
1067What Does Winning With Money Look Like?
1068We can divide financial well-being into three levels.
1069* NOTE: These levels are not determined by income, but rather by how you manage your income.
10701. Survival: At this level there are simply income, bills and
1071hope that there is enough money to get you to the end of the
1072month. Sounds like fun, right? You work for every dollar
1073you earn and spend everything you earn. This is the living
1074“paycheck to paycheck” level of financial well-being.
10752. Comfort: At this level, you have a basic understanding
1076of money management. There are still income and bills,
1077how-ever, you pay yourself first! You have a small
1078monthly surplus that you use to save and invest. You
1079are slowly building wealth and moving toward being
1080financially secure.
10813. Secure: Instead of saving and investing a small surplus,
1082you arrange your finances in such a way that your wealth
1083now generates your income. That’s right! At this level,
1084your money actually works for you.
1085On which level would you like your financial future to rest?
1086How You View Money Matters
1087The way we view money is unique
1088and largely dependent on our current
1089financial state. Even though you are
1090still dependent on your parents, you
1091are already developing a “money
1092personality.” Some people are really
1093good at saving while others are talented
1094at finding bargains. The fact is we all
1095have strengths and weaknesses; we all
1096have a money personality. How much
1097money a person has, unfortunately,
1098does not always dictate his or her
1099spending behavior. Some millionaires
1100hate spending while some people who
1101are broke can’t seem to stop buying
1102things. Money—or the lack of money—
1103can affect the way we feel about
1104ourselves and the way we interact
1105with others. Your relationship with
1106money is complex and dynamic.
110722 Foundations in Personal Finance High School Edition
1108SECTION 3
1109LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1110Budget
1111Builder
1112One of the most important
1113steps in winning with
1114money is to have a plan. We
1115are going to teach you how
1116to write a budget. Go to
1117foundationsU.com/1 for
1118your first budget lesson!
1119»»Winning with money isn’t just about understanding how
1120it works—it’s about putting your
112127
1122into it.
1123That’s the 80% behavior we’ve talked about.
1124»»Money is a
112528
1126. It’s up to you to manage it.
1127»»The best way to manage money is to learn how
1128to manage
112929
1130.
1131»»You need to know your natural
113230
1133when
1134it comes to money. For instance, are you more likely to
1135spend or save?
1136»»Once you know your money
113731
1138, you
1139develop a financial plan that works for you.
1140»» It’s in recognizing who you really are that allows you the
114132
1142to grow and learn.
1143During this course, as you develop
1144your knowledge and skills in areas like
1145budgeting and saving, consider your
1146money personality. Think about how
1147your parents and other adults in your
1148life spend and save. Reflect on your own
1149spending habits. Understanding the
1150way you think about money will help
1151you manage your money and make good
1152decisions for your financial future.
1153JOURNAL QUESTION: VIDEO 3.1
1154How do you want your financial future to look?
1155Chapter 1: Introduction to Personal Finance 23
1156LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1157Chapter Summary
1158Check for Understanding
1159Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
1160checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
1161Your Progress section.
1162Build On What You’ve Learned
1163Fill in the graphic organizer below.
11641. 2. 3.
11656. 5.
11667. 4. Key Components
1167of Financial Planning
1168Big Ideas
1169The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
1170and think about how what you’ve learned will affect your current and future decisions. Then, in the space
1171provided, write an “I believe” statement for each of the Big Ideas.
1172»» Personal finance is 80% behavior and 20% head knowledge.
1173»»Many Americans are buried in debt.
1174»» Learn the language of money!
117524 Foundations in Personal Finance High School Edition
1176RECAP & REVIEW
1177LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1178Take Action Challenge
1179The first key component of financial planning is to assess your current financial situation. This should
1180be pretty easy at your age. It’s important to have a clear picture of your income (money in) and expenses
1181(money out) before you move on to the next phases of financial planning. Complete the student financial
1182assessment form below.
1183LIST ALL INCOME SOURCES
1184Regular Income Source (job/allowance) Amount Pay Period (weekly, biweekly, etc.)
1185Irregular Income Source (babysitting, summer job, tutoring, etc.)
1186N/A
1187LIST ALL EXPENSES (auto insurance, car payment, cell phone bill, entertainment, clothing, etc.)
1188Expense Amount Pay Period (weekly, biweekly, etc.)
1189LIST ALL ASSETS (anything you own that has value: car, savings account, etc.)
1190Asset Value
1191N/A
1192N/A
1193N/A
1194N/A
1195Chapter 1: Introduction to Personal Finance 25
1196LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1197Money in Review
1198a Consumer
1199b Financial Literacy
1200c Credit
1201d Loan
1202e Debt
1203f Interest
1204g Economy
1205h Personal Finance
12061. _____ A fee paid by a borrower to the lender for
1207the use of borrowed money
12082. _____ An obligation of repayment owed by one
1209party (debtor/borrower) to a second
1210party (creditor/lender)
12113. _____ A person or organization that buys/uses
1212goods or services
12134. _____ A debt evidenced by a “note,” which
1214specifies the principal amount, interest
1215rate and date of repayment (example:
1216house mortgage)
12175. _____ The granting of a loan and the creation
1218of a debt; any form of deferred payment
12196. _____ A system by which goods and services
1220are produced and distributed
12217. _____ The knowledge and skillset necessary
1222to be an informed consumer and manage
1223finances effectively
12248. _____ All of the decisions and activities of
1225an individual or family regarding their
1226money, including spending, saving,
1227budgeting, etc.
1228Matching
1229Match the following terms to the correct definition below.
1230Illustration
1231Draw a picture representation of each of the following terms.
1232Money personality Consumerism
123326 Foundations in Personal Finance High School Edition
1234RECAP & REVIEW
1235LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1236Multiple Choice
1237Circle the correct answer.
12389. Learning the language of money is not that
1239important because you will be able to depend
1240on financial planners to manage your money.
1241a True b False
124210. Which of the following is NOT a reason
1243credit is marketed so heavily to consumers
1244in the United States?
1245a There is strong consumer demand for big
1246ticket items.
1247b The credit industry has become extremely
1248profitable.
1249c The use of credit is not socially accepted
1250in the United States.
1251d After World War I, credit laws in the
1252United States were relaxed in an attempt
1253to create a mainstream alternative to loan
1254sharks for the working class.
125511. During the Great Depression, New Deal
1256policy makers came up with mortgage
1257(home loans) and consumer lending policies
1258that convinced commercial banks that:
1259a Consumer credit was not a profitable
1260industry.
1261b Consumer credit could be profitable.
1262c Consumers would not be willing to use
1263credit, since borrowing money for large
1264purchases had not previously been an
1265option for the middle class.
1266d They would not be able to compete with
1267loan sharks in the industry of consumer
1268lending.
126912. When it comes to managing money, success
1270is about _______% head knowledge and
1271_______% behavior.
1272a 50, 50
1273b 80, 20
1274c 60, 40
1275d 20, 80
1276Short Answer
1277Respond in the space provided.
127813. Describe some of the mistakes Americans
1279often make when it comes to money.
128014. Explain why understanding your money
1281personality is important when it comes to
1282developing a money plan that’s right for you.
128315. Does the History of Credit and
1284Consumerism segment make you view the
1285use of credit differently than you did before?
1286Explain your answer.
128716. Explain how marketing can affect your
1288decisions when it comes to spending money.
128917. Does managing your money well mean that
1290you can’t have fun with your money? Explain
1291your answer.
1292Chapter 1: Introduction to Personal Finance 27
1293LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1294What do other high
1295school students know
1296about saving?
1297We asked high school students to
1298describe something they really wanted
1299and thought they had to buy, only to
1300realize later that they wasted their money.
1301“I worked and saved $250 for a guitar
1302that I never learned how to play.”
1303Junior, Michigan
1304“I bought some fish that I thought
1305I really wanted. I never fed them,
1306totally lost interest in them, and they
1307all died. What a waste of money!”
1308Junior, Alabama
1309“I really wanted this expensive
1310skateboard that cost $229. I had
1311to have it. Turned out it skated no
1312better than the other ones that
1313were a lot less expensive.”
1314Sophomore, Alabama
1315“I got a pink Coach purse that I
1316paid more than $200 for and have
1317maybe used twice.”
1318Junior, Florida
1319“I bought an $80 sweater that turned
1320out to be really cheap quality.”
1321Freshman, Tennessee
13222
1323CHAPTER
1324LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1325Saving
1326YOU MIGHT BE wondering why you, a
1327teenager, need to worry about saving money.
1328While saving money when you make very
1329little can be a challenge, it is important that
1330you develop a habit of saving a portion of what
1331you earn now. This simple habit can change
1332your life in the years to come. In fact, it’s the
1333only foolproof way of becoming a millionaire.
1334The best part is, anyone can do it! The earlier
1335you begin to save, the wealthier you can
1336become—it’s as simple as that!
1337*StatisticBrain.com
1338of American
1339families have no
1340savings at all.*
134125%
1342of Americans
1343are not saving
1344for retirement.*
134540%
1346UNIT 1: CHAPTER 2
1347LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1348Key Terms
1349Get to know the language of money.
1350»» Compound interest: Interest paid
1351on interest previously earned;
1352credited daily, monthly, quarterly or
1353semiannually
1354»» Emergency fund: Five hundred dollars
1355in readily available cash to be used only
1356in the event of an emergency; the goal of
1357the First Foundation
1358»» Interest rate: Percentage paid to a
1359lender for the use of borrowed money
1360(in debt); percentage earned on invested
1361principal (in investing)
1362»» Five Foundations: The five steps to
1363financial success
1364»» Sinking fund: Saving money over time
1365for a large purchase
1366Learning Outcomes
1367Once you’ve completed this chapter’s videos, you will be asked
1368to return to this list and place a checkmark next to the items
1369you’ve mastered.
1370Section 1: Saving: An Exercise of Character
1371Â…Â… Identify the Five Foundations of personal finance.
1372Â…Â… Understand the purpose of having an emergency fund.
1373Section 2: Three Basic Reasons to Save Money
1374Â…Â… Explain the three basic reasons for saving money.
1375Â…Â… Understand the importance of saving for both long-term
1376and short-term goals.
1377Â…Â… Describe what a sinking fund is and identify purchases
1378for which you would use a sinking fund.
1379Section 3: The Power of Compound Interest
1380Â…Â… Demonstrate how compound interest works and
1381understand the impact of annual interest rate.
1382Â…Â… Describe the difference between simple and
1383compound interest.
1384Â…Â… Understand the importance of beginning to save now.
1385
1386Before You Begin
138730 Foundations in Personal Finance High School Edition
1388INTRODUCTION
1389LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1390Measure Your Progress
1391Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
1392column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
1393on any statement.
1394JOURNAL QUESTION: INTRODUCTION
1395What are your initial thoughts about saving? What do you want to learn about saving?
13961. The amount of money you save depends on how
1397much money you earn. Simply put, you will save
1398more when you earn more.
13992. A savings account at your bank is the best place to
1400put your emergency fund.
14013. The two biggest factors in compound interest and
1402building wealth are time and the initial amount of
1403the investment.
14044. It is okay to use your emergency fund to pay cash for
1405big purchases such as a TV or a cell phone.
14065. You should pay yourself first before you pay bills.
1407Agree Disagree Agree Disagree
1408BEFORE AFTER
1409Chapter 2: Saving 31
1410LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1411THE FIVE FOUNDATIONS
1412are the beginner steps
1413for establishing and
1414maintaining financial
1415peace. These steps will
1416serve as your compass
1417or framework for your
1418financial success. You will
1419find the Five Foundations
1420explained in detail
1421throughout this course.
1422These are basic steps that
1423anyone can and should do
1424in order to win with money.
1425So start now. We want to
1426see you WIN!
1427+
1428“Discipline yourself
1429to do the things you
1430need to do when you
1431need to do them, and
1432the day will come
1433when you will be able
1434to do the things you
1435want to do when you
1436want to do them.”
1437ZIG ZIGLAR
1438Best-selling author and
1439motivational speaker
1440“
1441The most important lessons
1442teens want to know when
1443learning how to manage
1444money are learning to save
1445(35%) and understanding
1446how to budget (28%).
1447ING Direct USA Survey
1448$
14492 CHAPTER
1450Section 1:
1451Saving: An Exercise of Character
1452VIDEO 1.1
1453The Five Foundations
1454THE SECOND FOUNDATION Get Out of 2
14552
1456THE THIRD FOUNDATION Pay 3 3 for Your Car
1457THE FOURTH FOUNDATION Pay Cash for 4
14584
1459THE FIFTH FOUNDATION Build 5 and 6
14605
1461THE FIRST FOUNDATION Save a $500 1 1 Fund
146232 Foundations in Personal Finance High School Edition
1463SECTION 1
1464LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1465You should have an
1466emergency fund because
1467unexpected things are
1468going to happen. Smart
1469people have known this
1470for centuries and used
1471to say, “In the house of
1472the wise are stores of
1473choice food and oil, but a
1474foolish man devours all
1475he has” (Proverbs 21:20).
1476In other words, having
1477some money saved away
1478can turn a crisis into an
1479inconvenience.
1480+
1481Saving Money the American Way
1482THE FIRST FOUNDATION is saving
1483an emergency fund. It is going to rain.
1484Even as a young adult, you need a
1485rainy-day fund. You’ll have many
1486financial goals throughout your life.
1487You don’t want anything to stand in
1488the way of paying your way through
1489college or buying your first house. But
1490emergencies will happen along the
1491way. Money Magazine says that 78%
1492of us will have a major negative event
1493in a given 10-year period of time. At
1494your age, it might be needing to pay
1495for a car repair. Later in life, it might
1496be an extended illness or an injury that
1497keeps you from working for several
1498months. Regardless of the emergency,
1499having money set aside—$500 at your
1500age—will ensure that those life events
1501do not devastate you financially.
1502Are Americans Good Savers?
1503A Negative Savings Rate
1504Back in December 2006, CNN Money reported
1505that Americans had a -0.6% savings rate. The
1506savings rate compares after-tax income to the
1507money people spent on a variety of items. It turns
1508negative when people take on additional debt such
1509as credit cards or car loans. The negative savings
1510rate meant that Americans were spending more
1511money than they were making in 2006. The title
1512of CNN Money’s article was “Americans spend
1513every cent and more: Critics say America’s
1514negative savings rate can’t be sustained and see
1515a recession coming. Are they right?”
1516Fast Forward to Today
1517The critics were right, and Americans faced one
1518of the worst recessions in our nation’s history.
1519If our collective spending and saving habits have an
1520effect on the overall economy, shouldn’t Americans
1521want to change their behavior? After all, when
1522the economy is strong, we prosper through lower
1523unemployment and higher incomes. When it is
1524weak, we suffer with high unemployment and
1525lower incomes.
1526Americans’ initial response to the economic
1527downturn was positive. In the summer of 2008,
1528the savings rate reached nearly 7%. However,
1529Americans did not maintain this new commitment
1530to saving. By 2010, Americans saved 5.5% of their
1531income. During 2012, that number plunged as
1532low as 3.3%.*
1533What’s the Lesson Here?
1534When things are good, Americans tend to behave
1535as though things will always be good. The reality is,
1536whether it’s an economic downturn or a personal
1537money emergency, you have to be prepared.
1538You need an emergency fund, an old-fashioned
1539rainy-day fund!
1540*Economic Research, Federal Reserve Bank of St. Louis
1541Chapter 2: Saving 33
1542LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1543TIPS FROM TEENS
1544ON SAVING
1545Bailey, 15: “I have a little
1546gift box that I put spare
1547change and bills into
1548when I earn baby-sitting
1549money. Whenever I have a
1550significant amount in there,
1551I’ll invest it or put it in the
1552bank. It’s important to
1553keep a routine. Every time
1554I get money, I put some of
1555it away.”
1556Adam, 16: “I recently got
1557a part-time job where
1558my paychecks are
1559automatically deposited
1560into my checking account.
1561I set up an automatic
1562transfer of $25 from my
1563checking to my savings
1564account each week. Since
1565it’s all done automatically,
1566I never actually see the
1567money. It is just left to pile
1568up in my savings account.
1569I’ve already saved several
1570hundred dollars without
1571doing anything!”
1572WHAT ABOUT YOU?
1573Think of a way you have
1574saved money or could save
1575money. Write it down and
1576then share it with
1577your class.
1578The First Foundation
1579»»The First Foundation is $
15807
1581in an emergency fund.
1582You should do this as quickly as possible.
1583»»When you’re in high school, you won’t have the same
1584emergency expenses as your
15858
1586(like needing
1587to put a new roof on the house). For you, a surprise
1588expense might be fixing a flat tire or replacing a broken
1589cell phone.
1590»»An emergency fund allows you to have money available
1591for any surprise
15929
1593.
1594»» If you don’t have money saved to pay for these things,
1595then
159610
1597will start looking like an easy answer.
1598»»Debt
159911
1600solves problems. At best, it just delays
1601one problem while creating another one!
1602»»When you’re older and out of school, you’ll need to
160312
1604your emergency fund into a full three
1605to
160613
1607months’ worth of expenses.
1608»»Make sure this money is kept in the
160914
1610and that
1611you ONLY use it for emergencies. You can’t keep the
1612money handy, because it will get spent.
1613»»Keep your emergency fund in a
161415
1615savings
1616account away from your spending money.
161734 Foundations in Personal Finance High School Edition
1618SECTION 1
1619LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
162080% of America’s
1621millionaires are firstgeneration
1622rich. That
1623means they started with
1624nothing, did smart stuff,
1625and became millionaires.
1626The Millionaire Next Door
1627+ JOURNAL QUESTION: VIDEO 1.1
1628What has kept you from saving in the past? Based on what you’ve
1629learned, how can you change this?
1630How Can I Save $500 Quickly?
1631Five hundred dollars might sound like a lot,
1632but you’d be amazed at how quickly you can pile
1633up some cash! First, make it a goal. Next, set
1634a target date. Goals need a timeline. Now here
1635are some money-making ideas:
16361. If you get a regular allowance from your
1637parents, save it! Say goodbye to fancy
1638coffees, vending machine goodies and
1639fast food. Okay, not forever! Those are
1640fun treats. But try limiting yourself to a
1641Friday splurge and saving your money
1642the other days of the week.
16432. Hold an auction. Gather things you don’t
1644use or need anymore, like expensive
1645clothing or your unused gaming system
1646(get your parents’ permission, of course)
1647and sell them online or at a garage sale.
1648You won’t believe how much money you
1649have in the form of unused stuff!
16503. Become an entrepreneur! Hand out fliers in
1651your neighborhood advertising baby-sitting
1652or yard work services.
16534. If you’re old enough and your schedule allows
1654it, get a part-time job on the weekends.
16555. Communicate your money goals with your
1656parents. They might be willing to pay you
1657for doing extra jobs around the house or for
1658getting good grades.
16596. If your parents (or other relatives) own a
1660business, they might be able to hook you up
1661with a part-time job there.
16627. Consider tutoring. Some teens report
1663earning as much as $20 an hour.
16648. Take advantage of summer months off of
1665school. Explore being a camp counselor,
1666golf caddy or a lifeguard.
16679. Watch the local ads for people needing
1668pet sitters or house sitters when they go
1669out of town.
167010. Use your skills. Think about what you are
1671good at. You might offer horseback riding
1672lessons, Spanish lessons or piano lessons.
1673Chapter 2: Saving 35
1674LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1675“Save a part of
1676your income and
1677begin now, for
1678the man with a
1679surplus controls
1680circumstances and
1681the man without a
1682surplus is controlled
1683by circumstances.”
1684HENRY BUCKLEY
1685Australian politician
1686“
1687So now you know about the
1688savings crisis in America.
1689You might be thinking, Yeah,
1690I’d like to start saving, but
1691I’m barely making any
1692money. And sometimes,
1693doing something fun
1694seems more important
1695than saving just a few
1696bucks. Besides, if I can
1697only save $20 or $50 a
1698month, is it really worth it?
1699The Answer: Absolutely!
1700By starting now, you’re
1701giving your money time to
1702grow. And when you start
1703young, you’ll end up with
1704more cash than someone
1705who waits.
1706+
1707Section 2:
1708Three Basic Reasons to Save Money
1709The First Foundation is simple.
1710Save a $500 emergency fund. Keep
1711in mind that $500 won’t always be
1712enough for your emergency fund. As you
1713get older and you have more financial
1714responsibilities like paying a mortgage
1715and supporting a family, you will want
1716to have three to six months of living
1717expenses set aside in your emergency
1718fund. How much money is that?
1719Well, that will depend on what your
1720monthly bills total at any given time.
1721For instance, if your living expenses
1722(mortgage, utilities, insurance, food,
1723etc.) total $3,000 a month, then you’ll
1724want to set aside $9,000 to $18,000 in an
1725emergency fund. That sounds like a lot.
1726But rest assured, if you are managing
1727your money wisely, as your income
1728grows so will your savings.
1729VIDEO 2.1
1730Save Money for Three Basic Reasons:
17311.
173216
1733Fund
17342.
173517
17363.
173718
1738Building
1739Emergency Fund
1740»»
174119
1742are going to happen. Count on it. The
1743First Foundation, a beginner emergency fund, is $500.
1744* NOTE: Later in life this should increase to three to six months of living expenses.
1745»» It’s a good idea to open a separate savings account for
1746your emergency fund. Then, leave it alone!
1747»»Your emergency fund is not an investment. It is
1748insurance for when unexpected things happen.
1749»»The emergency fund is your first savings priority.
1750Do it quickly!
175136 Foundations in Personal Finance High School Edition
1752SECTION 2
1753LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1754In 2012, only 27% of all
1755point-of-sale purchases
1756were made with cash, and
1757that number is expected
1758to drop to 23% by 2017.
1759Report published by Javelin
1760Strategy & Research
1761$
1762WHICH IS WISER?
1763Using a sinking fund
1764versus borrowing money
1765for a large purchase—you
1766make the call.
1767Say you borrow $4,000 to
1768purchase a dining room
1769set, and your interest rate
1770is 24% for two years.
1771This means you will have
1772payments of $211 per
1773month for 24 months.
1774So, you will pay a total of
1775$5,064, plus interest, for
1776that set.
1777But if you use the sinking
1778fund method and save the
1779same $211 per month for
1780only 18 months, you will be
1781able to pay cash.
1782When you pay cash,
1783you can almost always
1784negotiate a discount. So
1785you will be able to own that
1786furniture even earlier for
1787less money.
1788+
1789VIDEO 2.2
1790Purchases
1791»»The second thing you save money for is
179220
1793.
1794»» Instead of
179521
1796to purchase, pay cash by
1797using a
179822
1799fund approach.
1800A sinking fund is a way to save
1801when you know you have a large
1802purchase coming up, like a prom
1803dress or new tires for your car. You
1804calculate the expected cost of the
1805item and how long you have until
1806you need to purchase it. Divide the
1807total cost of the item by the number
1808of months until the purchase. For
1809instance, if prom is five months away
1810and the amount you are willing to
1811spend is $200, you will need to save
1812$40 a month toward your purchase
1813($200 divided by 5 equals $40).
1814Saving over time means you will
1815never need to go into debt for a large
1816purchase. Think of it this way: You pay
1817yourself $40 a month, and then pay
1818cash instead of using a credit card and
1819paying someone else $40 a month plus
1820interest! That’s right. That dress would
1821end up costing you more than $200 if
1822you borrowed money for it.
1823JOURNAL QUESTION: VIDEO 2.1
1824Explain how having an emergency fund helps protect your wealth.
1825Chapter 2: Saving 37
1826LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1827“It was character
1828that got us out of bed,
1829commitment that
1830moved us into action,
1831and discipline that
1832enabled us to follow
1833through.”
1834ZIG ZIGLAR
1835American author and
1836motivational speaker
1837“
1838Wealth Building
1839»»The third thing you save money for is
184023
1841building.
1842»»
184324
1844is the key ingredient when it comes to
1845wealth building.
1846»»Building wealth is a
184725
1848, not a sprint.
1849JOURNAL QUESTION: VIDEO 2.2
1850Why do you think so many people borrow money for large purchases
1851instead of using a sinking fund?
1852Ready to Start Saving? Read These Bank Tips First!
1853* REMEMBER: The emergency fund is not intended to grow wealth, so interest earned is not a factor.
1854»» A bank is one of the safest places to keep your
1855money. Since the financial crisis of 2008, the
1856federal government (Federal Deposit Insurance
1857Corporation or FDIC) increased the level of
1858insurance on bank accounts to $250,000 per
1859depositor.
1860»» An interest-bearing account is an account
1861that generates interest income on the available
1862balance in the account.
1863»» The convenience of a bank account comes
1864at a cost. Banks generally pay lower rates on
1865interest-bearing accounts than other financial
1866institutions that offer accounts that resemble
1867bank services: The most common are brokerage
1868cash management accounts, credit union
1869accounts, and mutual fund money market
1870accounts.
1871»» Inflation can eat up the interest you earn on
1872an interest-bearing bank account. Even a low
1873rate of inflation (a persistent rise in the cost
1874of goods and services or the decline in the
1875purchase power of money) generally outpaces
1876what banks pay on interest-bearing accounts.
187738 Foundations in Personal Finance High School Edition
1878SECTION 2
1879LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1880IMPORTANT: Since you’re
1881in high school, hold off on
1882investing for retirement
1883until you have college
1884completely paid for. It
1885doesn’t make sense to
1886invest while, at the same
1887time, taking out loans for
1888college. We want you to
1889live debt free, even through
1890college. Make paying for
1891your education a priority
1892over investing. Once you’ve
1893done that, invest as soon
1894as possible.
1895+
1896VIDEO 2.3
1897Wealth Building (Continued)
1898»»
189926
1900is a mathematical
1901explosion. You must start
190227
1903.
1904* TURN THE PAGE: Follow along with the Ben and Arthur compound interest chart to see the
1905power of compound interest!
1906JOURNAL QUESTION: VIDEO 2.3
1907How is saving an exercise of your character?
1908Maybe You Can Afford That Car!
1909“I’m 14 and want to buy a car in a couple of years. How much money will it take to
1910get a good one?”
1911DAVE’S ANSWER: You can buy a good used car for
1912around $3,000. This may seem like a lot right now,
1913but let me show you how easy it can be. Let’s say
1914you work part time after school and on weekends.
1915If you make $100 a week and save it all, you’ll have
1916enough for a car in only eight months. Pretty cool,
1917huh? Can’t do $100 a week? Saving a little bit at
1918a time adds up, and you will eventually reach
1919your goal. Take a look at the graph below for a
1920few ways it can be done.
1921YEARS TO GOAL 0.0 0.5 1.0 1.5 2.0 2.5
1922$3,000 in
192310 Months
1924$3,000 in
192515 Months
1926$3,000 in
192730 Months
1928| | ||| | ||| | || | ||| | | | | | ||| | | |||
1929| | | || | |||||| || | || |||| ||| | ||| |
1930|||| | || | | | || || ||| | | | | | | ||| | ||
1931Save $300/month
1932($75/week)
1933Save $200/month
1934($50/week)
1935Save $100/month
1936($25/week)
1937Chapter 2: Saving 39
1938LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1939The Story of Ben and Arthur
1940Both save $2,000 per year at 12%. Ben starts at age 19 and stops at age 26, while
1941Arthur starts at age 27 and stops at age 65.
19422,000 2,240 19 0 0
19432,000 4,749 20 0 0
19442,000 7,558 21 0 0
19452,000 10,706 22 0 0
19462,000 14,230 23 0 0
19472,000 18,178 24 0 0
19482,000 22,599 25 0 0
19492,000 27,551 26 0 0
19500 30,857 27 2,000 2,240
19510 34,560 28 2,000 4,749
19520 38,708 29 2,000 7,558
19530 43,352 30 2,000 10,706
19540 48,554 31 2,000 14,230
19550 54,381 32 2,000 18,178
19560 60,907 33 2,000 22,599
19570 68,216 34 2,000 27,551
19580 76,802 35 2,000 33,097
19590 85,570 36 2,000 39,309
19600 95,383 37 2,000 46,266
19610 107,339 38 2,000 54,058
19620 120,220 39 2,000 62,785
19630 134,646 40 2,000 72,559
19640 150,804 41 2,000 83,506
19650 168,900 42 2,000 95,767
19660 189,168 43 2,000 109,499
19670 211,869 44 2,000 124,879
19680 237,293 45 2,000 142,104
19690 265,768 46 2,000 161,396
19700 297,660 47 2,000 183,004
19710 333,379 48 2,000 207,204
19720 373,385 49 2,000 234,308
19730 418,191 50 2,000 264,665
19740 468,374 51 2,000 298,665
19750 524,579 52 2,000 336,745
19760 587,528 53 2,000 379,394
19770 658,032 54 2,000 427,161
19780 736,995 55 2,000 480,660
19790 825,435 56 2,000 540,579
19800 924,487 57 2,000 607,688
19810 1,035,425 58 2,000 682,851
19820 1,159,676 59 2,000 767,033
19830 1,298,837 60 2,000 861,317
19840 1,454,698 61 2,000 966,915
19850 1,629,261 62 2,000 1,085,185
19860 1,824,773 63 2,000 1,217,647
19870 2,043,746 64 2,000 1,366,005
19880 2,288,996 65 2,000 1,532,166
1989Invests Running Total Age Invests Running Total
1990BEN ARTHUR
1991Arthur
1992invested
1993$78,000 and
1994NEVER
1995CAUGHT UP!
1996Ben invested
1997ONLY $16,000.
1998$2,288,996 vs $1,532,166
1999$2,000
2000÷ 12
2001$167
2002MONTHS
2003INVESTED
2004ANNUALLY
2005Saving $2,000 each
2006year works out to
2007only $167 per month!
2008INVESTED
2009MONTHLY
2010Ben came out
2011ahead by over
2012$700,000!
2013Ben stops investing;
2014Arthur starts investing
2015Grand Total
201640 Foundations in Personal Finance High School Edition
2017SECTION 3
2018LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2019INTERESTED IN
2020INVESTING?
2021We will talk more about
2022investing in Chapter 8.
2023+
2024What excites you most
2025about investing?
2026“Making money without
2027doing anything.”
2028Junior, Oklahoma
2029“Being able to be financially
2030secure when I retire.”
2031Senior, Florida
2032“I am excited about what
2033even a small investment
2034can become.”
2035Senior, Colorado
2036“Having tons of money in
2037the end.”
2038Senior, New Jersey
2039“Patience is
2040golden because it
2041will increase the
2042satisfaction you take
2043from achieving your
2044goals and desires.”
2045DAVE RAMSEY
2046“
2047Section 3:
2048The Power of Compound Interest
2049VIDEO 3.1: THERE ARE NO FILL-INS IN THIS SECTION.
2050What Is Interest?
2051““The most powerful force in the universe is compound interest!”
2052ALBERT EINSTEIN, German physicist
2053What is interest? In investing, it
2054is the money the principal (original
2055amount invested) earns. It is typically
2056a percentage of the principal, paid on
2057a monthly, quarterly or annual basis.
2058Compound interest is interest paid
2059on interest previously earned.
2060Whew! Need further explanation?
2061Here’s an example.
2062Take a one-time investment of $1,000
2063and earn 10% on it. Your interest
2064earned at the end of the year is $100.
2065Add that to your original $1,000, and
2066you have $1,100.
2067At the end of the next year, your $1,100
2068is compounded at 10% interest, so your
2069return on investment is $110. Add that
2070to the $1,100, and you now have $1,210.
2071Your interest on $1,210 is $121.
2072So as time passes, the amount you earn
2073from interest grows. That is why it is
2074so important that you start as early as
2075possible. You have more time for your
2076interest to snowball and pick up more
2077and more snow!
2078How to Calculate Compound Interest
2079Use this simple formula to figure out the future value of a
2080deposit once compound interest has worked its magic.
2081FV=PV (1+r/m)mt
2082* REMEMBER: When calculating this formula, use the mathematical order of operations.
2083FV: The future value
2084PV: The present value
2085r: The annual rate of interest as a
2086decimal (5% is expressed as the
2087decimal 0.05)
2088m: The number of times per year the
2089interest is compounded (monthly,
2090annually, etc.)
2091t: The number of years you leave it
2092invested
2093Chapter 2: Saving 41
2094LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2095Budget
2096Builder
2097Saving money is a lot easier
2098to do when you make it part
2099of your budget! Go to
2100foundationsU.com/2 for
2101your next budget lesson.
2102See what your investment
2103will be worth in 40 years!
2104Check out the
2105Investing Calculator
2106at foundationsU.com.
2107+
2108Compound Interest (Continued)
2109Inflation: Inflation is a persistent rise in the price of goods
2110and services over a period of time.
2111Time Value of Money: This principle suggests that a
2112certain amount of money today has different buying power
2113than the same amount of money in the future. This notion
2114exists both because there is an opportunity to earn interest
2115on the money and because inflation will drive prices up,
2116thereby changing the “value” of the money.
2117So let’s say you and a friend each get $100 for your
2118birthdays. Your friend buys designer jeans, and you put
2119your cash in a savings account. In two years, your money
2120will have earned interest. But will you have enough cash to
2121buy the same designer jeans?
2122The trade-off between money now and money later depends
2123on, among other things, the inflation rate and the rate of
2124interest you can earn by investing or saving.
2125The rate of return, or the interest rate, on your investment
2126is important to consider. We will talk about different types
2127of investments and rate of return in detail in Chapter 8,
2128Investing and Retirement.
212942 Foundations in Personal Finance High School Edition
2130SECTION 3
2131LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2132“Most people have the
2133will to win; few have
2134the will to prepare
2135to win.”
2136BOBBY KNIGHT
2137Former head coach of the
2138Indiana Hoosiers (1971–2000)
2139“
2140How Important Is My Interest Rate?
2141Look at what happens to a $1,000 one-time investment with no withdrawals from
2142age 25 to age 65 (40 years).
2143$800,000 »
2144$700,000 »
2145$600,000 »
2146$500,000 »
2147$400,000 »
2148$300,000 »
2149$200,000 »
2150$100,000 »
21510 »
2152$10,285
2153$93,050
2154$750,378
21556% 12% 18%
2156ANNUAL INTEREST RATE
2157Where you put your
2158money matters!
2159JOURNAL QUESTION: VIDEO 3.1
2160Why don’t more people save for the future? Which reasons can be fixed
2161by having a money plan?
2162Chapter 2: Saving 43
2163LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2164Chapter Summary
2165Check for Understanding
2166Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
2167checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
2168Your Progress section.
2169Build On What You’ve Learned
2170Review: The Three Reasons to Save
2171Fill in the graphic organizer. What are the three things you need to save for? Describe why each is important
2172for your financial future. Take a look at section 2 if you need help.
2173SAVE FOR:
2174IMPORTANT BECAUSE:
21751
2176SAVE FOR:
2177IMPORTANT BECAUSE:
21782
2179SAVE FOR:
2180IMPORTANT BECAUSE:
21813
21823 Reasons to Save
218344 Foundations in Personal Finance High School Edition
2184RECAP & REVIEW
2185LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2186Take Action Challenge
2187See how quickly you can save your $500 emergency fund. Set a time goal and make it happen!
2188Emergency
2189Fund
2190Complete! $0 Chart your progress here!
2191$50 $100 $150 $200 $250 $300 $350 $400 $450 $500
2192Months Weeks Days
2193Goal:
2194Big Ideas
2195The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
2196and think about how what you’ve learned will affect your current and future decisions. Then, in the space
2197provided, write an “I believe” statement for each of the Big Ideas.
2198»» The Five Foundations are your steps to Financial Peace.
2199»» The First Foundation: Save a $500 Emergency Fund
2200»» Save for emergencies, large purchases and wealth building.
2201Chapter 2: Saving 45
2202LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2203Money in Review
2204a The Five Foundations
2205b Interest Rate
2206c Sinking Fund
2207d Compound Interest
2208e Emergency Fund
2209f Inflation
2210g Interest-Bearing Account
22111. _____ An account that generates interest
2212income on the available balance in
2213the account
22142. _____ The five steps to financial success
22153. _____ A savings account that is set aside to
2216be used only for emergency expenses
22174. _____ Interest paid on interest
2218previously earned
22195. _____ Saving money over time for
2220a large purchase
22216. _____ A rate which is either charged (on debt)
2222or paid (on investment accounts) for the
2223use of money
22247. _____ The persistent increase in the cost of
2225goods and services or the persistent
2226decline in the purchasing power of money
2227Matching
2228Match the following terms to the correct definition below.
2229Illustration
2230Draw a picture representation of each of the following terms.
2231Recession Economy
223246 Foundations in Personal Finance High School Edition
2233RECAP & REVIEW
2234LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2235Multiple Choice
2236Circle the correct answer.
22378. When it comes to saving money, the amount
2238you save is determined by how much you
2239have left at the end of the month once all of
2240your spending is done.
2241a True
2242b False
22439. Your income level greatly affects your
2244saving habits.
2245a True
2246b False
224710. At your age, a fully funded emergency fund
2248should be:
2249a $1,000
2250b $5,000
2251c $100
2252d $500
225311. Which of the following is not one of the
2254three basic reasons for saving money?
2255a Large purchases
2256b Have money available to lend to friends
2257c Emergency fund
2258d Build wealth
225912. Instead of borrowing money for large
2260purchases, you should set money aside in a
2261_____________ over time and pay with cash.
2262a Sinking fund
2263b Emergency fund
2264c Credit card fund
2265d Mortgage fund
2266Short Answer
2267Respond in the space provided.
226813. What is the First Foundation? Explain how
2269and why the dollar amount will change as
2270you get older.
227114. Looking back at the “Ben and Arthur” story,
2272how did Ben come out ahead even though he
2273invested less money than Arthur?
227415. What two things do you consider when
2275evaluating the time value of money?
227616. Calculate the compound interest for each
2277problem below.
2278• $1,000 at 6% interest for three years
2279• $500 at 18% interest for four years
2280• $1,500 at 12% interest for two years
228117. Why do you need an emergency fund at
2282your age?
2283Chapter 2: Saving 47
2284LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2285What do other high
2286school students know
2287about budgeting?
2288We asked high school students
2289to share some tips on how to
2290handle money.
2291“Put yourself on a budget and be
2292wise with your money. That way
2293you won’t be tempted to dip into
2294your savings account.”
2295Freshman, Florida
2296“Get direct deposit and put money
2297right into your savings account.
2298Then only spend the money you
2299have left over.”
2300Senior, Missouri
2301“It’s a good idea to start saving with
2302your first paycheck because once
2303you start spending, it is hard to stop.”
2304Junior, Tennessee
2305“Expenses don’t just happen—
2306they’re always there. It takes
2307practice to save money and not
2308spend it all.”
2309Junior, Utah
2310“It is good to make a money plan.
2311You should save a percentage every
2312month, even if it is not a lot.”
2313Freshman, Texas
23143
2315CHAPTER
2316LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2317Budgeting
2318BECOMING WEALTHY DOESN’T happen
2319accidentally. It is a journey that requires
2320intentionality, persistence and discipline. But
2321with all of life’s distractions, how can you stay
2322focused on your money goals? A budget is the
2323perfect solution. It’s simple—just write down
2324a plan for your money and intentionally follow
2325it every day. Surprisingly, when you put
2326boundaries on your spending, you end up with
2327more freedom!
2328*National Foundation for Credit Counseling, Inc.
2329of U.S. adults admit
2330that they do not have
2331a budget.*
233256%
2333of Americans do not
2334pay all of their bills
2335on time. That’s
2336more than 77
2337million people!*
233833%
2339UNIT 1: CHAPTER 3
2340LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2341Key Terms
2342Get to know the language of money.
2343»» Budget: A written cash flow plan
2344»» Cash Flow Statement: A summary that
2345shows total income and spending for a
2346given time period
2347»» Carbon Check: A copy of each check
2348you write
2349»» Envelope System: Series of envelopes
2350that are divided into categories (food,
2351entertainment, gas, etc.) and are used to
2352store cash for planned monthly expenses
2353»» Impulse Purchase: An item that is
2354bought without previous planning or
2355consideration of the long-term effects
2356»» Overdraft: Occurs when money is
2357withdrawn from a bank account and the
2358available balance goes below zero
2359»» Reconcile: To match your bank
2360statement with your checkbook
2361»» Zero-Based Budget: A cash flow plan
2362that assigns an expense to every dollar
2363of your income, wherein the total income
2364minus the total expenses equals zero
2365Learning Outcomes
2366Once you’ve completed this chapter’s videos, you will be asked to
2367return to this list of learning outcomes and place a checkmark
2368next to the items you’ve mastered.
2369Section 1: Budgeting 101
2370Â…Â… Understand the purpose of cash flow planning.
2371Â…Â… Identify reasons some people avoid having or sticking
2372to a budget.
2373Â…Â… Identify changes in personal spending behavior that
2374contribute to wealth building.
2375Â…Â… Explain the difference between a cash flow statement
2376and a budget.
2377Section 2: The Basics of Banking
2378Â…Â… Develop a filing system for keeping financial records,
2379both paper and electronic.
2380Â…Â… Describe recordkeeping features that financial
2381institutions provide for online account management.
2382Â…Â… Describe how to use different payment methods and
2383banking features.
2384Section 3: The Importance of Having
2385a Zero-Based Budget
2386Â…Â… Define zero-based budget.
2387Â…Â… Develop a plan for spending and saving that has both
2388long-term and short-term components.
2389Â…Â… Analyze how changes in circumstances can affect a
2390personal budget.
2391
2392Before You Begin
239350 Foundations in Personal Finance High School Edition
2394INTRODUCTION
2395LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2396Measure Your Progress
2397Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
2398column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
2399on any statement.
2400JOURNAL QUESTION: INTRODUCTION
2401On average, how much money do you spend per week? $____________________
2402What are your top three expenses?
24031.
24042.
24053.
24061. It is important to know how to live within my means
2407and have good money habits.
24082. I expect and would like my parents to stop
2409supporting me before age 25.
24103. I am knowledgeable about money management,
2411including budgeting and saving.
24124. I am prepared to deal with the adult financial world
2413after school.
24145. I know how to balance and reconcile my
2415checking account.
24166. I know how to write a check.
24177. I have more than $100 in savings.
2418Agree Disagree Agree Disagree
2419BEFORE AFTER
2420Chapter 3: Budgeting 51
2421LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2422“If you will happen
2423to your money, then
2424you’ll have some.
2425If you just let all
2426your money happen
2427to you, then you’ll
2428never win.”
2429DAVE RAMSEY
2430“
243110 THINGS
2432MILLIONAIRES
2433DO NOT DO
24341. Buy brand-new cars
24352. Eat out on a
2436regular basis
24373. Replace what is
2438not broken
24394. Impulse buy
24405. Carry debt
24416. Visit the tanning bed
24427. Buy brand-name
2443clothes
24448. Desire instant
2445gratification
24469. Socialize with people
2447who waste money
244810. Spend more money
2449than they earn
2450The Millionaire Next Door
2451+
24523 CHAPTER
2453Section 1: Budgeting 101
2454VIDEO 1.1
2455Cash Flow Planning
2456BUDGETING IS CRUCIAL to your
2457success. Your income is your
2458responsibility. If you get to retirement
2459with a mountain of debt and nothing
2460to live on, it’s no one else’s fault. But
2461beyond the obvious financial benefits
2462of managing your money well, there
2463are a ton of other reasons to pull out
2464the budget forms every month. It may
2465sound nerdy or old fashioned, but it
2466isn’t. Keeping a budget is really helpful
2467for everyone. A simple, written plan
2468can actually give you more money
2469to enjoy!
2470»»Money is
24711
2472. It is moving all the time. So if you
2473don’t make your money behave, you’ll always wonder
2474where it went.
2475»»You must do a written
24762
2477plan every
24783
2479. A budget is your blueprint for building
2480wealth. You’ve got to have a game plan!
2481»»A budget might seem intimidating at first, but it is not as
2482intimidating as going broke!
2483* REMEMBER: Don’t try to have the perfect budget for the perfect month, because you’ll never have
2484one. A good cash flow plan lives and moves—it changes as your life changes.
248552 Foundations in Personal Finance High School Edition
2486SECTION 1
2487LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2488“There are plenty
2489of ways to get
2490ahead. The first is
2491so basic I’m almost
2492embarrassed to say
2493it: Spend less than
2494you earn.”
2495PAUL CLITHEROE
2496Australian financial advisor
2497“
2498“People don’t plan to
2499fail, they fail to plan.”
2500ANONYMOUS
2501“
2502WHAT’S THE DIFFERENCE
2503BETWEEN A CASH
2504FLOW STATEMENT AND
2505A BUDGET?
2506A cash flow statement
2507summarizes all of the
2508income and outgo
2509(spending) over a certain
2510time period. A budget is a
2511written plan for saving,
2512giving and spending. The
2513cash flow statement is
2514reflective of what has
2515already taken place, and a
2516budget is a proactive plan
2517of what will take place.
2518+
2519VIDEO 1.2
2520Four Reasons People Avoid Budgets
2521Doing a budget or cash flow plan doesn’t sound like much
2522fun. In fact, people will come up with lots of excuses for not
2523keeping a budget.
25241. It has a
25254
2526connotation. They believe
2527that having a budget will constrict them and keep
2528them from doing what they want to do. The reality is,
2529managed money goes further and actually gives you
2530more freedom.
25312. A budget has been used to
25325
2533them. They’re
2534constantly hearing, “It’s not in the budget!” The purpose
2535of a budget is to not spend more than you make. It is not
2536intended to take all the fun out of your life.
25373. They’ve never had a budget that
25386
2539. Don’t
2540expect to write a perfect budget on your first try. You
2541will make mistakes. With some practice, however,
2542writing a monthly budget will become easier.
2543JOURNAL QUESTION: VIDEO 1.1
2544Describe in your own words what it means to have a budget.
2545Chapter 3: Budgeting 53
2546LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2547DESCRIBE SOME
2548STRENGTHS AND
2549WEAKNESSES YOU HAVE
2550WHEN IT COMES
2551TO MANAGING MONEY.
2552“I don’t spend money on
2553stupid things. But when I
2554have more money, I tend to
2555spend more.”
2556Senior, Oregon
2557“One of my strengths is
2558saving short term and not
2559getting into debt. One of
2560my weaknesses is buying
2561things I don’t need.”
2562Sophomore, New York
2563Four Reasons People Avoid Budgets (Continued)
25644. Paralysis from
25657
2566of what they will find. Some
2567people are afraid to look at their finances closely. It’s
2568better to face those bills or debts and begin to
2569proactively fix the situation. Ignoring financial distress
2570only allows the problem to get bigger.
2571JOURNAL QUESTION: VIDEO 1.2
2572What do you think is most challenging when it comes to keeping a
2573monthly budget?
2574Real Wealth Building Begins With Your Behavior
2575Often the importance of smart money-management
2576techniques gets overlooked. Why is it important
2577to manage your money well? What impact does
2578managing money well have on your long-term
2579financial well-being? Studies show that simple
2580changes in your spending and saving habits will
2581help you build wealth.
25821. Live on less than you make. Don’t spend every
2583dollar of your paycheck.
25842. Keep on learning and finding ways to grow
2585your income.
25863. Write a monthly budget that includes saving,
2587giving and spending. Stick to it.
25884. Plan your spending and avoid impulse
2589or unnecessary purchases.
25905. Stay out of debt.
25916. Pay yourself first. This means assigning a
2592portion of your income to saving and investing
2593every month.
25947. Use gifts and “extra” income wisely. You might
2595be tempted to just blow money you receive
2596as a gift. It’s okay to use some of that money
2597to treat yourself to a “want.” But it’s wise to
2598use a portion of it toward a money goal (like
2599getting out of debt, saving for a car, saving for
2600college, etc.).
260154 Foundations in Personal Finance High School Edition
2602SECTIONS 1 & 2
2603LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2604“This is your wealth
2605we’re talking about
2606here! Get excited!
2607Make those dollars
2608dance!”
2609DAVE RAMSEY
2610“
2611“Every young man
2612should have a hobby.
2613Learning how to
2614handle money is the
2615best one.”
2616JACK HURLEY
2617Boxing manager and trainer
2618“
2619It’s important to know how
2620much things cost before
2621you buy. A smart doctor
2622once wrote, “Suppose
2623one of you wants to build
2624a tower. What is the first
2625thing you will do? Won’t
2626you sit down and figure out
2627how much it will cost and
2628if you have enough money
2629to pay for it? Otherwise,
2630you will start building the
2631tower, but not be able to
2632finish. Then everyone who
2633sees what is happening
2634will laugh at you. They will
2635say, ‘You started building,
2636but could not finish the job’”
2637(Luke 14:28–30).
2638+
2639Section 2: The Basics of Banking
2640VIDEO 2.1
2641Responsible Banking
2642Managing your money will involve
2643banking. Once you’ve established cash
2644flow, either through employment or
2645an allowance from your parents, you
2646should open a checking account. Don’t
2647forget about your First Foundation:
2648Save a $500 emergency fund. This
2649money should be placed in a separate
2650savings account. You should consider
2651your checking account as your
2652spending account and always keep
2653your savings separate.
2654Learning how to keep your checking account
2655balanced is an important and necessary skill.
2656»»You must keep your checking account
26578
2658.
2659Keeping an accurate balance of your checking account will
2660help you avoid the most frequent and costly mistake, the
2661overdraft. Each occurrence can cost an average of $35 for the
2662bounced check fee at your bank, plus possible store charges.
2663»»
26649
2665are a sign of crisis living and sloppy,
2666lazy
266710
2668habits. Remember, managing your
2669money is your responsibility. Managing money well is a
2670sign of maturity.
2671»»Use
267211
2673, or carbon checks, if necessary to
2674keep up with your check register. Just looking at your
2675online statement every few days to see how much money
2676is in the account is not enough. Your online statement
2677may not reflect unprocessed checks or debit purchases.
2678»» If not managed and made to behave, the
267912
2680card
2681is certain to become a budget buster.
2682Chapter 3: Budgeting 55
2683LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2684Balancing Your
2685Checking Account
2686At first, keeping track of your transactions may seem tedious and unnecessary.
2687But once you get the hang of it, balancing a checking account is actually easy.
2688By keeping track, you can avoid a bunch of headaches, like bouncing a check, the
2689bank making mistakes with your account, or not knowing your actual balance.
2690Remember, when you take responsibility for your money, you’ll have more of it!
2691How to Do It
2692»» Throughout the month, write down every deposit
2693or withdrawal in your register. Your transactions
2694might include ATM withdrawals, checks you’ve
2695written, debit card purchases, bank fees and
2696paychecks.
2697»» Each time you make an entry in your register, add
2698or subtract that amount from the current balance.
2699»» When you receive your monthly bank statement,
2700record any interest accrual and bank fees in the
2701check register.
2702Compare Your Check Register and
2703Bank Statement Side by Side
2704»» Compare each transaction one by one. As you
2705do this, make checkmarks on both lists.
2706»» On the reconciliation sheet, list any debits or
2707deposits that are present in the register but not
2708present in the bank statement. Then calculate
2709those into your bank statement balance.
2710»» Compare your register balance to the statement
2711balance. They should be the same. If not, look
2712for discrepancies like outstanding checks,
2713unrecorded bank fees or transactions, or
2714bank errors.
2715What You’ll Need
27161. Your Check Register or
2717Smartphone Budgeting App
27182. Your Last Bank Statement or
2719Online Account Summary
27203. A Reconciliation Sheet
2721(on the back of most bank statements or you
2722can find one online)
2723Things to Remember
2724»» If you were diligent with recording transactions
2725in your check register every time money went in
2726or out, your check register has the most current
2727balance.
2728»» Remember, the account balance from the bank
2729statement or ATM is not as current as your
2730register’s balance because they don’t account
2731for transactions that haven’t gone through yet.
2732»» Contact the bank if you think they made an
2733error. It happens more than you may think.
2734»» Don’t be discouraged on the first few tries.
2735Balancing your account takes practice.
2736The more you do it, the easier it becomes.
273756 Foundations in Personal Finance High School Edition
2738SECTION 2
2739LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2740Check Register / Smartphone Budgeting App
2741$ 504.56
2742$ 217.00
2743$ 700.00
2744$ 987.56
2745MINUS
2746EQUALS
2747PLUS
2748Total Withdrawals
2749Total Deposits
2750Ending Balance
2751Transaction Description Check # Date Deposit
2752Paycheck 8/14 700.00
2753List the deposit amounts in your register
2754that aren’t on your statement. Then total
2755these transactions.
2756$ 700.00
2757$ 217.00
2758Transaction Description Check # Date Payment
2759Electric Company 5672 8/14 101.00
2760Telephone Company 5673 8/ 16 50.00
2761One Stop Grocery 5674 8/ 19 66.00
2762List the withdrawal amounts in your
2763register that aren’t on your statement.
2764Then total these transactions.
2765This should be the same
2766as your register balance.
2767✓ Trans. # Date Transaction Description Payment (-) Deposit (+) Balance
2768Starting balance
2769of $564.46
2770Reconciliation Sheet
2771Bank Statement
27725671 8/12 One Stop Grocery 57.40 507.06
27735672 8/14 Electric Company 101.00 406.06
27748/14 Paycheck 700.00 1106.06
27755673 8/16 Telephone Company 50.00 1056.06
27765674 8/19 One Stop Grocery 66.00 990.06
27778/16 Bank Service Charge 2.50 $987.56
2778To reconcile your register
2779with your bank statement,
2780start with the ending balance
2781from your statement.
2782Chapter 3: Budgeting 57
2783LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2784RECONCILING or
2785balancing an account
2786refers to a process that
2787compares two sets of
2788records (yours and your
2789bank’s, in this case) to
2790make sure the balances
2791match at the end of a
2792particular time period.
2793+
279463% of people 18 and under
2795have savings accounts,
2796and 73% of those savings
2797accounts were started
2798before the age of 3.
2799National Foundation for Credit
2800Counseling, Inc.
2801$
2802Keep Records
2803»»Smart money managers develop a filing system for
2804keeping and using financial records. You should
2805maintain both paper and electronic files for reference.
2806»»These records will be useful for filing taxes and for
2807disputing bank errors or fraudulent purchases.
2808»»You may want to check with your bank to find out what
2809online record keeping features they offer.
2810»» In this digital age, it’s easy to personalize a system that
2811works for you. Explore phone apps and software that may
2812help in many areas of personal finance like budgeting,
2813saving and keeping records.
2814Are Multiple Accounts a Good Idea?
2815“I just got a part-time job, and I want to make sure I save some money in case
2816something bad happens to my car. Do you think I should tell my parents I
2817want to open a checking account and a savings account?”
2818DAVE’S ANSWER: First, congratulations on
2819the new job! You’ve taken a big first step toward
2820financial independence.
2821Second, I think it’s a great idea to keep your
2822checking and savings accounts separate, and
2823here’s why. If you put all your money in one place,
2824it becomes too easy to dip into your savings or
2825emergency fund when you’re writing checks. This
2826defeats the original purpose of saving money.
2827This separation acts as a mental note and a
2828barrier. It’s a way of telling you that you’ve reached
2829your spending limit!
283058 Foundations in Personal Finance High School Edition
2831SECTION 2
2832LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2833WHAT TEENS SHOULD
2834KNOW ABOUT DEBIT
2835CARDS
2836• Keep them secure at
2837all times.
2838• Pick a secure PIN
2839(personal identification
2840number).
2841• Trust your friends, but
2842not with your debit card!
2843• Be cautious of online
2844transactions. Reconciling
2845your account will help
2846you be aware of
2847fraudulent charges.
2848+
2849FIRST CHECKING
2850ACCOUNT?
2851Make it free checking.
2852There are plenty of $0
2853monthly fee accounts out
2854there. You may want to
2855open your first account
2856at your parents’ bank in
2857order to take advantage
2858of special multi-account
2859privileges. Either way,
2860shop around to get an
2861account with minimal or
2862no fees.
2863+
2864Banking Tools
2865Writing Checks
2866Checks can be used to pay bills at a
2867store, give a person a check if you are
2868short of cash, or send a check through
2869the mail or electronically. Checks
2870allow you to pay for things without
2871having to carry large amounts of
2872cash. Most stores will want some
2873basic information if you are using a
2874check, such as your address and phone
2875number, and most will require you to
2876show a photo ID.
2877Online Bill Pay
2878Online bill pay allows you to make
2879payments without having to write a
2880check and send it in the mail. After
2881logging into your bank’s online site,
2882you can specify whom you want to pay
2883and how much. Your bank will either
2884make an electronic transfer or mail a
2885check to satisfy the payment. A great
2886benefit of using online bill pay is the
2887option to schedule repeat payments.
2888Debit Card Purchases (In Store and Online)
2889A debit card can be used for both instore
2890and online purchases. Although
2891your debit card may have a credit card
2892logo on it, it is not a credit card. When
2893used, money is withdrawn from your
2894checking account for the purchase.
2895We recommend selecting the “credit”
2896option instead of “debit” when making
2897a store purchase. While the funds
2898are withdrawn from your account in
2899the same way, using the credit option
2900ensures that you are protected by
2901the card company’s zero-liability
2902policy. You will not be responsible
2903for unauthorized transactions. If you
2904do decide to use your PIN, be sure to
2905memorize your PIN and never carry
2906it with you.
2907Account Transfers
2908Account transfers allow you to move
2909money between your accounts.
2910Once you have a regular income, we
2911recommend setting up weekly or
2912monthly automatic transfers from
2913your checking to your savings account.
2914This is the easiest way to build your
2915savings for emergency fund or large
2916purchases.
2917Chapter 3: Budgeting 59
2918LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2919FOUR TYPES OF
2920EXPENSES TO
2921BUDGET FOR
2922Variable Expenses:
2923Expenses that vary from
2924month to month (e.g.,
2925electricity, gasoline,
2926groceries, clothing)
2927Fixed Expenses: Expenses
2928that remain the same
2929from month to month (e.g.,
2930rent, insurance premiums,
2931cable bill)
2932Intermittent Expenses:
2933Expenses that occur at
2934various times throughout
2935the year and tend to be
2936in large lump sums (e.g.,
2937tuition payments, athletic
2938or club dues, car repairs)
2939Discretionary (Non-
2940Essential) Expenses:
2941Expenses for things we
2942don’t need (e.g., eating out,
2943gifts and candy)
2944+
2945Banking Tools (Continued)
2946ATM
2947The ATM (automatic teller machine)
2948allows you to make withdrawals,
2949deposits or transfers without entering
2950your bank. Normally your bank will
2951not charge you an ATM fee when you
2952use their ATMs. But be aware that if
2953you use an ATM owned by another
2954bank, you will be charged a fee for your
2955withdrawal, usually from both your
2956bank and the competitor.
2957Mobile Banking
2958Mobile banking takes a lot of the
2959features of online banking and brings
2960them to your cell or smartphone. They
2961may also offer additional features like
2962text alerts and text banking. Mobile
2963banking features will vary from bank
2964to bank.
2965JOURNAL QUESTION: VIDEO 2.1
2966Explain why Dave describes overdrafts as a sign of “crisis living.”
296760 Foundations in Personal Finance High School Edition
2968SECTIONS 2 & 3
2969LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
2970THINK A CREDIT CARD
2971IS SAFER TO USE THAN
2972A DEBIT CARD?
2973Think again. Some people
2974believe that credit cards
2975carry a better track record
2976and that you’re less likely
2977to have your money stolen
2978when you use a credit card.
2979Sadly, those people are
2980wrong.
2981Credit cards carry a huge
2982risk of allowing the user
2983to incur debt. Debit cards
2984force you to pay with money
2985you already have. If you
2986hold a debit card from a
2987well-known name like
2988Visa or MasterCard, it will
2989have the same policy about
2990unauthorized charges that
2991credit cards have. Don’t fool
2992yourself into thinking that
2993credit cards are the “safe”
2994way to go. They’ll only get
2995you into trouble and force
2996you to make payments.
2997+ Section 3: The Importance
2998of Having a Zero-Based Budget
2999VIDEO 3.1
3000Cash Flow Plans Do Not Work When . . .
3001»»You
300213
3003things
300414
3005. Make sure your budget
3006includes everything that requires money. You may forget
3007and leave some things out at first, but as you get better at
3008budgeting, that will happen less frequently.
3009»»You
301015
3011your plan. All you really
3012need is paper, a pen and a calculator. It’s as simple as
3013writing down everything that requires money each
3014month and putting an amount next to it.
3015»»You don’t actually
301616
3017. This may sound overly
3018simple, but it’s easy to find reasons not to write a budget.
3019When this happens, remind yourself of all the reasons
3020you should do it.
3021»»You don’t actually
302217
3023on it. Your written plan
3024will not work unless you actually follow it. And as you
3025get used to it, you may see some budget items that aren’t
3026realistic. That’s okay! Just adjust the budget for next
3027month until you get it right.
3028Chapter 3: Budgeting 61
3029LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3030HAVE YOU EVER
3031WITNESSED MONEY
3032AFFECTING
3033A RELATIONSHIP
3034CLOSE TO YOU?
3035“Yes. My dad and mom
3036have been struggling a lot
3037financially. I think it affects
3038their relationship.”
3039Junior, Colorado
3040“Yes. My mom and
3041stepdad’s relationship is
3042constantly strained due to
3043lack of money.”
3044Senior, Georgia
304543% of parents review
3046bank statements with their
3047kids monthly.
3048Only 28% of children have
3049used online banking to
3050view their savings account
3051balance.
3052National Foundation for Credit
3053Counseling, Inc.
3054$
3055Reasons You Should Do a Cash Flow Plan
3056»» A written plan removes the “management by
305718
3058”
3059from your finances. Seventy percent of Americans are
3060living paycheck to paycheck, just one missed payday away
3061from disaster.
3062»»
306319
3064money goes further. That’s because
3065when you write up a budget, you’re accounting for every
3066single dollar of your income. You cut out all of those little
3067expenses that fly into your wallet like moths and eat
3068away at your money.
3069Money Affects Relationships
3070Consider your future relationship. The
3071number-one cause of strife in marriage
3072today is money. It’s disagreements
3073over debt. It’s disagreements over the
3074stress that debt brings. It’s not agreeing
3075on what we’re going to purchase and
3076where we’re going to spend the money
3077we make. When you are not on the
3078same page with money, you are not on
3079the same page in life.
3080»»A written plan, if actually lived and agreed on, will remove
3081many of the
308220
3083in a relationship.
3084»» A written plan, if actually lived and agreed on, will remove
3085much of the
308621
3087,
308822
3089and
309023
3091that
3092may be part of buying necessities such as food or clothing.
3093»»A written plan, if actually lived and agreed on, will remove
3094many of the
309524
3096from your life,
3097consequently removing a lot of
309825
3099.
3100»»A written plan, if actually lived and agreed on, will show
3101if you are
310226
3103in a certain area.
310462 Foundations in Personal Finance High School Edition
3105SECTION 3
3106LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3107IRREGULAR INCOME
3108Shaun sells real estate
3109and has what we call an
3110“irregular income.” That
3111just means his income
3112fluctuates from month
3113to month. If you’re in this
3114situation, you absolutely
3115must do a monthly budget,
3116but you’ll do it a little
3117differently.
3118JOURNAL QUESTION: VIDEO 3.1
3119Why do you think it is so common in America to spend more than
3120you make?
3121How Do You Budget With Irregular Income?
3122“I baby-sit from time to time for a neighbor. How do I do a budget when I don’t
3123know how much money I’ll make each month?”
3124DAVE’S ANSWER: First, make a list of all of
3125your expenses for the month ahead. Write down
3126absolutely everything that you’ll need or want to
3127spend money on. This includes everything from
3128rent to gas to savings to weekend fun money.
3129Write it all down.
3130Then, prioritize the list in order of importance. Ask
3131yourself, “If I only have enough to pay for one thing,
3132what would it be?” That’s number one. Then ask,
3133“If I only have enough to pay for one more thing,
3134what would it be?” That’s number two. Keep that
3135up all the way down the list.
3136Now you’re ready to get paid! When your check
3137comes in, just spend your money all the way
3138down the list. When the money’s gone, you’re
3139done spending for the month. That’s why it is so
3140important to prioritize the list. You may not have
3141enough cash for everything you want to do each
3142month, so make sure you’re making the best
3143with what you have.
3144Chapter 3: Budgeting 63
3145LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3146Budget
3147Builder
3148It’s time to evaluate what
3149you spend money on and
3150put it in your budget.
3151Spending money is a
3152lot more fun when you
3153plan for it first. Go to
3154foundationsU.com/3 for
3155your next budget lesson.
315651% of parents give their
3157children allowance, but
3158only 4% require them to
3159deposit that money into a
3160bank account.
316138% of parents match their
3162children’s savings.
3163National Foundation for Credit
3164Counseling, Inc.
3165$
3166VIDEO 3.2
3167The Zero-Based Budget
3168»»The zero-based budget gives every dollar a name on
3169paper, on purpose,
317027
3171the month begins. This is
3172the best method of budgeting since it ensures that every
3173dollar you make is assigned a specific purpose. Money
3174that is not directed toward a goal or included in a plan is
3175typically wasted.
3176»» Income minus outgo equals exactly
317728
3178. This way
3179you are able to put every dollar to work for you.
3180»»The
318129
3182works great
3183for managing spending on things that don’t normally
3184have a fixed monthly expense, like eating out. Decide
3185how much you have to spend on each specific category
3186and place that amount in an envelope. When the
3187envelope for a specific area of spending—like clothing or
3188entertainment—is empty, you are done spending in that
3189area for the month.
3190The Student Budget Form
3191»»Think you don’t have money to budget? You’ve got some
319230
3193, you just need to think a little differently.
3194»» If you have a part-time
319531
3196after school or even
3197if your parents give you a commission for doing
319832
3199around the house, you’ve got some money.
320064 Foundations in Personal Finance High School Edition
3201SECTION 3
3202LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3203YOUR BUDGET WILL
3204ONLY WORK IF
3205YOU FOLLOW IT.
3206Here are three tips to help
3207you stick to a budget.
32081. Write it down. A budget
3209is not a form of medieval
3210torture! It is YOUR
3211game plan, where YOU
3212tell YOUR money what
3213YOU want it to do. This
3214isn’t rocket science!
3215Just give every dollar
3216a name on paper.
32172. Stay away from places
3218that tempt you to
3219spend. If you have a
3220problem sticking to a
3221budget, you may not
3222yet be disciplined. If
3223that’s the case, stay
3224out of the mall or
3225wherever your spending
3226weakness occurs.
32273. Use the envelope
3228system. Take some
3229envelopes, write your
3230budget categories on the
3231envelopes, and use only
3232that money to purchase
3233those items. Try only
3234a couple of categories
3235at first until you get the
3236hang of it. If the money
3237is not in there, you can’t
3238spend it. Easy as pie.
3239And remember, it takes
3240practice; you won’t get
3241it right the first time.
3242+
3243»»But it goes further than that. If your parents buy you
3244clothes or give you money to go out with your friends, pay
3245for club or athletic fees, or put gas in your car, all of those
3246things represent
324733
3248that are flowing right
3249through your fingers.
3250»»All we want you to do is
325134
3252how you’re going to
3253spend that money
325435
3255you actually spend it.
3256That’s all a budget is!
3257»» Instead of having your parents pay for stuff, ask if they’ll
3258figure out how much money they’d end up giving you for
3259the month and then put it in your
326036
3261account.
3262From there, it will be up to you to budget that money.
3263»» If your folks go along with this, then you’ll have a pile of
3264money to
326537
3266every month.
3267»»We’ve developed a
326838
3269budget form just for
3270you. So no more
327139
3272! Starting this month,
3273you will do a written budget every month for the rest of
3274your life!
3275JOURNAL QUESTION: VIDEO 3.2
3276Explain in your own words what a zero-based budget is. Why is it
3277important to write a zero-based budget every month?
3278Chapter 3: Budgeting 65
3279LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3280IS IT A LITTLE WEIRD
3281FOR A TEENAGER TO
3282DO A BUDGET ON A $100
3283MONTHLY INCOME?
3284Yeah—it really is. Truth is,
3285it’s a little weird for most
3286adults with full-time jobs
3287and great big paychecks to
3288do a budget too! The only
3289thing that makes it weird is
3290that nobody else does it.
3291But guess what?
3292Everyone else is broke!
3293If you want to struggle with
3294money your whole life,
3295then go ahead and do what
3296everyone else does.
3297But if you want to win with
3298money, you’ve got to do a
3299budget—no matter how
3300old you are or how much
3301money you have.
3302We’re not crazy, though.
3303We’re not giving you a giant
3304binder full of spreadsheets.
3305We just have a basic
3306student budget form for
3307you to get used to.
3308If you get in the habit of
3309doing a budget now, you
3310could change your whole
3311financial future.
3312+ The Student Budget
3313Yes, this budget form has a lot of lines and blanks. But that’s
3314okay. We do that so we can list practically every expense
3315imaginable on this form to prevent you from forgetting
3316something. Don’t expect to put something on every line. Just
3317use the ones that are relevant to your specific situation. Now
3318follow the steps below to get started!
33191 Add Up Your Monthly Income
3320Write your monthly income in the box at the bottom of the page (A),
3321including any money your parents give you. This is the amount you have to
3322spend for the month. Pretty simple, right?
33232 Estimate Your Spending
3324Within each category, like RECREATION, there are items like Movies and
3325Sporting Events. Start at the top and work your way down, filling out the Budgeted
3326column (B) first. Then add up each subcategory and put that number in each
3327category’s Total box (e.g., C).
3328* REMEMBER: Your spending will change from month to month. Just put a “$0” in categories where
3329you don’t plan on spending any money.
3330* NOTE: The envelope icons ( ) represent good options for cash envelopes.
33313 Total Each Category
3332Go through the form and add up all of the category Total boxes (e.g., C).
3333Write that grand total in the Monthly Outgo box (D). That’s how much you spend
3334every month.
3335The goal is to spend every dollar you make, but no more. So if your Outgo is
3336greater than your Income, you need to bring down the budgeted amount on some
3337items. If your Outgo is less than your Income, you need to increase the amount
3338in some area like College savings or Restaurants.
33394 Get to Zero
3340Once your Outgo is the same as your Income, write a zero in the Zero box
3341at the bottom (E). You’re done!
334266 Foundations in Personal Finance High School Edition
3343STUDENT BUDGET
3344LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3345Start Here
3346To begin your journey toward financial success!
3347GIVING Budgeted
3348Charity $
3349Other: _____________________ $
3350GIVING TOTAL:
3351SAVING Budgeted
3352Emergency Fund $
3353College $
3354Car & Repairs $
3355Computer $
3356Other: _____________________ $
3357SAVING TOTAL:
3358FOOD Budgeted
3359Restaurants / Eating Out $
3360School Lunch / Snacks $
3361FOOD TOTAL:
3362CLOTHING Budgeted
3363Clothes $
3364Sports Jerseys / Apparel $
3365CLOTHING TOTAL:
3366$
3367$
3368$
3369$
3370TRANSPORTATION Budgeted
3371Gas $
3372Car Insurance $
3373Oil Changes $
3374License & Taxes $
3375TRANSPORTATION TOTAL:
3376PERSONAL Budgeted
3377Cosmetics / Hair Care $
3378Music / Technology $
3379Gifts $
3380Pocket Money $
3381Cell Phone $
3382Other: _____________________ $
3383PERSONAL TOTAL:
3384RECREATION Budgeted
3385Movies $
3386Concerts $
3387Sporting Events $
3388Other: _____________________ $
3389RECREATION TOTAL:
3390$
3391$
3392$
3393C
3394B
3395( + + + + + + )
3396$
3397Monthly Income
3398$
3399Monthly Outgo
3400– =
3401A D
3402$
3403E ZERO!
3404Chapter 3: Budgeting 67
3405LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3406Chapter Summary
3407Check for Understanding
3408Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
3409checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
3410Your Progress section.
3411Build On What You’ve Learned
3412Review Real Wealth Building Begins With Your Behavior in Section 1. Fill in the graphic organizer with the
3413seven wealth-building habits. Discuss with your classmates which things you are already doing well and
3414which habits you still need to work on.
3415Wealth-
3416Building Habits
34172.
34181.
34193.
34206.
34215.
34227.
34234.
342468 Foundations in Personal Finance High School Edition
3425RECAP & REVIEW
3426LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3427Take Action Challenge
3428It’s time to practice budgeting using a variety of income levels. Go to foundationsU.com/budgetnow for
3429your Take Action Challenge.
3430Big Ideas
3431The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
3432and think about how what you’ve learned will affect your current and future decisions. Then, in the space
3433provided, write an “I believe” statement for each of the Big Ideas.
3434»» Do a written budget every month!
3435»» Use the envelope system to help you stay on budget.
3436»» Commit to having good money-management habits.
3437Chapter 3: Budgeting 69
3438LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3439Money in Review
3440a	Reconcile
3441b	Impulse Purchase
3442c	Cash Flow Statement
3443d	Budget
3444e	Zero-Based Budget
3445f Envelope System
3446g Carbon Check
3447h Overdraft
34481. _____ A written cash flow plan
34492. _____ The act of matching your bank
3450statement with your checkbook
34513. _____ A cash flow plan that assigns an expense
3452to every dollar of your income, wherein
3453the total income minus the total
3454expenses equals zero
34554. _____ An item that is bought without
3456previous planning or consideration
3457of the long-term effects
34585. _____ Occurs when money is withdrawn
3459from a bank account and the available
3460balance goes below zero
34616. _____ Series of envelopes that are divided
3462into categories (food, entertainment,
3463gas, etc.) and are used to store cash for
3464planned monthly expenses
34657. _____ A summary that shows total income
3466and spending for a given time period
34678. _____ A copy of each check you write
3468Matching
3469Match the following terms to the correct definition below.
3470Illustration
3471Draw a picture representation of each of the following terms.
3472Managed Money Overspending
347370 Foundations in Personal Finance High School Edition
3474RECAP & REVIEW
3475LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3476Multiple Choice
3477Circle the correct answer.
34789. The number-one cause of divorce in North
3479America today is stress and disagreements
3480over money.
3481a	True
3482b	False
348310. The envelope system works great for
3484managing spending on things that don’t
3485normally have a fixed monthly expense.
3486a	True
3487b	False
348811. Which of the following is a consequence of
3489overdrawing your checking account?
3490a	Overdraft fee from your bank
3491b	Bounced check fee from the store
3492c	Stress from money mismanagement
3493d	All of the above
349412. Doing a budget does not:
3495a	Make your money go further
3496b	Make overspending more likely
3497c	Show if you are overspending in an area
3498d	Remove guilt and shame sometimes
3499associated with purchases
350013. Your monthly budget should include:
3501a	Fixed expenses
3502b	Variable expenses
3503c	Discretionary expenses
3504d	All of the above
3505Short Answer
3506Respond in the space provided.
350714. What are the reasons cash flow plans
3508sometimes do not work?
350915. Why is the zero-based budget the best
3510method of budgeting?
351116. Explain why you should always have a cash
3512flow plan.
351317. Describe the various payment options that
3514come with a checking account.
351518. Why is it important to maintain a file of
3516both paper and electronic financial records?
3517Chapter 3: Budgeting 71
3518LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3519What do other high
3520school students know
3521about debt?
3522We asked students why they think so
3523many people go into debt for things
3524like clothing and other purchases.
3525“Because they don’t think about
3526their bills coming up at the time
3527they are using their credit card.”
3528Senior, Nevada
3529“Because our whole society is
3530so consumed with material
3531things. People base their selfworth
3532on ‘stuff .’ ”
3533Junior, South Dakota
3534“We want everything now. We
3535don’t want to wait and save up
3536for things.”
3537Sophomore, Kentucky
3538“People go into debt because credit
3539card companies have made using
3540credit trendy. They even make the
3541credit cards look pretty.”
3542Senior, California
3543“People don’t keep track of
3544their money and are only
3545concerned with the now, not the
3546consequences later.”
3547Senior, Wisconsin
35484
3549CHAPTER
3550LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3551Debt
3552WE’VE ALL BEEN taught that we need to build
3553a good credit score and that debt is a financial
3554tool used to get the things we want. Sadly, as
3555you learned in Chapter 1, borrowing money
3556is so ingrained in our culture that we can’t
3557imagine life without it. The truth is, “building
3558a credit score” causes more harm than good.
3559And using debt as a “tool” displays impatience
3560and immaturity in money management. Debt
3561forces us to become slaves financially, and it
3562limits how we spend our money.
3563*Federal Reserve Survey of Consumer Finances
3564of undergraduate
3565students have a
3566credit card.*
356776%
3568of undergraduate
3569students have
3570four or more
3571credit cards.*
357248%
3573UNIT 2: CHAPTER 4
3574LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3575Key Terms
3576Get to know the language of money.
3577»» Annual fee: A yearly fee that’s charged
3578by the credit card company for the
3579convenience of the credit card
3580»» Annual percentage rate (APR): Cost of
3581borrowing money on an annual basis;
3582takes into account the interest rate and
3583other related fees on a loan
3584»» Credit card: Type of card issued by a bank
3585that allows users to finance a purchase
3586»» Credit report: A detailed report of an
3587individual’s credit history
3588»» Credit score: A measure of an individual’s
3589credit risk; calculated from a credit report
3590using a standardized formula
3591»» Debt snowball: Preferred method of debt
3592repayment; includes a list of all debts
3593organized from smallest to largest balance;
3594minimum payments are made to all debts
3595except for the smallest, which is attacked
3596with the largest possible payments
3597»» Depreciation: A decrease or loss in value
3598»» Introductory rate: An interest rate
3599charged to a customer during the early
3600stages of a loan; the rate often goes up
3601after a specified period of time
3602»» Loan term: Time frame that a loan
3603agreement is in force, and before or at
3604the end of which the loan should either be
3605repaid or renegotiated for another term
3606»» Tax deduction: An expense, such as
3607a charitable contribution, that can be
3608deducted from one’s taxable income
3609* Note: You may also want to review the
3610following terms from Chapter 1: consumer,
3611credit, debt, interest and loan
3612Learning Outcomes
3613Once you’ve completed this chapter’s videos, you will be asked to
3614return to this list of learning outcomes and place a checkmark
3615next to the items you’ve mastered.
3616Section 1: Debt: Product, Not Privilege
3617Â…Â… Identify the costs of using various types of credit.
3618Section 2: Debunking the Credit Myths
3619Â…Â… Evaluate and refute the myths associated with debt.
3620Â…Â… Apply systematic decision making to identify the most
3621cost-effective option for purchasing a car.
3622Â…Â… Identify various types of mortgage loans and the most
3623cost-effective option for purchasing a home.
3624Â…Â… Evaluate ways that debt can negatively affect your
3625financial future and how to overcome personal debt.
3626Section 3: The Credit Score
3627Â…Â… Describe the elements of a credit score.
3628Â…Â… Understand how to obtain a credit report.
3629Â…Â… Explain how a credit score affects creditworthiness and
3630the cost of credit.
3631Â…Â… Explain the factors that affect a credit score.
3632Â…Â… Analyze a credit report, indicate the time that certain
3633negative data can be retained, and describe how to
3634dispute inaccurate entries.
3635Section 4: Credit Bureaus and Identity Theft
3636Â…Â… Identify organizations that maintain consumer credit records.
3637Â…Â… Summarize major consumer credit laws.
3638Â…Â… Develop a plan for protecting personal information.
3639
3640Before You Begin
364174 Foundations in Personal Finance High School Edition
3642INTRODUCTION
3643LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3644Measure Your Progress
3645Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
3646column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
3647on any statement.
3648JOURNAL QUESTION: INTRODUCTION
3649What have you heard about “building your credit score”?
3650Agree Disagree Agree Disagree
3651BEFORE AFTER
36521. Co-signing a loan is a good way to help a friend
3653or relative.
36542. Cash advance and title pawning are needed services
3655but should be used with caution.
36563. The typical millionaire drives reliable used cars.
36574. Leasing a car is a smart way to drive a newer car for
3658a lower monthly payment.
36595. A new car is the largest purchase most consumers
3660make that goes down in value.
36616. A home equity loan is a substitute for an emergency
3662fund and a good way to consolidate debt.
36637. You need to have a credit card to rent a car or check
3664in to a hotel.
36658. It is okay to use a credit card if you pay it off every month.
36669. Teens are the number one target of credit card
3667companies today.
3668Chapter 4: Debt 75
3669LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3670If you have a hard time
3671viewing debt as a product
3672that is sold and marketed,
3673maybe this will help: Total
36742011 earnings for the entire
3675credit card industry were
3676$18.5 billion, which was
3677up from the $13.6 billion
3678earned in 2010.
3679BCS Alliance, Inc.
3680$
3681The Second Foundation is
3682Get Out of Debt. But don’t
3683stop there! Keep it up and
3684commit to living a debtfree
3685life!
3686+
3687When someone borrows
3688money from another, we
3689understand he or she has
3690an obligation to repay. A
3691study in the dictionary
3692will show you what this
3693really means. A definition
3694of obligation is “bound,”
3695which is defined as “tied; in
3696bonds: a bound prisoner.”
3697“The rich rule over the poor,
3698and the borrower is slave to
3699the lender” (Proverbs 22:7).
3700Don’t become a prisoner or
3701slave to debt!
3702+ 4 CHAPTER
3703Section 1:
3704Debt: Product, Not Privilege
3705WE LIVE IN A WORLD where it takes a
3706total national economic meltdown to
3707get most people’s attention about crazy
3708mortgages and stupid credit card debt!
3709If there’s one good thing that’s come
3710from the national economic mess of
37112008 and beyond, it’s that some people
3712are finally getting the message: Debt
3713is dumb!
3714VIDEO 1.1
3715Debt Is Everywhere
3716»»Almost
37171
3718% of Americans are living paycheck to
3719paycheck. A Reuters survey of 30,600 people found that
372068% said it would be somewhat difficult or very difficult
3721if their paychecks were delayed for a week. The problem?
3722Overspending and way too much debt.
3723»»When it comes to debt, if you tell a lie or spread a
37242
3725long enough, eventually it becomes accepted as the
37263
3727. The truth is, debt is a product—the most
3728successfully marketed product in history.
3729THE SECOND FOUNDATION 2 Get Out of Debt
373076 Foundations in Personal Finance High School Edition
3731SECTION 1
3732LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3733Sadly, it is easier than ever
3734for 18-year-old college
3735students to get credit cards.
3736In response to the 2009
3737Credit Card Accountability,
3738Responsibility and
3739Disclosure (CARD) Act,
3740the credit card industry
3741has updated its marketing
3742techniques and incentives to
3743now include mailing credit
3744card offers to students and
3745offering promotional and
3746“tangible” gifts to prospective
3747collegiate customers. New
3748policies also allow students
3749to include student loans
3750as a component of the
3751income they cite to qualify
3752for credit cards.
3753Fox Business
3754$
3755»»The world wants us to believe that debt is a service or
3756reward that is offered to help consumers. This is simply
3757NOT true!
3758»»Debt has been
37594
3760to us with such intensity
3761for so long that to imagine living without it requires a
3762complete
37635
3764shift—a completely new way
3765of looking at things.
3766JOURNAL QUESTION: VIDEO 1.1
3767Explain how debt is actually a product that is bought and sold.
3768The Devastating Effects of Credit
3769In 2001, CBS’s 60 Minutes II correspondent Vicki
3770Mabrey reported on the devastating effects credit
3771card marketing had for one college student and his
3772mother. Sean Moyer was an 18-year-old National
3773Merit Scholar with future law school plans when
3774he headed off to the University of Texas in Dallas.
3775Even though he had always worked from the
3776time he was 16, Sean was naïve when it came to
3777credit cards. Like a lot of other freshmen, Sean
3778applied for and received his first credit card when
3779he got to college. Because of credit card debt,
3780Sean was forced to transfer to the University
3781of Oklahoma so he could live at home. By that
3782time, he was working two jobs making minimum
3783wage as a salesperson and gift wrapper for a
3784major department store. One day, his mother
3785knocked on Sean’s bedroom door but got no
3786answer. Upon entering, she found him dead;
3787he had hung himself in the closet. Sean Moyer
3788was 22 at the time with more than $14,000 of
3789credit card debt. His mother told 60 Minutes
3790II, “It just never occurred to me that you could
3791give a credit card to an 18-year-old making
3792minimum wage. When he died, he had 12 credit
3793cards.” In 2007, CNN ran a similar story about
3794credit card marketing on campuses and what
3795happened to Sean Moyer. They reported that
3796Sean’s mother still receives credit card offers
3797in the mail for her son, despite the fact that he
3798died in 1998.
3799Chapter 4: Debt 77
3800LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3801NATIONAL DEBT: The
3802amount of money a country
3803owes. Yes, even the
3804government sometimes
3805spends money it does not
3806actually have. The U.S.
3807national debt now exceeds
3808$16 trillion! It is the highest
3809national debt in the world.
3810The U.S. owes about half of
3811that money to individuals,
3812companies and foreign
3813governments who have
3814bought bonds and other
3815investments from the
3816U.S. Treasury. If you have a
3817savings bond, then some of
3818that debt is owed to you!
3819Want to see the current
3820national debt? Go to
3821foundationsU.com/clock.
3822PERSONAL DEBT: The
3823amount of money an
3824individual person owes.
3825+
382639% of incoming college
3827freshman already have a
3828credit card.
3829Federal Reserve Survey of
3830Consumer Finances
3831$
3832VIDEO 1.2
3833A Message From Dave
3834As a marketer, I have to
3835give the credit card
3836industry some credit.
3837They’ve done a great
3838job of marketing their
3839product. They’ve not
3840only gotten nearly every American
3841hooked on their goods, but they’ve
3842done it in a way that makes the
3843consumer feel special, accepted and
3844as though they’ve been done a favor.
3845It’s kind of scary how good a job
3846they’ve done, in fact.
3847Financial Myths Young Adults Fall For
3848»» The first one is the belief that you have to build
38496
3850.
3851The credit industry wants you to believe this. Credit is
3852NOT necessary to survive. The truth is there is
38537 good reason to go into debt.
3854»»The second myth is that you can spend money on
3855whatever you want while in
38568
3857and pay for it
3858later when you’re making more
38599
3860.
3861* REMEMBER: Taking on a lot of debt when you’re young will limit your options later in life.
3862»»The third myth is that you need a
386310
3864car. You should
3865buy the car you can afford—with cash.
3866Don’t fall for these myths.
386711
3868debt, save for
3869emergencies and large purchases, and learn to say no, even
3870when people around you won’t.
3871JOURNAL QUESTION: VIDEO 1.2
3872Explain what Dave means when he says, “The borrower is slave to the lender.”
387378 Foundations in Personal Finance High School Edition
3874SECTIONS 1 & 2
3875LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3876“Our greatgrandparents
3877thought
3878debt was a sin. Our
3879grandparents
3880thought debt was
3881dumb. Our parents
3882borrowed on a few
3883things. We borrow on
3884everything.”
3885DAVE RAMSEY
3886“
3887The average number of
3888credit cards per person
3889is 3.5.
3890Federal Reserve Survey of
3891Consumer Finances
3892$
3893Section 2:
3894Debunking the Credit Myths
3895A Message From Dave
3896We weren’t born to use debt. Our
3897country was not founded on easy
3898financing and 90-days-same-as-cash.
3899The great fortunes in the history of
3900America weren’t built on cash-back
3901bonuses and free airline miles. We’ve
3902been sold a bill of goods, and it’s a total
3903lie. If you tell a lie or spread a myth
3904often enough, loud enough and long
3905enough, eventually the myth becomes
3906accepted as truth. That’s where we are
3907with debt in America: trapped in the
3908myth that credit is a normal, healthy
3909part of life.
3910VIDEO 2.1
3911Money Myths
3912MYTH If I
391312
3914money to a friend or relative, I will
3915be helping them.
3916TRUTH The relationship will be strained or
391713
3918.
3919Which Credit Card Is Best?
3920“I’m going to college after I graduate and will need a credit card for various things,
3921such as internet access. Can you recommend one that’s better than the others?”
3922DAVE’S ANSWER: I never recommend using
3923credit cards. NEVER! You can pay for internet
3924access, make online purchases, and buy things
3925in a store with a debit card.
3926Using a debit card, which is connected to your
3927checking account, means you’re spending money
3928that’s actually yours. You’re not borrowing it from
3929some bank and then paying interest on it. If you
3930don’t have money in your account, you won’t be
3931making purchases. That’s the way it works, and
3932it’s the smartest thing you can do.
3933Credit cards are the quickest way I know to
3934become broke and stay broke for the rest of
3935your life!
3936Chapter 4: Debt 79
3937LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
3938SECURED LOANS and
3939UNSECURED LOANS
3940are the two types of loans
3941typically available to
3942borrowers.
3943An UNSECURED LOAN is
3944given to borrowers based
3945on their financial resources
3946or ability to repay the loan.
3947Nothing “secures” the loan.
3948In other words, the lender
3949does not have rights to a
3950specific asset if the loan is
3951not repaid. Personal loans,
3952student loans, and personal
3953lines of credit are examples
3954of unsecured loans.
3955A SECURED LOAN is
3956usually needed when
3957borrowing large amounts
3958of money. The loan is
3959“secured” with collateral. In
3960other words, if you default
3961on the loan and your house
3962was used as collateral,
3963the lender would take the
3964house. Secured loans
3965usually have lower interest
3966rates and longer repayment
3967terms. Automobile loans,
3968mortgages and home
3969equity loans are examples
3970of secured loans.
3971+
3972Money Myths (Continued)
3973MYTH By
397414
3975a loan, I am helping out a
3976friend or relative.
3977TRUTH The bank requires a co-signer because the person
3978isn’t likely to
397915
3980. Be ready to pay the loan and
3981have your credit damaged.
3982MYTH
398316
3984, payday lending, rent-toown,
3985title pawning, and tote-the-note lots are needed
398617
3987for lower income people to help them get ahead.
3988TRUTH These are horrible, greedy rip-offs that aren’t
3989needed and benefit no one but the owners of these
3990companies. They are what’s known as predatory lenders.
3991Predatory lenders are modern-day loan sharks who take
3992advantage of people and should be avoided at all costs. So
3993why is the industry still thriving? Because they offer fast
3994cash. But these are serious money traps. Here are reasons
3995you should stay away from this type of lender:
3996»» Payday loans are expensive. If a $100 payday loan costs you
3997$15 for 10 days, that’s an annual percentage rate of 400%.
3998»»You can get stuck in a repeat cycle. According to Center
3999for Responsible Lending Research, 76% of payday loans
4000are to pay off old payday loans.
400180 Foundations in Personal Finance High School Edition
4002SECTION 2
4003LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4004Have you ever loaned
4005someone money, only
4006to have it turn into a bad
4007experience?
4008“My friendship hasn’t been
4009the same since I loaned
4010a friend money and didn’t
4011get it back. I don’t trust him
4012anymore.”
4013Junior, Missouri
4014“A close friend of mine
4015bought a new car and
4016couldn’t afford the
4017payment. I loaned him
4018$300, then he left the state.
4019I couldn’t afford to take him
4020to court because of court
4021costs, so I dropped the
4022whole thing.”
4023Junior, Michigan
4024“I loaned $150 to a friend
4025who never returned it and
4026then claimed that I ‘gave’ it
4027to him.”
4028Senior, Missouri
4029“I loaned my mother more
4030than $2,000 to help pay for
4031my 19-year-old brother’s
4032car note and college fees.
4033She promised to pay me
4034back but it has been over
4035a year and a half and I
4036haven’t received one
4037payment from her. I will
4038never loan money again.”
4039Senior, Georgia
4040»»Debt grows fast at these rates. It’s not unusual to end up
4041owing 4–10 times the amount you originally borrowed.
4042»»Many of these companies have horrible reputations for
4043unethical debt collection practices.
4044Eighty percent of
404518
4046in America are
4047first-generation rich. That means they started with
4048nothing, did smart stuff, and became millionaires. That’s
4049the opposite of what we’re talking about here.
4050MYTH The
405119
4052and other forms of gambling
4053will make me
405420
4055.
4056TRUTH The lottery is a
405721
4058on the poor and on people
4059who can’t do math.
4060Texas Tech University did a study on the Texas Lottery and
4061found that, of those who play the lottery, people without a
4062high school diploma spent an average of $
406322
4064a month
4065playing the lottery. College graduates spent $
406623
4067a
4068month on average.
4069JOURNAL QUESTION: VIDEO 2.1
4070Explain why co-signing a loan is never a good idea.
4071Chapter 4: Debt 81
4072LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4073DRIVE FREE. RETIRE RICH.
4074The Power of One Decision
4075Don’t make car payments
4076a way of life! What if we
4077decided that enough was
4078enough? What if we decided
4079to hang on to our money
4080instead of sending it all
4081to the bank in the form of
4082payments? What if we got
4083really radical and devised
4084a plan to make our money
4085work for us, instead of
4086letting it work for the bank?
4087In the Drive Free example,
4088the average car payment
4089was $475. Instead of
4090making those payments
4091to the bank or car dealer,
4092pay yourself instead. Then,
4093pay cash for your car. Do
4094it again and combine that
4095savings with the value of
4096your first car. That’s a major
4097upgrade in car without
4098owing the bank a dime!
4099Continue this plan and
4100start putting that $475 a
4101month into a good mutual
4102fund. The interest you’ll
4103earn on that mutual fund
4104will pay for your cars for
4105the rest of your life. That’s
4106free cars! That’s what
4107happens when your money
4108starts working for you!
4109+
4110VIDEO 2.2
4111The Truth About Car Loans
4112The Third Foundation is paying
4113cash for your car. We teach people
4114not to borrow money, period. But
4115there are a few more reasons to avoid
4116financing a new car. For instance,
4117when you purchase a new car, you
4118lose money. If you have a net worth
4119of $1 million, it’s not such a big deal.
4120But many people who buy new are
4121broke, living paycheck to paycheck.
4122And that’s why they have so much
4123money trouble.
4124MYTH
412524
4126payments are a way of life, and you’ll
4127always have one.
4128TRUTH Staying away from car payments by driving reliable
4129used cars is what the typical
413025
4131does. That
4132is how they became millionaires.
4133How many times have you heard or said, “I’ll always have
4134a car payment”? That’s the normal way of thinking. But
4135normal is broke. We want to be WEIRD! To get new results,
4136you have to try new things.
4137So think about this:
4138»»What if you decided to stop messing with car payments?
4139»»What if you invested that car payment every month
4140instead of giving it away to the bank?
4141»»What if we showed you a six-year plan that would put you
4142in free cars for the rest of your life?
4143»»What if that plan also made you a millionaire?
4144THE THIRD FOUNDATION 3 Pay Cash for Your Car
414582 Foundations in Personal Finance High School Edition
4146SECTION 2
4147LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4148“If you call my radio
4149show, struggling
4150to get out of debt,
4151you can almost
4152guarantee that the
4153first words out of my
4154mouth will be, ‘Sell
4155the car!’ If you want
4156to take control of
4157your money, you’ve
4158got to amputate
4159the out-of-control
4160lifestyle. For
4161most people, that
4162starts with the car
4163payment.”
4164DAVE RAMSEY
4165“
4166Three huge ways you lose when buying a new car:
41671. Payments. Spreading the purchase of an automobile
4168over four or five years hinders your ability to pay off debt
4169or save money for that time.
41702. Interest. Included in the payment, of course, are the
4171interest charges. That means you pay more than the
4172sticker price. It’s like buying a $20,000 vehicle for
4173$23,000.
41743. Depreciation. This is the biggest one. If you purchase a
4175$20,000 car, it will be worth about $8,000 in four years.
4176That’s in addition to all the gasoline, maintenance and
4177other stuff. You could buy a $2,000 beater and get the
4178same use out of it for those same four years without
4179taking a $12,000 hit.
4180Save a few thousand dollars and buy a used vehicle with
4181cash (getting a discount by flashing the money), and you’ll
4182ride with a lot more peace of mind.
4183JOURNAL QUESTION: VIDEO 2.2
4184Explain how the “drive free” method of buying a car works.
4185Chapter 4: Debt 83
4186LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4187The average new-car loan
4188now is at 65 months, a
4189term previously unheard
4190of. Even more distressing
4191is that financing for new
4192cars with terms from 73
4193months to 84 months—
4194that’s six- and seven-yearplus
4195notes—jumped 19.4%
4196in 2012. With these terms,
4197you’ll be upside down (owe
4198more than the car is worth)
4199almost as soon as you
4200drive off the lot!
4201The Wall Street Journal
4202$
4203A CAR LEASE is a longterm
4204rental agreement;
4205a form of secured longterm
4206debt.
4207+
4208“The rich ask, ‘How
4209much?’ Broke people
4210ask, ‘How much
4211down and how much
4212a month?’ If you can’t
4213pay cash, you can’t
4214afford it.”
4215DAVE RAMSEY
4216“
4217VIDEO 2.3
4218The Truth About Car Loans (Continued)
4219MYTH
422026
4221your car is what sophisticated
4222financial people do. You should always lease things that go
4223down in value. There are tax advantages.
4224TRUTH Consumer Reports, Smart Money magazine and a
4225good calculator will tell you that the car
422627
4227is the
4228most
422928
4230way to finance and operate a vehicle.
4231If you own a business, you can
423229
4233your paidfor
4234car on taxes without making payments for the privilege.
4235The way to
423630
4237the money lost on things that
4238go down in value is to buy slightly
423931
4240.
4241MYTH You can get a good deal on a
424232
4243car.
4244TRUTH A new car loses
424533
4246% of its value in the first
4247four years. This is the largest purchase most consumers
4248make that goes down in value.
4249JOURNAL QUESTION: VIDEO 2.3
4250Explain why leasing a car is a bad idea.
425184 Foundations in Personal Finance High School Edition
4252SECTION 2
4253LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4254WHAT DO FIXED AND
4255VARIABLE RATES MEAN?
4256With a fixed rate mortgage,
4257the interest rate is set
4258when you take out the
4259loan, and it will not change.
4260Therefore, your monthly
4261payments will never
4262change. Variable rate
4263mortgages (or adjustable
4264rate mortgages—ARM)
4265will start with a lower
4266rate. This initial rate may
4267stay the same for months
4268or years. But when this
4269“introductory period” is
4270over, your interest rate will
4271change and the amount of
4272your monthly payment will
4273likely go up.
4274+
4275VIDEO 2.4
4276Buying a House
4277MYTH I’ll take out a 30-year mortgage and pay
427834
4279on it. I promise!
4280TRUTH Life happens and something else will always seem
4281more important. Never take out more than a
428235
4283-year
4284fixed rate mortgage.
4285The ideal way to buy a house is the
4286100%-down plan—pay cash for the
4287whole house. Sounds weird, doesn’t
4288it? But think how much fun that would
4289be! No mortgage! No payments! If
4290paying cash for a house seems too far
4291out of reach, you can still buy a house
4292if you make wise choices. Save a down
4293payment of at least 10% on a 15-year
4294(or less) fixed rate mortgage, and limit
4295your monthly payment to 25% or less of
4296your monthly take-home pay. You can
4297probably qualify for a much larger loan
4298than what 25% of your take-home pay
4299will give you. But it’s not wise to spend
4300more on a house, because then you will
4301be what Dave calls “house poor.” Too
4302much of your income will be going out
4303in payments, and that will put strain
4304on the rest of your budget. You won’t
4305be able to save and pay cash for things
4306like furniture and cars.
430715- or 30-Year Mortgage?
4308Let’s say you’re buying a home valued at $250,000 with a $25,000 down payment.
4309That would leave you with a mortgage amount of $225,000. Now let’s look at how
4310much you’ll pay if you choose a 15- or a 30-year repayment plan.
4311$500,000 »
4312$400,000 »
4313$300,000 »
4314$200,000 »
4315$100,000 »
4316TOTAL COST OF MORTGAGE
4317@ $1,899 / Month
431815-YEAR PAYBACK:
4319$341,762
4320@ $1,349 / Month
432130-YEAR PAYBACK:
4322$485,636
4323$485,636 – $341,762 = $143,874!
4324Choosing the 15-year mortgage saved you
4325$143,874 and it’s done in half the time!
432630-Year Mortgage 15-Year Mortgage
4327Chapter 4: Debt 85
4328LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4329MORTGAGE OPTIONS
4330TO AVOID
4331ADJUSTABLE RATE
4332MORTGAGES (ARMs):
4333An ARM is a mortgage
4334with an interest rate that
4335changes based on market
4336conditions. The intention
4337is to transfer the risk of
4338higher interest rates to you
4339and, in return, the lender
4340gives a lower rate up front.
4341Since they can qualify
4342for more home, many
4343people find this mortgage
4344appealing; however, as
4345many homeowners
4346learned in the economic
4347downturn, if your rate
4348adjusts higher or you lose
4349your job, your payment can
4350quickly become too much
4351for you to afford.
4352REVERSE MORTGAGES:
4353A reverse mortgage
4354is when a homeowner
4355borrows against the
4356equity in their home and
4357obtains monthly, tax-free
4358payments from the lender.
4359This mortgage is a bad idea
4360because you are putting
4361a paid-for home at risk,
4362and the fees are horrible.
4363In fact, the FTC claims
4364that reverse mortgages
4365have the most fraud in the
4366mortgage business.
4367+
4368Home Buying Tips
4369Get your finances in order. The first thing you should do
4370is make sure you are financially ready to buy a house. In
4371other words, you need to be debt-free with a fully funded
4372emergency fund.
4373Be certain you can afford a new home by asking
4374these questions:
43751. Can I make at least a 10% (preferably 20%)
4376down payment?
43772. Can I afford a 15-year fixed rate loan?
43783. Can I keep the house payments at or below 25% of my
4379monthly take-home pay?
4380If you answered yes to all three questions, then you can
4381afford a house. You should also be debt-free with a full
4382emergency fund left over after closing. Otherwise, Dave
4383strongly suggests you wait to buy a home.
4384JOURNAL QUESTION: VIDEO 2.4
4385Explain why it is better to take out a 15-year mortgage instead of a
438630-year mortgage.
438786 Foundations in Personal Finance High School Edition
4388SECTION 2
4389LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4390“The only man who
4391sticks closer to you
4392in adversity than a
4393friend is a creditor.”
4394UNKNOWN
4395“
4396“Never spend your
4397money before you
4398have it.”
4399THOMAS JEFFERSON
4400American founding father
4401“
4402Researchers studying the
4403neurological impact of big
4404purchases hooked up an
4405MRI to participants and
4406watched their brainwave
4407activity. They found that
4408when people spend cash,
4409it neurologically registers
4410as pain.
4411Carnegie Mellon Magazine
4412$
4413Credit cards are moving
4414away from a magnetic
4415swipe and moving toward
4416chips in the cards. It’s
4417called RFID technology,
4418and all you have to do when
4419you use your credit card is
4420wave it.
4421+
4422VIDEO 2.5
4423Credit Cards
4424MYTH You need a
442536
4426to rent a car or
4427make a purchase online or by phone.
4428TRUTH A
442937
4430card does all of that. The only thing
4431you can’t do with a debit card that you can do with a credit
4432card is go into debt!
4433MYTH I pay my
443438
4435off every month
4436with no annual payment or fee. I get brownie points, air
4437miles and a free hat.
4438TRUTH When you use cash instead of plastic, you spend
443939
4440% less because spending cash hurts.
4441MYTH I’ll make sure my
444240
4443gets a credit
4444card so he or she can learn to be responsible with money.
4445TRUTH Teens are a huge
444641
4447of credit card
4448companies today. The reason is that the adult market is saturated.
4449Also, researchers have discovered that there is a strong brand
4450loyalty to your first credit card. Therefore, credit card
4451companies are competing to have their card be your first card.
4452JOURNAL QUESTION: VIDEO 2.5
4453Explain the difference between a credit card and a debit card.
4454Chapter 4: Debt 87
4455LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4456“Rather go to bed
4457supperless than rise
4458in debt.”
4459BENJAMIN FRANKLIN
4460Author, inventor and
4461political theorist
4462“
4463Before McDonald’s chose
4464to accept credit cards, the
4465average ticket price was
4466$4.75. When they went to
4467credit cards, the average
4468ticket price went to $7.
4469That’s a 47% increase!
4470Nightline, ABC
4471$
4472VIDEO 2.6
4473Debt vs. Wealth-Building
4474MYTH Debt is a
447542
4476. It should be used to
4477create prosperity.
4478TRUTH The
447943
4480is slave to the lender.
4481When surveyed, the Forbes 400 were asked, “What is the
4482most important key to building wealth?”
448344
4484% replied
4485that becoming and staying
448645
4487-free was the numberone
4488key to wealth building.
4489That’s because your largest wealth-building tool is your
4490income. When you don’t have any payments, you have money.
4491What About Credit Card Rewards?
4492“My credit card has no annual fee, and I get money back from the credit card
4493company for all of my charges. I only use it for bills and I pay it off every month,
4494so I’m getting money from the credit card company for using their credit card.
4495What’s wrong with that?”
4496DAVE’S ANSWER: I’ve been doing financial
4497counseling for decades, and I’ve worked with
4498tens of thousands of people. During that time I’ve
4499repeatedly met folks who were doing exactly what
4500you are doing, and it has come back to bite them.
4501When you’re talking about credit cards, you’re
4502talking about a multibillion-dollar industry
4503designed to do just one thing—separate you from
4504your money. And they’re really good at it! They’re
4505more than willing to pay you a percentage point
4506back because they know you’re going to stumble
4507at some point—
4508and that’s when they pounce!
4509I’ve talked with hundreds of millionaires, and
4510I’ve never met one who said they got rich thanks
4511to credit card rebates. They’ve all just gone
4512about the business of earning money, living
4513on less than they make, and saving. They don’t
4514play with snakes because they know, sooner or
4515later, they’ll get bitten.
451688 Foundations in Personal Finance High School Edition
4517SECTION 2
4518LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4519Borrowing money and failing
4520to pay it back has some
4521serious consequences. Here
4522are some terms commonly
4523used when dealing with debt
4524problems that have gone
4525too far. This is lingo you don’t
4526want to experience firsthand.
4527FORECLOSURE: Process
4528by which the holder of
4529a mortgage sells the
4530property of a homeowner
4531who has not made interest
4532and/or principal payments
4533on time as stipulated in the
4534mortgage contract
4535REPOSSESSION:
4536Process of a lender taking
4537something back (like a
4538car) for failure to make
4539payments
4540BANKRUPTCY: A legal
4541procedure for dealing with
4542debt when an individual
4543or business cannot repay
4544what they owe
4545GARNISHMENT: A courtordered
4546attachment that
4547allows a lender to take
4548monies owed directly from
4549a borrower’s paycheck;
4550only allowed as part of a
4551court judgment
4552SURRENDER OF
4553COLLATERAL: In a
4554bankruptcy proceeding, a
4555debtor can give up property
4556(collateral) to the creditor in
4557exchange for a clean slate.
4558DELINQUENCY: Broadly
4559refers to a borrower not
4560being current on his or her
4561payments
4562+
4563Steps Out of Debt
45641. Quit borrowing more money!
45652. You must save money.
45663. Sell something.
45674. Get a part-time job or work overtime (temporarily).
45685. Use the debt snowball method.
4569Debt Snowball: List your debts in order from smallest
4570to largest. Pay minimum payments on all your debts
4571except for the smallest one, and attack that one with
4572intensity! Every extra dollar you can get your hands on
4573should be thrown at the smallest debt until it is gone.
4574Then you attack the second one. Every time you pay off
4575a debt, you add its old minimum payment to your next
4576debt payment. So as the snowball rolls over, it picks up
4577more snow. Get it?
4578* REMEMBER: Even if your other loans have higher interest rates, you should still start with your
4579smallest one first. That way you experience quick wins and build momentum along the way!
4580JOURNAL QUESTION: VIDEO 2.6
4581Which credit myths did you believe prior to hearing this lesson?
4582Explain why each of those are myths and not facts.
4583Chapter 4: Debt 89
4584LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4585WHAT DOES FICO
4586STAND FOR?
4587FICO stands for Fair Isaac
4588Corporation, the company
4589that created and computes
4590this credit score. Although
4591other companies also
4592compute credit scores,
4593FICO is the most trusted
4594and most used score.
4595+
4596The total number of
4597card holders in the U.S.
4598is 176.8 million.
4599Federal Reserve Survey of
4600Consumer Finances
4601$ Section 3: The Credit Score
4602VIDEO 3.1
4603What Your Credit Score Really Measures
4604MYTH You need to take out a credit card or car loan to
4605“build up your
460646
4607.”
4608TRUTH The
460947
4610score is an “I love
461148
4612” score
4613and is not a measure of winning financially. In fact, it can often
4614mean the opposite. If you were to inherit $10 million
4615tomorrow, it would have NO effect on your credit score!
4616Some people seem to believe that the
4617credit score is almost as important as
4618oxygen and water. Most of that stems
4619from the fact that we’ve been beaten
4620over the head with the importance
4621of the credit score since we first
4622learned the difference between a
4623$10 bill and a $5 bill. But it’s simply
4624not true. Can you really live without
4625a credit score? Absolutely—and it’s
4626actually easier than you’d think. It
4627just takes some foresight, planning
4628and maybe a little patience.
4629Type of Debt
4630Debt History
4631Debt Levels
4632Duration of
4633the Debt
4634New Debt
4635The Five Components of the FICO Score
4636Don’t be fooled into thinking a FICO score measures how well you handle money.
4637Take a look at its five components below.
4638The only thing
4639measured
4640here is debt! 10%
464110%
464215%
464335% 30%
464490 Foundations in Personal Finance High School Edition
4645SECTION 3
4646LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4647There are a lot of
4648companies that measure
4649credit, but two major
4650credit scoring systems are
4651FICO and VantageScore
4652(which the three credit
4653bureaus jointly created).
4654FICO ranges from 300 to
4655850, and VantageScore
4656ranges from 501 to 990.
4657Remember, a credit score
4658measures the risk of your
4659not repaying debt; it is not
4660a measure of financial
4661success.
4662+
4663The average college
4664undergrad is carrying
4665about $2,169 in credit card
4666debt. Graduate students
4667carry an average of $8,162
4668in credit card debt.
4669Investopedia.com
4670$
4671CREDIT BUREAUS are
4672also commonly referred
4673to as consumer reporting
4674agencies or credit
4675reporting agencies.
4676+
4677No Credit Score? No Problem!
46784. How do I rent an apartment? Most apartments will
4679work with you if you can provide first and last month’s
4680rent as well as a security deposit. Get a rental history
4681referral from your previous landlord. If it’s your first time
4682renting, you might have to look around for a little while.
4683But you’ll be able to find someone to work with you.
46845. How do I take out a mortgage? If you don’t have a
4685credit score, you should focus on one thing—making sure
4686you have a large down payment. If you’ve never gone into
4687debt, that shouldn’t be too difficult, right? Without a credit
4688score, the down payment, as well as your job and how long
4689you’ve been employed in that line of work, are big factors.
4690You’ll also want an outstanding history of rental and
4691utility payments. Look for a mortgage company that uses
4692a process called manual underwriting, sometimes called
4693“non-traditional credit” or “no credit score” lending.
46946. What if an employer wants to see my credit score
4695during the interview process? This is a growing trend,
4696but it mainly affects people in the financial industry—
4697banks, mortgage brokers, investment companies and so
4698on. Again, the key here is to learn their process up front
4699and explain why you don’t have a credit score if they ask
4700you about it.
4701JOURNAL QUESTION: VIDEO 3.1
4702What does a credit score measure?
4703Chapter 4: Debt 91
4704LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4705In a recent survey, one in
4706four teens didn’t know the
4707difference between a debit
4708card and a credit card.
4709MSN Money
4710$
4711VARIOUS FORMS OF
4712CREDIT REPAYMENT
4713Note: We recommend that
4714you NEVER borrow money.
4715Period.
4716Installment: This is credit
4717that you use to borrow
4718money and promise to
4719repay in equal amounts
4720over a specific period
4721of time.
4722Revolving Credit: This
4723is credit in which a
4724pre-established amount
4725of money is borrowed
4726repeatedly as long as the
4727account is in good standing.
4728Layaway: An agreement
4729in which the seller
4730reserves an item for a
4731buyer until the buyer pays
4732for the item in full
4733+
4734Section 4:
4735Credit Bureaus and Identity Theft
4736What Is a Credit Bureau?
4737»»A credit bureau is an agency that researches and collects
4738individual credit information and sells it for a fee to
4739creditors so they can make a decision on granting loans.
4740Typical clients include banks, mortgage lenders, credit
4741card companies and other financing companies.
4742»»Individual account information is removed from your
4743credit report seven years after the last activity on the
4744account, except for Chapter 7 bankruptcy, which stays on
4745for 10 years.
4746»»Beware of credit clean-up scams. The only information
4747that may be legally removed from a credit report is
4748inaccurate information.
4749»»The three main credit bureaus are: Experian,
4750TransUnion and Equifax.
4751Correcting Credit Report Inaccuracies
4752A recent study by the Federal Trade Commission questions
4753the reliability of the credit reporting industry. It is believed
4754that as many as 40 million Americans have a mistake on
4755their credit report. Twenty million have significant mistakes.
4756* REMEMBER: You should check your credit report annually. You can do this for free
4757at foundationsU.com/report.
475892 Foundations in Personal Finance High School Edition
4759SECTION 4
4760LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4761The 2013 Identity Fraud
4762Report released by Javelin
4763Strategy and Research
4764states that in 2012 identity
4765fraud incidents increased
4766by more than 1 million
4767victims. Fraudsters stole
4768more than $21 billion, the
4769highest amount since 2009.
4770$
4771VIDEO 4.1
4772Identity Theft
4773Identity theft is the fastest growing -
477449
4775crime in North America today.
4776Warning signs that you may have had your identity stolen:
4777»» Checks disappear from
4778your checkbook.
4779»» Your credit report shows
4780accounts you didn’t open.
4781»» A collection agency calls about a
4782debt you didn’t incur.
4783»» Bank and billing statements don’t
4784arrive on time.
4785»» You receive a bill from a credit
4786account you didn’t open.
4787»» Unauthorized charges appear on
4788your cell phone or bank accounts.
4789»» You are turned down for a loan,
4790mortgage or other form of credit
4791because of unauthorized debts on
4792your credit report.
4793What you should do if you think you are a victim:
4794»»Obtain a copy of your credit report and look for any
4795suspicious activity.
4796»»Place a -
479750
4798alert on your credit bureau
4799report (stays on for 90 days without a police report).
4800»» If your purse or wallet is stolen, cancel all cards
4801immediately and get replacements. Also put a “stop
4802payment” on all lost or stolen cards.
4803»»File a
480451
4805report and keep a copy of the report
4806for your personal records.
4807»»Report any suspicious charges and accounts to the
4808appropriate credit issuers and credit bureaus immediately
4809via the phone and in writing. Cancel the accounts.
4810Chapter 4: Debt 93
4811LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4812CREDIT COUNSELING
4813Companies that offer
4814consumer credit
4815counseling services can
4816help you get better interest
4817rates and lower payments,
4818but at a price. When you use
4819one of these companies
4820and then try to get a home
4821mortgage loan, you will
4822be treated the same as if
4823you had filed Chapter 13
4824bankruptcy.
4825Real debt help is found only
4826in changing your behavior.
4827In short, debt management
4828companies are out. Hard
4829work is in. Change your
4830financial behavior and
4831change your life—for good.
4832True debt management
4833is about one thing: you
4834controlling your money.
4835+
4836HOME EQUITY LOAN
4837A home equity loan means
4838borrowing money against
4839your house. Like any other
4840debt, home equity loans
4841are a bad idea. They often
4842come with higher, variable
4843interest rates and if there
4844comes a time when you
4845can’t make the payments,
4846you risk losing your home!
4847+
4848Identity Theft (Continued)
4849»»Remember, this is
485052
4851. You owe
485253
4853and should pay nothing.
4854»»Contact the fraud-victim division of the three main credit
4855reporting companies and furnish
485654
4857.
4858»» Be persistent. This will take some time. You now have a
4859new
486055
4861.
4862Obviously, you’re never too young to be careful with
4863your personal information. Here are some tips to protect
4864yourself from identity theft:
4865»» Use a paper shredder and
4866destroy credit card offers and
4867other documents with your
4868personal information.
4869»» Check your credit report annually.
4870Many people don’t even know that
4871their identity has been stolen.
4872Bottom line, you can’t fix the
4873problem if you’re not aware of it.
4874»» Never print your Social Security
4875number or driver’s license
4876number on your checks.
4877»» Sign the back of your debit
4878card and write “PHOTO ID
4879REQUIRED.”
4880»» Create strong passwords
4881using a combination of letters,
4882characters and numbers.
4883»» Keep passwords and personal
4884information confidential.
4885»» Purchase identity theft
4886protection.
4887Consumer Credit Laws
4888The U.S. Congress enacted the Fair Credit Reporting Act
4889(FCRA) in 1970. The FCRA was intended to address concerns
4890over consumer credit report accuracy, privacy and fairness.
4891»»Accuracy: Prior to the FCRA, consumers were unable to
4892challenge errors in their credit reports. The FCRA gives
4893consumers the right to review the contents of their credit
4894report file and dispute inaccurate information.
489594 Foundations in Personal Finance High School Edition
4896SECTION 4
4897LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4898THE FEDERAL TRADE
4899COMMISSION (FTC) is
4900one of many U.S. federal
4901agencies that regulate the
4902consumer credit system
4903and enforce the laws
4904related to it.
4905+
4906Budget
4907Builder
4908Do you already have
4909debt in the form of credit
4910cards or a car loan? Go to
4911foundationsU.com/4 to
4912learn how to tackle debt
4913with your budget.
4914The total number of credit
4915cards in use in the U.S. is
49161.5 billion.
4917Federal Reserve Survey of
4918Consumer Finances
4919$
4920»»Privacy: To protect consumers’ privacy, the FCRA
4921requires that a person or organization have a
4922“permissible purpose” (or legitimate need) for checking a
4923person’s credit information.
4924»»Fairness: The FCRA grants consumers the right to
4925know if a decision to deny them credit or other adverse
4926action against them was based on information in a credit
4927report file. Creditors must notify consumers if they deny
4928credit based on a credit report file, and they must also tell
4929the consumer which of the three credit bureaus provided
4930the report. The act also allows consumers to receive one
4931free credit report per year.
4932* NOTE: There are several other credit laws of which you should be aware. Please refer to the
4933glossary under “credit laws” for more information.
4934JOURNAL QUESTION: VIDEO 4.1
4935Explain why the credit industry wants you to believe that you need a
4936credit score.
4937Chapter 4: Debt 95
4938LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4939Chapter Summary
4940Check for Understanding
4941Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
4942checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
4943Your Progress section.
4944Big Ideas
4945The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
4946and think about how what you’ve learned will affect your current and future decisions. Then, in the space
4947provided, write an “I believe” statement for each of the Big Ideas.
4948»» The Second Foundation: Get Out of Debt
4949»» The Third Foundation: Pay Cash for Your Car
4950»» The FICO score is an “I love debt” score!
495196 Foundations in Personal Finance High School Edition
4952RECAP & REVIEW
4953LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4954Take Action Challenge
4955We’ve told you that it is important to check your credit report every year, even if you don’t use credit. So why
4956not do it now? It’s easy and it’s free. You can get a free copy from each of the three credit agencies—
4957TransUnion, Experian and Equifax—once a year. Go to foundationsU.com/report to get started.
4958* NOTE: The vast majority of teens ages 14–18 do not have a credit file. Ideally, you will receive a simple rejection message from
4959AnnualCreditReport.com. However, if there is a credit file and it is full of errors, you’ll need to work on clearing them up. Contact all
4960three credit bureaus and consider putting a freeze on your credit.
4961Build On What You’ve Learned
4962You’ve learned that there are many myths in our culture when it comes to the use of credit. Review the chapter
4963and select five credit myths that were most surprising to you. Fill in both the myth and truth for each of
4964them in the graphic organizer below.
4965CREDIT MYTHS CREDIT TRUTHS
49661. 1.
49672. 2.
49683. 3.
49694. 4.
49705. 5.
4971Chapter 4: Debt 97
4972LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
4973Money in Review
4974a Credit Report
4975b Loan Term
4976c Depreciation
4977d Credit Score
4978e Debt Snowball
4979f Annual Percentage Rate
4980g Credit Card
4981h Annual Fee
49821. _____ Cost of borrowing money on an annual
4983basis; takes into account the interest
4984rate and other related fees on a loan
49852. _____ A decrease or loss in value
49863. _____ A detailed report of an individual’s
4987credit history
49884. _____ Time frame that a loan agreement is
4989in force, and before or at the end of
4990which the loan should either be repaid
4991or renegotiated for another term
49925. _____ Type of card issued by a bank that allows
4993users to finance a purchase
49946. _____ A measure of an individual’s credit risk;
4995calculated from a credit report using a
4996standardized formula
49977. _____ A yearly fee that’s charged by the credit
4998card company for the convenience of the
4999credit card
50008. _____ Preferred method of debt repayment;
5001includes a list of all debts organized from
5002smallest to largest balance; minimum
5003payments are made to all debts except
5004for the smallest, which is attacked with
5005the largest possible payments
5006Matching
5007Match the following terms to the correct definition below.
5008Illustration
5009Draw a picture representation of each of the following terms.
5010Debt Debt Free
501198 Foundations in Personal Finance High School Edition
5012RECAP & REVIEW
5013LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5014Multiple Choice
5015Circle the correct answer.
50169. You must establish credit in order to buy
5017a house.
5018a True
5019b False
502010. If you are a victim of identity theft, you
5021are only responsible for paying back half
5022of the debt.
5023a True
5024b False
502511. Which of the following is not a factor in
5026determining a FICO score?
5027a Paying cash for all purchases
5028b Getting a personal loan from a bank
5029c Using credit cards
5030d Taking out a mortgage on a house
503112. Which of the following is not a good idea for
5032getting out of debt?
5033a Quit borrowing money
5034b Get a part-time job or work overtime
5035c Borrow money from your parents to pay
5036off the debt
5037d Sell something
503813. Which of the following things cannot be
5039done with a debit card but can be done with
5040a credit card?
5041a Rent a car
5042b Purchase something online
5043c Go into debt
5044d Purchase an airline ticket
5045Short Answer
5046Respond in the space provided.
504714. Why is an adjustable rate mortgage (ARM) a
5048bad idea?
504915. Explain why financing a car is a bad idea.
505016. Describe the negative consequences of
5051taking on debt. What effect can debt have on
5052your future?
505317. What are some things you can do to protect
5054your personal information?
505518. Explain how the debt snowball works.
5056Chapter 4: Debt 99
5057LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5058How are other
5059students planning for
5060life after high school?
5061We asked students what education and
5062career plans they have after graduation.
5063“I plan on going to business school
5064and starting my own company.”
5065Senior, Washington
5066“I plan to go to college for four or more
5067years and find a job that pays well.
5068I don’t know what yet, to be honest.”
5069Junior, Michigan
5070“I want to go to college and become a
5071dental assistant or a school teacher.”
5072Junior, Utah
5073“I am going to culinary arts school.”
5074Sophomore, Arizona
50755
5076CHAPTER
5077LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5078Life After
5079High School
5080ONCE YOU GRADUATE from high school,
5081a world filled with endless opportunities is set
5082before you. While it’s exciting, it can also
5083be difficult to navigate. Aside from choosing a
5084career, you’ll need to select an education path
5085that will help you achieve your individual
5086career goals. These choices will greatly affect
5087your financial well-being after college. As a
5088young adult, you will have a marketing target
5089on your back. Credit cards and student loans
5090might seem like an enticing solution when
5091money is tight, but you must be prepared to
5092avoid these financial hazards by having a plan.
5093*Education Insider
5094of college-bound
5095students have never
5096discussed college
5097funding with their
5098parents.*
509935%
5100of college-bound
5101students have not
5102projected the total
5103amount of money
5104they will need to
5105graduate college.*
510680%
5107UNIT 2: CHAPTER 5
5108LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5109Key Terms
5110Get to know the language of money.
5111»» Free Application for Federal Student
5112Aid (FAFSA): A form that is completed
5113annually by current and prospective
5114college students to determine their
5115eligibility for financial aid
5116»» Grant: A form of federal or state
5117financial aid that does not need to be
5118repaid; usually given to students who
5119demonstrate financial need
5120»» Scholarship: A form of financial aid
5121that does not need to be repaid; usually
5122awarded on the basis of academic,
5123athletic or other achievements
5124»» Work study: A program that allows
5125students to work part time while
5126continuing their studies
5127Learning Outcomes
5128Once you’ve completed this chapter’s videos, you will be asked to
5129return to this list of learning outcomes and place a checkmark
5130next to the items you’ve mastered.
5131Section 1: Beware and Be Wise
5132Â…Â… Understand the long-term impact of student loans.
5133Section 2: Start With the End in Mind
5134Â…Â… Identify reasons for not taking on debt to fund
5135your education.
5136Section 3: Cash-Flow Your College Education
5137Â…Â… Develop a plan to attend college without acquiring debt.
5138Â…Â… Demonstrate how to apply for financial aid.
5139Section 4: Education Options for the 21st Century
5140Â…Â… Identify the educational requirements, training and cost
5141for your career of choice.
5142Â…Â… Analyze post-high school education and career
5143training options.
5144
5145Before You Begin
5146102 Foundations in Personal Finance High School Edition
5147INTRODUCTION
5148LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5149Measure Your Progress
5150Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
5151column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
5152on any statement.
5153JOURNAL QUESTION: INTRODUCTION
5154Not every career requires a four-year degree. Have you researched the education requirements
5155for your career of choice? If so, what education options do you have? If not, research the education
5156requirements for your career choice(s) and write them below.
51571. I have a good idea as to what college I want to attend after
5158graduation, and cost was a major factor in that decision.
51592. I believe that it is possible to go to college debt free.
51603. Everyone uses student loans to attend college. I don’t
5161see any reason I should be different.
51624. I have considered technical school and other 21stcentury
5163educational options for my career of choice.
51645. I have discussed with my parents how we plan to
5165cover the expense of my college education.
5166Agree Disagree Agree Disagree
5167BEFORE AFTER
5168Chapter 5: Life After High School 103
5169LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5170There is roughly $1 trillion
5171in total outstanding
5172student loan debt in the
5173United States today.
5174Consumer Finance Protection
5175Bureau
5176$
5177Nearly 20 million
5178Americans attend college
5179each year. Of that 20
5180million, close to 12 million—
5181or 60%—borrow annually
5182to help cover costs.
5183The Chronicle of Higher Education
5184$ 5 CHAPTER
5185Section 1: Beware and Be Wise
5186VIDEO 1.1
5187Considering all your career and
5188education options after high school
5189can be overwhelming. After all, some
5190of your decisions may open doors to
5191endless opportunities while others
5192may have long-term consequences.
5193The good news is, planning ahead for
5194your career and education will help you
5195find those opportunities. And learning
5196about the dangers of student loans and
5197credit cards will allow you to avoid
5198those long-term consequences of a few
5199bad decisions. Bottom line, you’ve got
5200to beware and be wise.
5201Wise People Invest in Themselves
5202Before anything else and throughout your whole life, the best
5203investment you can make is in yourself! Here are some ways
5204you can invest in yourself.
5205»»Charlie “Tremendous” Jones said, “Five years from
5206now you will be exactly the same person you are today
5207except for the
52081
5209you read and the
52102
5211you meet.”
5212»»First, you have got to
52133
5214. Leaders are readers!
5215»» Reality TV and video games are great
52164
5217,
5218but they’re just entertainment.
5219104 Foundations in Personal Finance High School Edition
5220SECTION 1
5221LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5222The average student
5223loan debt has now
5224surpassed $27,000 for an
5225undergraduate degree.
5226The Project on Student Debt
5227»» The average $
52285
5229reads one nonfiction book
5230a month!
5231»»Your net
52326
5233as an adult will be the average of the
5234five people you hang out with the most.
5235»»The people you put in your life influence your career,
5236your
52377
5238and how you spend your money.
5239»»Have some
52408
5241who have already had
5242some success.
5243JOURNAL QUESTION: VIDEO 1.1
5244What is your plan for after high school graduation?
5245“This debt has ruined relationships.”
5246“My name is Andrea, and I currently have $112,623 in debt. The short version of
5247my story is simply that I used student loans for my entire education, which is
5248how I earned a bachelor’s degree in Early Childhood Education. I’m currently a
5249preschool teacher’s assistant, and I only make $24,000 a year. As a result, I have
5250a second job and work about 80 hours a week, every single week. The majority of
5251‘my’ student loan debt is a ‘stupid tax,’ because I co-signed on a student loan for
5252an ex-boyfriend. I constantly tell my friends to work hard and save to pay cash
5253for everything they buy. A few of them have listened, but I pray that no one else
5254has to endure what I’m going through. This debt has ruined relationships, and
5255there are many days that I can’t quite picture the end.”
5256* DISCUSS: If Andrea could do college over again, what things might she choose to do differently? Why?
5257Chapter 5: Life After High School 105
5258LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5259During the last 20 years,
5260tuition has increased
5261at a faster rate than any
5262other major product or
5263service— four times faster
5264than overall inflation. After
5265adjusting for financial aid,
5266the amount families pay for
5267college has skyrocketed
5268439% since 1982.
5269CNN Money
5270$
5271“Do more than is
5272required. What
5273is the distance
5274between someone
5275who achieves their
5276goals consistently
5277and those who
5278spend their lives
5279and careers merely
5280following? The extra
5281mile.”
5282GARY RYAN BLAIR
5283Motivational speaker
5284and author
5285“
5286VIDEO 1.2
5287Beware of the Student Loan Myth
5288Not all careers require the same type
5289of post-secondary education. We are
5290going to show you how to come up with
5291the most cost-effective education plan
5292for your career of choice. If a four-year
5293college is the best education option for
5294you, we want to show you how to do it
5295without student loans. Believing that
5296student loans are a “good debt” because
5297they are a path to getting an education
5298is a myth. You can get your education
5299without becoming a slave to debt.
5300»»Our culture thinks student loan debt is okay—it seems
5301totally
53029
5303. Some people even call it “good debt.”
5304»»When you receive your financial aid award package for
5305college, you’ll see a list of all different types of awards
5306like
530710
5308and grants.
5309* BE AWARE: Student loans will be listed in your financial aid award package as well.
5310»»A student
531111
5312is NOT an award! It will take years to
5313pay it back, plus you’ll have to pay interest.
5314»»
531512
5316is owing anything to anyone for
531713
5318reason.
5319»»There is no such thing as a “good debt.”
5320»»The total estimated student loan debt in our country is
5321one
532214
5323dollars.
5324»»Millions of people can’t afford to make their student loan
532515
5326every month.
5327THE FOURTH FOUNDATION 4 Pay Cash for College
5328106 Foundations in Personal Finance High School Edition
5329SECTION 1
5330LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5331Studies show that 30% of
5332student loan borrowers
5333drop out of school, and
5334then have to find a way
5335to pay back their student
5336loans on a high school
5337graduate’s salary.
5338Washington Post
5339$
5340Debt Free
5341It might be tough to turn down what
5342society considers “good debt” and
5343find other ways to pay for college.
5344But is it worth the extra work? Yes!
5345If you make the sacrifice and effort
5346right now, you’ll keep yourself from
5347digging a hole you’ll have to start
5348climbing out of the moment you
5349receive your college degree. How
5350will you do it? By the end of this
5351chapter, you’ll have more options
5352than you can even imagine to get a
5353great college education completely
5354debt free.
5355A Message From Dave
5356Pi ling up student
5357loans throughout your
5358college career is like
5359keeping a monster
5360locked in your closet.
5361Every semester, that
5362beast gets bigger and meaner and
5363nastier. Then six months after you
5364graduate, whether you have a job or
5365not, that monster busts out and starts
5366wrecking your life! All of a sudden
5367you have to make every decision
5368based on tackling that mountain of
5369debt you neglected for four years. It
5370controls where you live, what you do,
5371and what kind of job you can take.
5372That’s definitely not a good way to
5373start your career!
5374That’s why we want to teach you how
5375to get through college debt free. You’ll
5376learn about career education and
5377training options, grants, scholarships,
5378work programs, and how to “shop” for
5379a college that’s within your budget.
5380I know college is a lot of hard work,
5381and I know it can be a lot of fun. I want
5382you to have plenty of both. But I don’t
5383want you to end up with a four-year
5384degree with 40 years of payments on
5385it! Do whatever it takes to stay out of
5386debt—whether it’s student loans or
5387credit cards. Then when you graduate,
5388you’ll really have a world of options
5389because you won’t be worried about the
5390time bomb of student loan payments
5391waiting for you six months later!
5392JOURNAL QUESTION: VIDEO 1.2
5393Why might people refer to student loans as “good debt”?
5394Chapter 5: Life After High School 107
5395LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5396Two-thirds of college
5397students graduate with
5398student loans.
5399CNN Money
5400$
5401Debt is normal. Be weird!
5402+
5403Section 2:
5404Start With the End in Mind
5405VIDEO 2.1: THERE ARE NO FILL-INS IN THIS SECTION.
5406So you’ve decided that you will
5407continue your education at a four-year
5408college. How do you plan to pay for it?
5409If student loans are part of your plan,
5410you may want to rethink that. Listen to
5411the stories in this chapter and decide
5412how you really want to begin your
5413post-college life.
5414You can start making decisions right
5415now that will allow you to avoid the
5416mounds of debt that so many young
5417adults begin their life with. One of
5418those choices is to cash-flow (pay as
5419you go) your college education.
5420Many people believe it’s impossible
5421to go to college without taking out
5422a loan. They’ll say things like, “The
5423economy is down,” or “Tuition is
5424so expensive,” or “I have no other
5425options.” Everyone takes out loans,
5426so it’s not a big deal, right? We hear
5427it all the time. It’s easy to think that
5428because it’s what we see all around us
5429in our culture. In fact, almost 70% of
5430college students graduate with debt!
5431But just because it’s easy to sign those
5432student loan notes doesn’t mean it’s
5433the only way. And it definitely doesn’t
5434mean it’s the best way.
5435“I regret going to college when and how I did.”
5436“I regret going to college when and how I did. I didn’t know how a credit card
5437worked when I started college at 17. I was told I would get a fantastic job and
5438wouldn’t have to worry about those loans. I graduated a year ago, have the
5439same jobs I had during college, and am deferring most of my $40,000 of loans
5440because I can’t pay the bills. I am desperate to be a stay-at-home mom, and
5441I can’t because of my loans. I worked the entire time I went to college, but all
5442of my money went toward my living expenses and a car, so I was not able to
5443put any toward tuition.”
5444108 Foundations in Personal Finance High School Edition
5445SECTION 2
5446LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5447“It’s not hard to
5448decide what you
5449want your life to be
5450about. What’s hard
5451is figuring out what
5452you’re willing to give
5453up in order to do the
5454things you really
5455care about.”
5456Bittersweet: Thoughts on
5457Change, Grace, and Learning
5458the Hard Way
5459“
5460About 41% of borrowers
5461fall behind on their student
5462loan payments in the first
5463five years.
5464nytimes.com
5465$
5466Don’t Steal From Your Future
5467Take a look at some of these statistics:
5468»»The total estimated student loan debt outstanding is
5469more than $1 trillion.
5470»»Of the total outstanding student loan debt,
5471approximately $85 billion is past due.
5472»»The percentage of student loan borrowers who paid
5473on time without postponing payments or becoming
5474delinquent? A mere 37%. In other words, 63% of
5475borrowers had a hard time paying back their loans.
5476»»Nearly 30% of student loan borrowers wind up dropping
5477out of school, and more than 50% of borrowers at twoyear
5478for-profit colleges never finish.
5479Think about it: You don’t want to steal all of your
5480future possibilities from yourself by going into debt
5481to get your degree.
5482JOURNAL QUESTION: VIDEO 2.1
5483Imagine if your reality at age 24 was that you were $70,000 in
5484debt but your income was only $30,000. Write down some words
5485describing how you might feel.
5486Chapter 5: Life After High School 109
5487LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5488CASE STUDIES
5489Chris O. “I planned for
5490college ahead of time by
5491joining the military, saving
5492for years before I got out,
5493and getting three wellpaid
5494internships. When
5495I finished school, I had
5496money in the bank and no
5497college debt.”
5498Beth H. “We have twins
5499who just finished their
5500freshman year in college.
5501During their senior year of
5502high school, every other
5503Sunday afternoon we
5504spent two hours at the
5505kitchen table researching
5506scholarships and applying.
5507One son received $13,000
5508this way, the other about
5509$5,000 (but his school is
5510less expensive). When
5511they went to college, they
5512thought it would be okay to
5513get loans. After meeting
5514kids who are financing
5515college completely with
5516loans, they were glad
5517we insisted on working
5518on scholarships. My
5519best advice is to do
5520everything early and make
5521scholarship hunting a parttime
5522job. It will work.”
5523Section 3:
5524Cash-Flow Your College Education
5525VIDEO 3.1
5526What does it mean to cash-flow your college education?
5527To “cash-flow” simply means to pay with cash as you go,
5528instead of using credit or debt.
5529Plan Ahead
5530»»You need a
553116
5532! Start now. Get help from your
5533parents and school counselor along the way.
5534»»Planning for college involves more than just ACT scores
5535and college applications. You must understand how much
5536it is going to cost (that includes tuition, books and living
5537expenses) and know how you are going to pay for it.
5538Get Good Grades
5539»»One thing you can do
554017
5541is get good grades.
5542»»Good grades do more than just get you into the school
5543and career you want. They also help you get free money!
5544Yes, scholarships go to those who earn them.
5545»»Making good grades and scoring well on the ACT or SAT
5546will set you apart from the crowd.
5547»»How would you like to get paid to be a high school student?
5548Well, the fact is your hard work now can turn into money
5549later. Think about it.
5550110 Foundations in Personal Finance High School Edition
5551SECTION 3
5552LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5553While 96% of college
5554students are determined
5555to finish college, only 46%
5556feel they have the financial
5557resources to stay in school.
5558Study by Noel-Levitz
5559$
5560CASE STUDIES
5561Kayla O. “I’m going to
5562finish college with an RN
5563degree and zero debt by
5564attending a community
5565college. I pay $4,000 a year,
5566while other people I know
5567are going to the university
5568up the road and spending
5569$20,000 a year for the
5570same education. In the
5571end, we have to take the
5572same national test to be
5573an RN, so why not keep the
5574$16,000?”
5575Shop Around
5576»» It’s a good idea to
557718
5578your choices down to
5579six schools or less. During this process, consider each
5580school’s degree programs, living expenses and tuition.
5581»»Keep in mind that
558219
5583doesn’t
5584always mean
558520
5586. Your future
5587happiness, success and income will have very little to
5588do with the prestige or name recognition of the college
5589you attend.
5590»»Attending a community college for your first two years is
5591a great way to knock out your freshman and sophomore
5592years at a low cost. If you plan to continue your education
5593after your two-year degree, work closely with your
5594advisor to make sure the classes you take are going to
559521
5596to your four-year university of choice.
5597»»Consider attending a state school instead of a private or
5598out-of-state school, which will have much higher tuition.
5599You must “shop” for the best price for your education in
5600the same way you comparison shop on any large
5601purchase. Don’t be sold on prestige!
5602JOURNAL QUESTION: VIDEO 3.1
5603Has money affected your decision on whether or not to attend college?
5604Why or why not?
5605Chapter 5: Life After High School 111
5606LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5607IS THERE A SCHOLARSHIP
5608OUT THERE FOR ME?
5609Scholarships aren’t just
5610for the highest scorers on
5611the ACT or SAT. Schools
5612and foundations have
5613broadened their criteria
5614to include community
5615involvement, after-school
5616work and financial status
5617in addition to the traditional
5618athletics and diversity
5619scholarships. Don’t
5620avoid the scholarship
5621applications requiring
5622essays. They can be a
5623good way to improve your
5624writing skills while earning
5625scholarships. Here are
5626some additional resources
5627to look into:
56281. Explore your state’s
5629website.
56302. Many businesses
5631have scholarships for
5632employees’ children.
5633Ask your parents to
5634check at their place of
5635employment.
56363. Explore the federal
5637government’s website at
5638studentaid.ed.gov.
56394. Check out the big
5640college organizations
5641for information
5642(collegeboard.org,
5643petersons.com).
5644+
5645VIDEO 3.2
5646Applying for Financial Aid
5647In order to make the most of
564822 college, you’ve got to focus on the specifics like filling out
5649your financial paperwork, researching scholarships, and
5650finding part-time work opportunities.
5651Fill Out the FAFSA Form
5652»» The
565323
5654(Free Application for Federal Student Aid)
5655is the first step to receiving any kind of financial aid.
5656Whether you are interested in scholarships, grants, loans
5657or other financial aids, you’ll need to submit this form.
5658»»The FAFSA form needs to be completed each year
5659you are in college. The sooner you turn in the form (by
5660January or February), the more likely you are to get
5661financial help because some federal
566224
5663is
5664awarded on a first-come,
566525
5666-served basis.
5667»»Remember, student loans are bad news. Make sure you
5668ask that the student loans be
566926
5670from
5671your funding.
5672»»You’ll need your family’s tax information as you complete
5673the FAFSA. Keep in mind, if you turn it in online, the
5674process moves faster.
5675112 Foundations in Personal Finance High School Edition
5676SECTION 3
5677LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5678The average cost of tuition
5679and fees for the 2012–2013
5680school year was:
5681• $29,056 at private
5682universities
5683• $8,655 for in-state
5684residents at public
5685universities
5686• $21,706 for out-of-state
5687residents attending
5688public universities (outof-
5689state tuition)
5690To find out the average cost
5691of tuition for this year, go to
5692foundationsU.com.
5693$
5694Explore Grants
5695»»
569627
5697are golden.
5698»»Federal and state governments offer grants that are
5699usually need-based. The FAFSA will determine which
5700grants you qualify for. Examples include the Federal
570128
5702and state-specific grants.
5703»»Grants are free
570429
5705!
5706Research Scholarships
5707»»Another form of free money is
570830
5709.
5710»»You should never pay to apply for scholarships.
5711And do not give out your Social Security number
5712when you apply.
5713Where to Find Scholarships
5714While merit-based scholarships are the most
5715popular, there are countless other types available.
5716If you have a unique talent or skill set, there is a
5717good chance of finding an award that’s just right for
5718you. With a little research, you’ll be amazed at both
5719the variety and availability of these scholarships.
5720Here are some types of scholarships:
5721»» University scholarships for academics,
5722athletics, clubs, etc.
5723»» Community scholarships like the Boys and
5724Girls Club or Rotary Club
5725»» Local business scholarships exist to promote
5726their organization
5727»» Private donors might include relatives or other
5728individuals
5729»» Student-specific scholarships exist for almost
5730every characteristic you can think of
5731»» Unique scholarships for a variety of hobbies,
5732talents and interests
5733Talk to your guidance counselor and search
5734online to see what award opportunities are
5735out there for you. Don’t be put off by a small
5736award. Every dollar adds up, and there is no
5737limit to the number of scholarships for which
5738you can apply.
5739Chapter 5: Life After High School 113
5740LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5741Eight out of every 10
5742students who drop out
5743of college say financial
5744trouble was the main
5745reason.
5746Attrition Study at Idaho
5747State University
5748$
5749“If you live like no one
5750else, later you can
5751live like no one else!”
5752DAVE RAMSEY
5753“
5754CASE STUDY
5755William M. worked full
5756time on the second shift
5757for a company that offered
5758tuition reimbursement.
5759“Burning the candle at
5760both ends was the hardest
5761thing I’ve ever done, but
5762it was worth it when I
5763finished summa cum
5764laude,” he said.
5765+
5766Applying for Financial Aid (Continued)
5767When to Visit the Financial Aid Office
5768»» If you get stuck at any point in the process, just stop by
5769your college’s
577031
5771office.
5772»» If your financial situation has changed, a parent has been
5773laid off, or a medical situation has come up, it’s important
5774to visit the financial aid office. Your financial aid can be
5775re-evaluated and possibly increased.
5776»»Talk to a financial aid officer as soon as an emergency
5777arises. They will offer you advice, encouragement or help.
5778Research Work Opportunities
5779Get a part-time job.
5780»»Research shows that students who work up to
578132
5782hours a week have the highest grade point averages of any
5783type of student in college because they often develop good
5784time-management skills.
5785»»Research also shows that working more than 20 hours a
5786week may affect your grades negatively.
5787Work on or off campus.
5788»»You can find jobs
578933
5790that offer flexible
5791schedules for students in a variety of roles. These jobs
5792usually pay more than work study.
5793»»On-campus jobs may pay you directly or pay toward your
5794tuition bill.
5795114 Foundations in Personal Finance High School Edition
5796SECTION 3
5797LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5798More than 78% of
5799freshmen plan to work
5800during their college years.
5801National Freshman
5802Attitudes Report
5803$
5804THINGS TO CONSIDER
5805The smartest investment
5806you can make is in yourself.
5807As a young adult, you
5808should have two goals:
5809continue your education
5810and stay out of debt.
5811+
5812»»Usually the school provides hourly positions that pay
5813minimum wage; the good news is you can often study as
5814you work. Check with the financial aid office to see what
5815jobs are offered.
5816Make Sure You Have an Emergency Fund
5817»» The First Foundation is to establish an emergency fund
5818of $500. Since you are taking this course in high school,
5819you should already have your emergency fund in place by
5820the time you graduate.
5821* REMEMBER: In spite of what society teaches us, credit cards are NOT emergency funds!
5822»»As you work in the summer and save money for your
5823school bill, set aside a separate amount in an emergency
5824fund. If something bad happens during school, you will
5825have some funds to fix the problem so you don’t have to
5826drop out of school.
5827Average Student Loan Balance: 2005–2012
5828Student loan debt is the only form of consumer debt that has grown since the peak of
5829consumer debt in 2008. Balances of student loans have exceeded both auto loans and credit
5830cards, making student loan debt the largest form of consumer debt outside of mortgages.
5831« $22,500
5832« $17,500
5833« $12,500
5834« $7,500
5835« $2,500
5836« $25,000
5837« $20,000
5838« $15,000
5839« $10,000
5840« $5,000
58412005
58422007
58432009
58442006
58452008
58462010
58472012
58482011
5849Chapter 5: Life After High School 115
5850LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5851CASE STUDY
5852Jacquelyn H.’s college
5853roommates thought she
5854was crazy because she
5855worked three jobs and
5856lived on just a few hours
5857of sleep. “It sure kept me
5858out of trouble though!”
5859she said. Her five years
5860of work experience
5861gave her an edge when
5862she graduated, and she
5863landed a management job
5864right away.
5865+
5866Live on a Zero–Based Budget
5867Now is a good time to review the basics of budgeting.
5868»»Make sure you do a monthly budget. Having a zero-based
5869budget is a great way to manage your money and live on
5870less than you make.
5871»» In order to live on less than you make, you’ve got to
5872decide ahead of time how much you’ll spend, save and
5873give each month. Then, stick to it!
58741. Spending. Break it down into categories, like food, gas,
5875etc.—and make sure you keep your spending in check.
58762. Saving. It’s never too early to start saving, whether it’s
5877for a new car, next semester’s tuition or a video game.
58783. Giving. Make it a priority to help other people. Give to
5879your church or an organization that shares your beliefs.
5880Avoid Student Loans
5881»»Remember, you have two goals:
58821. Stay in school.
58832. Stay out of debt.
5884»»Avoid student loans! The average repayment period for
5885a student loan is 10 years if you make the minimum
5886payment each month. You will pay more interest if you
5887go beyond 10 years.
5888116 Foundations in Personal Finance High School Edition
5889SECTION 3
5890LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5891THINGS TO CONSIDER
5892Living off campus can
5893cost a lot of money! You’ll
5894probably be excited to be
5895out on your own when you
5896begin college. But think
5897about the savings if you
5898just put that off for a year
5899or two. You might be wise
5900to reconsider that dorm or
5901apartment.
5902+
5903Consider Attending a School Close to Home
5904»»Attending a community college or state university that
5905allows you to live at home is a great option for reducing
5906the cost of living expenses, even if it is only for your first
5907two years of school.
5908» Collegedata.com reported that the average cost of room
5909and board in 2012–2013 ranged from $9,205 at four-year
5910public schools to $10,462 at private schools.
5911Your Determination Will Pay Off
5912So there it is. When it comes to college (and life in general),
5913debt is not the answer. You have countless options when it
5914comes to getting a great college education completely debt
5915free! It might mean working hard and planning ahead. But
5916when you’re out of college and you actually get to keep your
5917paycheck instead of sending it all to student loan debt, you
5918will be so glad you did.
5919The choices you make in the next few years will affect the
5920next 40 years of your life. You’ll have much more freedom
5921to pursue your dreams and do exactly what you want to do.
5922Now that’s a great way to begin your future!
5923JOURNAL QUESTION: VIDEO 3.2
5924What money-saving options will you consider in order to cash-flow
5925your college education?
5926Chapter 5: Life After High School 117
5927LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5928“Education is the
5929most powerful
5930weapon which you
5931can use to change the
5932world.”
5933NELSON MANDELA
5934Revolutionary and politician
5935“ Section 4:
5936Education Options for the 21st Century
5937VIDEO 4.1
5938Be a Lifelong Learner
5939Many students and their parents
5940believe that a four-year college degree
5941is necessary to compete in the job
5942market. College is not for everyone,
5943and it is possible to build a career
5944without investing in an expensive
5945college education. Twenty-firstcentury
5946education comes in many
5947forms. Remember, however, that even
5948if a traditional four-year college isn’t
5949for you, it is still important to invest
5950in yourself. Learning is a necessary
5951lifelong venture regardless of your
5952career choice or specific educational
5953needs. If you do your research, you can
5954be sure you’re deciding on a career
5955path that ref lects your passions
5956as well as your financial goals. It’s
5957important to assess what your
5958interests are, how you like to learn,
5959and what motivates you. For example,
5960do you like to build things, sit behind
5961a computer, or interact with people?
5962Once you’ve decided on a career,
5963here are some college alternatives
5964to consider.
5965Trade School
5966Trade schools allow students to learn basic
596734
5968in two years or less
5969because technical schools typically cut out many of the
5970general courses required by traditional universities. Also,
5971since trade schools are often directly tied into the
5972employment needs of their region or state, prospective
5973employers often seek new hires from trade school
5974graduates.
5975118 Foundations in Personal Finance High School Edition
5976SECTION 4
5977LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
5978Certifications
5979Students who are looking to learn specific skills can look
5980into free or low-cost
598135
5982found online,
5983at community colleges, or through governmentfunded
5984programs.
5985Self-Education
5986Start reading books, blogs and trade magazines in your
5987field of choice. Attend conferences and local events. Meet
5988people and find a mentor. You may also want to attend
5989online courses specific to your field.
5990On-the-Job Training
5991- -
599236
5993training is just that. You, the
5994employee, train at the place of work while you are doing
5995the actual job. Usually a professional trainer serves as the
5996course instructor and uses a combination of hands-on
5997activities and formal classroom training.
5998Associate’s Degree
5999An associate’s
600037
6001is a two-year degree that can
6002offer a variety of benefits including lower cost than fouryear
6003colleges, specialized training and a flexible schedule
6004that allows you to work while you earn your degree.
6005Whether it is your first step toward earning a bachelor’s
6006degree or the beginning of your career, an associate’s
6007degree may be a great option. Career fields such as fashion
6008design, nursing, cardiovascular technology and criminal
6009justice are offered at the associate’s level.
6010Chapter 5: Life After High School 119
6011LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6012Budget
6013Builder
6014Cash-flowing your
6015post-high school
6016education will take
6017some planning. Go to
6018foundationsU.com/5 to
6019build it into your budget!
6020“I have never let my
6021schooling interfere
6022with my education.”
6023MARK TWAIN
6024American author
6025“
6026Starting a Business
6027Maybe you’d like to
602838
6029your own business. While
6030there is always risk involved, if you have passion and an
6031entrepreneurial spirit, it might be right for you. Be sure
6032to create a solid business plan and establish financial
6033resources first. Stick with a debt-free plan. Remember to
6034be enthusiastic about your venture. Many people who don’t
6035necessarily make “good” traditional students make the best
6036entrepreneurs because of their passion and people skills.
6037Be prepared to work hard and know that there will be some
6038bumps in the road.
6039Military
6040The military isn’t for everyone, but it has helped a lot of
6041people get through college debt free while giving them the
6042honor of serving their country.
6043Remember, post-secondary education is not a one-size-fitsall
6044plan. With so many options, you have the opportunity to
6045create your own educational experience that allows you to
6046follow your passions and meet your goals.
6047120 Foundations in Personal Finance High School Edition
6048SECTION 4
6049LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6050CASE STUDIES
6051Anthony K. began working
6052toward a U.S. military
6053academy appointment
6054when he was a freshman
6055in high school. He attended
6056the U.S. Naval Academy,
6057receiving a $250,000
6058education for free.
6059Kate J.’s husband attended
6060college paid for by the Air
6061Force while they scrimped
6062to pay for books. He
6063worked part time and was
6064even deployed to Iraq, but
6065he graduated in five years
6066with a 4.0 grade point
6067average. He now has his
6068dream job—USAF pilot.
6069+
6070A Message From Rachel
6071We’ve talked a ton
6072about going to college,
6073but some of you might
6074feel like college isn’t for
6075you—and that’s okay.
6076There are alternatives
6077to getting a four-year degree, many of
6078which result in great career options.
6079Before making a firm decision to pass
6080up college, though, I’d like to encourage
6081you to do two things: ask yourself why,
6082and make sure you have a solid plan for
6083your future.
6084Ask yourself why you don’t feel like
6085college is right for you—and be honest
6086when you answer. Don’t lie to yourself,
6087okay? It may help to talk through your
6088reasons with a parent or adult that you
6089trust. You might find that you’re just
6090like the rest of us—a little scared of the
6091unknown. You know, “What will the
6092first day be like?” or “What if I can’t
6093make the grades?” Those worries are
6094normal—and most of them will be old
6095news by the second week of school.
6096But maybe you’ll discover college
6097really isn’t for you. That’s when you
6098need a plan. Just like other areas of
6099life, most successful careers aren’t
6100stumbled upon. They’re built with
6101a plan. And no, a solid plan doesn’t
6102include living in your parents’
6103basement until you meet a lovely
6104lady who will take over cooking and
6105cleaning duties from your mom. It just
6106doesn’t work that way, guys!
6107Everyone is different—and thank
6108goodness, right? It’s totally okay if
6109your life after high school doesn’t
6110look the same as your friends’.
6111What’s not okay is settling because
6112of uncertainties. If you’re willing
6113to put in the work, then you’ve got
6114what it takes to conquer your fears
6115and reach your dreams. Don’t let
6116anything hold you back from reaching
6117your potential and pursuing a career
6118that you love!
6119JOURNAL QUESTION: VIDEO 4.1
6120Think about what careers you might be interested in pursuing. What
6121type of education or training will you need to enter that field?
6122Chapter 5: Life After High School 121
6123LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6124Chapter Summary
6125Big Ideas
6126The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
6127and think about how what you’ve learned will affect your current and future decisions. Then, in the space
6128provided, write an “I believe” statement for each of the Big Ideas.
6129»» The Fourth Foundation: Pay Cash for College
6130»» Not all careers require four-year degrees.
6131»» Begin planning now!
6132Build On What You’ve Learned
6133Review: Securing Financial Aid
6134Write what you know about each of the following components of a financial aid package.
6135Grants:
6136Scholarships:
6137Work Study:
6138Loans:
6139Check for Understanding
6140Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
6141checkmark next to the learning outcomes you’ve mastered, and complete the “after” column of the Measure
6142Your Progress section.
6143122 Foundations in Personal Finance High School Edition
6144RECAP & REVIEW
6145LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6146Take Action Challenge
6147If you don’t know the educational requirements for your specific career choice, take this opportunity to research
6148the information. Fill in this graphic organizer with the information you gather. If you are undecided among
6149several career options, be sure to research the educational requirements and the cost of each career program.
6150NEXT STEPS:
6151Â…Â… Community college
6152Â…Â… 4-year college
6153Â…Â… Trade school
6154Â…Â… Certification
6155Â…Â… Self-education
6156Â…Â… On-the-job training
6157Â…Â… Start a business
6158Â…Â… Military
6159OPTION
61601
6161COST:
6162$
6163TIME:
6164NEXT STEPS:
6165Â…Â… Community college
6166Â…Â… 4-year college
6167Â…Â… Trade school
6168Â…Â… Certification
6169Â…Â… Self-education
6170Â…Â… On-the-job training
6171Â…Â… Start a business
6172Â…Â… Military
6173OPTION
61742
6175COST:
6176$
6177TIME:
6178NEXT STEPS:
6179Â…Â… Community college
6180Â…Â… 4-year college
6181Â…Â… Trade school
6182Â…Â… Certification
6183Â…Â… Self-education
6184Â…Â… On-the-job training
6185Â…Â… Start a business
6186Â…Â… Military
6187OPTION
61883
6189COST:
6190$
6191TIME:
6192START YOUR CAREER DEBT FREE!
6193AFTER HIGH SCHOOL
6194I want to be a:
6195Other options
6196I’m considering:
6197I’ll prepare for this position
6198with one of the following educational options:
6199Chapter 5: Life After High School 123
6200LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6201Money in Review
6202a FAFSA
6203b Work Study
6204c Grant
6205d “Good Debt”
6206e Scholarships
6207f Associate’s Degree
6208g Mentorship
6209h Trade School
62101. _____ A developmental partnership through
6211which one person shares knowledge,
6212skills and perspective to foster the
6213personal and professional growth of
6214someone else
62152. _____ A form of federal or state financial aid
6216that does not need to be repaid
62173. _____ A program that allows students to work
6218part time while continuing their studies
62194. _____ An undergraduate academic degree
6220awarded by colleges upon completion of
6221a course of study lasting two years
62225. _____ A form that is completed annually by
6223current and prospective college students to
6224determine their eligibility for financial aid
62256. _____ A money myth that portrays student
6226loans as the only financial option
6227when it comes to funding one’s college
6228education
62297. _____ A merit-based form of financial aid
6230that does not need to be repaid; usually
6231offered on the basis of academic, athletic
6232or other achievements
62338. _____ A type of higher learning school that
6234focuses on job skill training for specific
6235career fields rather than academics in
6236liberal arts
6237Matching
6238Match the following terms to the correct definition below.
6239Illustration
6240Draw a picture representation of each of the following terms.
6241Student Loans Financial Peace
6242124 Foundations in Personal Finance High School Edition
6243RECAP & REVIEW
6244LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6245Multiple Choice
6246Circle the correct answer.
62479. Our culture thinks student loan debt is
6248normal and that it’s an acceptable way to
6249pay for college.
6250a True
6251b False
625210. A four-year degree is necessary regardless
6253of what career you’re pursuing.
6254a True
6255b False
625611. The total estimated student loan debt
6257outstanding (unpaid) in the U.S.
6258a $1 billion
6259b $1 trillion
6260c $10,000
6261d $7 trillion
626212. Which of the following is not a good option
6263when it comes to paying for your education?
6264a Get a part-time job
6265b Plan ahead
6266c Ask your parents to take out a loan
6267d Fill out the FAFSA
626813. Which of the following are ways that you
6269can invest in yourself?
6270a Find a mentor
6271b Read books
6272c Surround yourself with people who have
6273similar goals and ambitions as you
6274d All of the above
6275Short Answer
6276Respond in the space provided.
627714. Explain how you can get an education debt
6278free after high school.
627915. Based on what you’ve learned, do you
6280believe it is realistic to graduate debt free?
6281Why or why not?
628216. Write down three reasons why you should
6283avoid student loans.
628417. Select one of the student stories in this
6285chapter (section 1 or 2) and describe the
6286effect student loan debt had on that
6287person’s life.
628818. What excites you the most about life after
6289high school?
6290Chapter 5: Life After High School 125
6291LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6292What do other high
6293school students know
6294about consumer
6295awareness?
6296We asked other high school students
6297to share their favorite television
6298commercials.
6299“I like the Super Bowl commercials.
6300They show how much competition
6301there is between companies.”
6302Senior, Utah
6303“I like the mayhem commercials
6304the best.”
6305Junior, Missouri
6306“My favorite is the ‘Is it better to be
6307faster or slower’ commercial.”
6308Junior, Tennessee
6309“I like the commercials with
6310the baby talking about online
6311investing.”
6312Senior, North Carolina
6313“I like the one where they ask the
6314little kids questions and they come
6315up with funny answers.”
6316Sophomore, Alabama
63176
6318CHAPTER
6319LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6320Consumer
6321Awareness
6322MARKETING IS POWERFUL! Think about
6323it—almost every single purchase you’ve made
6324started with advertising. But be careful. As
6325you learned in Chapter 4, debt is also marketed
6326to you. Some salespeople don’t want you to
6327think about the product’s total cost; they want
6328you to think in terms of how much down and
6329how much a month. Buyer beware!
6330*Marketingvox, Rand Youth Poll, Seventeen, Packaged Facts
6331of teens say they are
6332currently saving.*
633340%
6334of teens have placed
6335an order online
6336in the past three
6337months.*
633826%
6339UNIT 2: CHAPTER 6
6340LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6341Key Terms
6342Get to know the language of money.
6343»» Branding: The promotion of a product
6344or service by identifying it with distinct
6345characteristics (usually associated
6346with public perception, quality or
6347effectiveness)
6348»» Brand recognition/awareness: Refers
6349to the public’s ability to recall and
6350recognize a brand by its logo, jingles,
6351packaging, etc.
6352»» Buyer’s remorse: Feeling regret or
6353concern after making a large purchase
6354»» Caveat emptor: Latin term for
6355“buyer beware”
6356»» Financing: To buy an item with credit;
6357paying over time
6358»» Marketing: The process of
6359communicating the value of a product
6360or service to customers
6361»» Opportunity cost: Refers to the financial
6362opportunity that is given up because
6363you choose to do something else with
6364your money
6365»» Significant purchase: An amount of
6366money you spend, usually $300, that
6367causes some pain to part with
6368Learning Outcomes
6369Once you’ve completed this chapter’s videos, you will be asked to
6370return to this list of learning outcomes and place a checkmark
6371next to the items you’ve mastered.
6372Section 1: Buyer Beware
6373Â…Â… Identify ways companies compete for your money.
6374Â…Â… Be familiar with marketing strategies that encourage
6375people to go into debt or finance large purchases.
6376Â…Â… Evaluate how peer pressure can affect spending decisions.
6377Â…Â… Summarize factors that influence consumer decisions.
6378Section 2: Buyer’s Remorse
6379Â…Â… List five steps you should take before making
6380a major purchase.
6381Section 3: Opportunity Cost
6382Â…Â… Evaluate the role opportunity cost plays
6383in purchasing decisions.
6384Â…Â… Describe the effect of inflation on buying power.
6385
6386Before You Begin
6387128 Foundations in Personal Finance High School Edition
6388INTRODUCTION
6389LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6390Measure Your Progress
6391Before watching the video, read each statement and select what you believe to be the correct answer.
6392Then, after watching the video, return to this activity and correct your answers if necessary.
6393JOURNAL QUESTION: INTRODUCTION
6394How does advertising affect your buying decisions?
63951. What percentage of “90-days-same-as-cash” purchases are not paid in 90 days and
6396convert to payments?
639725% 50% 75% more than 75%
63982. The average cost of a 30-second television advertisement during the 2013 Super Bowl was:
6399$1 million $2 million $3 million $4 million
64003. The average American was exposed to almost 560 advertisements daily in 1971. Today
6401that number is closer to:
64021,500 2,500 3,000 more than 5,000
64034. A Harvard University study found that for every hour of television you watch each week,
6404your yearly spending increases by an average of:
6405$50 $100 $200 $500
64065. The fashion category accounts for about percent of teen spending.
640710 25 40 75
6408BEFORE & AFTER
6409Chapter 6: Consumer Awareness 129
6410LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6411WHY ARE WE SO
6412MARKETED TO?
6413The U.S. is the most
6414capitalistic country in the
6415world. Capitalism is an
6416economic system based
6417on a free market, profit
6418motive, open competition
6419and private ownership of
6420the means of production.
6421This market is driven by
6422the economic law of supply
6423and demand. Companies
6424promote consumer demand
6425by marketing their products.
6426+
6427TEEN SPENDING HABITS
6428AT A GLANCE
6429• 55–60% of teens say
6430their parents contribute
6431more than half of their
6432spending dollars.
6433• The fashion category
6434accounts for roughly
643540% of teen budgets.
6436• Approximately 79% of
6437females and 76% of
6438males shop online, and
6439respondents indicated
6440that roughly 18% of their
6441spending is online.
64422013 Taking Stock With Teens
6443Survey, Piper Jaffray Companies
6444$
64456 CHAPTER
6446Section 1: Buyer Beware
6447VIDEO 1.1
6448The Most Marketed-to Culture in History
6449WE LIVE IN THE MOST marketed-to
6450culture in the history of the world! If
6451you are going to have financial peace,
6452you are going to have to develop a
6453resistance to that marketing. It’s not
6454that buying things is bad. But buying
6455too many things, with money you
6456don’t have, to impress people you don’t
6457really like—that’s a bad idea.
6458»» “Caveat emptor” means
64591
6460.
6461»»We’re not saying that you can’t have a good time with
6462your money. Remember, we want you to
64632
6464like no
6465one else so later you can live like no one else.
6466»»We want to sacrifice to win and then we want to
64673
6468the winning. There’s nothing wrong with
6469buying a good product.
6470130 Foundations in Personal Finance High School Edition
6471SECTION 1
6472LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6473“He who buys what he
6474does not need steals
6475from himself.”
6476UNKNOWN
6477“
6478The Super Bowl is known
6479almost more for its
6480commercials than for the
6481football game. The average
6482cost of a 30-second
6483television spot during the
64842013 Super Bowl was $4
6485million. These ads were
6486viewed in roughly 53.3
6487million households.
6488USA Today
6489$
6490»» A good salesman has a servant’s heart, knows how to
6491sell, and is professional—all of which can make the whole
6492process pretty
64934
6494.
6495»»Companies use every angle to aggressively compete for
6496our
64975
6498.
6499»»Companies that are not sophisticated and aggressive
6500in their marketing or do not have a marketing budget
6501generally do not stay open.
6502»»Competition is
65036
6504for the consumer dollar.
6505JOURNAL QUESTION: VIDEO 1.1
6506Why is it important for consumers to be aware of marketing tactics?
6507What’s Wrong With Financing a Purchase?
6508“What’s wrong with buying things on 12-months-same-as-cash?”
6509DAVE’S ANSWER: It’s a stupid idea. First off, if I
6510buy the item with cash, I’ll get a better deal. Plus,
6511if you play with snakes, you’ll get bitten. If they
6512record your payment wrong and it’s late, they’ll
6513backcharge you through the entire term of the
6514deal at about 24–38% interest. You’ll spend the
6515next year and a half cleaning up this mess. It
6516actually happened with one of our clients here. If
6517you can’t save up and pay for the item with cash,
6518you can’t afford to buy it!
6519Chapter 6: Consumer Awareness 131
6520LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6521For every hour of television
6522per week you watch, you
6523spend an average of $200
6524extra a year.
6525Harvard University
6526$
6527THE ECONOMIC LAW OF
6528SUPPLY AND DEMAND
6529The theory that, in a free
6530market economy, prices
6531are determined by the
6532interaction of supply and
6533demand; an increase in
6534supply will lower prices
6535if not accompanied
6536by increased demand,
6537and an increase in
6538demand will raise prices
6539unless accompanied by
6540increased supply.
6541+
6542VIDEO 1.2
6543Four Common Marketing Tactics
6544When you turn on the TV, listen
6545to the radio, surf the web, or walk
6546into the mall, you are stepping into
6547battle—a battle for your dollars.
6548Today, companies use every angle
6549imaginable to aggressively compete
6550for your money. The purpose of
6551advertising is to inform, tease and
6552persuade consumers to purchase
6553products.
6554When you’re aware of these techniques, you are more
65557
6556as consumers. Here are four common marketing strategies:
65571. One of the techniques is
65588
6559selling. People
6560who know how to sell spend thousands of dollars and
6561hours sitting in a classroom learning how to talk to
6562you—to serve you, to
65639
6564you in your decision to
6565buy their stuff.
65662. The second technique is
656710
6568. They use money
6569and easy payments as a marketing tool. They don’t want
6570you to think about how much something actually costs,
6571rather how much down and how much per month.
6572I Want to Buy Something, But Can I Afford it?
6573How do you know when you can afford something?
6574When you have the cash to pay for it! Here are
6575two common financing plans you should avoid:
657690-Days-Same-As-Cash
6577If you pay within 90 days, there are no finance
6578fees. But if you pay late, you will be charged
6579interest for the entire 90 days. What if you
6580have good intentions of paying it off before
6581the 90 days is up? On average, about 80%
6582of customers do not pay it off in 90 days.
6583Life happens. The best intentions are often
6584interrupted by life.
6585Zero Percent Interest
6586Look out for the 0% interest trap on car loans! The
6587truth is that 0% financing is nothing more than a
6588really good marketing tool. It has worked so well
6589for the auto industry that other types of retailers,
6590particularly in furniture and electronics, have
6591adopted this method of marketing. In reality,
6592less than one third of all consumers qualify
6593for 0% financing. For the other two thirds, well,
6594they’ve got you where they want you: in the store
6595and wanting to buy. For those that do qualify for
65960%, sellers often make up for the lost finance
6597charges by increasing the price of the product.
6598132 Foundations in Personal Finance High School Edition
6599SECTION 1
6600LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6601Have you ever wanted
6602to know what was really
6603important to someone?
6604Look at their checkbook
6605entries. Are they spending
6606a lot on “stuff” like
6607entertainment, clothes,
6608friends, etc.? People spend
6609their money on things most
6610meaningful to their heart.
6611“For where your treasure
6612is”—the money you spend
6613or save—“there your heart
6614will be also” (Matthew 6:21).
6615+
661625% of Christmas
6617shoppers will still be
6618paying off the bills come
6619next Christmas! The
6620average consumer takes at
6621least six months to pay off
6622holiday bills.
6623The Wall Street Journal
6624If a $1,200 purchase is
6625charged on a credit card at
662617% interest and only the
6627minimum payments are
6628made, it will take almost
662920 years to pay it off and
6630will cost an additional
6631$2,076 in interest, bringing
6632the total cost of that $1,200
6633purchase to $3, 276!
6634The Wall Street Journal
6635$
6636VIDEO 1.3
6637Four Common Marketing Tactics (Continued)
66383. Other media like TV, radio and internet use
663911
6640to sell products. How does repetition
6641work? In advertising, repetition means repeated
6642exposure. Over time, repeated messages become familiar
6643and accepted as true. Companies behind the ads are
6644willing to pay for such repetition because it works!
66454. When it comes to marketing they also use product
664612
6647.
6648Types of Product Positioning
6649»»Brand Recognition: When marketing causes you to
6650position a product in your mind to be associated with
6651a certain
665213
6653.
6654JOURNAL QUESTION: VIDEO 1.2
6655What are some of your favorite brands (soft drink, clothing, etc.)?
6656Why do you like them?
6657JOURNAL QUESTION: VIDEO 1.3
6658Describe one way advertising has played a role in something
6659you’ve purchased.
6660Chapter 6: Consumer Awareness 133
6661LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6662Teens have cited “friends”
6663as the strongest influence
6664over their purchase
6665decisions for the duration
6666of our survey history, but
6667“internet” is quickly rising
6668in profile. Approximately
666953% of females and 52%
6670of males indicate that
6671social media impacts their
6672purchases, with Facebook
6673being the most important,
6674followed closely by Twitter
6675and Instagram. But the
6676popularity of Facebook is
6677waning among teens, with
667833% citing it as the most
6679important, down from 42%
6680six months ago.
66812013 Taking Stock With Teens
6682Survey, Piper Jaffray Companies
6683$
6684The average consumer
6685mentions specific brands
6686over 90 times per week in
6687conversations with friends,
6688family and coworkers.
6689Word of Mouth Marketing
6690Association
6691Consumer reviews are
6692significantly more trusted—
6693nearly 12 times more—
6694than descriptions that
6695come from manufacturers.
6696eMarketer
6697+
6698VIDEO 1.4
6699Types of Product Positioning (Continued)
6700»»Color: Color
670114
6702when you’re doing
6703product positioning. Color has an impact on consumer
6704reaction to a product.
6705»»Shelf Positioning: Companies pay for prime shelf
6706position in stores. It’s a
670715
6708shelf position.
6709It is meant to influence impulse buying.
6710»»Packaging: The
671116
6712, the look and the feel of
6713the package are all meant to have an impact on you.
6714There’s no reason to be paranoid. But marketers are very
6715sophisticated—so we should at least
671617
6717.
6718JOURNAL QUESTION: VIDEO 1.4
6719Have you ever bought something you thought would make you happy,
6720but in the end it didn’t?
6721134 Foundations in Personal Finance High School Edition
6722SECTIONS 1 & 2
6723LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6724The average U.S.
6725household has 52 unused
6726items around the house
6727worth a total of $3,100.
6728eBay/Nielsen Survey
6729$
6730Describe a money goal
6731that you currently have.
6732“Saving up enough to buy a
6733nice used car.”
6734Sophomore, Kansas
6735“Saving $20 per week.”
6736Junior, Washington
6737“I’m trying to save up $800
6738for a new set of tires.”
6739Senior, Massachusetts
6740“My current money goal is
6741to pay off my car and save
6742more money for college.”
6743Junior, Pennsylvania
6744Section 2: Buyer’s Remorse
6745VIDEO 2.1
6746Significant Purchases
6747Your body goes through physiological
6748changes when you make a significant
6749purchase. You sweat. Your eyes dilate.
6750Your pulse rate changes. Proteins and
6751endorphins are released.
6752»» A “significant purchase” is normally anything over $
675318
6754.
6755»»Buyer’s
675619
6757is when you wake up the next day
6758and regret your purchase.
6759»»We all have that spoiled, grocery store kid living inside of
6760us. His name is
676120
6762.
6763»»When it comes to spending, adults devise a
676421
6765and
676622
6767it.
6768»»When it comes to big purchases, the right way to do it is
6769to
677023
6771and pay cash.
6772JOURNAL QUESTION: VIDEO 2.1
6773Can you think of anything in your home that was bought but never or
6774rarely used?
6775Chapter 6: Consumer Awareness 135
6776LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6777“Many a man thinks
6778he is buying pleasure,
6779when he is really
6780selling himself to it.”
6781BENJAMIN FRANKLIN
6782Author, inventor and
6783political theorist
6784“
6785Budget
6786Builder
6787Thinking about making
6788a significant purchase?
6789You’ll need to save up
6790for that! Go to
6791foundationsU.com/6
6792to add a sinking fund
6793to your budget.
6794OPPORTUNITY COST
6795The true cost of something
6796in terms of what you have
6797to give up to get the item;
6798the benefits you would
6799have received by taking the
6800other action.
6801+
6802Section 3: Opportunity Cost
6803VIDEO 3.1
6804Develop Power Over Purchase
6805Because it’s always easy to spend more than you make, you
6806must develop
680724
6808over
680925
6810. It doesn’t
6811matter how much money you make. If you have a spending
6812plan and power over purchase, you can win with money.
6813Having power over purchase involves following these steps:
68141. Wait
681526
6816before making a purchase. Take
6817the time to consider whether it is a need or a want. And
6818make sure you’ve budgeted for it!
68192. Consider your buying
682027
6821. No amount of
6822stuff equals
682328
6824or fulfillment. People
6825sometimes get
682629
6827and
682830
6829confused.
6830You buy fun, but you can’t buy happiness. Happiness is
6831where you are right now. Claim it for yourself!
68323. Never buy anything you do not
683331
6834.
6835Particularly financial products like insurance
6836or investments.
68374. Consider the “
683832
6839cost” of your money—
6840which means that money spent here cannot be spent there.
6841Whenever you make a choice, you must pass up other
6842opportunities. Take your time and make the right decision.
68435. Seek wise
684433
6845. Young adults who are not yet
6846married should find an accountability partner—someone
6847with whom you can discuss big purchases. Once you are
6848married, you should seek the counsel of your spouse.
6849136 Foundations in Personal Finance High School Edition
6850SECTION 3
6851LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6852“A budget tells us
6853what we can’t afford,
6854but it doesn’t keep us
6855from buying it.”
6856WILLIAM FEATHER
6857American publisher
6858and author
6859“
6860If you follow these steps, you will limit your spending and
6861make purchases that you’re proud of—and you will have
6862financial peace.
6863* NOTE: You’ll learn more about investing and retirement planning in Chapter 8.
6864JOURNAL QUESTION: VIDEO 3.1
6865Explain why it is important to develop power over purchase.
6866How Does Inflation Affect Your Buying Power?
6867INFLATION can be described as the persistent
6868increase in the cost of goods and services or the
6869persistent decline in the buying power of money.
6870Regardless of how you describe it, inflation
6871basically means your dollars buy less than they
6872used to. You must consider inflation when planning
6873for future expenses, especially retirement. So
6874what should you do?
68751. Pay attention to the long-term rate of inflation.
6876This can make inflation trends more predictable.
68772. Be sure to consider inflation in your investment
6878planning.
68793. Factor a realistic inflation expectation into
6880your financial planning. For instance, what
6881might you expect your cost of living to be by
6882the time you retire?
68831913–
68841919
68851970–
68861979
68871940–
68881949
68892000–
68902009
68911920–
68921929
68931980–
68941989
68951950–
68961959
68972010–
68982012
68991930–
69001939
69011990–
69021999
69031960–
69041969
690510.0% »
69066.0% »
69072.0% »
6908-2.0% »
69098.0% »
69104.0% »
69110.0% »
69129.8%
69135.5%
69142.0% 2.3%
69155.5%
69163.0%
69172.6% 2.3%
69181913–
69192012
6920-0.1% -2.1%
692112.0% »
6922Average Annual Inflation by Decade
69237.1%
69243.2%
6925Long -Term Average
6926Chapter 6: Consumer Awareness 137
6927LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6928Chapter Summary
6929Check for Understanding
6930Now it’s time to check your learning! Go back to the Before You Begin section for this chapter and place a
6931checkmark next to the learning outcomes you’ve mastered. Review the Measure Your Progress section and
6932correct your answers if necessary.
6933Build On What You’ve Learned
6934Describe three instances where peer pressure has influenced your decision about a purchase.
6935ITEM/EVENT:
6936PEER PRESSURE:
69371
6938ITEM/EVENT:
6939PEER PRESSURE:
69403
6941ITEM/EVENT:
6942PEER PRESSURE:
69432
69443 Times Peer Pressure Influenced Your Purchasing Decision
6945138 Foundations in Personal Finance High School Edition
6946RECAP & REVIEW
6947LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6948Take Action Challenge
6949Imagine that you inherited $5,000. Come up with three things that you could do with the money. Then
6950describe the opportunity cost of each choice.
6951Big Ideas
6952The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
6953and think about how what you’ve learned will affect your current and future decisions. Then, in the space
6954provided, write an “I believe” statement for each of the Big Ideas.
6955»» Don’t buy things with money you don’t have.
6956»» Develop power over purchase.
6957»» Consider the opportunity cost of your purchases.
6958$5,000!
6959inherited
6960Now what are you
6961going to do with
6962the money?
6963You
6964USE $5,000 FOR:
6965OPPORTUNITY COST:
6966USE $5,000 FOR:
6967OPPORTUNITY COST:
6968USE $5,000 FOR:
6969OPPORTUNITY COST:
69701
6971OPTION
69722
6973OPTION
69743
6975OPTION
6976Chapter 6: Consumer Awareness 139
6977LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
6978Money in Review
6979a Opportunity Cost
6980b Significant Purchase
6981c Branding
6982d Buyer’s Remorse
6983e Financing
6984f Caveat Emptor
6985g Marketing
6986h Brand Recognition
69871. _____ To buy an item with credit; paying
6988over time
69892. _____ The promotion of a product or
6990service by identifying it with distinct
6991characteristics (usually associated
6992with public perception, quality or
6993effectiveness)
69943. _____ Latin term for “buyer beware”
69954. _____ An amount of money you spend, usually
6996$300, that causes some pain to part with
69975. _____ Refers to the financial opportunity that
6998is given up because you choose to do
6999something else with your money
70006. _____ Feeling regret or concern after making a
7001large purchase
70027. _____ Refers to the public’s ability to recall
7003and recognize a brand by its logo, jingles,
7004packaging, etc.
70058. _____ The process of communicating
7006the value of a product or service to
7007customers
7008Matching
7009Match the following terms to the correct definition below.
7010Illustration
7011Draw a picture representation of each of the following terms.
7012Inflation Power Over Purchase
7013140 Foundations in Personal Finance High School Edition
7014RECAP & REVIEW
7015LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7016Multiple Choice
7017Circle the correct answer.
70189. As a consumer, you should consider inflation
7019in your investment and retirement planning.
7020a True
7021b False
702210. If you don’t have cash on hand, financing a
7023significant purchase is a good option.
7024a True
7025b False
702611. Which of the following is not a need?
7027a Food
7028b Housing
7029c Eating out
7030d Utilities
703112. The purpose of advertising is to:
7032a Inform the consumer
7033b Tease the consumer
7034c Persuade the consumer
7035d All of the above
703613. Which of the following is not a common
7037marketing strategy?
7038a Providing financing options
7039b Making the customer do product research
7040c Personal selling
7041d Repetition
7042Short Answer
7043Respond in the space provided.
704414. Explain why financing a purchase is a bad idea.
704515. Why should you always consider
7046the opportunity cost when making
7047a significant purchase?
704816. What are the five steps you should take
7049before making a significant purchase?
705017. What effect does inflation have on
7051purchasing power?
705218. Summarize factors that influence
7053consumer decisions.
7054Chapter 6: Consumer Awareness 141
7055LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7056What do other high
7057school students
7058know about bargain
7059shopping?
7060We asked other high school students
7061to describe how they have saved
7062money on a purchase.
7063“I negotiated the price of my
7064vehicle by pulling cash out of my
7065pocket. I got it for $350 less than
7066the asking price.”
7067Senior, Oklahoma
7068“I cut coupons with my dad when I
7069was little. When we went shopping,
7070he would give me the money he
7071saved by using the coupons.”
7072Junior, Maine
7073“I find and purchase products
7074online for cheaper than they are in
7075the store. This saves me both time
7076and money.”
7077Senior, Oregon
7078“I bought a $500 dress for $45 at
7079a consignment shop—and I looked
7080like a million dollars at prom
7081that spring!”
7082Senior, California
7083“I waited a couple of months for
7084the price to go down on something
7085I wanted and then bought it.”
7086Junior, Georgia
70877
7088CHAPTER
7089LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7090Bargain
7091Shopping
7092EVEN IF YOU’RE not a spender by nature,
7093finding a great bargain on something you
7094really want will send a rush down your
7095spine. It’s just plain fun to find a deal!
7096However, if you want to find the absolute
7097best bargains, you will need to do three
7098things: learn how to negotiate, have
7099patience, and know where to find great
7100deals. Now let the fun and games begin!
7101*Charles Schwab Teens & Money Survey (2011)
7102of teens say they
7103know how to shop
7104for the best deal
7105when making
7106a purchase.*
710766%
7108of teens consider
7109themselves super
7110savers as opposed
7111to big spenders.*
711277%
7113UNIT 3: CHAPTER 7
7114LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7115Key Terms
7116Get to know the language of money.
7117»» Auction: A public sale in which property
7118or items of merchandise are sold to the
7119highest bidder
7120»» Consignment shop: Retail store where
7121people sell items and the owner of the
7122shop gets a percentage of the sale
7123»» Cost-benefit analysis: The process
7124of quantifying costs and benefits of
7125a decision
7126»» Estate sale: Type of yard sale with
7127more items, usually the entire contents
7128of a household
7129»» Foreclosure: Process by which the
7130holder of a mortgage sells the property of
7131a homeowner who has not made interest
7132and/or principal payments on time as
7133stipulated in the mortgage contract
7134»» Integrity: Having to do with a person’s
7135honesty and moral attributes
7136»» Markup: The difference between the
7137wholesale price and retail price
7138»» Negotiate: To bargain for a lower price
7139»» Walk-away power: The ability to walk
7140away from a purchase when negotiating
7141Learning Outcomes
7142Once you’ve completed this chapter’s videos, you will be asked to
7143return to this list of learning outcomes and place a checkmark
7144next to the items you’ve mastered.
7145Section 1: Bargain Shopping: Part of a Healthy
7146Financial Plan
7147Â…Â… Understand how shopping for bargains is part of a
7148healthy financial plan.
7149Â…Â… Analyze and use the three keys to getting bargains:
7150Learn how to negotiate, have patience, and know where
7151to find great deals.
7152Section 2: The Seven Basic Rules of Negotiating
7153Â…Â… Develop skills for negotiating deals on products or services.
7154Â…Â… Understand that integrity and honesty are important
7155when it comes to negotiating with others.
7156Section 3: Places to Find Great Deals
7157Â…Â… Know the best places to shop for deals.
7158Â…Â… Evaluate the benefits of not buying brand-name products,
7159taking advantage of seasonal shopping, buying slightly
7160outdated products, etc.
7161
7162Before You Begin
7163144 Foundations in Personal Finance High School Edition
7164INTRODUCTION
7165LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7166Measure Your Progress
7167Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
7168column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
7169on any statement.
7170JOURNAL QUESTION: INTRODUCTION
7171Explain the best deal you’ve ever negotiated.
71721. Most of the items at a pawn shop are stolen.
71732. Learning to be quiet is actually a powerful tool
7174in negotiation.
71753. A seller who senses that you are attached to an item
7176will be less likely to negotiate a deal.
71774. In certain circumstances, it is okay to stretch the
7178truth to get a bargain.
71795. Most countries, except for the U.S., use negotiating
7180as a way of life.
7181Agree Disagree Agree Disagree
7182BEFORE AFTER
7183Chapter 7: Bargain Shopping 145
7184LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7185BARGAINING is a type
7186of negotiation in which
7187the buyer and seller of a
7188good or service dispute
7189the price that will be paid
7190and the exact nature of the
7191transaction. Bargaining
7192is an alternative pricing
7193strategy to fixed prices.
7194+
719516–18% of Americans will
7196shop at a thrift store during
7197a given year; about 12–15%
7198will shop at consignment/
7199resale shops.
7200America’s Research Group
7201$
7202“The bargain that
7203yields mutual
7204satisfaction is the
7205only one that is apt to
7206be repeated.”
7207B.C. FORBES
7208Scottish financial journalist
7209and author
7210“ 7 CHAPTER
7211Section 1: Bargain Shopping:
7212Part of a Healthy Financial Plan
7213VIDEO 1.1
7214It’s Okay to Want a Better Deal
7215THIS IS GOING TO BE A FUN LESSON!
7216It’s about how to buy stuff and get the
7217best possible bargain. When you get
7218a good deal the right way, everyone
7219wins. You get what you want, and the
7220seller gets your money, which is what
7221he wants. You both feel good about it.
7222Does negotiating with someone sound
7223strange? Americans are horrible
7224at it. You need to think globally.
7225Practically everywhere outside the
7226U.S., negotiation is a way of life. If
7227you’ve ever traveled outside the U.S.,
7228you’ve seen it.
7229Bottom line: It’s okay to want a better
7230deal. In fact, saving money should be
7231a part of your healthy financial plan.
7232It’s not immoral to want to save more
7233of your hard-earned money. You’re
7234not hurting the other party as long
7235as you follow some basic principles
7236of negotiating.
7237It’s proper to get a great deal if you:
72381. Have in no way
72391
7240the truth.
72412. Have not set out to
72422
7243the other party.
72443. Have created a -
72453
7246deal.
7247146 Foundations in Personal Finance High School Edition
7248SECTION 1
7249LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7250People in other cultures
7251routinely use negotiation
7252when buying and selling
7253goods.
7254+
7255“Let us never
7256negotiate out of fear.
7257But let us never fear
7258to negotiate.”
7259JOHN F. KENNEDY
726035th president of the
7261United States
7262“
7263The First Key to Getting Huge Bargains
7264»»The first key to opening the door to huge bargains is
7265learning to
72664
7267everything. Everything is
7268negotiable! Make getting a bargain a way of life.
7269»»Win-win deals really work, so don’t be
72705
7271to ask
7272for the deal. If you gather information from the people
7273you are dealing with, you both can get 100% of what you
7274want. Then there is no harm done to either party, making
7275it a win-win scenario.
7276JOURNAL QUESTION: VIDEO 1.1
7277Why do you think it’s so uncommon for people in our culture to negotiate?
7278The Benefits of Being a Wise Consumer
7279Being a wise consumer involves developing
7280a variety of skills—from product research to
7281careful comparative analysis. The benefits are
7282not just cost-related. Wise consumers also enjoy
7283improved health and the knowledge that they have
7284made a positive impact on the larger social and
7285even global environment. Using a cost-benefit
7286analysis approach to your buying decisions will
7287make you a wise consumer.
7288HOME ECONOMICS: Making the right choices
7289as a consumer will usually yield savings. Follow
7290the bargain shopping tips in this chapter for
7291great savings.
7292HEALTH: Making informed decisions about what
7293foods to buy will promote your physical health.
7294SOCIETY: Your choices as a consumer have
7295an impact on the larger social and even global
7296environment and economy. Decisions like whether
7297to buy a product manufactured overseas or pay
7298more to support your local business community
7299are things to consider.
7300Chapter 7: Bargain Shopping 147
7301LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7302“The love of truth is
7303the stimulus to all
7304noble conversation.
7305This is the root of all
7306the charities. The
7307tree which springs
7308from it may have a
7309thousand branches,
7310but they will all
7311bear a golden and
7312generous fruit.”
7313ORVILLE DEWEY
7314American minister
7315“ Section 2:
7316The Seven Basic Rules of Negotiating
7317VIDEO 2.1
7318Negotiate With Integrity
7319Getting a great deal doesn’t happen by accident, nor
7320does it always happen just because you bothered to ask.
7321Remember, this is a negotiation, and that means it’s a
7322conversation with give and take. Here are what we call
7323“The Lucky Seven” rules that can help you make the most
7324of every single negotiation:
73251. When negotiating, always tell the absolute
73266
7327.
7328Not telling something you know to be true is also lying.
7329JOURNAL QUESTION: VIDEO 2.1
7330Explain why it is not necessary to purchase product
7331replacement warranties.
7332148 Foundations in Personal Finance High School Edition
7333SECTION 2
7334LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7335Do you have any
7336experience negotiating
7337overseas?
7338“I bartered in Mexico and
7339paid $3 for a ring that
7340started at $10.”
7341Senior, Florida
7342“It’s so fun to negotiate in
7343Germany and see how low
7344you can get the seller to go
7345on his price.”
7346Junior, New Mexico
7347“I got a $50 chain for $15.”
7348Junior, Michigan
7349“Once I negotiated and paid
7350half the price listed.”
7351Senior, Missouri
7352“You can bargain at the straw
7353market in the Bahamas. I
7354talked the sales rep at a
7355purse shop down from $150
7356to $40.”
7357Senior, Georgia
7358VIDEO 2.2
7359Know How to Score a Good Deal
73602. Use the power of
73617
7362. The use of cash is becoming
7363less and less common. But if you walk into a store
7364fanning yourself with a handful of bills, you’ll get some
7365attention—and increase your power of negotiation.
7366Here’s why:
7367• Cash is
73688
7369.
7370• Cash is
73719
7372.
7373• Cash has
737410
7375.
73763. Understand and use “ -
737711
7378power.” If
7379you are not prepared to walk away from the purchase,
7380you will lose your ability to negotiate. Don’t get
7381emotionally attached to the item.
7382JOURNAL QUESTION: VIDEO 2.2
7383Explain how you can get a better deal on something using cash rather
7384than credit.
7385Chapter 7: Bargain Shopping 149
7386LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7387More than two-thirds of
7388teenage girls say they
7389shop at low-budget stores
7390and outlets, along with
739155% of guys.
7392Business Insider
7393$
7394HOW DOES THE
7395GOOD GUY, BAD GUY
7396TECHNIQUE WORK?
7397One salesperson pretends
7398to be your friend, helping
7399you get the best deal. But
7400every time you get close
7401to making the deal, the
7402salesperson (the “good
7403guy”) says he has to get
7404his manager’s approval
7405for that price. He goes
7406away and comes back
7407claiming his manager
7408(the “bad guy”) won’t
7409approve the deal. Dave
7410recommends bypassing
7411the good guy, bad guy
7412technique by requesting to
7413speak directly to someone
7414who has the authority to
7415negotiate the deal.
7416+
7417VIDEO 2.3
7418Know How to Score a Good Deal (Continued)
74194.
742012
7421. Don’t talk too much. If you’re trying
7422to buy something, it’s not your job to come up with a
7423good price. Make the seller work for your business.
74245. “That’s not
742513
7426.” When the person
7427trying to make the sale gives the price, just look him
7428in the eye and say those words. Then be silent. At that
7429point, it’s up to him to change the deal.
74306. The
743114
7432guy,
743315
7434guy technique is a
7435negotiating tool that you should be aware of.
7436When negotiating with a salesperson, don’t fall for
7437this. Neutralize the situation by going around the
7438salesperson. Communicate directly with the
7439supervisor who has the authority to negotiate the deal.
7440JOURNAL QUESTION: VIDEO 2.3
7441Explain why silence is powerful when negotiating a deal.
7442150 Foundations in Personal Finance High School Edition
7443SECTION 2
7444LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7445THE MOST COMMON
7446TYPES OF CONSUMER
7447FRAUD
7448According to a survey
7449issued by the Federal
7450Trade Commission,
7451the most common
7452types of consumer
7453fraud reported were
7454for bogus weight-loss
7455products, nonexistent
7456foreign lotteries,
7457unauthorized buyer club
7458enrollments, dishonest
7459prize promotions and
7460fraudulent work-athome
7461programs. The
7462FTC study also found the
7463following results:
7464• 25- to 34-year-olds
7465issued the most
7466complaints.
7467• Those without high
7468school diplomas were
7469more likely to be fraud
7470victims.
7471• Those who reported
7472having more debt than
7473they could handle were
7474more likely to be victims
7475of frauds involving
7476credit repair and debt
7477consolidation.
7478$
7479VIDEO 2.4
7480Seal the Deal
74817. Use the “If I” -
748216
7483technique. You
7484use this one near the end of the deal, after you’ve pretty
7485much figured out the lowest price possible. The point is
7486to agree to a price, but then throw something else into
7487the deal. For example, “Okay, if I take the car for that
7488price, you’ve got to throw in new wipers and floor mats.”
7489“T he Lucky Seven” rules can get you incredible deals on the
7490stuff you buy every day, but they only work if you actually
7491use them. Have some fun with them and enjoy the process!
7492If you are patient, willing to negotiate, and educated about
7493what items are on sale during certain seasons, you’ll be
7494saving big before you know it.
7495The Second Key to Getting Huge Bargains
7496The second key to opening the door to huge bargains is
7497having
749817
7499. Our collective, consumer lack of
7500patience always makes headlines whenever a hot new tech
7501gadget comes out, doesn’t it? Those who buy the moment
7502something new hits the market will always pay the highest
7503price. Save some money—be patient!
7504Don’t get
750518
7506to a purchase. Being emotionally
7507attached to a purchase will always cost you more money.
7508Think about those $50 concert T-shirts!
7509Chapter 7: Bargain Shopping 151
7510LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7511There are currently
7512more than 25,000 resale,
7513consignment and Not For
7514Profit resale shops in the
7515United States.
7516The Association of Resale
7517Professionals
7518$
7519The Third Key to Getting Huge Bargains
7520The third key to opening the door to huge bargains is
7521knowing
752219
7523to
752420
7525deals. Finding great
7526buys is like a treasure hunt. The more you sniff out bargains,
7527the better you’ll be at it.
7528* REMEMBER: Really good deals aren’t necessarily found underneath a giant banner that reads
7529“SALE!” Don’t fall for a “lower” price that’s still not a good price.
7530JOURNAL QUESTION: VIDEO 2.4
7531Why is bargain shopping an important part of a healthy financial plan?
7532Don’t Get Stuck With Seller’s Remorse
7533“I have used your tips for negotiating, and they really work. But how can I
7534get the most money for items I sell? I don’t want to get ripped off, and I’m not
7535sure how to go about this wisely. Do you have any tips?”
7536DAVE’S ANSWER: That’s a good question,
7537and you are right, you don’t want to get ripped
7538off when you sell things. First, don’t play all
7539your cards face up. The buyer will see that you
7540really need the money. Make it clear that you
7541have walk-away power as a seller. If you can’t
7542get the price you want, just walk away from
7543the deal. In the case of antiques or collectible
7544items, get them appraised and sell them slightly
7545below that price. Showing the buyer that you
7546are selling for less than the appraisal will make
7547them feel like they are getting a deal. At the
7548same time, you’ll know it was a win-win deal
7549because you were armed with information. Try
7550these things, and like everything else, you will
7551get better with practice.
7552152 Foundations in Personal Finance High School Edition
7553SECTIONS 2 & 3
7554LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7555BARTER is the exchange
7556of goods or services
7557without the use of money;
7558to trade.
7559+
7560SIMPLE TIPS ON STORE
7561RETURN POLICIES
7562Store return policies must
7563balance two purposes—
7564customer service and
7565profits. While stores don’t
7566want to lose customers
7567over restrictive return
7568policies, they also need to
7569control costs by restricting
7570returns. Here are some
7571tips for store returns:
75721. Familiarize yourself with
7573the store’s return policy
7574prior to your purchase.
75752. Hold on to your receipts.
75763. Keep the labels and
7577price tags on the item.
75784. Don’t delay. There
7579is usually a time
7580restriction included in
7581store return policies.
7582TIME Business & Money
7583+
7584Section 3:
7585Places to Find Great Deals
7586VIDEO 3.1
7587Another thing you can do is
758821
7589something of value,
7590either goods or just your
759122
7592. When it comes
7593to specific places to find great deals, we can give you some
7594ideas. But remember, the trick is to be a little creative.
7595There really isn’t a “one-size-fits-all” spot to find good
7596deals, so you’ll have to learn the basics and then apply them
7597to your own location.
7598Where to Find Great Deals
75991.
760023: Typically, private sellers aren’t
7601trying to make a sale for profit; they’re just trying to
7602get some money out of the stuff they don’t need or want
7603anymore. Also, they are usually motivated and willing
7604to negotiate for a lower price because the stuff is in
7605their way. This makes for a win-win situation.
76062.
760724 sales and public 25: You
7608can find great deals at these places, but you have to be
7609careful. It’s easy to get excited and end up paying more
7610than retail for things. It’s best to be prepared. Before
7611bidding at an auction, you should know exactly what
7612you’re bidding on, how much it’s worth, and what you’re
7613willing to pay. Then don’t go past that line.
76143. Couponing: The trick to coupons is to only use them
7615on the items you need to buy.
7616Chapter 7: Bargain Shopping 153
7617LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7618You may not be the
7619bargain-hunting,
7620negotiating type, but if
7621you’re going to make the
7622most of your money, you’ll
7623have to start looking for
7624ways to save money by
7625shopping for big bargains.
7626+
7627Where to Find Great Deals (Continued)
76284. 26: You can always find good deals
7629at garage sales.
76305. Repo lot: You can get good deals on cars. Again, you
7631need to do your homework to know what you’re buying
7632and what it’s worth. You also need to be willing to
7633compromise on things like the color of the car.
76346. 27: This is one of the best places to
7635hone your bargain-buying skills!
76367. Refunds and rebates: Always follow up with refunds
7637or rebates on purchases. Those dollars can add up!
76388.
763928: Avoid foreclosure sales until
7640you are really educated on the process. But you can find
7641good deals on foreclosed homes.
76429.
764329 shops: These items are cleared with the
7644police department and are highly regulated. Pawn
7645shops are great places to buy things.
7646Everyday Bargain Hunting Really Adds Up!
7647“I’ve heard you teach people to always watch for deals and ask for bargains
7648on whatever they want to buy. Have you ever totaled up how much money
7649you’ve saved in a single year by bargaining?”
7650DAVE’S ANSWER: No, I haven’t. That might
7651be a fun experiment to try sometime. I do
7652know that one year my wife added up all of
7653the money she saved by using coupons at the
7654grocery store, and it came to more than $600
7655that year—just by using coupons to buy things
7656we were going to buy anyway. Seeing those
7657savings really made an impact on how we feel
7658about bargain hunting and using coupons to
7659save money.
7660154 Foundations in Personal Finance High School Edition
7661SECTION 3
7662LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7663Budget
7664Builder
7665In Chapter 6, you added
7666a significant purchase
7667goal to your budget. While
7668you are building your
7669sinking fund, you should
7670be developing a plan
7671to get the best deal on
7672your big purchase. Go to
7673foundationsU.com/7 for
7674your next budget lesson.
767510. Online 30: While there is a possibility
7676of getting burned, it’s also possible to find great deals.
767711.
767831 ads: These will link you to
7679individual sellers.
768012. Consignment sales: You can either buy at a discount
7681or sell your used items through consignment.
768213. Conventions: Vendors at conventions and trade shows
7683are virtually willing to give their stuff away because
7684they don’t want to pack it up and take it back home!
7685JOURNAL QUESTION: VIDEO 3.1
7686Have you ever used social media to get a great deal on something?
7687How to Help Stretch Your Hard-Earned Money
76881. Keep your eye on the calendar. If you buy your
7689winter clothes in the summer and your summer
7690clothes in the winter, you can literally save
7691hundreds. Even if you buy a car or house during
7692the off seasons, you can save big. That whole
7693supply-and-demand thing really is true!
76942. Get outdated technology. Be willing to buy last
7695year’s models of TVs, computers and digital
7696cameras, and you can save tons. Chances
7697are the bells and whistles added to the latest
7698versions aren’t worth the extra money!
76993. Comparison shop. You may always shop at one
7700particular store, but venture out to find big
7701bargains at stores you may have never visited
7702before. Discount stores and second-hand shops
7703are fantastic places to find deals! You can even
7704hop online to find sites that compare products
7705and stores to help you find the best value.
77064. Make a deal. Don’t be afraid to negotiate for a
7707lower price. If you’re shopping with cash, your
7708chances of making a sweet deal are a lot better.
77095. Buy off-brands when possible. Don’t be married
7710to a label. If the product serves the purpose
7711and has comparable quality, save some money
7712by buying a less popular brand.
7713Chapter 7: Bargain Shopping 155
7714LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7715Chapter Summary
7716Check for Understanding
7717Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
7718checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
7719Your Progress section.
7720Build On What You’ve Learned
7721It’s time to review “The Lucky Seven” rules of negotiation. Fill in the graphic organizer below.
77221. 2. 3.
77236. 5.
77247. Rules of Negotiation 4.
7725Big Ideas
7726The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
7727and think about how what you’ve learned will affect your current and future decisions. Then, in the space
7728provided, write an “I believe” statement for each of the Big Ideas.
7729»» It’s okay to negotiate!
7730»»When negotiating, be patient and honest.
7731»» Be a wise consumer.
7732156 Foundations in Personal Finance High School Edition
7733RECAP & REVIEW
7734LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7735DECIDE: WOULD YOU MAKE THE PURCHASE? Y N EXPLAIN YOUR ANSWER:
7736Take Action Challenge
7737Wise consumers always do a cost-benefit analysis before making a big purchase. This just means you analyze
7738the costs and benefits of your purchase. Let’s say you receive $250 in birthday cash and are trying to decide
7739if you should use it to buy a new phone. Determine whether each statement below is a cost or benefit of your
7740purchase. Then write a statement about whether you would choose to make the purchase or not, and why.
7741COST BENEFIT
7742COST BENEFIT
7743COST BENEFIT
7744COST BENEFIT
7745?
7746The cost of the phone is $200 if you extend your contract for 2 years.
7747You can use the phone for research at school.
7748You won’t be able to buy that new gaming system you wanted.
7749COST or BENEFIT?
7750COST You won’t get to save the entire $250. BENEFIT
7751The new phone would work better and have updated features.
7752NOW
7753Chapter 7: Bargain Shopping 157
7754LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7755Money in Review
7756a Foreclosure
7757b Markup
7758c Walk-Away Power
7759d Cost-Benefit Analysis
7760e Auction
7761f Consignment Shop
7762g Estate Sale
7763h Integrity
7764i Negotiate
77651. _____ Having to do with a person’s honesty
7766and moral attributes
77672. _____ Retail store where people sell items and
7768the owner of the shop gets a percentage
7769of the sale
77703. _____ The ability to walk away from
7771a purchase when negotiating
77724. _____ Process by which the holder of a
7773mortgage sells the property of a
7774homeowner who has not made interest
7775and/or principal payments on time as
7776stipulated in the mortgage contract
77775. _____ A public sale in which property or
7778items of merchandise are sold to
7779the highest bidder
77806. _____ The process of quantifying costs and
7781benefits of a decision
77827. _____ The difference between the wholesale
7783price and retail price
77848. _____ Type of yard sale with more
7785items, usually the entire contents
7786of a household
77879. _____ To bargain for a lower price
7788Matching
7789Match the following terms to the correct definition below.
7790Illustration
7791Draw a picture representation of each of the following terms.
7792Wise Consumer The Power of Cash
7793158 Foundations in Personal Finance High School Edition
7794RECAP & REVIEW
7795LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7796Multiple Choice
7797Circle the correct answer.
779810. Using cash gives you more bargaining
7799power than using credit.
7800a True
7801b False
780211. Being married (or emotionally attached)
7803to a purchase will cause you to lose
7804bargaining power.
7805a True
7806b False
780712. Getting the best deal on a purchase involves
7808doing all of the following except:
7809a Having patience
7810b Being first in line for a new product
7811c Negotiating
7812d Shopping around to find the best deal
781313. Which of the following is typically not a
7814good place to find a deal?
7815a Consignment shops
7816b Individuals
7817c Mall
7818d Online auctions
781914. Which of the following describes why using
7820cash is a great bargaining tool?
7821a Cash is visual.
7822b Cash has immediacy.
7823c Cash is emotional.
7824d All of the above
7825Short Answer
7826Respond in the space provided.
782715. Summarize the benefits of being a
7828wise consumer.
782916. Explain how walk-away power can be used
7830as a negotiating tool.
783117. What role does research play in getting good
7832deals on purchases?
783318. Why is honesty an important component
7834of bargaining?
783519. Describe the cost benefit of buying slightly
7836outdated products.
7837Chapter 7: Bargain Shopping 159
7838LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
78398
7840CHAPTER
7841What do other high
7842school students know
7843about investing?
7844We asked high school students to
7845describe the weirdest get-rich-quick
7846scheme they’ve ever heard of.
7847“Someone told me that I could get
7848rich selling food door to door. After
7849three days of embarrassment, I
7850ended up only $5 richer.”
7851Junior, Michigan
7852“I know about a chain letter where
7853you put $1 in an envelope, include
7854six addresses, and send it out to
7855the top address. Eventually people
7856are supposed to send you $1 each.”
7857Junior, Alabama
7858“People think you can go to
7859Hollywood and become a street
7860performer until a big-time
7861producer discovers you and you
7862become a rich actor.”
7863Junior, Missouri
7864“I’ve heard people say you can go
7865to Alaska and work in a canning
7866plant to get rich.”
7867Senior, Wyoming
7868LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7869Investing and
7870Retirement
7871AS YOU CONSIDER a good time to begin
7872investing and retirement planning, think back
7873to Ben and Arthur in Chapter 2. The fact is,
7874you want to start planning and preparing for
7875your financial future now! Dave’s friend and
7876best-selling author Zig Ziglar once said, “If
7877you aim at nothing, you will hit it every time.”
7878Remember, the sooner you start investing, the
7879sooner your money can begin to work for you!
7880The magic of compound interest works best
7881when given lots of time to do its thing.
7882* Teens & Money Survey, Charles Schwab
7883of teens would like
7884their parents to talk
7885more about how to
7886invest money.*
788744%
7888of teens say that
7889learning more about
7890money management,
7891including budgeting,
7892saving and investing,
7893is one of their top
7894priorities.*
789575%
7896UNIT 3: CHAPTER 8
7897LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7898Key Terms
7899Get to know the language of money.
7900»» Diversification: The practice of dividing
7901the money a person invests between
7902several different types of investments in
7903order to lower risk
7904»» Investing: The process of setting money
7905aside to increase wealth over time
7906for long-term financial goals such
7907as retirement
7908»» Investment: Account or arrangement
7909in which a person puts his/her money
7910for long-term growth; invested money
7911should not be used for a suggested
7912minimum of five years
7913»» Liquidity: Quality of an asset that permits
7914it to be converted quickly into cash without
7915loss of value; availability of money
7916»» Portfolio: A list of your investments
7917»» Risk: Degree of uncertainty of return on
7918an asset; in business, the likelihood of
7919loss or reduced profit
7920»» Risk-Return Ratio: Relationship of
7921substantial reward compared to the
7922amount of risk taken
7923»» Share: Piece of ownership in a company,
7924mutual fund or other investment
7925»» Stocks: Securities that represent part
7926ownership or equity in a corporation
7927»» Tax-Favored Dollars: Money that is
7928invested, either tax deferred or tax free,
7929within a retirement plan
7930Learning Outcomes
7931Once you’ve completed this chapter’s videos, you will be asked
7932to return to this list and place a checkmark next to the items
7933you’ve mastered.
7934Section 1: Investing 101
7935Â…Â… Explain how investing builds wealth and helps meet
7936financial goals.
7937Â…Â… Examine the relationship between diversification and risk.
7938Â…Â… Identify regulatory agencies and their functions.
7939Section 2: Types of Investments
7940Â…Â… Evaluate investment alternatives: money markets, bonds,
7941single stocks, mutual funds, annuities and real estate.
7942Â…Â… Explain the Rule of 72.
7943Â…Â… Identify different types of retirement plans.
7944Â…Â… Explain how taxes affect the rate of return on investments.
7945Â…Â… Understand how pre-tax and after-tax investments work.
7946Â…Â… Understand how the stock market works.
7947Â…Â… Be familiar with the various retirement account
7948tax treatments.
7949Â…Â… Develop a plan for investing; describe how to buy and
7950sell investments.
7951Section 3: Employer Benefits & Retirement Plans
7952Â…Â… Analyze the components of an employer benefits package.
7953Â…Â… Explain how compound interest works.
7954
7955Before You Begin
7956162 Foundations in Personal Finance High School Edition
7957INTRODUCTION
7958LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7959Measure Your Progress
7960Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
7961column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
7962on any statement.
7963JOURNAL QUESTIONS: INTRODUCTION
7964List your initial thoughts about investing. What do you want to learn about investing?
79651. You can start investing with a small amount of money.
79662. The more sophisticated the investment, the more
7967money you get in return.
79683. With virtually all investments, as the risk goes up, so
7969does the potential return.
79704. It’s difficult to find an investment with a long-term
7971record that averages 12%.
79725. It is okay to borrow money if you are going to invest it.
7973Agree Disagree Agree Disagree
7974BEFORE AFTER
7975Chapter 8: Investing and Retirement 163
7976LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
7977THINGS TO CONSIDER
7978The smartest investment
7979you can make is in yourself.
7980As a young adult, you
7981should have two goals:
7982continue your education
7983and stay out of debt.
7984+
7985While 79% of American
7986millionaires use brokers
7987for guidance, they make
7988their own investment
7989decisions.
7990The Millionaire Next Door
7991$ Section 1: Investing 101
7992REMEMBER, the goal is to build
7993wealth. You can and should save
7994money for your emergency fund and
7995for purchases. Then, once you’re sure
7996that you have your post-secondary
7997education paid for, you should begin
7998to invest a portion of your income.
7999How does investing build wealth?
8000Investing allows your money to work
8001for you. You’ll be amazed at how your
8002money, when invested wisely, can
8003begin to grow!
8004Investing will help you reach your
8005long-term financial goals, such as
8006retirement. In this chapter, we are
8007going to give you the tools to achieve
8008lifelong financial well-being.
8009VIDEO 1.1
8010Basic Rules of Investing
8011»»Keep it
80121
8013, stupid! Investing doesn’t have
8014to be complicated, and there is really no trick to it. Never
8015invest money in anything you do not understand!
8016THE FIFTH FOUNDATION 5 Build Wealth and Give
80178 CHAPTER
8018164 Foundations in Personal Finance High School Edition
8019SECTION 1
8020LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8021“Diversification is a
8022protection against
8023ignorance.”
8024WARREN BUFFETT
8025Famous American investor
8026“
8027People with a bachelor’s
8028degree or higher have
8029unemployment rates
8030that are about half the
8031unemployment rate of
8032people with just a high
8033school diploma.
8034Bureau of Labor Statistics
8035A bachelor’s degree on
8036average increases lifetime
8037income by $1.2 million
8038as compared with a high
8039school diploma.
8040Journal of Student Financial Aid
8041$
8042THROUGHOUT THE
8043STOCK MARKET’S
8044HISTORY
8045100% of 15-year periods
8046made money.
8047$
8048VIDEO 1.2
8049Basic Rules of Investing (Continued)
8050»»Never invest purely for
80512.
8052If what you are investing in is primarily a tax deal, then
8053it is probably not a good investment. Your motivation
8054should be to make money, not save on taxes.
8055»»Never invest using 3 money. Never
8056borrow money, period. Borrowing money is a particularly
8057bad idea for an investment because it increases the
8058risk of the investment. And if you lose the money, you are
8059still left with payments on it.
8060Diversification
8061““Here’s the thing to remember: Money is like manure. Left in one
8062pile, it stinks—spread around, it will grow things.”
8063DAVE RAMSEY
8064»»
80654
8066is a risk-management
8067technique that mixes a wide variety of investments within
8068a portfolio. The rationale behind this technique is that
8069having a variety of investments will yield higher returns
8070and lower risk.
8071JOURNAL QUESTION: VIDEO 1.1
8072As a young adult, what is the most important thing you can invest in?
8073Chapter 8: Investing and Retirement 165
8074LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8075Risk Return Ratio and Liquidity
8076»»The risk return ratio is used by investors to compare
8077the expected return of an investment to the amount of
8078risk they take to get the return. This ratio is calculated
8079mathematically by dividing the amount you stand to lose
8080if the price goes down (risk) by the amount of profit you
8081expect to make (return). With virtually all investments,
8082as the
80835
8084goes up, so does the potential return.
8085»»Liquidity refers to assets that can be easily bought or
8086sold (liquid assets). When discussing investments,
80876
8088is availability. As there is more liquidity,
8089there is typically
80907
8091return.
8092The Power of Diversification
8093What would happen if two people each invested $10,000—one diversifies, the other
8094does not—and left it alone for 25 years?
8095« $110K
8096« $120K
8097« $90K
8098« $70K
8099« $50K
8100« $30K
8101« $10K
8102« $100K
8103« $80K
8104« $60K
8105« $40K
8106« $20K
8107Investor 2:
8108More than
8109$116,000
8110because of
8111diversification!
8112Investor 1:
8113Just
8114$57,254
8115without
8116diversification!
8117Investor 1 invests:
8118$10,000 for 25 years at 7%
8119compounded annually
8120Investor 2 invests:
8121$2,000 and loses it all
8122$2,000 in his cookie jar
8123$2,000 at 5% return
8124$2,000 at 10% return
8125$2,000 at 15% return
8126The
8127difference
8128is almost
8129$59,000!
8130166 Foundations in Personal Finance High School Edition
8131SECTIONS 1 & 2
8132LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8133U.S. SECURITIES
8134AND EXCHANGE
8135COMMISSION (SEC):
8136The government agency
8137responsible for regulating
8138the stock market. It was
8139created in 1934 to increase
8140public trust after the 1929
8141stock market crash and
8142the years of the Great
8143Depression.
8144FEDERAL DEPOSIT
8145INSURANCE
8146CORPORATION (FDIC):
8147The U.S. federal agency
8148that insures deposits in
8149commercial banks. It was
8150created to restore public
8151trust in banks after the
81521929 stock market crash.
8153FDIC replaced the former
8154Federal Savings and Loan
8155Insurance Corporation in
81561989.
8157FEDERAL RESERVE: The
8158central (federal) banking
8159system of the United States
8160INTERNAL REVENUE
8161SERVICE (IRS): A U.S.
8162federal agency responsible
8163for collecting taxes and
8164for the interpretation and
8165enforcement of the Internal
8166Revenue Code (laws)
8167+
8168Section 2: Types of Investments
8169VIDEO 2.1
8170Money Markets
8171»»A market in which short-term financial instruments
8172such as certificates of deposit (CD), Treasury bills,
8173commercial papers and bank deposits are traded. New
8174York is the major money market, followed by London
8175and Tokyo.
8176»»A CD is a
81778
8178,
8179typically at a bank. It is a savings account with a
8180slightly higher interest rate because of a longer savings
8181commitment (i.e. six months, one year, etc.).
8182»»A money market account is a
81839
8184-risk bank
8185savings account with check-writing privileges.
8186JOURNAL QUESTION: VIDEO 1.2
8187If you were giving advice to a friend, what would you say are the most
8188important things to know about investing?
8189Chapter 8: Investing and Retirement 167
8190LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8191CASE STUDY
8192Harry, a bright young man,
8193was fresh out of college
8194when Bob approached
8195him with an investment
8196opportunity that sounded
8197too good to pass up.
8198“I’ve got some property on
8199a potential oil field,” Bob
8200said. “For only $750 you
8201can buy a share of the
8202land. You’d be crazy not to
8203get in on this investment.”
8204Bob, an expert salesman,
8205promised Harry would
8206become rich and sealed
8207the deal with a simple
8208appeal: “Harry, this is a
8209great way to diversify your
8210portfolio.”
8211Thirty years later, after
8212all the oil was pumped
8213out, Harry still hadn’t
8214seen any money from
8215his “investment.” It turns
8216out that Bob was offering
8217rights to land that he
8218didn’t have the right to
8219sell, scamming people by
8220selling “phantom shares.”
8221Harry’s risky attempt to
8222diversify cost him $750.
8223What would have
8224happened if he had put
8225that money in a mutual
8226fund with a 12% return
8227instead? He would now
8228have $22,469.
8229+
8230Money Markets (Continued)
8231»» These are great for your 10
8232due to their liquidity (accessibility) and stability.
8233»»Money market investments are low-risk, and therefore,
8234have low returns.
8235Single Stocks
8236»» Single stock investing carries an extremely
823711
8238degree of risk.
8239»»When you buy stock, you are buying a small piece of
824012
8241in the company.
8242»»Your return comes as the company increases in
824313
8244or pays you, its owner, some of the
8245profits (dividends).
8246Bonds
8247»»A bond is a
824814
8249instrument by which the company
8250owes you money; a form of I.O.U. The company that issued
8251the bond makes regular interest payments to the bond
8252holder and promises to pay back or redeem the face value of
8253the bond at a specified point in the future (maturity date).
8254»»Your return is the fluctuation in price and the
825515
8256rate paid.
8257»»Few individuals do well with
825816
8259purchases.
8260168 Foundations in Personal Finance High School Edition
8261SECTION 2
8262LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8263WAR BONDS (ALSO
8264KNOWN AS DEFENSE
8265BONDS): The last time the
8266United States issued war
8267bonds was during World
8268War II. Issued by the U.S.
8269government, they were
8270named war bonds after
8271the Japanese attack on
8272Pearl Harbor, Dec. 7, 1941.
8273The purpose of war bonds
8274was to finance military
8275operations during war
8276time. The bonds yielded a
8277mere 2.9% return after a
827810-year maturity.
8279DIVIDEND: Distribution of
8280a portion of a company’s
8281earnings, decided by the
8282board of directors, to a
8283class of its shareholders;
8284generally distributed in the
8285form of cash or stock
8286+
8287“October. This is one
8288of the peculiarly
8289dangerous months
8290to speculate in stocks.
8291The others are July,
8292January, September,
8293April, November,
8294May, March, June,
8295December, August,
8296and February.”
8297MARK TWAIN
8298American author
8299“
8300»»Examples include Treasury bonds (a bond issued by the
8301U.S. government that bears fixed interest) and savings
8302bonds (in the United States, a bond that can be bought
8303from the federal government).
8304»» Bonds are typically low risk and low return on investment.
8305VIDEO 2.2
8306Mutual Funds
8307»»A mutual fund is an investment vehicle made up of a
8308pool of
830917
8310collected from many investors for
8311the purpose of investing in securities such as stocks,
8312bonds, money market instruments and similar assets.
8313»»Portfolio managers manage the pool or
831418
8315and attempt to increase the value of the fund in order to
8316produce capital gains and income for the fund’s investors.
8317»»A mutual fund portfolio is structured and maintained to
8318match the investment objectives stated in its prospectus.
8319»»Your
832019
8321comes as the value of the fund
8322is increased.
8323JOURNAL QUESTION: VIDEO 2.1
8324Explain why single stocks carry a high degree of risk.
8325Chapter 8: Investing and Retirement 169
8326LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8327THE STANDARD
8328DIVERSIFICATION PLAN
832925% Growth Stock Mutual
8330Fund (Mid-Cap): Fund that
8331buys stock in mediumsized
8332companies that have
8333experienced some growth
8334and are still expanding
833525% Growth and Income
8336Stock Mutual Fund (Large-
8337Cap): Fund comprised of
8338large, well-established
8339companies
834025% Aggressive Growth
8341Stock Mutual Fund
8342(Small-Cap): Fund that
8343seeks to provide maximum
8344long-term capital growth
8345from stocks of primarily
8346smaller companies; the
8347most volatile fund
834825% International Stock
8349Mutual Fund: Fund that
8350contains international or
8351overseas companies
8352+
8353Mutual Funds (Continued)
8354»» The main advantage of mutual funds is that they give small
8355investors access to professionally managed, diversified
8356portfolios of stocks, bonds and other securities.
8357»»Mutual funds are good
835820
8359-term investments.
8360»»A mutual fund portfolio that is
8361properly diversified will have
8362investment dollars spread equally
8363among four different classes of
8364financial assets. Remember, the
8365overall diversification of your mutual
8366fund portfolio means lower risk. We
8367recommend 25% in each of these four
8368classes. Compared to other
8369investments, if you use this strategy,
8370you would have moderate risk.
8371JOURNAL QUESTION: VIDEO 2.2
8372Which are a better investment, stocks or mutual funds?
8373Explain your answer.
837425%
8375Large-
8376Cap
837725%
8378Small-
8379Cap
838025%
8381International
838225%
8383Mid-Cap
8384170 Foundations in Personal Finance High School Edition
8385SECTION 2
8386LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8387KNOW THE RULE OF 72!
8388The Rule of 72 is a quick
8389way to calculate the length
8390of time it will take to double
8391a sum of money. Divide 72
8392by the expected interest
8393rate to determine the
8394number of years (i.e. 72
8395divided by 8% = 9 years).
8396+
8397THE ROTH IRA is named
8398for Sen. William Roth of
8399Delaware, who authored
8400this section of the Taxpayer
8401Relief Act of 1997.
8402+
8403VIDEO 2.3
8404Qualified Plans
8405A qualified plan is a -
840621
8407investment
8408(which means it has special tax treatment).
8409Examples of qualified plans include:
8410Individual Retirement Arrangement (IRA)
8411When it comes to IRAs, everyone with an
841222
8413is eligible.
8414Remember: IRA is not a type of investment at a bank.
8415It is the
841623
8417on virtually any type
8418of investment.
8419Roth IRA
8420»» The Roth IRA is funded with after-tax money, which allows
8421you to use the money in your Roth tax free in retirement.
8422»» After five years, you can make -
842324
8424, penaltyfree
8425withdrawals of earnings under these conditions:
84261. Over 59 and a half years old
84272. Because of death or disability
84283. First-time home purchase
8429Investing money pretax is different than investing money
8430after tax. There are no taxes when you cash out a Roth, so it
8431forces you to invest more.
8432* NOTE: There are limits (based on total household income) to the annual contribution amounts.
8433These amounts can change based on inflation. Go to foundationsU.com to check out the current
8434contribution phase-out limits. As an adult, you should invest 15% of your household income into
8435Roth IRAs and pretax retirement plans.
8436Chapter 8: Investing and Retirement 171
8437LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8438EDUCATION SAVINGS
8439PLAN (529 PLAN): A savings
8440plan operated by a state
8441or educational institution
8442designed to help families set
8443aside funds for future college
8444costs. It is named after
8445Section 529 of the Internal
8446Revenue Code, which created
8447these types of savings plans
8448in 1996.
8449TAX-DEFERRED: The
8450key advantage of stashing
8451money in a tax-deferred
8452retirement account isn’t
8453just that you’ll pay less to
8454the government this year,
8455but that your investments
8456will compound faster than
8457in a taxable account. The
8458result is usually a larger
8459retirement nest egg even
8460after the funds are taxed
8461upon withdrawal.
8462+ Annuities
8463»» An annuity is a
846425
8465account sold by an
846626
8467company, designed to provide
8468payments to the holder at specified intervals, usually
8469after retirement.
8470»»The holder is taxed at the time of distribution or
8471withdrawal, making this a tax-deferred arrangement.
8472»»
847327 annuities have a low interest rate of around
84745%; they have high fees and are a bad investment option.
8475»»
847628 annuities are mutual funds sheltered by
8477the annuity, which allows the mutual fund to grow
847829
8479.
8480Make the Most of Your Inheritance
8481“I’m 21 and currently in college. Next month, I’ll be receiving an inheritance of about
8482$40,000. I don’t know anything about stocks, mutual funds or CDs, but I don’t want
8483to lose all this money. I don’t have any debt, so what should I do?”
8484DAVE’S ANSWER: I’m glad you’re asking
8485questions. One of the fastest ways to lose
8486money is to put it into an investment that you
8487don’t understand.
8488You don’t need to change your major to
8489finance to make this happen, but you do have
8490a $40,000 responsibility that you didn’t have
8491before. For now, a simple savings account
8492is fine. I’d park $30,000 in there and just
8493forget about it for a while. Then use $5,000
8494to set up an emergency fund and maybe blow
8495$5,000 on some things just for you. After
8496all, spending and having fun with money is
8497still important!
8498But here’s something to think about once
8499you’ve educated yourself on investing. If you
8500put that remaining $30,000 in a good growth
8501stock mutual fund, by the time you’re ready to
8502retire you’ll be looking at about $5.5 million.
8503Talk about being able to retire with dignity
8504and change your family tree!
8505172 Foundations in Personal Finance High School Edition
8506SECTION 2
8507LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
850862% of those who make
8509financial investments
8510rarely change their
8511strategy.
8512Survey by 24/7 Wall St./Harris
8513$
8514Real Estate
8515»»You should have lots of
851630
8517before using real
8518estate as an
851931
8520. Real estate is
8521usually held as part of a larger portfolio and is generally
8522considered an alternative investment.
8523»»Real estate is land plus anything permanently fixed to it,
8524including buildings and natural resources.
8525»» Real estate is the
852632
8527liquid consumer investment.
8528»» Benefits of investing in real estate include higher returns
8529for a given level of risk. By adding real estate to a portfolio,
8530you could maintain your portfolio returns while
8531decreasing risk.
8532»»Another benefit of real estate is your ability to influence
8533its value. As a tangible asset, an investor can increase the
8534value of the property through a variety of improvements.
8535»»Other special considerations when investing in real estate:
8536• It is costly to buy, sell and maintain.
8537• It requires management.
8538• It can be difficult to acquire.
8539• The investment market is cyclical based on supply
8540and demand.
8541Chapter 8: Investing and Retirement 173
8542LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8543SPECULATIVE:
8544Purchasing risky
8545investments that present
8546the possibility of large
8547profits, but also post a
8548higher-than-average
8549possibility of loss
8550+
8551Horrible Investments
8552»»Gold: Gold has a 50-year track record of 4.1% returns.
8553That’s about the rate of inflation.
8554»»Commodities:
855533
8556are agricultural
8557or mining products. All commodities are traded, but since
8558no one really wants to transport all those heavy materials,
8559what is actually traded are commodities futures contracts—
8560an agreement to buy or sell a commodity at a specific date
8561in the future at a specific price. Both commodities and
8562futures are bad investments because they result in price
8563distortions and are highly volatile.
8564»»Day trading: This is the buying and selling of stock
8565purchases each day through the practice of speculation.
8566Evidence shows the vast majority of investors lose
8567money in day trading.
8568»»Viaticals: This is when someone with a terminal disease
8569sells his life insurance policy for less than face value. The
8570buyer then cashes in the full amount at the original owner’s
8571death. There are a lot of scam artists surrounding this type
8572of investment, and investors often incur legal risks.
8573What Is the Stock Market?
8574The stock market is a generic term that encompasses the
8575trading of securities. This trading takes place in stock
8576exchanges. There are three major stock exchanges in the
8577United States:
85781. Formed in 1792, the New York Stock Exchange (NYSE) is
8579the largest organized stock exchange in the United States.
8580174 Foundations in Personal Finance High School Edition
8581SECTION 2
8582LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8583TIPS ON BUYING AND
8584SELLING INVESTMENTS
85851. Set your investment
8586goals and consider a
8587time frame (ie: getting
8588married and buying a
8589house, five years; having
8590kids and buying a bigger
8591house, 10 years; college
8592tuition for kids, 18 years;
8593retirement, 40 years).
85942. Learn the different
8595types of investments.
85963. Choose an investment
8597broker. Remember,
8598they work for you!
8599We recommend one
8600with the heart of a
8601teacher. NEVER invest
8602in something you don’t
8603completely understand.
86044. Understand basic
8605investment strategies
8606and identify ones
8607that will help you
8608reach your goals.
86095. Build your portfolio and
8610be sure to diversify so
8611that all your eggs are
8612not in one basket!
86136. Stick to your investment
8614strategy. Remember:
8615100% of the 15-year
8616periods in the stock
8617market’s history
8618have made money.
8619+
86202. The American Stock Exchange (AMEX) was known
8621before 1951 as the American Curb Exchange. That’s
8622because trading was conducted on the curb of Wall and
8623Broad streets in New York City. The American Stock
8624Exchange has less stringent listing requirements than
8625the NYSE, so it attracts many smaller companies.
86263. Another of the major stock exchanges, NASDAQ stands
8627for the National Association of Securities Dealers
8628Automated Quotation System. Unlike the NYSE and the
8629AMEX, there isn’t any physical location for the exchange;
8630trading is done by computer. The American Stock
8631Exchange and NASDAQ have merged but maintain their
8632own names and identities.
8633The overall performance of the stock market is evaluated
8634in many different ways. The Dow Jones Industrial
8635Average is one measure of the stock market.
8636A security is a financial asset (such as a stock or bond)
8637that can be bought and sold; a tradable financial asset.
8638“ Bear vs. Bull Market”
8639The terms bull market and bear market describe upward
8640(bullish) and downward (bearish) market trends.
8641JOURNAL QUESTION: VIDEO 2.3
8642What is real estate? Why is it considered an investment?
8643Chapter 8: Investing and Retirement 175
8644LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8645WHAT’S THE DIFFERENCE
8646BETWEEN SAVING
8647AND INVESTING?
8648Any money set aside
8649for five years or less is
8650considered saving.
8651Money set aside for
8652more than five years is
8653considered investing.
8654+
8655Section 3: Employer Benefits
8656and Retirement Plans
8657VIDEO 3.1
8658As you enter the workforce, it’s a good idea to be familiar
8659with the components of an employee benefits package.
8660Employee benefits are various -
866134
8662compensations provided to employees in addition to their
8663normal wages or salaries. The purpose of employee benefits
8664is to increase the financial security of staff members, and in
8665doing so, improve worker retention across the organization.
8666Common employee benefits are retirement plans,
8667savings plans,
866835
8669, leave (sick, vacation, etc.), stock
8670purchase, educational reimbursement, incentive plans and
8671cafeteria plans. In addition to considering salary when you
8672are offered employment with a company, you should also
8673evaluate the employer’s benefits package.
8674Anticipating the Future
8675“I am 19 years old and working in my family’s business. I live at home with my
8676parents, I’m not in college, and my car is completely paid for. How should I start
8677saving for a house and retirement? I want to make sure I am doing everything I
8678can to avoid financial problems in the future. What do I need to do?”
8679DAVE’S ANSWER: Your first goal should be to
8680save three to six months of your income (since
8681you don’t really have any expenses). This will
8682be your full emergency fund. Then you should
8683save for anything you plan on doing in the next
8684few years, like getting married or buying a home.
8685On top of that, you should invest into a Roth IRA.
8686The current contribution limit is $5,500 per year,
8687which comes out to about $458 per month. You
8688can do less than that, but not more. If you start
8689that now, you will be extremely wealthy when
8690you retire.
8691176 Foundations in Personal Finance High School Edition
8692SECTION 3
8693LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8694WHERE DOES THE TERM
8695401(K) COME FROM?
8696401(k) refers to the
8697section of the tax code
8698that discusses this sort
8699of retirement plan, as do
8700403(b) and 457.
8701+
8702Employer Retirement Plans
8703»»Simplified Employee Pension Plan (SEP): A selfemployed
8704person may deduct up to 15% of their net profit
8705on the business by investing in a SEP.
8706»»
870736
8708is a retirement savings plan offered by a
8709corporation to its employees. The employee contributes
8710money to the 401(k) from his/her gross pay, and the
8711money in the account grows tax deferred. In some cases,
8712employers will match the employee’s contribution,
8713but you should fund your plan whether your company
8714matches or not.
8715»»403(b) is found in
871637
8717organizations such as
8718churches, hospitals and schools.
8719»»457 is deferred compensation, which means you are
8720deferring or putting off compensation. Usually this is
8721available for
872238
8723employees.
8724»»Do not use a Guaranteed Investment Contract (GIC)
8725or bond funds to fund your plan. This is like a CD inside
8726of your 401(k). You will only make about 3–4%, and it will
8727not help you win long term.
8728»»Pre-tax contributions are taken from your gross
8729income before taxes. Taxes are due upon withdrawal.
8730»»After-tax contributions are taken from your net
8731income after taxes. No taxes are due upon withdrawal.
8732Chapter 8: Investing and Retirement 177
8733LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8734WINNING THE LOTTERY
8735does not guarantee peace
8736of mind when it comes to
8737your financial future.
8738In fact, Ellen Goodstein of
8739bankrate.com reported
8740that just the opposite
8741happened to some lottery
8742winners—they went broke.
8743Saving and investing have
8744nothing to do with the
8745amount of money you make
8746or get. It is about making it
8747a priority and being smart
8748with your money.
8749+
8750Rollovers
8751If you leave a job and have money saved in your employer’s
8752retirement plan, always roll that money into an IRA using a
8753direct rollover, which allows you to avoid taxes and penalties.
8754Retirement Loans
8755Never borrow on your
875639
8757. Never!
8758Even though you pay yourself back some interest, it is
8759nowhere close to what you would have earned if you had left
8760the money in the investment.
8761Can Anyone Become a Millionaire?
8762The Power of Compound Interest
8763Whether you have never stepped foot in a bank
8764or you are actively saving and investing for your
8765future, all it takes is a little effort and a lot of
8766patience to become confident in your financial
8767decisions. One awesome thing that you can take
8768advantage of is compound interest. It may sound
8769like an intimidating term, but it really isn’t once
8770you know what it means. Here’s a little secret:
8771Compound interest is a millionaire’s best friend.
8772It’s really free money. Seriously. But don’t take
8773our word for it!
8774Let’s take another look at the story of Ben and
8775Arthur from Chapter 2. Remember that Ben
8776invested $16,000 over eight years, and Arthur
8777invested $78,000 over 39 years. Believe it or not,
8778Ben came out ahead . . . $700,000 ahead! How
8779did he do it? Starting early is the key. He put in
8780less money but started eight years earlier. That’s
8781compound interest for you! It turns $16,000 into
8782almost $2.3 million! Since Ben invested earlier,
8783the compound interest kicked in sooner.
8784What You Can Do Now
8785The trick is to start as soon as possible. You
8786should start investing as soon as you have your
8787college education funded. A survey by Charles
8788Schwab found that 24% of young adults believe
8789that because they are young, saving money isn’t
8790important. Looks like we just blew that theory out
8791of the water! That same survey also discovered
8792that only 2% of young adults say they know how
8793to invest money to make it grow. Why not change
8794that statistic and learn how to become a smart
8795investor with your money? Remember, waiting
8796just means you make less money in the end. So
8797get moving!
8798178 Foundations in Personal Finance High School Edition
8799SECTION 3
8800LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8801Budget
8802Builder
8803So you’re ready to invest?
8804Your investment dollars
8805will need to be part of
8806your monthly budget. Go
8807to foundationsU.com/8 to
8808update your budget!
8809JOURNAL QUESTION: VIDEO 3.1
8810Why do you think it is important to consider both salary and benefits
8811when applying for a job?
8812Chapter 8: Investing and Retirement 179
8813LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8814Build On What You’ve Learned
8815So you currently don’t have any money to invest? Brainstorm at least five job options for teens and list
8816them below.
88171.
88182.
88193.
88204.
88215.
8822Chapter Summary
8823Big Ideas
8824The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
8825and think about how what you’ve learned will affect your current and future decisions. Then, in the space
8826provided, write an “I believe” statement for each of the Big Ideas.
8827»» Invest to build wealth and meet financial goals.
8828»»When investing, diversification lowers risk.
8829»» Employee benefits often include insurance and retirement plans.
8830Check for Understanding
8831Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
8832checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
8833Your Progress section.
8834180 Foundations in Personal Finance High School Edition
8835RECAP & REVIEW
8836LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8837Take Action Challenge
88381 Review: Risk Return Ratio
8839The risk return ratio applies to any type of investment. Any time you invest money into something
8840there is a risk, whether large or small, that you might not get your money back. In turn, you expect a
8841return, which compensates you for bearing this risk. In theory, the higher the risk, the more you should
8842receive for holding the investment, and the lower the risk, the less you should receive.
88432 Directions
8844Plot the following investments on the risk return continuum below. If you’ve forgotten the level
8845of risk for any of the investment types, refer to earlier in the chapter for review.
8846a Money Market Accounts
8847b Single Stocks
8848c Bonds
8849d Mutual Funds
8850e Fixed Annuities
8851f Real Estate
8852RISK RETURN RATIO CONTINUUM: The relationship between risk and return on investment
8853RISK AMOUNT
8854ANNUAL RETURN
8855Low risk,
8856low growth
8857potential
8858High risk,
8859high growth
8860potential
88611
88622
8863Chapter 8: Investing and Retirement 181
8864LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8865Money in Review
8866a 401(k)
8867b Investment
8868c IRA
8869d Liquidity
8870e Mutual Fund
8871f Portfolio
8872g Risk
8873h Share
88741. _____ A list of your investments
88752. _____ Quality of an asset that permits it to be
8876converted quickly into cash without loss
8877of value
88783. _____ A piece of ownership in a company,
8879mutual fund or other investment
88804. _____ A retirement savings plan offered by
8881a corporation to its employees; the
8882employee contributes money from his/
8883her gross pay, and the money grows
8884tax deferred
88855. _____ Account or arrangement in which
8886one would put their money for longterm
8887growth
88886. _____ Degree of uncertainty of return on
8889an asset
88907. _____ Pool of money managed by an
8891investment company and invested
8892in multiple companies
88938. _____ Tax-deferred arrangement for
8894individuals with earned income;
8895individual retirement arrangement
8896Matching
8897Match the following terms to the correct definition below.
8898Illustration
8899Draw a picture representation of each of the following terms.
8900Diversification Stock
8901182 Foundations in Personal Finance High School Edition
8902RECAP & REVIEW
8903LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8904Multiple Choice
8905Circle the correct answer.
89069. A single stock would be a good place to keep
8907your emergency fund.
8908a True
8909b False
891010. Diversification lowers risk with investing.
8911a True
8912b False
891311. Long-term investments properly diversified
8914include the following mutual funds:
8915a Growth, growth and income, bond,
8916aggressive growth
8917b Growth, balanced, international, bond
8918c International, bond, aggressive growth,
8919growth
8920d Growth, growth and income,
8921international, aggressive growth
892212. Which of the following is a good
8923investment option?
8924a Gold
8925b Viaticals
8926c Futures
8927d Mutual funds
892813. Which statement is true about liquidity?
8929a The less liquid the investment,
8930the less return
8931b The more liquid an investment,
8932the more return
8933c The more liquid an investment,
8934the less return
8935d Both a and b
8936Short Answer
8937Respond in the space provided.
893814. Explain why you should never invest using
8939borrowed money.
894015. Explain the risk return ratio.
894116. Why do single stocks carry a high degree of
8942risk? Why do mutual funds carry less risk?
894317. What is the Rule of 72? How is it calculated?
894418. Is real estate a liquid investment?
8945Explain your answer.
8946Chapter 8: Investing and Retirement 183
8947LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8948What do other high
8949school students know
8950about insurance?
8951We asked teens to tell us why they
8952think insurance is necessary.
8953“Insurance is something that will
8954pay for medical help. It’s money
8955for any medical problems you will
8956have now or in the future.”
8957Junior, Mississippi
8958“There are different types of
8959insurance to insure different
8960things like your house or car. Then
8961there is life insurance, which will
8962help your family if you die.”
8963Sophomore, Florida
8964“Everyone needs life insurance,
8965which some people also call ‘death
8966insurance.’”
8967Senior, Missouri
8968“Insurance covers liability and
8969protects you. It provides cash for
8970accidental occurrences.”
8971Senior, Florida
89729
8973CHAPTER
8974LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
8975Insurance
8976AS A HIGH SCHOOL STUDENT, insurance
8977may not seem that important. However,
8978it’s incredibly important to be prepared for
8979unexpected disasters. An illness, injury or car
8980accident that occurs without the necessary
8981insurance coverage can completely ruin your
8982finances. Having an emergency fund and a
8983budget and staying out of debt will help you
8984win with money. But without the proper
8985coverage, even the best financial plan can’t save
8986you from thousands of dollars of unexpected
8987medical expenses. You never know what the
8988future holds. As you get older, you’ll find that
8989you need insurance when you least expect it!
89901 ABC News
89912 InsuranceQuotes.com
8992of American renters
8993have renter’s
8994insurance.1
899534%
8996of tenants
8997incorrectly think a
8998landlord’s insurance
8999will cover them if
9000their property is
9001destroyed due to
9002fire, theft, etc.2
900348%
9004UNIT 3: CHAPTER 9
9005LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9006Key Terms
9007Get to know the language of money.
9008»» Beneficiary: The recipient of assets
9009passed on from the death of a friend or
9010relative
9011»» Claim: Paperwork filed with an
9012insurance company in order to get them
9013to cover a loss for someone they insure
9014»» Coverage: Applies to the amount
9015of protection you have through an
9016insurance company in the event of a loss
9017»» Deductible: Amount you must pay
9018before you begin receiving any benefits
9019from your insurance company
9020»» Liability: The state or quality of being
9021obligated according to law or equity
9022»» Out-of-pocket expense: Specific amount
9023of money that you pay when insurance
9024only covers a portion of costs
9025»» Policy: Describes the type of coverage in
9026an insurance agreement
9027»» Premium: Amount you pay monthly,
9028quarterly, semiannually or annually to
9029purchase different types of insurance
9030»» Will: A legally enforceable declaration of
9031how a person wishes his or her property
9032to be distributed after death
9033Learning Outcomes
9034Once you’ve completed this chapter’s videos, you will be asked to
9035return to this list of learning outcomes and place a checkmark
9036next to the items you’ve mastered.
9037Section 1: Protecting Your Wealth
9038Â…Â… Explain why insurance is an essential part of a healthy
9039financial plan.
9040Â…Â… Identify ways to lower the cost of insurance premiums.
9041Â…Â… Identify insurance for the types of risks that young adults
9042might face.
9043Section 2: Basic Types of Coverage
9044Â…Â… Identify common types of risks.
9045Â…Â… Distinguish between necessary and unnecessary types
9046of coverage.
9047Â…Â… Understand the importance of identity theft protection.
9048Â…Â… Understand the importance of property and
9049liability protection.
9050Section 3: The Importance of Life Insurance
9051Â…Â… Differentiate between term and cash value life insurance.
9052Â…Â… Explain how one becomes self-insured.
9053Â…Â… Examine the purpose and importance of a will.
9054Section 4: Insurance to Avoid
9055Â…Â… Know what types of insurance to avoid and why.
9056
9057Before You Begin
9058186 Foundations in Personal Finance High School Edition
9059INTRODUCTION
9060LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9061Measure Your Progress
9062Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
9063column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
9064on any statement.
9065JOURNAL QUESTION: INTRODUCTION
9066What do you think is the purpose of insurance?
90671. Insurance rates can vary depending on the company,
9068and I can save money if I shop around.
90692. I must always have collision insurance on my
9070automobile, even if it’s an old car that’s not worth much.
90713. If an employer offers me health insurance but
9072requires me to pay part of the premium, it is not a
9073good deal, and I shouldn’t get it.
90744. I only need to have renter’s insurance if I have a lot of
9075valuable items.
90765. Everyone should have life insurance.
9077Agree Disagree Agree Disagree
9078BEFORE AFTER
9079Chapter 9: Insurance 187
9080LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9081“It is unwise to hope
9082for the best without
9083preparing for the
9084worst.”
9085ANONYMOUS
9086“ 9 CHAPTER
9087Section 1:
9088Protecting Your Wealth
9089VIDEO 1.1
9090The Role of Insurance in Your Financial Plan
9091WE GET IT. Insurance may be one
9092topic where you begin to yawn a little
9093bit. Let’s face it: No one really likes
9094spending money on insurance. There
9095are many other things that are more
9096fun to spend money on. But, while
9097we hope we never have to use it,
9098insurance is a necessary part of a
9099healthy financial plan. Why? Because
9100insurance transfers the financial
9101risk of life’s major catastrophes.
9102Chances are that something major
9103and unexpected is going to happen
9104at some point during your lifetime.
9105Insurance will protect your wealth
9106during those events.
9107»»While paying insurance premiums may feel like you’re
9108losing money, in the end it really helps you
91091
9110more of it.
9111»»It’s important to remember that insurance is a
9112financial product, which means that the buyer
9113should beware. When the consumer is
91142
9115with
91163
9117, the consumer makes
9118different decisions.
9119188 Foundations in Personal Finance High School Edition
9120SECTION 1
9121LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9122Property and Casualty
9123(P&C) insurance is a $442
9124billion industry (2011 net
9125premiums written).
9126Insurance Information Institute
9127Thirty-five insurance
9128companies are listed
9129on the 2012 Fortune
9130500 annual ranking
9131of America’s largest
9132corporations. Eighteen of
9133these top companies are in
9134the P&C insurance sector.
9135Fortune Magazine
9136$
9137»» Insurance is an essential financial planning tool. You’ll
9138want to make sure you get only the coverage you need at
9139the best possible price.
9140»»The purpose of insurance is to
91414
9142risk.
9143»»Without proper insurance, certain losses can
91445
9145you. Conventional wisdom says that
9146you should transfer risk.
9147»» Insurance puts an
91486
9149over your life, the
9150hard work that you’ve done, the money you’ve saved, and
9151the money that you have to invest.
9152The 7 Basic Types of Coverage Needed
91531. Homeowner’s or Renter’s Insurance
91542. Auto Insurance
91553. Health Insurance
91564. Disability Insurance (when you are established
9157in your career)
91585. Long-Term Care Insurance (when you are 60 or older)
91596. Identity Theft Protection
91607. Life Insurance (when you have dependants who rely
9161on your income)
9162Chapter 9: Insurance 189
9163LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9164RAISE YOUR
9165DEDUCTIBLE TO KEEP
9166THE PREMIUMS DOWN.
9167Calculate how much you’re
9168saving and compare that
9169with the extra expense
9170you will have if you suffer a
9171loss. It has to be worth the
9172cost to transfer risk.
9173Any time you’re shopping
9174for insurance, go to an
9175independent insurance
9176agent and let them shop
9177among many different
9178plans and companies.
9179Health, disability, auto,
9180homeowner’s, identity
9181theft, long-term care
9182and life insurance catch
9183the big stuff. You handle
9184the little stuff with an
9185emergency fund and solid
9186financial planning.
9187+
9188Ways to Save Money on Your Premium
9189»» If you have a full emergency fund, the best way to keep
9190your premiums down is to raise your
91917
9192.
9193* NOTE: An emergency fund for high school and college students is typically $500 or more;
9194for adults, it should be a full three to six months of living expenses.
9195»»A deductible is what you have to pay out of pocket before
9196the insurance company kicks in any money.
9197»»Make sure you carry adequate liability. Liability covers
9198property damage and medical bills if you’re at fault in a
9199car wreck or if someone gets hurt on your property.
9200»»Consider dropping your collision on older cars. That’s the
9201insurance that pays to fix your own car.
9202JOURNAL QUESTION: VIDEO 1.1
9203Explain why insurance is an important part of your financial plan.
9204190 Foundations in Personal Finance High School Edition
9205SECTIONS 1 & 2
9206LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9207WHAT KINDS OF
9208INSURANCE DO I NEED
9209AFTER HIGH SCHOOL?
9210After high school, you’ll
9211probably need to have four
9212types of insurance:
92131. Car
92142. Health
92153. Identity Theft
92164. Renter’s
9217+ Section 2:
9218Basic Types of Coverage
9219VIDEO 2.1
9220Basic Parts of Auto Insurance
9221Auto insurance protects you against
9222financial loss if you are in a car accident
9223or if something else causes damage to
9224your car. Here are the basic components
9225of an auto insurance policy:
9226»»Liability covers medical costs and property damage of
9227the other driver if you get in a wreck and it’s your fault.
9228It is the least expensive part of your car insurance. You
9229should always get really good coverage limits.
9230Need Another Reason to Pay Cash for Your Car?
9231“My car was recently totaled, but I had full-coverage insurance. The problem
9232is the bank is asking for $3,000 in 30 days because I did not have gap
9233insurance. What is gap insurance? I thought I would finally be done with
9234these car payments because the insurance would take care of everything, but
9235now I have this bill. What can I do? ”
9236DAVE’S ANSWER: Gap insurance covers the
9237difference between what you owe on a car and
9238what the insurance company says it is worth.
9239That is what happened to you. Your full-coverage
9240policy paid for the current value of the car, but
9241that is less than what you owe the bank. Since
9242you no longer have the car as collateral, the bank
9243is calling their note.
9244Gap insurance can be pretty expensive, which
9245is another reason not to buy a new car on credit.
9246The minute you drive off the car lot with a new
9247car, it loses value and if you get into an accident,
9248there will be a gap that you are responsible for
9249unless you have this gap insurance. All you can
9250do right now is pay the bank what you owe and
9251move on, lesson learned.
9252Chapter 9: Insurance 191
9253LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9254BEFORE DROPPING
9255COLLISION ON YOUR CAR,
9256CONSIDER THIS: Since
9257collision insurance rates
9258have dropped over the
9259years, you’ll want to do a
9260break-even analysis to
9261see how many years you’d
9262need to go without a
9263wreck for it to make
9264sense. For example, if you
9265have a $4,000 car and
9266dropping collision would
9267save you $800 a year on
9268premiums, you’d need to
9269go five years without a
9270wreck to break even.
9271+
9272BREAK-EVEN ANALYSIS:
9273Method used to evaluate
9274the wisdom of a financial
9275decision by determining
9276the length of time it will
9277take for the cost of the
9278decision to be recouped
9279+
9280Basic Parts of Auto Insurance (Continued)
9281»»Medical payment coverage pays for all accidentrelated
9282medical costs incurred by you or your family
9283members within three years of an accident.
9284»»Collision insurance covers damage to your car if it is
9285hit by another car or object. If you owe money on your
9286car, the lien holder will require collision coverage. It’s
9287still not a bad idea even if you own your car or if it’s old.
9288The insurance coverage will replace your car if totaled in
9289a wreck—and you won’t be stuck walking.
9290»»Comprehensive coverage takes care of damage to
9291your car not caused by a collision. If your car is stolen,
9292damaged by fire, flood or hail for example, your policy
9293will pay to repair or replace it.
9294»»Uninsured/underinsured motorist protection
9295covers your costs if you are injured by an uninsured
9296motorist or if you are injured in a hit-and-run accident.
9297192 Foundations in Personal Finance High School Edition
9298SECTION 2
9299LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9300According to the federal
9301Centers for Disease
9302Control and Prevention
9303(CDC), crash rates per mile
9304driven for 16- to 19-yearolds
9305are four times higher
9306than those of older drivers.
9307This makes teen drivers the
9308most expensive to insure.
9309$
9310How Can I Get a Good Deal on
9311Car Insurance as a Teen Driver?
9312»»Get good grades. Insurance companies assume that if
9313you’re a responsible student you are more likely to be a
9314responsible driver.
9315»»Take a driver education class.
9316»» Shop around. Insurance is a product! Make sure you are
9317getting the best deal for your money.
9318»» Stay on your parents’ policy through college if possible in
9319order to benefit from multi-car discounts.
9320Top Things to Know About Auto Insurance
93211. You’re a statistic. To an insurer, you’re not a
9322person—
9323you’re a set of risks. An insurer bases
9324its decisions on your “risk factors,” including
9325some things that may seem unrelated to
9326driving a car.
93272. Insurers differ. Prices can vary from company
9328to company. You can save money by comparison
9329shopping.
93303. Don’t just look at price. A low price is no bargain
9331if an insurer takes forever to service your claim.
9332Research the insurer’s record for claims service,
9333as well as its financial stability.
93344. Go beyond the basics. Although most states
9335require only a minimum of liability coverage,
9336you should look for a minimum coverage of
9337$500,000.
93385. Demand discounts. Insurers provide
9339discounts to reward behavior that reduces
9340risk. However, Americans waste $300
9341billion a year because they forget to ask
9342for discounts!
93436. At claims time, your insurer isn’t necessarily
9344your friend. Your idea of fair compensation
9345may not match that of your insurer. Their job
9346is to restore you financially. Your job is to prove
9347your losses so that you get what you need.
93487. Prepare before you have to file a claim.
9349Keep your policy updated and reread
9350it before you file a claim so there are
9351no surprises.
9352Chapter 9: Insurance 193
9353LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9354The average renter’s policy
9355costs about $16 per month.
9356National Association of Insurance
9357Commissioners
9358Most people don’t
9359realize how affordable
9360renter’s insurance is. An
9361InsuranceQuotes.com
9362survey found that 60% of
9363renters believed renter’s
9364insurance must cost
9365$250 a year or more; 21%
9366guessed it would cost
9367$1,000 or more.
9368$
9369Homeowner’s and Renter’s Insurance
9370When you’re ready, the purchase of
9371a home is likely one of the largest
9372single purchases you will ever make.
9373It will need to be protected through a
9374homeowner’s insurance policy. This
9375policy will cover the costs of repairing
9376or replacing your home in the event
9377that it is damaged or destroyed by fire,
9378storms, theft and a variety of other
9379possible causes.
9380»»Homeowner’s insurance should be “guaranteed
93818
9382cost” instead of extended
9383replacement cost.
9384»»When you are ready to move out of your parents’ house,
9385you need to have
93869
9387insurance, which covers
9388the
938910
9390of the renter’s apartment in the event
9391of fire, storm or theft.
9392»»
939311
9394liability policies are a good buy once
9395you have some assets. An umbrella policy gives you
9396additional liability protection above your other policies.
9397JOURNAL QUESTION: VIDEO 2.1
9398What are some ways you can save on car insurance?
9399194 Foundations in Personal Finance High School Edition
9400SECTION 2
9401LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9402GROUP VS. INDIVIDUAL
9403HEALTH PLANS
9404A group health plan is an
9405employee benefit plan
9406maintained by an employer
9407or by an organization
9408(such as a union) that
9409provides medical care
9410for participants and/or
9411their dependents through
9412insurance, reimbursement
9413or otherwise. The two
9414main advantages of group
9415plans are that they spread
9416the risk over the entire
9417group to keep premiums
9418stable and they cannot
9419deny you coverage based
9420on health issues.
9421A smaller percentage of
9422Americans are covered
9423through individual health
9424insurance plans that are
9425purchased in the open
9426market—meaning that
9427they are not provided by
9428a group or an employer.
9429People generally choose
9430this option because
9431they are self-employed,
9432retired early, or do not
9433have a spouse with group
9434coverage. These plans
9435are sometimes more
9436expensive than group
9437plans and can deny
9438coverage if you have a
9439history of poor health.
9440+
9441VIDEO 2.2
9442Health Insurance
9443You may think that because you are young and healthy
9444that health insurance is not necessary, but you’d be
9445wrong. Everyone needs to have health insurance. Medical
9446emergencies due to injury or illness can occur to anyone at
9447any time. And with the ever-rising cost of health care, you
9448need to be prepared.
9449Save on Your Health Insurance Premiums
9450»» Just like with auto insurance, staying on your parents’
9451health insurance policy until you’re out of school and on
9452your own will lower your costs.
9453»» Increase your
945412
9455and /or coinsurance amount.
9456»» Increase your -
945713
9458, but never decrease
9459your maximum pay. Stop-loss is your maximum out-ofpocket
9460expense.
9461»» See if an
946214
9463, a Health Savings Account, would
9464make sense for your situation.
9465»»The HSA is a -
946615
9467savings account
9468for medical expenses that works with a high-deductible
9469insurance policy.
9470Chapter 9: Insurance 195
9471LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9472On average, the cost of
9473a trip to the hospital via
9474ambulance is anywhere
9475from $350 to as much as
9476$2,000.
9477howmuchisit.org
9478In a recent study,
9479researchers found that
9480the average charge for
9481an emergency room visit
9482came out to $1,233, which
9483is 40% higher than the
9484average American rent
9485right now, $871 per month.
9486The Washington Post
9487$
9488The Basic Components of Health Insurance
9489»»Basic health insurance policies cover hospital, surgical
9490and physician expenses.
9491»»Major medical expense insurance covers medical costs
9492that are in excess of those covered by basic health insurance.
9493»»Dental and eye insurance plans cover only expenses
9494for dental work and expenses related to eye care.
9495»»A copayment is an amount of money you pay to help
9496cover a portion of your medical costs. Copayments
9497may be a set amount or a percentage of the total cost,
9498depending on your insurance policy.
9499»»A deductible is the amount you must pay before you begin
9500receiving any benefits from your insurance company.
9501* NOTE: There are currently many changes going on in our health care system. It’s important
9502for you to stay educated on these changes and how they relate to your health insurance needs.
9503JOURNAL QUESTION: VIDEO 2.2
9504Explain why having health insurance is important even if you are
9505young and healthy.
9506196 Foundations in Personal Finance High School Edition
9507SECTION 2
9508LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9509REAL LIFE
9510Some companies will
9511do anything to make a
9512buck—including insurance
9513companies. Here are a few
9514bizarre examples of actual
9515insurance plans available:
9516• Alien abduction
9517insurance
9518• Pet insurance
9519• Wedding insurance
9520+
9521VIDEO 2.3
9522Long-Term Care Insurance
9523Long-term care is care that you need if you can no longer
9524perform everyday tasks by yourself. Causes may be chronic
9525illness, injury, disability or advanced age. Your odds of
9526needing this level of care increase as you get older.
9527»»Long-term care insurance is for
952816
9529homes,
9530assisted living facilities or in-home care.
9531»»A good long-term care policy will include
9532-
953317
9534care.
9535»»You should not buy long-term care insurance until
9536age
953718
9538. The probability of a nursing home stay
9539before age 60 is almost zero.
9540»»At least
954119
9542% of people over the age of 65 will require
9543long-term care at some point.
9544»»Long-term care insurance is not the same as disability or
9545short-term medical care.
9546JOURNAL QUESTION: VIDEO 2.3
9547At what stage of life will the cost of your healthcare needs be
9548most expensive?
9549Chapter 9: Insurance 197
9550LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9551THINGS TO REMEMBER
9552ABOUT DISABILITY
9553INSURANCE
9554Disability insurance is
9555a long-term solution.
9556Your short-term needs
9557should be covered by a full
9558emergency fund of three to
9559six months of expenses.
9560Buy disability with aftertax
9561dollars. If you become
9562disabled and you bought
9563disability insurance with
9564pre-tax dollars, your
9565disability income will
9566be taxable.
9567+
9568OCCUPATIONAL
9569DISABILITY: Type of
9570insurance that provides
9571an income in case the
9572insured becomes unable to
9573perform the job he/she was
9574educated or trained to do
9575+
9576VIDEO 2.4
9577Disability Insurance
9578Disability insurance is designed to replace
957920
9580lost due to a short-term or permanent disability. It basically
9581provides an income for you if you have an accident or health
9582condition that prevents you from working. Once you are
9583working full time to support yourself, you will need to have
9584disability coverage.
9585»»Try to buy disability insurance that pays if you cannot
9586perform the job that you were
958721
9588or
9589educated to do.
9590»»That is called
959122
9592or “own occ”
9593disability. Many times, this is only available for two years.
9594»»Beware of -
959523
9596policies covering less
9597than five years. Short-term disability should be covered
9598by your emergency fund, staying out of debt, and having a
9599money plan.
9600»»Disability insurance is most affordable if it is offered
9601through your employer.
9602»» Your coverage should be for
960324
9604% of your current income.
9605»»The
960625
9607period is the time between the
9608disabling event and when the payments actually begin.
9609A
961026
9611elimination period will
961227
9613your
9614premium cost.
9615198 Foundations in Personal Finance High School Edition
9616SECTION 2
9617LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9618• 38% of ID theft victims
9619had a debit or credit card
9620number stolen.
9621• 43% of all ID theft is a
9622result of stolen wallets
9623and paperwork.
9624• About 11% of all identity
9625theft occurs through the
9626internet.
9627• 40% of victims report
9628profound stress in their
9629personal lives as a result
9630of identity theft.
9631identityhawk.com
9632$
9633WHITE-COLLAR CRIME:
9634Financially motivated,
9635nonviolent crime
9636+
9637DO I HAVE TO
9638PROVIDE MY SOCIAL
9639SECURITY NUMBER
9640TO ANY BUSINESS OR
9641GOVERNMENT AGENCY
9642THAT ASKS?
9643Go to foundationsU.com/
9644sshelp to find out when
9645it’s necessary and when
9646it’s not!
9647+
9648Identity Theft Protection
9649The fastest growing white-collar
9650crime in North America today is
9651identity theft. Identity theft happens
9652when someone gains unauthorized
9653access to your personal information.
9654According to identityhawk.com, young
9655adults ages 18 to 24 are at the highest
9656risk. It takes people in this age range 132
9657days on average to notice fraudulent
9658activity on their accounts.
9659»»Don’t buy identity theft protection that only provides
9660credit report
966128
9662. Credit report monitoring
9663is something you can, and should, do yourself.
9664»»Good protection includes
966529
9666services
9667that assign a
966830
9669to clean up the mess. This
9670means someone else will spend the time it takes to clean
9671up the mess so you won’t have to.
9672Remember, insurance is all about transferring risk. In this
9673case, you’re paying someone to take on the risk of cleaning
9674up the aftermath of your stolen identity. This is someone
9675who is ready, willing and able to go to battle with banks and
9676creditors that will come after you to collect the debts that
9677the thief created in your name.
9678JOURNAL QUESTION: VIDEO 2.4
9679Explain why identity theft protection is so important.
9680Chapter 9: Insurance 199
9681LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9682WHAT DOES IT MEAN TO
9683BE SELF-INSURED?
9684If you follow the Five
9685Foundations, you will begin
9686investing when you finish
9687school and begin working
9688in your career. Then, when
9689you are 57 years old and
9690the kids are grown and
9691gone, the house is paid for,
9692you have no debt, and you
9693have $700,000 in mutual
9694funds, you’ll become
9695self-insured. That means
9696when your 20-year term is
9697up, you shouldn’t need life
9698insurance at all—because
9699with no kids to feed, no
9700house payment, and
9701$700,000 in the bank, your
9702spouse will be financially
9703secure in the event of
9704your death.
9705+ Section 3:
9706The Importance of Life Insurance
9707VIDEO 3.1
9708Life insurance provides a monetary payout to
9709beneficiaries (the person or people you elect to receive
9710money or other assets) in the event of your death. The
9711financial risk associated with death is the loss of income
9712necessary to support your family.
9713»» Life insurance is to replace lost income due to
971431
9715.
9716»»Two Types of Life Insurance:
97171.
971832
9719insurance is for a specified period, is
9720substantially cheaper, is easy to understand, and has
9721no savings plan built into it. It has one job and one job
9722only: It replaces your income when you die.
97232.
972433
9725insurance is normally for life and
9726is more expensive because it funds a savings plan.
9727»»The most common insurance myth is that the need for
9728life insurance is a
972934
9730situation.
9731»» If you save, invest, stay out of debt, and have a solid
9732financial plan, you will eventually become -
973335
9734.
9735200 Foundations in Personal Finance High School Edition
9736SECTION 3
9737LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9738»»When purchasing life insurance, you should buy only
9739low-cost level term. Level term means you pay the same
9740amount for the entire term of the policy.
9741JOURNAL QUESTION: VIDEO 3.1
9742Which type of life insurance is the better option, term or cash value?
9743Explain your answer.
9744The Purpose and Importance of Estate Planning
9745“I’m a teenager. Why should I care about a will now?”
9746DAVE’S ANSWER: Once you turn 18, you will
9747need to create a will. The truth is you have no
9748idea when you’ll pass away. It’s not pleasant to
9749think about, but it’s important to be ready. You’ll
9750have valuable items that will be left behind, and
9751you do not want the state deciding where your
9752money or belongings should go.
9753A will includes your final wishes for your family
9754and friends, so take your responsibility seriously.
9755You should identify people in your life who will
9756receive these valuables, or assets. Do not rely on
9757your state government to distribute your wealth.
9758* NOTE: Get more information on creating a will by completing the Chapter 9 activity “What’s With the Will?”
9759Chapter 9: Insurance 201
9760LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9761Budget
9762Builder
9763Insurance isn’t exciting.
9764But it is necessary
9765and so appreciated
9766when you need it! Go to
9767foundationsU.com/9 to
9768build insurance premiums
9769into your budget.
9770Section 4 : Insurance to Avoid
9771VIDEO 4.1
9772Bad Ideas in the Insurance World
9773»»
977436
9775life/disability: pays off a borrower’s debt
9776if that borrower dies or becomes disabled (your term life
9777insurance already covers this)
9778»»Credit
977937
9780protection: insures your credit card
9781debt (you should avoid owning a credit card, period)
9782»»
978338
9784and hospital indemnity insurance: insures
9785you against cancer or other medical issues (your health
9786insurance already covers this)
9787»»Accidental
978839
9789: insures you against unexpected
9790accidents that cause your death (your term life insurance
9791already covers this)
9792»»Any insurance with
979340
9794, investments
9795or refunds: anything that combines insurance with
9796investments is a bad idea
9797»»Prepaid
979841
9799policies: if invested instead, this
9800money would pay for the burial policy many times over
9801»»
980242
9803life insurance: pays off your home
9804mortgage if you die unexpectedly or become disabled
9805(your term life insurance, which is 10 to 15 times
9806cheaper, already covers this)
9807202 Foundations in Personal Finance High School Edition
9808SECTION 4
9809LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9810»»Any kind of
981143
9812coverage: any extra
9813insurance on top of your existing insurance (remember,
9814you only need one policy for each type of insurance); the
9815two insurance companies fight over who pays the bills
9816and nothing gets accomplished
9817JOURNAL QUESTION: VIDEO 4.1
9818What is duplicate coverage, and why should you avoid it?
9819Cash Value vs. Term + Roth IRA
9820Cash value life insurance is a bad investment. Consider this:
9821« $1.375M
9822« $1.500M
9823« $1.125M
9824« $875K
9825« $625K
9826« $375K
9827« $125K
9828« $1.250M
9829« $1.00M
9830« $750K
9831« $500K
9832« $250K
9833AGE 30 AGE 50 AGE 70
9834FOR $145 A MONTH, you could have
9835$125,000 in cash value insurance.
9836OR, for that same $145, you could pay
9837$10 a month for $400,000 in 20-year
9838term insurance and invest $135 into
9839a Roth IRA. If you start at age 30 your
9840investment will be worth:
9841At Age 70
9842Term + Roth IRA: $133,000
9843Cash Value: $27,500
9844Term + Roth IRA: $1,500,000
9845Cash Value: $65,000
9846At Age 50
9847Chapter 9: Insurance 203
9848LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9849Take Action Challenge
9850Garret owns an older car worth about $5,000. He thinks he is paying too much for auto insurance and wants
9851to find out how he can save money. He decides to look into raising his deductible from $250 to $1,000. By
9852doing this, he can save $200 per year. Use the break-even analysis (found in Section 2): If Garret raises the
9853deductible, will it be worth the risk? Defend your answer.
9854Chapter Summary
9855Check for Understanding
9856Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
9857checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
9858Your Progress section.
9859Big Ideas
9860The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
9861and think about how what you’ve learned will affect your current and future decisions. Then, in the space
9862provided, write an “I believe” statement for each of the Big Ideas.
9863»»Managing risk is a major part of a healthy financial plan.
9864»» The purpose of insurance is to transfer risk.
9865»» Insurance is a product—be a wise consumer!
9866204 Foundations in Personal Finance High School Edition
9867RECAP & REVIEW
9868LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9869Build On What You’ve Learned
9870Complete the graphic organizer below.
9871TYPE OF INSURANCE NEEDED FINANCIAL RISK COVERED STAGE OF LIFE NEEDED
98721. Homeowner’s or Renter’s
98732.
9874Cost of damage to your vehicle,
9875liability and medical in the event
9876of an accident or other event that
9877may damage your vehicle
98783. Health
9879You should always have
9880health insurance.
98814.
9882Your income in the case of illness
9883or injury that prevents you from
9884working
98855. At age 60 and above
98866. Identity Theft Protection
9887The cost of hiring someone who
9888has the time and knowledge to
9889clean up the mess
98907.
9891When you have
9892dependants who rely on
9893your income until you
9894become self-insured
9895Chapter 9: Insurance 205
9896LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9897Money in Review
9898a Deductible
9899b Policy
9900c Claim
9901d Premium
9902e Liability
9903f Coverage
9904g Out-of-Pocket Expense
99051. _____ Specific amount of money that you pay
9906when insurance only covers a portion
9907of costs
99082. _____ Paperwork filed with an insurance
9909company in order to get them to cover a
9910loss for someone they insure
99113. _____ Describes the type of coverage in an
9912insurance agreement
99134. _____ Amount you pay monthly, quarterly,
9914semiannually or annually to purchase
9915different types of insurance
99165. _____ Applies to the amount of protection you
9917have through an insurance company in
9918the event of a loss
99196. _____ Amount you must pay before you
9920begin receiving any benefits from your
9921insurance company
99227. _____ The state or quality of being obligated
9923according to law or equity
9924Matching
9925Match the following terms to the correct definition below.
9926Illustration
9927Draw a picture representation of each of the following terms.
9928Financial Risk Insurance
9929206 Foundations in Personal Finance High School Edition
9930RECAP & REVIEW
9931LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9932Multiple Choice
9933Circle the correct answer.
99348. Raising your deductible may be a good option
9935when it comes to lowering your premium, but
9936it is important to do a break-even analysis
9937before making that decision.
9938a True
9939b False
99409. Financially, it makes sense to stay on your
9941parents’ auto insurance policy through
9942college if possible.
9943a True
9944b False
994510. Which of the following would not be a
9946huge financial risk (and, therefore would
9947not require insurance) if you had a full
9948emergency fund of $500 or more?
9949a A car accident
9950b A lost cell phone
9951c A medical emergency
9952d Stolen identity
995311. The time between the disabling event and
9954the beginning of payments in your disability
9955coverage is called:
9956a Deductible
9957b Out of pocket
9958c Stop gap
9959d Elimination period
996012. A life insurance policy that covers a specific
9961period of time is called:
9962a Whole life
9963b Term
9964c Universal
9965d Level
9966Short Answer
9967Respond in the space provided.
996813. What does it mean to “transfer risk”?
996914. Explain the importance of liability protection.
997015. Why should life insurance not be used as
9971an investment?
997216. Explain how someone becomes self-insured.
997317. What are some unnecessary types of
9974insurance? Why are these unnecessary?
9975Chapter 9: Insurance 207
9976LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
9977What do other high
9978school students know
9979about money and
9980relationships?
9981We asked high school students if
9982they’ve ever witnessed money affecting
9983a relationship close to them.
9984“Money is always a strain at my
9985house. At least every other day, my
9986parents fight about money.”
9987Junior, Michigan
9988“When my parents fight, it is
9989usually concerning a large
9990purchase that they didn’t discuss.”
9991Senior, Wyoming
9992“My parents fought all the
9993time about money and are now
9994divorcing.”
9995Senior, Alabama
9996“Money was the cause of my
9997parents’ divorce when I was
99985 years old.”
9999Senior, Oklahoma
10000“I argue with my parents all the time
10001about money. I don’t understand
10002why they say no to giving me the
10003spending money I ask for, even
10004though we seem to be fine financially.”
10005Junior, Florida
1000610
10007CHAPTER
10008LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10009Money and
10010Relationships
10011MONEY AND RELATIONSHIPS go hand in
10012hand, which means the way you handle your
10013money affects everyone around you. Hard to
10014imagine, right? Well it’s true. Whether you
10015save, overspend, are generous in your giving,
10016or often borrow from friends—people notice.
10017Your current and future relationships will
10018all be influenced by how you handle money.
10019So let’s make it a priority now to learn more
10020about this topic.
10021*Charles Schwab Teens & Money Survey (2011)
10022of teens receive a
10023weekly allowance
10024of, on average, just
10025over $16 per week.*
1002634%
10027of teens are
10028borrowing money.
10029On average they owe
10030$252. They most
10031frequently owe money
10032to their parents,
10033school or friends.*
1003428%
10035UNIT 4: CHAPTER 10
10036LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10037Key Terms
10038Get to know the language of money.
10039»» Accountability: The quality or state of
10040being responsible, liable or answerable
10041»» Free Spirit: A person who thinks
10042that everything will work out fine and
10043typically hates to deal with the details
10044»» Nerd: A person who is picky about
10045budgeting and details
10046»» Time poverty: A situation in which
10047a person is lacking time, which leads
10048to stress
10049»» Value system: A person’s priorities,
10050beliefs and standards that affect how he
10051or she views the world
10052Learning Outcomes
10053Once you’ve completed this chapter’s videos, you will be asked to
10054return to this list of learning outcomes and place a checkmark
10055next to the items you’ve mastered.
10056Section 1: Understanding Your Money Personality
10057…… Identify differences among people’s values and attitudes
10058as they relate to money.
10059Â…Â… Evaluate your own money personality.
10060Section 2: Marriage and Money
10061Â…Â… Evaluate how discussing important financial matters
10062with household members can reduce conflict.
10063Â…Â… Understand how having a budget or a money plan can
10064reduce conflict.
10065Section 3: Communication Is Key
10066Â…Â… Understand the value of discussing individual and
10067shared financial responsibilities.
10068Â…Â… Develop communication strategies for discussing
10069financial issues.
10070Â…Â… Integrate healthy communication about money with
10071parents, friends and others.
10072
10073Before You Begin
10074210 Foundations in Personal Finance High School Edition
10075INTRODUCTION
10076LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10077Measure Your Progress
10078Before you watch the Money and Relationships video, take the following survey to see if you have more Free
10079Spirit or Nerd tendencies. Check the characteristics that best describe you.
10080JOURNAL QUESTION: INTRODUCTION
10081What are your initial thoughts about money and relationships? What do you want to learn
10082about money and relationships?
10083Creative
10084Spontaneous
10085Less organized and not concerned
10086about rules
10087Late for meetings, dates,
10088appointments—most everything
10089Easygoing
10090Number-oriented (enjoy working
10091with numbers)
10092Rule followers
10093Organized
10094On time for everything
10095Slow and steady when making
10096decisions
10097FREE SPIRITS tend to be: NERDS tend to be:
10098Chapter 10: Money and Relationships 211
10099LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10100“Your priorities,
10101passions, goals and
10102fears are shown
10103clearly in the flow of
10104your money.”
10105DAVE RAMSEY
10106“
10107Information not otherwise
10108sourced in this section is
10109based on Dave Ramsey’s
10110personal experience
10111counseling families for
10112more than 20 years.
10113+ 10 CHAPTER
10114Section 1:
10115Understanding Your Money Personality
10116VIDEO 1.1
10117Values and Attitudes
10118HOW DO YOUR VALUES RELATE TO
10119MONEY? If you value security, you
10120are more likely to be a saver. If you
10121value freedom and spontaneity,
10122you’re probably more likely to spend.
10123When handling money, it’s difficult
10124to balance who you are with what
10125you should do. Being aware of your
10126money personality will help you
10127create a plan to accommodate both.
10128When it comes to relating with others
10129about money, it’s important to also
10130consider their values.
10131Men, Women and Money (Over-Generalizing)
10132Men and women generally approach money in very
10133different ways. Of course, not all men and women will
10134relate to money in this way, but there are some patterns
10135that have proved themselves over and over again.
10136The flow of money in a family represents the
101371
101381
10139under which that family operates. Where your
10140money goes is an indication of what is important to you.
10141212 Foundations in Personal Finance High School Edition
10142SECTION 1
10143LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10144“Personal
10145relationships are the
10146fertile soil from which
10147all advancement,
10148all success, all
10149achievement in real
10150life grows.”
10151BEN STEIN
10152American actor, writer
10153and commentator
10154“
10155More teen girls than boys
10156report saving their money
10157for small purchases like
10158music or clothes. (27%
10159boys, 36% girls)
10160More teen boys than girls
10161report saving their money
10162for bigger purchases, like a
10163car. (48% boys, 37% girls)
10164Charles Schwab Teens
10165& Money Survey (2011)
10166$
10167Emergency Fund Savings
10168»»Men: “It’s boring and not
101692
10170enough.”
10171»»Women: “It’s the most
101723
10173key to our
10174financial plan.”
10175Shopping
10176»»Men get good deals by
101774
10178. They want to win.
10179»»Women get good deals by
101805
10181. They enjoy
10182the process.
10183Financial Problems
10184»»Men lose -
101856
10186when money problems
10187pop up, because money usually represents a scorecard
10188to them.
10189»»Women experience
101907
10191or even
101928
10193when
10194money problems arise. With women, money usually
10195represents
101969
10197.
10198JOURNAL QUESTION: VIDEO 1.1
10199Have you ever witnessed money affecting a relationship close to you?
10200Chapter 10: Money and Relationships 213
10201LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10202HOW TEENS LEARN TO
10203MANAGE MONEY
10204• 82% Parents
10205• 65% Real-Life Experience
10206• 49% School
10207Charles Schwab Teens
10208& Money Survey (2011)
10209$
10210FINANCIAL CONTRACTS
10211AND RESPONSIBILITIES
10212A lease is a contractual
10213arrangement calling for
10214the lessee (user) to pay
10215the lessor (owner) for the
10216use of property. A more
10217common term is rental
10218agreement.
10219Contracts or legal
10220documents not only
10221define the legal rights or
10222privileges of the parties
10223involved, but also define
10224the duties and obligations
10225of the parties. Contracts
10226and written agreements
10227are “binding documents,”
10228which when properly
10229written and signed become
10230enforceable by law.
10231+
10232Section 2: Marriage and Money
10233VIDEO 2.1
10234It takes teamwork! If men and women
10235are so different, who is supposed to
10236do the financial decision making in
10237a marriage? BOTH! Handling money
10238is the responsibility of both people
10239in a relationship. Although one
10240person might have a natural gift for
10241budgeting and working with numbers,
10242the decision making has to be done
10243together. Communication, teamwork
10244and consistency are all important
10245elements of handling family finances.
10246»»The number-one cause of divorce in America is money
1024710
10248. If it’s the number-one problem, that means it
10249is also the number-one opportunity to improve a marriage.
10250»»When you agree on your spending, that means that you
10251also agree on your value system.
10252»»The
1025311
10254likes doing the budget because it gives them
10255control, and they feel like they are taking care of loved ones.
10256»»The
1025712
10258feels controlled, not cared for,
10259and can appear irresponsible to the Nerd.
10260In a marriage, you are financially
10261accountable to one another. That’s
10262why having a monthly budget is
10263so important. Not only does it tell
10264your money what to do, but it also
10265represents two people agreeing on
10266what they want their money to do.
10267JOURNAL QUESTION: VIDEO 2.1
10268Would you describe yourself as a Nerd or a Free Spirit when it comes
10269to handling money? Explain your answer.
10270214 Foundations in Personal Finance High School Edition
10271SECTIONS 2 & 3
10272LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10273According to a recent
10274Charles Schwab Teens &
10275Money Survey (2011), 9 out
10276of 10 teens say they were
10277“affected by the recession,”
10278causing major shifts in
10279perspective that include
10280a greater appreciation
10281for what they have and an
10282increased awareness of
10283financial hardship.
10284Section 3: Communication Is Key $
10285VIDEO 3.1
10286The Budget Committee Meeting
10287»»The budget committee meeting is a great way to learn
10288how to communicate and avoid conflict when it comes to
10289money and marriage.
10290»»The Nerd should be the one to prepare the budget, but the
10291decision making must be done by both people.
10292»»Remember the basics of budgeting: You spend every
10293dollar on paper before the month begins. Every dollar has
10294a name or a purpose.
10295Will My Boyfriend’s Credit Score Affect Me?
10296“My boyfriend’s credit is in bad shape, and we’re thinking about getting
10297married someday. Will his bad credit rating affect mine? My credit is in
10298good shape right now.”
10299DAVE’S ANSWER: Marrying someone with a bad
10300credit rating will not affect your score. In other
10301words, the black marks on his credit rating don’t
10302jump across the aisle onto your report as soon
10303as he slips the ring on your finger.
10304After you’re married, your husband will be listed
10305as “spouse” on your report. Then, if they pull
10306your report for any reason, they’ll see that half
10307of your “team” has had some problems in the
10308past. When the two of you decide to buy a home,
10309it may be difficult if there are still problems with
10310his credit report.
10311But the big issue here is that you seem to have
10312differing views on money management. Make sure
10313you go through premarital counseling together
10314and begin the process of working together to make
10315monthly budgets. If you get married, money is
10316going to be a big part of your lives for a long time.
10317Agreeing on your goals now will set the foundation
10318for your dreams.
10319Chapter 10: Money and Relationships 215
10320LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10321PRACTICAL TIPS FOR
10322COMMUNICATING WITH
10323OTHERS ABOUT MONEY
103241. Listen. Communicating
10325with others isn’t just
10326about expressing
10327your own wants and
10328needs—it’s also about
10329listening to what others
10330want and need.
103312. Pick the right time
10332and place. Starting a
10333conversation with your
10334mom or dad two minutes
10335before they need to
10336leave for work is not
10337ideal. Make sure there
10338is time for both of you
10339to have a relaxed and
10340complete conversation.
103413. Be honest. When
10342it comes to money
10343and relationships,
10344honesty is key.
103454. Seek counsel. You’re
10346young, and there will
10347be money mistakes
10348in your future. One
10349of the best ways to
10350avoid these mistakes
10351is to seek advice from
10352trusted adults—even
10353if it’s not the answer
10354you want to hear.
103555. Communicate your
10356money goals. Let your
10357parents and others
10358close to you know
10359about your goals.
10360Doing this will help
10361provide accountability
10362and encouragement
10363along the way.
10364+
10365How to Talk to Your Parents About Money
10366Some of you have parents who pay for everything. Others
10367have parents who won’t give you a dime—if you want
10368something, even if it’s important, it’s your responsibility.
10369The rest of you may have parents who fall somewhere in
10370the middle.
10371You can’t control your parents, but what you can do is
1037213
10373to them. If you want to learn how to manage money
10374before taking on the bills and responsibilities of an adult, you
10375need to be in open communication with your parents.
10376Talk about your
1037714
10378. Share your thoughts on money,
10379what you want to start paying for, and the things you may
10380need help paying for.
1038115
10382your parents’ decisions. Don’t beg or
10383manipulate. The goal here isn’t to get more money out of your
10384parents. Instead, it’s to become responsible and independent
10385with the money you have.
10386Singles and Money
10387It won’t be long before you’re an adult
10388managing your own money and
10389paying your own bills. You’ll find that
10390managing your money alone creates
10391some unique challenges. You go from
10392being accountable to your parents to
10393making all your choices on your own,
10394which can make it easy to get off track
10395when it comes to your financial goals.
10396Single adults need to be proactive
10397about having financial accountability
10398in their lives.
10399»»
1040016
10401and fatigue can lead to poor
10402money management. Young singles who are in college
10403or just getting started in their career typically pour all
10404of their time and energy into that. It’s easy to let your
10405216 Foundations in Personal Finance High School Edition
10406SECTION 3
10407LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10408“When you learn to
10409respect others, you
10410will see yourself
10411improve in selfesteem,
10412happiness
10413and fulfillment.”
10414SHARON RAMSEY
10415“
10416MONEY TOPICS TEENS
10417WOULD LIKE TO TALK
10418ABOUT WITH THEIR
10419PARENTS
104201. How to invest money
104212. Their career aspirations
104223. How to budget money
10423+
10424Budget
10425Builder
10426Is your money personality
10427and value system evident
10428in your budget? Go to
10429foundationsU.com/10 for
10430your next budget lesson.
10431busy life keep you from reconciling your account, much
10432less writing a budget each month. If you let this happen,
10433financially you’ll end up just treading water and not
10434going anywhere. Even with a tight schedule, managing
10435your money must remain a priority.
10436»»Beware of
1043717
10438buying, which can be brought
10439on by
1044018
10441or even by the “I owe it to myself”
10442syndrome. With no one’s opinion or input to worry about,
10443single adults can rationalize almost any expense. If
10444you’re single, you have a greater responsibility to manage
10445your money because no one is looking over your shoulder.
10446It’s up to you!
10447»»A written plan gives the single person empowerment,
10448self-accountability and
1044919
10450. You must do a
10451budget every month! A written plan gives you peace of
10452mind and keeps you on track to reach your goals.
10453»»Develop an
1045420
10455relationship. This is
10456someone with whom you discuss major
1045721
10458and your budget. Accountability friends must love you
10459enough to be brutally honest and promise to do so for
10460your own good.
10461JOURNAL QUESTION: VIDEO 3.1
10462How will this chapter change the way you talk to your parents about money?
10463Chapter 10: Money and Relationships 217
10464LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10465Chapter Summary
10466Check for Understanding
10467Now it’s time to check your learning! Go back to the Before You Begin section for this chapter and place a
10468checkmark next to the learning outcomes you’ve mastered. Review the Measure Your Progress section to
10469see if any of your answers have changed.
10470Big Ideas
10471The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
10472and think about how what you’ve learned will affect your current and future decisions. Then, in the space
10473provided, write an “I believe” statement for each of the Big Ideas.
10474»» How you handle money will affect your relationships.
10475»» Know your money personality.
10476»» Communication is key!
10477218 Foundations in Personal Finance High School Edition
10478RECAP & REVIEW
10479LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10480Take Action Challenge
10481Reflect on your self-portrait. Think about your money personality and values. Now consider your spending
10482and saving habits. In the space below, write about how your money personality and values relate to how you
10483handle your money.
10484Build On What You’ve Learned
10485Draw a picture of yourself in the space below (a stick figure will work fine). Label your drawing with elements
10486of your money personality and values. Compare your drawing with your peers’. In what ways are your money
10487personalities and values similar? In what ways are they different?
10488Chapter 10: Money and Relationships 219
10489LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10490Money in Review
10491a Nerd
10492b Value System
10493c Time Poverty
10494d Free Spirit
10495e Accountability
104961. _____ A person who is picky about budgeting
10497and details
104982. _____ The quality or state of being responsible,
10499liable or answerable
105003. _____ A situation in which a person is lacking
10501time, which leads to stress
105024. _____ A person who thinks that everything
10503will work out fine and typically hates to
10504deal with the details
105055. _____ A person’s priorities, beliefs and
10506standards that affect how he or she
10507views the world
10508Matching
10509Match the following terms to the correct definition below.
10510Illustration
10511Draw a picture representation of each of the following terms.
10512Conflict Respect
10513220 Foundations in Personal Finance High School Edition
10514RECAP & REVIEW
10515LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10516Multiple Choice
10517Circle the correct answer.
105186. Communicating about financial issues and
10519goals in a relationship can reduce conflict.
10520a True
10521b False
105227. When it comes to managing money, your
10523personality and values have no importance.
10524a True
10525b False
105268. Which of the following present challenges
10527to managing money as a single adult?
10528a Time poverty
10529b Being accountable to no one
10530c Impulse buys
10531d All of the above
105329. When it comes to communicating with
10533others about money, you should not:
10534a Listen
10535b Manipulate
10536c Pick the right time and place
10537d Be honest
1053810. When married couples do not share goals
10539and values in how they manage money,
10540which of the following can occur?
10541a Conflict
10542b Divorce
10543c Stress
10544d All of the above
10545Short Answer
10546Respond in the space provided.
1054711. Describe some general differences in
10548how men and women relate with money.
1054912. How does communication about
10550important financial matters in households
10551reduce conflict?
1055213. How does having a budget reduce conflict
10553in relationships?
1055414. Summarize challenges you’ll face managing
10555money as a young single adult.
1055615. Summarize ways that you can overcome the
10557challenges you listed in question 14.
10558Chapter 10: Money and Relationships 221
10559LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10560What do other high
10561school students know
10562about taxes?
10563We asked other high school students
10564how they think taxes will affect them.
10565“Many people struggle with
10566understanding how they work
10567(like me).”
10568Junior, Louisiana
10569“We all have to pay them, and
10570sometimes we get taxes back.”
10571Sophomore, Texas
10572“They are taken out of every
10573paycheck.”
10574Senior, Minnesota
10575“You pay taxes on everything you
10576own, but then they give you a tax
10577return or something like that.”
10578Junior, Illinois
1057911
10580CHAPTER
10581LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10582Careers
10583and Taxes
10584IT MIGHT SEEM overwhelming to consider
10585all the career opportunities in the world
10586today and have to land on just one. But now is
10587an important time to start selecting, preparing
10588and planning for your future career.
10589Obviously, income is important. But when it
10590comes to careers, it’s not just about money.
10591The goal of your professional life should be to
10592devote yourself to your passion and calling,
10593finding somewhere and some way to make a
10594living by working in your strengths.
10595*Junior Achievement Teens and Careers Survey 2012
10596of teens do not know
10597anyone who works
10598at their dream job.*
1059935%
10600of teens said their
10601chosen career will
10602require four or more
10603years of college.*
1060466%
10605UNIT 4: CHAPTER 11
10606LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10607Key Terms
10608Get to know the language of money.
10609»» Earned income: Any income (wages/
10610salary) that is generated by working
10611»» Income tax: Tax paid out by anyone who
10612earns an income
10613»» Passive income: Money earned on a
10614regular basis with little or no effort
10615required to maintain it. Some things that
10616produce passive income are real estate,
10617intellectual property like books or
10618internet content, or a business in which
10619the owner is not actively involved.
10620»» Personal branding: The process by
10621which we “market” ourselves to others;
10622involves highlighting personal strengths,
10623interests and unique qualities and
10624identifying goals
10625»» Portfolio income: Income generated by
10626selling an investment at a higher price
10627than you paid for it
10628»» Property taxes: Taxes paid by anyone
10629who owns property such as land, a
10630home or commercial real estate
10631»» Résumé: A brief account of one’s
10632professional or work experience and
10633qualifications, often submitted with an
10634employment application
10635»» Sales tax: Tax on goods and services
10636that goes to your state or local
10637government
10638»» Social Security: A federal insurance
10639program funded by taxpayer dollars
10640that provides benefits to people who
10641are retired, unemployed or disabled
10642Learning Outcomes
10643Once you’ve completed this chapter’s videos, you will be asked to
10644return to this list of learning outcomes and place a checkmark
10645next to the items you’ve mastered.
10646Section 1: Self-Assessment
10647Â…Â… Identify your personal strengths and weaknesses.
10648Section 2: Goal Setting
10649Â…Â… Clarify your educational and career goals.
10650Â…Â… Understand the components of goal setting.
10651Section 3: You Won’t Love the Entry Level
10652Â…Â… Understand the value of entry-level jobs.
10653Â…Â… Identify valuable work attributes outside of your general
10654skill set.
10655Section 4: Best Practices of Successful People
10656Â…Â… Identify the best practices of successful people.
10657…… Develop a résumé.
10658Â…Â… Analyze the interview process and develop personal
10659interview skills.
10660Section 5: Income and Taxes
10661Â…Â… Describe factors affecting take-home pay.
10662Â…Â… Identify sources of personal income.
10663Â…Â… Identify different types of taxes.
10664Â…Â… Be familiar with various documents for reporting taxes.
10665Â…Â… Analyze the costs and benefits of paying taxes and the
10666cost of government services.
10667
10668Before You Begin
10669224 Foundations in Personal Finance High School Edition
10670INTRODUCTION
10671LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10672Measure Your Progress
10673The majority of this chapter is about choosing a career that blends your strengths, interests, abilities and
10674personality traits. Whether you are going to college or straight into the workforce, you will need to be able to
10675answer some basic questions about yourself. The answers to these questions will not only help guide you in
10676your career path, but they will prepare you for interviews as well. Take some time to answer these questions:
10677JOURNAL QUESTION: INTRODUCTION
106781. What are your interests?
106792. What are your career goals?
106803. How would you describe yourself?
106814. Describe your ability to work as part of a team.
10682Chapter 11: Careers and Taxes 225
10683LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10684“The mindset today
10685is you have to know
10686who you are and
10687how you function in
10688the market. That’s
10689the only security
10690you have.”
10691DAVE RAMSEY
10692“
10693• 43% of teens are “very
10694confident” they will
10695someday have their
10696dream job.
10697• 71% of teens would
10698consider giving up their
10699dream job for one that
10700paid a higher salary.
10701Junior Achievement Teens
10702and Careers Survey 2012
10703$ Section 1: Self-Assessment
10704VIDEO 1.1
10705A Message From Dave
10706THE JOB MARKET
10707is changing, so you
10708must be prepared to
10709change with it. My
10710grandfather was an
10711incredible man. He
10712was one of my heroes, actually. He
10713entered the workforce during one of
10714the most difficult periods in American
10715history, the Great Depression. Life
10716wasn’t easy back then, but he enjoyed
10717his work, loved his family, and poured
10718himself into both. He started in the
10719accounting department at Alcoa,
10720an aluminum company, as a very
10721young man, and over time he grew into
10722one of their head cost accountants.
10723Grandpa stayed with Alcoa for 38
10724years, until the day he retired from
10725the workforce. He left with a gold
10726watch and a pension, as well as the
10727satisfaction of knowing he’d devoted
10728his entire working life to a single
10729company. Those days are gone in
10730America. Companies, products,
10731services, startups and shutdowns
10732are moving faster today than ever
10733before. The rate of change going on
10734in the workplace is mind-blowing!
10735My grandfather, God love him, would
10736be completely out of place in today’s
10737market. Throughout this course, we
10738focus almost entirely on the “outgo.”
10739That is, we budget and plan how to
10740spend and save our money. That’s what
10741the Five Foundations are all about,
10742right? It’s how we tell our money what
10743to do once it leaves our hands. In this
10744chapter we switch gears and examine
10745your income.
1074611 CHAPTER
10747226 Foundations in Personal Finance High School Edition
10748SECTION 1
10749LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10750“Winning isn’t
10751everything, but
10752wanting to win is.”
10753VINCE LOMBARDI
10754Former NFL coach
10755“
10756“Just because you’re
10757good at something
10758doesn’t make it
10759a strength. You also
10760must have a passion
10761for what you’re
10762doing—that’s what
10763qualifies it as
10764a strength.”
10765MARCUS BUCKINGHAM
10766Author
10767“
10768Consider This When Choosing a Career Path
10769»»Deciding on a career is not as hard as you think.
10770Ask yourself: What do you love to do? What are you
107711
10772good at? What hobbies and interests
10773do you already have that you could turn into a career?
10774»»You can experiment by getting a part-time job,
10775volunteering, or just
107762
10777someone on a job you
10778are interested in. While you are there, ask questions!
10779»» Invest time in
107803
10781your decision rather than
10782spending time
107834
10784it later.
10785»»Remember, just because a particular job pays well
10786doesn’t mean it will be something you
107875
10788.
10789»»Don’t get money and happiness
107906
10791!
10792»»The job market constantly changes—and so do
107937
10794.
10795Even if you decide the career you chose doesn’t fit you
1079610 years from now, it’s not the end of the world. It’s
10797actually
107988
10799.
10800»»What’s most important is that you do what you love;
10801do what you’re naturally good at. If you do that with
108029
10803, you won’t have to worry about money.
10804Chapter 11: Careers and Taxes 227
10805LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10806“It’s not how much
10807money we make that
10808ultimately makes us
10809happy between nine
10810and five. It’s whether
10811our work fulfills us.”
10812Outliers: The Story of Success
10813“
10814Young adults go through
10815an average of seven jobs
10816during their 20s.
10817Society for the Study
10818of Emerging Adulthood
10819$
10820“It took me a long
10821time to learn that
10822dreamers are a dime
10823a dozen. The world is
10824lousy with dreamers.
10825Doers? They’re rare.
10826They’re the ones
10827who actually change
10828the world.”
10829JON ACUFF
10830“
10831Identify Your Personal Strengths
10832and Weaknesses
10833The average worker today will have 10
10834different jobs by age 40 and could have
10835as many as 20 different jobs during his
10836or her working lifetime. Unlike past
10837generations of Americans, the modern
10838workforce finds security not in the
10839longevity of their employment with a
10840single, stable company, but rather in
10841understanding who they are and what
10842they want to be doing. The focus has
10843shifted away from the big corporations
10844and toward the individual’s strengths
10845and passions.
10846VIDEO 1.2
10847A Message From Jon
10848How to Stay Positive
10849Everyone has them:
10850those nagging voices
10851of fear and doubt. They
10852only get loud when you
10853do things that matter.
10854And since you’re going to do a lot of
10855things that matter, you can expect
10856some voices headed your way. So what
10857can you do? You’re going to beat your
10858voices by doing three things:
108591. 10 them down. Voices are invisible bullies,
10860and they hate when you make them visible. The best way
10861to do that is to write them down in a simple notebook.
10862They can’t stand to be documented, because the minute
10863they are, you can see how stupid they are. Lies hate the
10864light of day.
10865JOURNAL QUESTION: VIDEO 1.1
10866What are some of your personal strengths and weaknesses?
10867228 Foundations in Personal Finance High School Edition
10868SECTION 1
10869LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10870“Hard work is a
10871prison cell only
10872if the work has no
10873meaning.”
10874MALCOLM GLADWELL
10875Best-selling author and speaker
10876“
10877“The future belongs
10878to those who believe
10879in the beauty of their
10880dreams.”
10881ELEANOR ROOSEVELT
10882Former First Lady of
10883the United States
10884“
108852. 11 them with truth. Never argue with a
10886voice. That’s a never-ending tangled discussion you
10887won’t escape from any time soon.
108883. 12 your voices. Do you know what fear and
10889doubt fear? Community. One of fear and doubt’s chief
10890aims is to make you feel alone—like you’re the only one
10891who feels a certain way. Fear wants to isolate you. As
10892long as you keep your fear to yourself, no one can tell you
10893the truth about it.
10894Build Your Brand
10895Most people know what a brand is.
10896Who makes your favorite shoes or soft
10897drink? But do you know why branding
10898is important when selling a product?
10899Companies spend a lot of money
10900on developing their specific brand
10901message. A brand is meant to tell the
10902“story” of a product through creative
10903packaging and advertising in order to
10904distinguish it from the competition.
10905Personal branding has the same
10906purpose. It’s simply a process of
10907identifying your skills, experiences
10908and strengths and marketing those
10909in the most effective way. You want
10910to leverage your education and
10911personal attributes for success. For
10912example, say you spend a semester of
10913college studying Spanish in a thirdworld
10914country. You would want to be
10915intentional about how you market
10916that unique experience on your
10917résumé. What you learned and how
10918you grew as an individual were just
10919as important as the skill of speaking
10920a foreign language.
10921JOURNAL QUESTION: VIDEO 1.2
10922Write down what your negative voice says about you. Refute that voice
10923with the truth and share it with others.
10924Chapter 11: Careers and Taxes 229
10925LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
10926The DISC is a popular
10927system originally based on
10928the work of an American
10929psychologist named
10930William Moulton Marston
10931in the 1920s.
10932TEST YOURSELF
10933Go to foundationsU.com
10934and take the DISC
10935Personality Profile.
10936+
10937“The way to succeed
10938is to identify your
10939strengths and
10940weaknesses, then
10941seek goals that fit
10942those strengths
10943and weaknesses
10944using tactics and
10945strategies that
10946take advantage
10947of your strengths
10948and sidestep your
10949weaknesses.”
10950JOHN T. REED
10951American businessman,
10952author and investor
10953“
10954VIDEO 1.3: THERE ARE NO FILL-INS FOR THIS SECTION
10955Just Because You’re Good at Something
10956Doesn’t Make It a Strength
10957According to Marcus Buckingham,
10958author of Go Put Your Strengths
10959To Work, “most people think your
10960strengths are what you’re good at,
10961and your weaknesses are what you’re
10962bad at.” He explains that this isn’t a
10963good way to measure your strengths
10964and weaknesses. There may be a lot
10965of things that you’re good at but hate
10966doing. Just because you’re good at
10967something doesn’t make it a strength.
10968You also must have a passion for what
10969you’re doing—that’s what qualifies it
10970as a strength. “A better definition of
10971a strength,” says Buckingham, “is an
10972activity that makes you feel strong. And
10973a weakness is an activity that makes
10974you feel weak. Even if you’re good at
10975it, if it drains you, that’s a weakness.”
10976You Never Outgrow Who You Are
10977Even though your knowledge and
10978work experience will change
10979throughout your life, you’ll never
10980outgrow who you are. Everyone has
10981natural tendencies, strengths and
10982weaknesses that are intertwined with
10983who they are as people. You cannot
10984leave it up to someone else to tell you
10985what you should do with your life—not
10986your parents, your friends or your
10987teachers. Your career must engage
10988your strengths, not silence them. For
10989example, if you have high energy and
10990love interacting with others, then a
10991job that requires you to sit at a desk
10992all day where you are isolated from
10993others probably would not be a good
10994fit for you.
10995JOURNAL QUESTION: VIDEO 1.3
10996Which careers compliment your passions and strengths?
10997230 Foundations in Personal Finance High School Edition
10998SECTION 1
10999LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11000DISC Personality Profile
11001Understanding your own strengths and weaknesses should be a top priority.
11002Remember, people who only work for money are miserable because there is no
11003fulfillment or meaning in their careers. You must find something that blends
11004your skills, abilities, personality traits, values, dreams and passions.I
11005S
11006D
11007C
11008Implementor Conductor Persuader
11009Promoter Relator
11010Analyzer
11011Coordinator
11012Supporter
11013FAST
11014SLOW
11015TASKS PEOPLE
11016Stabilizing
11017CHARACTERISTICS
11018Loyal; Dislikes conflict; Amiable;
11019Calm; Can seem unenthusiastic;
11020Understanding; Team player
11021CONCERNED WITH
11022Why
11023ANIMAL
11024Golden Retriever
1102540% POPULATION
11026Cautious
11027CHARACTERISTICS
11028Detail-oriented; Can seem rigid;
11029Analytical; Resistant to change;
11030Logical; Can be too serious
11031CONCERNED WITH
11032How
11033ANIMAL
11034Beaver
1103525% POPULATION
11036Decisive
11037CHARACTERISTICS
11038Driver; Results-oriented;
11039Overlooks details; Focuses on the
11040bottom line; Can hurt feelings
11041CONCERNED WITH
11042When
11043ANIMAL
11044Lion
1104510% POPULATION
11046Interactive
11047CHARACTERISTICS
11048Expressive; Can lose focus;
11049Persuasive; Good at speaking;
11050Likes entertaining; Impulsive
11051CONCERNED WITH
11052Who
11053ANIMAL
11054Otter
1105525% POPULATION
11056Chapter 11: Careers and Taxes 231
11057LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11058“What causes you to
11059hit goals is not the
11060things you’re willing
11061to do to accomplish
11062them. It’s the things
11063you’re willing to
11064sacrifice.”
11065DAVE RAMSEY
11066“
11067SET YOUR GOALS!
11068In which areas of life do you
11069most need to set goals? Go
11070to foundationsU.com/wheel
11071to take Zig Ziglar’s Wheel
11072of Life Quiz.
11073+ Section 2: Goal Setting
11074VIDEO 2.1
11075Goal-Setting Categories
11076It is important to have a goal for each area of your life.
11077»»Career
11078»»Financial
11079»» Spiritual
11080»»Physical
11081»»Education
11082»»Family
11083»» Social
11084What Kind of Job Do You Want After Graduation?
11085Take a look at the graph below to see what fields of employment teens are most
11086interested in.
1108735% »
1108825% »
1108915% »
110905% »
1109130% »
1109220% »
1109310% »
1109431%
1109518%
1109630%
1109714%
1109811%
1109923%
1110013%
1110116%
11102Science,
11103Technology,
11104Engineering
11105or Math
11106Medical or
11107Dental
11108Arts Public
11109Service
11110Business Start
11111My Own
11112Business
11113Sports Another
11114Field
111152012 Teens and Careers Survey by Junior Achievement and the ING Foundation
11116232 Foundations in Personal Finance High School Edition
11117SECTION 2
11118LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11119OTHER IMPORTANT
11120ELEMENTS OF
11121GOAL SETTING
11122• Make sure you have
11123some accountability.
11124Share your goals with
11125the people closest
11126to you. Give them
11127an opportunity to
11128encourage you along
11129the way.
11130• Eliminate distractions.
11131It’s important not to let
11132yourself get sidetracked.
11133• Write goals in the
11134positive, not the
11135negative. Focus on what
11136you’re going to achieve,
11137not what you’re going to
11138give up.
11139• Read your goals on a
11140regular basis. Post them
11141where you can see them.
11142• Make your goals
11143challenging, but
11144attainable. For longterm
11145goals, try breaking
11146them into smaller steps.
11147Is walking from fuzzy
11148goal to real action easy to
11149do? Not always. But the
11150clearer your goals are,
11151the more likely you are to
11152actually reach them.
11153Ready to be an effective
11154goal setter? Go to
11155foundationsU.com/goals to
11156use our Goal Tracker tool.
11157+
11158Goal Guidelines
11159How do you take a goal from fuzzy and undefined to crystal
11160clear and actionable? Your goals must:
11161»»Be 13. How will you know you’ve
11162achieved your goal? Give yourself a time limit and some
11163other measure of achievement.
11164»»Be 14. Don’t just say, “I am going to save for a
11165car.” Have a specific car and a specific price in mind.
11166»»Have 15. If your goal has no end
11167in sight, you’ll get discouraged. Plan to accomplish your
11168goals by a specific date.
11169»»Be 16 goals. Example: If you want to be a doctor
11170and, therefore, you go to medical school, great! If your
11171parents want you to be a doctor and, therefore, you go to
11172medical school, I don’t want to be your patient! You may
11173accomplish a goal that someone else has set for you, but
11174you won’t be passionate about it.
11175»»Be 17 down. Writing your goals down gives
11176you clarity and focus. A written goal is also a powerful
11177reminder that you can use to keep you on track.
11178JOURNAL QUESTION: VIDEO 2.1
11179Describe a recent goal you set for yourself. What did you do to make
11180reaching that goal a success?
11181Chapter 11: Careers and Taxes 233
11182LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11183MORE THAN JUST
11184A SUMMER JOB
11185In recent years fewer and
11186fewer teenagers have
11187been working during
11188the summer months.
11189With youth employment
11190declining, young people
11191are losing the opportunity
11192to develop important
11193life skills that will help
11194them climb the corporate
11195ladder in later years. It’s
11196these “first jobs” that help
11197young people develop the
11198perseverance, humility,
11199flexibility, hard work,
11200respect, teamwork and
11201commitment that make
11202one successful in an adult
11203career. Something to
11204consider!
11205+ Section 3:
11206You Won’t Love the Entry Level
11207VIDEO 3.1
11208What Will Life Be Like When You Move Out?
11209Maybe you’re assuming that when
11210you’re on your own, you’ll have as big
11211of a house and as nice of a car and
11212take the same kind of vacations as
11213your parents. And you aren’t alone;
1121459% of your peers believe they will
11215do even BETTER financially than
11216their parents. But here’s the deal: Your
11217parents didn’t have those things when
11218they were starting out. Just ask them
11219what life was like when they were
11220starting out. Listen to the story of
11221their humble beginnings—their first
11222apartment or car or where they went
11223out to eat for dinner.
11224The truth is—having the same lifestyle as your
11225parents won’t be automatic or immediate.
11226»»Average rent on a one-bedroom apartment in most cities
11227is about $
1122818
11229a month! Water and electricity—which
11230are kind of important—we’re talking $200 a month. Food
11231will cost you about $250 a month—and yes, that’s for just
11232one person. That’s $1,200 a month already!
11233»»College graduates who actually get a job in their field
11234out of college might start out with $35,000 to $45,000
11235a year. But if you factor in the graduates who are
11236unemployed or underemployed because they can’t find
11237work in their career field, the average salary drops to
11238around $
1123919
11240.
11241»»Don’t expect to see all of that $27,000 come home with
11242you. That’s because
1124320
11244will eat up 20 to 25% of
11245your paycheck.
11246234 Foundations in Personal Finance High School Edition
11247SECTION 3
11248LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11249“Choose a job you love,
11250and you will never
11251have to work a day in
11252your life.”
11253CONFUCIUS
11254Chinese teacher, politician
11255and philosopher
11256“
11257“In order to succeed,
11258your desire for
11259success should be
11260greater than your
11261fear of failure.”
11262BILL COSBY
11263American comedian,
11264actor and author
11265“
11266»»That only leaves you about $600 a month for things like
11267transportation, clothes, cable and a cell phone—not
11268to mention saving,
1126921
11270and having fun with
11271your friends.
11272»»You might think having a full-time job means you’ll be
11273able to go out and buy whatever you want. But that’s just
11274not real life. That’s why it’s crucial to know how to
1127522
11276now!
11277Someday you’ll think back to your
11278first car with one working window
11279or your thrift-store coffee table and
11280you’ll laugh—because they were pieces
11281of junk, sure, but also because those
11282little sacrifices paved the way for a
11283great future.
11284It takes time and being smart with
11285your money to build wealth. So get
11286an education, budget your income,
11287save for big items, and invest early for
11288your future. As you move up in your
11289career, your income will grow—and
11290if you do what we teach, you will win
11291with money.
11292JOURNAL QUESTION: VIDEO 3.1
11293Describe a work experience that has helped you develop valuable career
11294attributes such as a strong work ethic, respect, commitment, etc.
11295Overtime and Extra Jobs
11296Many people work extra jobs or
11297overtime in order to pay off debt. If
11298you have debt, attack it now by picking
11299up extra work opportunities. Once you
11300are out of debt, or if you are wise and
11301avoid debt altogether, these jobs will
11302be a thing of the past.
11303Chapter 11: Careers and Taxes 235
11304LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11305“What I know is that
11306if you do work that
11307you love and work
11308that fulfills you, the
11309rest will come. I
11310truly believe that the
11311reason I’ve been able
11312to be so financially
11313successful is because
11314my focus has never,
11315ever for one minute
11316been money.”
11317OPRAH WINFREY
11318American television host,
11319actress and philanthropist
11320“
11321“Money won’t make
11322you happy . . . but
11323everybody wants
11324to find out for
11325themselves.”
11326ZIG ZIGLAR
11327American author and
11328motivational speaker
11329“
1133013% of teens want to
11331start their own business
11332someday.
11333Junior Achievement Teens and
11334Careers Survey 2012
11335$
11336Section 4:
11337Best Practices of Successful People
11338VIDEO 4.1: THERE ARE NO FILL-INS FOR THIS SECTION
11339Take notes in the spaces provided.
11340Five Things Successful People Always Do
113411. They start. _ __________________________________________
113422. They fight fear. _______________________________________
113433. They ignore haters. _ __________________________________
113444. They stay humble and hungry. _________________________
113455. They give to others. _ __________________________________
11346A Message From Dave on Contentment
11347Over the years, I’ve
11348been able to talk to a
11349lot of men and women
11350at a l l d i f ferent
11351income levels and at
11352all different levels of
11353wealth. I’ve met people making
11354$150,000 who are flat broke and
11355up to their eyeballs in debt, and
11356I’ve met people making $50,000
11357who are debt-free, building wealth,
11358and winning with money. How’s
11359that possible? How can someone
11360be winning at $50,000 while
11361someone else is losing—big time—at
11362$150,000? The answer may surprise
11363you. I think this one thing is so
11364fundamental that it’s impossible to
11365be successful without it. I’m talking
11366about contentment.
11367Five Lands on the Road to Awesome
113681. Learning _____________________________________________
113692. Editing _______________________________________________
113703. Mastering ____________________________________________
113714. Harvesting ___________________________________________
113725. Guiding ______________________________________________
11373236 Foundations in Personal Finance High School Edition
11374SECTION 4
11375LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11376KEYS TO MAKING
11377MENTORSHIP A REAL
11378BENEFIT
11379• Choose wisely. The goal
11380of this relationship is
11381to improve your habits
11382and values as you
11383work toward your goals.
11384Often, your mentor will
11385be older than you and in
11386the next stage of life, so
11387you can gain from their
11388experiences.
11389• Take action. If all you
11390do is meet with your
11391mentor, you’re not
11392going to get much from
11393the relationship. Even
11394the best mentoring
11395relationship is a failure if
11396you don’t follow through
11397and act on what you’ve
11398learned.
11399• Change it up. You may
11400find that you need
11401different mentors as
11402you progress through
11403different stages of life.
11404One last thought:
11405Mentoring is a cycle. Keep
11406it going and return the
11407favor of all the wisdom you
11408received from your mentor
11409by being willing to become
11410a mentor yourself someday.
11411+
11412“As iron sharpens
11413iron, so one person
11414sharpens another.”
11415Proverbs 27:17
11416“
11417VIDEO 4.2: THERE ARE NO FILL-INS FOR THIS SECTION
11418A Story About Mentorship
11419““I was lucky to have the right heroes. Tell me who your heroes are
11420and I’ll tell you how you’ll turn out to be. The qualities of the one
11421you admire are the traits that you, with a little practice, can make
11422your own, and that, if practiced, will become habit forming.”
11423WARREN BUFFETT, Legendary investor
11424Warren Buffett, billionaire and
11425chairman of Berkshire Hathaway,
11426knows the value of a mentor. Buffett’s
11427father, a stockbroker, was his first
11428mentor. He guided young Warren as
11429he spread his business and investing
11430wings at an early age.
11431Buffett’s next mentor was Ben Graham,
11432author of The Intelligent Investor,
11433and Buffett’s professor at Columbia
11434University. Following in the footsteps
11435of these “heroes,” Buffett became one
11436of the wealthiest men in the world,
11437eventually mentoring another one
11438of the wealthiest men in the world,
11439Bill Gates.
11440Whatever your goals in life, if you
11441desire success, find a person who
11442has achieved success and follow in
11443their footsteps.
11444JOURNAL QUESTION: VIDEO 4.1
11445Look back at Jon’s list of “Five Things Successful People Always Do.” Which
11446of these comes naturally to you? Which of these do you struggle with?
11447JOURNAL QUESTION: VIDEO 4.2
11448Describe someone you consider to be a success. What qualities make
11449this person seem successful?
11450Chapter 11: Careers and Taxes 237
11451LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11452TO FIND A JOB, EXPAND
11453THREE CIRCLES
114541. Geography: Be willing to
11455work a greater distance
11456from home or move to
11457another city if necessary.
114582. Industry: Don’t get
11459caught up looking
11460for a specific job title.
11461Be willing to look at
11462related career fields.
114633. Permanence: If a
11464full-time position is not
11465available, be willing to
11466work part time or as a
11467temporary employee.
11468Small circles will limit you,
11469e.g., “I only want to work in
11470advertising in a full-time
11471position in Nashville.”
11472Expand the circles, e.g.,
11473“I will work anywhere in the
11474Southeast, in advertising,
11475marketing or corporate
11476communications
11477and will take part-time
11478contract work.”
11479+
11480Your résumé should include
11481a Results paragraph at
11482the top. This is just one
11483or two lines that highlight
11484something important you’ve
11485accomplished. In high
11486school, your key results may
11487be limited to community
11488service or extracurricular
11489activities. That’s okay!
11490Employers just want to see
11491that you’ve actually done
11492something.
11493+
11494VIDEO 4.3
11495Job Search and Résumé Basics
11496Job Hunting
11497»»Companies do not start out looking for
1149823
11499.
11500They have a specific
1150124
11502, and they need someone
11503to meet it.
11504»»Develop a strategy: Identify your
1150525
11506job/employer
11507and
1150826
11509everything you can about them.
11510Applying for a Job
11511When it is time to contact the
11512company, think of it like starting a
11513new relationship with a person. After
11514you target the companies where you
11515would most like to work, you are going
11516to contact them at least three times.
115171. Introduction
1151827: The primary purpose of an
11519introduction letter is to introduce yourself to a company.
11520This is usually your first point of contact with a business.
115212. Cover letter and résumé: Your cover letter should
11522be specific to the position you are applying for, relating
11523your experience, skills and experience to the position for
11524which you are applying. Your résumé should present your
11525background and skills to an employer.
115263. Phone follow-up: Make sure your initial introduction
11527letter and résumé are followed with more personal
11528contact with the employer.
11529Interviews and jobs come from persistent follow-up and
1153028
11531.
11532238 Foundations in Personal Finance High School Edition
11533SECTION 4
11534LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11535RESULTS
11536Named “Employee of the Month” three times in the past year at Jeffrey’s Grille. Youngest coaching
11537assistant for Lamponia Middle School wrestling team. Saved a life through CPR. More to come.
11538EDUCATION
11539Washington High School
11540Projected graduation date: May 20XX | GPA: 3.4
11541WORK EXPERIENCE
11542YMCA, Lamponia (20XX–present)
11543• Ensured safety of all patrons at the swimming pool
11544• Coordinated swimming instructions for 50 students each summer
11545Jeffrey’s Grille, Lamponia (20XX–present)
11546• Managed prepping station for salads and fries
11547• Provided a clean dining environment by wiping off tables and cleaning dishes
11548VOLUNTEER POSITIONS
11549Coaching Assistant, Lamponia Middle School l Wrestling Program (20XX–20XX)
11550• Exercised quick decision-making skills to coach wrestlers during matches
11551• Planned and instructed practices, including skills training for 32 wrestlers
11552• Prepared facilities for tournaments including coordinating concessions, referees
11553and scorekeepers
11554EXTRACURRICULAR ACTIVITIES
11555Junior Varsity Wrestling Team, Lamponia High School (20XX–present)
11556Iron Man Award
11557Wrestling Clubs
11558Thompson County Wrestling Club, Hopeville Jr. Wrestling Club, Lamponia Wrestling Club
11559JOhN Q. PUbLIC
11560402111 Little Drive | Lamponia, TN 13579
11561johnp@email.com | 555.123.4567
11562Sample Résumé
11563Building a solid résumé is a key step toward landing a job. Take a look at the
11564sample below. What do you see that you might want to add to your résumé?
11565Chapter 11: Careers and Taxes 239
11566LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
1156710 CAREER FIELDS
11568LIKELY TO FLOURISH
11569IN 2020
115701. Data crunching
115712. Counseling
11572and therapy
115733. Scientific research
115744. Computer engineering
115755. Veterinarians
115766. Environmental and
11577conservation science
115787. Some healthcare fields
115798. Management
115809. Finance
1158110. Entrepreneurship
11582usnews.com
11583$
11584VIDEO 4.4
11585Interviews: Dave’s Advice
11586»»Present yourself well. You are the
1158729
11588, so
11589make it the best one available. Be on
1159030
11591, address
11592everyone by
1159331
11594, offer a firm, confident
1159532
11596, and maintain
1159733
11598contact
11599at all times.
11600»»Designate a time to
1160134
11602after the interview
11603—and DO IT!
11604How Can I Land a Job Without Any Experience?
11605“What kind of things can you put on a part-time job application that will
11606make you stand out from everyone else?”
11607DAVE’S ANSWER: Experience is a great thing to
11608have when you’re looking for a job. Every employer
11609wants to know that a potential employee can
11610do the job.
11611But even if it’s your first “real” job, you probably
11612have experience you didn’t think about. Babysitting
11613is great experience. It’s even better if the
11614parents will give you a good recommendation. If
11615parents feel comfortable with you caring for their
11616child, surely a fast-food manager can trust you
11617to flip a few burgers.
11618If you’re in band, hold a seat on the student
11619council, or even play sports, these things can
11620catch a manager’s eye. They all show that you’re
11621willing to work, commit to something, and take
11622on responsibility.
11623JOURNAL QUESTION: VIDEO 4.3
11624What do you think is the most important thing to remember when
11625looking for a job?
11626240 Foundations in Personal Finance High School Edition
11627SECTION 4
11628LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11629“Think beyond
11630your lifetime if you
11631want to accomplish
11632something truly
11633worthwhile.”
11634WALT DISNEY
11635American animator, film
11636producer, entrepreneur and
11637philanthropist
11638“
11639In American culture, too
11640many people spend a
11641lifetime chasing wealth
11642in a career that they hate.
11643Or they work an excessive
11644number of hours every
11645week. “Do not wear
11646yourself out to get rich;
11647have the wisdom to show
11648restraint” (Proverbs 23:4).
11649Do something you love
11650and that is fun for you! If
11651you make a lot of money,
11652great! But if you don’t, at
11653least you will have spent a
11654lifetime doing something
11655that was rewarding. Money
11656should never become your
11657primary motivation.
11658+
11659Interview Basics
11660Before an Interview
11661»»Research the company. You will need to be prepared to
11662answer questions such as, “What do you know about our
11663company?” and “Why do you want to work here?”
11664»»Practice with a friend and prepare to answer commonly
11665asked interview questions (you can research these online).
11666During the Interview
11667»»Dress professionally and be well-groomed.
11668»»Do not slouch or chew gum.
11669»»Arrive 10 to 15 minutes early.
11670»»Be personable. Connect with the interviewer.
11671»»Be yourself. You will be perceived as authentic
11672and trustworthy.
11673»»Be organized. Bring extra copies of your résumé and
11674a notepad to jot things down.
11675»»Keep it positive. Never say anything negative about past
11676employers or work experiences.
11677»» Show interest and be enthusiastic. Ask questions that
11678build on your interview discussion.
11679Chapter 11: Careers and Taxes 241
11680LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11681TAXPAYER OBLIGATIONS,
11682INTEREST AND
11683PENALTIES
11684As a taxpayer, there are
11685certain legal obligations
11686you are expected to meet
11687when managing your taxes.
11688If you fail to pay your taxes
11689on time, it can result in
11690IRS penalties, and in turn,
11691compounding interest that
11692can make your tax debt
11693much larger. The IRS has
11694the power to garnish your
11695pay, take money from your
11696bank account, or place a
11697lien against or seize your
11698personal property.
11699+
11700“All misfortune is but
11701a stepping stone to
11702fortune.”
11703HENRY DAVID THOREAU
11704American author, poet
11705and abolitionist
11706“
11707Interview Basics (Continued)
11708»»Do not bring up the issue of salary during your first
11709interview. Find out all you can about the general salary
11710levels of the company beforehand. If the employer asks
11711you about salary expectations, try to give a general answer.
11712»»Ask your interviewer when you can expect to hear
11713from them.
11714After the Interview
11715»»Take time to write down some notes about anything that
11716might influence your decision of whether or not to accept
11717the position.
11718»»Write a thank-you note to the employer within 48 hours
11719of the interview, even if you are not interested in the job.
11720JOURNAL QUESTION: VIDEO 4.4
11721Summarize what Jon Acuff means when he talks about being willing
11722to expand your “Three Circles” when looking for a job.
11723242 Foundations in Personal Finance High School Edition
11724SECTIONS 4 & 5
11725LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11726THE INTERNAL
11727REVENUE SERVICE (IRS)
11728The IRS is the federal
11729government agency
11730responsible for tax
11731collection and tax law
11732enforcement. It was
11733created during the Civil
11734War in 1862 to enact a
11735national income tax to pay
11736for war expenses.
11737+
11738When you get your first
11739job, you will quickly notice
11740that a portion of your pay
11741is taken out of your check
11742for taxes. Taxes are a
11743required contribution to
11744local, state and federal
11745governments and are
11746used to fund government
11747programs, infrastructure
11748and agencies such as the
11749military, public schools
11750and roads.
11751+ Section 5: Income and Taxes
11752NOTE: THERE ARE NO VIDEOS FOR SECTION 5
11753Benjamin Franklin said, “Only two
11754things in life are certain: death and
11755taxes.” The government relies on
11756the revenue taxes create to meet
11757their expenses and pay for services
11758such as roads, education and social
11759services. While the specifics differ
11760from state to state, the government
11761taxes three economic bases to pay for
11762its programs: income, consumption
11763and wealth. Like it or not, taxes are a
11764part of everyday life.
11765Taxes on Income
11766Income taxes are taxes paid out by
11767anyone who earns an income. April 15
11768is the day that income tax filings are
11769due in the United States. If you have
11770overpaid throughout the year, you will
11771receive a tax refund. If it is determined
11772that you have underpaid, you will have
11773an additional tax payment due. You
11774will pay both federal and state income
11775taxes (unless you live in a state that
11776does not have an income tax). Income
11777taxes are often subject to deductions or
11778credits based on individual financial
11779circumstances.
11780On your pay stub, you will notice three
11781taxes taken out or deducted from
11782your paycheck. These are commonly
11783referred to as withholdings. When you
11784are hired by a company, you will fill out
11785a federal tax form called a W-4. The
11786information on this form is the basis
11787for determining how much income
11788tax should be withheld from your
11789paycheck. Payroll taxes, as these are
11790commonly known, are a tax on income.
11791Hence, you file an income tax return
11792with the government every year you
11793earn income.
11794The Three Taxes Are:
117951. Federal income tax, which is used to support government
11796programs. This is where the federal government gets much
11797of its money. You work. They spend.
117982. State income tax, which is used to support state
11799services (if you work in a state without a state income
11800tax, you will not have this withholding)
11801Chapter 11: Careers and Taxes 243
11802LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11803KNOW THE DIFFERENCE:
11804GROSS vs NET INCOME
11805What do gross pay and
11806net pay mean? Gross pay
11807is what you make before
11808any deductions. If a job
11809is advertised as having a
11810$40,000 salary, then that’s
11811the gross pay. Net pay
11812is what’s left after taxes,
11813health benefits and other
11814deductions are taken out
11815of your check. So a gross
11816pay of $40,000 would
11817become something like a
11818net pay of $30,084.
11819+
11820For more information
11821and educational
11822activities on taxes, go to
11823foundationsU.com/taxes.
11824+
118253. FICA (Federal Insurance Contribution Act) tax
11826pays for benefits that workers and families receive for
11827either Social Security or Medicare. This tax is a flat tax
11828(meaning the rate is constant). A single rate of 12.4% is
11829applied to your income. Half of this tax is paid for by the
11830employee in the form of payroll withholding. The other
11831half is paid by the employer.
11832Taxes on Wealth
11833The primary tax on wealth is property tax.
11834»»Property tax is the main source of revenue for local
11835governments. Taxes on land, private homes and
11836business property are property taxes.
11837»» Some states tax certain types of personal property.
11838This might include cars, boats and recreational vehicles.
11839»»Taxes on wealth include inheritance, estate and gift taxes.
11840Taxes on Consumption
11841The primary taxes on consumption are sales and excise tax.
11842»» Sales tax is tax on goods and services that goes to your
11843state or local government. Sales tax is used by states as a
11844source of their income, and each state sets its own tax rate.
11845»»Excise tax is levied on certain goods produced within
11846a country and is sometimes referred to as luxury tax.
11847This is used by both the state and federal government.
11848Taxes on items such as gasoline, beer, liquor, cigarettes
11849and airplane tickets are excise taxes.
11850244 Foundations in Personal Finance High School Edition
11851SECTION 5
11852LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11853Budget
11854Builder
11855As your income changes,
11856so will your budget! Go to
11857foundationsU.com/11 for
11858your next budget lesson.
11859In the latest annual survey
11860for the National Association
11861of Colleges and Employers,
11862companies planning to
11863hire were most interested
11864in grads who had majored
11865in engineering, business,
11866accounting, computer
11867science or economics.
11868Unfortunately, many
11869students prefer majors
11870such as social sciences,
11871history, education and
11872psychology, which aren’t in
11873high demand.
11874+
11875Three Types of Income
11876* NOTE: All types of income are taxed.
118771. Earned income: Any income (wages/salary) that is
11878generated by working. Earned income is taxed at a
11879higher rate than any other type of income.
118802. Portfolio income: Income generated by selling an
11881investment at a higher price than you paid for it.
11882Portfolio income is sometimes referred to as “capital
11883gains” because that’s how the money is taxed by the
11884federal government. Portfolio income is often taxed at
11885very high rates, sometimes as high as earned income.
118863. Passive income: Money earned on a regular basis with
11887little or no effort required to maintain it. Some things
11888that produce passive income are real estate, intellectual
11889property like books or internet content, or a business in
11890which the owner is not actively involved. Passive income
11891often allows for the most favorable tax treatment.
11892JOURNAL QUESTION: SECTION 5
11893Describe some costs and benefits associated with paying taxes.
11894Chapter 11: Careers and Taxes 245
11895LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11896Chapter Summary
11897Check for Understanding
11898Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a checkmark
11899next to the learning outcomes you’ve mastered. Review the Measure Your Progress section.
11900Big Ideas
11901The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
11902and think about how what you’ve learned will affect your current and future decisions. Then, in the space
11903provided, write an “I believe” statement for each of the Big Ideas.
11904»» Know your personal strengths and weaknesses.
11905»» Set goals.
11906»»Taxes on income include federal, state and FICA taxes.
11907246 Foundations in Personal Finance High School Edition
11908RECAP & REVIEW
11909LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11910Take Action Challenge
11911Create your résumé. If you already have a résumé, compare it to our sample in Section 4 and make sure that
11912it has each component. Remember, your résumé will require updating every time you change jobs or complete
11913different education levels. Go to foundationsU.com/resume to access a quick and easy résumé building tool.
11914Build On What You’ve Learned
11915Use the graphic organizer below to describe the three types of income.
11916The 3 Types of Income
11917EARNED INCOME:
119181
11919PASSIVE INCOME:
119203
11921PORTFOLIO INCOME:
119222
11923Chapter 11: Careers and Taxes 247
11924LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11925Money in Review
11926a Cover Letter
11927b Portfolio Income
11928c Personal Branding
11929d Property Taxes
11930e Résumé
11931f Earned Income
11932g Social Security
11933h Income Tax
119341. _____ The process by which we “market”
11935ourselves to others; involves highlighting
11936personal strengths, interests and
11937unique qualities and identifying goals
119382. _____ Taxes paid out by anyone who earns
11939an income
119403. _____ A letter that is always accompanied by
11941a résumé; used to inform a prospective
11942employer of your interest and
11943capabilities as they relate to a specific
11944employment opportunity
119454. _____ A brief account of one’s professional or
11946work experience and qualifications
119475. _____ Income generated by selling an
11948investment at a higher price than you
11949paid for it
119506. _____ A federal insurance program funded by
11951taxpayer dollars that provides benefits
11952to people who are retired, unemployed
11953or disabled
119547. _____ Any income (wages/salary) that is
11955generated by working
119568. _____ Taxes paid by anyone who owns
11957property such as land, a home or
11958commercial real estate
11959Matching
11960Match the following terms to the correct definition below.
11961Illustration
11962Draw a picture representation of each of the following terms.
11963Networking Passive Income
11964248 Foundations in Personal Finance High School Edition
11965RECAP & REVIEW
11966LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
11967Multiple Choice
11968Circle the correct answer.
119699. Once you’ve defined your dream, your goals
11970should be the practical application of how
11971you’re going to accomplish your dream.
11972a True
11973b False
1197410. Taxes are an optional contribution to local,
11975state and federal governments.
11976a True
11977b False
1197811. The Internal Revenue Service (IRS) is the
11979federal government agency responsible for
11980a Writing tax laws
11981b Tax collection and tax law enforcement
11982c Keeping the unemployment rate low
11983d Filling out your tax forms
1198412. What is the difference between gross pay
11985and net pay?
11986a Gross pay describes your pay after
11987deductions; net pay is before
11988b Gross and net pay are the same
11989c Net pay describes your pay after
11990deductions; gross pay is before
11991d None of the above
1199213. Sales tax and excise tax are both taxes on
11993a Wealth
11994b Income
11995c Property
11996d Consumption
11997Short Answer
11998Respond in the space provided.
1199914. Would you do something you did not like
12000in order to make a higher income? Why or
12001why not?
1200215. Why is it important to understand different
12003personality styles?
1200416. What are some important things to do when
12005interviewing for a job?
1200617. What is the difference between gross and
12007net income?
1200818. Jon gave you a great deal of practical
12009information on achieving success and
12010reaching your goals. What was your
12011biggest takeaway from his lesson?
12012Chapter 11: Careers and Taxes 249
12013LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12014What do other high
12015school students know
12016about giving to others?
12017We asked teens to describe
12018something—big or small—they had
12019done to help others.
12020“I created a charity organization
12021called ‘Cash for Candy’ to help a
12022little girl in Guatemala pay for a
12023surgery her family could not afford.”
12024Junior, New York
12025“I listen when anyone needs
12026someone to talk to and give some
12027helpful advice.”
12028Freshman, Kansas
12029“I did a food drive for a family who
12030lost their house in a fire awhile ago.”
12031Senior, Connecticut
12032“I have helped others by doing
12033service projects with my Boy
12034Scout Troop.”
12035Senior, South Dakota
1203612
12037CHAPTER
12038LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12039Giving
12040MANY HIGH SCHOOL students want to help
12041others; they are just not sure how to go about
12042it. It’s easy as a young adult to see someone
12043in need—a charity that you care about,
12044a ministry that matters—and feel helpless
12045because you don’t have a lot of money to give.
12046Finding extra time and resources to help
12047others is not always easy. In this chapter we
12048are going to highlight the importance of
12049serving others and help you identify ways
12050you can give . . . starting now!
12051*National Philanthropic Trust
12052of households give
12053to charity.*
1205465%
12055of high-net-worth
12056households give
12057to charity.*
1205898%
12059UNIT 4: CHAPTER 12
12060LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12061Key Terms
12062Get to know the language of money.
12063»» Core Values: Traits or qualities that
12064represent an individual’s highest priorities,
12065deeply held beliefs and motivating forces;
12066one’s guiding principles
12067»» Legacy: Anything handed down from
12068the past; something that someone has
12069achieved that continues to exist after they
12070are gone
12071»» Nonprofits: Organizations that use money
12072raised to achieve their goals rather than
12073distributing them as profit
12074»» Philanthropy: Means “love of humanity”;
12075identifying and exercising one’s values in
12076giving and volunteering
12077Learning Outcomes
12078Once you’ve completed this chapter’s videos, you will be asked to
12079return to this list of learning outcomes and place a checkmark
12080next to the items you’ve mastered.
12081Section 1: False Perceptions
12082Â…Â… Identify your core values.
12083Â…Â… Identify your own specific talents and evaluate ways
12084you could use those talents to help others.
12085Section 2: Make an Impact
12086Â…Â… Identify ways in which giving benefits both the giver and
12087the receiver.
12088Section 3: Give Your Time and Talents
12089Â…Â… Identify various types of charitable giving (time,
12090money, talents).
12091Â…Â… Examine various areas of need in your own community.
12092Â…Â… Identify a variety of charitable organizations.
12093Section 4: Define Your Legacy
12094Â…Â… Explain the concept of leaving a legacy.
12095Â…Â… Illustrate the importance of giving to others throughout
12096your life, starting now.
12097
12098Before You Begin
12099252 Foundations in Personal Finance High School Edition
12100INTRODUCTION
12101LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12102Measure Your Progress
12103Before watching the video, read each statement below and mark whether you agree or disagree in the “Before”
12104column. Then, after watching the video, do it again using the “After” column to see if you changed your mind
12105on any statement.
12106JOURNAL QUESTION: INTRODUCTION
12107Do you feel as though giving is an important part of your financial plan? Why or why not?
121081. I can name three national or international charitable
12109organizations where I have recently volunteered my
12110time or would like to volunteer in the near future.
121112. I would like to help others, but I don’t know how to go
12112about doing it.
121133. I can list five of my core values or principles in which
12114I strongly believe.
121154. I can think of three families and/or organizations in
12116my community that need my help.
121175. Only people who have a lot of money are able to help
12118those in need.
12119Agree Disagree Agree Disagree
12120BEFORE AFTER
12121Chapter 12: Giving 253
12122LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12123“You give but little
12124when you give of
12125your possessions. It
12126is when you give of
12127yourself that you
12128truly give.”
12129KAHLIL GIBRAN
12130Lebanese philosopher
12131“
12132DESCRIBE THE MOST
12133RECENT THING YOU
12134HAVE GIVEN TO OTHERS:
12135“I worked in my church’s
12136nursery this week.”
12137Sophomore, Maryland
12138“I volunteered my time to
12139watch a special needs
12140child, and it was the most
12141rewarding experience. I
12142got more joy out of it just by
12143seeing the little girl’s smile.”
12144Junior, Mississippi
12145“I volunteer at our local
12146nursing home on Tuesdays
12147and Thursdays after school.”
12148Senior, Ohio
12149“I help our elderly neighbor
12150with her grocery shopping
12151every month since she
12152can’t drive.”
12153Junior, Missouri
1215412 CHAPTER
12155Section 1: False Perceptions
12156VIDEO 1.1
12157I Am Just One
12158CONGRATULATIONS! You have made
12159it to the end of your personal finance
12160course. We’ve taught you to save,
12161budget, avoid debt, invest and . . .
12162give? Well that’s really what this
12163chapter is about. If you follow the
12164principles we’ve taught you, you will
12165achieve wealth. That’s so exciting!
12166But managing money isn’t just about
12167wealth. Remember when we said that
12168money is like a mirror: It reflects
12169what’s important to the person
12170who holds it. We can’t complete a
12171course on personal finance without
12172talking about the joy and value
12173of helping others. That’s why the
12174Fifth Foundation is Build Wealth
12175and Give.
12176»»We often hear about people who are hurting—families with
12177no food, adults with no homes, kids with no parents.
12178»» In these moments, our world can seem so big. We might
12179think, “I wish I could do something,” but at the same time
12180realize, “I am just
121811
12182person.”
12183THE FIFTH FOUNDATION 5 Build Wealth and Give
12184254 Foundations in Personal Finance High School Edition
12185SECTION 1
12186LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12187“Some people give
12188time, some money,
12189some their skills
12190and connections,
12191some literally give
12192their life’s blood.
12193But everyone has
12194something to give.”
12195BARBARA BUSH
12196Former First Lady of the
12197United States
12198“
12199Recent studies show
12200that the largest source
12201of charitable giving
12202came from individuals
12203at $217.79 billion, or 73%
12204of total giving; followed
12205by foundations ($41.67
12206billion/14%), bequests
12207($24.41 billion/8%) and
12208corporations ($14.55
12209billion/5%).
12210National Philanthropic Trust
12211$
12212CHARITABLE
12213ORGANIZATION: An
12214organization set up to
12215provide help and raise
12216money for those in need
12217AID: To give money, food or
12218other help to a country or
12219organization that needs it
12220+
12221»»The good news is, you can make a huge difference in the
12222life of someone else, even if your action is
122232
12224.
12225»»One of the most important and rewarding things you can
12226do is
122273
12228!
12229Giving money away produces more joy than anything
12230money can buy. And time spent helping and serving others
12231can be just as meaningful. You might only be one person,
12232but you can make a difference!
12233What the World Says About You
12234Maybe you’re already wanting to help others, but you’re
12235just not sure how to go about it. You might even feel okay
12236not helping because it doesn’t seem like you can afford
12237it. You’ll give when you’re older, when you’ve got a bigger
12238bank account. That’s when you’ll really be able to make a
12239difference, anyway!
12240»»The fact is, you can get started right away with what
12241you’ve got
122424
12243. That means, if you’re working, you
12244can use a portion of your money to benefit someone else.
12245»»But even if you don’t have money to give, you’ve still got
12246YOU! Start with what you have today and give of
122475
12248by volunteering your time and talents.
12249»»To do that, first you’ll need to know what
122506
12251to you.
12252Chapter 12: Giving 255
12253LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12254“I am only one, but
12255still I am one; I
12256cannot do everything,
12257but still I can do
12258something; I will
12259not refuse to do the
12260something I can do.”
12261HELEN KELLER
12262American author, political
12263activist and lecturer
12264“
12265What the World Says About You (Continued)
12266At times, our culture can send you
12267the message that, as a teen, all you
12268really care about is your cell phone,
12269music and hanging out with friends.
12270You might begin to feel like, Is that
12271it? Is that who I am? You mistake
12272society’s portrayal of teenagers as
12273your own reflection.
12274»»Don’t be fooled! The reality is, you are
122757
12276.
12277»»Begin the process of discovering the real you! We’re
12278talking about your
122798
12280, your interests and your
12281passions. The things that make you, YOU.
12282»»Before you can help others, you’ve got to know your own
122839
12284—the things that matter most to you.
12285Knowing what you value will help you
12286select an organization or charity to
12287serve. If you can identify your talents,
12288you can discover more specific ways
12289to serve. You may not have a steady
12290income in your life right now, but
12291that doesn’t mean you have nothing
12292to offer. Giving can be in the form of
12293time, money or abilities.
12294What Do You Value Most?
12295Circle the 10 qualities that are most important to you from the list below.
122961 2 3
12297respectful
12298trustworthy
12299spiritual
12300forgiving
12301confident
12302loving
12303hard-working
12304giving
12305unique
12306leader
12307compassionate
12308accountability
12309peaceful
12310loyal
12311accepting
12312sensitive
12313kind
12314joyful
12315humorous
12316honest
12317patient
12318committed
12319energetic
12320helpful
12321self-controlled
12322excellence
12323communication
12324intellect
12325assertive
12326cooperative
12327creative
12328persistent
12329fair
12330unifying
12331competitive Now List
12332Your Top 3
12333These are the qualities
12334you value the most,
12335or your core
12336values.
12337256 Foundations in Personal Finance High School Edition
12338SECTION 1
12339LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12340“The happiest people
12341in the world are those
12342who do the most for
12343others.”
12344BOOKER T. WASHINGTON
12345American educator, author
12346and speaker
12347“
12348APPLYING YOUR GIFTS
12349List some of your talents
12350and hobbies.
123511.
123522.
123533.
12354Now think of one way
12355you could use one of your
12356talents to help others.
12357+
12358Your Values
12359Your values make you, YOU. People
12360generally give of themselves to causes
12361that are important to them. Your
12362values are the beliefs and attitudes
12363that guide your daily behavior. When
12364you decide to help others, make sure
12365that you focus on a need that you can
12366be passionate about and that is in line
12367with your personal values.
12368You’ve identified what is important
12369to you. Now let’s see what you’re good
12370at. Everyone has talents and gifts that
12371can be used to help others.
12372Here are some examples of how other high school
12373students have used their talents to help others:
12374»»Maggie loves working with animals. She and her family
12375have raised four guide dogs for the blind.
12376»» Charlene’s friends say that she has a kindness about her and
12377a gift for putting others at ease. She knows what it’s like to
12378be a new student in a big school because her family moved
12379when she was in middle school. Now she makes it a point to
12380reach out to other new students to make them feel welcome.
12381»»Tim is excellent in math and offers free tutoring to his
12382peers after school two days a week.
12383»»Frank is a star basketball player at his high school. On
12384Saturday mornings he volunteers to referee youth games
12385at his local community center.
12386JOURNAL QUESTION: VIDEO 1.1
12387Complete the values and talents activities before responding to the
12388journal question. How can giving of your time and talents align with
12389your core values?
12390Chapter 12: Giving 257
12391LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12392“Money is neither my
12393god nor my devil. It
12394is a form of energy
12395that makes us more
12396of who we already are,
12397whether it’s greedy
12398or loving.”
12399DAN MILLMAN
12400Former world champion
12401athlete and author
12402“
12403Americans give billions
12404of dollars to charities
12405every year.
12406National Philanthropic Trust
12407$
12408OUTREACH: The practice
12409of providing help and
12410advice to people in a
12411community before they
12412have to ask for it
12413DONOR: Someone who
12414gives things such as
12415money or goods to an
12416organization, especially
12417one that helps people
12418+
12419Section 2: Make an Impact
12420VIDEO 2.1
12421Open Hands Build Wealth
12422Money is important, but people are
12423more important. Being wealthy is
12424not an end—it is a means to an end.
12425That end is helping people. The
12426truth is, when you hold your money
12427with a clenched fist, it destroys your
12428relationships. You end up placing more
12429value on money than people. So make
12430a decision right now to put people first.
12431»»When you hold your money with an
1243210
12433hand, life
12434looks a lot different.
12435»» It may take a little longer to reach your financial goals, but
12436you’re investing in something far more
1243711
12438.
12439»»When you give, you
1244012
12441a person’s life permanently.
12442»»The joy of giving lasts longer than the happy feeling you
12443get when you spend money on
1244413
12445.
12446»» It’s okay to spend money on yourself. Just make sure you
12447spend money to
1244814
12449other people as well.
12450»»Need another reason to give? It’s just plain
1245115
12452!
12453You don’t need a lot of money to help
12454others. You just need to be willing to
12455start. We think that giving 10% of
12456your income is a good goal. If that’s
12457too much, then just give what you can.
12458If you don’t have any money to give,
12459no problem! Give of your time, your
12460talents, your energy. The point is, you
12461can give. The measure of a person is
12462not how much money they make, it’s
12463how they use the money and how they
12464help others.
12465258 Foundations in Personal Finance High School Edition
12466SECTION 2
12467LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12468“Wealth is a sacred
12469trust to be managed
12470for the good of others.”
12471ANDREW CARNEGIE
12472American industrialist
12473and philanthropist
12474“
1247581% of high-net-worth
12476donors cite “giving back to
12477the community” as a chief
12478motivation for giving.
12479National Philanthropic Trust
12480$
12481Give Now and Always
12482John D. Rockefeller was a businessman
12483in the late 1800s and early 1900s. He
12484became one of the wealthiest people
12485in America during his lifetime. But
12486Rockefeller is not just remembered
12487for his wealth. It’s what he did with
12488his money that we remember him for
12489generations later.
12490Rockefeller spent the last 40 years of his life as a
12491philanthropist. The money he gave made huge progress
12492in
1249316
12494, medicine and scientific research.
12495He also gave generously to churches, built hospitals and
12496colleges, and was even well-known for handing out money
12497to people as he walked down the street.
12498Rockefeller began giving long before he became rich. He
12499understood the importance of starting small and gave out of
12500his first paycheck, which was only $1.50. He
1250117
12502giving when he didn’t have much money, and he continued
12503to give as his salary grew into the hundreds, thousands and
12504eventually millions.
12505Case Study: Finding Comfort in Giving
12506A teenager in Ohio was grieving over the death
12507of her 89-year-old great-grandmother. “Some of
12508her last words were, ‘I don’t want anybody to be
12509upset.’” But Samantha was upset. She decided,
12510“Maybe I can’t be happy right now, but I can do
12511things to make other people happy.”
12512Samantha began doing small acts of kindness,
12513like paying for the meal of a person behind her in
12514line at McDonald’s. She decided that, in honor of
12515her grandmother, she would perform 89 random
12516acts of kindness. She discovered that seeing the
12517reaction of people made her feel good.
12518Over time, Samantha’s giving included buying
12519meals for others at restaurants, donating items to
12520the Humane Society, and baking a birthday cake
12521for a friend. She enjoyed giving so much that she
12522began to inspire others to give on her Facebook
12523page 89 Acts of Kindness. She offered packets
12524with good-deed suggestions that included a
12525photo and bio of her late grandmother, Virginia.
12526Doing good for others was a fitting tribute to
12527Virginia. “She was like the Golden Rule put in
12528motion,” Samantha said. “And she was a really
12529big influence in my life.”
12530Chapter 12: Giving 259
12531LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12532TIPS FOR DONATING
12533MONEY
125341. Be proactive in your
12535giving. Take time
12536to identify which
12537causes are most
12538important to you.
125392. Check the charity’s
12540commitment to
12541accountability and
12542transparency.
125433. Obtain copies of the
12544charity’s financial
12545records and determine
12546what percentage of
12547funds raised are used on
12548salaries and overhead
12549(cost of running the
12550organization). You
12551should feel confident
12552that most of the money
12553you give is concentrated
12554on the cause you are
12555supporting and not on
12556administration costs.
125574. Concentrate your
12558giving on just a few
12559well-run organizations.
12560Unlike investing, when
12561spending your charitable
12562dollars, diversification
12563is not a good thing.
125645. Make a long-term
12565commitment. Smart
12566donors support their
12567favorite charities
12568for the long haul.
12569+
12570Give Now and Always (Continued)
12571By starting where you are today, you
1257218
12573character
12574for the future.
12575The more you give, the more you are fulfilled and the more
12576you want to give. It’s a great cycle to be on. Giving is not
12577a matter of moving money from your wallet to a charity
12578or collection plate; it is a matter of realizing that there
12579are others less fortunate than you and you have a genuine
12580desire to help them. Money is just one way to do that.
12581By helping someone, you give them encouragement, hope
12582and relief. The more people you help, the more joy you
12583will experience!
12584JOURNAL QUESTION: VIDEO 2.1
12585When you are doing your monthly budget, why do you think it is
12586important to have “giving” placed at the very top?
12587Start Here
12588To begin your journey toward financial success!
12589GIVING Budgeted
12590Charity $
12591Other: _____________________ $
12592GIVING TOTAL:
12593SAVING Budgeted
12594Emergency Fund $
12595College $
12596Car & Repairs $
12597Computer $
12598Other: _____________________ $
12599SAVING TOTAL:
12600FOOD Budgeted
12601Restaurants / Eating Out $
12602School Lunch / Snacks $
12603FOOD TOTAL:
12604CLOTHING Budgeted
12605Clothes $
12606Sports Jerseys / Apparel $
12607CLOTHING TOTAL:
12608$
12609$
12610$
12611$
12612TRANSPORTATION Budgeted
12613Gas $
12614Car Insurance $
12615Oil Changes $
12616License & Taxes $
12617TRANSPORTATION TOTAL:
12618PERSONAL Budgeted
12619Cosmetics / Hair Care $
12620Music / Technology $
12621Gifts $
12622Pocket Money $
12623Cell Phone $
12624Other: _____________________ $
12625PERSONAL TOTAL:
12626RECREATION Budgeted
12627Movies $
12628Concerts $
12629Sporting Events $
12630Other: _____________________ $
12631RECREATION TOTAL:
12632$
12633$
12634$
12635c
12636b
12637( + + + + + + )
12638$
12639Monthly Income
12640$
12641Monthly Outgo
12642– =
12643a D
12644$
12645E ZERO!
12646CHAPTER 3 : budgE T ing 20
12647Make Giving a Priority
12648Giving is the first
12649category in the Student
12650Budget form as a
12651reminder to always put
12652giving first!
12653260 Foundations in Personal Finance High School Edition
12654SECTIONS 2 & 3
12655LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12656TIPS FOR DONATING
12657NON-CASH ITEMS
126581. Determine whether or
12659not the items you wish
12660to donate are useful.
126612. Consider selling your
12662items and donating the
12663proceeds to charity.
12664Donating cash instead of
12665goods allows charities
12666greater flexibility in
12667spending the money so
12668that it reaches people
12669who need it the most.
126703. Start locally to find the
12671right charity in order to
12672avoid transportation
12673costs that can lower the
12674impact of your donation.
12675+
12676“Volunteers are not
12677paid not because
12678they are worthless,
12679but because they are
12680priceless.”
12681AUTHOR UNKNOWN
12682“
12683“You’ve got to live like
12684no one else so later
12685you can GIVE like no
12686one else!”
12687DAVE RAMSEY
12688“ Section 3:
12689Give Your Time and Talents
12690VIDEO 3.1
12691Money Is Not the Only Way to Give
12692Giving is one of the most important
12693and rewarding parts of your financial
12694journey. Since you are going to make
12695sure that you stay completely debt
12696free, you will have that much more
12697money to spend, invest and give. Just
12698remember that money given produces
12699more joy than it could ever buy!
12700As you are working toward your
12701financial goals, like saving your $500
12702emergency fund, money to give may
12703seem hard to come by. That’s when
12704you can find creative ways to give.
12705You can give your time, your talents,
12706your knowledge or your services to
12707help other people.
12708»»Our culture is so “me” focused.
12709»»A powerful thing happens when we
1271019
12711others—
12712we stop focusing on ourselves. We stop being consumed
12713by our own struggles, our looks and the things we want.
12714»»When we give to others we are saying, “Right now the
12715needs of this person matter
1271620
12717.” That’s why giving
12718more than money—giving of yourself—is so powerful!
12719»»Andy Stanley says, “Giving up something now for
12720something better later is not a sacrifice. It is an
1272121
12722.”
12723Each person you give to produces
12724a new story and a new thrill. It is a
12725feeling that never grows dull. Having
12726fun with money is good, but you will
12727tire of movies and clothes. In a way,
12728giving is a lot like compound interest—
12729you put some in, but you get much
12730more out! Try it! When you’re in line
12731at a coffee shop, offer to pay for the
12732coffee of the person behind you and
12733see how it makes you feel. That feeling
12734and the feeling of the person your
12735generosity impacted is much more
12736valuable than $5!
12737Chapter 12: Giving 261
12738LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12739“The best thing about
12740giving of ourselves is
12741that what we get is
12742always better than
12743what we give. The
12744reaction is greater
12745than the action.”
12746ORISON SWETT MARDEN
12747American author
12748“
12749GIVING IS CONTAGIOUS
12750Amidst holiday cheer, a
12751customer in the drive-thru
12752line of a local coffee shop
12753decided to pay for the
12754coffee of the customer
12755behind him. He had no
12756idea that his small act of
12757kindness would spark
12758three full hours of giving. A
12759total of 228 customers who
12760followed decided to “pay it
12761forward” by paying for the
12762coffee of the person behind
12763them in line! People inside
12764the store joined in the fun
12765as well. “There was a lot of
12766energy in the store,” said
12767the general manager. “Our
12768team was really excited
12769and shouting out the
12770number of pay-it-forwards
12771all morning.”
12772+
12773Ways You Can Give Now
12774Here are some practical ways you can volunteer in your
12775community. This is just a start. Be creative! Consider your
12776personal talents and skills.
12777»» With every season, clean out
12778the clothes you no longer use and
12779donate them to your local
12780homeless shelter. Get your friends
12781involved so that, together, you
12782can donate even more!
12783»» Offer to tutor a peer or younger
12784child who is struggling in a subject
12785you happen to be good at. Your
12786school counselor may be able to
12787help set this up.
12788»» Offer to be a mentor to an
12789underprivileged youth in
12790your community.
12791»» Volunteer to help at a Special
12792Olympics event.
12793»» Volunteer at your local
12794animal shelter.
12795»» Adopt a senior citizen as a friend/
12796mentor and commit to spending
12797time with him/her each week.
12798»» Rake leaves, shovel snow, or clean
12799gutters for a senior citizen.
12800»» Teach Sunday school.
12801»» Participate in a 5k run for your
12802favorite charity.
12803»» Befriend new students and eat
12804lunch with them, introduce
12805them to your friends, and offer
12806to help them find a class, etc.
12807»» Write a letter or send a care
12808package to a soldier overseas.
12809»»Write a thank you letter to a
12810teacher who had a positive effect
12811on you.
12812»» Do extra chores around your
12813house without being asked.
12814»» Help a younger brother or sister
12815with his or her homework.
12816JOURNAL QUESTION: VIDEO 3.1
12817List some areas of need in your school or community (youth programs,
12818homeless shelter, humane society, recycling, roadside cleanup, nursing
12819home, etc.).
128201.
128212.
128223.
12823262 Foundations in Personal Finance High School Edition
12824SECTIONS 3 & 4
12825LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12826“Let us not be
12827satisfied with just
12828giving money.
12829Money is not enough,
12830money can be got,
12831but they need your
12832hearts to love them.
12833So, spread your love
12834everywhere you go.”
12835MOTHER TERESA
12836Indian Roman Catholic nun
12837“
12838There are approximately
128391 million charitable
12840organizations in the
12841United States.
12842National Philanthropic Trust
12843$
12844The top four national
12845volunteer activities are
12846fundraising (26.6%), food
12847collection or distribution
12848(23.5%), general labor or
12849transportation (20.5%), and
12850tutoring or teaching (19%).
12851National Philanthropic Trust
12852$ Section 4: Define Your Legacy
12853VIDEO 4.1
12854Legacy
12855Why are we talking so much about giving? Wasn’t this
12856course supposed to be about personal
1285722
12858? How
12859is giving connected?
12860The act of giving—putting yourself out there for the sake of
12861another person, building relationships, and sacrificing your
12862time and energy—creates a legacy. It gives
1286323
12864to the journey of your life.
12865You can be remembered for any number of things:
12866»» athletic ability
12867»» musical gifts
12868»» sense of humor
12869»» kindness
12870»» anger
12871»» attitude
12872»» selfishness
12873»» generosity
12874What you can do today—yes, even in high school—is ask
12875yourself, How do I want to be remembered?
12876You can make a lot of money and be wildly successful; you
12877can go after your dreams and accomplish each and every
12878one of them. But to what end? If you’re giving of yourself,
12879you’re building a legacy to be proud of. After all, your
1288024
12881is the impact you have on the world—and it
12882shows the world what really matters to you.
12883Chapter 12: Giving 263
12884LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12885TAX BENEFITS OF GIVING
12886Your primary motivation
12887for giving should be the
12888simple desire to help
12889others. However, since this
12890is a course on personal
12891finance, we also want you
12892to be aware of the great
12893tax benefits that come
12894with giving. Here are some
12895things you should know.
12896• A gift to a qualified
12897charitable organization
12898may entitle you to a
12899charitable contribution
12900deduction against your
12901income tax if you itemize
12902deductions.
12903• A contribution to a
12904qualified charity is
12905deductible in the year
12906in which it is paid.
12907• Most, but not all,
12908charitable organizations
12909qualify for a charitable
12910contribution deduction.
12911• There are limits to how
12912much you can deduct,
12913but they’re very high.
12914• Certain rules exist for
12915non-cash donations.
12916• Remember to document
12917your charitable
12918contributions.
12919+
12920TAX DEDUCTION: A
12921reduction in the gross
12922amount of income on
12923which a tax is calculated
12924+
12925Summary of the Five Foundations
12926We know that by following these steps, you will build
12927wealth. The sky is the
1292831
12929! As you do, be intentional
12930with your money. Take care of your needs and commit to
12931helping others along the way! Keeping an open hand and an
12932open
1293332
12934means you will leave behind an amazing
12935legacy someday.
12936The bottom line is, as a high school student, you’ve got the
12937opportunity to take all of the
1293833
12939we’ve
12940taught you and apply them to your own situation. You control
12941your future! That’s so exciting! You’ve got your whole life
12942ahead of you. Where you’re from, your family background,
12943what you’ve been told by others—those things don’t define you.
12944YOU define you. Success isn’t easy, but it’s
1294534
12946for anyone who is willing to go after it.
12947So what will your future look like? What will your legacy be?
12948THE SECOND FOUNDATION Get Out of 26
129492
12950THE THIRD FOUNDATION Pay 27 3 for Your Car
12951THE FOURTH FOUNDATION Pay Cash for 28
129524
12953THE FIFTH FOUNDATION Build 29 and 30
129545
12955THE FIRST FOUNDATION Save a $ 25 1 Emergency Fund
12956264 Foundations in Personal Finance High School Edition
12957SECTION 4
12958LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
12959“We make a living
12960by what we get, we
12961make a life by what
12962we give.”
12963WINSTON CHURCHILL
12964Former Prime Minister of the
12965United Kingdom
12966“
12967Budget
12968Builder
12969Okay everyone, we’ve
12970shown you how and why to
12971give to those in need. Now
12972it’s time to commit. Go to
12973foundationsU.com/12
12974to make giving first in
12975your budget.
12976Recent studies show that
12977the majority of charitable
12978dollars go to churches
12979(32%), education (13%),
12980human services (12%),
12981and grant-making
12982foundations (9%).
12983National Philanthropic Trust
12984$
12985A Message From Jon
12986The Generosity of Future Me
12987It would be silly to
12988pretend there are
12989two different people
12990working the same day
12991under the same name,
12992Jon Acuff, but you’d be
12993surprised how many people do that
12994when it comes to money. Especially
12995regarding the “G” word.
12996I’m talking about giving. When
12997you get intense about beating debt
12998(and reaching other money goals),
12999sometimes it’s easy to make the
13000mistake of thinking that giving is
13001something that will come later. And
13002when we talk about later, it’s fun to
13003imagine how generous future me is
13004going to be.
13005“Right now, giving doesn’t really fit into
13006the plan. But in the future? Down the
13007road? I’m going to be like Bill Gates!
13008I’ll probably just rent a hot air balloon
13009and drop stacks of cash out of it. I’ll
13010play Natasha Bedingfield music as I do
13011this and get people dancing and really
13012enjoying the full depth of my amazing
13013generosity. Gonna change the world,
13014man, really change the world.”
13015But you know the truth about “future
13016me”? He or she is incredibly slippery.
13017Just when you think the future has
13018finally arrived, something else comes up.
13019Something more important or critical
13020or . . . well, I can start giving later.
13021You want to beat debt and have longterm
13022success with everything Dave
13023Ramsey talks about? Say good night to
13024future me. Start giving today. Budget
13025some giving right now. You don’t have
13026to go crazy. Giving time and money is
13027important no matter where you are
13028in the Five Foundations, that’s why
13029Dave put it at the top of the student
13030budget form!
13031The truth is, future me won’t know
13032how to be generous with a lot unless
13033present me learns how to be generous
13034with a little.
13035So give a little.
13036JOURNAL QUESTION: VIDEO 4.1
13037When have you been impacted because someone gave their time,
13038money or talents to help you? How did this affect you?
13039Chapter 12: Giving 265
13040LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13041Chapter Summary
13042Check for Understanding
13043Now it’s time to check your learning! Go back to the Before You Begin section for this chapter. Place a
13044checkmark next to the learning outcomes you’ve mastered and complete the “after” column of the Measure
13045Your Progress section.
13046Build On What You’ve Learned
13047Fill in the graphic organizer with each of the Five Foundations. Put a checkmark next to each of the foundations
13048you have accomplished.
13049THE SECOND FOUNDATION 2
13050THE THIRD FOUNDATION 3
13051THE FOURTH FOUNDATION 4
13052THE FIFTH FOUNDATION 5
13053THE FIRST FOUNDATION 1
13054COMPLETE? THE FIVE FOUNDATIONS (WRITE THESE OUT)
13055266 Foundations in Personal Finance High School Edition
13056RECAP & REVIEW
13057LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13058Take Action Challenge
13059Look at your Five Foundations chart. For each foundation that you have not completed, write a brief summary
13060of how you intend to meet that goal. Be sure to include a time goal for each of the foundations.
13061STEPS TO MEET YOUR FOUNDATION GOAL TIME
130621
130632
130643
130654
130665
13067Big Ideas
13068The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement
13069and think about how what you’ve learned will affect your current and future decisions. Then, in the space
13070provided, write an “I believe” statement for each of the Big Ideas.
13071»» People are more important than money.
13072»» Discover your values, interests and passions—then give!
13073»» Your legacy is the impact you make on the world.
13074Chapter 12: Giving 267
13075LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13076Money in Review
13077a Legacy
13078b Core Values
13079c Nonprofits
13080d The First Foundation
13081e The Fourth Foundation
13082f Philanthropy
130831. _____ Organizations that use money raised
13084to achieve their goals rather than
13085distributing them as profit
130862. _____ Means “love of humanity”; identifying
13087and exercising one’s values in giving and
13088volunteering
130893. _____ Pay cash for college
130904. _____ Anything handed down from the past;
13091something that someone has achieved
13092that continues to exist after they are gone
130935. _____ Save a $500 emergency fund
130946. _____ Traits or qualities that represent an
13095individual’s highest priorities, deeply
13096held beliefs and motivating forces; one’s
13097guiding principles
13098Matching
13099Match the following terms to the correct definition below.
13100Illustration
13101Draw a picture representation of each of the following terms.
13102Charitable Giving Your Core Values
13103268 Foundations in Personal Finance High School Edition
13104RECAP & REVIEW
13105LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13106Multiple Choice
13107Circle the correct answer.
131087. You have to wait until you have a large
13109income before you can help others.
13110a True
13111b False
131128. One financial benefit of giving money to
13113charity is that your contribution may be
13114tax deductible.
13115a True
13116b False
131179. Which of the following should be a
13118consideration when selecting a nonprofit
13119to which you’d like to contribute?
13120a Your values and beliefs
13121b The charity’s commitment to
13122accountability and transparency
13123c How well run the organization is
13124d All of the above
1312510. Is it better to give to many charities
13126or just a few?
13127a Many
13128b Just a few
13129c Doesn’t matter
13130d None at all
1313111. What percentage of households give
13132to charity?
13133a 100%
13134b 20%
13135c 65%
13136d 5%
13137Short Answer
13138Respond in the space provided.
1313912. Why is it important to give money, time
13140or talents?
1314113. What does it mean to leave a legacy?
1314214. Write down something you learned in
13143this chapter.
1314415. If you could start a charity, what would it be?
13145Who would you help and in what way? Why?
1314616. How can giving to others have a positive
13147impact on you?
13148Chapter 12: Giving 269
13149LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13150270 Foundations in Personal Finance High School Edition
13151401(k): Defined contribution plan offered by a
13152corporation to its employees, which allows employees to
13153set aside tax-deferred income for retirement purposes;
13154in some cases, employers will match their contributions
13155403(b): Retirement plan similar to a 401(k) plan, but
13156one that is offered by non-profit organizations, such as
13157hospitals, schools and some charitable organizations,
13158rather than corporations; employees set aside taxdeferred
13159dollars
13160457 plan: Non-qualified, deferred compensation plan
13161established by state and local governments for taxexempt
13162government agencies and tax-exempt employers;
13163eligible employees are allowed to make salary deferral
13164contributions to the 457 plan; earnings grow on a taxdeferred
13165basis and contributions are not taxed until the
13166assets are distributed from the plan.
13167529 plan: College savings plan that allows individuals
13168to save on a tax-deferred basis in order to fund future
13169college and graduate school expenses of a child or
13170beneficiary; generally sponsored by a state, these are
13171professionally managed investments
1317212b-1 fee: An annual fee that some mutual funds charge
13173to pay for marketing and distribution activities
13174A
13175Accelerated payment: Making bi-weekly payments on
13176your mortgage that makes one additional payment on
13177your mortgage annually
13178Accountability: The quality or state of being responsible,
13179liable or answerable
13180Adjustable rate mortgage (ARM): Home loan secured
13181by a deed of trust or mortgage in which the interest rate
13182will change periodically (i.e., annually); typically adjusted
13183based on a published index such as the Treasury Bill or
13184LIBOR; brought on as a result of high interest rates in
13185the early 1980s as a way for banks to transfer the risk of
13186higher interest rates to the consumer
13187Aggressive growth stock mutual fund: Mutual fund that
13188seeks to provide maximum long-term capital growth
13189from stocks of primarily smaller companies or narrow
13190market segments; dividend income is incidental; the
13191most volatile fund; also referred to as a small-cap fund
13192Allowance: Money given to a child by his/her parent/
13193guardian, typically on a weekly basis
13194Amoral: Lacking morals; neither good nor bad
13195Amortization table: Breakdown showing how much of
13196each regular payment will be applied toward principal
13197and how much toward interest over the life of a loan; also
13198shows the gradual decrease of the loan balance until it
13199reaches zero
13200Annuity: Contract sold by an insurance company,
13201designed to provide payments to the holder at specified
13202intervals, usually after retirement; the holder is taxed
13203at the time of distribution or withdrawal, making this a
13204tax-deferred arrangement
13205Annual fee: A yearly fee that’s charged by the credit card
13206company for the convenience of the credit card
13207Annual percentage rate (APR): Cost of borrowing money
13208on an annual basis; takes into account the interest rate
13209and other related fees on a loan.
13210Appreciation: An increase in value
13211Asset: Anything that is owned by an individual; with
13212respect to saving and investing, assets are generally
13213categorized as liquid (cash) and capital (investment)
13214assets
13215Glossary
13216LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13217Glossary 271
13218Asset allocation: The process of deciding how
13219investment dollars will be apportioned among various
13220classes of financial assets, such as stocks, bonds and
13221cash investments
13222Asset classes: Major categories of financial assets
13223or securities. The three primary classes are common
13224stocks, bonds and cash investments
13225ATM card: Automated teller card which allows you to
13226make transactions in automated teller machines
13227Auction: A public sale in which property or items of
13228merchandise are sold to the highest bidder
13229Auto insurance: Insurance to protect a car owner in the
13230event of an accident or damage to a vehicle
13231Average annual return: The rate of return on investments
13232averaged over a specific period of time. It is determined
13233by adding together the rates of return for each year and
13234dividing by the number of years in the calculation
13235B
13236Back-end load: Sales commission paid when the investor
13237sells mutual fund shares; sometimes phased out over
13238several years; also called redemption fee or contingentdeferred
13239sales charge
13240Balanced fund: A mutual fund that invests in more than
13241one type of financial asset: stocks, bonds, and in some
13242cases, cash investments
13243Balloon mortgage: A home loan in which the sum of the
13244monthly payments is insufficient to repay the entire loan;
13245a final payment comes due, which is a lump sum of the
13246remaining principal balance
13247Bankruptcy: Legal procedure for dealing with debt
13248problems of individuals and businesses; specifically
13249a legal court case filed under one of the chapters of
13250Title 11 of the United States Code (also see Chapter 7
13251bankruptcy, Chapter 11 bankruptcy, and Chapter 13
13252bankruptcy)
13253Bargain: A deal obtained when negotiating and paying a
13254lesser price than asked for an item
13255Beneficiary: The recipient of assets passed on from the
13256death of a friend or relative
13257Bond: A debt instrument where an issuer such as a
13258corporation, municipality or government agency owes
13259you money; a form of I.O.U.; the issuer makes regular
13260interest payments on the bond and promises to pay back
13261or redeem the face value of the bond at a specified point
13262in the future (the maturity date)
13263Bond mutual fund: Mutual funds that buy bonds
13264Branding: The promotion of a product or service by
13265identifying it with distinct characteristics (usually
13266associated with public perception, quality or
13267effectiveness)
13268Brand recognition/awareness: Refers to the public’s
13269ability to recall and recognize a brand by its logo, jingles,
13270packaging, etc.
13271Break-even analysis: Method used to evaluate the wisdom
13272of a financial decision by determining the length of time it
13273will take for the cost of the decision to be recouped
13274Budget: A written cash flow plan
13275Buyer’s remorse: Feeling regret or concern after
13276making a large purchase
13277C
13278Capital gain: A positive difference between an asset’s
13279price when bought and its price when sold; the opposite
13280of capital loss
13281Capital gains distribution: Payment to mutual fund
13282shareholders of any gains realized during the year on
13283securities that have been sold at a profit. Capital gains
13284are distributed on a “net” basis after subtracting any
13285capital losses for the year. When losses exceed gains
13286for the year, the difference may be carried forward and
13287subtracted from future gains.
13288Capital loss: A negative difference between an asset’s
13289price when bought and its price when sold; the opposite
13290of capital gain
13291Carbon check: A copy of each check you write
13292Career: Your line of work
13293Cash flow statement: A summary that shows total
13294income and spending for a given time period
13295LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13296272 Foundations in Personal Finance High School Edition
13297GLOSSARY
13298Cash investments: Investments in interest-bearing bank
13299deposits, money market instruments and U.S. Treasury
13300Bills or notes
13301Cash value insurance: Also known as permanent life
13302insurance; premiums include a death benefit and a plan
13303to build savings within the policy; two main types are
13304whole life and universal life; significantly more expensive
13305than term life insurance
13306Caveat emptor: Latin term for “buyer beware”
13307C.D.: Certificate of Deposit, usually at a bank; savings
13308account with a slightly higher interest rate because of a
13309longer savings commitment (i.e., six months, one year, etc.)
13310Chapter 7 Bankruptcy: Chapter of the Bankruptcy Code
13311providing for liquidation of the debtor’s assets in order to
13312repay the creditors; certain assets or aggregate value of
13313assets of the debtor may be exempt based on state law
13314Chapter 11 Bankruptcy: Reorganization bankruptcy,
13315usually involving a corporation or partnership; generally
13316includes a plan of reorganization to keep a business alive
13317and pay creditors over time
13318Chapter 13 Bankruptcy: Chapter of the Bankruptcy
13319Code providing for an individual to repay debts over
13320time, usually three to five years; debtor makes periodic
13321payments to the bankruptcy trustee, who in turn pays
13322the creditors; sometimes includes adjustments to debt
13323balances within the bankruptcy
13324Checking account: Account set up to maintain daily
13325financial activities. Users can draft checks for payment,
13326issue deposits into their accounts, and keep track of their
13327debit card transactions through their checking account.
13328Claim: Paperwork filed with an insurance company in
13329order to get them to cover a loss for someone they insure
13330Co-insurance: In a health insurance policy, after you pay
13331the deductible the insurance company pays a percentage
13332and you pay a percentage; 80/20–insurance pays 80%
13333and you pay 20%
13334Collision: Portion of auto insurance that covers losses
13335due to vehicle damage in an accident
13336Commission: A fee paid for providing a service
13337Commodities: A food, metal or fixed physical substance
13338that investors buy or sell, usually via future contracts
13339Communication: A process by which information is
13340exchanged between individuals
13341Compensation: The total wage or salary and benefits
13342that an employee receives
13343Compound interest: Interest paid on interest previously
13344earned; credited daily, monthly, quarterly or semiannually
13345Comprehensive: Pays for damage to your car that is not
13346a result of an accident
13347Consignment shop: Retail store where people sell items
13348and the owner of the shop gets a percentage of the sale
13349Consumer: A person or organization that uses a product
13350or a service
13351Contact letter: A letter informing a prospective employer
13352that you are interested in working for their company
13353Contents insurance: Insurance policy that covers
13354personal possessions in a home or apartment
13355Conventional loan: Mortgage obtained through the
13356Federal National Mortgage Association (FNMA), which
13357insures against default; generally includes a down
13358payment of 5-20% or more
13359Copay: In regards to health insurance, paying a set
13360amount per medical visit
13361Core values: Traits or qualities that represent an
13362individual’s highest priorities, deeply held beliefs, and
13363motivating forces; one’s guiding principles
13364Cost-benefit analysis: The process of quantifying costs
13365and benefits of a decision
13366Cover letter: Similar to a contact letter but is used to
13367inform the prospective employer of your interest and
13368capabilities as they relate to a specific employment
13369opportunity; always accompanied by a résumé
13370Coverage: Applies to the amount of protection you have
13371through an insurance company in the event of a loss
13372Cosigning: Offering to guarantee someone else’s loan;
13373becoming responsible for loan repayment if the borrower
13374defaults
13375Credit: The granting of a loan and the creation of debt;
13376any form of deferred payment
13377LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13378Glossary 273
13379Credit bureau: An agency which collects the credit
13380history of consumers so that creditors can make
13381decisions about granting loans
13382Credit card: Tool used to finance a purchase
13383Credit disability: Insurance that pays for financed items
13384or purchases if you become disabled and are unable to
13385earn an income
13386Credit Laws:
13387»» Fair Credit Reporting Act (1971): Federal law
13388governing the reporting of debt repayment
13389information; establishes when a credit reporting
13390agency may provide a report to someone; states
13391that obsolete information must be taken off (7 to 10
13392years); gives consumers the right to know what is in
13393their credit report; requires that both a credit bureau
13394and information provider (i.e., department store)
13395have an obligation to correct wrong information;
13396gives consumers the right to dispute inaccurate
13397information and add a 100-word statement to their
13398report to explain accurate negative information;
13399gives consumers the right to know what credit
13400bureau provided the report when they are turned
13401down for credit
13402»» Fair Credit Billing Act (1975): Federal law that
13403covers credit card billing problems and applies to
13404all open-end credit accounts (i.e. credit cards and
13405overdraft checking); states that consumers should
13406send a written billing error notice to the creditor
13407within 60 days (after receipt of first bill containing
13408an error), which the creditor must acknowledge
13409in 30 days; requires the creditor to investigate and
13410prohibits them from damaging a consumer’s credit
13411rating while a dispute is pending
13412»» Fair Debt Collection Practices Act (1978): Federal
13413law that prohibits debt collectors from engaging
13414in unfair, deceptive, or abusive practices when
13415collecting debts; requires collectors to send a
13416written notice stating the name of the creditor and
13417the amount owed; prohibits contacting the consumer
13418if he or she disputes the debt in writing within 30
13419days (unless collector furnishes proof of the debt);
13420requires collectors to identify themselves on the
13421phone and limits calls to between 8:00 a.m. and 9:00
13422p.m. unless the consumer agrees to another time;
13423prohibits calling the consumer at work if requested
13424»» Equal Credit Opportunity Act (1975): Federal law
13425that ensures consumers are given an equal chance
13426to receive credit; prohibits discrimination on the
13427basis of gender, race, marital status, religion,
13428national origin, age or receipt of public assistance;
13429prohibits lenders from asking about plans to have
13430children, or refusing to consider consistently
13431received alimony or child support payments as
13432income; grants the consumer legal rights to know
13433why he or she was denied credit
13434»» Truth in Lending Act (1969): Federal law that
13435mandates disclosure of information about the cost
13436of credit; mandates that the finance charge (i.e., all
13437charges to borrow money, including interest) and
13438the annual percentage rate (APR) must be displayed
13439prominently on forms and statements used by
13440creditors; provides criminal penalties for willful
13441violators, as well as civil remedies; protects against
13442unauthorized use of one’s credit card, limiting
13443personal loss to $50 if the card is lost or stolen
13444»» Fair Credit and Charge Card Disclosure Act (1989):
13445Portion of the Truth in Lending Act that mandates
13446a section on credit card applications that describes
13447key features and cost (i.e., APR, grace period for
13448purchases, minimum finance charge, balance
13449calculation method, annual fees, transaction fees for
13450cash advances, and penalty fees such as over-thelimit
13451fees and late payment fees)
13452Credit life: Insurance that pays for financed items or
13453purchases in the event of your death
13454Credit report: Report showing your payment history
13455Credit score: A measure of an individual’s credit risk;
13456calculated from a credit report using a standardized
13457formula
13458Credit union: Not-for-profit cooperatives of members
13459with some type of common bond (i.e., employer) that
13460provide a wide array of financial services, often at a
13461lower cost than banks
13462Currency: Money
13463LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13464274 Foundations in Personal Finance High School Edition
13465GLOSSARY
13466D
13467Day trading: Establishing and liquidating the same
13468position or positions within one day’s trading
13469Debit card: Type of card, often bearing the seal of a major
13470credit card company, issued by a bank and used to make
13471purchases; unlike a credit card, the money comes directly
13472out of a checking account; also called a check card
13473Debt: An obligation of repayment owed by one party (the
13474debtor/borrower) to a second party (the creditor/lender);
13475in most cases this includes repayment of the original
13476loan amount plus interest
13477Debt consolidation: Act of combining all debts into one
13478monthly payment, typically extending the terms and the
13479length of time required to repay the debt
13480Debt snowball: Preferred method of debt repayment;
13481includes a list of all debts organized from smallest to
13482largest balance; minimum payments are made to all
13483debts except for the smallest, which is attacked with the
13484largest possible payments.
13485Deductible: Amount you must pay before you begin
13486receiving any benefits from your insurance company
13487Deduction: An amount subtracted from something
13488especially as an allowance against tax
13489Deed: The legal document conveying title to a property
13490Deflation: A broad, overall drop in the price of goods and
13491services; the opposite of inflation
13492Delinquency: Broadly refers to not being current on your
13493payments
13494Depreciation: A decline in the value of property; the
13495opposite of appreciation
13496Direct deposit service: A service that electronically
13497transfers all or part of any recurring payment, including
13498dividends, paychecks, pensions and Social Security
13499payments directly to a shareholder’s account
13500Direct transfer: Movement of tax-deferred retirement
13501plan money from one qualified plan or custodian to
13502another; results in no immediate tax liabilities or
13503penalties, but requires IRS reporting
13504Disability insurance: Policy that insures a worker in the
13505event of an occupational mishap resulting in disability;
13506compensates the injured worker for lost pay
13507Disposable income: Amount of money left over after all
13508necessities and expenses are paid
13509Dividend distribution: Payment of income to mutual
13510fund shareholders from interest or dividends generated
13511by the fund’s investments
13512Diversification: The practice of dividing the money
13513a person invests between several different types of
13514investments in order to lower risk
13515Dividend: Distribution of a portion of a company’s
13516earnings, decided by the board of directors, to a class
13517of its shareholders; generally distributed in the form of
13518cash or stock
13519Down payment: The part of the purchase price of a
13520property that the buyer pays in cash and does not finance
13521with a mortgage
13522Duplicate checks: Type of checks that make duplicate
13523copies as you write them out
13524E
13525Earned income: Any income (wages/salary) that is
13526generated by working
13527Economy: A system by which goods and services are
13528produced and distributed
13529Educational Savings Account (ESA): After-tax college
13530fund that grows tax-free for educational uses; eligibility
13531based on parents’ annual income
13532Elimination period: Amount of time that lapses after a
13533disabling event before the insurance company begins to
13534pay benefits
13535Emergency fund: Five hundred dollars in readily
13536available cash to be used only in the event of an
13537emergency; the goal of the First Foundation
13538Employee benefit: Something of value that an
13539employee receives in addition to a wage or salary.
13540Examples include health insurance, disability insurance,
13541discounted childcare, etc.
13542LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13543Glossary 275
13544Employer-Sponsored Retirement Savings Program:
13545Tax-deferred savings plans offered by employers that
13546provide a federal tax deduction, tax-deferral of contributions
13547and earnings, and in some cases employer matching. They
13548include 401(k) plans for corporate employees, 403(b) plans
13549for employees of schools and non-profit organizations, and
13550Section 457 plans for state and local government employees.
13551Entrepreneur: A person who starts a business
13552Envelope system: Series of envelopes that are divided
13553into categories (food, entertainment, gas, etc.) and are
13554used to store cash for planned monthly expenses
13555Equity: The value of a piece of property over and above
13556any mortgage or liabilities related to it
13557Estate sale: Type of yard sale with more items, usually
13558the entire contents of a household
13559Excise tax: A tax levied on the purchase of certain
13560non-essential consumer goods such as tobacco, airline
13561tickets, etc.
13562Expense: The cost of goods or services
13563Expense ratio: The percentage of a fund’s average
13564net assets used to pay annual fund expenses. The
13565expense ratio takes into account management fees,
13566administrative fees, and any 12b-1 marketing fees
13567Extended replacement cost: Part of homeowner’s
13568insurance policy that pays a percentage beyond the
13569insured price of the home for purposes of rebuilding it
13570in the event of a catastrophic loss. If you do not update
13571this, it will not cover the appreciation of your home (e.g.
13572house is insured for $200,000, but the value goes up to
13573$300,000, you are covered for the $200,000 plus whatever
13574the coverage states).
13575F
13576Federal Deposit Insurance Corporation (FDIC): A
13577federal institution that insures bank deposits
13578Federal Housing Administration (FHA): Federally
13579sponsored agency chartered in 1934 whose stock is
13580currently owned by savings institutions across the United
13581States. The agency buys residential mortgages that
13582meet certain requirements, sells these mortgages in
13583packages, and insures the lenders against loss.
13584Federal Insurance Contributions Act (FICA):
13585Government legislations that funds Social Security
13586Federal Reserve System: The monetary authority of
13587the United States, established in 1913, and governed
13588by the Federal Reserve Board located in Washington
13589D.C. The system includes 12 Federal Reserve Banks and
13590is authorized to regulate monetary policy as well as to
13591supervise Federal Reserve member banks, bank holding
13592companies, international operations of US banks, and US
13593operations of foreign banks.
13594Fee table: A table, placed near the front of a mutual
13595fund’s prospectus, disclosing and illustrating the
13596expenses and fees a shareholder will incur
13597Financial goals: Short-, immediate, and long-term goals
13598that require money and guide a person’s future plans and
13599savings decisions
13600Financial literacy: The knowledge and skill base
13601necessary to be informed consumers and manage their
13602finances effectively
13603Financial plan: A plan of action that allows a person
13604to meet not only the immediate needs but also their
13605long-term goals
13606Financial resources: Financial assets that can be
13607accessed when necessary
13608Financing: To buy an item with credit; paying over time
13609Fiscal: Having to do with money
13610Fiscal year: Accounting period covering 12 consecutive
13611months over which a company determines earnings and
13612profits. The fiscal year serves as a period of reference for
13613the company and does not necessarily correspond to the
13614calendar year.
13615Five Foundations: The five steps to financial success
13616Fixed annuity: Type of annuity that guarantees a certain
13617rate of return; see annuity
13618Fixed income securities: Investments, such as bonds,
13619which provide current income from a fixed schedule of
13620interest payments. While the level of income offered by
13621these securities is predetermined and usually stable,
13622their market value may fluctuate
13623Fixed rate: An interest rate that does not change over time
13624LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13625276 Foundations in Personal Finance High School Edition
13626GLOSSARY
13627Forbearance: Agreement of a lender to suspend
13628foreclosure proceedings and allow a debtor to “catch up”
13629a past due account over a specified period of time; lender
13630grants a postponement of loan payments for a set period
13631of time, giving the borrower time to make up for overdue
13632payments
13633Foreclosure: Process by which the holder of a mortgage
13634sells the property of a homeowner who has not made
13635interest and/or principal payments on time as stipulated
13636in the mortgage contract
13637Fraud: A seller’s intentional deception of a buyer, which
13638is illegal
13639Free Application for Federal Student Aid (FAFSA):
13640A form that is completed annually by current and
13641prospective college students to determine their eligibility
13642for financial aid
13643Free spirit: A person who thinks that everything will
13644work out fine and typically hates to deal with the details
13645Front-end load: Sales commission that is paid up-front
13646when shares of a mutual fund are purchased
13647Fund family: A group of mutual funds sponsored by the
13648same organization, often offering exchange privileges
13649between funds and combined account statements for
13650multiple funds
13651Futures: A term used to designate all contracts covering
13652the sale of financial instruments or physical commodities
13653for future delivery on a commodity exchange
13654G
13655Garnishment: Court-ordered attachment that allows a
13656lender to take monies owed directly from a borrower’s
13657paycheck; only allowed as part of a court judgment
13658Goal: The result of achievement toward which effort is
13659directed
13660Grace period: Time period during which a borrower can
13661pay the full balance of credit due with no finance charges
13662Grant: A form of federal or state financial aid that does
13663not need to be repaid; usually given to students who
13664demonstrate financial need
13665Gratuity: An amount paid beyond what is required
13666usually to express satisfaction with service quality; also
13667known as a tip
13668Gross income: A person’s total income prior to
13669withholdings and deductions
13670Gross National Product (GNP): Measures an economy’s
13671total income. It is equal to Gross Domestic Product,
13672plus the income abroad accruing to domestic residents,
13673minus income generated in domestic market accruing to
13674non-residents.
13675Growth and income mutual fund: A fund that buys
13676stocks in larger, more established companies, mediumsized
13677companies or growth stocks; also called a largecap
13678fund
13679Growth stock mutual fund: A fund that buys stock in
13680medium-sized companies that have experienced some
13681growth and are still expanding; also called a mid-cap
13682fund
13683Guaranteed renewable: If you have a 20-year policy,
13684the insurance has to provide coverage after 20 years
13685regardless of health; it will only be more expensive
13686because you are older
13687Guaranteed replacement cost: Part of homeowner’s
13688insurance policy that pays for the full cost of replacing
13689damaged property without a deduction for depreciation
13690and without a dollar limit
13691H
13692Health insurance: Covers you in the event of illness or
13693injury
13694Health savings account (HSA): A health insurance plan
13695for self-employed people containing a large deductible.
13696Money saved in this account grows tax deferred. It can
13697be used for medical care with no penalties and no taxes,
13698and may be kept if unused.
13699Home equity loan (HEL): Credit line offered by mortgage
13700lenders that allows a homeowner to borrow money
13701against the equity in their home
13702Home warranty: An agreement that ensures the
13703structural soundness of a home
13704LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13705Glossary 277
13706Homeowner’s insurance: Policy that covers a loss due to
13707damage, theft or injury within one’s home
13708House poor: A condition of having a disproportionately
13709high house payment that limits one’s ability to maintain
13710the home and/or meet necessities
13711I
13712Impulse purchase: An item that is bought without previous
13713planning or consideration of the long-term effects
13714Income: Earnings from work or investment
13715Income fund: A mutual fund that invests in bonds and
13716stocks with higher than average dividends
13717Income risk: The possibility that income from a mutual
13718fund or other investment will decline either as a fund’s
13719assets are reinvested or when a fixed income investment
13720matures and is replaced with a lower-yielding investment
13721Income tax: Tax paid out by anyone who earns an income
13722Index: A statistical benchmark designed to reflect
13723changes in financial markets or the economy. In
13724investing, indexes are used to measure changes in
13725segments of the stock and bond markets and as
13726standards against which fund managers and investors
13727can measure the performance of their investment
13728portfolios.
13729Index fund: A mutual fund that seeks to match the
13730performance of a predetermined market benchmark or
13731index
13732Individual retirement arrangement (IRA): Tax-deferred
13733arrangement for individuals with earned income and
13734their non-income-producing spouses; growth is not
13735taxed until money is withdrawn; contributions to an IRA
13736are often tax-deductible
13737Inflation: Rate at which the general level of prices for
13738goods and services rise
13739Inflation hedge: An asset rising in value, which helps
13740one to keep up with the rising cost of inflation. Real
13741estate can be a great inflation hedge.
13742Integrity: Having to do with a person’s honesty and
13743moral attributes
13744Interest: Charge for borrowed money generally defined
13745as a percentage; money paid to savers and investors by
13746financial institutions, governments, or corporations for
13747the use of their money (such as a 2% return on money
13748held in a savings account)
13749Interest-only loan: A mortgage where you only pay the
13750interest
13751Interest rate: Percentage paid to a lender for the use
13752of borrowed money (in debt); percentage earned on
13753invested principal (in investing)
13754Interest rate risk: The risk that a security or mutual
13755fund will decline in price because of changes in market
13756interest rates
13757Internal Revenue Service (IRS): Federal agency
13758responsible for the collection of federal taxes, including
13759personal and corporate, Social Security, and excise and
13760gift taxes
13761International stock mutual fund: Mutual fund that
13762contains international or overseas companies
13763Introductory rate: An interest rate charged to a
13764customer during the early stages of a loan; the rate often
13765goes up after a specified period of time
13766Investing: The process of setting money aside to
13767increase wealth over time for long-term financial goals
13768such as retirement
13769Investment: Account or arrangement in which a person
13770puts his/her money for long-term growth; invested
13771money should not be used for a suggested minimum of
13772five years
13773Investment advisor/manager: The individual who
13774manages a portfolio of investments; also called a
13775portfolio manager or a money manager
13776Investment objective: A mutual fund’s performance
13777goal, such as long-term capital appreciation, high
13778current income, or tax exempt income
13779Investors: People investing in securities, such as stocks
13780and bonds, or other investments, to achieve long-term
13781financial goals
13782Interview: A meeting between an employer and an
13783applicant; the employer asks the applicant questions to
13784assess whether he or she has the right social skills and
13785intelligence suitable for the workplace
13786LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13787278 Foundations in Personal Finance High School Edition
13788GLOSSARY
13789J
13790Job: A regular activity performed in exchange for payment,
13791especially as one’s trade, occupation, or profession
13792L
13793Large-cap fund: Funds comprised of large, wellestablished
13794companies
13795Lease: A long-term rental agreement, and a form of
13796secured long-term debt
13797Legacy: Anything handed down from the past; something
13798that someone has achieved that continues to exist after
13799they are gone
13800Level term: This means you pay the same amount for
13801the entire term of the policy
13802Liability: The state or quality of being obligated
13803according to law or equity
13804Liability insurance: Policy that protects an individual
13805in the event of a lawsuit due to injury on one’s personal
13806property or as the result of an automobile accident
13807Life insurance: Type of insurance designed to replace
13808income lost due to death; traditionally two types: term
13809and cash value
13810Liquidity: Quality of an asset that permits it to be
13811converted quickly into cash without loss of value;
13812availability of money
13813Loan: Temporary borrowing of a sum of money
13814Load fund: Mutual fund that sells shares with a sales
13815charge of typically 2-6% of the net amount sold; some
13816no-load funds also levy distribution fees permitted by
13817Article 12b-1 of the Investment Company Act. These are
13818typically 0.25%; a true no- load fund has no sales charge.
13819Loan term: Time frame that a loan agreement is in force,
13820and before or at the end of which the loan should either
13821be repaid or renegotiated for another term
13822Loan to value (LTV): Value of a property versus the
13823amount borrowed against it; example: a 70/30 LTV
13824means that the property owner owes 70% of the item’s
13825worth and owns 30% of the item’s worth
13826Long-term care insurance: Policy that covers the cost
13827of nursing home or in-home care; recommended for
13828everyone over age 60
13829Long-term coverage: Coverage for an extended period
13830of time
13831Long-term disability: Disability insurance designed to
13832replace lost income for a period of five years or greater
13833Loss: The negative difference between total revenue
13834from a business or investment minus total expense
13835Low-load fund: Mutual fund that charges a sales
13836commission equal to 3% or less of the amount invested
13837M
13838Management fee: The fee paid by a mutual fund to its
13839investment advisor
13840Marketing: The process of communicating the value of a
13841product or service to customers
13842Market risk: The possibility that an investment will fall
13843in value due to a general decline in financial markets
13844Markup: The difference between the wholesale price and
13845retail price
13846Maximum pay: The amount an insurance company will
13847pay before you are dropped from coverage. With health
13848insurance keep at least a one million dollar maximum pay
13849Medicare: Federal government program that pays for
13850certain health care expenses for citizens 65 or older;
13851managed by the Social Security Administration
13852Mid-cap fund: Mutual fund containing a group of
13853medium-sized companies that are growing
13854Money: Currency and coin that are guaranteed as legal
13855tender by the government
13856LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13857Glossary 279
13858Money market fund: Mutual fund that seeks to maintain
13859a stable share price and to earn current income by
13860investing in interest-bearing instruments with shortterm
13861(usually 90 days or less) maturities
13862Money order: A financial instrument backed by a deposit
13863at a certain firm, such as a bank, that can be easily
13864converted to cash
13865Mortgage: Loan secured by the collateral of some
13866specified real estate property, which obligates the
13867borrower to make a predetermined series of payments
13868Mortgage life insurance: Insurance policy that pays off
13869the remaining balance of the insured person’s mortgage
13870at death
13871Mutual fund: Pool of money managed by an investment
13872company and invested in multiple companies, bonds,
13873etc.; offers investors a variety of goals depending on the
13874fund and its investment charter; often used to generate
13875income on a regular basis or to preserve an investor’s
13876money; sometimes used to invest in companies that are
13877growing at a rapid pace
13878Myth: Information that has been passed on but is not true
13879N
13880Need: Economic goods and services that are basic for
13881living such as food, clothing, and shelter
13882Negotiate: To bargain for a lower price
13883Nerd: A person who is picky about budgeting and details
13884Nest egg: Sum of money earmarked for ongoing living
13885expenses at retirement or when employment income
13886otherwise stops
13887Net asset value (NAV): The market value of a mutual
13888fund’s total assets, less its liabilities, divided by the
13889number of outstanding shares
13890Nonprofits: Organizations that use money raised to
13891achieve their goals rather than distributing them as profit
13892No-load mutual fund: Open-ended investment company
13893whose shares are sold without a sales charge; might
13894include other distribution charges, such as Article 12b-1
13895fees, but a true no-load fund has neither a sales charge
13896nor a distribution fee
13897O
13898Objective: A goal or plan
13899Occupational disability: Type of insurance that provides
13900an income in case the insured becomes unable to
13901perform the job he/she was educated or trained to do
13902Opportunity cost: Refers to the financial opportunity that
13903is given up because you choose to do something else
13904with your money
13905Out-of-pocket expense: Specific amount of money that
13906you pay when insurance only covers a portion of costs
13907Owner financing: Type of home loan in which the
13908existing owner acts as the mortgage holder; payments
13909are made to the owner rather than to a mortgage
13910company or bank
13911Overdraft: Occurs when money is withdrawn from a
13912bank account and the available balance goes below zero
13913P
13914Paradigm: Your belief system; the way you see or
13915perceive things
13916Passive income: Money earned on a regular basis with
13917little or no effort required to maintain it. Some things
13918that produce passive income are real estate, intellectual
13919property like books or internet content, or a business in
13920which the owner is not actively involved.
13921Pawn shop: Retail establishment selling items that have
13922been traded as security for a cash loan
13923Payroll deduction: Amount subtracted from a paycheck,
13924either by government requirement (mandatory taxes,
13925Social Security, etc.) or at the employee’s request (health
13926insurance, retirement plan, etc.)
13927Permanent disability: Disabilities that are ongoing and
13928are not expected to end
13929Personal branding: The process by which we “market”
13930ourselves to others; involves highlighting personal strengths,
13931interests and unique qualities and identifying goals
13932LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
13933280 Foundations in Personal Finance High School Edition
13934GLOSSARY
13935Personal finance: The decisions which an individual or
13936a family unit is required to make to obtain, budget, save,
13937and spend money over time
13938Philanthropy: Means “love of humanity”; identifying and
13939exercising one’s values in giving and volunteering
13940Policy: Describes the type of coverage in an insurance
13941agreement
13942Portfolio: A list of your investments
13943Portfolio income: Income generated by selling an
13944investment at a higher price than you paid for it
13945Portfolio transaction costs: The costs associated with
13946buying and selling securities, including commissions on
13947trades, dealer mark-ups on bonds, bid-asking spreads,
13948and any other miscellaneous expenses. These costs are
13949not included in the expense ratio.
13950Pre-authorized checking (PAC): System of automatic
13951payment processing by which bills, deposits, and
13952payments are handled electronically and at regular
13953intervals or on a predetermined schedule
13954Pre-paid tuition: Paying for college ahead of time by
13955accumulating units of tuition
13956Pre-tax retirement plan: A type of retirement plan
13957where you put money in before taxes have been taken
13958out, but must pay taxes on the money at the time of
13959withdrawal
13960Premium: Amount you pay monthly, quarterly, semiannually
13961or annually to purchase different types of
13962Insurance
13963Principal: Original amount of money invested, excluding
13964any interest or dividends; also called the face value of
13965a loan
13966Priority: Level of high importance or great urgency
13967Private mortgage insurance (PMI): Policy paid by the
13968mortgage borrower that protects the lender against loss
13969resulting from default on a mortgage loan
13970Profit: The positive difference between total revenue
13971from a business or investment minus total expense
13972Property taxes: Taxes paid by anyone who owns property
13973such as land, a home or commercial real estate
13974Pro rata: Debt repayment plan by which the borrower
13975repays each lender a fair percentage of the total debt
13976owed when one cannot make the minimum payments on
13977one’s debt
13978Prospectus: Official document that contains information
13979required by the Securities and Exchange Commission to
13980describe an investment
13981R
13982Rate of return: Return on an investment expressed as a
13983percentage of its cost; also called yield
13984Realtor: An intermediary who receives a commission
13985for arranging and facilitating the sale of a property for a
13986buyer or a seller; also referred to as a Real Estate Broker
13987or an Agent
13988Reconcile: To match your bank statement with your
13989checkbook
13990Redemption fee: Fee charged by some mutual funds for
13991selling (redeeming) shares
13992Refunding: Sending in proofs of purchase to receive
13993cash back or free gifts
13994Reinvestment: Use of investment income or dividends to
13995buy additional shares
13996Rent: Periodic fee for the use of property
13997Rental real estate: Buying real estate to rent out as an
13998investment
13999Renter’s insurance: Type of insurance that provides
14000coverage for accidents, damages and losses in a rental
14001(apartment or house) or dormitory. Renter’s insurance
14002provides coverage for personal belongings and liability
14003that may occur from an accident in the insured home
14004Replacement cost: Insurance that pays the actual
14005cost of replacing your home and its contents after a
14006catastrophic event
14007Repo lot: A place where items that have been
14008repossessed are offered for sale
14009LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
14010Glossary 281
14011Restoration services: Part of identity theft insurance
14012that assigns a counselor to clean up the mess made
14013when your identity was stolen
14014Résumé: A brief account of one’s professional or work
14015experience and qualifications, often submitted with an
14016employment application
14017Retailer: One who buys a product to re-sell
14018Reverse mortgage: Used to release the home equity in
14019a property. The home owner either makes no payments
14020and the interest is added to the lien of the property, or
14021receives monthly payments thereby increasing the debt
14022each month.
14023Risk: Degree of uncertainty of return on an asset; in
14024business, the likelihood of loss or reduced profit
14025Risk-return ratio: Relationship of substantial reward
14026compared to the amount of risk taken
14027Rollover: Movement of funds from a tax-deferred
14028retirement plan from one qualified plan or custodian to
14029another; incurs no immediate tax liabilities or penalties,
14030but requires IRS reporting
14031Roth IRA: Retirement account funded with after-tax
14032dollars that subsequently grows tax free
14033Roth 401(k): Employer-sponsored retirement savings
14034account that is funded with after-tax dollars and
14035subsequently grows tax free
14036Rule of 72: A quick way to calculate the length of time
14037it will take to double a sum of money. Divide 72 by the
14038expected interest rate to determine the number of years
14039(72 divided by 8% = 9 years).
14040Rule of 78: Pre-payment penalty in a financing contract; the
14041portion of a 90-days-same-as-cash agreement that states
14042that the entire loan amount plus the interest accumulated
14043over the first 90 days becomes due immediately
14044S
14045Salary: Payment for work, usually calculated in
14046periods of a week or longer. Salary is usually tied to the
14047completion of specific duties over a minimum, but not
14048maximum, number of hours. (See wage.)
14049Sales tax: Tax on goods and services that goes to your
14050state or local government
14051Saving: The process of setting aside money until a future
14052date instead of spending it today. The goal is to provide
14053for emergencies, short term goals, and investments.
14054Savings account: Accounts at financial institutions that
14055allow regular deposits and withdrawals. The minimum
14056required deposit, fees charged, and interest rate paid
14057varies among providers.
14058Savings bond: Certificate representing a debt; example:
14059U.S. savings bond is a loan to the government in which
14060the government agrees to repay to the bondholder the
14061amount borrowed, with interest; government bonds are
14062issued in face value denominations from $50 to $10,000,
14063with local and state tax-free interest and semi-annually
14064adjusted interest rates.
14065Savings & loan associations (S&Ls): Financial
14066institutions that provide loans and interest bearing
14067accounts which are federally insured
14068Scholarship: A form of financial aid that does not need
14069to be repaid; usually awarded on the basis of academic,
14070athletic or other achievements
14071Sector fund: A mutual fund that invests its shareholders’
14072money in a relatively narrow market sector, e.g.
14073technology, energy, the internet, or banking
14074Security: The state of being free from danger or threat
14075Self-esteem: A confidence and satisfaction in yourself
14076Self-insured: Condition of wealth at which time one no
14077longer needs an outside insurance policy to cover a loss
14078Share: Piece of ownership in a company, mutual fund or
14079other investment
14080Short-term disability: Minimal period of incapacitation;
14081often used to describe an insurance policy that insures
14082one’s income for the immediate future following an
14083incapacitating event
14084Short-term policy: Insurance policy that only covers a
14085minimal period of time
14086Significant purchase: An amount of money you spend,
14087usually $300, that causes some pain to part with
14088LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
14089282 Foundations in Personal Finance High School Edition
14090GLOSSARY
14091Simple interest: Interest credited daily, monthly,
14092quarterly, semi-annually, or annually on principal only,
14093not previously credited interest
14094Simple IRA: Salary deduction plan for retirement
14095benefits provided by some small companies with fewer
14096than 100 employees
14097Simplified employee pension plan (SEPP): Pension plan
14098in which both the employee and the employer contribute
14099to an individual retirement account; also available to the
14100self-employed
14101Sinking fund: Saving money over time for a large purchase
14102Small-cap fund: Mutual fund that invests in companies
14103whose market value is less than $1 billion; largely
14104consists of smaller, more volatile companies; also called
14105aggressive growth stock mutual fund
14106Social Security: A federal insurance program funded by
14107taxpayer dollars that provides benefits to people who are
14108retired, unemployed or disabled
14109Speculative: Purchasing risky investments that present
14110the possibility of large profits, but also pose a higherthan-
14111average possibility of loss
14112Stock markets:
14113»» National Association of Securities Dealers Automated
14114Quotation System (NASDAQ): The electronic stock
14115exchange run by the National Association of Securities
14116Dealers for over the counter trading. Established in
141171971, it is America’s fastest growing stock market and
14118a leader in trading foreign securities and technology
14119shares. The NASDAQ uses market makers who trade for
14120their own account and profit on the spread between bid
14121and ask prices. Although once the province of smaller
14122companies, NASDAQ today is where many leading
14123companies are traded.
14124»» New York Stock Exchange (NYSE): The NYSE traces
14125its origins back more that 200 years to the signing
14126of the Buttonwood Agreement by 24 New York City
14127stockbrokers and merchants in 1792. The NYSE
14128utilizes a trading floor for traditional exchanges where
14129buyers and sellers meet directly–that is, brokers
14130representing investors on each side of the transaction
14131come together on a price.
14132Stocks: Securities that represent part ownership or
14133equity in a corporation
14134Stop-loss: Total out-of-pocket expense for health
14135insurance; once reached, insurance will pay 100 percent
14136T
14137Take-home pay: The amount of money one has available
14138after taxes have been taken out of their pay; total wage,
14139salary, commissions, and/or bonuses minus payroll
14140deductions
14141Tax: A government fee on business and individual
14142income, activities, products, or services
14143Tax credit: An amount that a taxpayer who meets certain
14144criteria can subtract from tax owed
14145Tax deduction: Expense that a taxpayer is allowed to
14146deduct from taxable income; examples include money
14147paid as home mortgage interest and charitable donations
14148Tax deductible: The effect of a tax deduction, such as
14149charitable contributions and mortgage interest
14150Tax-deferred income: Dividends, interest, and
14151unrealized capital gains on investments in a qualified
14152account, such as a retirement plan, in which income is
14153not subject to taxation until a withdrawal is made
14154Tax exempt: Investments whose earnings are free from
14155tax liability
14156Tax exemptions: Amount that a taxpayer who meets
14157certain criteria can subtract from a taxable income; see
14158tax credit and tax deduction
14159Tax-favored dollars: Money that is invested, either tax
14160deferred or tax free, within a retirement plan
14161Taxable income: Income subject to tax; total income
14162adjusted for deductions, exemptions and credits
14163Teamwork: Cooperative and coordinated effort on the
14164part of a group of persons acting together in the interest
14165of a common goal
14166Term insurance: Life insurance coverage for a specified
14167period of time
14168Time poverty: A situation in which a person is lacking
14169time, which leads to stress
14170Timeshare: A form of vacation property ownership
14171where a company sells a small segment of time (usually
14172a week) to a customer. The use and costs of running the
14173property are shared among all of the customers, now
14174owners, who bought into the timeshare.
14175LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
14176Glossary 283
14177Time value of money: Money at the present time is
14178worth more than the same amount in the future
14179Title insurance: Coverage that protects a policyholder
14180from future challenges to the title of a property that may
14181result in loss of the property
14182Total return: The change in percentage over a particular
14183period in the value of an investment; including any
14184income from the investment and any change in its
14185market value
14186Track record: The past history of something; with
14187investments, look at the five or ten year record
14188Turnover rate: A measure of a mutual fund’s trading
14189activity. Turnover is calculated by taking the lesser of
14190the fund’s total purchases or total sales of securities
14191(not counting securities with maturities under one year)
14192and dividing by the average monthly assets. A turnover
14193rate of 50% means that during a year, a fund has sold
14194and replaced securities with a value equal to 50% of the
14195fund’s average net assets.
14196U
14197Umbrella liability insurance: High-limit insurance
14198policy that acts as a protective covering over your home
14199and car insurance against liability caused by an accident
14200Underwriter: A firm that buys an issue of securities
14201from a company and resells it to investors; in general, a
14202party that guarantees the proceeds to the firm from a
14203security sale, thereby in effect taking ownership of the
14204securities
14205Unearned income: Money received for which no
14206exchange was made, such as a gift
14207Uniform Gifts to Minors Act (UGMA): Legislation
14208that provides a tax-effective manner of transferring
14209property to minors without the complications of trusts or
14210guardianship restrictions
14211Uniform Transfers to Minors Act (UTMA): Law similar
14212to the Uniform Gifts to Minors Act (UGMA) that extends
14213the definition of gifts to include real estate, paintings,
14214royalties, and patents
14215Universal life: Type of life insurance policy, similar to
14216cash value, but with better projected returns
14217Unrealized capital gain/loss: An increase/decrease in
14218the value of a stock or security (mutual fund) that is not
14219“realized” because the security has not yet been sold for
14220a gain or a loss
14221V
14222Veterans Administration (VA) loan: Type of mortgage
14223loan designed to benefit veterans that allows for a true
14224zero-down mortgage; generally more expensive than a
14225conventional mortgage
14226Value fund: Mutual fund that emphasizes stocks of
14227companies whose growth prospects are generally
14228regarded as sub-par by the market, resulting in stocks
14229typically priced below average based on such factors as
14230revenue, earnings, book value, and dividends
14231Value system: A person’s priorities, beliefs and
14232standards that affect how he or she views the world
14233Variable annuity: Annuity that has a varying rate of
14234return based on the mutual funds in which one has
14235invested; also see annuity
14236Variable life: Type of life insurance that is similar to
14237cash value, but buys into mutual funds to project better
14238returns
14239Viatical: Contractual arrangement in which a business
14240buys life insurance policies from terminally ill patients
14241for a percentage of the face value
14242Vocation: What you do for a living that is your “calling”
14243Volatility: Fluctuations in market value of a mutual fund
14244or other security; the greater a fund’s volatility, the wider
14245the fluctuations between high and low prices
14246W
14247W-4: A federal tax form filled out by an employee to
14248indicate the amount that should be withheld from his/her
14249paycheck for taxes
14250Wage: Payment for work, usually calculated in periods of
14251an hour rather than longer (see salary)
14252LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE
14253284 Foundations in Personal Finance High School Edition
14254GLOSSARY
14255Walk-away power: The ability to walk away from a
14256purchase when negotiating
14257Wants: Desires for economic goods or services not
14258necessary in order to survive
14259Wealth: Accumulating assets such as money and
14260possessions, often as a result of saving or investing
14261Will: A legally enforceable declaration of how a person
14262wishes his or her property to be distributed after death
14263Withholding: A portion of employee’s wages or salary
14264deducted for taxes
14265Whole life insurance: Type of insurance that contains a
14266low-yield savings plan within the insurance policy; more
14267expensive than term life insurance
14268Work ethic: How motivated, loyal and honest you are in
14269your work
14270Work study: A program that allows students to work part
14271time while continuing their studies
14272Y
14273Yield: The annualized rate at which an investment earns
14274income, expressed as a percentage of the investment’s
14275current price
14276Z
14277Zero-based budget: A cash flow plan that assigns an
14278expense to every dollar of your income, wherein the total
14279income minus the total expenses equals zero
14280LICENSED TO: HEBRON 9TH GRADE CENTER UNLIMITED SCHOOL LICENSE