Life in United States: Family Finance Simulation

1. Welcome to Life in…United States …a Family Finance Simulation Developed by: Take Charge Today Take Charge America Institute - University of Arizona Funded by a grant from Take Charge America, Inc.

2. Today’s Presentation • Today's presentation will include: • Reviewing the key components of the simulation and its design • Completing the simulation • Discussing the facilitation options for the simulation • Overview of Life Of…

3. Create a spending plan Incorporate the decision making process into daily life Demonstrate the relationship between income and education Provide realistic insights into the costs of living associated with the spending plan process Objectives

4. What is “Life In…” ? • Family finance simulation • Emulates the “real life” constraints households encounter when managing their finances • All costs are national averages • United States Census Bureau, United States Department of Labor, Bureau of Labor Statistics, United States Department of Agriculture, National Coalition on Health Care, and various private businesses • Simulation is an average community in the United States • 25 individuals in 18 households

5. Background information • Background Information • Describes individual and/or family values, needs and wants • Family dynamics and lifestyle choices are explained • Occupational Outlook Handbook guides • Nature of work, working conditions, training required, job outlook and earnings • Read your scenario and be prepared to share and learn more about who is in your community

6. Major expenditure Percentages • Identify the recommended average percent of net income to spend in a specific category • Use as a guide when making spending decisions • Percentages should be adjusted to meet individual values, needs, and wants • Other includes items such as: • Clothing • Personal care • Entertainment • Donations

7. What to complete • Goal of “Life in…” • Make spending plan decisions to meet the needs of the family by balancing their income and expenses • Assignments to complete • Setting a Financial Goal worksheet 2.0.1.A1 • Guided Spending Plan worksheet 2.0.1.A2 • Spending Plan Statement 2.0.1.A3

8. Life in…United States

9. Job announcement envelopes Your level of education is represented by the color in which your name is printed on the front of the envelopes. All children are printed in brown Who is in our community? Orange: less than 9th grade Light pink: high school drop out Green: high school graduate or GED Sky blue: some college Red: associate’s degree Navy: bachelor’s degree Purple: graduate degree Black: doctorate degree Education vs. Income • How does having residents with various levels of education benefit a community?

10. Setting a financial goal • Set a financial goal • Financial goals provide direction when creating a spending plan • Behind Spending Plan tab, complete each section to set a SMART goal • Review profile and consider the family’s values, needs, and wants • Set SMART financial goal • Your financial goal will be recorded on question #2 on the Guided Spending Plan

11. Understanding the paycheck • Under the profile tab review the paycheck(s) for your scenario • Review all elements of a paycheck • Gross income • Payroll deductions • Net income • Why do some paychecks have additional withholding for retirement and medical and others do not?

12. Complete the following: • Based upon your paycheck, question #3 in the Guided Spending Plan will include the following: • Gross income • All paycheck deductions • Calculated net income • For dual-income families, add both paychecks together

13. Saving • It is recommended a person save a minimum of 10% of net income • Determine what amount you will be saving or investing • Guided Spending Plan question #4 is the savings component

14. Housing • Housing, on average, is 30% of a household’s net income • The information sheet describes basic terminology, renting vs. buying, mortgages, how to determine insurance costs and various types of insurance • Guided Spending Plan Question #5 is where housing information will be recorded

15. Housing Purchase Rent Must include all items in red in your spending plan Rent Laundromat (when applicable) If you have a pet, your rental unit must allow for them and applicable fees charged Renter’s insurance is not required, but recommended $15.83/mo. for $25,000 coverage • Must include all items in red in your spending plan: • Mortgage • Insurance • Property taxes • Repairs and maintenance Only choose a house available for the type of location in which you live!

16. Housing Amenities • Required amenities • Power • Water/sewer • Garbage • Some rentals include all or some of the required amenities • Optional amenities • Internet • Cellular phone • Home phone line • Cable/Satellite • Recycling

17. Transportation • Transportation, on average, is 20% of a household’s net income • The information sheet describes basic terminology, new vs. used, automobile financing, how to determine insurance costs, and various types of insurance • Transportation information will be recorded on question #6 of the Guided Spending Plan worksheet

18. Transportation Transportation options: Things to know: All items in red must be included in the spending plan Payment Insurance Fuel costs Repairs and maintenance If an alternative option is chosen, it must be appropriate for the location • Purchasing new: • Not pre-owned, warranty, wide selection • Purchasing used: • Costs less, lower insurance rates, depreciates more slowly • Alternative options: • Less expensive than a vehicle • Availability is limited in some locations Some profiles indicate transportation choices the family has made.

19. Food • Food, on average, is 15% of a household’s net income • Food information will be recorded on question #7 of the Guided Spending Plan worksheet

20. Types of Food Plans • Thrifty • Generic brands • Canned fruits and vegetables • No junk food • Chicken and hamburger • Low-cost • Generic brands • Some fresh fruit and vegetables • Chicken, hamburger, turkey, ham • Moderate-cost • Mostly fresh fruit and vegetables • Both name brand and generic • Variety of meats • Liberal • Organic • Name brands • Fresh fruit and vegetables • Variety of meats including steak and lobster

21. Stop Watch Complete the profile, paycheck, saving, housing, transportation, and food section of your spending plan.

22. Insurance • Insurance, on average, is 7% of a household’s net income • The information sheet describes basic terminology, how to determine insurance costs and various types of insurance • Insurance information will be recorded on question #8 of the Guided Spending Plan worksheet

23. Health Insurance Determine if health insurance is provided by employer If provided, ascertain which family members are protected If not provided, decide if it will be purchased separately If so: Identify the age of the oldest individual being covered Review the appropriate plan 1 individual = single 2 individuals = single + dependent More than 2 = family plan Select from the row of the appropriate age and column of the appropriate plan

24. Disability Insurance Determine if disability insurance is provided by employer If not provided, decide if it will be purchased separately If so: Monthly net income x .02 = monthly cost

25. Life Insurance Determine if life insurance is provided by employer If not provided, decide if it will be purchased separately If so: Identify who will be insured Must be purchased separately for each individual being insured Select the amount of coverage $100,000 $250,000 $350,000 Find out if people in your scenario use tobacco products or not Determine the monthly cost

26. Cost of Raising Children • Select the appropriate table based upon single or two parent families and income • Record total on the Guided Spending Plan #9

27. Cost of raising children If you have children, go to the Cost of Raising Children tab Select the appropriate table based upon single or two-parent families and income Find the row for the oldest child Add together the costs of: Clothing + Healthcare (could be reduced if insured) + Childcare + Education + Miscellaneous = Total cost

28. Cost of Raising Children Total cost is based on families with 2 children If there are not two children: Single parent family 1 child = total cost x 1.35 3 or more children = total cost x .72 Two-parent family 1 child = total cost x 1.24 3 or more children = total cost x .77 Record total on the Guided Spending Plan #9

29. Stop Watch • Complete the insurance and children sections, as well as anything from the previous sections • If you do not finish everything, that’s okay!

30. Credit card statements America’s Debt • A 2007 survey of college students said that one-third of students reported having two credit cards or more; 12% had three or more credit cards • College students carry an average of $1,035 of credit card debt (this does not include college loans) • Source: Buffalo State College, Financial Literacy Key to Prevent College Student Credit Card Debt, October 2007, http://www.newswise.com/articles/view/534061 • Congratulations! • Your monthly credit card bill has arrived • Guided Spending Plan Question #10 • Identify how much debt, if any, you have • Need to include at least the minimum payment

31. Personal Profile Expenses • Review personal profile and record all expenses printed in red • Hobbies, activities, medical expenses, pets, charity donations, extra bills, habits, etc. • Expenses identified in red are valued or necessary and cannot be eliminated • Incorporate any expenses not already included in the Average Expenditures section of the Guided Spending Plan question # 11

32. Average Expenditures Guided Spending Plan Question # 11 Review the average expenditures for: Entertainment Personal Care Health Care Apparel & Services Contributions Education and Reading Based upon your scenario’s income level, select expenses These are flexible expenses based upon averages Therefore, you may choose to allocate more or less money to each category Record expenses and total them Remember to allocate enough money to cover all members of the family!

33. Chance cards • Each day brings new surprises… • Why a spending plan is a “plan” for how to allocate your money • Spending plans are always evaluated and adjusted based upon life's events • Guided Spending Plan Question # 12 • Identify what chance card was received • Incorporate that chance card into your spending plan

34. Balancing the spending plan • Guided Spending Plan Question #13 • Transfer all income and expense subtotals throughout the worksheet onto this chart • Subtract the total expenses from the total income • Your balance must equal zero • Make changes as necessary • If there is a net gain, where will the extra money be allocated? • If there is a net loss, identify what changes may be made • Identify decisions made to make the spending plan balance

35. Creating the Spending Plan Statement • Write your revised goal on the Spending Plan Statement • Transfer all income and expense information to the Spending Plan Statement • Calculate the percentage of net income spent on each category

36. Take Time • Finish any remaining sections of your spending plan

37. Discussion

38. Reflection • Identify two things you learned as a result of completing this simulation which you will employ in your daily life in the next five years. • Do you feel that insurance is an essential component of a financial plan? Why or why not? • How did working with a partner and discussing options influence decisions? Was it hard, easy? • What do you feel is the most difficult component of creating a spending plan which families encounter?

39. Facilitation and Assessment

40. How many Can Participate? • Simulation is designed specifically for 25 participants, but can be used with as few as 1 person or as many as 90 people • Less than 25 • 25-40 people • 40-90 people

41. Facilitation Methods • Facilitator guided • Semester course • Workshop • Independent study • Information sheets are included in each section • Career Development • Your own creative way

42. Assessment Tools • Assessment tools within “Life In…” • Multiple choice and short answer quizzes • Reflection questions for group discussion or individual short answer • Essay • Trivia game • “Life In…” as an assessment tool • Stand alone authentic assessment of skills

43. Educator Tips • Put each page into page protectors to keep participants from writing on pages • Be sure that the spending plan section has been printed in black and white. This is the section where the participants will be writing • Use only one scenario for entire class to create a discussion on how wants and needs and values of different people lead to different decisions • Use binders appropriate for the area you live in (specific socio-economic status, jobs, race, or family make-up). Use the profile descriptions to help make your decision

44. Educator Tips

45. Educator Tips • Determine if the participants will work individually or in groups • If participants are going to work individually, consider allowing more time for completion • If participants are going to work in pairs, two options are available • Allowing participants to choose their partner will help them to feel more comfortable • Choosing the groups for participants will force different values, needs, and wants to be discussed • If participants are working in pairs, the educator may assign daily participant points to ensure all participants are assisting with completing the scenario

46. Educator Tips • To illustrate diversity in income levels • Seat groups with various income levels next to each other • Students will often share and discuss challenges of creating a spending plan • Assign students to specific scenarios

47. How to acquire “Life In…” • Can be viewed and downloaded for no-cost at http://takechargetoday.arizona.edu/ • Can be purchased for $42500

48. Take Charge Today Introductory Level Life Of….. Finance Simulations “A Teenager’s Spending Plan” Funded by a grant from Take Charge America, Inc.

49. Life Of…

50. Life Of… • Each scenario consists of one notebook • Available simulations: • Taylor B. Jones • Monica Erickson • Ben West • Mandy Gonzales • Carlos Chavez Scenario about a teenager Pick the scenario your students would relate to the most!