Economics Unit Five

1. Economics Unit Five Personal Finance

2. Monday, March 12th • Good Morning/afternoon! • As you enter, please: • Sit in your assigned seat • Front table – pick up your Unit 5 Info Summary and your Expedition Econ. • Then complete it in the first 15 minutes!

3. Important Dates to Remember! • Tuesday, March 13th – tutoring after school in room 238 • Wednesday, March 14th – Unit 5 Formative assessment • Thursday, March 15th – tutoring after school in room 238 • Friday, March 16th – Unit 5 Summative assessment • Saturday, March 17th – Super Saturday Economics Review – 9am to Noon (bonus points for attending) • Tuesday, March 20th – Economics Milestones Test (part 1) – 20% of student grade • Wednesday, March 21st – Economics Milestones Test (part 2) • Thursday, March 22nd – Economics Department Final Exam – 5% of student grade • Friday, March 23rd – FINAL due date for all economics make-up work

4. Class Updates 4th Block Luz Eric Latavish Anayah 2nd Block Attallah Randy (100!) Katie Jose Shaliah Saige Amy Jamall Chantz 1st Block Destini • Unit 4 Test Results are in Synergy! • Congratulations to: Finish Strong - Eye of the Tiger Finish Strong with TD Jakes Falling and Winning Track Example Derek Redmond Finishing Race with Torn Hamstring Dream Motivational Video

5. Class Updates • Today: • Unit 5 – Savings and Banking • Expedition Econ • Mini-Lesson • EverFi.com (may need to finish at home) • Official Homework – Guided Notes (unless you made an ‘A’ on Unit 4 Summative • Econ Review • Diagnostic Test to see where you need to focus your studying and get help

6. Econ Diagnostic • Do your Best but Don’t Stress! • Bubble in your Zipgrade Sheet • Then Click in your answers with the iRespond handheld • Tomorrow – I’ll have your results so you know where to focus your study time

7. Today’s Learning Standards SSEPF1 Apply rational decision making to personal spending and saving choices. • Use a rational decision making model to evaluate the costs and benefits of post-high school life choices (i.e., college, technical school, military enlistment, workforce participation, or other option). • Create a budget that includes a savings or financial investment plan for a future goal. SSEPF2 Explain that banks and other financial institutions are businesses that channel funds from savers to investors. • Compare services offered by different financial institutions, including banks, credit unions, payday lenders, and title pawn lenders. • Explain reasons for the spread between interest charged and interest earned. • Give examples of the direct relationship between risk and return. • Evaluate the risk and return of a variety of savings and investment options, including: savings accounts, certificates of deposit, retirement accounts, stocks, bonds, and mutual funds.

8. Day #1 – Mini-Lesson

9. Personal Finance: The First Unit and Most Useful Unit of ECON! Wednesday – Formative Friday – Summative “I wish we had more time!!”

10. What are you going to do after high school?

11. Long Term: Personal Spending & Life Choices • I can use a rational decision making model to evaluate post-high school choices: • College • Technical School • Military Enlistment • Workforce participation • Other options

12. Rational Decisions: Occur When • We choose the item that meets all of our criteria • Or • Always consider the marginal costs and marginal benefits of your decisions in order to make a rational decision.

14. Long Term: Budget • I can create a budget for a future goal

15. Why Savings? • Sacrificing a small benefit now in exchange for a larger benefit later

16. The Wisdom of Savings 10% Average Rate of Return

17. EducationAn Investment in Your Future • Saving for the future and giving your education 110% effort is the key to a future of good earnings and low unemployment!

19. So Once You’re SavingWhat Do You Do With It?? • There are several options for putting your money away – each has different levels of service and risk. • Let’s talk about banking, savings and investment options…

20. Commercial Banks • Offer a wide variety of services from basic checking accounts to savings and investment options. • They also offer loans for cars, homes and other large purchases. • Loans require a credit check • Deposits are protected by the FDIC – Federal Deposit Insurers Corporation – up to $250,000

21. How do banks make money? • Difference between INTEREST PAID vs. INTEREST EARNED = INTEREST SPREAD • EXAMPLE: • Southern Federal Credit Union is currently paying about .75% annual interest on savings accounts • When they make a loan they charge 2% • 2% - .75 = 1.25% profit

22. How do banks make money? • Other money makers include overdraft fees, annual or monthly fees, and products like checks • Annual percentage Rate (APR) – the yearly cost of a loan

25. Credit Union • Is not-for-profit financial institution that is owned and controlled by its members, usually people who work in the same company or the same occupation.

27. Credit Unions • They offer checking and savings accounts as well as offer loans • Offer higher interest rates on savings/lower rates on loans. • Loans do require a credit check • Exclusive - only certain members may join • Money is protected by the government

28. Remember: • Banks • Offer the widest variety of services • Checking, Savings, Loans (many types), Credit Cards, Business Loans, Transfers, etc • Owned by a private company • Credit Union • Owned by people who hold accounts there (the MEMBERS) • Usually must be a member of another organization 1st (FCBOE, Delta, Firemen’s, Police) • Typically more “personal” and more willing to make emergency or cheaper loans Banks have “customers”, CU’s have MEMBERS

29. Pay Day Lenders

30. Payday Lenders • Solve temporary problem • Give out small loans in return for a portion of the upcoming pay check • Loans don’t require a credit check • Charge much higher interest on loans than other institutions.

31. Title Pawn Lender

32. Title Pawn Lenders • Provide short-term loans to individuals facing a gap between their income and expenses. • Inability to repay the loan could result in the loss of the vehicle put up as collateral

33. SSEPF2.c • Give examples of the direct relationship between risk and return.

34. RISK • The financial action you take in investing your money over a period of time. • The possibility you will lose all or part of your money

35. - Risk and return have a positive relationship - The higher the risk, usually the higher the return and the lower the risk the lower the return

36. SSEPF2.Dd • Evaluate a variety of savings and investment options; including stocks, Saving accounts, CD, Retirement accounts, bonds, and mutual funds.

37. CD: • Certificate of Deposit: a deposit you promise to leave in the bank for a specific amount of time, usually a year or more, in exchange for a higher rate of interest. (very safe, but instant access carries a penalty) • 50,000 x 7%=_________ the amount a person will earn at the end of the year.

38. Saving Account: • provide a small but steady return • (Low Risk-Medium Return)

39. Bonds: • lending money to a business or government with a promise of higher returns than those offered by a bank savings or CD’s. • Pretty low risk – Medium Return

40. Retirement Accounts • 401k-Percentage of matching funds • Roth IRA-Paytaxes today and withdraw tax free in the future • MyRA- For workers who do not have 401K. Contribute up to 15,000 before having to roll it over into an account with an investment bank

41. Stocks • part ownership in a company offering higher risks and potentially higher returns than other investments

42. Dividends: A portion of a firm’s profits paid to owners of the firm’s stock.

43. Mutual Funds: • Pools of money from many investors and uses it to buy a variety of stocks and bonds called a portfolio. Mutual funds offer a compromise by including low-risk, low-return stocks with some high-risk, high-return stocks.

45. Summary • STOCKS • Pros: high return, easy to purchase • Cons: HIGH RISK, requires research • MUTUAL FUNDS • Pooling money into a fund with others and having someone else invest for you • Pros: Decent return, safer investment, requires less research • Cons: Less return than stocks, less flexibility • BONDS • Loaning money to government or corporation • Pros: Safe investment, specific terms • Cons: Low rates of return

46. Risk/Return Spectrum • Low Risk • Low Return • High Risk • High Return • BONDS • STOCKS • MUTUAL FUNDS • SAVINGS ACCOUNT • Antiques /Collectibles • Commodities (Gold, Silver) • Real Estate

47. Checkpoint Questions What are the costs and benefits of borrowing from payday lenders? • The credit checks are difficult to pass, but the loans are long term • The fees are cheap to pay back, but it takes a long time to receive the funds • The loans are fast and require no credit check, but have high interest rates & fees • The interest rates are low compared to other lenders, but most people don’t qualify Which type of financial institution is MOST LIKELY to require a membership, offer lower interest rates and special options for their members? • Large national banks • Savings & loan banks • Credit Unions • Bank holding companies

48. Checkpoint Questions What type of financial institution offers a variety of services to the general public? • Banks • Credit unions • Payday lenders • Title pawn lenders Which sentence best describes a title pawn lender? • They require lengthy credit checks for a fixed long term loan • They lend money on the equity accrued on one’s home value • They serve communities without access to traditional banking services • They’re designed to be quick and convenient while continuing the use of one’s vehicle

49. Time to get started! • Each unit will feature a: • Short pre-test • Lesson • Post-test • You can retake this as many times as you want until you get the grade you want • These grades will be put into Synergy on Friday!

50. Our EverFi Lessons • Monday Savings Banking • Tuesday Taxes and Insurance • Wednesday Credit Scores Payment Types • Thursday Catch-up day OR Bonus points for your choice of remaining lessons (higher education, consumer protection or renting vs. owning)