Do NOW (Review)

1. Do NOW (Review) • Who came up with the idea of Capitalism and “the invisible hand?” What is the “invisible hand” driven by?

2. Agenda • DO NOW • Why is financial literacy important? • Budget Vocab • Building a Budget • Exit Slip

3. Do NOW • Come up with a review question to ask me or a classmate before taking our stock market quiz

4. Agenda • Swag Tag • Review • Quiz • Exit Ticket Makeups • Stock Portfolio check • Personal Finance

5. Stock Market update • Under Day 4, mark down the stock prices for each of your stocks. • If you were to sell your stock today, would you make or lose money?

6. Building a Budget • Nondiscretionary Expenses • Discretionary Expenses • Fixed Expenses • Variable Expenses • Disposable Income • Discretionary Income • Gross Income • Net Income

7. Discretionary expenses • What does discretion mean? • What is an expense? • Discretionary Expenses-expense for goods and serviceswhich are either non-essential or more expensivethan necessary • Nondiscretionary Expenses-Expenses that an individual must pay.

8. Fixed vs variable expenses • Fixed expenses-expenses that do not change over time • Example? • Variable expenses-expenses that may change over time • Example?

9. Disposable vs Discretionary • Comes down to needs vs wants • Disposable income-Disposable income is essentially after-tax income • Discretionary income is the money remaining after households pay necessities. • Which one deals with needs? Which one with wants?

10. Gross vs Net Income • Gross=total • Gross income=Your salary not including taxes • Net income=Your salary after taxes • Historically speaking, is net salary higher under Democrats or Republicans?

12. How to Build a Budget • STEP 1: Divide your expenses into two categories: • Nondiscretionary expenses • Discretionary expenses •  Complete Step 1 for a college student in their junior year who has a job at the university book store. Give approximate costs. • STEP 2: List sources of income • Assume the college student gets paid $9/hour and works 22 hours/week. Assume he has his birthday this month and gets a total of $150 in cash gifts. What were his sources of income this month?

13. How to Build a Budget • STEP 3: Do the math. • Add up total expenses and total income. Does the student come up short or can he afford all of his expenses this month? •  He wants to go on a date this month and take a girl to the movies. She will definitely want Raisinets and a Sprite. Can he afford the date? • Rent = $650 • Utilities = $100 • Movie tickets = $10/each • Raisenets = $3.50 • Small Sprite = $4.50

14. How to Build a Budget • STEP 4: Monitor. • Keeping your budget up to date and sticking to it are often the hardest parts—but they're also keys to success. So once your budget is complete, monitor it regularly. • Try carefully tracking your spending for 30 days. Does it match your projections? Do you need to change your daily spending habits to meet your longer-term savings goals?

15. What things do you see wrong in this budget?

16. Exit Slip (20 minutes) Keep voices at low level • Build a monthly budget with a partner assuming the following: • You are a senior in college, living in an apartment off campus. • You work one job as a tutor ($15/hr). You get to determine how many hours per week you work. • If you take a full course load (25-30 hours/week) • You must include approximate values for rent, utilities, transportation, and food. • You may choose to include other items as well. Think: Imagine what your life would be like as a senior in college (minus partying). • Be sure to list: Total expenses, total income, discretionary and nondiscretionary expenses and and make sure it balances out

17. Do NOW

18. Vocab Frontload • Checking account • Savings account • Interest • Federal Deposit Insurance Corporation (FDIC) • Certificate of deposit (CD) • Automated Teller Machine (ATM) • Overdraft protection • Credit union

19. To check or to save • Checking accounts are either zero or very low interest accounts • A savings account offers more interest. • Note- the reason checking accounts earn less interest is because the Government wants you to save so that banks can borrow that money to fund loans. So, the government offers higher interest rates to the bank for savings account to encourage people to save.

20. Checking vs saving • Advantages of checking=an infinite number of transactions • Check writing, Debit Card, ATM etc. • Saving account has a limited number of withdrawals per month • Note- the reason checking accounts earn less interest is because the Government wants you to save so that banks can borrow that money to fund loans. So, the government offers higher interest rates to the bank for savings account to encourage people to save.

21. FDIC • FDIC-a federally sponsored corporation that insures accounts in national banks • Why does it exist? • When did it come about?

22. Certificate of Deposit (CD) • A certificate of deposit is a promise issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand.  • For example, let's say that you purchase a $10,000 CD with an interest rate of 5% compounded annually and a term of one year. At year's end,  the CD will have grown to $10,500 ($10,000 * 1.05).

23. ATM • a machine at a bank branch or other location which enables a customer to perform basic banking activities (checking one's balance, withdrawing or transferring funds) even when the bank is closed.

24. Overdraft Protection • Overdraft protection-a feature offered by banks to keep your checking account from overdrafting(drawing too much) but don't have enough money in your checking account to cover the balance. • Ex: writing check, or swiping debit card • Overdraft protection links your checking account to a savings account, credit card, or line of credit and uses that account to pay transactions that would have otherwise triggered an overdraft fee. • You must be careful when overdraft protection is linked to your credit card. • high interest, no grace period, fees

25. A credit union is a cooperative financial institution in which individuals pool their money to provide loans and services to other members. • Because the users and members of the cooperative are the same people, the idea behind credit unions is that they provide services that are tailored to the people who use them, rather than to driving profit for the institution. In addition, each member of a credit union, no matter how small his or her holdings, often has a voting share in the credit union's affairs.

26. Drawbacks to credit unions • Fewer branches and ATMs, as well as a lack of or lower-quality online banking options. • Don’t provide 24-hour customer service like many big banks provide

27. Newscasts • You’re watching your favorite TV show and it gets interrupted by a piece of breaking news – something just happened to the banks!

28. Newscasts! • 1. Make up a scenario that will affect banks. • 2.Write a 2-3minute skit that includes 5 of the following vocab words correctly: • checking account • saving account • interest • FDIC • CD • ATM • overdraft protection • credit unions • expense • income • Suggested roles: 2 newscasters, 1 field reporter, 1-2 interviewees • Ex: Run on banks like in the Great Depression • Each group will turn in one neatly written script at the end • Make sure each person has access to a script when presenting • Get creative, get funny • Each group has one group manager • Keeps group on task • Assigns roles • Keeps organized

29. Credit Card Commercial or skit • Write a 2-3 minute commercial or skit for a credit card company that includes 5 of the following vocab words correctly • Credit, Credit card, Debit card, Cash advance, Credit check, Credit rating, Credit limit, Minimum payment, Default, Grace period, Pre-approval, Premium • Ex: Sketchy credit card commercial • Shableez Champagne rewards card

30. DO NOW • Objective: Following a lecture and case study, SWBAT explain why credit is important and how to get good credit by examining case studies and explaining credit to a relative in an exit slip. • Review: What is the difference between a checking account and savings account? • Preview: What do you know about credit? Is it important? Why or why not? • Homework: Banking newscasts due next class, Credit Card Hunt due Friday

31. Agenda • DO NOW • Credit Notes • Credit Reading and questions • Stock checkup • Credit Rating handout • Exit Slip

32. Do NOW • Why do people have credit cards? Why would someone use a credit card over cash?

33. NP Essay • If you have an NP, go to the Luskin website under my name for the essay prompt due December 4th • The essay must be completed to gain access to the exam • You can also do the essay for extra credit

34. Market Competition • I have graded most of them • If you have not handed them to me, as of today, it is a zero in the gradebook until you hand it to me.

35. Credit Vocab • Credit • Credit card • Debit card • Cash advance • Charge account • Credit check • Credit rating

36. Credit • Credit-The ability to obtain goods or services before payment, based on the trust that payment will be made in the future • How do we use credit in slang? • Credit Card-A plastic card issued by a bank, business, etc., for the purchase of goods or services on credit. • Do you own any? What company?

37. Debit Card • Debit Card-An electronic card issued by a bank which allows bank clients access to their account to withdraw cash or pay for goods and services.

38. Cash Advance • Cash Advance-A service provided by many credit card issuersallowing cardholders to withdraw a certain amount of cash • Very high interest rates

39. Credit Reading (12 minutes) • Silently and independently complete the credit handout and reading

40. Stock Checkup • Take out your stock tracker and quickly take down the price of your stock for Dow Jones and Nasdaq. • Next Wednesday, we will sell our stocks and see how much we made or lost. • If you have not picked three stocks and completed the handout and tracker, let me know • We get a grade for the successful completion of both

41. Credit Check • Credit Check-Before banks, credit card, and finance companies lend money they will run a credit check. • includes information to confirm the borrower's place of residence, current and past debt, and any county court judgments.

42. Credit Check • Credit Rating/Score-A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person.

44. A Good Credit Rating

45. Credit Worthy or not? • Character is a borrower’s willingness to pay and your past history paying back loans • This is perhaps the most subjective part of a Credit rating • Prejudice often plays a factor in determining an applicant’s “character.”

47. Capacity • Capacity is the borrower’s ability to pay back the money you have borrowed. • Collateral is property that can be taken to cover the amount owed if the borrower fails to pay you back as promised.

48. Who is creditworthy • Complete the handout, following the directions on the sheet • For each situation, write at least two sentences on how you made your decision, making reference to capacity, character, and collateral

49. Downside of Credit • Your creditors expect that you will pay back your debt, plus interest. Even though the government and courts have recently become more sympathetic to the consumer having credit problems, it is still expected that you will pay back your debts. • Secondly, there is a limit to the amount of credit one can handle, based upon one's income. In other words, credit is not unlimited for any person--whether he or she has a high or a low income. One must seriously consider the cost of gaining too much credit. Not being able to pay back your debt can affect your ability to get credit at a reasonable rate for many years. • A third understanding is that a poor credit rating can affect many areas of your life. With a poor credit rating, you will have trouble getting loans or reasonable interest rates when securing larger loans -- eg., for buying a car or house. As indicated, a poor credit rating could also affect your employment.

50. Exit Ticket • In a letter to a relative, explain why banks or credit card companies want to look at their credit score. What are two of the things that go into a credit score/rating. Why is it important to have good credit. Use at least two vocab words from the day and underline them. • Credit, Credit card, Debit card, Cash advance, Credit check, Credit rating