This lesson teaches and reinforces the "economic way of thinking" along with the personal finance concepts: spend, save, invest and donate - in the context of making economic decisions or choices with money. The concepts of philanthropy and contributing to the common good, are integrated into the financial literacy contents of goal setting (short & long-term), spending plans (budgets), interest (simple and compound), and an introduction to the uses and abuses of credit, including "impulse spending” and “buyer’s remorse."
Teacher Note: This unit is designed for use with Money Smart Choices: Financial Literacy and Philanthropy, http://www.learningtogive.org/moneysmartchoices/, an interactive web site created through a partnership between the National Endowment for Financial Education and The LEAGUE/Learning to Give. The unit can be used effectively even if Internet access is not available to students. All of the content of the web site is provided in the lesson’s Instructional Procedures or Attachments.
Adapt this lesson, and all lessons in this unit, as needed for student level. Specific activities can be omitted or enhanced to meet learner needs.
Four 45 minute class periods
The learner will:
Day One: Money Choices
Display a $20 bill and ask the students what choices they would make with $20 if it were given to them. Ask students if they ever receive gifts of money for holidays or special occasions, or if they have other sources of income, such as an allowance or part-time jobs. Discuss income briefly with students and ask what they usually do with their own money.
1. Why save money? What are some benefits and costs of saving? What is a possible opportunity cost (the next best alternative you give up) of saving? Why should it be the first consideration to “pay yourself first”?
2. What does it mean to spend money? Why is balance needed between wants and needs? What are some benefits of spending? Some costs? What is an opportunity cost of spending your income?
3. What does it mean to invest money? When does saving become investing? What are some benefits and costs of investing? What is an opportunity cost of investing? (Money may not be readily available for use).
4. What does it mean to donate money? What are some benefits and costs of donating? What is a possible opportunity cost for donating to a charity/nonprofit? Why is giving important?
Day Two: Interest is Interesting
Part One: About Donating (10-15 minutes)
Write the definition of common good, “for the benefit of all,” on a display area. Ask students: Who has a responsibility for the common good? (“we the people”)
Day Two: Part Two: Interest is Interesting (20-35 minutes)
Optional Extension: Teacher may want to coordinate this lesson with a math teacher for extended math computation practice so students can learn how to calculate simple and compound interest with and without calculators.
1. Why do people not save? (They don’t save because they perceive that the opportunity cost - the next best alternative they give up- is too great).
2. How important is knowledge of basic math when it comes to saving and investing? (Knowing some basic mathematics computation skills, both paper and pencil and with calculators, makes it possible for anyone to make better economic and personal financial decisions.)
Day Three: Hitting theTarget
Write “impulse spending” on a display board or chart paper. Discuss and define the concept. Ask how impulse spending could be related to using and/or abusing credit. (Impulse spending could lead to signing for an unnecessary installment loan or use of a credit card to purchase something not really needed. Give examples.
Write “buyer’s remorse” on a display board or chart paper. Ask students if anyone can define the term. ("Buyers remorse” is regretting a purchase after the fact.) Ask for volunteers to share an example of when they, or someone they know, may have experienced “impulse spending” and/ or “buyer’s remorse.”
Pose these questions:
What benefits did they or you see when making the decision to spend?
What costs (monetary and other) were perceived?
Ask what influences might cause “impulse spending.”
Day Four: Learning to Spend, Learning to Give
Refer to homework from Day Three and ask for volunteers to share a family short or long-term goal for saving or investing. Ask if anyone further refined their own goals after discussing with their family. Explain that today they will consider their own income and expenses by creating a personal “spending plan” or budget to help them meet their short and long term goals for spending, saving, investing, and donating.
Teacher Note: If students do not currently have a source for any personal income, suggest an imaginary scenario for use on this spending plan.
1. Ask for student discounts. Many programs have discounts for students. If you’re not sure, ask. Showing a student ID may get you savings on movies, transportation and even meals.
2. Change expensive habits. Take a look at your lifestyle and see what it’s really costing you. For instance, if you buy snacks and soda at school everyday, you may be spending $3 per day on food. That might not seem like much, but it adds up to $1,095 per year.
3. Think before you spend. Before you make a purchase, consider it carefully. Ask yourself, “Is it a good idea to spend money on this right now? What is my opportunity cost for spending this money?”
A teacher created vocabulary quiz can be administered.
Ask students to write and describe a personal example of scarcity, choice, and opportunity cost from the perspectives of spending, saving, investing, donating, or using credit of any kind and/or Ask students to reflect in writing on why people give, or why they personally think it is important to give or donate.
Interactive Parent/Student Homework:
Optional: Send home a note introducing the unit and explaining that the class will be studying about money and credit, including planning and implementing a financial literacy based service project for the good of the school and/or community..(See Attachment Six: Letter to Families.)
Homework Assignment: At the end of Day Three: Hitting the Target, students are asked to share their completed Savings and Investing Goals worksheet with their families and report back the next class session on their discussions.
Invite a bank or financial institution representative to bring brochures, pamphlets, and flyers about saving, investing, and various lines of credit, including installment loans and credit cards. Compare interest rates during the presentation and incentives (both positive and negative) relating to different savings/investment plans and forms of credit. Ask the representative to focus on the importance of financial goal setting and spending plans (budgeting) and responsible lending and borrowing practices at age appropriate levels.
Lesson Developed By:John Noling
Save: to put by as a store or reserve (such as part of an allowance each week); to accumulate or put aside for a particular purpose or occasion (example: to purchase a portable listening device or save for a vacation trip in the short term (less than a year). This is often done by placing money to be saved in a low risk, low return savings account.
All of the income in the world won’t help if you spend every dime. If you make a million and spend a million, what are you left with? Zero. In a way, you’re no better off than the person who makes $100 and spends $100. You might have bought a lot of thinks in the process, but you’re still left with nothing.
Saving is important because it helps you care for yourself over the long term. If you’re a good saver, you’ll have that money when you need it. Plus, having savings helps you to feel secure. The easiest way to save money is to follow one simple principle: PAY YOURSELF FIRST! Every time you receive any income, make a point to save some. A good plan is to save 10 percent of all you earn. Some people even save 20 percent or 50 percent!
When creating a spending plan (budget), make “savings” the first expense category.
You may wish to have more than one savings account:
Spend: to pay out, trade money for goods or services, use money freely. Spending includes paying taxes, donating to charity, and spending on other wants and needs.
Once you’ve set aside money to save, you’ll have a certain amount of income left. This is the money you can spend. When making spending choices, it helps to know the difference between needs and wants. You should make sure your spending covers needs first, then wants.
Needs vs. Wants
“Needs” are items that you truly must have. For instance, we all need a place to live and food to eat. We need water and clothing. We may not want to spend our money on these things, but they must be paid for first because they sustain life.
“Wants” are items that you would like to have. You could do without these items if you had to. For instance, you might want a new shirt or a certain CD. You might want to go to the movies or to buy a cool video game. You don’t really need these things like you need food and shelter.
When creating your spending plan, try for a balance of needs and wants. Consider your needs first. Set aside money for the important things, like school supplies or basic clothing. Then be sure to plan for some wants.
Credit: the opportunity to borrow money or receive goods or services in return for a promise to pay later such as credit cards.
Credit can be constructively used to meet wants and needs, but it can also be misused.
Invest: a way of saving where money is put someplace with the hope and intention of making a financial gain in the longer term.
Saving becomes investing when money is directed to a place where it will increase in value.
Investing is the process of earning money with your money. Investing wisely is the key to a secure future. Through investing, you can grow your money so eventually you can retire. This means you have enough money saved so that you no longer have to work. Even a small amount of money can make a difference if you start early. The longer you invest, the more your money will grow.
Donate: to voluntarily make a free gift of money, goods or service (giving time, talent or treasure), esp. to a charity or charitable cause (example - giving money, food, and/ or volunteering at a food pantry). Donate is a form of spending.
Finally, an important part of your spending plan involves the money that you choose to share with others. This type of giving is called donating. In the next section, we’ll talk about why giving is important. For now, we’ll look at the different ways to donate and how a spending plan can help you do so.
Your spending plan will help you know how much money you have to help support important causes. Some people choose to give 10 percent of their income away. Others give less than 10 percent, or more. The amount you give is up to you. What’s important is that you plan your giving wisely.
In your spending plan, you may wish to include a category for donating funds. This category includes money that you will give to organizations and even individuals. It’s a good idea to choose a set amount for giving each month
A GOOD SPENDING PLAN has three basic characteristics:
It lists all of your sources of income.
It lists all of your expenses, and how much money you plan to spend on each expense.
It’s realistic. This quality is the most important. It must be realistic in order to work.
Dear Family Members,
Our class has started a Money and Credit: Making Smart Choices learning unit about personal finance and using credit responsibly. Students will learn about the choices people make with their money including spending, saving, investing, donating and use of credit, including installment loans and credit cards.
Students will be asked to identify their spending goals and to develop skills in developing spending plans (budgets). We will focus on saving and investing, and discuss the importance of saving early and regularly. We will study about interest, and how interest can be earned or paid depending on financial decisions.
The concept of philanthropy (voluntarily giving or sharing time, talents or treasure for the common good of everyone) will be introduced and practiced by our class. Students will decide where in our school or community they can be most effective in sharing their newly acquired knowledge by proposing, planning, problem solving, and implementing a service project that addresses financial literacy and responsible use of credit.
After the service project is completed, students will reflect on their service to the community and create a visual presentation to describe their work to others.
Knowing about managing money wisely will give your student freedom and choices in life that they would not otherwise have. Knowledge may help prevent someone from taking advantage of them, or prevent them from making a bad financial decision. Knowledge might even make them wealthy, or at least financially independent!
Financial knowledge and community involvement will go a long way toward helping your son or daughter be an informed and responsible consumer, producer, and citizen. If you would like to contribute any of your time, talent, or treasure to our efforts, we welcome your assistance! Feel free to contact me with any questions or concerns.
E-mail Address if appropriate
|“LOAN IT”||"OWN IT"|
|You let someone else use your money for a period of time to receive interest, like receiving “rent”||You exchange your money for something else to own. You can sell it later, but no promise or guarantee of return.
The Goal Setting Process:
Directions: Write personal saving/investment goals for the short and long-term. Write your goals in the chart and determine the most realistic opportunity cost (the cost of the next best alternative you give up to achieve the goal) for choosing to save/invest for that particular goal. Example: Saving $40 per month for a car in the long-term might have an opportunity cost of not spending that amount on entertainment. Remember: The real opportunity cost is determined by the person and depends on the individual perceptions, values, and priorities of the person making the decision.
Sources of Income
(Next best alternative given up)
A good spending plan has three basic characteristics:
Now that you’ve learned about the parts of a spending plan, it’s time to create one. To create your plan, start by listing your monthly income and expenses. Remember, these totals must match!
|Job (take-home pay after taxes)||$|
|Tips or bonuses||$|
|Chores or work at home||$|
|Chores or work for others (babysitting, mowing, pet sitting, etc.)||$|
|Interest on savings||$|
|Total monthly income||$|
Continued on page 2
|Personal (cosmetics, haircuts, clothing)||$|
|Sports fees and hobbies||$|
|School fees and supplies||$|
|Transportation (bus or subway fare)||$|
|Cell phone or pager||$|
|Donations (charitable giving)||$|
|Total monthly expenses||$|
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