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.

The learner will:

• describe choices one can make with money.
• define philanthropy (philanthropist) as giving time, talent, or treasure, and taking action for the common good.
• describe the economic and financial concepts of: resources, scarcity, choice, benefits, costs, opportunity cost, interest, interest rate, principal, simple interest, compound interest, compounding, spend, save, invest, donate, credit, short-term goal, long-term goal.
• discuss motivations for giving, and options for donating.
• identify steps in the goal-setting process.
• participate in discussions about goals and the use of money.
• give examples of short and long-term goals and opportunity costs for each.
• Identify the benefits of setting goals and committing to them.
• describe the two basic types of investments.
• identify personal income and expenditures.
• create a personal spending plan/budget.
• identify uses and abuses of credit.

Day One: Money Choices

Anticipatory Set:
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.

• Using an overhead transparency of the Economics and Money Visual Organizer (Attachment One), access student prior knowledge about economics.  Tell the class that they will be learning about the choices people have about money with the goal of becoming better money managers themselves. Explain the visual organizer to give students the understanding that all choices have costs (not necessarily monetary costs!) because of the condition of scarcity.  Use personal or student examples whenever possible.
• Explain to the students that during this unit of study they will learn the basics about personal finance, including the wise use of credit. This information will help them develop a personal spending plan (budget) and will hopefully result in them being able to successfully manage their money in the future.
• Group Activity (approximately 10 minutes): Arrange the class into four groups, giving each group one of the prepared chart papers.  Hand out Attachment Two: Definitions and Creating a Spending Plan to the students.  Ask students to read and underline or highlight important information about the topic of their chart for transfer to the chart paper. 
• Groups prepare their chart for whole class reporting and viewing.  Each group summarizes their findings for the class.
• After each group reports,  lead a class discussion, adding important points to the T-chart for benefits and costs on each paper, using these questions:

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?

• Add words or short phrases to each group’s chart paper based on whole group contributions.
• After the discussion, display the four charts in the following manner in the front of the classroom:

SPEND          SAVE

DONATE        INVEST

•  Use the charts' visual positions to explain that:
  • Donating is a subset of spending, and donating or giving wisely contributes to the common good.
  • Investing is a subset of saving. Investing a portion of savings usually results in higher returns, through compounding of interest which students will learn more about in a future lesson.

• (Optional) Hand out and review Attachment Three: Letter to Families.

Day Two: Interest is Interesting
Part One: About Donating (10-15 minutes)
Anticipatory Set:
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”)

• Display the definition of philanthropy: giving time, talent, or treasure, and taking action for the common good.
• Discuss the idea that people can give time, talent, or treasure for the common good.  They can be philanthropic without having a lot of money.  As an example, students could give of their time and talent to plan and implement a service project on financial literacy and wise use of credit for other students or for the community-at-large.
• Discuss how people of all ages donate time, talent, and treasure to a cause, individuals or nonprofit organizations. (Examples could include various school fund drives, local programs for hungry and homeless people, arts events, faith based programs, local parks, environmental groups, etc.)
• Discuss with the class: Is philanthropy a choice?  How important is this freedom to be philanthropic in our democracy?  (If needed, explain that “common good” is an important fundamental democratic principle.)
  What benefits does philanthropy bring to the school, neighborhood, community, nation, or world receive?
• If someone does not have control of their finances, (bankruptcy, credit problems), how can this affect the common good of everyone else in society? (poor financial decisions mean that other people are affected when they are not paid for goods or services they produced; properly managing money, including credit, has a lot to do with whether we have money available to spend, save, invest, or donate.

Day Two: Part Two: Interest is Interesting (20-35 minutes)

• Teacher Note: This part of the lesson addresses the concepts of investing, interest, and computing simple interest and compound interest.  Basic math percentage and decimal computations, mental math, paper and pencil calculations, and calculators are involved. Assess how much of this content is appropriate for your students and adjust the lesson accordingly.  See Bibliographical References for additional resources to teach compounding.
• Point out the Save and Invest charts from Day One and explain that saving, investing and interest will be the focus for the remainder of the lesson.
• Explain that “interest is interesting” and very important to understand because it can be a source of income (benefit), or might have to be paid to someone else for the privilege of borrowing (cost) such as an installment loan or by charging items using a credit card.
• Display Attachment Four: Loan It or Own It and explain that first they will learn about how interest can be a source of income through two broad types of investments, “loan it“investments or “own it” investments. When you “loan it”, you let someone use your money for a period of time. Your money grows by “earning” additional money payments (interest) from other individuals or groups such as banks, companies, governments, etc., who pay you for the privilege of being able to use the money you loaned (invested) with them.  Examples are checking accounts, savings accounts, money market accounts, Certificates of Deposit (CD’s), Treasury bills, notes, and bonds, corporate and municipal bonds.  Money payments received over and above what was originally loaned out, (invested by you), is called interest.  It is like being paid “rent” for being able to use your money.  When you “own it”, you exchange your money for something else, usually something like common stock in a company, a mutual fund, real estate property, gold, or collectible items such as rare coins, etc. When you “own it”, you are not promised a return on your money. To get your money back, you would have to sell it for more than you paid for it.  There is no guarantee.
• Explain that interest is the cost for being able to use someone else’s money.  Interest is either “payments spent for the use of borrowed money or payments received for invested money.  When one saves and then invests money, it is the money received.  When one borrows on credit, it is the additional money one spends, the cost, for that privilege. (Use concrete examples of receiving and paying interest, and check for student understanding before proceeding with the lesson.)
• Explain to students that for investing money and earning interest:
  • Principal is the original amount of money set aside to invest such as in a savings account, without including interest earned.  The interest rate (expressed as a percentage of the principal) is the price paid for using someone else’s money.
  • Simple interest is paid to the depositor when it is earned and is not added to the principal.
  • Compound interest is interest earned on savings that includes previously earned interest.  Interest earned in any time period is added to the principal.  Future interest calculations are made on the higher amount of the original principal plus the interest that was added to it.  Over the long- term, this is like a snowball that keeps getting bigger, as long as the interest earned is reinvested.

• Show on a display area or use an Internet interest calculator to show appropriate computations of simple interest earned on principal and compounding of interest differences. An online Compounding Calculator, such as the one found at http://www.themint.org/kids/compounding-calculator.html can be used to show students the power of compounding interest stretched over more years.  Simply type in the amount saved each year, the interest rate earned, and the number of years invested and click on “Calculate” to see the power of investing and compounded interest.  Involve students in determining realistic numbers to type in for various calculations. Tell students that this is a demonstration of how “interest” can be a big benefit, especially when it compounds.
  Teacher Note: An excellent example of the power of compounding interest to increase principal is revealed in how Todd and Sarah chose to invest their monies at the Money Smart Choices: Financial Literacy and Philanthropy website: http://www.learningtogive.org/moneysmartchoices/your_money/ym-investing.html
• To demonstrate how interest can be a cost when borrowing money on credit, show an online Credit Card Calculator, such as the one found at http://www.indexcreditcards.com/creditcardcalculators/howmuchininterest.html  to show students how interest that has to be paid out can compound over a period of time, especially if monthly payments are minimal and the interest rate is high.  Ask students to help with inserting the numbers into the calculator.  Provide credit card interest rate information so students can see what interest rates are commonly being charged on credit card balances.

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.

• If time permits, debrief by posing questions such as:

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

Anticipatory Set:
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.”

• Write the word “goals” on a display area. Explain that goals act as a “target” for aiming our money choices and avoid impulse spending and buyer’s remorse. Ask the students if they have any saving or investing goals.  Share some examples.
• Explain that saving goals can be short-term or long-term, depending on what you are saving for and how much is saved each week, month, or year.
  Short-term saving goals are for something people plan to buy soon,
  usually in less than a year.
  Long-term goals, like saving for college, a home, or retirement, for more than a year are called long-term goals.
• Display Attachment Five: The Goal Setting Process. Read and discuss the steps together.  Discuss a personal example or ask for a student example of the goal setting process leading to achievement of a goal.
• Hand out Attachment Six: Saving and Investing Goals.  Explain that eventually achieving any goal, financial or otherwise, requires some focus and effort.  Model possible answers for the chart by asking for student volunteers to share a short and long term saving/investment goal.   For each goal, ask the student to provide source(s) of income for that goal and to determine what their opportunity cost would be for saving/investing money for that goal.  Write each goal, income source, and opportunity cost on the display area to model how the chart should be completed.
• Give the students 5-10 minutes to complete the Saving and Investing Goals chart.  They may be asked to share their charts with others in pairs or small groups prior to debriefing this activity.
• For debriefing the following questions may be asked:
  • Why is it a good idea to set financial or other goals?  What are the benefits and costs?
  • How does a wish differ from a goal?

• Homework Assignment:  Ask students to take their completed Saving and Investing Goals worksheet home to discuss with their family and add new ideas or information to it.  Ask students to find out if their family has any short or long-term goals.
• Conclude Day Three by explaining that having reasonable goals will make spending decisions easier, especially if they develop a spending plan.  Without goals and a plan of some kind, poor spending decisions are likely to be made, often resulting in expensive and damaging credit decisions that can change a person’s life and negatively affect the common good.

Day Four: Learning to Spend, Learning to Give

Anticipatory Set:
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.

• Draw a circle graph on the chalkboard and divide the circle into approximately four sections to fit these labels: 5% savings, 10% investment, 10% donate, 75% money to spend. Tell students that this is an approximation of how the average person might make their money choices. Each individual’s percentages may vary and change due to life experiences.  For instance a person who gets a big pay increase may choose to increase their percentage of investment.  A person who has a child diagnosed with juvenile diabetes, may choose to increase donations for diabetes research.  Give the students a concrete idea of $ amounts by demonstrating that if a person earns $20,000 a year what the $ amount would be for each section.  Do the same with $50,000 and $100,000.
  Teacher Note:  For the purposes of this lesson, short-term refers to saving for things in the coming weeks or months, usually under a year.  Long-term typically refers to investing savings for periods longer than a year.
• If your students need review of these terms, write the words budget, income/revenue, and expenditures/expenses on the board and review the definitions.
  • Budget - a spending plan to help keep track of money
  • Income (Revenue)- money coming in from any source
  • Expenses (Expenditures)-money expended “going out” (includes all spending, donating, and even saving/investment money going out), also known as expenses.
  • Student access to the Spending Plan at http://www.learningtogive.org/moneysmartchoices/your_money/ym-spendingplan.html or distribute Attachment Seven: My Spending Plan.  Review the three characteristics of a spending plan.

Teacher Note: If students do not currently have a source for any personal income, suggest an imaginary scenario for use on this spending plan.

• Ask students to list their monthly income (real or the scenario) and expenses on the worksheets.
• After entering income data, ask students what they plan to do with their expenditures.  Encourage students to think about something short-term for which they would like to save their money and something else in the long term to invest some other money. (Note the two separate line items on the Monthly Expenses worksheet, one for saving, the other for investments) Remind students that any decision to save or invest, or use credit, involves an opportunity cost, the next-best alternative given up.
• Ask students to think about causes they care deeply about and to which they would like to plan to donate money.
• Discuss with students:
  • Why should your income and expenditures balance?
  • What happens when people make poor choices about budgeting or fail to budget?

• Tell students that since a budget is a time-based spending plan (i.e., based on a certain time period), it can be changed, but it should not be changed often.  A real attempt to work and live within this budget for the one-month period should be the goal.
• Conclude today’s lesson by offering these three suggestions:

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?”

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.

• http://learningtogive.org/moneysmartchoices/ - an interactive financial literacy and philanthropy web site for students, teacher and parents from the National Endowment for Financial Education and Learning to Give that addresses: Managing Your Money, Supporting your Community, Running a Nonprofit, Family Giving.
• http://www.themint.org/kids/try-it.html- Excellent explanations and online activities relating to saving, investing and interest, including simple and compounding interest, with a Compounding Interest Calculator.  The When Will You Become a Millionaire challenge and The Power of 72 Calculator are particularly appealing and instructive.
• http://www.econedlink.org/lessons/ - National Council on Economic Education (NCEE) Economics Minutes, excellent lessons or short reinforcement activities for Grades 6-12 on the concepts of saving, investing, interest, compounding interest
• Credit Card Calculator  http://www.indexcreditcards.com/creditcardcalculators/howmuchininterest.html