Thursday May 5, 2014Agenda HomeworkPresent Federal Reserve

BookIdeas from Books (notes)Introduction to Personal

Financial Literacy

What are the three parts of a budget?

Why is savings so important? Create a scenario which shows why having savings is important (3 sentences).

I’m going to be out for two reasons

My Mom is Graduating!My mom is graduating

from Community College on Monday!

She started college but then was pregnant with me. She has been working hard to get her education and I need to be there to support her!

College Roommate’s Wedding is four hours away

Friday’s Assignment1st and Foremost: Behave for the Substitute.

I will try to leave instructions that if you want to listen to music while you work that you can.

Take Notes from the Power PointsComplete the WorksheetCome ready for an Open Note Quiz on

Monday.Learn something new!

MoneyMoney makes it to where we can trade easily.Every dollar used to be worth a certain

weight in gold.Now we have “fiat money”

Money that only has value because the government says so.

What is Money?Money is three things:

Medium of Exchange

What is Money?Store of Value

What is MoneyMeasure of Value?

Fiscal PolicyUsed by every level of governmentAdjusting spending levels and taxes to help

the economy.Higher Taxes=Less Spending

Monetary PolicyAdjusting the size and rate of growth of the

money supply which affects interest rates.The more money in the Economy=lower

value=higher inflation

Federal Reserve“The Bank’s Bank”

Affects the amount of money banks need to keep (More or less loans)

Affects Interest Rates Higher Rates=Less Loans

6 Major Jobs of the Fed Supply the economy with paper Supply the economy with paper

money and coins.money and coins. Hold bank reserves.Hold bank reserves. Provide check-clearing servicesProvide check-clearing services Supervise member banksSupervise member banks Serve as lender of last resort.Serve as lender of last resort. Control the money supplyControl the money supply

Financial SystemThe main idea is that our system connects savers to borrowers.

If you save money, you can then loan it to someone and charge them interest.

This is what banks do!

What affects your individual financial goals?

EducationGenerally speaking, the higher

your level of education the greater your earning potential.

Career PathEvery career has a different

pathway and different opportunities.

IncomeYour income level determines

things like retirement, house size, car, etc.

Ex: Bill Gates might want to own an island, I want to own a house.

Career Path• There are two

major questions• What are your

interests?▫ Example: Mr.

Neanover likes government, running, ultimate frisbee, and music.

▫ He dislikes science, babies, science, blood and guts, and sitting still.

What is important to you? What level of

responsibility would you like to have?

What results do you want to have?

Where do you want to work/

What compensation do you desire?

What type of work/life balance do you want?

Median Weekly Earnings Based on EducationHigh School Drop Out $471High School Graduate- $652Enlisted Military Member-$700Trade School- $807Community College Graduate- $785College Graduate- $1,066Master’s Degree-$1,300Doctorate’s Degree- $1,624Professional Degree $1,735

Cost of Degrees• Community College- $2439 per year (2 years)• Trade School- varies but around the cost of

community college• State University- $7,136/year (4 years)• Out of State Public University- $19,622/year• Private University- $22,771/year• Master’s degree-$14,825/year (1-2 years)• Medical School- $28.685 public, $46,899

private year (4 years)• Law School- $20,238 public, $37,446 private

(3 years)• Ph.D. Program $20,903/ year (5 years)

Paying for EducationGrants- A sum of money given by an organization

for a particular purpose.Scholarships- grants awarded to support a

student’s education.Loans- money borrowed and agreed to pay back

with interest.Financial Aid- money to support a worthy person or

causeNeed based (FAFSA- Free Application for Federal

Student Aid)Merit- Scholarships awarded for meeting a criteriaWork study-school agrees to award you money

and in return you work for them.

Loan Need-Based?

Subsidized?

Sponsor Borrower Interest Rate

Direct Subsidized Loan  

Yes Yes Federal government

Student 3.4% (fixed)

Direct Unsubsidized Loan

No No Federal government

Student 6.8% (fixed)

Perkins Yes Yes Federal government

Student 5% (fixed)

Parent PLUS No No Federal government

Parent 7.9% (fixed)

Private (Alternative) and State

No No Banks, colleges, foundations, state agencies

Usually student with creditworthy parental cosigner

Usually higher than federal rates; variable

What is a Budget?

A plan for spending and saving money

Why Budgets Make SenseBudgets help

you:Set priorities

Achieve what’s important to you

A good budget is:RealisticOngoingClear and easy

to use

Budget CategoriesIncome

GrossNet

SavingsEmergenciesLong-TermRetirementShort-Term

ExpensesFixedVariableDiscretionary

Income: Money EarnedGross income:

An individual’s income before taxes.

Net income: Income after taxes are paid.

Taxes can range from 15% to 31%.

ExpensesExpense: A

cost to meet a need or pay a debt

Types of expensesFixedVariableDiscretionary

Savings: Pay Yourself FirstSavings: unspent incomeTypes

Emergencies: Plan to set aside three months’ living expenses

Long-term: Large ticket items (house, car, college)

Retirement: It’s never to early to start

Short-term: Vacation, clothes, new basketball shoes

Start Saving Young!Save $2,000 per year

from age 19 – 26$1,035,148 by age 65

Save $2,000 per year from age 27 – 65$805,185 by age 65

Time value of moneyInvest fewer dollars at

a younger age but have 25% more

Discretionary ExpensesA cost determined by personal wants that may be controlled

Movies, videos, Video Games

Sports Going out to eat Grooming and

clothes Concerts and plays Vacations Others?

Ways to Reduce your Grocery Bill•Make a shopping list

•Study grocery ads

•Buy store-brand products

•Avoid impulse purchases

•Learn the basic prices of your favorite foods.

HomeworkWhat are the three parts of a budget?Why is savings so important? Create a

scenario which shows why having savings is important (3 sentences).