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Chapter Introduction

Section 1: Managing Your Money

Section 2: Planning and Budgeting

Section 3: Saving and Investing

Section 4: Achieving Your Financial Goals

Visual Summary

Chapter Intro 1

Whatever goals or dreams you may have, the way you live your life will be determined, at least in part, by your relationship to money: how you get it and how you use it. The opportunities you create for yourself are greatly affected by the money habits you form when you are young.

Chapter Intro 2

Section 1: Managing Your Money

You and everyone around you are consumers and, as such, play an important role in the economic system. As a consumer and a citizen, you will make many economic decisions every day.

Chapter Intro 2

Section 2: Planning and Budgeting

We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make. Following a budget can be valuable to you.

Chapter Intro 2

Section 3: Saving and Investing

We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make. It is important for financial security to start the habit of saving.

Chapter Intro 2

Section 4: Achieving Your Financial Goals

We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make. Our personal interests, wants, and abilities affect our career choices.

Chapter Preview-End

Section 1-Main Idea

Guide to Reading

Big Idea

You and everyone around you are consumers and, as such, play an important role in the economic system.

Section 1-Key Terms

Guide to Reading

Content Vocabulary

• consumer

• disposable income

• discretionary income

• consumerism

• comparison shopping

• warranty

Academic Vocabulary

• reject

• alternative

A. A

B. B

Section 1-Polling Question

Do you agree that the rights of consumers are more important than the rights of producers and sellers?

A. Agree

B. Disagree

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Section 1

Consumer Rights

To make good economic decisions as consumers, we need to be aware of our rights and responsibilities.

Section 1

Consumer Rights (cont.)

• Consumers have rights, or protections, in the free enterprise system.

• Consumers have two types of income to spend:

– Disposable Income: money left after taxes are paid

– Discretionary Income: money left after bills are paid

Section 1

• Consumerism:

– Laws (ex. Pure Food and Drug Act)

– Private groups (Better Business Bureau)

Consumer Rights (cont.)

Section 1

• Consumer Bill of Rights

– Right to a safe product

– Right to be informed

– Right to choose

– Right to be heard

– Right to redress

Consumer Rights (cont.)

A. A

B. B

Section 1

Do you think private groups are better than the government at protecting consumer rights?

A. Yes

B. No

0%0%

Section 1

Consumer Responsibilities

In addition to rights, consumers also have responsibilities.

Section 1

Consumer Responsibilities (cont.)

• Consumers have responsibilities as well as rights.

• Smart buying strategies:

– Gather information

– Use advertising carefully

– Determine the best value

– Comparison shopping

Section 1

– Look at brand name and generic items

– Balance costs and benefits

Consumer Responsibilities (cont.)

Section 1

• Other responsibilities:

– Initiate problem-solving process for faulty goods or services

– Keep warranty information

– Respect rights of producers and sellers

– Report problems to government when a settlement cannot be reached

Consumer Responsibilities (cont.)

A. A

B. B

C. C

D. D

Section 1

0% 0%0%0%

What do you think is the most important consumer responsibility?

A. Using advertising carefully

B. Comparison shopping

C. Initiating problem-solving

D. Respecting rights of others

Section 1

Making Buying Decisions

Buying a product or service costs more than money; it also costs the time it takes to make the purchase and the opportunity cost of not buying something else.

Section 1

Making Buying Decisions (cont.)

• Many factors are involved in consumers’ buying decisions.

• Steps:

– Decide whether to buy an item or not

– Invest time obtaining product information

– Balance opportunity cost

A. A

B. B

Section 1

Do you think most consumer purchases are worth their opportunity cost?

A. Yes

B. No

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Section 1-End

Section 2-Main Idea

Guide to Reading

Big Idea

We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make.

Section 2-Key Terms

Guide to Reading

Content Vocabulary

• budget

• income

• expense

• credit

• annual percentage rate (APR)

• collateral

• bankruptcy

Academic Vocabulary

• exceed

• status

A. A

B. B

Section 2-Polling Question

Do you keep records of your spending and earnings?

A. Yes

B. No

0%0%

Section 2

Making a Budget—and Sticking to It!

Making and following a budget can help you organize your financial life.

Section 2

Making a Budget—and Sticking to It! (cont.)

• A budget is a record of money earned and spent to help you match expenses to income.

• Basic budgeting terms

– Income

– Expenses

– Balance: leftover money

Section 2

– Surplus: More income than expenses (good)

– Deficit: More expenses than income (bad)

Making a Budget—and Sticking to It! (cont.)

Section 2

• How to Make a Budget

– List what you spend.

– Record what you earn.

– Analyze the data.

– Try to have surplus.

– Monitor spending.

Making a Budget—and Sticking to It! (cont.)

A. A

B. B

Section 2

Do you agree that it is better to raise your income than to cut your expenses in order to balance a budget?

A. Agree

B. Disagree

0%0%

Section 2

Credit

Credit can be a valuable item in your financial toolbox; however, as with all tools, you have to know how to use it correctly.

Section 2

Credit (cont.)

• Credit allows consumers to receive a good or service and pay for it later.

• Recognizing credit terms

– A lender gives money to a borrower.

– A lender charges interest, expressed as the annual percentage rate (APR).

Section 2

– A credit rating evaluates how well the borrower will repay the loan.

– The borrower may pledge collateral for the loan.

Credit (cont.)

Section 2

• Sources of Credit:

– Usually require down payment

– Banks, savings and loans, credit unions, finance companies offer credit

– Most common—credit cards

– Can charge high interest rates

Credit (cont.)

Section 2

• Credit: Benefits and Drawbacks

– Benefits:

Credit (cont.)

• Allows you to get what you want sooner

• Teaches financial discipline

Section 2

– Drawbacks:

• Spending more than you can afford

• Bankruptcy

• Poor credit rating

Credit (cont.)

Section 2

• Your Responsibilities as a Borrower

– Have a plan to make payments

– Use budget skills

– Understand credit agreement

Credit (cont.)

Methods of Payment

A. A

B. B

Section 2

Do you think credit should be hard to obtain?

A. Yes

B. No

0%0%

Section 2-End

Section 3-Main Idea

Guide to Reading

Big Idea

We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make.

Section 3-Key Terms

Guide to Reading

Content Vocabulary

• save

• interest

• principal

• return

• stock

• dividend

• bond

• mutual fund

Academic Vocabulary

• establish

• fund

• interval

A. A

B. B

Section 3-Polling Question

People generally do not save enough money.

A. Agree

B. Disagree

0%0%

Section 3

Saving for the Future

Saving part of your income is the key to meeting many of your short-term and long-term financial goals.

Section 3

Saving for the Future (cont.)

• To save is to set aside income for later use.

• Why save?

– Money for large purchases

– Emergency aid

– Luxuries

– Benefits the whole economy

Section 3

• Saving regularly

– Automatic deposits into savings accounts

– Budgeting for savings

– Earning interest by saving through financial institutions

Saving for the Future (cont.)

Section 3

• Deciding about your savings

• Trade-offs:

Saving for the Future (cont.)

– Less to spend today

– More to spend tomorrow

A. A

B. B

C. C

D. D

Section 3

0% 0%0%0%

What do you think is the best reason to save money?

A. Building up money for large purchases

B. Having funds for emergencies

C. Buying luxury items

D. Helping the whole economy

Section 3

Types of Savings

A variety of options is available to allow you to save money.

Section 3

Types of Savings (cont.)

• Many ways exist for people to save portions of their incomes.

• Savings accounts

– Earn low interest on principal

– Financial institutions loan the money to others

The Savings Rate, 1952–2006

Section 3

• Checking accounts

– Money for purchases

– Must keep careful records

– Debit cards allow paperless money transfer

Types of Savings (cont.)

Types of Savings Accounts

Section 3

• Money market accounts

– Allows you to write checks, like a checking account

– Pays interest like a savings account

Types of Savings (cont.)

Section 3

• Certificates of deposit

– Type of time deposit

– Agreement to leave money in financial institution for a set amount of time

Types of Savings (cont.)

A. A

B. B

C. C

D. D

Section 3

0% 0%0%0%

Which type of account do you think would be the most useful to you?

A. Savings account

B. Checking account

C. Money market account

D. Certificate of deposit

Section 3

Investments

Making wise investments in a variety of stocks and bonds is an important part of achieving long-term financial goals.

Section 3

Investments (cont.)

• Investing in stocks and bonds leads to higher returns than other types of savings.

• Stocks

– Shares of stock provide partial ownership in a company

– Stock prices may go up or down, based on company performance.

Section 3

– Investors may earn dividends.

– Higher possible return, but at greater risk

Investments (cont.)

Section 3

• Bonds

– Loans money to company or government

– Pays set rate of interest over several years

– U.S. government bonds are a very safe investment.

Investments (cont.)

Section 3

• Mutual funds

– Pools money to invest in different stocks and bonds

– Chosen by financial experts

– Less risk than investment in individual stocks

Investments (cont.)

A. A

B. B

C. C

D. D

Section 3

0% 0%0%0%

Which type of investment do you think has the best potential to make money in the long run?

A. Stocks

B. Bonds

C. Mutual funds

D. None of the above

Section 3-End

Section 4-Main Idea

Guide to Reading

Big Idea

We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make.

Section 4-Key Terms

Guide to Reading

Content Vocabulary

• impulse buying

Academic Vocabulary

• evaluate

• commit

• eliminate

A. A

B. B

C. C

D. D

Section 4-Polling Question

0% 0%0%0%

What is your main financial goal?

A. Getting lots of inexpensive gadgets

B. Buying a large item

C. Saving for college

D. Something else

Section 4

What Kind of Spender Are You?

Careful spenders avoid pitfalls, such as impulse buying, on their way to meeting their financial goals.

Section 4

What Kind of Spender Are You? (cont.)

• Setting financial goals can help you spend money wisely.

• Evaluate your spending to help you meet financial goals.

Analyzing Advertising

Section 4

• Beware of impulse buying.

– Try not to buy too quickly based on emotions.

– Some impulse-buying is okay. Too much is bad.

– Follow guidelines to avoid too much impulse buying.

What Kind of Spender Are You? (cont.)

A. A

B. B

Section 4

Do you agree that impulse buying should be avoided at all costs?

A. Agree

B. Disagree

0%0%

Section 4

Your Goals and Your Buying Decisions

The buying decisions you make can have a major impact on your life and career choices.

Section 4

Your Goals and Your Buying Decisions (cont.)

• Consider goals when buying items.

• Long-term goals can conflict with short-term goals.

– Must balance long and short-term goals.

– Long-term planning can improve finances down the road (e.g., saving for college will lead to higher income later)

A. A

B. B

Section 4

Do you think it is easy to sacrifice short-term goals for long-term benefits?

A. Yes

B. No

0%0%

Section 4-End

VS 1

Buying Strategy

• Making consumer decisions involves deciding the following:

• whether to spend your money

• what you will purchase

• how to use your purchase

• Comparison shopping involves making comparisons among brands, sizes, and stores.

VS 2

Consumerism

Consumer rights include

• the right to safety

• the right to be informed

• the right to choose

• the right to be heard

• the right to redress

VS 3

Budget

• A budget is an organized plan for spending and saving money.

• What you do with the information in a budget is up to you. No one can force you to spend less and save more unless you want to.

VS 4

Credit

• When buying on credit, the amount you will owe is equal to the principal plus interest.

• Financial institutions that provide credit include commercial banks, savings and loan associations, and credit unions.

VS 5

Saving and Investing

• It is important to get into the habit of saving.

• Individuals have many places to invest their savings, including savings accounts and certificates of deposit.

• Shares of stock entitle the buyer to a certain part of the future profits and assets of the corporation that is selling the stock.

VS-End

Figure 1

Figure 2

Figure 3

Figure 4

TIME Trans

DFS Trans 1

DFS Trans 2

Possible response: spend less money on food and entertainment

DFS Trans 3

a savings account; an investment account

DFS Trans 4

Vocab1

consumer

someone who buys a good or service

Vocab2

disposable income 

money income left after all taxes on it have been paid

Vocab3

discretionary income 

money income left after necessities have been bought and paid for

Vocab4

consumerism 

a movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers

Vocab5

comparison shopping

buying strategy to get best buy for the money

Vocab6

warranty 

the promise made by a manufacturer or a seller to repair or replace a product within a certain time period if it is faulty

Vocab7

reject 

to refuse or throw away

Vocab8

alternative 

a choice or possibility

Vocab9

budget 

a plan for making and spending money

Vocab10

income 

money received from labor, business, or property

Vocab11

expense

money spent on goods and services

Vocab12

credit

money borrowed to pay for a good or service

Vocab13

annual percentage rate (APR)

annual cost of credit expressed as a percentage of the amount borrowed

Vocab14

collateral

property or valuable item serving as security for a loan

Vocab15

bankruptcy

inability to pay debts

Vocab16

exceed 

to be or go beyond a limit

Vocab17

status 

a position or rank

Vocab18

save

to set aside income for a period of time so that it can be used later

Vocab19

interest 

the payment people receive when they lend money or allow someone else to use their money

Vocab20

principal 

the most important

Vocab21

return

profit earned through investing

Vocab22

stock

ownership share of a corporation

Vocab23

dividend

payment of a portion of a company’s earnings

Vocab24

bond 

contract to repay borrowed money with interest at a specific time in the future

Vocab25

mutual funds

pools of money from many people who are invested in a selection of individual stocks and bonds chosen by financial experts.

Vocab26

establish 

to bring into existence or create

Vocab27

fund 

a sum of money

Vocab28

interval 

a break or period of time between two events

Vocab29

impulse buying

purchasing an item on the spot because of an emotional rather than planned decision

Vocab30

evaluate 

to assess or find the value of

Vocab31

commit 

to perform or bring about ; to pledge or assign oneself to a particular action

Vocab32

eliminate 

to get rid of

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