See Page 6

Learn to Saveby PayingYourself First

See Page 12

Your CreditPast Is YourCredit Future

See Page 3

PracticeBudgetingYour Money

See Page 15

The Ins andOuts ofPaying forCollege

Be Money SmartAnswering the need for financial education in today’s economic climate with tools on investing,managing and saving money. Together we can ensure a successful financial future for our youth.

3

Sandy DafféPresident

JA of Chicago

Alice ByrneField Vice PresidentMidwest Region

Allstate Insurance Company

Charles EvansPresident and

Chief Executive OfficerFederal Reserve Bank of Chicago

ContentsIntroductory Letter . . . . . . . . . . . . . . . . . . . . . . .2

Budget Your Money . . . . . . . . . . . . . . . . . . .3Something for Nothing . . . . . . . . . . . . . . .4Take-Home Pay . . . . . . . . . . . . . . . . . . . . . .5Pay Yourself First . . . . . . . . . . . . . . . . . . . .6

Compare Interest Rates . . . . . . . . . . . . . . . . .7Money Doubles by the Rule of 72 . . . . . . . . .8Start Saving Early . . . . . . . . . . . . . . . . . . . . .9High Risk, High Return . . . . . . . . . . . . .10-11

Your Credit Past Is Your Credit Future . . . . .12Don’t Borrow What You Can’t Repay . . . . . . .13Staying Insured . . . . . . . . . . . . . . . . . . . . . . . . .14The Ins and Outs of Paying for College . . . . .15

2

Dear Teacher/Educator:The Newspaper in Education (NIE) Department of the Chicago Sun-Times is pleased to partnerwith The Allstate Foundation, Junior Achievement of Chicago and the Federal Reserve Bank ofChicago to bring you this financial literacy publication. All of the activities are designed to beeasily integrated into your existing classroom teaching, while meeting educational guidelines asestablished by the Illinois Learning Standards (ILS).

NewspaperActivities

using theChicago Sun-Times

Supply and Demand

One definition for the law of supply and demandstates that when demand is high, prices will rise, andwhen supply is high, prices will drop. In other words,when a lot of people want to purchase something andthere is a limited supply, the price goes up. On the other hand, when there is a largesupply of a product available for purchase, the price usually goes down.Using advertisements in the Chicago Sun-Times, identify three products you thinkare in demand. Clip ads for these products out of the newspaper. Why do you thinkthese products are in demand? What kind of supply is there for this product? Why?

Cash vs. Credit

The word credit means “to trust.” Credit meansthat someone is willing to lend you money forsomething you need, and trusts you to pay it back,usually for a fee or with interest. Credit allows youto enjoy your purchase now and pay for it later.Today many items may be purchased using credit.Look through your Chicago Sun-Times for 10examples of items that may be purchased usingcredit. Make a list of these items on a separatesheet of paper. Next to each item write one benefitand one drawback to making this purchase usingcredit as compared to paying cash.

Buying a car

The Chicago Sun-Times is a great place to start looking for that new or used caryou want to buy. Find a car you would liketo purchase and complete the following:

- Make a list of at least 5 hidden costswhen it comes to owning a car.

- Find another ad for a similar car.Compare and contrast the two autos basedon the information found in the ad.

- Would you purchase this car usingcredit or cash? What are some of thebenefits of paying cash for your car?What are some of the benefits of payingwith credit?

Wants and Needs

One of the best ways of learning how to saveyour money is to think about things you “want”as opposed to things you “need.” Write downyour definition of “wants” versus “needs.” Lookthrough the advertisements in your copy of theChicago Sun-Times and make a list of threethings you would like to purchase and threethings you and/or your family need to purchase.Next to each item, explain why you listed theitem as a “want” or “need.”

A budget is like a balance scale. The two sides must be equal, or the balance is tipped. Abalanced budget means you don’t spend more than you earn.

It’s easy to be tempted to overspend; there are so many neat things to buy: DVDs,skateboards, video games, clothes, fashion accessories. The list is endless, and the ads areso appealing. One of the best ways to keep yourself from overspending is to make a list ofyour earnings and then create a spending plan that helps you stay within your limit.

With a slow economy, youmay have noticed some changes in your home. Your parents orguardians may be taking you to fewer movies, or youmay be going out to eat less often.Instead of wearing expensive designer-label outfits, your closet may now havemore clotheswith non-designer labels. These changes may be the result of budgeting, and budgetingmeans choices. So we have to make choices about what to do, where to go and how to spend.Sometimes making spending choices is easier if we have a clear view of our finances. If wehave this clear view, wemight even find that we can put somemoney away today to beprepared for that “rainy day” tomorrow. That’s where a budget comes in handy.

Activity for Secondary Grades

Based on earnings of $220 per week, how would you balance your budget? Fill in the blanksbelow, allocating expenses in a way that does not exceed $220.

Expenses per week:Food (groceries and eating out)Transportation (car expenses and/or public transportation)Clothing (don’t forget dry-cleaning bills)Music (CDs and concerts)Entertainment (movies, video rentals, travel)School supplies (from pencils to printer ink)Savings (set aside 10% from each paycheck)Charity

Total $220.00

Answer the following questions:1. If your favorite music group was coming to town for a concert, and you decided to

spend $45 for a ticket, how would you adjust your other expenses?

2. If you had to construct a model for a school project and the supplies cost $37, howwould you modify your budget?

3. If you needed to buy awinter coat priced at $125, what would you have to give up inanother area to pay for it?

Each decision you made above involved an “opportunity cost.” An opportunity cost isthe next best alternative given up when a choice is made. Every budget involvesopportunity costs; the important thing to remember is that you can’t have everything youwant. You have to make choices.

To find out if you could really live within the budget above, track your own expenses fora month and divide by four for a weekly average. Be sure to count every penny you spend,from a package of gum to a new TV.What’s the verdict? Could you live on $220 a week?

When someone gives youmoney for your birthday, or your uncle pays you $5 for helpinghimwash his car, that’s called income. Some income is earned, like the car-washmoney, andsome income comes from gifts, like a birthday check. Either way, you can use themoney to buythe things youwant, but you can’t spendmore than your income. If you don’t spendmore thanyou have, you’ve successfully balanced your budget.

Activity for Primary Grades

Try to solve this problem to balance a budget.

IncomeGift from Grandma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$10Pay for washing dishes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5Pay for walking neighbor’s dog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 4Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5Reward for good report card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3

Total

PurchasesToys, games and candy cost different amounts. When you choose to buy thosethings, you have to make sure you don’t go over your total income. From the listbelow, circle the items you want to buy; then total the costs. Add them all up. Besure you don’t spend more than your income, totaled above.

Good Better BestColoring book $2 $3 $6Toy cars $5 $7 $10Snacks $2 $4 $6Crayons $2 $3 $4Puppets $5 $6 $8Stickers $1 $2 $3Puzzle $5 $7 $9T-shirt $4 $6 $8Pencils $1 $4 $7

If you want to buy the best puzzle but you don’t have enough income, youhave two choices:

Spend less (buy a cheaper puzzle or spend less on some other item).Earn more (try to get more dog-walking or car-washing jobs ).

Balancing a budget is not difficult if you remember the rule: Don’t spendmore than you earn.

Suggestions for SuccessfulBudgeting

Use computer software to make thejob easier. Programs such asQuicken® or Microsoft Money® havebuilt-in budget-making tools.Watch out for cash “leakages,” suchas ATM fees. If you use an ATMmore than once a week, the fees canadd up to a substantial sum over thecourse of a year.Don’t spend beyond your limit.Spending beyond your limit isdangerous. Government figuresshowmany households with a totalincome of $50,000 or less arespending more than they bring in.This practice can lead to bigfinancial problems.Know the difference between needsand wants. If your income is notcovering your costs, eliminate theluxuries you don’t really need.Pay yourself first. Try to save 10% ofyour income each paycheck, nomatter what other expenses comeup. If you subtract savings right offthe top, you won’t miss them.Only count the income you are sureof. Bonuses or investment gains maynot materialize.

How muchyou earn How muchyou spend

BudgetYourMoney

Beware of “spending creep.” Whenyou get a raise, don’t spend all of it.Bonuses and promotions are greatways to increase your savings.

(From “CNNMoney,”http://money.cnn.com/pf/101/lessons/2/)

Ways to Save MoneyPay cash whenever possible so thatyou don’t have to pay interest oncredit card debt. If you must use acredit card, try to pay off thebalance quickly.Bring your lunch to work or schoolinstead of eating out. This can save$5 or more per day (that’s about$1,300 a year).Be careful about telephone usage.Try not to make calls during peakhours. Check with your phonecompany about the best times to call.Don’t forget about clipping coupons.This may seem like a minor savings,but it can add up over time. Youcould save $20 per shopping trip.

(From “Personal Budgeting and MoneySaving Tips,” http://www.personal-budget-planning-saving-money.com/moneysavingtips.html)

Be Money SmartDear Parent or Guardian:

Americans cannot open a newspaper, watch TV or access the web without seeingsomething about the current state of the economy. These developments are frighteningand confusing enough for us as adults, but the impact on our kids is even moredisconcerting. According to Junior Achievement and The Allstate Foundation’s 10th

annual “Teens and Personal Finance” poll, for many kids this is the first time in theirlives they are seeing their households contending with a new economic reality.

One of the best ways to face something you don’t understand is to learn as much asyou can about it. In this context, The Allstate Foundation and Junior Achievement havepartnered to develop this financial education guide to help parents and guardians educatetheir kids about money and its role in the economy.

The “Be Money Smart” insert is kicking off Money Smart Week in the Chicagolandarea from April 18 - 25, 2009. Created by the Federal Reserve Bank of Chicago andsupported by The Allstate Foundation, Junior Achievement of Chicago, and other localpartners, Money Smart Week is a weeklong event that offers free educational activitiesabout managing personal finances. For a schedule of activities from April 18 - 25, 2009,visit www.moneysmartweek.org/chicago.

The effort put into this guide is a reflection of The Allstate Foundation’s long historyof commitment to communities. The Allstate Foundation is dedicated to providing youand your family peace of mind through its efforts to ensure families have the informationneeded to have a better understanding of our financial systems and the economy, which isespecially critical in this time of uncertainty.

For its part, Junior Achievement of Chicago has been working since 1940 to helpyoung people understand the economy. The organization’s vital financial literacy, workreadiness, and entrepreneurship curriculum – which is so essential at a time like this –comes alive when volunteers, such as business leaders and community members, leadstudents through innovative, hands-on lesson plans.

The materials provided in this guide may not address all of the questions you andyour family have about the current economic environment. But our hope is that it willstart to lay a foundation that will help your children be better prepared from a financialliteracy standpoint to understand our economy and our world.

On behalf of The Allstate Foundation, Junior Achievement of Chicago, and theFederal Reserve Bank of Chicago, we appreciate the opportunity to bring thisinformation into your home. Thank you for taking time to share it with your families.Together, we are creating a successful financial future for our children.

3

Sandy DafféPresident

JA of Chicago

Alice ByrneField Vice PresidentMidwest Region

Allstate Insurance Company

Charles EvansPresident and

Chief Executive OfficerFederal Reserve Bank of Chicago

ContentsIntroductory Letter . . . . . . . . . . . . . . . . . . . . . . .2

Budget Your Money . . . . . . . . . . . . . . . . . . .3Something for Nothing . . . . . . . . . . . . . . .4Take-Home Pay . . . . . . . . . . . . . . . . . . . . . .5Pay Yourself First . . . . . . . . . . . . . . . . . . . .6

Compare Interest Rates . . . . . . . . . . . . . . . . .7Money Doubles by the Rule of 72 . . . . . . . . .8Start Saving Early . . . . . . . . . . . . . . . . . . . . .9High Risk, High Return . . . . . . . . . . . . .10-11

Your Credit Past Is Your Credit Future . . . . .12Don’t Borrow What You Can’t Repay . . . . . . .13Staying Insured . . . . . . . . . . . . . . . . . . . . . . . . .14The Ins and Outs of Paying for College . . . . .15

2

Dear Teacher/Educator:The Newspaper in Education (NIE) Department of the Chicago Sun-Times is pleased to partnerwith The Allstate Foundation, Junior Achievement of Chicago and the Federal Reserve Bank ofChicago to bring you this financial literacy publication. All of the activities are designed to beeasily integrated into your existing classroom teaching, while meeting educational guidelines asestablished by the Illinois Learning Standards (ILS).

NewspaperActivities

using theChicago Sun-Times

Supply and Demand

One definition for the law of supply and demandstates that when demand is high, prices will rise, andwhen supply is high, prices will drop. In other words,when a lot of people want to purchase something andthere is a limited supply, the price goes up. On the other hand, when there is a largesupply of a product available for purchase, the price usually goes down.Using advertisements in the Chicago Sun-Times, identify three products you thinkare in demand. Clip ads for these products out of the newspaper. Why do you thinkthese products are in demand? What kind of supply is there for this product? Why?

Cash vs. Credit

The word credit means “to trust.” Credit meansthat someone is willing to lend you money forsomething you need, and trusts you to pay it back,usually for a fee or with interest. Credit allows youto enjoy your purchase now and pay for it later.Today many items may be purchased using credit.Look through your Chicago Sun-Times for 10examples of items that may be purchased usingcredit. Make a list of these items on a separatesheet of paper. Next to each item write one benefitand one drawback to making this purchase usingcredit as compared to paying cash.

Buying a car

The Chicago Sun-Times is a great place to start looking for that new or used caryou want to buy. Find a car you would liketo purchase and complete the following:

- Make a list of at least 5 hidden costswhen it comes to owning a car.

- Find another ad for a similar car.Compare and contrast the two autos basedon the information found in the ad.

- Would you purchase this car usingcredit or cash? What are some of thebenefits of paying cash for your car?What are some of the benefits of payingwith credit?

Wants and Needs

One of the best ways of learning how to saveyour money is to think about things you “want”as opposed to things you “need.” Write downyour definition of “wants” versus “needs.” Lookthrough the advertisements in your copy of theChicago Sun-Times and make a list of threethings you would like to purchase and threethings you and/or your family need to purchase.Next to each item, explain why you listed theitem as a “want” or “need.”

A budget is like a balance scale. The two sides must be equal, or the balance is tipped. Abalanced budget means you don’t spend more than you earn.

It’s easy to be tempted to overspend; there are so many neat things to buy: DVDs,skateboards, video games, clothes, fashion accessories. The list is endless, and the ads areso appealing. One of the best ways to keep yourself from overspending is to make a list ofyour earnings and then create a spending plan that helps you stay within your limit.

With a slow economy, youmay have noticed some changes in your home. Your parents orguardians may be taking you to fewer movies, or youmay be going out to eat less often.Instead of wearing expensive designer-label outfits, your closet may now havemore clotheswith non-designer labels. These changes may be the result of budgeting, and budgetingmeans choices. So we have to make choices about what to do, where to go and how to spend.Sometimes making spending choices is easier if we have a clear view of our finances. If wehave this clear view, wemight even find that we can put somemoney away today to beprepared for that “rainy day” tomorrow. That’s where a budget comes in handy.

Activity for Secondary Grades

Based on earnings of $220 per week, how would you balance your budget? Fill in the blanksbelow, allocating expenses in a way that does not exceed $220.

Expenses per week:Food (groceries and eating out)Transportation (car expenses and/or public transportation)Clothing (don’t forget dry-cleaning bills)Music (CDs and concerts)Entertainment (movies, video rentals, travel)School supplies (from pencils to printer ink)Savings (set aside 10% from each paycheck)Charity

Total $220.00

Answer the following questions:1. If your favorite music group was coming to town for a concert, and you decided to

spend $45 for a ticket, how would you adjust your other expenses?

2. If you had to construct a model for a school project and the supplies cost $37, howwould you modify your budget?

3. If you needed to buy awinter coat priced at $125, what would you have to give up inanother area to pay for it?

Each decision you made above involved an “opportunity cost.” An opportunity cost isthe next best alternative given up when a choice is made. Every budget involvesopportunity costs; the important thing to remember is that you can’t have everything youwant. You have to make choices.

To find out if you could really live within the budget above, track your own expenses fora month and divide by four for a weekly average. Be sure to count every penny you spend,from a package of gum to a new TV.What’s the verdict? Could you live on $220 a week?

When someone gives youmoney for your birthday, or your uncle pays you $5 for helpinghimwash his car, that’s called income. Some income is earned, like the car-washmoney, andsome income comes from gifts, like a birthday check. Either way, you can use themoney to buythe things youwant, but you can’t spendmore than your income. If you don’t spendmore thanyou have, you’ve successfully balanced your budget.

Activity for Primary Grades

Try to solve this problem to balance a budget.

IncomeGift from Grandma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$10Pay for washing dishes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5Pay for walking neighbor’s dog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 4Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5Reward for good report card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3

Total

PurchasesToys, games and candy cost different amounts. When you choose to buy thosethings, you have to make sure you don’t go over your total income. From the listbelow, circle the items you want to buy; then total the costs. Add them all up. Besure you don’t spend more than your income, totaled above.

Good Better BestColoring book $2 $3 $6Toy cars $5 $7 $10Snacks $2 $4 $6Crayons $2 $3 $4Puppets $5 $6 $8Stickers $1 $2 $3Puzzle $5 $7 $9T-shirt $4 $6 $8Pencils $1 $4 $7

If you want to buy the best puzzle but you don’t have enough income, youhave two choices:

Spend less (buy a cheaper puzzle or spend less on some other item).Earn more (try to get more dog-walking or car-washing jobs ).

Balancing a budget is not difficult if you remember the rule: Don’t spendmore than you earn.

Suggestions for SuccessfulBudgeting

Use computer software to make thejob easier. Programs such asQuicken® or Microsoft Money® havebuilt-in budget-making tools.Watch out for cash “leakages,” suchas ATM fees. If you use an ATMmore than once a week, the fees canadd up to a substantial sum over thecourse of a year.Don’t spend beyond your limit.Spending beyond your limit isdangerous. Government figuresshowmany households with a totalincome of $50,000 or less arespending more than they bring in.This practice can lead to bigfinancial problems.Know the difference between needsand wants. If your income is notcovering your costs, eliminate theluxuries you don’t really need.Pay yourself first. Try to save 10% ofyour income each paycheck, nomatter what other expenses comeup. If you subtract savings right offthe top, you won’t miss them.Only count the income you are sureof. Bonuses or investment gains maynot materialize.

How muchyou earn How muchyou spend

BudgetYourMoney

Beware of “spending creep.” Whenyou get a raise, don’t spend all of it.Bonuses and promotions are greatways to increase your savings.

(From “CNNMoney,”http://money.cnn.com/pf/101/lessons/2/)

Ways to Save MoneyPay cash whenever possible so thatyou don’t have to pay interest oncredit card debt. If you must use acredit card, try to pay off thebalance quickly.Bring your lunch to work or schoolinstead of eating out. This can save$5 or more per day (that’s about$1,300 a year).Be careful about telephone usage.Try not to make calls during peakhours. Check with your phonecompany about the best times to call.Don’t forget about clipping coupons.This may seem like a minor savings,but it can add up over time. Youcould save $20 per shopping trip.

(From “Personal Budgeting and MoneySaving Tips,” http://www.personal-budget-planning-saving-money.com/moneysavingtips.html)

Be Money SmartDear Parent or Guardian:

Americans cannot open a newspaper, watch TV or access the web without seeingsomething about the current state of the economy. These developments are frighteningand confusing enough for us as adults, but the impact on our kids is even moredisconcerting. According to Junior Achievement and The Allstate Foundation’s 10th

annual “Teens and Personal Finance” poll, for many kids this is the first time in theirlives they are seeing their households contending with a new economic reality.

One of the best ways to face something you don’t understand is to learn as much asyou can about it. In this context, The Allstate Foundation and Junior Achievement havepartnered to develop this financial education guide to help parents and guardians educatetheir kids about money and its role in the economy.

The “Be Money Smart” insert is kicking off Money Smart Week in the Chicagolandarea from April 18 - 25, 2009. Created by the Federal Reserve Bank of Chicago andsupported by The Allstate Foundation, Junior Achievement of Chicago, and other localpartners, Money Smart Week is a weeklong event that offers free educational activitiesabout managing personal finances. For a schedule of activities from April 18 - 25, 2009,visit www.moneysmartweek.org/chicago.

The effort put into this guide is a reflection of The Allstate Foundation’s long historyof commitment to communities. The Allstate Foundation is dedicated to providing youand your family peace of mind through its efforts to ensure families have the informationneeded to have a better understanding of our financial systems and the economy, which isespecially critical in this time of uncertainty.

For its part, Junior Achievement of Chicago has been working since 1940 to helpyoung people understand the economy. The organization’s vital financial literacy, workreadiness, and entrepreneurship curriculum – which is so essential at a time like this –comes alive when volunteers, such as business leaders and community members, leadstudents through innovative, hands-on lesson plans.

The materials provided in this guide may not address all of the questions you andyour family have about the current economic environment. But our hope is that it willstart to lay a foundation that will help your children be better prepared from a financialliteracy standpoint to understand our economy and our world.

On behalf of The Allstate Foundation, Junior Achievement of Chicago, and theFederal Reserve Bank of Chicago, we appreciate the opportunity to bring thisinformation into your home. Thank you for taking time to share it with your families.Together, we are creating a successful financial future for our children.

Some people think that being successful is just a matter of luck. They believe LeBronJames was lucky to be born with great basketball skills, Nicole Kidman was lucky tohave a special acting talent, and Bill Gates was lucky to have a knack for computertechnology. The truth is that just about everyone who is successful works very hard atwhat they do. They practice, practice, practice.

Being proficient at finances takes practice, too. No one is born knowing how to be agood money manager. It’s a skill that takes time and effort to master. As you begin tomanage your money, you might come across offers, especially on the Internet, that seemtoo good to be true. Beware of them. Ask yourself these questions before conductingbusiness online:

Was the promotion unsolicited?Did it come from overseas?Does it look too good to be true?Do I have to respond at once? What’s the rush?Do I have to make a purchase to win a prize?Do I have to call a long-distance telephone number?Do I have to provide my bank or credit card details?Do I have to send the money to a postal box?Am I asked to keep the offer confidential?

Even though not all offers are scams, some “come-ons” should be avoided. A few of thetop Internet and telemarketing frauds are listed below:

Prizes and SweepstakesMagazine SalesCredit Card SalesWork-At-Home OffersAdvance Fee LoansCredit Card Loss ProtectionBuyers’ Clubs

(Source: http://www.peoples-law.org/consumer/scams/consumer_scams.htm)

The best way to avoid dishonest bargains is to purchase from reputable dealers. You can bea wise shopper without falling for questionable deals offered by dishonest scammers. Agood way to start is a simple one: Compare the prices of the things you buy. Sometimes it’seasy. For example, if the same bike costs $200 at one store and $175 at another, you knowwhere tomake your purchase. But sometimes comparison shopping is tricky. For example,which is a better deal: 24 cans of root beer for $5.99 or 10 cans for $2.75?

You might think that saving a nickel or dime on an item isn’t a big deal, but if yousave 10 cents on every item you buy, you could be $20 or $30 ahead each week. That’senough to add to your savings account, go out for pizza, see a movie, or buy a music CD.

5

One Dollar = 100 cents Five Dollars = 500 cents

Penny = 1 cent Nickel = 5 cents Dime = 10 cents Quarter = 25 cents

14¢

25¢

75¢

$1.30

$2.28

Match the amount of money on the left with the items on the right by drawing aline with a pencil or crayon.

Something for Nothing

Activity for Primary Grades

When you shop, you should know about the money you use. If you see a toy you want,you need to know if you have enough money to pay for it. First, you should understandU.S. coinage:

Activity for Primary Grades

The following activity will challengeyou to do some comparison shopping.In each example, circle the better deal.

1. Gum— a package of 5 sticks for $0.25 or apackage of 19 sticks for $0.95?

2. Milk— a gallon for $2.99 or a quart for $0.89?3. Gym socks— 6 pairs for $10 or 10 pairs for

$15?4. Music CDs— buy 1 at $17.99 and get one free

or 4 for $34.99?5. Batteries— 6 pack for $6.99 or 8 pack for

$7.99?6. Soap— 5 bars for $4.50 or 2 bars for $2.25?7. Cookies— 4 for $2.99 or 5 for $4?8. Golf balls— 12 for $15 or 15 for $20?9. Notebooks— 4 for $2.29 or 6 for $3.29?10. DVD rental— $2.99 for one night or $7.99 for

three nights?

Bonus:Calculate how much you saved on each item. What’s the total savings? 4

Jamaal Willis was excited about his first real paycheck. Sure, he had worked duringmiddle school mowing lawns and babysitting a few neighborhood kids, but this was a realjob. He was earning $6 an hour in a Chicago fast-food restaurant. Jamaal already hadplans for the $120 he’d be getting for his 20-hour work week.

When Jamaal tore open the envelope that held his first check, his jaw dropped indisbelief. Instead of $120, his check was for only $89.22! Seeing Jamaal’sdisappointment, his manager, Ms. Carter, took him aside and showed how a number ofdeductions are made from each worker’s check. She listed the amount subtracted fromJamaal’s pay:

Jamaal’s Gross Pay for 20 Hours: ............................................................$120.00Deductions, Subtracted from Gross Pay:FICA, or Social Security (6.2%) ...............................................................................$7.44Medicare (1.45%) ........................................................................................................$1.74Federal income tax (15%) ........................................................................................$18.00State income tax in Illinois (3%) ..............................................................................$3.60

Jamaal’s Total Deductions: ........................................................................$30.78Jamaal’s Net Pay: ($120 - $30.78) ...............................................................$89.22

Now Jamaal understood the numbers, but he wasn’t too happy about them. Why didhe have to pay taxes? Ms. Carter explained that taxes are used to support governmentprograms such as schools, roads, and police and fire departments. Each taxpayer pays asmall portion to maintain these programs, and everyone benefits from them.

Later that day, Jamaal took his check to the bank and deposited it in his checkingaccount. Now he would be able to write checks to buy what he wanted. He went to themusic shop and picked out a $14.99 music CD for his mom for her birthday. Of course,when he got to the counter, he discovered that he’d have to write a check for $16.53, theprice of the CD plus 10.25% sales tax! Not only did he get less in his paycheck than heexpected, but the things he wanted to buy cost more than he expected. This tax thingwas really eating up his earnings!

Themoral of Jamaal’s story is this:When you plan your expenses, be sure to take intoaccount the taxes that are deducted from your pay and the taxes that are added to yourpurchases. Otherwise, youmight find yourself with a budget deficit (not enoughmoney) atthe end of themonth.

Activity for Secondary Grades

Calculate the total cost of Jamaal’s purchases; then write checks for Jamaal, buying theitems below. Don’t forget to keep a record using the check register. Keep in mind thatChicago’s sales tax rate is 10.25%. Calculate tax like this: Cost of Item + 10.25% of theCost* = Cost of Item plus Tax*Multiply the Cost of Item times 0.1025 to get 10.25% of the Cost.

Store Items Purchased Cost Tax (10.25%) Total Cost with TaxBoomer’s Music Shop Elvis CD for Mom $14.99 $1.54 $16.53

Boundary Book Store School Supplies $17.96

Classic T-Shirts Basketball Shirt $20.00

Deuce Hardware Store Combination Lock $5.50

Sal’s Sporting Goods Tennis Balls $6.99

Check RegisterCheck No. Date Transaction Description Payment Deposit $ BALANCE

3/8/09 Pay Check $89.22324 3/10/09 CD for Mom $16.53 $72.69

Interesting LinkInternal Revenue Service, 2008 Tax Table. http://www.irs.gov/pub/irs-pdf/i1040tt.pdfThis site has a federal income 2008 Tax Table that illustrates howmuch tax is due for anindividual,married couple filing jointly, and others.

Take-Home PayPay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

NO.324

NO.325

NO.326

NO.327

NO.328

Boomer’s Music Shop 16.53

March 10

sixteen dollars and 53 cents

Elvis CD for Mom/$1.54 tax Jamaal Willis

Some people think that being successful is just a matter of luck. They believe LeBronJames was lucky to be born with great basketball skills, Nicole Kidman was lucky tohave a special acting talent, and Bill Gates was lucky to have a knack for computertechnology. The truth is that just about everyone who is successful works very hard atwhat they do. They practice, practice, practice.

Being proficient at finances takes practice, too. No one is born knowing how to be agood money manager. It’s a skill that takes time and effort to master. As you begin tomanage your money, you might come across offers, especially on the Internet, that seemtoo good to be true. Beware of them. Ask yourself these questions before conductingbusiness online:

Was the promotion unsolicited?Did it come from overseas?Does it look too good to be true?Do I have to respond at once? What’s the rush?Do I have to make a purchase to win a prize?Do I have to call a long-distance telephone number?Do I have to provide my bank or credit card details?Do I have to send the money to a postal box?Am I asked to keep the offer confidential?

Even though not all offers are scams, some “come-ons” should be avoided. A few of thetop Internet and telemarketing frauds are listed below:

Prizes and SweepstakesMagazine SalesCredit Card SalesWork-At-Home OffersAdvance Fee LoansCredit Card Loss ProtectionBuyers’ Clubs

(Source: http://www.peoples-law.org/consumer/scams/consumer_scams.htm)

The best way to avoid dishonest bargains is to purchase from reputable dealers. You can bea wise shopper without falling for questionable deals offered by dishonest scammers. Agood way to start is a simple one: Compare the prices of the things you buy. Sometimes it’seasy. For example, if the same bike costs $200 at one store and $175 at another, you knowwhere tomake your purchase. But sometimes comparison shopping is tricky. For example,which is a better deal: 24 cans of root beer for $5.99 or 10 cans for $2.75?

You might think that saving a nickel or dime on an item isn’t a big deal, but if yousave 10 cents on every item you buy, you could be $20 or $30 ahead each week. That’senough to add to your savings account, go out for pizza, see a movie, or buy a music CD.

5

One Dollar = 100 cents Five Dollars = 500 cents

Penny = 1 cent Nickel = 5 cents Dime = 10 cents Quarter = 25 cents

14¢

25¢

75¢

$1.30

$2.28

Match the amount of money on the left with the items on the right by drawing aline with a pencil or crayon.

Something for Nothing

Activity for Primary Grades

When you shop, you should know about the money you use. If you see a toy you want,you need to know if you have enough money to pay for it. First, you should understandU.S. coinage:

Activity for Primary Grades

The following activity will challengeyou to do some comparison shopping.In each example, circle the better deal.

1. Gum— a package of 5 sticks for $0.25 or apackage of 19 sticks for $0.95?

2. Milk— a gallon for $2.99 or a quart for $0.89?3. Gym socks— 6 pairs for $10 or 10 pairs for

$15?4. Music CDs— buy 1 at $17.99 and get one free

or 4 for $34.99?5. Batteries— 6 pack for $6.99 or 8 pack for

$7.99?6. Soap— 5 bars for $4.50 or 2 bars for $2.25?7. Cookies— 4 for $2.99 or 5 for $4?8. Golf balls— 12 for $15 or 15 for $20?9. Notebooks— 4 for $2.29 or 6 for $3.29?10. DVD rental— $2.99 for one night or $7.99 for

three nights?

Bonus:Calculate how much you saved on each item. What’s the total savings? 4

Jamaal Willis was excited about his first real paycheck. Sure, he had worked duringmiddle school mowing lawns and babysitting a few neighborhood kids, but this was a realjob. He was earning $6 an hour in a Chicago fast-food restaurant. Jamaal already hadplans for the $120 he’d be getting for his 20-hour work week.

When Jamaal tore open the envelope that held his first check, his jaw dropped indisbelief. Instead of $120, his check was for only $89.22! Seeing Jamaal’sdisappointment, his manager, Ms. Carter, took him aside and showed how a number ofdeductions are made from each worker’s check. She listed the amount subtracted fromJamaal’s pay:

Jamaal’s Gross Pay for 20 Hours: ............................................................$120.00Deductions, Subtracted from Gross Pay:FICA, or Social Security (6.2%) ...............................................................................$7.44Medicare (1.45%) ........................................................................................................$1.74Federal income tax (15%) ........................................................................................$18.00State income tax in Illinois (3%) ..............................................................................$3.60

Jamaal’s Total Deductions: ........................................................................$30.78Jamaal’s Net Pay: ($120 - $30.78) ...............................................................$89.22

Now Jamaal understood the numbers, but he wasn’t too happy about them. Why didhe have to pay taxes? Ms. Carter explained that taxes are used to support governmentprograms such as schools, roads, and police and fire departments. Each taxpayer pays asmall portion to maintain these programs, and everyone benefits from them.

Later that day, Jamaal took his check to the bank and deposited it in his checkingaccount. Now he would be able to write checks to buy what he wanted. He went to themusic shop and picked out a $14.99 music CD for his mom for her birthday. Of course,when he got to the counter, he discovered that he’d have to write a check for $16.53, theprice of the CD plus 10.25% sales tax! Not only did he get less in his paycheck than heexpected, but the things he wanted to buy cost more than he expected. This tax thingwas really eating up his earnings!

Themoral of Jamaal’s story is this:When you plan your expenses, be sure to take intoaccount the taxes that are deducted from your pay and the taxes that are added to yourpurchases. Otherwise, youmight find yourself with a budget deficit (not enoughmoney) atthe end of themonth.

Activity for Secondary Grades

Calculate the total cost of Jamaal’s purchases; then write checks for Jamaal, buying theitems below. Don’t forget to keep a record using the check register. Keep in mind thatChicago’s sales tax rate is 10.25%. Calculate tax like this: Cost of Item + 10.25% of theCost* = Cost of Item plus Tax*Multiply the Cost of Item times 0.1025 to get 10.25% of the Cost.

Store Items Purchased Cost Tax (10.25%) Total Cost with TaxBoomer’s Music Shop Elvis CD for Mom $14.99 $1.54 $16.53

Boundary Book Store School Supplies $17.96

Classic T-Shirts Basketball Shirt $20.00

Deuce Hardware Store Combination Lock $5.50

Sal’s Sporting Goods Tennis Balls $6.99

Check RegisterCheck No. Date Transaction Description Payment Deposit $ BALANCE

3/8/09 Pay Check $89.22324 3/10/09 CD for Mom $16.53 $72.69

Interesting LinkInternal Revenue Service, 2008 Tax Table. http://www.irs.gov/pub/irs-pdf/i1040tt.pdfThis site has a federal income 2008 Tax Table that illustrates howmuch tax is due for anindividual,married couple filing jointly, and others.

Take-Home PayPay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

Pay to theorder of

Memo

Date , 2009

Jamaal Willis1234 Main StreetChicago, IL 60654

The Big BankAnywhere, USA

$

Dollars

No. 324

NO.324

NO.325

NO.326

NO.327

NO.328

Boomer’s Music Shop 16.53

March 10

sixteen dollars and 53 cents

Elvis CD for Mom/$1.54 tax Jamaal Willis

6 7

earnings, and write that amount on your scoresheet. Play this game with a friend to see who cansave the most by paying yourself first.

What you need: a pencil and a sheet ofpaper to keep score, a coin to toss and two plasticgame pieces. (You can use beans, macaroni, orsmall tops from colored markers.)

Before the game: Take turns flipping thecoin; the first person to get heads starts. If youboth get heads, flip again. Put both game pieceson start.

Play the game: Flip the coin; heads movesone space and tails moves two. When you land onan occupation segment, calculate 10% of yourearnings and add it to your score. Follow thedirections on the board. Continue until the firstplayer reaches finish. The winner is the playerwith the most savings when the game ends.

Bureau of Labor Statistics, FastestGrowing Occupations, 2006-2016

Medical assistantsNetwork systems and data communications analystsSocial and human service assistantsMedical records and health information techniciansPhysical therapist aidesComputer software engineersPhysical therapist assistantsFitness trainers and aerobics instructorsDatabase administratorsVeterinary technologists and techniciansHazardous materials removal workersDental hygienistsDental assistantsPersonal and home care aidesSelf-enrichment education teachersComputer systems analystsEnvironmental engineersPostsecondary teachersNetwork and computer systems administratorsEnvironmental science and protection technicians(including health)Preschool teachers (except special education)Computer and information systems managersPhysical therapistsOccupational therapistsRespiratory therapists

http://www.bls.gov/emp/emptab3.htm

Saving, even small amounts, can add up to bigbundles of money over your lifetime. Imaginethat you gave up a soft drink each day, a rentedvideo once a week, or a pizza once a month. Ifyou regularly invested the money you would havespent, you could have plenty of savings withouttoo much effort!

Next, imagine that you invested $4 a day in amutual fund that returned as little as 4%. Withinterest accrued, in 40 years you’d have morethan $118,000.

The easiest way to begin a saving andinvesting habit is to pay yourself first. Thismeans you should set aside a certain amount(about 10% is recommended) each time youreceive money. Put this money in a savingsaccount, or invest it in a mutual fund. If themoney is invested, you won’t be tempted to spendit on stuff you don’t need. Because you set it asideas soon as you earn it, you won’t even miss it.

You might think, “What’s the big deal about10%? If I’m earning $30 a week cutting grass andbabysitting, that’s only $3 a week.”

Again, let’s take a long-term look at how $3 aweek would grow: At just 4% interest, in 40 yearsyou’d have more than $10,000, all from $3 a week.

The best news is that if you start a strongsaving habit when you are young, it will becomeroutine. Later, as you earn pay increases,bonuses, and raises, you’ll be able to increasethat $3 to $30 or even $300. If you saved $300 aweek for 30 years at 4%, you’d have nearly$700,000 at retirement. Use the calculator atbankrate.com to compute other savingscombinations:http://www.bankrate.com/brm/cgi-bin/savings.asp

Of course, the amount you can save dependson the amount you earn, and we all know thatsome jobs pay more than others. You can seewhat different jobs pay by checking the JACareer Center:http://studentcenter.ja.org/aspx/Findcareer

Activity for Secondary Grades

Did you know that some people change careersmore than six to eight times in their lives?Here’s a game that lets you change jobs with theflip of a coin. The object is to see who can savethe most money, no matter how many differentjobs you have.

Each time you land on a job, save 10% of your

Architect $70,000

Cable TV Installer $36,000

Dressmaker $22,000Flight Engineer $60,000Mechanical Engineer $70,000

Travel Agent $40,000

Pharmacy Aide $26,000

Taxi Driver $19,000

Firefighter $50,000

Electrician $60,000

Farmer $20,000

Real Estate Agent $40,000

Painter $35,000

001110101002

Military $36,000

Advertising Agent $30,000Accountant $50,000

Miss a Turn

Go Again

MoveAhead 3Spaces

Go Back3 Spaces

Computer Programmer $60,000

StartFinish

Pay Yourself First!$5.00

Puzzle

CandyBar

Movie Ticket

T-Shirt

Game$3.50

$6.00

$1.50

$8.50

You use your credit card to buy acomputer for $2,000. If you makepayments of $50 a month, it should bepaid for in 40 months, right? After all,$50 x 40 months = $2,000.

Unfortunately, when you make acredit card purchase, you do not just paythe original purchase price. You alsohave to pay interest. If the annualinterest rate on your credit card is 15%,and you only pay the minimumpayment, it will take you 56 months topay it off. You will end up paying $2,000for the computer plus $800 in interest.

Here’s How It WorksWhen you use a credit card to buy a$2,000 computer at HiTech Tony’s, Tonygets paid immediately. In effect, whenyou sign the credit card receipt, you aregetting a loan from the credit cardcompany. Your signature means youagree to pay the credit card company$2,000, plus interest. Interest is theprice you pay for using the bank’smoney. Interest rates are expressed aspercentages; you might pay 6%, 18%, ormore on a credit card.

Some people use the same creditcard for years, never looking for a betterrate. However, you can often find betterdeals by shopping around. Just as youlook for the best deal on a new computer,stereo, or television, you should shoparound for the best deal when youchoose a new credit card.

Compare Interest Rates

Activity for Secondary GradesYou and your family probably get a pile of credit card applications in themail every week. Find six credit card offers and compare them by usingthe chart below:

Name of Card Interest Rate Grace Period Annual Fee Other Fees

Based on the information you’ve gathered, evaluate the cards. Whichwould you choose? Why? The Bankrate.com website calculates how longit will take to pay off a credit card:www.bankrate.com/brm/calc/creditcardpay.asp

Here are some things to look forwhen you’re in the market for acredit card:

What is the interest rate?Be careful here; some cards offer anintroductory rate that is very low,but after 30 or 60 days the rate jumpsup. Be sure to read the fine print.Is there a grace period? The graceperiod is the number of days duringwhich you pay no interest after apurchase is made. Some cards offer20-day grace periods; some offermore. Caution: if you have anoutstanding balance, there is nograce period. That means you begin

to pay interest the minute youcharge something. If you have a20-day grace period, you startpaying interest on the 21st day, sodon’t wait until the end of themonth to pay your bill.What is the annual fee? Feesrange from zero to as much as$100 a year. Look for a card thathas no fee.What about other fees?Many credit card companieschargemore than $25 if yourpayment is even one day late. Besure to read the offer carefully tofind any hidden fees.

Activity for Primary Grades

Your aunt pays you $5 a week to takecare of her parakeet. You put 50 centseach week into your piggy bank to save.Cut out the quarters. Put the numberof quarters you would need to buy eachof the items below on top of thepictures. How long will it take you tosave enough to buy each item?

6 7

earnings, and write that amount on your scoresheet. Play this game with a friend to see who cansave the most by paying yourself first.

What you need: a pencil and a sheet ofpaper to keep score, a coin to toss and two plasticgame pieces. (You can use beans, macaroni, orsmall tops from colored markers.)

Before the game: Take turns flipping thecoin; the first person to get heads starts. If youboth get heads, flip again. Put both game pieceson start.

Play the game: Flip the coin; heads movesone space and tails moves two. When you land onan occupation segment, calculate 10% of yourearnings and add it to your score. Follow thedirections on the board. Continue until the firstplayer reaches finish. The winner is the playerwith the most savings when the game ends.

Bureau of Labor Statistics, FastestGrowing Occupations, 2006-2016

Medical assistantsNetwork systems and data communications analystsSocial and human service assistantsMedical records and health information techniciansPhysical therapist aidesComputer software engineersPhysical therapist assistantsFitness trainers and aerobics instructorsDatabase administratorsVeterinary technologists and techniciansHazardous materials removal workersDental hygienistsDental assistantsPersonal and home care aidesSelf-enrichment education teachersComputer systems analystsEnvironmental engineersPostsecondary teachersNetwork and computer systems administratorsEnvironmental science and protection technicians(including health)Preschool teachers (except special education)Computer and information systems managersPhysical therapistsOccupational therapistsRespiratory therapists

http://www.bls.gov/emp/emptab3.htm

Saving, even small amounts, can add up to bigbundles of money over your lifetime. Imaginethat you gave up a soft drink each day, a rentedvideo once a week, or a pizza once a month. Ifyou regularly invested the money you would havespent, you could have plenty of savings withouttoo much effort!

Next, imagine that you invested $4 a day in amutual fund that returned as little as 4%. Withinterest accrued, in 40 years you’d have morethan $118,000.

The easiest way to begin a saving andinvesting habit is to pay yourself first. Thismeans you should set aside a certain amount(about 10% is recommended) each time youreceive money. Put this money in a savingsaccount, or invest it in a mutual fund. If themoney is invested, you won’t be tempted to spendit on stuff you don’t need. Because you set it asideas soon as you earn it, you won’t even miss it.

You might think, “What’s the big deal about10%? If I’m earning $30 a week cutting grass andbabysitting, that’s only $3 a week.”

Again, let’s take a long-term look at how $3 aweek would grow: At just 4% interest, in 40 yearsyou’d have more than $10,000, all from $3 a week.

The best news is that if you start a strongsaving habit when you are young, it will becomeroutine. Later, as you earn pay increases,bonuses, and raises, you’ll be able to increasethat $3 to $30 or even $300. If you saved $300 aweek for 30 years at 4%, you’d have nearly$700,000 at retirement. Use the calculator atbankrate.com to compute other savingscombinations:http://www.bankrate.com/brm/cgi-bin/savings.asp

Of course, the amount you can save dependson the amount you earn, and we all know thatsome jobs pay more than others. You can seewhat different jobs pay by checking the JACareer Center:http://studentcenter.ja.org/aspx/Findcareer

Activity for Secondary Grades

Did you know that some people change careersmore than six to eight times in their lives?Here’s a game that lets you change jobs with theflip of a coin. The object is to see who can savethe most money, no matter how many differentjobs you have.

Each time you land on a job, save 10% of your

Architect $70,000

Cable TV Installer $36,000

Dressmaker $22,000Flight Engineer $60,000Mechanical Engineer $70,000

Travel Agent $40,000

Pharmacy Aide $26,000

Taxi Driver $19,000

Firefighter $50,000

Electrician $60,000

Farmer $20,000

Real Estate Agent $40,000

Painter $35,000

001110101002

Military $36,000

Advertising Agent $30,000Accountant $50,000

Miss a Turn

Go Again

MoveAhead 3Spaces

Go Back3 Spaces

Computer Programmer $60,000

StartFinish

Pay Yourself First!$5.00

Puzzle

CandyBar

Movie Ticket

T-Shirt

Game$3.50

$6.00

$1.50

$8.50

You use your credit card to buy acomputer for $2,000. If you makepayments of $50 a month, it should bepaid for in 40 months, right? After all,$50 x 40 months = $2,000.

Unfortunately, when you make acredit card purchase, you do not just paythe original purchase price. You alsohave to pay interest. If the annualinterest rate on your credit card is 15%,and you only pay the minimumpayment, it will take you 56 months topay it off. You will end up paying $2,000for the computer plus $800 in interest.

Here’s How It WorksWhen you use a credit card to buy a$2,000 computer at HiTech Tony’s, Tonygets paid immediately. In effect, whenyou sign the credit card receipt, you aregetting a loan from the credit cardcompany. Your signature means youagree to pay the credit card company$2,000, plus interest. Interest is theprice you pay for using the bank’smoney. Interest rates are expressed aspercentages; you might pay 6%, 18%, ormore on a credit card.

Some people use the same creditcard for years, never looking for a betterrate. However, you can often find betterdeals by shopping around. Just as youlook for the best deal on a new computer,stereo, or television, you should shoparound for the best deal when youchoose a new credit card.

Compare Interest Rates

Activity for Secondary GradesYou and your family probably get a pile of credit card applications in themail every week. Find six credit card offers and compare them by usingthe chart below:

Name of Card Interest Rate Grace Period Annual Fee Other Fees

Based on the information you’ve gathered, evaluate the cards. Whichwould you choose? Why? The Bankrate.com website calculates how longit will take to pay off a credit card:www.bankrate.com/brm/calc/creditcardpay.asp

Here are some things to look forwhen you’re in the market for acredit card:

What is the interest rate?Be careful here; some cards offer anintroductory rate that is very low,but after 30 or 60 days the rate jumpsup. Be sure to read the fine print.Is there a grace period? The graceperiod is the number of days duringwhich you pay no interest after apurchase is made. Some cards offer20-day grace periods; some offermore. Caution: if you have anoutstanding balance, there is nograce period. That means you begin

to pay interest the minute youcharge something. If you have a20-day grace period, you startpaying interest on the 21st day, sodon’t wait until the end of themonth to pay your bill.What is the annual fee? Feesrange from zero to as much as$100 a year. Look for a card thathas no fee.What about other fees?Many credit card companieschargemore than $25 if yourpayment is even one day late. Besure to read the offer carefully tofind any hidden fees.

Activity for Primary Grades

Your aunt pays you $5 a week to takecare of her parakeet. You put 50 centseach week into your piggy bank to save.Cut out the quarters. Put the numberof quarters you would need to buy eachof the items below on top of thepictures. How long will it take you tosave enough to buy each item?

98

Activity for Secondary Grades

Here’s a game that demonstrates howmoney grows as a function of principal,interest rate, and time. Use a calculatorto play the game with a friend.Materials: sharpened pencil, paper clip,and a calculator.

DirectionsPlace the paper clip in the center of thePrincipal circle and the point of thepencil through the paper clip pointing tothe center of the paper to make a spinner.Flick the paper clip with your finger tomake it spin. The space that you land onis your Principal amount. Repeat withthe Interest Rate and Time circles.

Multiply the three numbers tocalculate your Total Amount. (TotalAmount = Principal x Interest x Time).Then put your answer in the grid below.Play five rounds. The winner has themost money at the end of the game.

Round Player #1 Round Player #2

1 1

2 2

3 3

4 4

5 5

TOTAL TOTAL

Principal

Interest Rate

Time

$100

$670

$230

$805

2 years

10 years

5 years

7 years

6%

3%

9%

13%

Activity for Primary Grades

An Example of Compounding InterestIn an old Persian legend, a peasant presented a beautiful chessboard to his king.The king was so grateful that he asked what he could give in return. The peasantrequested one grain of rice for the first square on the board, double the amount(two grains) for the second square, double again (four grains) for the third, andso on. The king readily agreed and ordered rice to be brought from the royalstoreroom.

Howmany grains would the king have to give on the 15th square? (Answer:More than 16,000.) The number of rice grains on the last (64th) square would be18,446,744,073,709,600,000! If each grain is 1⁄4 inch long, that’s enough rice to surround theearth’s equator nearly 3 billion times. That must have been an awfully big chessboard!

Compound interest is like the pennies below, growing each time they’re doubled.How many pennies will you need for this activity? Put one penny on a table. Puttwo pennies next to the first one. Then double the number of pennies and placethe piles of pennies next to each other. Estimate how many pennies will be in thetenth pile.

MoneyDoublesby theRule of 72

Tiger Woods was hitting golf balls whenhe was 2 years old. Aretha Franklin sanggospel songs at her church at the age of5. Bill Gates was just a teen when hestarted dabbling with computers. Thesestars of sports, entertainment, andbusiness knew what they wanted to do,and they began to reach for their goalswhen they were very young.

Saving for the future can beginwhen you’re young, too. Though some ofyour goals may seem very distant now,before you know it, you’ll need to takeaction. The earlier you start saving, themore you’ll have for a new car, collegeeducation, furniture, travel, a home, orwhatever you dream of.

When you begin to save, you’ll besurprised at the number of differentoptions you have. Some have very littlerisk, like a regular savings account.Others are very risky, like speculativestocks. When the time comes to choose asavings plan, you should knowsomething about all your choices.

After you’ve read the descriptions ofsavings options below, fill in the chart,classifying each as a low, medium, orhigh risk. Then think of an advantageand a disadvantage for each choice. Thecompleted chart will help you make awise decision about how to save yourmoney. The earlier you start, the moreyou’ll ultimately have!

Regular Savings Accounts

Many regular savings accounts areinsured by the government. Even if yourbank closes, you’re guaranteed to getyour money back, up to $250,000. Where’sthe risk? Regular savings accounts faceinflation risk. Let’s say you want to buya computer that costs $1,200. Each monthyou deposit $100 in your savings account,but you earn very little interest, perhapsless than 1%. At the end of a year, youhave $1,200 plus about $6 in interest. Atthe same time, if the inflation rate is 3%,a computer that costs $1,200 this yearwill cost $1,236 next year.

Blue Chip Stocks

Owning blue chip stocks means you ownshares in certain big, successfulcompanies like GE, Microsoft, and Wal-Mart.Although all stock investmentscarry risk, shares of well-establishedcorporations are less likely to lose valuethan are new companies that have notyet established a reputation of success.Some blue chip stocks have returned anaverage of 10% annually over the past50 years, but even solid stock choicescarry some tax risk; you may beresponsible for paying high taxes on themoney you gain.

Speculative Stocks

Shares of stock in new, high-techcompanies can offer the potential for bigrewards. In the late 1990s, some investorsmade mega-bucks buying and sellingstock in “dot com” companies that werereturning 20% to 30% increases in value.Those who didn’t sell at the right time,though, lost a lot of money. They becamevictims of industry risk because theindustry they thought would be a super-star fizzled out instead.

Certificates of Deposit (CDs)

Bank CDs offer a fixed rate of interest fora specific length of time, usually fromthreemonths to 10 years. Though theinterest rate on CDs is higher than for asavings account, CDs face liquidity risk,whichmeans that you are not able toaccess yourmoney quickly. If you needmoney before your CD reaches itsmaturity date, you’ll have to pay a penalty.

Mutual Funds

Amutual fund allows you to own sharesin hundreds of companies. The mutualfund manager balances the fund so thatthere is a good mix of big companies,small companies, energy companies,medical supply companies, etc. Bymixing the stocks, there’s less likelihoodthat they’ll all lose value at the sametime, and you’ll earn a pretty good rateof return, depending upon how well theindividual stocks do. It’s like instantdiversification. But even balancedmutual funds may suffer from economicrisk — the chance that if the wholeeconomy declines, your fund will alsolose value.

Piggy Banks

Putting your money in a piggy bank, adresser drawer, or in your closet athome does not pay any interest, but youcan access it at any time. You’ll sufferbig safety risks, however, because yourmoney can easily be lost, stolen, ordestroyed by a fire or flood.

Commodities

Investing in antiques, rare coins, orother commodities is very risky. What isin high demand one day can lose itsappeal the next. Let’s say you buy a rarebaseball card for $500, hoping to sell itfor $700. If you need money and can’t

Savings Option Level of Risk Advantages Disadvantages

Savings Account

Blue Chip Stocks

Speculative Stocks

Certificates of Deposit

Mutual Funds

Piggy Banks

Commodities

U.S. Savings Bonds

Activity for Secondary Grades

How do you know which savings option is best for you? You need to examinethe pros and cons of each one, using the chart below. Put a check mark nextto the options that you feel are best for you, and explain why.

find a buyer for the card, you might have tosell it for $300, thus taking a big loss. Youface market risk with commodities becauseyou can’t know today what buyers willwant tomorrow.

United States Savings Bonds

Bonds are loans. When you buy a bond,you’re actually lending money to thegovernment. A U.S. Savings Bond is backedby the government, so you’re assured ofgetting back your initial investment, plusinterest. However, you can’t cash in yourbond in an instant, so you face liquidityrisk. Also, there’s reinvestment riskbecause your bond could lose value, andyou wouldn’t be able to reinvest the moneyat the same rate of return.

There are many ways to save. Some are good for short-term goals; some arebetter if you’re thinking about the long term. Which savings option wouldyou choose in the situations described below?

In each blank, write Savings Account, Blue Chip Stocks, Speculative Stocks,Certificates of Deposit, Mutual Funds, Piggy Bank, Commodities, or U.S. SavingsBond to indicate which choice is best in the following circumstances.

1. You need $5 right away for school supplies.

2. You need $3,000 in a year for college tuition.

3. You want to diversify, but you don’t knowmuch about the stock market.

4. You are 13 years old, and your uncle gave you $1,000. You would like to invest itfor the long term.

5. You want easy access to your money, but you’d like to earn some interest, too.

6. You want to give your sister’s new baby a gift to start his college fund.

Start Saving Early

Jack and Jill are twins. When he was 10 years old, Jack started to save $20 a month.After 20 years, he stopped adding to his savings. Jill didn’t start to save until she was 20.Then, she saved $20 a month and kept adding to her savings until she retired 45 yearslater. They each earned 6% interest on their savings. Who had more money at theretirement age of 65?

Even though Jill saved for 45 years and Jack saved for only 20, at age 65 Jack had $66,000in his account compared to Jill’s $54,000. This seems like a paradox, something that seems theopposite of common sense. How can you save less and havemore?

The answer is compound interest.

When you save money in a savings account — a certificate of deposit, a money marketfund or other savings plan — you earn interest on the principal. The principal is theamount you already have in your account. When interest is compounded, you begin toearn interest not only on the principal, but on the earned interest as well.

Year Principal Interest Principal plus interest(6% of principal) (becomes next year’s

principal)1 $100.00 $6.00 $106.002 106.00 6.36 112.363 112.36 6.74 119.104 119.10 7.15 126.25

Look at the table above, and notice how the interest amount increases each year, eventhough no additional deposits are made. That’s because the interest is based on anincreasing principal amount. As interest compounds, your money grows faster and faster.

You can calculate how fast your savings will increase by using the “Rule of 72.”Divide 72 by the percent of interest your savings are earning. The answer is the numberof years it will take to double your money. For example, if you earn 6% interest, yourmoney will double in 12 years (72 ÷ 6 = 12). If you earn 10% interest, your money willdouble in 7.2 years (72 ÷ 10 = 7.2). Some stock market investments in the late 1990s grew at30%. That means that you would have doubled your investment in less than three years.

When you save, there are three important components to consider:1. The amount you deposit (principal).2. The interest rate you earn.3. The length of time you save.

If you add to any of these, you’ll earn a greater return. If you increase all three ofthem, you’ll really increase your wealth.

Principal x Interest Rate x Time = Total Amount

If you have $100 and put it into a Money Market account with a 6% interest rate fortwo years, the formula works like this: $100 x 6% x 2 years = $112.36.

Now, increase the principal, the interest rate, and the time. The total nearly triples:$200 x 10% x 5 years = $322.10.

The moral: Save as much as you can, as early as you can, at the best interest rate you canget. That way, you’ll be on your way to greater financial security sooner.

98

Activity for Secondary Grades

Here’s a game that demonstrates howmoney grows as a function of principal,interest rate, and time. Use a calculatorto play the game with a friend.Materials: sharpened pencil, paper clip,and a calculator.

DirectionsPlace the paper clip in the center of thePrincipal circle and the point of thepencil through the paper clip pointing tothe center of the paper to make a spinner.Flick the paper clip with your finger tomake it spin. The space that you land onis your Principal amount. Repeat withthe Interest Rate and Time circles.

Multiply the three numbers tocalculate your Total Amount. (TotalAmount = Principal x Interest x Time).Then put your answer in the grid below.Play five rounds. The winner has themost money at the end of the game.

Round Player #1 Round Player #2

1 1

2 2

3 3

4 4

5 5

TOTAL TOTAL

Principal

Interest Rate

Time

$100

$670

$230

$805

2 years

10 years

5 years

7 years

6%

3%

9%

13%

Activity for Primary Grades

An Example of Compounding InterestIn an old Persian legend, a peasant presented a beautiful chessboard to his king.The king was so grateful that he asked what he could give in return. The peasantrequested one grain of rice for the first square on the board, double the amount(two grains) for the second square, double again (four grains) for the third, andso on. The king readily agreed and ordered rice to be brought from the royalstoreroom.

Howmany grains would the king have to give on the 15th square? (Answer:More than 16,000.) The number of rice grains on the last (64th) square would be18,446,744,073,709,600,000! If each grain is 1⁄4 inch long, that’s enough rice to surround theearth’s equator nearly 3 billion times. That must have been an awfully big chessboard!

Compound interest is like the pennies below, growing each time they’re doubled.How many pennies will you need for this activity? Put one penny on a table. Puttwo pennies next to the first one. Then double the number of pennies and placethe piles of pennies next to each other. Estimate how many pennies will be in thetenth pile.

MoneyDoublesby theRule of 72

Tiger Woods was hitting golf balls whenhe was 2 years old. Aretha Franklin sanggospel songs at her church at the age of5. Bill Gates was just a teen when hestarted dabbling with computers. Thesestars of sports, entertainment, andbusiness knew what they wanted to do,and they began to reach for their goalswhen they were very young.

Saving for the future can beginwhen you’re young, too. Though some ofyour goals may seem very distant now,before you know it, you’ll need to takeaction. The earlier you start saving, themore you’ll have for a new car, collegeeducation, furniture, travel, a home, orwhatever you dream of.

When you begin to save, you’ll besurprised at the number of differentoptions you have. Some have very littlerisk, like a regular savings account.Others are very risky, like speculativestocks. When the time comes to choose asavings plan, you should knowsomething about all your choices.

After you’ve read the descriptions ofsavings options below, fill in the chart,classifying each as a low, medium, orhigh risk. Then think of an advantageand a disadvantage for each choice. Thecompleted chart will help you make awise decision about how to save yourmoney. The earlier you start, the moreyou’ll ultimately have!

Regular Savings Accounts

Many regular savings accounts areinsured by the government. Even if yourbank closes, you’re guaranteed to getyour money back, up to $250,000. Where’sthe risk? Regular savings accounts faceinflation risk. Let’s say you want to buya computer that costs $1,200. Each monthyou deposit $100 in your savings account,but you earn very little interest, perhapsless than 1%. At the end of a year, youhave $1,200 plus about $6 in interest. Atthe same time, if the inflation rate is 3%,a computer that costs $1,200 this yearwill cost $1,236 next year.

Blue Chip Stocks

Owning blue chip stocks means you ownshares in certain big, successfulcompanies like GE, Microsoft, and Wal-Mart.Although all stock investmentscarry risk, shares of well-establishedcorporations are less likely to lose valuethan are new companies that have notyet established a reputation of success.Some blue chip stocks have returned anaverage of 10% annually over the past50 years, but even solid stock choicescarry some tax risk; you may beresponsible for paying high taxes on themoney you gain.

Speculative Stocks

Shares of stock in new, high-techcompanies can offer the potential for bigrewards. In the late 1990s, some investorsmade mega-bucks buying and sellingstock in “dot com” companies that werereturning 20% to 30% increases in value.Those who didn’t sell at the right time,though, lost a lot of money. They becamevictims of industry risk because theindustry they thought would be a super-star fizzled out instead.

Certificates of Deposit (CDs)

Bank CDs offer a fixed rate of interest fora specific length of time, usually fromthreemonths to 10 years. Though theinterest rate on CDs is higher than for asavings account, CDs face liquidity risk,whichmeans that you are not able toaccess yourmoney quickly. If you needmoney before your CD reaches itsmaturity date, you’ll have to pay a penalty.

Mutual Funds

Amutual fund allows you to own sharesin hundreds of companies. The mutualfund manager balances the fund so thatthere is a good mix of big companies,small companies, energy companies,medical supply companies, etc. Bymixing the stocks, there’s less likelihoodthat they’ll all lose value at the sametime, and you’ll earn a pretty good rateof return, depending upon how well theindividual stocks do. It’s like instantdiversification. But even balancedmutual funds may suffer from economicrisk — the chance that if the wholeeconomy declines, your fund will alsolose value.

Piggy Banks

Putting your money in a piggy bank, adresser drawer, or in your closet athome does not pay any interest, but youcan access it at any time. You’ll sufferbig safety risks, however, because yourmoney can easily be lost, stolen, ordestroyed by a fire or flood.

Commodities

Investing in antiques, rare coins, orother commodities is very risky. What isin high demand one day can lose itsappeal the next. Let’s say you buy a rarebaseball card for $500, hoping to sell itfor $700. If you need money and can’t

Savings Option Level of Risk Advantages Disadvantages

Savings Account

Blue Chip Stocks

Speculative Stocks

Certificates of Deposit

Mutual Funds

Piggy Banks

Commodities

U.S. Savings Bonds

Activity for Secondary Grades

How do you know which savings option is best for you? You need to examinethe pros and cons of each one, using the chart below. Put a check mark nextto the options that you feel are best for you, and explain why.

find a buyer for the card, you might have tosell it for $300, thus taking a big loss. Youface market risk with commodities becauseyou can’t know today what buyers willwant tomorrow.

United States Savings Bonds

Bonds are loans. When you buy a bond,you’re actually lending money to thegovernment. A U.S. Savings Bond is backedby the government, so you’re assured ofgetting back your initial investment, plusinterest. However, you can’t cash in yourbond in an instant, so you face liquidityrisk. Also, there’s reinvestment riskbecause your bond could lose value, andyou wouldn’t be able to reinvest the moneyat the same rate of return.

There are many ways to save. Some are good for short-term goals; some arebetter if you’re thinking about the long term. Which savings option wouldyou choose in the situations described below?

In each blank, write Savings Account, Blue Chip Stocks, Speculative Stocks,Certificates of Deposit, Mutual Funds, Piggy Bank, Commodities, or U.S. SavingsBond to indicate which choice is best in the following circumstances.

1. You need $5 right away for school supplies.

2. You need $3,000 in a year for college tuition.

3. You want to diversify, but you don’t knowmuch about the stock market.

4. You are 13 years old, and your uncle gave you $1,000. You would like to invest itfor the long term.

5. You want easy access to your money, but you’d like to earn some interest, too.

6. You want to give your sister’s new baby a gift to start his college fund.

Start Saving Early

Jack and Jill are twins. When he was 10 years old, Jack started to save $20 a month.After 20 years, he stopped adding to his savings. Jill didn’t start to save until she was 20.Then, she saved $20 a month and kept adding to her savings until she retired 45 yearslater. They each earned 6% interest on their savings. Who had more money at theretirement age of 65?

Even though Jill saved for 45 years and Jack saved for only 20, at age 65 Jack had $66,000in his account compared to Jill’s $54,000. This seems like a paradox, something that seems theopposite of common sense. How can you save less and havemore?

The answer is compound interest.

When you save money in a savings account — a certificate of deposit, a money marketfund or other savings plan — you earn interest on the principal. The principal is theamount you already have in your account. When interest is compounded, you begin toearn interest not only on the principal, but on the earned interest as well.

Year Principal Interest Principal plus interest(6% of principal) (becomes next year’s

principal)1 $100.00 $6.00 $106.002 106.00 6.36 112.363 112.36 6.74 119.104 119.10 7.15 126.25

Look at the table above, and notice how the interest amount increases each year, eventhough no additional deposits are made. That’s because the interest is based on anincreasing principal amount. As interest compounds, your money grows faster and faster.

You can calculate how fast your savings will increase by using the “Rule of 72.”Divide 72 by the percent of interest your savings are earning. The answer is the numberof years it will take to double your money. For example, if you earn 6% interest, yourmoney will double in 12 years (72 ÷ 6 = 12). If you earn 10% interest, your money willdouble in 7.2 years (72 ÷ 10 = 7.2). Some stock market investments in the late 1990s grew at30%. That means that you would have doubled your investment in less than three years.

When you save, there are three important components to consider:1. The amount you deposit (principal).2. The interest rate you earn.3. The length of time you save.

If you add to any of these, you’ll earn a greater return. If you increase all three ofthem, you’ll really increase your wealth.

Principal x Interest Rate x Time = Total Amount

If you have $100 and put it into a Money Market account with a 6% interest rate fortwo years, the formula works like this: $100 x 6% x 2 years = $112.36.

Now, increase the principal, the interest rate, and the time. The total nearly triples:$200 x 10% x 5 years = $322.10.

The moral: Save as much as you can, as early as you can, at the best interest rate you canget. That way, you’ll be on your way to greater financial security sooner.

10 11

When you begin to invest, you’ll need toask yourself howmuch risk you feelcomfortable with.

Several factors influence howmuchrisk you are willing to take:

Your age. You probably can affordto take more investing risks whenyou are 20 than when you are 80.Your income. Oprah Winfreyundoubtedly takes more risks withher money than you do. If she loses$100,000 on an investment, she won’tfeel the pinch as much as you would.Your family responsibilities. Amarried person with a growingfamily cannot take the same kinds ofrisks as someone who’s unmarriedwith no children.Your saving goals. If you needmoney for college 18 months fromnow, you can’t afford to take thesame risks as someone saving forretirement many years in the future.

Before you invest in the stockmarket, youshould know something about how it works.1. How to buy stock.When you buy a

share of stock, you are not buying itfrom the company; rather, you arebuying it from an individual who wantsto sell it. You do this by using astockbroker to handle the deal, or youcan buy and sell stock online. Eitherway, you will have to pay a fee for thetransaction. With a broker, you usuallypay a percentage of the stock price;online you’ll pay a flat fee for eachstock traded.

2. Which stock to buy? Look around atthe products that you and your friendsuse. Choose companies that you knowsomething about, or learn more bydoing research. Peter Lynch, a verysuccessful investor and author, suggeststhat you should not buy stock in acompany unless you can explain in 30seconds what the company does.

High Risk, High Return

Marita went to a craft show with hersister. She bought a stuffed rabbit for $5and a hand-painted jewelry box for $8.When she got home, she showed theitems to her cousin, Maribel. Maribelreally liked the jewelry box and askedMarita if she could buy it from her.Marita did not want to sell the jewelrybox, but Maribel offered to pay $10 for it.Marita couldn’t resist. She sold the boxto Maribel for $2 more than sheoriginally paid for it. The $2 wasMarita’s profit.

Investors in the stock market alsolike to make a profit. They live by themotto “Buy Low; Sell High.” This meansthat they try to buy stocks at low pricesand then sell them at higher prices, justas Marita bought her jewelry box for $8

3. What is diversification? You might hear the expression, “Don’t put all your eggsin one basket.” This is a good way to think about investing. If you have $5,000 toinvest, it’s better to buy five different stocks than just one. That way, if one stockgoes down in value, the others may go up. Diversification is a way to manage riskin the market.

4. How to read a stock table.Most stock tables, whether in a newspaper or on theInternet, contain similar information. The data are there to help you make adecision about buying and selling shares of stock. Here’s what you’ll see:

52-Week High and Low: These numbers tell you howmuch the stock’s price haschanged in the past year.P/E Ratio:This is a comparison of the price of the stock to its earnings per share. APE of 30means that the price of the stock is 30 times as great as its earnings pershare.Volume:Howmany shares of this stock have been traded today? A lot of activitycan mean a lot of people want to buy a stock (that’s good) or that a lot of peoplewant to sell (that’s not so good).Dividend: Dividends are how companies share their profits with shareholders. Adividend of $2.50 means a shareholder receives $2.50 per year for each share ofstock she owns. Not all stocks pay dividends. New companies generally don’t paydividends because they use their profits to expand and enlarge.Yield: Only companies that pay dividends report a yield. This number comparesthe dividend to the price per share. A yield of 2.4 means that the dividend, on anannual basis, is 2.4% of the current share price.High, Low, Closing Price, and Change: These four numbers are related. Theyindicate the stock’s high price for the day, its lowest price, and the price at the closeof the market (usually 5 p.m. New York time). The change is either positive ornegative, comparing today’s closing price to yesterday’s.

A Word of WarningTracking stocks for a week gives you a snapshot of how they are doing in the shortterm, but investing is a long-term strategy. Statistics show that investing in the stockmarket has provided investment returns of about 10%, long term (10-20 years). Thebest strategy is to diversify your investments and take a long-term view.

Did any of your stocks show an increase in price fromMonday to Friday?Which of the above stocks showed the greatest increase, or smallest decrease inprice?Which showed the biggest loss or smallest gain?If you had invested $1,000 in the best stock, how much would it have been worth atthe end of the week?

Company Three Monday Tuesday Wednesday Thursday Friday

Price per Share

Company One Monday Tuesday Wednesday Thursday Friday

Price per Share

Company Two Monday Tuesday Wednesday Thursday Friday

Price per Share

and sold it for $10. See if you can figureout which investors below made a profitand which ones suffered a loss on theirinvestments.1. Popeye invested in a case of spinach

for $15. A lot of people wanted tobuy the spinach, including Olive Oil,who paid Popeye $20. (Circle one.)Profit or loss for Popeye? Howmuch?

2. Homer invested in some peanutbutter for $300. It was a new creamyformula. Homer sold it to Bart for$400. (Circle one.) Profit or loss forHomer? How much?

3. Clark Kent invested in a silk cape for$30. Since no one else wanted to buyit, he sold it to Lois Lane for $25.(Circle one.) Profit or loss for

Activity for Secondary Grades

From today’s newspaper, choose three companies listed on theNewYork StockExchange ortheNASDAQ.Be sure to diversify; don’t pick all technology or allmanufacturing stocks.Complete the chart belowwith the information you find.Now track your stocks for aweek bymaking a line graph, using the charts below.

YTD 52-WEEK YLD VOL NET

% CHG HI LO STOCK (SYM) DIV % PE 100S CLOSE CHG

–5.7 38.90 21.40 OffshrLogst OLG … 9 1866 30.63 –0.229.0 21.45 12.75 OilStatesInt OLS … 18 3320 21.03 –0.302.4 19 12.61 OilDriAmer ODC .44 2.4 24 23 18.65 0.45

–14.7 25.49 20.53 OldNtlBcp ONB .76b 3.6 21 1235 21.00 –0.35

Clark? How much?4. Cinderella invested in a truckload of

glass slippers for $1,000 and soldthem to the wicked stepmother for$1,250. (Circle one.) Profit or lossfor Cinderella? How much?

5. The Incredible Hulk invested in anold baseball card for $50. He latersold it to Spiderman for $75.(Circle one.) Profit or loss for theHulk? How much?

6. Barbie invested in three rare BeanieBabies for a total cost of $90. Thoughthey were in excellent condition, shehad a hard time finding a buyer.Finally, she sold them to a neighborfor $25 each. (Circle one.) Profit orloss for Barbie? How much?

Company 52-Week 52-Week PE Volume Dividend Yield Today’s Change (+ or -

High Low Ratio (In 100s) Close since yesterday)

Activity for Primary Grades

Note to Parents and Guardians:The following section discusses the risks and rewards ofinvesting in the stock market. While the stock market hasnot been an ideal investment during the economicdownturn, stocks can, over time, provide a good return forinvestors.

The goal of this section is to introduce the concept ofstocks and to help young people better understand howthey work as part of an investment strategy. We hope thatit provides parents and guardians with an opportunity todiscuss investment options with their kids

“Some companies share their profits with their shareholders, Lamar.For every share you own, you get paid a dividend…or a small share ofthe company’s profit.”

“Do all stocks pay dividends, Gramps?”

“Nope. Newer companies usually invest their profits. They buildbigger factories, buy better machinery or hire more workers so thebusiness can expand and grow. Older, more established companiesare more likely than newer ones to pay dividends.”

“Don’t I have to have a broker or someone to buy stock?”

“I’ll make a deal with you, Lamar. I’ll teach you how to buy stock. Forevery share you buy, I’ll buy another one for you. We will do researchso we find the stocks with the best chance of going up in value overtime. We’ll use some of your money to buy stocks and put some ofyour money into a savings account. That way, you will reduce therisk of your investment. It’s called diversifying.”

“That’s a really cool plan, Gramps!” said Lamar. “Let’s try it.”

Lamar is a cool dude. His jeans are the latest style, his shoesare the hottest new brand, and his dance moves are better thanwhat he sees online. He watches what’s new at the mall, on TVand on the Web.

One day, his grandfather called him over, “Lamar, you know somuch about the latest stuff. Why don’t you take some of themoney you have saved and invest it in a company that makessome of the cool things you and your friends like? You mighteven make a profit!”

“Invest? Profit?” Lamar’s ears perked up at the thought ofmaking some extra money. “Why invest instead of saving?”

“It’s actually smart to do both. When you invest in a companyand buy shares of its stock, you own part, or ‘a share,’ of thecompany. If you think ABC jeans are really popular now, youmight think about buying shares of ABC stock.”

“But how can I make money by owning stock?” asked Lamar.

“There are a couple of ways you could make money,” hisgrandfather explained. “First, many stocks tend to increase invalue over time. For example, if you buy stock at $20 a shareand sell it later at $30 a share, you make a profit of $10 a share.Historically, the stock market as a whole tends to provide abetter return on your money than a savings account. Stocksshouldn’t take the place of a savings account, but they are anoption if you are willing to risk some money in hopes of abetter return.”

“But don’t stocks go down in price? Won’t I lose my money?”replied Lamar.

“Stocks do tend to go up and down in value over the short-term, so there is risk if you sell at the bottom or if thecompany you invest in goes out of business,” noted hisgrandfather. “But with stocks, the idea is to buy goodcompanies and hold the stock for the long-term so that youachieve a good return for your investment.”

“You said there were a couple of ways to make money, Gramps.What’s the other one?”

“Well, Lamar, you can make money if your stock pays adividend.”

“What’s a dividend?”

10 11

When you begin to invest, you’ll need toask yourself howmuch risk you feelcomfortable with.

Several factors influence howmuchrisk you are willing to take:

Your age. You probably can affordto take more investing risks whenyou are 20 than when you are 80.Your income. Oprah Winfreyundoubtedly takes more risks withher money than you do. If she loses$100,000 on an investment, she won’tfeel the pinch as much as you would.Your family responsibilities. Amarried person with a growingfamily cannot take the same kinds ofrisks as someone who’s unmarriedwith no children.Your saving goals. If you needmoney for college 18 months fromnow, you can’t afford to take thesame risks as someone saving forretirement many years in the future.

Before you invest in the stockmarket, youshould know something about how it works.1. How to buy stock.When you buy a

share of stock, you are not buying itfrom the company; rather, you arebuying it from an individual who wantsto sell it. You do this by using astockbroker to handle the deal, or youcan buy and sell stock online. Eitherway, you will have to pay a fee for thetransaction. With a broker, you usuallypay a percentage of the stock price;online you’ll pay a flat fee for eachstock traded.

2. Which stock to buy? Look around atthe products that you and your friendsuse. Choose companies that you knowsomething about, or learn more bydoing research. Peter Lynch, a verysuccessful investor and author, suggeststhat you should not buy stock in acompany unless you can explain in 30seconds what the company does.

High Risk, High Return

Marita went to a craft show with hersister. She bought a stuffed rabbit for $5and a hand-painted jewelry box for $8.When she got home, she showed theitems to her cousin, Maribel. Maribelreally liked the jewelry box and askedMarita if she could buy it from her.Marita did not want to sell the jewelrybox, but Maribel offered to pay $10 for it.Marita couldn’t resist. She sold the boxto Maribel for $2 more than sheoriginally paid for it. The $2 wasMarita’s profit.

Investors in the stock market alsolike to make a profit. They live by themotto “Buy Low; Sell High.” This meansthat they try to buy stocks at low pricesand then sell them at higher prices, justas Marita bought her jewelry box for $8

3. What is diversification? You might hear the expression, “Don’t put all your eggsin one basket.” This is a good way to think about investing. If you have $5,000 toinvest, it’s better to buy five different stocks than just one. That way, if one stockgoes down in value, the others may go up. Diversification is a way to manage riskin the market.

4. How to read a stock table.Most stock tables, whether in a newspaper or on theInternet, contain similar information. The data are there to help you make adecision about buying and selling shares of stock. Here’s what you’ll see:

52-Week High and Low: These numbers tell you howmuch the stock’s price haschanged in the past year.P/E Ratio:This is a comparison of the price of the stock to its earnings per share. APE of 30means that the price of the stock is 30 times as great as its earnings pershare.Volume:Howmany shares of this stock have been traded today? A lot of activitycan mean a lot of people want to buy a stock (that’s good) or that a lot of peoplewant to sell (that’s not so good).Dividend: Dividends are how companies share their profits with shareholders. Adividend of $2.50 means a shareholder receives $2.50 per year for each share ofstock she owns. Not all stocks pay dividends. New companies generally don’t paydividends because they use their profits to expand and enlarge.Yield: Only companies that pay dividends report a yield. This number comparesthe dividend to the price per share. A yield of 2.4 means that the dividend, on anannual basis, is 2.4% of the current share price.High, Low, Closing Price, and Change: These four numbers are related. Theyindicate the stock’s high price for the day, its lowest price, and the price at the closeof the market (usually 5 p.m. New York time). The change is either positive ornegative, comparing today’s closing price to yesterday’s.

A Word of WarningTracking stocks for a week gives you a snapshot of how they are doing in the shortterm, but investing is a long-term strategy. Statistics show that investing in the stockmarket has provided investment returns of about 10%, long term (10-20 years). Thebest strategy is to diversify your investments and take a long-term view.

Did any of your stocks show an increase in price fromMonday to Friday?Which of the above stocks showed the greatest increase, or smallest decrease inprice?Which showed the biggest loss or smallest gain?If you had invested $1,000 in the best stock, how much would it have been worth atthe end of the week?

Company Three Monday Tuesday Wednesday Thursday Friday

Price per Share

Company One Monday Tuesday Wednesday Thursday Friday

Price per Share

Company Two Monday Tuesday Wednesday Thursday Friday

Price per Share

and sold it for $10. See if you can figureout which investors below made a profitand which ones suffered a loss on theirinvestments.1. Popeye invested in a case of spinach

for $15. A lot of people wanted tobuy the spinach, including Olive Oil,who paid Popeye $20. (Circle one.)Profit or loss for Popeye? Howmuch?

2. Homer invested in some peanutbutter for $300. It was a new creamyformula. Homer sold it to Bart for$400. (Circle one.) Profit or loss forHomer? How much?

3. Clark Kent invested in a silk cape for$30. Since no one else wanted to buyit, he sold it to Lois Lane for $25.(Circle one.) Profit or loss for

Activity for Secondary Grades

From today’s newspaper, choose three companies listed on theNewYork StockExchange ortheNASDAQ.Be sure to diversify; don’t pick all technology or allmanufacturing stocks.Complete the chart belowwith the information you find.Now track your stocks for aweek bymaking a line graph, using the charts below.

YTD 52-WEEK YLD VOL NET

% CHG HI LO STOCK (SYM) DIV % PE 100S CLOSE CHG

–5.7 38.90 21.40 OffshrLogst OLG … 9 1866 30.63 –0.229.0 21.45 12.75 OilStatesInt OLS … 18 3320 21.03 –0.302.4 19 12.61 OilDriAmer ODC .44 2.4 24 23 18.65 0.45

–14.7 25.49 20.53 OldNtlBcp ONB .76b 3.6 21 1235 21.00 –0.35

Clark? How much?4. Cinderella invested in a truckload of

glass slippers for $1,000 and soldthem to the wicked stepmother for$1,250. (Circle one.) Profit or lossfor Cinderella? How much?

5. The Incredible Hulk invested in anold baseball card for $50. He latersold it to Spiderman for $75.(Circle one.) Profit or loss for theHulk? How much?

6. Barbie invested in three rare BeanieBabies for a total cost of $90. Thoughthey were in excellent condition, shehad a hard time finding a buyer.Finally, she sold them to a neighborfor $25 each. (Circle one.) Profit orloss for Barbie? How much?

Company 52-Week 52-Week PE Volume Dividend Yield Today’s Change (+ or -

High Low Ratio (In 100s) Close since yesterday)

Activity for Primary Grades

Note to Parents and Guardians:The following section discusses the risks and rewards ofinvesting in the stock market. While the stock market hasnot been an ideal investment during the economicdownturn, stocks can, over time, provide a good return forinvestors.

The goal of this section is to introduce the concept ofstocks and to help young people better understand howthey work as part of an investment strategy. We hope thatit provides parents and guardians with an opportunity todiscuss investment options with their kids

“Some companies share their profits with their shareholders, Lamar.For every share you own, you get paid a dividend…or a small share ofthe company’s profit.”

“Do all stocks pay dividends, Gramps?”

“Nope. Newer companies usually invest their profits. They buildbigger factories, buy better machinery or hire more workers so thebusiness can expand and grow. Older, more established companiesare more likely than newer ones to pay dividends.”

“Don’t I have to have a broker or someone to buy stock?”

“I’ll make a deal with you, Lamar. I’ll teach you how to buy stock. Forevery share you buy, I’ll buy another one for you. We will do researchso we find the stocks with the best chance of going up in value overtime. We’ll use some of your money to buy stocks and put some ofyour money into a savings account. That way, you will reduce therisk of your investment. It’s called diversifying.”

“That’s a really cool plan, Gramps!” said Lamar. “Let’s try it.”

Lamar is a cool dude. His jeans are the latest style, his shoesare the hottest new brand, and his dance moves are better thanwhat he sees online. He watches what’s new at the mall, on TVand on the Web.

One day, his grandfather called him over, “Lamar, you know somuch about the latest stuff. Why don’t you take some of themoney you have saved and invest it in a company that makessome of the cool things you and your friends like? You mighteven make a profit!”

“Invest? Profit?” Lamar’s ears perked up at the thought ofmaking some extra money. “Why invest instead of saving?”

“It’s actually smart to do both. When you invest in a companyand buy shares of its stock, you own part, or ‘a share,’ of thecompany. If you think ABC jeans are really popular now, youmight think about buying shares of ABC stock.”

“But how can I make money by owning stock?” asked Lamar.

“There are a couple of ways you could make money,” hisgrandfather explained. “First, many stocks tend to increase invalue over time. For example, if you buy stock at $20 a shareand sell it later at $30 a share, you make a profit of $10 a share.Historically, the stock market as a whole tends to provide abetter return on your money than a savings account. Stocksshouldn’t take the place of a savings account, but they are anoption if you are willing to risk some money in hopes of abetter return.”

“But don’t stocks go down in price? Won’t I lose my money?”replied Lamar.

“Stocks do tend to go up and down in value over the short-term, so there is risk if you sell at the bottom or if thecompany you invest in goes out of business,” noted hisgrandfather. “But with stocks, the idea is to buy goodcompanies and hold the stock for the long-term so that youachieve a good return for your investment.”

“You said there were a couple of ways to make money, Gramps.What’s the other one?”

“Well, Lamar, you can make money if your stock pays adividend.”

“What’s a dividend?”

13

Most of us make decisions based onprevious experiences. We go to a certainrestaurant because we liked the foodthere before. We pick a mechanic for ourcar who did a good job last time andcharged a fair price. We attend a concertbecause the performers were great thelast time we saw them.

Banks also look at previousexperiences when they decide whetherto give people car loans, mortgages orany type of credit. They look forborrowers who have good backgrounds,pay their bills on time and have goodcredit reports.

A credit report is a record ofhow well a person pays off loans andcredit card bills. You might wonder howthis bill-paying information gets into acredit report. It’s really quite simple:Nearly all lenders submit payment dataabout their customers to creditbureaus. Then, the credit bureausrelease the records to qualified lendersthat request them.

For example, when you apply for acredit card or a loan, the creditproviders will request your creditreport. After reviewing it, they’ll decideif you are a good risk. If you have paidyour bills on time, and you don’t haveloads of outstanding debt, you’llprobably get the credit card or loan youwant. Congratulations! You’ll be amongthe 190 million people in the UnitedStates with a charge account, car loan,student loan, or home mortgage.

The story doesn’t end there, though.To maintain your good report you haveto continually demonstrate that you areresponsible. Here are some ways todo that:1. Pay your bills on time.2. Keep your debt load reasonable. If

you have a lot of outstanding debt, alender might wonder if you’ll beable to handle another loan. Mostexperts say you should never letyour debts go over 15% of your take-home pay.

3. Avoid unnecessary inquiries.Whenever you apply for credit, thelender can check your credit report.If that happens a lot, a lender mightthink that you’re taking on moredebt than you can repay.

4. Eliminate excess unused credit.Some people have 20 credit cards.Even if they don’t use all of them,they still have the potential for tensof thousands of dollars of debt.Lenders might find that disturbing.

So, how do you know if your creditreport is good? Just like a report cardgrade in school, your credit report willyield a score. The score can range from375 to 900. A score of 650 or above isconsidered good and means you’ll

Activity for Secondary Grades

List some advantages and disadvantages of buying things with cash and credit.

CASHAdvantages Disadvantages

CREDITAdvantages Disadvantages

Read the credit history of these two loan applicants, and explain why each is oris not a good credit risk.1. Simeon LaBleu: Simeon, an architect, has eight bank credit cards and is carrying a

total debt of $12,000. His combined minimummonthly payments amount to $360. Hiscredit limit on each card is $10,000. He has made late payments four times in the pasttwo years, and has missed two payments on one card. Simeon’s monthly grossincome is $6,500.

2. Anita Westinghouse: Anita, a speech therapist, has four bank credit cards and carriesa total debt of $4,700. Her combined minimummonthly payments come to about $140,and her credit limit on each card is $7,500. Anita generally pays each card in fullevery month, though she’s not able to do that this month. She has never made a latepayment, nor has she ever missed a payment. Her monthly gross income is $2,400.

Activity for Primary Grades

Put an “X” next to the name of each student you would not let borrow from you.Then, explain what that student could do to earn your trust in the future. If youwanted to borrow money, how could you prove you could be trusted?

____ 1. Jamaal lost the toy you lent to him last month.____ 2. Kerry never pays her library fines.____ 3. Curtis used your bike yesterday and returned it when he was finished.____ 4. René borrowed a dollar for lunch and paid you back the next day.____ 5. Terrence promised to pay you for a raffle ticket, but he never did.

A consumer credit report contains fourtypes of information: identifyinginformation, credit information, publicrecord information and inquiries.

1. Identifying information:NameCurrent and previous addressesSocial Security numberYear of birthCurrent and previous employersSpouse’s name, if applicable

2. Information about creditaccounts or loans you have from:BanksRetailersCredit card issuersOther lenders

3. Public record information:BankruptciesTax liensLawsuits

Your Credit PastIs Your Credit Future

4. Inquiries from other creditors: Ifyou have a lot of recent inquiries onyour credit report, potential lendersmay think you are overextending.

Credit bureaus look at these factors:35% payment history30% amounts owed15% length of credit history10% new credit10% type of credit use

Possible reasons for poor scores:Owing too muchPoor payment historyToo many accounts with balancesToo many recent inquiries in thelast 12 monthsToo many accounts opened in thelast 12 monthsLength of credit history is too short

As you head off to college, remember:One card is sufficient.If you apply for a credit card, don’tinclude allowance as income. Thehigher your income, the higher thecredit limit will be.

probably have no trouble getting that carloan you want.

As your credit record develops, lenderscan request to see your credit report, butso can you. It is available from one of thesesources: Equifax, Experian or TransUnion.Now, it’s easier than ever to obtain yourcredit report: as of December 1, 2004,consumers in the U.S. are legally entitledto one free report from each of the creditbureaus every 12 months.

Most experts say you should reviewyour credit scores each year, even if it’sjust to make sure there are no mistakes. Ifyou intend to apply for a loan or a newcredit card, you should check your score inadvance. That way, if it’s not satisfactory,you’ll have time to improve it with on-timepayments or by paying off some debts.Another reason to check your credit reportperiodically is to spot identity theft. If yousee activity that you did not initiate, youshould report it immediately.

As you begin to build a good credithistory, you will improve your chances ofgetting a car or student loan sometime inthe future. However, it’s important toremember that although credit isconvenient, it is not the only way to pay forgoods and services.

Using cash or a check can help you stayout of credit trouble. It’s all up to you. Youhave to make the best choices about yourfinancial reputation and future.

Pay all your bills on time.Don’t let anyone borrow your creditcard, even your best friend.Record all transactions so you havegot an idea of how much the bill willbe at the end of the month.Keep the card active by periodicallycharging and paying off smallpurchases.Create a spending and budget plan.Don’t let your credit card paymentsexceed 20% of your monthly income.

For parents:Consider making your teenager anauthorized user on one of yourcredit cards. They will receive acredit card with their name on it, butthey will be tied directly to youraccount. You will be held liable forany charges they make on the card,but it is a good learning tool. Makesure they keep a record of what theyspend and that they pay you for theitems purchased on credit.

On his way home from school, Ramonspotted a “For Sale” sign on a bright redconvertible. “What a beauty,” he thoughtas he approached to take a closer look.“Hmmm. Lowmileage, really clean, oneowner, $6,700. I’ve already saved $2,000,so I think I can afford this car if Iborrow the rest.”

Ramon’s dad suggested that he makea trip to the bank to find out about carloans. A few hours later, Ramonreturned, smiling broadly. The loanspecialist at First Federated Bank toldhim that a car loan carried an interestrate of 7.9% for 60 months. Since Ramonwould have to borrow $4,700 after his$2,000 down payment, his paymentswould be $84 per month.

Ramon earned $10 an hour andworked 20 hours a week as aconstruction helper after school, so hisgross monthly income before taxes was$800. His car payments would amount toabout 10.5% of his monthly income. Hecertainly could afford that.

“Wait a second,” his dad cautioned.“Don’t forget about the other expensesthat go along with owning a car. You’llhave to pay for gas, oil changes andregular maintenance. It’s a used car,Ramon, so there might be some thingsthat need fixing, too. Another bigexpense is insurance. At your age, it willbe about $1,200 a year. You’d betterreconsider and decide if you can makethe monthly payments.”

Ramon’s excitement began to fade.When he added the insurance and othercosts, the total came to $269 a month.“That’s more than half of my take-homepay," he thought. "After school expenses,clothes, cell phone, Internet and otherlittle things, I won’t have anything left foreven amovie once a week. I guess I’dbetter wait for another car to comealong.”

“Wise choice, son,” said his father.“But, that sure was a fantastic car,”

Ramon sighed.Ramon did make a wise decision. He

knew he could borrow the money, but healso realized he’d have a tough timerepaying it.

Borrowing is not a bad thing; mostpeople will borrowmoney at some time

Name Hourly Number of Hours Monthly Gross 15% DebtWage Per Week Income Limit

Olivia

Ben

Anna

Aidan

What advice would you give to the workers who can’t afford the car payments?

What Is Bankruptcy?

Bankruptcy is a federal court processthat helps individuals and businessesrepay their debts or wipe them outaltogether. There are two basic types ofbankruptcies: liquidation orreorganization.

In a liquidation bankruptcy, you turnyour personal property over to the court,which sells it to pay your debts. Creditorscan no longer come after you forpayment, but the bankruptcy stays onyour credit history for 10 years and youmay be denied credit during that period.

In a reorganization bankruptcy, somedebts must be repaid in full, some arerepaid as a percentage of the originaldebt and others aren’t repaid at all.Payment plans usually cover three to fiveyears. If you stick with the repaymentplan until the end, youmay find thatcreditors will grant you credit at the endof the repayment period, even though thebankruptcy will stay on your credithistory for six years.

Filing for bankruptcy has seriousconsequences and should not be enteredinto lightly. Having your debts eraseddoesn’t miraculously solve your long-term financial problems if you haveirresponsible spending habits, butsometimes it’s the only way out of acrushing financial burden caused by jobloss, medical bills or other circumstancesthat are out of your control.

Bankruptcy StatisticsAverage age: 3844% of filers are couples30% are women filing alone26% are men filing aloneFilers are slightly better educatedthan the general populationTwo out of three have lost a jobHalf have experienced a serioushealth problemFewer than 9% have not suffered ajob loss, medical event, or divorceHighest bankruptcy rates:Tennessee, Utah, Georgia, Alabama

Don’t BorrowWhat YouCan’t Repay

in their lives, maybe for a home, a car or acollege education. The good news aboutborrowing is that you get something (like acar) nowwithout paying for it with yourownmoney. The bad news is thateventually you do have to pay.

Borrowing involves an opportunitycost. An opportunity cost is what you giveup when you get something you want.When you borrow, your opportunity costlies in the future because you’ll have togive up something each month to makeyour payments. And, if your payments aretoo high, you could run into big problems:

First, you’ll have to pay penalty fees ifyou miss a payment or are late.As a consequence, you’ll develop a badcredit report.In addition, you’ll be turned down forfuture loans because of your poorcredit history.Finally, if you have no other options,you might have to file for bankruptcy.

There were 1.6 million non-businessbankruptcy filings in 2004, and nearly100,000 of them were people under the ageof 25. What is the major reason forbankruptcy? Too much debt. The typicalfamily filing for bankruptcy owed morethan one and a half times its annualincome in short-term, high-interest debt.That means a family earning $24,000 ayear had an average of $36,000 in creditcard and similar debt.

The best way to avoid problems is toborrow wisely; never borrow more thanyou can repay.

Activity for Secondary Grades

Examine the earnings of the fourstudents listed and decide if any canafford payments of $130 a month for aused car. Use this rule: monthlypayments should not exceed 15% ofgross income.1. Olivia works as a manicurist. She

earns $8 an hour and works 25 hours aweek. She also earns about $20 perweek in tips.

2. Ben is an assistant manager at alocal theater. He earns $7.50 an hourand works 27 hours a week.

3. Anna just got a job as a receptionistin a doctor’s office. She works 24hours a week and earns $9 an hour.

4. Aidan works the late shift at asporting goods store. He earns $10.50an hour and works 20 hours a week.

Complete the chart at the bottom ofthe page to calculate each worker’s grossmonthly income. Then calculate 15% foreach person’s debt limit. Put a star nextto any worker who can afford $130 inmonthly car payments.

Activity for Primary Grades

If you borrow something from a friend,it’s important to return it as soon aspossible. If you borrow money, youshould repay quickly, too. Do the math tofigure out if these students will be ableto repay their friends tomorrow:1. Jacob borrowed $1 from Tanya to

buy dessert at school. Jacob has $3 athome, but he has to save 50 cents,buy some pencils for $1, and pay alibrary fine of 25 cents.Will Jacobbe able to repay Tanya?

2. Tatiana borrowed $2 from Brett tobuy a notebook. Tatiana has $5 inher piggy bank, but she has to buylunch tomorrow for $1.50 and pay $2to take the bus to her friend’s party.Will Tatiana be able to repayBrett?

3. José borrowed $10 from Nguyen tobuy a game that was on sale at themall. José has $20 that his grandmagave him for his birthday, but he hasto pay $7 to his cousin for a haircut,spend $2 for lunch, and pay $1 for araffle ticket.Will José be able torepay Nguyen?

4. Catherine lent $7 to Casimir to payfor pictures at school. Casimir has$12 in his dresser drawer, but he hasto save $2, buy pencils for $1.50, andpay his cousin $2 for helping himmow the lawn.Will Casimir be ableto repay Catherine?

12

13

Most of us make decisions based onprevious experiences. We go to a certainrestaurant because we liked the foodthere before. We pick a mechanic for ourcar who did a good job last time andcharged a fair price. We attend a concertbecause the performers were great thelast time we saw them.

Banks also look at previousexperiences when they decide whetherto give people car loans, mortgages orany type of credit. They look forborrowers who have good backgrounds,pay their bills on time and have goodcredit reports.

A credit report is a record ofhow well a person pays off loans andcredit card bills. You might wonder howthis bill-paying information gets into acredit report. It’s really quite simple:Nearly all lenders submit payment dataabout their customers to creditbureaus. Then, the credit bureausrelease the records to qualified lendersthat request them.

For example, when you apply for acredit card or a loan, the creditproviders will request your creditreport. After reviewing it, they’ll decideif you are a good risk. If you have paidyour bills on time, and you don’t haveloads of outstanding debt, you’llprobably get the credit card or loan youwant. Congratulations! You’ll be amongthe 190 million people in the UnitedStates with a charge account, car loan,student loan, or home mortgage.

The story doesn’t end there, though.To maintain your good report you haveto continually demonstrate that you areresponsible. Here are some ways todo that:1. Pay your bills on time.2. Keep your debt load reasonable. If

you have a lot of outstanding debt, alender might wonder if you’ll beable to handle another loan. Mostexperts say you should never letyour debts go over 15% of your take-home pay.

3. Avoid unnecessary inquiries.Whenever you apply for credit, thelender can check your credit report.If that happens a lot, a lender mightthink that you’re taking on moredebt than you can repay.

4. Eliminate excess unused credit.Some people have 20 credit cards.Even if they don’t use all of them,they still have the potential for tensof thousands of dollars of debt.Lenders might find that disturbing.

So, how do you know if your creditreport is good? Just like a report cardgrade in school, your credit report willyield a score. The score can range from375 to 900. A score of 650 or above isconsidered good and means you’ll

Activity for Secondary Grades

List some advantages and disadvantages of buying things with cash and credit.

CASHAdvantages Disadvantages

CREDITAdvantages Disadvantages

Read the credit history of these two loan applicants, and explain why each is oris not a good credit risk.1. Simeon LaBleu: Simeon, an architect, has eight bank credit cards and is carrying a

total debt of $12,000. His combined minimummonthly payments amount to $360. Hiscredit limit on each card is $10,000. He has made late payments four times in the pasttwo years, and has missed two payments on one card. Simeon’s monthly grossincome is $6,500.

2. Anita Westinghouse: Anita, a speech therapist, has four bank credit cards and carriesa total debt of $4,700. Her combined minimummonthly payments come to about $140,and her credit limit on each card is $7,500. Anita generally pays each card in fullevery month, though she’s not able to do that this month. She has never made a latepayment, nor has she ever missed a payment. Her monthly gross income is $2,400.

Activity for Primary Grades

Put an “X” next to the name of each student you would not let borrow from you.Then, explain what that student could do to earn your trust in the future. If youwanted to borrow money, how could you prove you could be trusted?

____ 1. Jamaal lost the toy you lent to him last month.____ 2. Kerry never pays her library fines.____ 3. Curtis used your bike yesterday and returned it when he was finished.____ 4. René borrowed a dollar for lunch and paid you back the next day.____ 5. Terrence promised to pay you for a raffle ticket, but he never did.

A consumer credit report contains fourtypes of information: identifyinginformation, credit information, publicrecord information and inquiries.

1. Identifying information:NameCurrent and previous addressesSocial Security numberYear of birthCurrent and previous employersSpouse’s name, if applicable

2. Information about creditaccounts or loans you have from:BanksRetailersCredit card issuersOther lenders

3. Public record information:BankruptciesTax liensLawsuits

Your Credit PastIs Your Credit Future

4. Inquiries from other creditors: Ifyou have a lot of recent inquiries onyour credit report, potential lendersmay think you are overextending.

Credit bureaus look at these factors:35% payment history30% amounts owed15% length of credit history10% new credit10% type of credit use

Possible reasons for poor scores:Owing too muchPoor payment historyToo many accounts with balancesToo many recent inquiries in thelast 12 monthsToo many accounts opened in thelast 12 monthsLength of credit history is too short

As you head off to college, remember:One card is sufficient.If you apply for a credit card, don’tinclude allowance as income. Thehigher your income, the higher thecredit limit will be.

probably have no trouble getting that carloan you want.

As your credit record develops, lenderscan request to see your credit report, butso can you. It is available from one of thesesources: Equifax, Experian or TransUnion.Now, it’s easier than ever to obtain yourcredit report: as of December 1, 2004,consumers in the U.S. are legally entitledto one free report from each of the creditbureaus every 12 months.

Most experts say you should reviewyour credit scores each year, even if it’sjust to make sure there are no mistakes. Ifyou intend to apply for a loan or a newcredit card, you should check your score inadvance. That way, if it’s not satisfactory,you’ll have time to improve it with on-timepayments or by paying off some debts.Another reason to check your credit reportperiodically is to spot identity theft. If yousee activity that you did not initiate, youshould report it immediately.

As you begin to build a good credithistory, you will improve your chances ofgetting a car or student loan sometime inthe future. However, it’s important toremember that although credit isconvenient, it is not the only way to pay forgoods and services.

Using cash or a check can help you stayout of credit trouble. It’s all up to you. Youhave to make the best choices about yourfinancial reputation and future.

Pay all your bills on time.Don’t let anyone borrow your creditcard, even your best friend.Record all transactions so you havegot an idea of how much the bill willbe at the end of the month.Keep the card active by periodicallycharging and paying off smallpurchases.Create a spending and budget plan.Don’t let your credit card paymentsexceed 20% of your monthly income.

For parents:Consider making your teenager anauthorized user on one of yourcredit cards. They will receive acredit card with their name on it, butthey will be tied directly to youraccount. You will be held liable forany charges they make on the card,but it is a good learning tool. Makesure they keep a record of what theyspend and that they pay you for theitems purchased on credit.

On his way home from school, Ramonspotted a “For Sale” sign on a bright redconvertible. “What a beauty,” he thoughtas he approached to take a closer look.“Hmmm. Lowmileage, really clean, oneowner, $6,700. I’ve already saved $2,000,so I think I can afford this car if Iborrow the rest.”

Ramon’s dad suggested that he makea trip to the bank to find out about carloans. A few hours later, Ramonreturned, smiling broadly. The loanspecialist at First Federated Bank toldhim that a car loan carried an interestrate of 7.9% for 60 months. Since Ramonwould have to borrow $4,700 after his$2,000 down payment, his paymentswould be $84 per month.

Ramon earned $10 an hour andworked 20 hours a week as aconstruction helper after school, so hisgross monthly income before taxes was$800. His car payments would amount toabout 10.5% of his monthly income. Hecertainly could afford that.

“Wait a second,” his dad cautioned.“Don’t forget about the other expensesthat go along with owning a car. You’llhave to pay for gas, oil changes andregular maintenance. It’s a used car,Ramon, so there might be some thingsthat need fixing, too. Another bigexpense is insurance. At your age, it willbe about $1,200 a year. You’d betterreconsider and decide if you can makethe monthly payments.”

Ramon’s excitement began to fade.When he added the insurance and othercosts, the total came to $269 a month.“That’s more than half of my take-homepay," he thought. "After school expenses,clothes, cell phone, Internet and otherlittle things, I won’t have anything left foreven amovie once a week. I guess I’dbetter wait for another car to comealong.”

“Wise choice, son,” said his father.“But, that sure was a fantastic car,”

Ramon sighed.Ramon did make a wise decision. He

knew he could borrow the money, but healso realized he’d have a tough timerepaying it.

Borrowing is not a bad thing; mostpeople will borrowmoney at some time

Name Hourly Number of Hours Monthly Gross 15% DebtWage Per Week Income Limit

Olivia

Ben

Anna

Aidan

What advice would you give to the workers who can’t afford the car payments?

What Is Bankruptcy?

Bankruptcy is a federal court processthat helps individuals and businessesrepay their debts or wipe them outaltogether. There are two basic types ofbankruptcies: liquidation orreorganization.

In a liquidation bankruptcy, you turnyour personal property over to the court,which sells it to pay your debts. Creditorscan no longer come after you forpayment, but the bankruptcy stays onyour credit history for 10 years and youmay be denied credit during that period.

In a reorganization bankruptcy, somedebts must be repaid in full, some arerepaid as a percentage of the originaldebt and others aren’t repaid at all.Payment plans usually cover three to fiveyears. If you stick with the repaymentplan until the end, youmay find thatcreditors will grant you credit at the endof the repayment period, even though thebankruptcy will stay on your credithistory for six years.

Filing for bankruptcy has seriousconsequences and should not be enteredinto lightly. Having your debts eraseddoesn’t miraculously solve your long-term financial problems if you haveirresponsible spending habits, butsometimes it’s the only way out of acrushing financial burden caused by jobloss, medical bills or other circumstancesthat are out of your control.

Bankruptcy StatisticsAverage age: 3844% of filers are couples30% are women filing alone26% are men filing aloneFilers are slightly better educatedthan the general populationTwo out of three have lost a jobHalf have experienced a serioushealth problemFewer than 9% have not suffered ajob loss, medical event, or divorceHighest bankruptcy rates:Tennessee, Utah, Georgia, Alabama

Don’t BorrowWhat YouCan’t Repay

in their lives, maybe for a home, a car or acollege education. The good news aboutborrowing is that you get something (like acar) nowwithout paying for it with yourownmoney. The bad news is thateventually you do have to pay.

Borrowing involves an opportunitycost. An opportunity cost is what you giveup when you get something you want.When you borrow, your opportunity costlies in the future because you’ll have togive up something each month to makeyour payments. And, if your payments aretoo high, you could run into big problems:

First, you’ll have to pay penalty fees ifyou miss a payment or are late.As a consequence, you’ll develop a badcredit report.In addition, you’ll be turned down forfuture loans because of your poorcredit history.Finally, if you have no other options,you might have to file for bankruptcy.

There were 1.6 million non-businessbankruptcy filings in 2004, and nearly100,000 of them were people under the ageof 25. What is the major reason forbankruptcy? Too much debt. The typicalfamily filing for bankruptcy owed morethan one and a half times its annualincome in short-term, high-interest debt.That means a family earning $24,000 ayear had an average of $36,000 in creditcard and similar debt.

The best way to avoid problems is toborrow wisely; never borrow more thanyou can repay.

Activity for Secondary Grades

Examine the earnings of the fourstudents listed and decide if any canafford payments of $130 a month for aused car. Use this rule: monthlypayments should not exceed 15% ofgross income.1. Olivia works as a manicurist. She

earns $8 an hour and works 25 hours aweek. She also earns about $20 perweek in tips.

2. Ben is an assistant manager at alocal theater. He earns $7.50 an hourand works 27 hours a week.

3. Anna just got a job as a receptionistin a doctor’s office. She works 24hours a week and earns $9 an hour.

4. Aidan works the late shift at asporting goods store. He earns $10.50an hour and works 20 hours a week.

Complete the chart at the bottom ofthe page to calculate each worker’s grossmonthly income. Then calculate 15% foreach person’s debt limit. Put a star nextto any worker who can afford $130 inmonthly car payments.

Activity for Primary Grades

If you borrow something from a friend,it’s important to return it as soon aspossible. If you borrow money, youshould repay quickly, too. Do the math tofigure out if these students will be ableto repay their friends tomorrow:1. Jacob borrowed $1 from Tanya to

buy dessert at school. Jacob has $3 athome, but he has to save 50 cents,buy some pencils for $1, and pay alibrary fine of 25 cents.Will Jacobbe able to repay Tanya?

2. Tatiana borrowed $2 from Brett tobuy a notebook. Tatiana has $5 inher piggy bank, but she has to buylunch tomorrow for $1.50 and pay $2to take the bus to her friend’s party.Will Tatiana be able to repayBrett?

3. José borrowed $10 from Nguyen tobuy a game that was on sale at themall. José has $20 that his grandmagave him for his birthday, but he hasto pay $7 to his cousin for a haircut,spend $2 for lunch, and pay $1 for araffle ticket.Will José be able torepay Nguyen?

4. Catherine lent $7 to Casimir to payfor pictures at school. Casimir has$12 in his dresser drawer, but he hasto save $2, buy pencils for $1.50, andpay his cousin $2 for helping himmow the lawn.Will Casimir be ableto repay Catherine?

12

1514

ScholarshipsWhen you investigate financial aid, beware of scams. Some companies promise ascholarship but ask you to pay an eligibility fee up front. Others charge a processingor application fee. Generally, if a company asks for money just to start the process,it’s probably not a reputable organization. Visit the JA Financial Aid Center athttp://studentcenter.ja.org/aspx/PayCollege for a scholarship search tool andmore information.Part-Time JobAnother way to help finance your education is to work part-time while going toschool. Work experience while you’re in college looks good on a résumé, especially ifit’s related to your field of study. For example, if your major is finance, you mighttake a part-time job as a bank teller; if your choice is pre-med, perhaps the studenthealth center needs a part-time receptionist.

Getting Started

To begin the planning process, try to estimate what you and your family can afford topay for college. Then check some of the college-cost calculators on the Internet tofind out what additional funds may be available.

Amount you have already saved: $

Amount you’ll be able to save before college: $

Amount your family will be able to contribute: $

Total $Now find out about:

Possible scholarships

Possible grants

Student loans

Internet Resources

1. The College Savings Plan of Illinois is a state-sponsored investment programthat helps families save and pay for future education costs. Visit them online at:www.collegesavings.org.- College Illinois! (Prepaid Tuition Program) lets you lock in up to ninesemesters of future college tuition at today’s prices.- Bright Start College Savings Plan (Savings/Investment Program) offers sixinvestment options, and management oversight for each option is provided byCitigroup Asset Management.

2. Junior Achievement’s comprehensive college site, containing valuable informa-tionabout how to save for college, apply for aid and calculate college costs.http://studentcenter.ja.org.

3. Educational Testing Service’s web site, with ideas for cutting costs, saving forcollege and acquiring loans, scholarships and grants:www.ets.org.

Public Colleges and UniversitiesThe average cost of tuition and fees by region in 2004-2005, frommost toleast expensive:

New England $6,839Middle states* $6,300Midwest $6,085Southwest $4,569South $4,143West $4,130

Private Colleges and UniversitiesThe average cost of tuition and fees by region in 2004-2005, frommost to leastexpensive:

New England $25,660Middle states* $21,439West $19,998Midwest $18,690South $17,317Southwest $15,867

*Middle states are defined as NY, NJ, PA, DE, MD

The suitcases are packed, the camping equipment is in the van, and the gas tank is filledto the brim. Your family is about to take off for a week inWisconsin. There’s just oneproblem—no one checked a map. Oops. This can make for a pretty rough journey.

Going on a trip requires planning: Which are the best routes? Where will you campeach night? Do you need reservations? Without a plan, you might run into unforeseenproblems throughout your vacation.

In the same way, you need a road map, or plan, to take the trip to your financialfuture. Which route will you take—big company, small company, or your own company?Where will you stop along the way—college, technical school, trade school, or themilitary? Do you need reservations—savings, credit, or investments?

Making a plan can spell the difference between success and failure on a vacation andas you set your sights on your life goals. One of your goals is probably a college degree.

Thinking Ahead

What’s the difference between an expense and an investment?An expense brings some satisfaction without any expectation of financial reward.Buying a burger for lunch is an expense. You like the taste of the burger, but youdon’t expect any long-term economic benefit.An investment includes the expectation of receiving economic benefit in the future.Paying college tuition is an investment. You expect to earn a higher income in thefuture in return for the time, money and effort you put into your education now.

College graduates can expect to earn 70 percent more during a lifetime, on average,than those with only a high school diploma. That means that over the course of a 40-yearworking career, the difference in earnings between a college graduate and high schoolgraduate is about $1 million. Even with escalating tuition costs, education is a goodinvestment. See the JA Financial Aid Center athttp://studentcenter.ja.org/aspx/PayCollege for more information.

Looking at College Costs

Type of Institution Tuition Increase(most recent data available)

Four-year, private $ 25,143 + 5.9%Four-year, public (in-state resident) $ 6,585 + 6.4%Two-year, public (in-state resident) $ 2,402 + 4.7%

Besides tuition, there are other costs to consider when thinking about college:Room and board—average of $4,000 - $5,000 per yearBooks and supplies—average of $600 - $1,100 per yearPersonal expenses such as laundry and phone—average $1,000 - $1,500 annuallyTravel—$650 - $1,000 per year (depends upon distance and whether commuting orliving on campus)

With a price tag of nearly $30,000, a private university may be out of reach for manyhigh school graduates. However, hundreds of less expensive schools provide an excellenteducation. Check out the college issues of major magazines. They generally provideannual rankings of schools by region and size. Online resources can help you calculateyour expenses and ability to pay at various levels. Don’t forget about grants,scholarships, and loans. In 2008, more than $143 billion was available in various forms offinancial aid. (www.collegeboard.com)

Map YourFinancialFutureNobody likes to think about accidents,

injuries, or disasters, but a glance atnewspaper headlines reminds us thatmisfortunes happen all the time:

Sixty-Car Pileup on Snowy HighwayConstruction Worker Injured in Fallfrom Downtown Hi-RiseThousands Left Homeless inAftermath of Hurricane

Usually such unexpected emergencieshave costly consequences, includingrepairs for autos and homes as well asmedical treatment for the peopleinvolved. However, the financial burdenof accidents, injuries, and disasters canbe reduced if you have insurance.

Insurance is a way to manage risk.You cannot completely eliminate thepossibility of an accident, but you canlower potential costs with insurance.

Auto insurance is a good example.You might pay $2,000 a year for autoinsurance, but if you’re involved in acrash and break a leg, the cost of fixingboth you and your car could amount tomuch more than the $2,000 premium youpay for the insurance. That’s a prettygood deal.

Then there’s renters’ insurance,which protects you in case of theft, fireor other problems. When you move intoyour first apartment, you might besurprised to learn that the landlord’sinsurance only covers the building andthe things that belong to her. Yourfurniture, clothes, cameras, TV, CDcollection and everything else you ownare your responsibility. You probablyhave thousands of dollars worth of stuffin your apartment. For about $200 ayear, you can protect it.

Health insurance is anotherimportant risk-management tool. It payspart or all of your doctor and hospitalbills, and some companies includehealth insurance coverage as part of thebenefits given to full-time employees.Because the cost of health care is rising,it is really important to consider goodhealth insurance when you are nolonger covered by your parents’ policy.

How are insurance costs calculated?Probability has a lot to do with it. If youown a sports car, you’ll pay morebecause it’s more likely to be stolen. Ifyou live in a wooden house, you’ll paymore because it’s more likely to burn. Ifyou smoke, you’ll pay more becauseyou’re more likely to get sick.

You can lower your insurance costs bymaking safe decisions about what youdrive, where you live, and how you takecare of yourself.

There are ways to lower yourinsurance costs, especially for carinsurance.1. Shop around. There are many

insurance companies. You can getcost estimates from local agents oron the Internet.

2. Choose a higher deductible (theamount of money you have to paybefore the insurance company paysthe rest). Usually, the higher thedeductible, the lower the annualpremium.

3. Drop collision coverage on an oldercar. Collision coverage pays fordamage to your car if it is hit bysomebody else. As a rule, if a car isworth less than $2,000, it probablywill cost more to insure it than toreplace it.

4. Buy a car that has a low theft rateand is inexpensive to repair. If youbuy a flashy sports car, insurancewill be more costly.

5. Carpool or try to limit the numberof miles you drive. Most insurancecompanies offer low mileagediscounts.

6. Ask about discounts for anti-lockbrakes, air bags, and other safetyfeatures. A safe car means lesschance of injury if you’re in anaccident.

7. Check on other discounts. Aninsurance company may offerdiscounts if you have no accidentsfor several years, take driver’seducation in school, have an alarmon your car, and are a good student.

Health insurance premiums alsocan be reduced. Choosing a healthylifestyle and having regular medicalcheckups can cut your costs. Similarly,the price of renters’ insurance may belower if you spend a few dollars fordeadbolt locks or for a basic securitysystem for your apartment.

Being insured is a good economicdecision. You pay a little bit now toavoid paying a lot in the future. Formore information about insurance, seewww.allstate.com.

Activity for Secondary Grades

Rank the following students aseither High Insurance Risk (HIR) orLow Insurance Risk (LIR) by circlingyour answer. Then, on the linesbelow each statement, give a reasonfor your answer.

1. Eddie drives a new SUV to workevery day, a round trip of about 80miles. HIR or LIR?

2. Caryn’s recent diet has brought herto her ideal weight. She has quitsmoking and joined a health club.HIR or LIR?

3. Pablo’s apartment is located in anew suburban subdivision near thepolice station. It has smoke alarmsand a sprinkler system in case offire. HIR or LIR?

4. Renata just made the honor roll atschool, and her green sedan isparked in a garage every night.HIR or LIR?

5. Takeisha has a chronic cough as aresult of pneumonia as a child. Sheworks as a roofer. HIR or LIR?

6. Tyler recently moved into a poshapartment near downtown. Thoughthe crime rate is high there, heenjoys being close to the excitementof big city life. HIR or LIR?

Activity for Primary Grades

Circle the riskiest activity in eachgroup:

TypingWorking in a storeClimbing a mountain

Driving a race carDelivering mailTeaching school

FarmingDrawingSkiing

JoggingSky divingSewing

Carrying dishesSleeping

Playing football

Sometimes you can’t avoid riskyactivities. That’s why it’s importantto be as safe as possible, no matterwhat you are doing. That way, therisk of getting hurt is not as great.Answer these questions aboutlowering risk:

1. Why is it important to wear a helmetwhen you ride your bike?

2. Why should you brush your teethevery day?

3. Why is it a good idea to have a fireextinguisher near your kitchen?

Staying Insured

Source: http://money.cnn.com/2004/10/18/pf/college/college_costs/index.htm

1514

ScholarshipsWhen you investigate financial aid, beware of scams. Some companies promise ascholarship but ask you to pay an eligibility fee up front. Others charge a processingor application fee. Generally, if a company asks for money just to start the process,it’s probably not a reputable organization. Visit the JA Financial Aid Center athttp://studentcenter.ja.org/aspx/PayCollege for a scholarship search tool andmore information.Part-Time JobAnother way to help finance your education is to work part-time while going toschool. Work experience while you’re in college looks good on a résumé, especially ifit’s related to your field of study. For example, if your major is finance, you mighttake a part-time job as a bank teller; if your choice is pre-med, perhaps the studenthealth center needs a part-time receptionist.

Getting Started

To begin the planning process, try to estimate what you and your family can afford topay for college. Then check some of the college-cost calculators on the Internet tofind out what additional funds may be available.

Amount you have already saved: $

Amount you’ll be able to save before college: $

Amount your family will be able to contribute: $

Total $Now find out about:

Possible scholarships

Possible grants

Student loans

Internet Resources

1. The College Savings Plan of Illinois is a state-sponsored investment programthat helps families save and pay for future education costs. Visit them online at:www.collegesavings.org.- College Illinois! (Prepaid Tuition Program) lets you lock in up to ninesemesters of future college tuition at today’s prices.- Bright Start College Savings Plan (Savings/Investment Program) offers sixinvestment options, and management oversight for each option is provided byCitigroup Asset Management.

2. Junior Achievement’s comprehensive college site, containing valuable informa-tionabout how to save for college, apply for aid and calculate college costs.http://studentcenter.ja.org.

3. Educational Testing Service’s web site, with ideas for cutting costs, saving forcollege and acquiring loans, scholarships and grants:www.ets.org.

Public Colleges and UniversitiesThe average cost of tuition and fees by region in 2004-2005, frommost toleast expensive:

New England $6,839Middle states* $6,300Midwest $6,085Southwest $4,569South $4,143West $4,130

Private Colleges and UniversitiesThe average cost of tuition and fees by region in 2004-2005, frommost to leastexpensive:

New England $25,660Middle states* $21,439West $19,998Midwest $18,690South $17,317Southwest $15,867

*Middle states are defined as NY, NJ, PA, DE, MD

The suitcases are packed, the camping equipment is in the van, and the gas tank is filledto the brim. Your family is about to take off for a week inWisconsin. There’s just oneproblem—no one checked a map. Oops. This can make for a pretty rough journey.

Going on a trip requires planning: Which are the best routes? Where will you campeach night? Do you need reservations? Without a plan, you might run into unforeseenproblems throughout your vacation.

In the same way, you need a road map, or plan, to take the trip to your financialfuture. Which route will you take—big company, small company, or your own company?Where will you stop along the way—college, technical school, trade school, or themilitary? Do you need reservations—savings, credit, or investments?

Making a plan can spell the difference between success and failure on a vacation andas you set your sights on your life goals. One of your goals is probably a college degree.

Thinking Ahead

What’s the difference between an expense and an investment?An expense brings some satisfaction without any expectation of financial reward.Buying a burger for lunch is an expense. You like the taste of the burger, but youdon’t expect any long-term economic benefit.An investment includes the expectation of receiving economic benefit in the future.Paying college tuition is an investment. You expect to earn a higher income in thefuture in return for the time, money and effort you put into your education now.

College graduates can expect to earn 70 percent more during a lifetime, on average,than those with only a high school diploma. That means that over the course of a 40-yearworking career, the difference in earnings between a college graduate and high schoolgraduate is about $1 million. Even with escalating tuition costs, education is a goodinvestment. See the JA Financial Aid Center athttp://studentcenter.ja.org/aspx/PayCollege for more information.

Looking at College Costs

Type of Institution Tuition Increase(most recent data available)

Four-year, private $ 25,143 + 5.9%Four-year, public (in-state resident) $ 6,585 + 6.4%Two-year, public (in-state resident) $ 2,402 + 4.7%

Besides tuition, there are other costs to consider when thinking about college:Room and board—average of $4,000 - $5,000 per yearBooks and supplies—average of $600 - $1,100 per yearPersonal expenses such as laundry and phone—average $1,000 - $1,500 annuallyTravel—$650 - $1,000 per year (depends upon distance and whether commuting orliving on campus)

With a price tag of nearly $30,000, a private university may be out of reach for manyhigh school graduates. However, hundreds of less expensive schools provide an excellenteducation. Check out the college issues of major magazines. They generally provideannual rankings of schools by region and size. Online resources can help you calculateyour expenses and ability to pay at various levels. Don’t forget about grants,scholarships, and loans. In 2008, more than $143 billion was available in various forms offinancial aid. (www.collegeboard.com)

Map YourFinancialFutureNobody likes to think about accidents,

injuries, or disasters, but a glance atnewspaper headlines reminds us thatmisfortunes happen all the time:

Sixty-Car Pileup on Snowy HighwayConstruction Worker Injured in Fallfrom Downtown Hi-RiseThousands Left Homeless inAftermath of Hurricane

Usually such unexpected emergencieshave costly consequences, includingrepairs for autos and homes as well asmedical treatment for the peopleinvolved. However, the financial burdenof accidents, injuries, and disasters canbe reduced if you have insurance.

Insurance is a way to manage risk.You cannot completely eliminate thepossibility of an accident, but you canlower potential costs with insurance.

Auto insurance is a good example.You might pay $2,000 a year for autoinsurance, but if you’re involved in acrash and break a leg, the cost of fixingboth you and your car could amount tomuch more than the $2,000 premium youpay for the insurance. That’s a prettygood deal.

Then there’s renters’ insurance,which protects you in case of theft, fireor other problems. When you move intoyour first apartment, you might besurprised to learn that the landlord’sinsurance only covers the building andthe things that belong to her. Yourfurniture, clothes, cameras, TV, CDcollection and everything else you ownare your responsibility. You probablyhave thousands of dollars worth of stuffin your apartment. For about $200 ayear, you can protect it.

Health insurance is anotherimportant risk-management tool. It payspart or all of your doctor and hospitalbills, and some companies includehealth insurance coverage as part of thebenefits given to full-time employees.Because the cost of health care is rising,it is really important to consider goodhealth insurance when you are nolonger covered by your parents’ policy.

How are insurance costs calculated?Probability has a lot to do with it. If youown a sports car, you’ll pay morebecause it’s more likely to be stolen. Ifyou live in a wooden house, you’ll paymore because it’s more likely to burn. Ifyou smoke, you’ll pay more becauseyou’re more likely to get sick.

You can lower your insurance costs bymaking safe decisions about what youdrive, where you live, and how you takecare of yourself.

There are ways to lower yourinsurance costs, especially for carinsurance.1. Shop around. There are many

insurance companies. You can getcost estimates from local agents oron the Internet.

2. Choose a higher deductible (theamount of money you have to paybefore the insurance company paysthe rest). Usually, the higher thedeductible, the lower the annualpremium.

3. Drop collision coverage on an oldercar. Collision coverage pays fordamage to your car if it is hit bysomebody else. As a rule, if a car isworth less than $2,000, it probablywill cost more to insure it than toreplace it.

4. Buy a car that has a low theft rateand is inexpensive to repair. If youbuy a flashy sports car, insurancewill be more costly.

5. Carpool or try to limit the numberof miles you drive. Most insurancecompanies offer low mileagediscounts.

6. Ask about discounts for anti-lockbrakes, air bags, and other safetyfeatures. A safe car means lesschance of injury if you’re in anaccident.

7. Check on other discounts. Aninsurance company may offerdiscounts if you have no accidentsfor several years, take driver’seducation in school, have an alarmon your car, and are a good student.

Health insurance premiums alsocan be reduced. Choosing a healthylifestyle and having regular medicalcheckups can cut your costs. Similarly,the price of renters’ insurance may belower if you spend a few dollars fordeadbolt locks or for a basic securitysystem for your apartment.

Being insured is a good economicdecision. You pay a little bit now toavoid paying a lot in the future. Formore information about insurance, seewww.allstate.com.

Activity for Secondary Grades

Rank the following students aseither High Insurance Risk (HIR) orLow Insurance Risk (LIR) by circlingyour answer. Then, on the linesbelow each statement, give a reasonfor your answer.

1. Eddie drives a new SUV to workevery day, a round trip of about 80miles. HIR or LIR?

2. Caryn’s recent diet has brought herto her ideal weight. She has quitsmoking and joined a health club.HIR or LIR?

3. Pablo’s apartment is located in anew suburban subdivision near thepolice station. It has smoke alarmsand a sprinkler system in case offire. HIR or LIR?

4. Renata just made the honor roll atschool, and her green sedan isparked in a garage every night.HIR or LIR?

5. Takeisha has a chronic cough as aresult of pneumonia as a child. Sheworks as a roofer. HIR or LIR?

6. Tyler recently moved into a poshapartment near downtown. Thoughthe crime rate is high there, heenjoys being close to the excitementof big city life. HIR or LIR?

Activity for Primary Grades

Circle the riskiest activity in eachgroup:

TypingWorking in a storeClimbing a mountain

Driving a race carDelivering mailTeaching school

FarmingDrawingSkiing

JoggingSky divingSewing

Carrying dishesSleeping

Playing football

Sometimes you can’t avoid riskyactivities. That’s why it’s importantto be as safe as possible, no matterwhat you are doing. That way, therisk of getting hurt is not as great.Answer these questions aboutlowering risk:

1. Why is it important to wear a helmetwhen you ride your bike?

2. Why should you brush your teethevery day?

3. Why is it a good idea to have a fireextinguisher near your kitchen?

Staying Insured

Source: http://money.cnn.com/2004/10/18/pf/college/college_costs/index.htm

TThhaannkkss ttoo::