PERSONAL FINANCE UNIT 2Careers, Insurance, and Investing

WHAT DO YOU THINK?

Forty-four percent of teenagers worked last summer.

Most of them worked full-time jobs. Teens most often work in the food

service and retail industries. The average American will have

between 5-10 jobs between the ages of 18 and 38.

SKILLS FOR TODAY’S WORKPLACE

INDIVIDUAL SKILLS TEAM SKILLS

Analytical Computer Detail-oriented Integrity and honesty Self-confidence Organizational Motivation and initiative

Communication Flexibility Interpersonal Leadership Teamwork

THE VALUE OF EDUCATION

High School Dropout, no degree $19,226

High School Diploma $28,950 Two-year college, associate’s

$36,395 Four-year college, bachelor’s

$51,568 Post-graduate degree (six plus yrs)

$67,073

THE VALUE OF BENEFITS

Paid leave Health Insurance Retirement Plans Life Insurance and Disability Insurance Education assistance

CAREER FACTORS

Education and training Experience Skills and talents Work environment Job availability Earning potential Benefits Work hours Costs Risks

INSURANCE: PROTECTING YOURSELF

1 in 7 Americans visits the emergency room each year.

Nearly 80% of crashes and 65% of near-crashes involve some form of driver inattention in the 3 seconds before the event.

Nearly 1 in 5 Americans will become disable for one year or more before the age of 65.

16 yr. old drivers have crash rates that are three times greater than those of 17 yr. olds and five times greater than those of 18 yr. old drivers.

RISK MANAGEMENT

Avoid the risk Reduce the risk Accept the risk Share the risk

FACTORS THAT AFFECT AUTO INSURANCE

Age Gender Marital status Type of car How often you use vehicle Location Driving record Claim record Credit history

CAR INSURANCE

General Liability (Required) 15/30/25 minimum limits ( in thousands)

Medical payments Collision (deductible) Comprehensive (deductible) Uninsured/ underinsured motorist Rental and towing

OTHER INSURANCE

Health insurance Property insurance (homeowners) Renters insurance Life insurance Disability insurance Flood insurance Liability (umbrella protection)

INVESTING

A dollar today is worth less than a dollar in the future.

The higher the interest rate, the less time it takes to reach a savings goal.

The smaller the down payment someone makes on a car, the less interest the owner pays over the life of a car loan.

ADVANTAGE OF STARTING EARLY

You put $2000 a year from age 18 to 27 (10years) @ 7% rate of return.

At age 65 you would have $361,418

Your friend waited until he was 31 and invested $2000 a year until he was 65 (35 years) @ 7% rate of return.

At age 65 he would have $276,474

COMPOUND INTEREST FORMULA

A= P (1 + i) n A = amount in the account P = principal i = interest rate as a decimal n = number of years compounded

EXAMPLE:

Diana invests $500 today in an account earning 7%. How much will it be worth in 5 years?

A = 500 (1 + .07) 5 A = 500 (1.07) 5 ( in order to raise the

1.07 to the 5 use the ^ symbol on your calculator which gives you 1.402

A = 500 * 1.402 A= $701 (rounded)

EXAMPLE 2

Diana invests $500 today in an account earning 7%. How much will it be worth in 10 years?

A = 500 ( 1 + .07) 10 A = 500 (1.967) A = $ 984 (rounded)

RULE OF 72

What interest rate would be necessary to double a $100 investment in 24 years?

72/24 = 3% How many years would it take to

double $100 if it earned interest at a rate of 8% per year?

72/8 = 9 years.

RISK VS. REWARD

The more riskier the investment than the most financial reward.

In order to reduce risk you should diversify your investments. ( do not put all of your money into one thing, spread it out to lower you chance of losing.)

CALCULATING CAPITAL GAINS AND LOSSES If you bought a stock at $5 and then

sold it later at $10, you would have a capital gain of $5.

If you bought a stock at $7 and then sold it later at $5, you would have a capital loss of $2

CALCULATING DIVIDENDS

If you own a stock that pays dividends (companies profit), you would calculate your share like this.

Number of shares times the dividend. For example if you own 10 shares and it pays .25 a share you would get a check for $2.50