Basics of Saving & Investing : Financial Decisions (Unit 1) - IN.gov

INDIANA DEPARTMENT OF FINANCIAL INSTITUTIONS
CONSUMER CREDIT EDUCATION CONSUMER FINANCE UNIT 1 The Basics of Financial Planning
INTRODUCTION
This teaching guide is a product of cooperative efforts to provide accurate
and objective information for teaching basic personal financial planning,
saving, and investing. The easy-to-use format is designed for educators.
The teaching guide is an introduction to financial planning and investing.
It can be the framework of a short course or a supplement to an existing
course in mathematics, home economics, business education, economics,
and/or personal finance.
KEY CONCEPTS Basics of Saving and Investing: A Teaching Guide contains learning
objectives that focus on:
. how to design a personal financial plan
.
. how financial markets work
. how to select among various savings and investment options
. how to find and use investment information
. how to recognize and victim-proof yourself against investment fraud
Each unit contains learning objectives, background information for teachers
and students, suggested activities, overhead transparency masters, student
handouts and worksheets, additional resources, and student exercise/s. The
appendix includes sources of additional information and a glossary of
terms. Hundreds of classroom teachers have used earlier editions of this guide. We
hope you and your students find it a useful educational tool.
You can successfully manage your money if you have the know-how and the
will to set aside some of today's income for the things you will want and
need in the future.
This unit will focus on basic financial planning principles to be
considered by people prior to investing. UNIT OBJECTIVES
. Discuss the benefits of planning personal financial affairs.
. Consider factors that influence financial decisions.
. Design a personal financial plan.
. Discuss ways to protect assets against financial risk. TOPIC 1 ( Personal Financial Planning
OBJECTIVE o Students will learn that saving a percent of income is the start of
committing to a plan to meet their financial goals.
o Students will know the benefits of a personal financial plan.
MATERIALS NEEDED
Pretest Exercise
Reading 1 ( "Benefits of a Personal Financial Plan"
Worksheet 1("Money Management Checklist" DIRECTIONS
[pic] 1. Ask students to write a brief paragraph using the Pretest Exercise.
[See "Answer Key."]
2. Distribute Reading 1, "Benefits of a Personal Financial Plan" and
discuss the benefits of having a financial plan.
3. Hand out the Worksheet 1, "Money Management Checklist." Discuss areas
where participants plan to improve their financial planning knowledge and
skills.
TOPIC 2 ( Factors That Influence Decisions
OBJECTIVE o Students will learn the many different factors that can influence
financial decisions.
o Students will create different case studies on decisions that
influence financial goals.
MATERIALS NEEDED
Reading 2 ( "Factors That Influence Financial Decisions"
Transparency 1 ( "Financial Tasks for Young Adults"
Case Study
Reading 3 ( "Developing a Financial Goal"
Worksheet 2("Budget Worksheet"
Reading 4 ( "Being Smart About Credit"
Transparency 2 ( "Your Credit Report"
Transparency 3 ( "Keys to Credit Success"
Student Exercise 1 DIRECTIONS 1. Distribute to students the Reading 2, "Factors That Influence Financial
Decisions." As a class read and discuss the factors that effect
financial decisions. Show Transparency 1. 2. Have students work in small groups to provide local data for the Mary
Ortega Case Study. This data will be used to develop a financial plan for
Mary, using the worksheets in Topic 3 of this Unit. 3. Extended Learning Activity Teacher and student groups could create additional case studies for the
following situations, then develop a financial plan for each situation,
using the worksheets in Topic 3.
1. College student living at home
2. Young couple, no children
3. Couple with two teenagers
4. Single parent with one child
5. Retired person living alone
Have students identify and discuss similarities and differences in
financial goals, income, expenses, and financial plans for various stages
of the life cycle.
4. Distribute to students the Reading 3, "Developing a Financial Goal." As
a class read and discuss how to develop and reach financial goals. 5. Have student complete a budget using Worksheet 3, "Budget Worksheet." 6. Have students take the Students Exercise 1 and discuss the answers. [See
"Answer Key."]. TOPIC 3 ( A Plan to Reach Financial Goals OBJECTIVE o Students will develop a financial plan.
o Students will consider personal financial goals, complete a net worth
statement, estimate income, record expenses, and focus on areas where
expenses could be reduced, such as gift purchases.
MATERIALS NEEDED
Worksheet 3 ( "Net Worth Statement, Personal Balance Sheet"
Worksheet 4 ( "Estimate Your Income"
Worksheet 5 ( "Record Your Expenses
Worksheet 6 ( "Match Income & Expenses"
Worksheet 7 ( "Gift Expenditure Chart"
Transparency 4 ( "Average Household Spending"
Transparency 5 ( "Consumer Expenditure Survey"
Student Exercise 2
DIRECTIONS 1. Using the Financial Case Study on Mary Ortega developed in Topic 2 for a
typical young person living away from home in your area, have learners
complete Worksheets 3-5 in this lesson. The 5 worksheets provide tools for learners to consider personal
financial goals, complete a net worth statement, estimate income, record
expenses and focus on areas where expenses could be reduced, such as gift
purchases.
2. Discuss the price of personal financial goals, such as: . spring break vacation trip
. wedding with 100 guests
. furniture for a new apartment
. college education
3. Discuss the Transparencies "Average Household Spending" and the related
chart titled "Consumer Expenditure Survey." Point out that housing and
transportation together make up 52 percent of average household expenses. 4. Example discussion questions are: What percentage of total household spending in 2004 was spent on average
on health care? (5.35%) On entertainment? (5.05%)
How much is spent in 2004 on transportation? ($7,215) What percentage of
total spending is this? (19.18%)
5. Discuss the Transparencies "Consumer Expenditure Survey," "Your Credit
Report" and "Keys to Credit Success." If your class has been taught
Credit Rights Study Unit 1, "An Overview of Consumer Credit" and Unit 5,
"Fair Credit Reporting Act," you can review the information in those
study units with your students. 6. Have students take the Students Exercise 2 and discuss the answers. [See
"Answer Key."]. TOPIC 4 ( Protection Against Financial Risk
OBJECTIVE o Students will learn the need for an emergency fund.
o Students will analyze emergency fund needs under different
situations. MATERIALS NEEDED
Reading 5 ( "Emergency Fund"
Worksheet 8 ( "Readings on Investments"
Post-Test Exercise
Student Exercise 3
Hidden Word Puzzle
Additional Resources
Brochures DIRECTIONS 1. Distribute to students the Reading 4, "Emergency Fund." As a class read
and discuss having an emergency fund. 2. Using the suggested guideline that every household should have an
emergency fund equal to three times monthly take-home pay, analyze the
emergency fund needs of a young single person living alone with monthly
take-home pay of $1,500. 3. Contrast this situation with that of a single parent with two school-
aged children and monthly take-home pay of $1,500. 4. Have participants collect and review current articles on personal
financial planning, using Worksheet 8, "Readings on Investments." 5. Post-Test Exercise. Have students review their Pre-Test Exercise
paragraph they wrote at the beginning of the unit. "Your uncle just gave
you $1,000 to spend any way you wish. What will you do with this money
and why"? Ask students the following question: Have your feelings
about the use of money changed? This unit has highlighted basic financial planning principles to be
considered prior to investing. After establishing a personal financial
plan as a foundation, one can continue to build wealth through savings
and investments. 6. See our Mini-Lesson "Map Your Financial Future" for additional financial
information.
at:
http://www.in.gov/dfi/education/MiniLessons/map_your_financial_futureMiniL
.htm. 7. Give the Student Exercise 3 and discuss any problem areas. [See "Answer
Key."]
8. Hand-out the Hidden Word Puzzle and have students see if they can find
all of the words.
9. Hand-out copies of the following brochures for review and discussion. What is a Budget
Fair Credit Reporting
Financial Tips 10. Review Additional Resources for additional information available.
ANSWER KEY STUDENT EXERCISE 1
1. G. emergency fund
2. K. college education
3. A. value
4. J. financial plan
5 . E. net worth
6. B. goal
7. D. pay yourself first
STUDENT EXERCISE 2 1. B. total assets minus total liabilities
2. C. set aside money for regular
savings
3. A . a savings account equal to two