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Chapter Introduction
Section 1: Managing Your Money
Section 2: Planning and Budgeting
Section 3: Saving and Investing
Section 4: Achieving Your Financial Goals
Visual Summary
Chapter Intro 1
Whatever goals or dreams you may have, the way you live your life will be determined, at least in part, by your relationship to money: how you get it and how you use it. The opportunities you create for yourself are greatly affected by the money habits you form when you are young.
Chapter Intro 2
Section 1: Managing Your Money
You and everyone around you are consumers and, as such, play an important role in the economic system. As a consumer and a citizen, you will make many economic decisions every day.
Chapter Intro 2
Section 2: Planning and Budgeting
We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make. Following a budget can be valuable to you.
Chapter Intro 2
Section 3: Saving and Investing
We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make. It is important for financial security to start the habit of saving.
Chapter Intro 2
Section 4: Achieving Your Financial Goals
We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make. Our personal interests, wants, and abilities affect our career choices.
Section 1-Main Idea
Guide to Reading
Big Idea
You and everyone around you are consumers and, as such, play an important role in the economic system.
Section 1-Key Terms
Guide to Reading
Content Vocabulary
• consumer
• disposable income
• discretionary income
• consumerism
• comparison shopping
• warranty
Academic Vocabulary
• reject
• alternative
A. A
B. B
Section 1-Polling Question
Do you agree that the rights of consumers are more important than the rights of producers and sellers?
A. Agree
B. Disagree
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Section 1
Consumer Rights
To make good economic decisions as consumers, we need to be aware of our rights and responsibilities.
Section 1
Consumer Rights (cont.)
• Consumers have rights, or protections, in the free enterprise system.
• Consumers have two types of income to spend:
– Disposable Income: money left after taxes are paid
– Discretionary Income: money left after bills are paid
Section 1
• Consumerism:
– Laws (ex. Pure Food and Drug Act)
– Private groups (Better Business Bureau)
Consumer Rights (cont.)
Section 1
• Consumer Bill of Rights
– Right to a safe product
– Right to be informed
– Right to choose
– Right to be heard
– Right to redress
Consumer Rights (cont.)
A. A
B. B
Section 1
Do you think private groups are better than the government at protecting consumer rights?
A. Yes
B. No
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Section 1
Consumer Responsibilities
In addition to rights, consumers also have responsibilities.
Section 1
Consumer Responsibilities (cont.)
• Consumers have responsibilities as well as rights.
• Smart buying strategies:
– Gather information
– Use advertising carefully
– Determine the best value
– Comparison shopping
Section 1
– Look at brand name and generic items
– Balance costs and benefits
Consumer Responsibilities (cont.)
Section 1
• Other responsibilities:
– Initiate problem-solving process for faulty goods or services
– Keep warranty information
– Respect rights of producers and sellers
– Report problems to government when a settlement cannot be reached
Consumer Responsibilities (cont.)
A. A
B. B
C. C
D. D
Section 1
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What do you think is the most important consumer responsibility?
A. Using advertising carefully
B. Comparison shopping
C. Initiating problem-solving
D. Respecting rights of others
Section 1
Making Buying Decisions
Buying a product or service costs more than money; it also costs the time it takes to make the purchase and the opportunity cost of not buying something else.
Section 1
Making Buying Decisions (cont.)
• Many factors are involved in consumers’ buying decisions.
• Steps:
– Decide whether to buy an item or not
– Invest time obtaining product information
– Balance opportunity cost
A. A
B. B
Section 1
Do you think most consumer purchases are worth their opportunity cost?
A. Yes
B. No
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Section 2-Main Idea
Guide to Reading
Big Idea
We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make.
Section 2-Key Terms
Guide to Reading
Content Vocabulary
• budget
• income
• expense
• credit
• annual percentage rate (APR)
• collateral
• bankruptcy
Academic Vocabulary
• exceed
• status
A. A
B. B
Section 2-Polling Question
Do you keep records of your spending and earnings?
A. Yes
B. No
0%0%
Section 2
Making a Budget—and Sticking to It!
Making and following a budget can help you organize your financial life.
Section 2
Making a Budget—and Sticking to It! (cont.)
• A budget is a record of money earned and spent to help you match expenses to income.
• Basic budgeting terms
– Income
– Expenses
– Balance: leftover money
Section 2
– Surplus: More income than expenses (good)
– Deficit: More expenses than income (bad)
Making a Budget—and Sticking to It! (cont.)
Section 2
• How to Make a Budget
– List what you spend.
– Record what you earn.
– Analyze the data.
– Try to have surplus.
– Monitor spending.
Making a Budget—and Sticking to It! (cont.)
A. A
B. B
Section 2
Do you agree that it is better to raise your income than to cut your expenses in order to balance a budget?
A. Agree
B. Disagree
0%0%
Section 2
Credit
Credit can be a valuable item in your financial toolbox; however, as with all tools, you have to know how to use it correctly.
Section 2
Credit (cont.)
• Credit allows consumers to receive a good or service and pay for it later.
• Recognizing credit terms
– A lender gives money to a borrower.
– A lender charges interest, expressed as the annual percentage rate (APR).
Section 2
– A credit rating evaluates how well the borrower will repay the loan.
– The borrower may pledge collateral for the loan.
Credit (cont.)
Section 2
• Sources of Credit:
– Usually require down payment
– Banks, savings and loans, credit unions, finance companies offer credit
– Most common—credit cards
– Can charge high interest rates
Credit (cont.)
Section 2
• Credit: Benefits and Drawbacks
– Benefits:
Credit (cont.)
• Allows you to get what you want sooner
• Teaches financial discipline
Section 2
– Drawbacks:
• Spending more than you can afford
• Bankruptcy
• Poor credit rating
Credit (cont.)
Section 2
• Your Responsibilities as a Borrower
– Have a plan to make payments
– Use budget skills
– Understand credit agreement
Credit (cont.)
Methods of Payment
A. A
B. B
Section 2
Do you think credit should be hard to obtain?
A. Yes
B. No
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Section 3-Main Idea
Guide to Reading
Big Idea
We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make.
Section 3-Key Terms
Guide to Reading
Content Vocabulary
• save
• interest
• principal
• return
• stock
• dividend
• bond
• mutual fund
Academic Vocabulary
• establish
• fund
• interval
A. A
B. B
Section 3-Polling Question
People generally do not save enough money.
A. Agree
B. Disagree
0%0%
Section 3
Saving for the Future
Saving part of your income is the key to meeting many of your short-term and long-term financial goals.
Section 3
Saving for the Future (cont.)
• To save is to set aside income for later use.
• Why save?
– Money for large purchases
– Emergency aid
– Luxuries
– Benefits the whole economy
Section 3
• Saving regularly
– Automatic deposits into savings accounts
– Budgeting for savings
– Earning interest by saving through financial institutions
Saving for the Future (cont.)
Section 3
• Deciding about your savings
• Trade-offs:
Saving for the Future (cont.)
– Less to spend today
– More to spend tomorrow
A. A
B. B
C. C
D. D
Section 3
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What do you think is the best reason to save money?
A. Building up money for large purchases
B. Having funds for emergencies
C. Buying luxury items
D. Helping the whole economy
Section 3
Types of Savings
A variety of options is available to allow you to save money.
Section 3
Types of Savings (cont.)
• Many ways exist for people to save portions of their incomes.
• Savings accounts
– Earn low interest on principal
– Financial institutions loan the money to others
The Savings Rate, 1952–2006
Section 3
• Checking accounts
– Money for purchases
– Must keep careful records
– Debit cards allow paperless money transfer
Types of Savings (cont.)
Types of Savings Accounts
Section 3
• Money market accounts
– Allows you to write checks, like a checking account
– Pays interest like a savings account
Types of Savings (cont.)
Section 3
• Certificates of deposit
– Type of time deposit
– Agreement to leave money in financial institution for a set amount of time
Types of Savings (cont.)
A. A
B. B
C. C
D. D
Section 3
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Which type of account do you think would be the most useful to you?
A. Savings account
B. Checking account
C. Money market account
D. Certificate of deposit
Section 3
Investments
Making wise investments in a variety of stocks and bonds is an important part of achieving long-term financial goals.
Section 3
Investments (cont.)
• Investing in stocks and bonds leads to higher returns than other types of savings.
• Stocks
– Shares of stock provide partial ownership in a company
– Stock prices may go up or down, based on company performance.
Section 3
– Investors may earn dividends.
– Higher possible return, but at greater risk
Investments (cont.)
Section 3
• Bonds
– Loans money to company or government
– Pays set rate of interest over several years
– U.S. government bonds are a very safe investment.
Investments (cont.)
Section 3
• Mutual funds
– Pools money to invest in different stocks and bonds
– Chosen by financial experts
– Less risk than investment in individual stocks
Investments (cont.)
A. A
B. B
C. C
D. D
Section 3
0% 0%0%0%
Which type of investment do you think has the best potential to make money in the long run?
A. Stocks
B. Bonds
C. Mutual funds
D. None of the above
Section 4-Main Idea
Guide to Reading
Big Idea
We all make economic choices. Opportunity cost, scarcity, and supply and demand influence the decisions we make.
Section 4-Key Terms
Guide to Reading
Content Vocabulary
• impulse buying
Academic Vocabulary
• evaluate
• commit
• eliminate
A. A
B. B
C. C
D. D
Section 4-Polling Question
0% 0%0%0%
What is your main financial goal?
A. Getting lots of inexpensive gadgets
B. Buying a large item
C. Saving for college
D. Something else
Section 4
What Kind of Spender Are You?
Careful spenders avoid pitfalls, such as impulse buying, on their way to meeting their financial goals.
Section 4
What Kind of Spender Are You? (cont.)
• Setting financial goals can help you spend money wisely.
• Evaluate your spending to help you meet financial goals.
Analyzing Advertising
Section 4
• Beware of impulse buying.
– Try not to buy too quickly based on emotions.
– Some impulse-buying is okay. Too much is bad.
– Follow guidelines to avoid too much impulse buying.
What Kind of Spender Are You? (cont.)
A. A
B. B
Section 4
Do you agree that impulse buying should be avoided at all costs?
A. Agree
B. Disagree
0%0%
Section 4
Your Goals and Your Buying Decisions
The buying decisions you make can have a major impact on your life and career choices.
Section 4
Your Goals and Your Buying Decisions (cont.)
• Consider goals when buying items.
• Long-term goals can conflict with short-term goals.
– Must balance long and short-term goals.
– Long-term planning can improve finances down the road (e.g., saving for college will lead to higher income later)
A. A
B. B
Section 4
Do you think it is easy to sacrifice short-term goals for long-term benefits?
A. Yes
B. No
0%0%
VS 1
Buying Strategy
• Making consumer decisions involves deciding the following:
• whether to spend your money
• what you will purchase
• how to use your purchase
• Comparison shopping involves making comparisons among brands, sizes, and stores.
VS 2
Consumerism
Consumer rights include
• the right to safety
• the right to be informed
• the right to choose
• the right to be heard
• the right to redress
VS 3
Budget
• A budget is an organized plan for spending and saving money.
• What you do with the information in a budget is up to you. No one can force you to spend less and save more unless you want to.
VS 4
Credit
• When buying on credit, the amount you will owe is equal to the principal plus interest.
• Financial institutions that provide credit include commercial banks, savings and loan associations, and credit unions.
VS 5
Saving and Investing
• It is important to get into the habit of saving.
• Individuals have many places to invest their savings, including savings accounts and certificates of deposit.
• Shares of stock entitle the buyer to a certain part of the future profits and assets of the corporation that is selling the stock.
Figure 1
Figure 2
Figure 3
Figure 4
TIME Trans
DFS Trans 1
DFS Trans 2
Possible response: spend less money on food and entertainment
DFS Trans 3
a savings account; an investment account
DFS Trans 4
Vocab1
consumer
someone who buys a good or service
Vocab2
disposable income
money income left after all taxes on it have been paid
Vocab3
discretionary income
money income left after necessities have been bought and paid for
Vocab4
consumerism
a movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers
Vocab5
comparison shopping
buying strategy to get best buy for the money
Vocab6
warranty
the promise made by a manufacturer or a seller to repair or replace a product within a certain time period if it is faulty
Vocab7
reject
to refuse or throw away
Vocab8
alternative
a choice or possibility
Vocab9
budget
a plan for making and spending money
Vocab10
income
money received from labor, business, or property
Vocab11
expense
money spent on goods and services
Vocab12
credit
money borrowed to pay for a good or service
Vocab13
annual percentage rate (APR)
annual cost of credit expressed as a percentage of the amount borrowed
Vocab14
collateral
property or valuable item serving as security for a loan
Vocab15
bankruptcy
inability to pay debts
Vocab16
exceed
to be or go beyond a limit
Vocab17
status
a position or rank
Vocab18
save
to set aside income for a period of time so that it can be used later
Vocab19
interest
the payment people receive when they lend money or allow someone else to use their money
Vocab20
principal
the most important
Vocab21
return
profit earned through investing
Vocab22
stock
ownership share of a corporation
Vocab23
dividend
payment of a portion of a company’s earnings
Vocab24
bond
contract to repay borrowed money with interest at a specific time in the future
Vocab25
mutual funds
pools of money from many people who are invested in a selection of individual stocks and bonds chosen by financial experts.
Vocab26
establish
to bring into existence or create
Vocab27
fund
a sum of money
Vocab28
interval
a break or period of time between two events
Vocab29
impulse buying
purchasing an item on the spot because of an emotional rather than planned decision
Vocab30
evaluate
to assess or find the value of
Vocab31
commit
to perform or bring about ; to pledge or assign oneself to a particular action
Vocab32
eliminate
to get rid of
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