AOF Principles of Finance

Lesson 3Financial Intermediaries

This lesson introduces students to the function and purpose of various financial intermediaries. Students evaluate how these businesses meet the needs of individuals and society. Students investigate the concept of capital and discuss its importance to financial intermediaries and to all businesses in general. Finally, they take a short-answer quiz, which focuses on the functions and services of the financial intermediaries that they studied, as well as some basic content on capital.

Advance PreparationOptional: Prior to Class Period 2, find headlines or quotes pertaining to the term capital. See Class Period 2, Step 3 for details.

This lesson is expected to take 4 class periods.

Lesson FrameworkLearning ObjectivesEach student will:

Identify the functions of different types of financial intermediaries* Explain how financial intermediaries benefit individuals, businesses, and the economy Define capital and describe its importance to financial intermediaries

*This is one of the 16 key learning objectives assessed by the NAFTrack Certification end-of-course exam for this course.

Academic StandardsThe relevant Common Core State Standards are too extensive to list here but are an important basis for this lesson. For details, please refer to the separate document “Correlations to the Common Core Standards” (available in the Course Planning Tools section of the course materials).

Evaluate services provided by financial deposit institutions to transfer funds (NBEA National Standards for Business Education 2013, Personal Finance VI, Banking and Financial Institutions)

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AOF Principles of FinanceLesson 3 Financial Intermediaries

AssessmentAssessment Product Means of Assessment

Quiz on financial intermediaries (Teacher Resource 3.2)

Answer Key: Financial Intermediaries and Capital Quiz (Teacher Resource 3.3)

Prerequisites General knowledge of some common financial institutions such as banks, credit unions, insurance

companies, and savings and loans

Instructional Materials Teacher Resources

Teacher Resource 3.1, Scenarios: Financial Intermediaries (separate PowerPoint file) Teacher Resource 3.2, Quiz: Financial Intermediaries and Capital Teacher Resource 3.3, Answer Key: Financial Intermediaries and Capital Quiz Teacher Resource 3.4, Prompts: Learning Objective Reflection (separate PowerPoint slide) Teacher Resource 3.5, Guide: Teaching Reflection Teacher Resource 3.6, Key Vocabulary: Financial Intermediaries Teacher Resource 3.7, Bibliography: Financial Intermediaries

Student Resources Student Resource 3.1, Reading: Financial Intermediaries Student Resource 3.2, Reading: Importance of Capital to Financial Intermediaries

Equipment and Supplies Blackboard, whiteboard, or chart paper LCD projector and computer to show PowerPoint slides Index cards (two per student) Highlighters (one per student)

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AOF Principles of FinanceLesson 3 Financial Intermediaries

Lesson StepsStep Min. Activity

CLASS PERIOD 1

1 20 Scenarios: Financial IntermediariesIn this activity, students apply what they learned in the previous lesson and begin thinking about some of the common functions and services of various financial intermediaries. It also focuses on the following college and career skills:

Demonstrating the ability to listen effectively Demonstrating teamwork and collaboration

Write the following list of financial intermediaries on the board:

Banks Thrifts (savings and loans and savings banks) Credit union Insurance companies Mutual funds Pension funds

Explain to the class that they are going to hear about some individuals who are in need of the services of a financial intermediary. This is another term for the financial institutions that they have been learning about. Intermediary means “to go between.” So a financial intermediary is an organization that is the middleman, the in-between, in a financial transaction. Have students form pairs and explain that they must work together to decide which financial intermediary would best meet the needs presented in the following scenarios.

Display the first slide from Teacher Resource 3.1, Scenarios: Financial Intermediaries (separate PowerPoint file), to the class, pausing before moving to each subsequent slide. Then read each scenario to the class, giving time between each reading for pairs to discuss their answer with each other. Invite pairs to share their responses with the class, and record their answers on the board.

Explain to the class that it’s okay if they are unsure about the correct answer to the question, because this will be the focus of the lesson. Explain to them that choosing a financial intermediary can be tricky and that in today’s lesson, students will have a better idea as to how they should go about selecting a financial intermediary that best meets their needs.

Note: Remind the class that while they are reading in the next activity they should think back to the scenarios that were just presented and decide if they would like to change any of their responses based upon their new knowledge.

2 30 Reading: Financial IntermediariesDuring this activity students are introduced to some of the most common functions and services provided by various financial intermediaries, laying the groundwork for further

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AOF Principles of FinanceLesson 3 Financial Intermediaries

Step Min. Activity

study of the subject. Students learn how financial intermediaries benefit individuals, businesses, and the economy.

Refer to Student Resource 3.1, Reading: Financial Intermediaries, and read and review the instructions with the class. Hand each student a highlighter and explain that they will have three tasks ahead of them during this activity. Students must:

Read the resource Highlight new words and ideas Underline two important phrases that will help them remember the meaning of the

word

Allow students 15–20 minutes to individually complete the reading and activity. Next, have them meet with their original partner from the previous activity and share with each other any new ideas and/or concepts that they highlighted. Pairs should also share at least one of their underlined phrases.

Next, have pairs think back to the scenarios that were read to them in the last activity. Display Teacher Resource 3.1, Scenarios: Financial Intermediaries (separate PowerPoint file), again for students to refer to. Ask students if they would like to change their response as to which financial intermediary best served each person and to discuss their reasons why or why not with their partner. Have pairs share their thoughts with the class.

Finally, pose the following question to the class:

Is it possible for there to be more than one correct answer for each scenario? Explain why or why not.

Explain that although many financial intermediaries like to design specific services and products that target a certain population, they also diversify, which means they offer a wider range of different services and products with the intention of creating a larger customer base. Students should realize that it’s possible for each scenario to have more than one answer to be correct (for example, insurance companies offer banking services), and this is a part of the complexity of choosing a financial intermediary that is best for you. The most important thing for students to remember is that being financially educated about the functions and services of specific financial intermediaries is a life skill that will help them to make educated adult financial choices in the future.

CLASS PERIOD 2

3 20 Think, Group, Share: CapitalUsing real-world examples, students are introduced to the concept of capital.

Place students in small groups and give each group several quotes or headlines from newspapers or magazines revolving around the subject of capital. Based on the headlines and quotes, instruct groups to make a prediction as to what the word capital means.

The following quotes can be used, or you can find current ones.

“Fed Officials Back Higher Capital: Increasing Levels for Major Institutions Is

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AOF Principles of FinanceLesson 3 Financial Intermediaries

Step Min. Activity

Viewed as Part of Solution to Too-Big-to-Fail Problem.” http://online.wsj.com/article/SB100 01424127887324763404578429052789418508.html

“Stocks Surge As Banks Get Capital” http://www.forbes.com/home/2008/10/28/briefing-afternoon-banks-markets-equity-cx_ss_1028markets36.html

Have students individually examine the quotes and jot down some ideas as to what they believe the word capital means. Next, instruct students to share their own ideas with the group.

Now that students have had a preliminary introduction to the concept of capital, explain to the class that capital refers to the financial resources (money or property) that are available for a business to use.

Next, give students the chance to create their own framework for understanding the term. Explain to the class that Defining Format is a strategy that will help them organize their thoughts about particular characteristics for the term. (See The NAF Learning Handbook for more information on this strategy.)

Explain that with this format, students will need to develop a category and three characteristics that relate to the term. Before students get started, review the example (on banks) given below.

Next, instruct the class to create a chart similar to the one below in their notebook.

Term Category Characteristics

A bank is a financial institution that:

1. helps people manage their money.

2. is regulated by the government.

3. provides depository and lending services.

Capital is a form of wealth that: 1.

2.

3.

Allow students some time to independently think of some characteristics. After a few minutes, tell the class to share their answers with a partner. At this point, students may add or delete any part of their responses based on what their partner has written. Have pairs share their characteristics with the class. As students are sharing, write

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AOF Principles of FinanceLesson 3 Financial Intermediaries

Step Min. Activity

down some of the common characteristics of the term capital that students have recorded.

Explain to the class that, as they will see in the following activity, capital is not only a crucial concept for financial intermediaries but also a critical concept for all businesses in general.

4 30 Reading: Capital and Its Importance to Financial IntermediariesIn this reading, students further their understanding of capital, realizing how important it is to financial intermediaries and all businesses in general.

Refer to Student Resource 3.2, Reading: Importance of Capital to Financial Intermediaries. Review the title and heading with the class and read the first paragraph together.

Next, explain to the class that they will be required to complete the rest of the reading independently and that they will get into groups to discuss what they learned. Hand out two index cards to each student before they begin reading. Explain to the class that while reading they must select two passages of particular interest and write a summary of the idea or concept on each index card. On the back of each card, the student must then write a response to the passage that was selected. Mention to the class that their responses could include:

A question A connection that they made to their own lives Something they didn’t really understand Something that they had a strong opinion about

Allow students time to complete the reading and the activity. Once they have completed their index cards, have them form groups of three or four and take turns sharing their responses (from the index cards) to the reading.

After a student reads his or her selected passage, the rest of the group gets an opportunity to respond to what was read. Remind students that whoever wrote the card always gets to have the last word by reading the reaction from his or her card. No one is allowed to respond to the comment after the author has read his or her response. Have groups continue in this fashion until every student has had a chance to read at least one index card.

End the activity by allowing groups to share any of their selected passages and/or comments with the whole class. In particular, ensure that any points of confusion are clarified. Encourage students to write down explanations that help them understand various concepts on their index cards.

CLASS PERIOD 3

5 50 Game: BluffStudents review what they have learned in this lesson by playing a game as preparation for the upcoming quiz. This activity focuses on the following college and

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AOF Principles of FinanceLesson 3 Financial Intermediaries

Step Min. Activity

career skill:

Demonstrating teamwork and collaboration

Before class begins, prepare a list of practice test questions based on Student Resources 3.1 and 3.2. You may wish to look at the actual quiz (Teacher Resource 3.2) for reference.

When class begins, display a sheet of chart paper for scorekeeping. Divide it into two columns labeled Team A and Team B.

Divide the class into two even teams, Team A and Team B. Each team will take turns answering a question that you read. Tell students that after you read each question to a team, all team members who think they know the correct answer should stand up. You will choose one of the standing team members to answer the question. If the team member gets the answer right, that team will earn one point for each team member who stood up, and it becomes the other team’s turn. If the team member gets the answer wrong, the team earns no points and it becomes the other team’s turn. The reason this game is called Bluff is because team members can stand up even if they do not know the correct answer and thus earn more points for their team. However, they risk being called on and causing their team to earn no points.

Begin play. Record points on the chart paper after each team’s turn.

Optional: Award bonus points to the winning team.

At the end of the class period, remind students that they will be taking a quiz on this content in the next class period. Ask them to review their notes and Student Resources 3.1 and 3.2 for homework.

CLASS PERIOD 4

6 20 Quiz: Financial Intermediaries and CapitalStudents take a quiz on financial intermediaries and capital.

Give students the quiz, Teacher Resource 3.2, Quiz: Financial Intermediaries and Capital. After 20 minutes, collect the quizzes. Let students know that they will review their answers immediately.

After the class period ends, assess the quizzes using Teacher Resource 3.3, Answer Key: Financial Intermediaries and Capital Quiz, using your preferred scoring method.

7 15 Review: Financial Intermediaries and Capital QuizStudents review the answers to the quiz.

Read the first section of the financial intermediaries table (commercial banks) out loud and ask for volunteers to share their answers. Use this opportunity to correct any misunderstandings. Repeat the process with the rest of the quiz questions.

8 15 Reflection: Key Learning Objective

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AOF Principles of FinanceLesson 3 Financial Intermediaries

Step Min. Activity

Students reflect on whether they met a specific learning objective for this lesson.

Prior to class, prepare to project Teacher Resource 3.4, Prompts: Learning Objective Reflection (separate PowerPoint slide), during this activity.

Note: If your students lack experience with reflecting on their learning or reflecting on whether they met a learning objective for a lesson, refer to Teacher Resource 3.5, Guide: Teaching Reflection. Allocate more time for this reflection activity in order to integrate more direct instruction and practice.

Write the following learning objective on the board:

Define capital and describe its importance to financial intermediaries

Project Teacher Resource 3.4, Prompts: Learning Objective Reflection (separate PowerPoint slide). Tell students to choose one of the prompts and think about it in connection with the learning objective on the board. They should then write their reflection in their notebook.

Give students a few minutes to write down their thoughts. Ask for a show of hands to see who chose the first prompt. Place these students in pairs or triads to compare their reflections. Do the same for each of the other prompts. Their task is to choose the reflection that is most complete, on topic, and thoughtful.

Ask a member of each group to share the reflection that the group feels best fits these criteria. Generate a brief class discussion to help students develop their metacognitive skills. Complete this activity by reminding students that this type of practice will help them when they have to complete professional self-evaluations in their internships or jobs. If your students are participating in NAFTrack Certification, it also prepares them for the reflection component of the culminating project.

Explain to students that in the next unit they will begin to look more closely at how they can manage their own money and work to build wealth and achieve their financial goals.

ExtensionsContent Enrichment

Have students bring closure to the vocabulary taxonomy they started in Lesson 1. Instruct students to spend five minutes adding any new terms that they have not yet included. Next, have students do a gallery walk to collect more terms from their classmates. Conduct a brief class review and discussion on the additions they made. Conclude by reminding students that they now have a resource for future assignments that will help them to remember and use new terminology.

Instruct students to look for current articles on the Internet, in newspapers, or in magazines that revolve around some of the key ideas that were studied in the lesson. For example, students could find articles that deal with some of the following topics: capital, regulation, financial intermediaries, and so forth. Have students complete the classic 5Ws activity (who, what, when, where, and why) for the information presented and then share their findings with the class.

Contact a local financial intermediary in your area and schedule a tour of the facility. Before the tour, have each student create one question that they could ask or research while on the tour.

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Students must find an answer to their question during their visit. Finally, have students write a thank-you card to the branch manager for supporting their visit.

Have students do research on banks and other financial intermediaries in their community. Put students in groups and give each group a “client profile” (e.g., a young married couple needs to get car insurance and renters’ insurance; a high school student needs to open an account to save for college) and then have them look for which financial institution(s) might be able to serve their client. Students can compare their answers with other groups’ answers.

STEM Integration Technology: Design a virtual field trip around the classroom with QR (quick response) codes

pointing to videos showcasing each type of financial intermediary discussed in the lesson. A QR is a two-dimensional barcode that is readable by smartphones and tablets with cameras. To understand the utility of these codes and to see how they work in a classroom, see “Twelve Ideas for Teaching with QR Codes” on Edutopia at http://www.edutopia.org/blog/QR-codes-teaching-andrew-miller. Generate your own codes for free using a site like https://bitly.com, www.qrcode-monkey.com, or Google QR Code Generator. Student devices require the appropriate reader software and are also available free from the iTunes App Store or Google Play.

Additional Cross-Curricular Ideas Social Studies: Have groups of students research the causes of the Savings and Loan Crisis of

the late 1980s and report their findings to the class. Students may further their investigations and compare and contrast the causes and effects of the Savings and Loan Crisis with the subprime mortgage crisis of 2007–2008.

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