Instructors Guide: Adult - Foundation

Financial Capability Curriculum

Instructors Guide

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ISBN: 978-0-9797853-2-0

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Table of Contents

FINANCIAL PSYCHOLOGY

LESSON TITLE LESSON DURATION ID (MINUTES) The Most Important Thing F1 10-30 How Does Financial Psychology Develop? F2 20-30 Where Did You Learn About Money? F3 20-40 Money & Emotions F4 20-30 Changing Your Financial Behavior F5 20-40 Dreams F6 10-40 Goals F7 10-40 Lifestyle Choices F8 20-30 Become a Life-Long Learner F9 10-20

Table of Contents

BUDGETING

LESSON TITLE LESSON DURATION ID (MINUTES) Wants vs. Needs B1 10-30 Money Management Styles B2 20-40 Can I Afford That: Vehicle B3 20-40 Can I Afford That: Renting B4 20-60 Let’s Learn to Budget B5 30-60

ACCOUNT MANAGEMENT

LESSON TITLE LESSON DURATION ID (MINUTES) Banking Basics A1 20-40 Banking Essentials A2 20-40 Debit Card v. Credit Card A3 10-30

CREDIT PROFILE

LESSON TITLE LESSON DURATION ID (MINUTES) What is Credit? C1 20-40 Credit History C2 20-40 Identity Theft C3 20-40 Table of Contents

LOANS & DEBT

LESSON DURATION LESSON TITLE ID (MINUTES) Good Debt v. Bad Debt L1 10-30 Cost & Benefits of College L2 20-30 Quantifying Your College Decision L3 20-40 Invest in Your Future L4 30-40 Funding College L5 30-40 How to Pay Off Debt L6 30-40 Car Loans L7 20-40 Loan Manager L8 20-50 Loan Qualification L9 10-30 Consequences of Default L10 20-30

Table of Contents

JOBS & CAREERS

LESSON TITLE LESSON DURATION ID (MINUTES) Identifying Passions J1 10-40 Career Changes J2 20-30 Resumes & Job Applications J3 30-120 Interviews J4 30-120 Growing & Shrinking Industries J5 20-30 Don't Get Lost In The Crowd J6 20-30 Prepare for Your Dream Job Today! J7 20-40 Networking in Your Field J8 20-30 Networking & Mentors J9 10-30 Table of Contents

ENTREPRENEURSHIP

LESSON DURATION LESSON TITLE ID (MINUTES) Be An Entrepreneur - Is It Right For You? E1 20-40 What is a Social Entrepreneur E2 20-40 Do You Have Entrepreneurial Mindset? E3 20-40 Internet-based Businesses E4 20-40 How to Start Your Internet Business E5 20-40 Calculated Risks E6 20-40 Creating a Social Enterprise! E7 20-40 Magazine Enterprise E8 20-40

ECONOMIC & GOVERNMENT INFLUENCES

LESSON TITLE LESSON DURATION ID (MINUTES) Taxes G1 20-50

Table of Contents

RISK MANAGEMENT & INSURANCE

LESSON DURATION LESSON TITLE ID (MINUTES) What's My Risk? R1 20-30 What is Insurance? R2 20-40 What Insurance Do I Need? The Basics R3 20-40 What Insurance Do I Need? Advanced R4 60-90 How Insurance Policies Work R5 20-40 Insurance Claims R6 20-40 How to Reduce Your Risk R7 20-30 Prepare for Disaster R8 20-40 Wills & Trusts R9 20-40

EVALUATING YOUR CURRENT RETIRMENT SITUATION

LESSON TITLE LESSON DURATION ID (MINUTES) Questions about Retirement S1 30-60 Retirement & Family S2 20-30 Retirement & Income S3 30-40 Retirement Plans S4 30-40 Table of Contents

INVESTMENTS

LESSON DURATION LESSON TITLE ID (MINUTES) Why People Invest V1 40-60

Introduction to Investing V2 20-30 Preparing to Invest V3 30-40 Compound Interest V4 30-60 Risk & Potential V5 10-20 Building a Team of Trusted Advisors V6 30-40 Types of Investments V7 30-45 The Stock Market V8 40-60 Investing in Real Estate V9 30-50 Investment Diversification V10 30-50 Investment Checklist V11 20-30

Financial Psychology

In this unit students will develop an understanding of how their financial psychology relates to achieving their financial and lifestyle goals. Students will explore these concepts by looking in-depth at how their personalities, goals, dreams, and emotions can affect their attitudes toward money.

Financial Psychology

LESSON DURATION LESSON TITLE ID (MINUTES) The Most Important Thing F1 10-30 How Does Financial Psychology Develop? F2 20-30 Where Did You Learn About Money? F3 20-40 Money & Emotions F4 20-30 Changing Your Financial Behavior F5 20-40 Dreams F6 10-40 Goals F7 10-40 Lifestyle Choices F8 20-30 Become a Life-Long Learner F9 10-20

Financial Psychology

The Most Important Thing

Duration  10-30 minutes

Lesson Overview  In this lesson, students will identify and recognize factors in their lives that have impact on their motivations around finances and their desire to pick up financial knowledge.

Big Idea  There’s a relationship between your values, emotions and personal finances.  Your financial traits and habits impact your finances.  Your values and emotions will influence your financial decisions  There are factors that influence your decisions.

Essential Questions At the end of the lesson, your students should be able to answer the following:  What motivates you to get money?  Why do these things motivate you to obtain money?  How does your motivation affect your desire to earn money?  Can your motivation for money affect your wants and needs in life?

Skills  To determine students’ motivating factors to become financially literate.

Vocabulary  Motivation — drive to action or incentive to do something.  Finances—Management of money and banking

Anticipatory Set Visually display this quote to students:

“Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.” ~Groucho Marx

Discuss the quote with students and ask them to share what they think it means. Have them write their answers in their student handbooks. Ask students to think about some things they dislike doing to facilitate discussion.

Explain that money gives us all kinds of choices. Say: “You could choose to hire someone to do the jobs you dislike, and then you in turn could use the time you freed up to do something you enjoy.”

F1 The Most Important Thing

Ask students to describe something they would choose not to do if they had all the money they desired. Discuss.

Lesson Explanation

Visually display the word “Motivation” to students. Then ask students to think about money. Ask: “What motivates you to obtain money?” Talk about their responses. For example, • Does their parents or children motivate them because they want to provide them with a better life? • Does the fact that they are affluent motivate them to stay that way? • Or does the notion that they don’t want to live in poverty anymore motivate them to work for more in life?

Ask: Is money is the real motivator, or is it what money can bring you that really drives you to pick up financial skills?

Read the examples below. Focus discussion on lifestyle, helping loved ones, free time, positive effect on emotions, and making the world a better place to live.

Explain how becoming motivated to get money so they can live a certain type of lifestyle plays a factor in their overall financial success.

SCENARIO1: JOHNNY Johnny lives in the city with his mother and three younger siblings. His mother works two jobs and struggles to pay their monthly expenses and buy food. At age 15, Johnny gets a job delivering newspapers in his neighborhood. He only earns $150 per month delivering papers. However, with his earnings he pays the electricity bill each month and saves money for his future. His motivation in life is not to have to worry about money. He is not concerned with being rich; rather, he just wants to have enough money so he doesn’t have to stress out about going to the grocery store, getting gas in the car, or having money for lunch. • What is Johnny’s financial motivation in life? • How will his motivation influence his lifestyle? • How do you think he will feel when he is financially comfortable?

SCENARIO 2: SAM Sam lives in a mansion on the west side of town. He has always had everything he could ever want. His parents own three coffee shops and two restaurants and Sam has never worked a day in his life. When he graduates from high school he plans to attend Princeton University. After college graduation, he plans to live on the money in his trust fund. His motivation in life is to have fun and not worry about anything. He knows money will always be there.

F1 Financial Psychology

• How can Sam’s personal life motivation affect his finances later in life? Talk about how these scenarios relate to motivation, and how motivation affects one’s desire for money. Highlight the fact that people’s decisions in life can affect their finances and that they are responsible for those decisions. Talk about how students can use their motivation for money to determine their wants and needs in life.

Share the example of Bill and Melinda Gates, who are billionaires. If they chose, they could never work another day in their lives. But they found motivation in helping people. They started a foundation to fight malaria and better the world.

• What motivates Bill and Melinda Gates? • If you were in their shoes, would you be motivated?

Lesson Activity: Money Motivation Instruct Students to complete the Belief Statement in the Money Motivation Activity in the Student Guide.

State the following to the whole group: “Your motivation to acquire money plays an important factor in your overall financial success, and developing financial skills supports both your motivation and the attainment of your financial goals. Developing strong financial skills allows you to:

• Live a certain lifestyle; • Help people you care about; • Experience the freedom to do what you want, when you want to do it; • Live without the stressors and negative emotions often associated with financial struggles; and • Make a positive contribution to society.” Explain that they are now going to learn a valuable technique that salespeople use to close a sale. It’s called the “Ben Franklin close,” and they are going to use this technique to sell themselves on learning about money.

Say: “The Ben Franklin close helps people logically evaluate the pros and cons of the action you want them to take.”

On the left of the T, have them write their “Reasons For” learning about money and on the right have them write their “Reasons Against.”

• Now give students a few minutes to write their “Reasons For” learning about money. Ask a few students to volunteer to share some “Reasons For.”

F1 The Most Important Thing

• Next have students write down their “Reasons Against.” Ask a few students to share their thoughts. (You’ll probably find that most of them are unable to think of many “Reasons Against.”) • Get students’ agreement that the “Reasons For” far outweigh the “Reasons Against.” Say: “The close is an essential element of getting people to take action. You just ‘sold yourselves’ on gaining financial skills.”

Wrap up the Money Motivation Activity with the following statement: “So we all agree that developing financial skills is a very important part of achieving the life goals we set for ourselves.”

Lesson Questions 1. What is the most important factor determining your overall financial success? a. Your current net worth. b. Accumulation of material goods. c. Developing financial skills. d. Freedom from want. 2. Which of the following supports your motivation to acquire money and attain your financial goals? a. Your dreams and personal goals. b. Graduating from school. c. Living without negative emotions. d. Living without stressors. 3. What is motivation? a. The drive to do something. b. Drive to do nothing. c. Lack of energy. d. None of the above.

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Lesson Review  Instruct participants to complete the Essential Questions in the Student Guide.  Obtain a firm acknowledgement from each participant that developing sound financial skills is vitally important.  Discuss the impact money has on people’s lives. Draw special attention to lifestyle, family, friends, and giving back. Then ask the class to share things they will miss out on if they don’t handle their money situations.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks  Reiterate the importance of knowing what motivates you in life.  Understanding motivation leads to financial literacy because motivation will shape how they save and spend money.

How Does Financial Psychology Develop?

Duration  20-30 minutes

Lesson Overview  In this lesson, students will learn how financial beliefs and behaviors are related to the general psychological principles of needs, wants, and environmental influences.

Big Idea  Your ability to change your behavior impacts your financial wellbeing.  There’s a relationship between your values, emotions and personal finances.  Your financial traits and habits impact your finances.  Your values and emotions will influence your financial decisions.  There are factors that influence your decisions.

Essential Questions At the end of the lesson, your students should be able to answer the following:  How does Maslow’s hierarchy of needs relate to an individual’s financial attitudes and behavior and motivate you to get money?  How does the concept of human conditioning relate to an individual’s financial attitudes and behavior?  What level of Maslow’s hierarchy of need do you identify with in terms of your financial life?  How has human conditioning shaped your financial life?

Skills  Assess how different emotional states can lead to different actions being taken.  You can assess external information to make informed decisions that align with your goals.

Vocabulary  Hierarchy of needs  Physiological needs  Security needs  Love and belonging needs  Esteem needs  Self-actualizing needs  Human conditioning

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Anticipatory Set Ask students to complete the Warm-up Activity in their Student Guides. Give the following instructions:

• Pretend you have just received $1,000 to spend any way you please, with no strings attached. • Take a few minutes to write down what you would do with the money. • After you’ve figured out how you’d spend the $1,000, take a few minutes to explain why you’d spend it that way. For example,

o If you’re going to put it all in savings, what are you saving for? o If you’re going to buy gifts, what’s the occasion?” MASLOW’S HIERARCHY OF NEEDS Self-Actualizing Needs. The highest level of Maslow’s Hierarchy of Needs is self-actualizing. This is when people focus on personal growth, legacy, and making a positive difference. Esteem Needs. Fourth on Maslow’s Hierarchy of Needs includes the desire for personal achievement, accomplishment, status, and earning respect. Love and Belonging Needs. These social needs include the desire to be accepted and loved, and share affection. Security Needs. The next level of Maslow’s Hierarchy of Needs includes the desire for safety and security. Physiological Needs. Maslow believed that needs such as food, water, air, and sleep are the most basic, fundamental, and instinctive. All other needs described in this hierarchy become secondary until core physiological needs are met.

Developed by Abraham Maslow in his 1943 paper A Theory of Human Motivation. Please note: This coursework is not validating Maslow’s theory. However, it gives us a good framework to understand the impact of finances on our lives.

Lesson Explanation Ask students to review the graphic of Maslow’s Hierarchy of Needs in the Student Guide. To facilitate in-class instruction, ask student volunteers to give examples from their own lives demonstrating each type of need.

Tell students: “Psychologist Abraham Maslow developed his Hierarchy of Needs theory in 1943. As we can see from the pyramid graphic, according to Maslow, the higher people climb up the needs hierarchy, the better their lives will be.

How Does Financial Psychology Develop?

Now, where does a person fall on the pyramid when he or she is suffering from heavy financial stress? If you’re about to lose your home, you’re probably not thinking about self-actualization. Financial issues place you in the lower levels of need. You must address the issues before you can address the higher levels of need.

Tell students to take a minute to look over their answers from the earlier activity. • When you had $1,000 to spend, how did you spend it? • What need did that money fulfill? • If you were relieved to have money for electricity, gas, and rent your financial life probably centers on your physiological needs right now. • If you decided to save that $1,000 for retirement, you were fulfilling a security need. For in-class instruction, ask student volunteers to share examples (if they feel comfortable doing so.)

Say, “Now that we’ve seen how finances can fulfill different psychological needs, let’s think about how we’ve learned to use money to fill those needs in our lives. We’re going to step away from Maslow for a minute and talk about human conditioning.”

Humans are conditioned to move away from pain and toward pleasure. That makes sense, right? Let’s think about that on a financial basis. • If you take pleasure in your daily latte or your monthly manicure, it’s easy to justify spending your money on those things. • If your favorite place to be is the beach, it’s probably easier for you to save money to spend on gas and a rental board and boardwalk fries for your next trip to the beach. These all are financial decisions that move us toward pleasure—we’re using money to get what we want.

We also make financial decisions that avoid pain. The positive aspects of pain avoidance are things like using money to buy insurance to avoid the future pain of paying medical bills out-of- pocket; or putting money in savings to avoid the fear that comes when you get your paycheck and it’s less than you need to cover monthly expenses. The negative aspects come in when we avoid spending money wisely because it’s not as much fun as spending money on fun. That’s how we get into situations where we spend $4 a day on coffee but don’t have anything saved for retirement.

Often the difference between making smart financial decisions and foolish financial decisions comes down to whether we’re conditioned to think about money in terms of long-term pain and pleasure, or short-term pain and pleasure.

F2 Financial Psychology

• Someone who knows from life experience that it’s painful not to have enough money for rent or food or medicine will probably take steps to avoid that pain by saving, planning, and thinking about long-term stability. • Someone who has always been fairly comfortable in terms of meeting their physiological and security needs but uses money to reward themselves or loved ones—that is, someone who’s always used money to meet love and belonging needs—will find it pretty painful to cut back on spending money to buy gifts. Tell students, “Think back to the way you spent your imaginary $1,000 at the beginning of the lesson. What were your motivations? Avoiding pain, seeking pleasure, or both?”

Lesson Activity: Applying Maslow’s Needs Hierarchy

Instruct Students to go to the Applying Maslow’s Needs Hierarchy Activity in the Student Guide and reach each scenario. Then ask the class: • What level of need in Maslow’s hierarchy is each person trying to meet? • What do you think is motivating the person—seeking pleasure or avoiding pain?" Facilitate discussion about motivation and how it relates to a person’s needs.

• Clarissa’s hours were just cut at work. She has enough savings to make her rent payment this month, but the loss of salary will mean that she will have to choose whether to pay her electric bill or her phone bill. Clarissa cancels plans with friends to go to a concert and takes a weekend job babysitting to earn extra money. What level of Maslow's hierarchy of needs is she seeking to fulfill? Would you say Clarissa is seeking pleasure or avoiding pain?

• Every year, Bill’s neighborhood goes all-out on holiday celebrations. Every neighbor participates in a house-decorating contest, a cookie exchange, a White Elephant gift exchange, and the block party. Only one neighbor has ever opted out, and everyone gossiped about her at the block party that year. Bill doesn’t particularly enjoy the holidays, but he still plans to spend over $500 on neighborhood events this holiday season. What level of Maslow’s hierarchy of needs is he seeking to fulfill? Would you say Bill is seeking pleasure or avoiding pain?

• Melody is planning to start an after-school program teaching dance to underprivileged children. She hopes the program will help inspire children to work hard and find a passion for creative expression, just like she did when she started taking dancing lessons at age four. Now that Melody has a successful dance studio and a booming business, she

How Does Financial Psychology Develop?

wants to pass the same opportunities along to others. What level of Maslow’s hierarchy of needs is she seeking to fulfill? Would you say Melody is seeking pleasure or avoiding pain?

• When Damien was growing up, his parents lived paycheck-to-paycheck. He remembers not having enough money for new clothes or shoes, and even a few times when they didn’t have enough to eat. Now that Damien is an adult, he has a good salary and a stable job. However, Damien always worries about what would happen if he lost his job. He still buys everything used and puts as much as he can into savings, just in case. What level of Maslow’s hierarchy of needs is he seeking to fulfill? Would you say Damien is seeking pleasure or avoiding pain?

Lesson Questions 1. Which statement best describes Maslow’s Hierarchy of Needs theory? a. The rise to the top is slow. b. The rise to the top is rapid. c. The slower the rise, the happier the person’s life will be. d. The higher people climb, the better their lives will be. 2. Which of the following statements is NOT true about human conditioning? a. Humans move toward pleasure. b. Humans move away from pain. c. Humans make financial decisions based on logic rather than emotions. d. Humans usually make smart financial decisions by considering short-term pain and pleasure. 3. Maslow’s hierarchy of needs suggests that basic needs, like food, water, and shelter, must be satisfied before higher level needs, such as esteem and self-actualization. a. True b. False

F2 Financial Psychology

4. Humans are conditioned to _____ pleasure and _____ pain. a. enjoy; dislike b. accept; reject c. seek; avoid d. take; give

Lesson Review  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

F2 Where Did You Learn About Money?

Where Did You Learn about Money?

Duration  20-40 minutes

Lesson Overview  In this lesson, students will learn Lev Vygotsky’s theory of social impact demonstrating how family, society, and culture play a role in the development of an individual’s financial psychology. Students will identify factors that have influenced and reinforced their own mindsets about money.

Big Idea  External factors can impact your financial decisions.  Not all financial information is accurate or truthful.  There are marketing messages that are influencing your spending.  There are factors that influence your decisions.

Essential Questions At the end of the lesson, your students should be able to answer the following:  How does culture influence an individual’s attitudes toward money?  What is a More Knowledgeable Other in the context of financial psychology?  Who would you consider to be a More Knowledgeable Other in your personal financial life?  What have your More Knowledgeable Others taught you about finances, directly or indirectly?

Skills  External factors can impact your financial decisions.  There are organizations and individuals that are influencing your spending.

Vocabulary  More Knowledgeable Other (MKO)  Social exchange

Anticipatory Set

Ask students the following questions: • Who were your role models for saving and spending? • Who do you look to for advice about financial planning? • If you’re on the fence between buying something or not, what sways you?

F3 Financial Psychology

Instruct the students to complete the Warm-Up Activity in the Student Guide, listing the five top influences in their financial life.

Lesson Explanation Lev Vygotsky theorized that social interactions inform an individual’s cognitive development. 1 Rather than gaining greater understanding or more sophisticated thought processes simply by aging or figuring things out on our own, Vygotsky believed that we learn by first interacting with others and then internalizing those skills to use ourselves. Vygotsky also believed that learning was strongly influenced by a More Knowledgeable Other, or MKO. An MKO could be a parent, teacher, friend, or peer — anyone with a more sophisticated knowledge and understanding of the information from whom the individual could learn.

How does this theory relate to financial psychology?

Well, using money is a social exchange. For an individual living completely outside of society, money is nothing more than pieces of paper and metal discs. It’s worthless when you have no one with whom to use it. But if we add in another person, suddenly we can use money to buy and sell—to get things we need and want. Since money only has meaning in the context of a society, it makes sense to look at what our society teaches us about money and how we use it.

• So who teaches us about money? • Who do we consider to be our MKO of finances? Very few people receive financial education in school. Most young people rely on their parents to teach them money skills, but unfortunately few parents actually discuss money with their children. Instead, we pick up information about how we should use money by observing others; and some of the attitudes and practices we observe aren’t the best. At other times we seek out MKOs in the wrong places—like salespeople or friends.

• A salesman’s commission is based on getting you to choose his product. Do you really trust his motives? • And the guy in the next cubicle at work probably is not a financial professional. Why would you ask him for investment advice? The key to your own financial psychology is to use your money in a way consistent with your values, beliefs, and lifestyle. If your entire family gathers for a large holiday celebration every year and you wouldn’t miss it for the world, it makes sense to include the travel costs to attend that celebration in your budget. When you choose an MKO, make sure that person supports the

1 http://www.learning-therories.com/vygotskys-social-learning-theory.html

F3 Where Did You Learn About Money?

same lifestyle and values you have. It doesn’t make sense to choose a popular book on financial management as your MKO if the book espouses complete financial independence and autonomy and you place highest value on a cultural tradition of providing for relatives who are elderly, sick or falling on hard times.

• We also learn about money from more subtle societal messages. Ask, “Who’s heard the phrase, keeping up with the Joneses?” More than likely, nobody ever pulled you aside and said, “Hey, if you’re buying a car, you’re going to want to make sure it’s just as nice as your neighbor’s—maybe even nicer!” But you probably picked that message up through observation. • Then there’s advertising. Keep in mind that advertisers use techniques that work to sell their products. How often have you seen an ad that says, “If it’s a priority for your family’s budget, a trip to our amusement park is one of several equally-attractive options. However, the park will still be here next year if you can’t afford it now.’ Not too often, right? Advertisements play on social values that encourage us to buy. They encourage us to get things endorsed by celebrities, things that will make other people envious of us, and things that are fun and exciting to have.

Lesson Activity: Evaluating MKOs

Tell the student to look back at their list of top five financial influencers, and ask the following: • Are you happy to have these MKOs? • What have they taught you? • Are they living the lifestyle you want your finances to earn for you? For in-class instruction, ask students to share answers to these questions (if they are comfortable doing so.)

F3 Financial Psychology

Lesson Questions 1. Which of the following might be a More Knowledgeable Other (MKO)? a. A parent with financial expertise. b. A peer with financial expertise. c. Neither A nor B. d. Both A and B. 2. How do most people learn about money? a. Through trial and error b. In college. c. From their siblings. d. In grade school. 3. When choosing a More Knowledgeable Other to guide your financial life, you should choose someone who: a. Is a member of your peer group. b. Is a qualified salesperson. c. Has the same lifestyle and values. d. Has a background in financial psychology.

Lesson Review  Tell students that we don’t learn about finances in a vacuum. Money is a social tool, and our attitudes, beliefs, and practices are heavily influenced by society. We all look to More Knowledgeable Others to inform our financial lives. The question is: are the MKOs we’ve chosen living with financial values that are consistent with the lifestyles we want for ourselves?  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

F3 Money & Emotions

Money & Emotions

Duration  20-30 minutes

Lesson Overview  In this lesson, students will learn how emotions and money are interconnected and will develop an understanding of how one can affect the other.

Big Idea  There’s a relationship between your values, emotions and personal finances.  Your values and emotions will influence your financial decisions.  There are factors that influence your decisions.  Financial decisions impact your future.  Goals impact your finances.

Essential Questions At the end of the lesson, your students should be able to answer the following:  How does my financial situation affect my emotions?  How do my emotions affect my financial situation?  Why is it important to know how money and emotions affect each other?

Skills  Students will identify the correlation between money and emotions, and will learn to recognize differences and similarities.

Vocabulary  Wheel of Emotions

Anticipatory Set

Read the following excerpt aloud: • You are at the mall with your friends. You only have $10 cash. You want to go to lunch with your friends but the cheapest item on the restaurant menu costs $15.

Instruct students to write the answer in the Warm-Up Activity in the Student Guide. • Make sure students only focus on how this scenario makes them feel. • They do not need to try to solve the dilemma. • Help them concentrate on feelings. Once they have completed the question, talk about their answers as a class. Focus on the feelings.

F4 Financial Psychology

Lesson Explanation Say: “Let’s talk about all the emotions involved with money and making financial decisions. Robert Plutchik’s Wheel of Emotions theory says there are basically eight emotions:

1. Trust → this also includes admiration and acceptance. 2. Fear → the feeling of being afraid, shocked, or scared. 3. Surprise → how you feel when something unexpected happens. 4. Sadness → feeling sad. Other words that describe sadness are sorrow, grief, and depression. 5. Disgust → feeling something is wrong or dirty. 6. Anger → feeling angry or enraged. 7. Anticipation → the sense of looking forward positively to something which is going to happen. 8. Joy → feeling happy, glad. Which of these eight emotions would you say are involved in financial decisions?

Explain how feelings relate to finances: • Describe how money can evoke any of these feelings depending on the financial situation. • For example: “If a person has a lot of money they may feel happiness and joy, where as a person who does not may feel stress and anxiety about not being able to pay their bills. There are, however, many unhappy wealthy people who are solely focused on money and miss out on time with friends, family, and life experiences because they were so focused on achieving their financial goals.” Talk about why it’s important to identify feelings and why they need to be aware of their emotions toward money as they develop their own personal financial literacy.

Discuss the fact that one of the main reasons why relationships and marriages fail is because of finances and failure to communicate about money.

F4 Money & Emotions

• Ask how they would feel if someone they were close to spent money on luxury items instead of bills, or vice versa. • This helps illustrate the concept of the correlation between relationships and finances.

Relate how emotions and money can greatly affect one’s personal health. • Ask students if they think it is healthy to constantly live under stress. • Tell them how a person experiencing stress or anxiety tends to have an elevated heart rate, which is unhealthy.

o When people are in stressful situations or carry anxiety they often neglect other areas of their life that help maintain good health—like exercise, good nutrition, and sleep. Now that students have identified how emotions and money are connected, they need to understand how to avoid negative emotions toward money.

• Ask students how they can avoid having negative feelings towards money. • Facilitate discussion, bringing in the following points when appropriate:

o Set up a savings and spending plan to avoid undue stress and anxiety. This will help you avoid not having money or relying on credit in financial emergencies. o Only spend what you have and develop a lifestyle that supports spending within your means. o Adjust your lifestyle to your means.

Lesson Activity: How Do You Feel About That?

Direct student to the How Do You Feel about That Activity in the Student Guide. • Divide students into four groups:

o Group A has all the money they want. o Group B has enough money to feel comfortable in an average middle-class lifestyle. o Group C is just barely getting by. o Group D is broke. • Have each group address the three scenarios described below using a skit/role-play activity. Give minimal direction to allow for student creativity. Make sure they answer the question about how they would feel in each of the three situations. SCENARIOS 1. Your girlfriend or boyfriend wants to go out for a nice dinner to celebrate your anniversary. 2. All your friends are taking a trip to Costa Rica for a week.

F4 Financial Psychology

3. A close relative is graduating from college and you want to buy her a great gift to honor her accomplishment. • Give students 10 minutes to plan their skits. • Have students perform their skits for the class.

Lesson Questions 1. Which of the following emotions could influence a person to make an incorrect financial decision? a. Fear b. Joy c. Sadness d. All of the above. 2. How can you avoid having negative feelings about money? a. Delay setting up a savings plan to avoid stress. b. Delay setting up a spending plan to avoid arguments. c. Think about your dreams and hope everything works out. d. Only spend the money you have. 3. Cultural values have little effect on the formation of an individual’s lifestyle and financial choices. a. True b. False 4. My personal emotions can be affected by my financial situation. a. True b. False

Lesson Review  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks  Reiterate the importance of understanding how money and emotions relate to each other.

F4 Changing Your Behavior

Changing Your Financial Behavior

Duration  20-40 minutes

Lesson Overview  In this lesson, students will learn how the Stages of Change model can be applied to modify their financial decision-making.

Essential Questions At the end of the lesson, your students should be able to answer the following:  What are the Stages of Change according to the Transtheoretical Model of Behavior Change?  What stage of change best describes your current approach to pursuing financial education and changing your financial habits?  How do you plan to move toward the next stage of change in your financial life?

Skills  Students will apply the Stages of Change model in their own financial decision-making process.

Vocabulary  Pre-contemplation  Contemplation  Preparation  Action  Maintenance  Termination

F5 Financial Psychology

Anticipatory Set Ask students to check the box next to the stage of change they feel best describes their current approach to pursuing financial education and change.

Pre-Contemplation. People at this stage have no intent to take action in the near future. Many are unaware even that their behavior is problematic.

Contemplation. Those in the contemplation stage are beginning to recognize that their behavior may be causing problems. They’ve begun looking at the benefits and drawbacks of their continued actions, and are considering the possibility of change.

Preparation. People who have reached the preparation stage have developed intentions to act. Procrastination can delay their movement into the next phase indefinitely.

Action. By the action stage people have made some modifications to their behaviors and lifestyles. Follow-up education can be helpful to keep momentum.

Maintenance. Those who reach the maintenance stage have changed their behaviors and have a plan to maintain them. Preventing relapse into past negative financial behavior is essential.

Termination. When people reach the termination stage, positive behavior change is in place and they’ve moved beyond any temptation to relapse into the negative choices of the past.

Pre- Contemplation Contemplation Preparation Action Maintenance Termination

Lesson Activity: Time for a Change Direct the students to the Time for a Change Activity in the Student Guide and read the scenario aloud. Ask students to respond to each question about the stage of change demonstrated at each point in the scenario.

F5 Changing Your Behavior

SCENARIO Leona is a college freshman. When she was growing up, her parents gave her spending money whenever she asked for it and required that she volunteer twice a week to gain an appreciation for working and serving others.

Leona has her first job working at the campus bookstore. When Leona gets her paycheck every other week, she plans to save some and spend the rest on pizza, movies, and shopping. However, things keep coming up that she didn’t budget for, and Leona ends up spending the money she meant to save on a new dress for a party, a concert with friends, and a trip to an amusement park. At the end of the first semester, Leona realizes she has no savings at all.

Leona plans to go on a ski trip with her friends next summer. Her parents say that she can go, but she must fund the trip herself since she now has a job. Leona realizes that in order to go on the trip, she must save half of her earnings from each paycheck next semester.

Leona decides she would rather go on the skiing trip than spend the money on smaller treats every weekend. Leona makes a plan to save 50% of her earnings starting with her very next paycheck. It is hard at first, when Leona has to eat leftovers instead of ordering pizza or when she chooses not to buy new jewelry or accessories. However, Leona continues to think about how much fun the ski trip will be. When her mind wanders at work or she imagines how much fun it would be to blow off steam over the weekend, she refocuses on the ski trip and imagines how much more fun this goal will be than a shorter-term reward.

Leona makes a point of depositing her savings as soon as she cashes her paycheck. After a month, saving becomes a habit.

By the end of the semester, Leona has reached her savings goal and goes on the ski trip with her friends. She plans to have a regular but more modest savings plan next year.

• Engage in a group discussion about each stage, pausing to review the definition as necessary and reach the answer as a group. Explain to students how we can use the stages of change to implement changes to our own financial behavior. These can be big-picture changes like redefining our perspective on money, or small changes like making a savings goal.

Ask the students for suggestions of a financial behavior change. • Make sure the suggestion is stated as a clear goal such as, “I will save $5 a week.”

F5 Financial Psychology

• Talk through each step in the stages of change model. • Discuss the process using the following questions to guide discussion of each stage of change.

o In the pre-contemplation stage, how would this person behave? o How would this person reach the contemplation stage? o What preparation would this person have to have in order to make this change? o What action will be required? o How will this person maintain the changed behavior? o Finally, how will this person know that the behavior has been changed?

Lesson Activity: Time for a Change 2 Ask students to identify the stages of change in the Time for a Change 2 Activity in the Student Guide. The list below is in order for each stage. The list in the student guide has been randomized.

1. I have a personal goal of increasing my savings for retirement. Prior to setting this goal — in my pre-contemplation stage — I just had the minimum amount taken out of my paycheck and funneled right into my 401k. I figured I had time to think about it later. 2. When my parents retired I realized that I needed to think seriously about what kind of lifestyle I wanted after retirement and how much I needed to save. That observation and realization was my contemplation stage. I knew I needed to make a change to my current behavior. 3. I read a few articles on finance blogs and talked to my parents, but everyone seemed to recommend something different. I felt really confused and put off thinking about it for a few weeks. Finally I made an appointment at my bank to talk with a financial planner about my finances, my retirement goals, and how to build up the savings I needed to make that happen. She suggested that I keep my current plan of investing in my 401k through work, but add an aggressive stock and investment plan on the side. All of that— doing my research, procrastinating, and making the appointment—counts as my preparation stage. I hadn’t made any change to my retirement savings, but I was preparing to make a change. 4. I invested a lump sum of money and will continue to re-invest my dividends in more stock. That was the action I took, and I think it was the right action for me to take on this issue. 5. I'm going to admit that sometimes it was hard in the beginning to get my statement of how much my stock had earned and keep reinvesting that money. There were other things I might like to spend the money on now, and sometimes I need to remind myself that I already have a plan for that money. That’s my maintenance stage. I’m maintaining

F5 Changing Your Behavior

my behavior by reminding myself why I’m doing what I’m doing, and staying motivated to keep going. 6. I got used to the idea and now I feel more relaxed and happy with the direction I’m going toward retirement. I don’t need to remind myself to keep the money where it is or why it’s important. This is the termination stage. The change is made, and I couldn’t be happier.

Lesson Questions 1. What is the first stage of change according to the Transtheoretical Model of Behavior Change? a. Preparation b. Pre-contemplation c. Maintenance d. Contemplation 2. You are at which stage of change when you have a plan for your money, but still need to remind yourself not to spend money on things you would like right now? a. Preparation b. Action c. Maintenance d. Termination 3. An individual at the “Termination” stage of change a. Has taken no action to change his or her behavior. b. Has successfully changed his or her behavior and is no longer tempted to revert back to previous habits. c. Has tried and failed to change his or her behavior. d. Has considered a behavior change and decided it is not in his or her best interest. 4. Which of the following stages in the Transtheoretical Model of Behavior Change best describes an individual who is considering changing his/her savings plan from the current model to a more aggressive model? a. Pre-contemplation b. Contemplation c. Preparation d. Action

F5 Financial Psychology

Lesson Review  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

F5 Dreams

Dreams

Duration  10-40 minutes

Lesson Overview  In this lesson, students will explore their personal dreams and learn the effects of lifestyle choices on achieving those dreams. They will understand how money is related to their lifestyle choices, either directly or indirectly.

Big Idea  Goals impact your finances.  There are tools and techniques to help you set and prioritize your financial goals.

Essential Questions  What are two ways that money can affect your dreams?  What can you do to ensure that you achieve your dreams, regardless of money?

Skills  Establish the benefits and consequences of learning financial intelligence.

Vocabulary  Financial — of, relating to, or involving money.  Consequence — the result of a cause or choice.  Dream — a cherished hope, ambition, or aspiration.

Anticipatory Set

Instruct participants to go to the Warm-up Activity in the Student Guide.

When the participants are finished, allow each participant time to share a few of his/her responses with the whole group. Seize the opportunity to connect with participants by sharing one of your dreams.

Close this activity by playing video F6 - 10 Year Reunion. • Facilitate discussion about the video. • Ask: “How can money help you avoid regrets and allow you to live the lifestyle you want?”

F6 Financial Psychology

Lesson Explanation Explain to students that in order for them to achieve the dreams they talked about in the anticipatory set, they must make certain lifestyle choices. Illustrate this concept by reading the following narrative.

In high school Tom always dreamed about surfing the best breaks in the world. He usually went to lunch with his best friend Vince and some other close friends, and almost every day he brought a surf magazine along. He would point to the pictures and tell his friends, “I’m going to surf in all these locations around the world.” After graduation Vince and Tom didn’t see each other very often, but they did reconnect at their 10-year class reunion. They were excited to see each other—laughing, joking around—it felt like no time at all had passed. Then Vince asked Tom about his travels and Tom got sad. He said, “I got in some debt, bought a truck, and had to work so I never went anywhere.” Vince was saddened to hear that Tom had missed out on his dream.

It’s never too late to recapture your dreams. But Tom gave up. Many of you have dreams. • What do you picture for your future? • You don’t have to know exactly, but what are some things you like that you want to spend more time doing? • Would you rather work every day or are there other things you want to do? When you have your money handled right you can do the things you want when you want to do them. In fact, every day can feel like the first day of vacation. You know what that feels like; think back to your last vacation. I always woke up excited because I could hang out with whoever I wanted and call my own shots. How would it feel if you could spend your whole life doing what you want?

• Discuss the story and ask students to explain how it makes them feel. • Talk about how lifestyle choices affect their dreams and how money plays a role. If you prefer, you may create your own illustration. If you share a personal story, these guidelines may help.

• Connecting with your students on a personal level builds trust and camaraderie. When you build student trust, you help them connect with you on another level and ultimately learn more.

o Share a lifestyle want that you or a friend really had.

F6 Dreams

o Share a financial mistake you made and its consequences. o How did it make you feel? Share what it felt like to miss out on something or other consequences. o Compare that feeling with the potential positive outcomes if you had managed your money right.

Lesson Activity: Dreams Have students complete the questions in the Dreams Activity in their Student Guide:

• Write down at least one dream you want to complete in the next 1-2 years. • Write down a dream you want to accomplish within 5 - 10 years. • Tell us why each one is a dream.

Motivate students with the following questions: Is your dream … • to go the beach twice a week? • to skydive? • to get a great dress for a special occasion? • to start a business? Once they have completed the question, discuss their dreams as a class. Share a dream of your own. Talk about what they must do to achieve their dreams.

Lesson Questions 1. How do you achieve your dreams? a. Make lifestyle choices that align with your goals. b. Do what you enjoy. c. Live life to the fullest. d. Share your ideas/goals with others. 2. If you missed out on a dream, you should _____. a. Accept defeat. b. Not worry about it. c. Make an effort to work toward that dream. d. Hope you will have another chance.

F6 Financial Psychology

3. Developing your financial skills… a. Places you in a position to help your loved ones. b. Gives you the ability to pursue your passions. c. Can help you make a positive difference in the world. d. All of the above.

Lesson Review  Ask students to share their dreams with the class. Have them talk about what lifestyles they need to accomplish those dream.  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks  Reiterate the importance of making the right choices to achieve one’s dreams.

F6 Goals

Goals

Duration  10-40 minutes

Lesson Overview  In this lesson, students will set good goals that are aligned with their personal dreams. They will learn how financial knowledge relates to the ability to achieve lifestyle goals.

Big Idea  Goals impact your finances.  There are tools and techniques to help you set and prioritize your financial goals.  There are methods to setting and accomplishing personal financial goals.

Essential Questions  How are goals and dreams related?  What do goals have to do with finances?  What is the importance of setting goals to reach your dreams?

Skills  Establish the benefits and consequences of learning financial intelligence.

Vocabulary  Goal — specific and achievable objective.  Consequence — the result of a cause or choice.

Anticipatory Set

Instruct students to answer the following questions in the Warm-Up Activity in the Student Guide. Allow them about five minutes to complete their answers. • What is a goal? • What is the difference between a goal and a dream?

Discuss their answers as a class. Explain that goals are essentially a person’s dreams that are written down with a detailed plan for achieving them. Most people have dreams; very few have specific plans for achieving them.

Facilitate a discussion about the differences between dreams and goals but how they are related to each other.

F7 Financial Psychology

Lesson Explanation Discuss with students the importance of setting goals and determining steps to achieve them.

Explain that in life or with their finances, if they set a goal it is important to work toward achieving that goal no matter how long it takes. Provide the following example:

• My goal is to purchase a car in 2 years. o This month: I’ll get a rough idea on how much I need to save; look at cars I might want; and find out how much I may need for a down payment. o Next month: I’ll create a savings plan so I can set aside money each month. o Within 6 months: I’ll learn about credit so I can qualify for a loan. o This year: I’ll find out how much insurance and registration will cost per month. Review with the class how to set goals that will help them achieve their dreams.

HOW TO SET GOALS TO ACHIEVE YOUR DREAMS

Daydream about how you want to live your life and the lifestyle that you picture for yourself.

Get these daydreams down in writing — just write. Do not judge.

Organize your goals on paper by the date you want to accomplish them.

Create a rough plan to accomplish your goals. Review your goals often — every day would be excellent! See it. Believe it. And think about achieving your goals.

Lesson Activity: I Want It! Have students complete the I Want It! Activity in the Student Guide.

• Ask students to write down at least one lifestyle and financial goal that they want to complete and then plan what they will do at each of the goal time frames listed in their workbooks: O This month O Next month O Within 6 months O This year O Next year O Two years from now O In five years O Ten years O Twenty-five years

F7 Goals

Discuss goals as a class. Share one of your own dreams with the students. Talk about what students must do in order to achieve their dreams. Help students to complete the activity as needed and then follow up in the lesson review section.

Lesson Explanation Ask students what’s standing between them and their dreams, their future success. The answer can be NOTHING — if they set goals and make an actionable plan for achieving them! Successful people have written goals. You will achieve a higher percentage of your goals by imagining the successful achievement of those goals. When you write your goals and use mental imagery to focus your thinking, you can actually rewire your brain so the neurons form new connections and make new pathways. This helps you achieve a higher percentage of your goals. Setting goals for financial planning and life success has many benefits, for example:

• MOTIVATION. Goals motivate you. Your life is moving toward something instead of floating to nowhere. • SAVING VS. SPENDING. How much of your monthly paycheck should you save? How much should you spend on shoes and music? Good questions—and without a set goal, you might see your shoe and iPod flourish while your finances suffer. • FREEDOM. Once you’ve set a goal — believe it or not — you become liberated from constantly worrying and wondering what you’re going to do with your life. Plan and set goals when you’re young, or else wake up when you’re 95 years old and say, “Hey! What happened to my life, my money, and my dreams?” • SCORING. You achieve success by scoring. How can you score if you don’t even know where the goal is? Set goals, achieve them, and feel rewarded. Planning ahead makes scoring so much easier.

Goal-setting can improve every area of your life. For a well-balanced life, set goals in each of the following areas: • Family/Relationships • Physical Health and Well-being • Giving Back • Fun & Toys • Spiritual Self • Money/Career • Personal Growth

F7 Financial Psychology

THE S.M.A.R.T. GUIDELINES Turning your dreams into reachable objectives takes some thought, but there’s a proven technique. Use the S.M.A.R.T guidelines:

S – SPECIFIC, SIGNIFICANT Be specific. Describe what you want to accomplish in clear and specific terms. If you can really visualize your goal, it’s easier to achieve. Example: If you’re saving money to buy a car, it’s much easier to keep to that savings plan when you have the model, color, and features picked out Significant. Make sure your goals are for what you want. Goals should match your personal interests and values.

M– MEASURABLE, MOTIVATIONAL. Measurable. You must be able to measure your goals; that is, you will know when you get there. Example: “I will have a net worth of $2.5 million by my 40th birthday.” Motivational. Your goals should motivate you to move to the next level — and beyond!

A – ATTAINABLE. Goals must be attainable. Example: Wanting to be President is a tough goal, but possible. Wanting to be Spiderman is a fantasy; you’ll never get there.

R – RESULT-ORIENTED, REASONS. Result-oriented: Phrase your goals in the positive. “I accomplished. I have. I am enjoying.” Positive phrases direct your mind to focus on outcomes. When your mind is on board, the rest comes naturally. Example: I will earn enough money by next January to afford the $1,000 vacation I’ve always wanted. Reasons: Why do you want to accomplish the goal? Deciding on the reasons behind each goal provides inspiration. For instance, if your goal is to be financially-free, some reasons behind that goal might be:

F7 Goals

• Spend more time with family or friends. • Feel more secure about your future. • Free time to do favorite activities — travel, sports, etc. • Stand out among friends and associates. • Be able to afford things you want. • Ability to help family members and take care of loved ones. The reasons behind a goal are the fuel that keeps you motivated to accomplish all your hopes, and more!

T – TIME DRIVEN. Good goals are time-driven. In other words, give yourself a deadline. For your plans to operate smoothly, you need to write down specific dates. You need a sensible time frame in order to work toward a goal and track your progress along the way. Example: “I have paid of my $2,300 credit card by Memorial Day, and will be enjoying myself on vacation”

Lesson Activity: Writing S.M.A.R.T. Goals Ask students to write their own SMART goals in their student workbook. Remember that your goals must fit together. Goals should be headed in the same direction, not contradictory. For instance, having two goals of “saving up enough money by the end of summer to buy a LED Smart TV” and “taking the summer off to travel” contradict each other— you would only be able to accomplish one or the other. You must decide which is more important to you: TV or travel?

POORLY WRITTEN GOALS WELL WRITTEN GOALS I want to have more money for I will have saved $5,000 by New Years’ Day and vacation. will reward myself with a trip to Hawaii with my family.

I’ll try to invest more. I will take a class on investing and find a trusted advisor by my birthday this year.

I’ll pay my credit cards and By focusing on keeping expenses low, I will pay hospital bills. in full my $4,200 credit card bill and cleared my hospital bills from my credit by the end of this year.

MAKE IT HAPPEN! Once you’ve written down your goals using the S.M.A.R.T. guidelines, follow these steps:

F7 Financial Psychology

• Plan of Attack. Write down each step you need to take toward accomplishing the goal. These step-by-step plans may sound corny, but they work. Reaching goals is like climbing stairs: without steps, how can we ever move up? Build steps in your staircase of life. Suddenly the next level will seem that much closer! • Review your goals often. Write your goals on the back of an index card and tape it to the mirror where you brush your teeth. Put an identical card by your bedside table and another on the dash of your car. Look at your goals daily. Keep them in the forefront of your mind. • See it, believe it. Visualize your goals coming true. The body goes only where the mind has already been. That means you must see, hear, smell, touch, and feel what it will be like to accomplish your goals. Visualization is like daydreaming with a purpose. By imagining yourself already accomplishing your goal, you are well on the road to success. • What you think about, you become. You have the ability to get whatever you want in life. All you need to do is change your thoughts. The law of attraction says you will get whatever you think about, whether wanted or unwanted.

Lesson Questions 1. To set a good goal, you should a. Set a clear timeline for achieving the goal. b. Identify what you are willing to give up in order to attain the goal. c. Both A and B. d. Neither A nor B. 2. Goals a. Are just dreams. b. Should only be long-term. c. Should only be short-term. d. Should be specific and achievable. 3. Setting financial goals a. Is not really necessary. b. Is only important if you own a business. c. Is only necessary once per year. d. Is required in order to achieve financial security.

F7 Goals

Lesson Review  Ask students to share their goals with the class. Have them talk about what they will do to achieve those goals.  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks  Reiterate the importance of setting goals in life and working to achieve them.

F7 Financial Psychology

Lifestyle Choices

Duration  20-30 minutes

Lesson Overview  In this lesson, students will determine their type of money personality. They will be able to identify three money personalities and associate themselves with at least one. The ultimate goal is to help them see how their money personality influences their spending and saving habits.

Big Idea  There’s a relationship between your values, emotions and personal finances.  Your financial traits and habits impact your finances.  Your values and emotions will influence your financial decisions.  There are factors that influence your decisions.  Financial decisions impact your future.  There is a process to making good financial decisions.

Essential Questions  What is your money personality and what can you do to improve or maintain it?  Why is it important to know what type of spender you are?  How do your spending habits affect your saving habits and your life as a whole?

Skills  Ability to evaluate one’s overall attitude toward money.

Vocabulary  Lifestyle — a way of life that reflects a person’s attitudes and values.

Anticipatory Set

Instruct students to write five of their personality characteristics in the Warm-up Activity in their Student Guide. • Are they outgoing or introverted? • Do they go with the flow, or want to be in control? • Are they natural leaders or do they tend to shy away from being the center of attention? When they have completed the activity, have students discuss their personality traits. Share some of your own.

F8 Lifestyle Choices

Talk about how their personalities affect their actions and their lives in general. Discuss how personality determines how people function in almost every aspect of society.

Close by talking about the importance of their personalities. Personality is important regardless of what type of personality a person has. Everyone has different strengths and weaknesses; one personality type is not better than another.

Lesson Explanation

Visually display the phrase “money personality.” State the phrase and tell students that they all have money personalities. When it comes to finances, money personality is just as important as social personality. Explain that money personality is how they manage their money.

Tell students that their money personality includes anything from spending and saving habits to how they think about money. • Talk about why it is important to identify their money personality.

Lesson Activity: Money Personality and Lifestyle

In any order, play the videos entitled F8 - Bethen; F8 - Sarah; and F8 - Anisa. After students have finished watching the films, pose the following questions: • How did these stories make you feel? • How do lifestyle choices affect your dreams? • How does money affect a person’s lifestyle? • Do you think Bethen – Street Banana – will be able to quit her job next month? • Did Anisa sound like she was happy about the sacrifices she made so she could afford to travel? • If Sarah can’t afford her lifestyle anymore, how do you think she will react? Ask participants, “Based on these explanations, what type of lifestyle would you choose to live?”

Instruct students to open their Student Guide to the Money Personality and Lifestyle Activity. Tell them they are going to complete a survey to identify their money personalities by answering the multiple-choice questions.

F8 Financial Psychology

1. Your best friend invites you to her birthday party. You … a. Add your name to your sister’s gift when she is not looking. b. Already have the present covered. You have been saving for skydiving lessons for the two of you. c. Tell your best friend you feel that birthday presents are for little kids, but still go to the party for the free food. 2. You get $50 from your favorite aunt for your birthday. You… a. Rush right out and spend it. Since you have no money left, you write your aunt a thank-you card and put it aside until you have enough money for a postage stamp. b. Save half and spend the other half. Send your aunt a lovely thank-you card. c. Save all of it. Send your aunt an e-card thanking her for the gift. (They’re free, plus you don’t have to pay for postage.) 3. You need a new outfit for your cousin’s wedding. You… a. Convince your mom to buy it for you. b. Wait for a good sale at your favorite department store and buy an outfit you can wear to other events as well. c. Skip the wedding altogether. A new outfit and a gift would seriously cut into your savings. 4. Your friend at work asks you to work his shift so he can go out of town. You … a. Agree to work his shift because you’re broke. But then you find $10 when you do the laundry, so you call in sick. b. Decline. You have plenty of money for the month and have plans with friends. c. Agree, but charge your coworker $10 to work his shift. 5. You hit a bird on the way to school and your windshield is broken. The bird flies off stunned but otherwise OK. You… a. Put some duct tape over the crack, because you forgot to pay your insurance premium. b. Pay your deductible and get your windshield fixed immediately. c. Save the money from the insurance claim so it will earn interest until the windshield breaks completely. 6. Your best friend asks you to borrow $100 to buy her mom a birthday present. She promises to pay you back Friday when she gets paid. You… a. Tell her you would if you had it, but you don’t. b. Give it to her right away. c. Give it to her but charge her interest on the money until Friday.

F8 Lifestyle Choices

7. Your favorite band is coming to play a concert. You… a. Call your local radio station and try to win tickets because that’s the only way you can afford to go. b. Buy the tickets with money you been saving since you found out the band was coming. c. Hope someone posts the concert on YouTube. No way will you shell out that much money. To determine their money personality type, instruct students to add up the number of times each answer (a, b, or c) was selected.

Mostly a’s — Carpe Diem Living above your means is when a person spends more money than he or she has. These people spend their money buying wants rather than needs, and often use credit to attain these items.

Mostly b’s: Money Guru Living at your means is when a person spends only the amount of money that he or she has. These people use credit occasionally, and they usually don’t have savings accounts because they spend the entire amount of money they have each month.

Mostly c’s: Penny-pincher Living beneath your means is when a person does not spend all of his or her money all the time. These people strike a perfect spending balance between purchasing wants and needs. They have a surplus and can easily participate in spur-of-the-moment events with their friends.

Let students know it’s all right to lean one way or another — people are unique — but say, “However, if you find yourself really at one end or the other, you may be missing out.

• If you were really cheap and never spent a dime but had a lot of money saved, what might you miss out on? • If you spent all your money frivolously, what might you miss out on?

F8 Financial Psychology

Lesson Questions 1. You are living beneath your means if you _____. a. Spend more money than you have. b. Spend all your money to buy “wants.” c. Spend only the amount of money you have. d. Can afford to spend more, but choose not to. 2. You are living within your means if you _____. a. Do not spend all your money all the time. b. Have a surplus and can participate in spur-of-the-moment events. c. Spend the entire amount of money you have each month. d. Spend money on “wants” rather than “needs.” 3. Which of the following is NOT an example of a need? a. Food b. Housing c. Top-brand clothing d. Medical care insurance

Lesson Review  Have students determine the money personality with which they most associate (according to the quiz).  Ask whether they agree with the results. If they’re not happy with the results, what could they change in their life to become a better spender?  Discuss why it’s important to know what type of spender they are. How does money personality relate to the bigger picture (financial literacy)?  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks  Reiterate the importance to your finances of knowing what type of spender you are.

F8 Become a Lifelong Learner

Become a Lifelong Learner

Duration  10-20 minutes

Lesson Overview  Students will understand the importance of continuing education and becoming a lifelong learner to enhance one’s career and attain financial independence.

Big Idea  There is a process to making good financial decisions.

Essential Questions  What is a lifelong learner?  Why is it important to become a lifelong learner?  Why should we continue to build our skills?

Skills  Becoming a lifelong learner to enhance career opportunities and attain financial independence.

Vocabulary  Lifelong learner  Skill

Anticipatory Set Visually display the following quote: “Education is what remains after one has forgotten what one has learned in school.” Albert Einstein

Have students write what they think the quote means in the Warm-Up Activity in the Student Guide. Discuss the quote and their responses as a class.

Describe why continued education is important after they have finished school.

Lesson Explanation Explain to students that skill development doesn’t stop in school. No matter what industry you enter, today’s fast-changing technology means if you don’t keep up you may be left behind. People become outdated just like technology.

F9 Financial Psychology

Say, “Do you all remember Friendster? That was replaced by MySpace — and now we have Facebook. Or look at cell phones. Years ago you didn’t have internet access on your mobile phone. Now they have streaming video where you can video chat on mobile. What happened to all our old technology?” (Most will answer that it’s been thrown away.)

You won’t be thrown away but, if your skills fall behind, you won’t make much money and you can expect long stretches of unemployment if you don’t continually develop your skill sets. That’s why becoming a lifelong learner is essential.

Ask students what they think “lifelong learner” means and why they need to become one.

Explain that a lifelong learner is a person who learns at every opportunity. Lifelong learners • stay up-to-date on news and political issues; • understand the effects current events may have on their careers; • pursue educational opportunities outside of school to icnrease their income potential over their lifetimes.

Ask students what steps they can master to become a lifelong learner. Discuss their responses and present some other things they can do. • They can attend seminars and conferences in their career fields to stay current on the latest industry trends and issues. • They can read the paper and blogs, and subscribe to an RSS feed to get the latest information and know what is happening in their industry. (An RSS feed is an Internet news feed that delivers information based on one’s preferences.) • They can enroll in professional development classes at a community college or university to learn the latest research within an industry. Talk about how ongoing education is beneficial.

Divide students into groups and have them brainstorm ways they can learn about money or pick up any skill.

Remind them that, given today’s technology, they can learn to do anything pretty easily.

Lesson Activity: Where can you learn? Have students provide examples of how they might pick up money, business, and life skills today to educate themselves for the future.

F9 Become a Lifelong Learner

Examples might include: • talk to others, • read the business section, • look at your family’s receipts, • play money-education games online, • watch the financial segment of the television news, • visit the business and finance section in a bookstore or library, • pursue internships, volunteer, read blogs, etc.

While the class brainstorms, instruct the students to record the brainstormed phrases, pictures/words, and ideas in the Where Can YOU Learn Activity in the Student Guide.

Follow up by writing general ideas and facilitating discussion.

Lesson Questions 1. Albert Einstein’s quote, “Education is what remains after one has forgotten what one has learned in school,” illustrates _____. a. The problem with schools. b. Life-long learning. c. Educational weakness. d. Gaining financial skills. 2. If you do not continually develop skill sets, _____. a. Your income could be limited. b. You could experience long-term unemployment. c. Your skills may become outdated. d. All of the above.

Lesson Review  Discuss the importance of becoming a lifelong learner.  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

Budgeting

This unit is designed to help students develop understanding about positive budgeting, savings, and spending habits. Through practical scenarios, participants will learn to create monthly budgets and savings plans.

Budgeting

DURATION LESSON TITLE LESSON ID (MINUTES) Wants vs. Needs B1 10-30 Money Management Styles B2 20-40 Can I Afford That: Vehicle B3 20-40 Can I Afford That: Renting B4 20-60 Let’s Learn to Budget B5 30-60

Budgeting

Wants vs. Needs

Duration  10-30 minutes

Lesson Overview  In this lesson, students will develop an understanding about wants vs. needs, and learn how to differentiate between wants and needs when making purchases.

Big Idea  There are different types of expenses that impact ones short- and long-term finances.  Your purchases and expense decisions impact your budget.

Essential Questions At the end of the lesson, your students should be able to answer the following:  What is a want?  What is a need?  What are some differences between wants and needs?  Why is it important to recognize the differences between wants and needs?

Skills  Students will understand the difference between a want and a need.  They will apply this understanding to determine wants from needs when making purchases.

Vocabulary  Needs  Wants  Money management

Anticipatory Set

Have the students complete the Warm-Up Activity in their workbooks to identify whether each of the following is a “want” or a “need.” Discuss their results together and facilitate a discussion. • New Xbox player • Shoes for work • Groceries • Shoes for a party next week • Practical car for work

B1 Wants vs. Needs

Lesson Explanation Although it may seem trivial, mapping concrete examples of each will help you navigate through your own emotions when making purchasing decisions.

Explain to participants that a need is something you must have for survival. Examples include: • Food • Electricity • Gas (for heat) • Water • Toiletries • Clothes • Shelter

Explain to participants that a want is something that is not essential to survival, but that you would like to have. Examples include: • Designer clothing • Cable television • Video games • DVDs • Cell phone • Toys (video gaming system, iPod, MP3 player, etc.)

Pose the following question to participants: “Is a computer a need or a want?” • Facilitate a whole group discussion based on this question. Have them provide reasoning for their answers • Present the following explanation: “Although a computer doesn’t fit the traditional definition of a need, needs also may include items that will help you accomplish your goals.”

Lesson Activity: Needs vs. Wants

Instruct students to go to the Needs vs. Wants Activity in their Student Guide. • Read and clarify the instructions. • When the students are finished the activity, allow each student time to share a few responses with the entire group.

B1 Budgeting

Lesson Questions 1. When can a want become a need? a. When it will help you stand out among your peers? b. When it is something you would like to have? c. When it will help you accomplish a financial goal? d. When you find a bargain that will help you purchase an item at a discounted rate? 2. Why is it important to distinguish between wants and needs? a. To purchase those items you want prior to purchasing things you need b. To reduce market risk. c. To calculate your credit balance. d. To help you plan your budget.

Lesson Review  Discuss the importance of knowing the difference between wants and needs.  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.

B1 Money Management Styles

Money Management Styles Duration  20-40 minutes

Lesson Overview  In this lesson, students will build knowledge about how to live within their means. Students will explore how to avoid spending traps and how practical money management habits can help them achieve their long-term goals. Students also will learn about both traditional and modern ways to handle money. They will gain understanding about how to handle their money within the current economic system. Big Idea  A budget impacts your financial wellness  There are different types of expenses that impact ones short- and long-term finances.  Your purchases and expense decisions impact your budget.  Saving money impacts your short-term and long-term budget. Essential Questions At the end of the lesson, students should be able to answer the following:  What is living within your means?  What does it mean to live beneath your means?  What does it mean to live beyond your means?  Why is important to know about living within your means?  What are traditional ways of handling money?  What are modern ways of handling money?

Skills  How to live within one’s means and how to avoid spending traps  Understanding both traditional and modern ways of handling money, and how to use the modern methods. Vocabulary  Living beyond, at, and beneath one’s means  Traditional money management  Modern money management

Anticipatory Set

Have the students complete the Warm-Up Activity in their Student Guide. • How often do you see other people use cash to make purchases? • How often do you use cash? • When was the last time you went to a bank?

Budgeting

Discuss answers and facilitate a brief discussion.

Lesson Explanation

Explain that there are three ways of living in regards to your finances: • Beneath your means; • At your means; and • Beyond your means

Ask students why they think people choose to live beneath, within, or beyond their means. Talk about this with the group.

Explain how people spend money, differentiate between wants vs. needs and how it can affect their spending habits. Then explain the following: • Living beyond one means is when people spend more money than they have. This means they spend money buying wants rather than needs, and often use credit to attain the items they want. • Living within one’s means is when people spend only the amount of money they have. They use credit occasionally, and usually don’t have savings accounts because they spend the entire amount of money they have each month. • Living beneath one’s means is when people do not spend all their money all the time. They have found the perfect spending balance between purchasing wants v. needs. They have surplus funds and can easily participate in spur-of-the-moment events with their friends.

Ask students with which group they want to be associated. Ask them into which group they think most families fall.

Lesson Activity: Beyond, Within, and Beneath

Present students with the following scenarios and ask them to identify whether each group is living beyond their means, within their means, or beneath their means. SCENARIOS 1. Which group is more likely to buy a large flat-screen plasma TV just in time to watch the Super Bowl, and not have enough money to order pizza during the game? Answer: Beyond your means

B2 Money Management Styles

2. Which group is most likely to have a very accurate budget and put money in their savings accounts before they spend money on other things? Answer: Beneath or At your means 3. Which group typically has bad credit? Answer: Beyond your means 4. Which group is most likely to have money set aside for emergencies? Answer: Beneath your means 5. Which group is most likely to go to restaurants whenever they feel like it, to celebrate a special event or cheer up the family on a bad day? Answer: Beyond your means 6. Which group is most likely to be able to pay cash to take a flight to the Bahamas on a whim for vacation? Answer: Beneath or At your means 7. Which group is more likely to go on a beach vacation they’ve planned all year? Answer: Beneath or At your means 8. Which group is most likely to stick to a list when shopping? Answer Beneath or At your means 9. Which group is most likely to have money set aside for going to a movie or an amusement park? Answer: Beneath or At your means 10. Which group is most likely not to have enough money to accompany their friends on a last-minute trip: Answer: Beyond your means

Lesson Explanation

State the following to the students: “All your goals require some amount of money, right? Even if you don’t have a goal to be the richest person in town, you understand now that you need money to achieve your goals.” • Say, “Before we go any farther, does anyone have a cassette tape player? I really want to listen to my jams later.” As the instructor, try not to let your coolness overwhelm your students. • Wait for responses, then reply in a surprised voice, “What?! You don’t?!” • Then say, “Oh, that’s right. Cassette players are old and people don’t use them anymore. The same is becoming true of CDs. We won’t even get into A-Track records” • Ask students to tell you what people use now, instead of cassette players. Wait for responses (e.g., iPods, online streaming).

Budgeting

Say, “People want immediate gratification so even if they couldn’t afford to eat out, they would go anyway and just put it on their credit cards. If they wanted new clothes, they charged them now and worried about paying the bill later.”

Explain how these habits allowed people to live the lifestyle they wanted for a while — until their debt caught up with them. • When you have out-of-control debt, you suffer from worry and stress. • When you use a credit card to pay for dinner, you end up paying for dinners you ate years go!

Explain that, since the recession, people have had to change the way they handle their money. • People are making smarter financial lifestyle choices now. • People are trying to eliminate debt and live within their means.

Adopting this new attitude toward money will allow you to save and invest your money while still having enough left over to have fun.

Lesson Activity: New and Old Money Management

Tell student that you are going to play a game as a class. Assign each student a number between 1 and 20 and tell them to find the scenario attached to their number in their Student Guide. (If you have a large class, there can be more than one student per number.) • Ask the students to read over their scenarios and decide whether the scenario represents a new or an old way to handle money. • Have each student find another student who handles money the same way he/she does. For example, students who have an old way of handling money should find another student who also has an old way of handling money. • Once everyone has found a partner, the students can take turns standing up with their partners and reading their scenarios to the class, explaining why they do it this way and what consequences – good and bad – can be expected from the behavior.

B2 Money Management Styles

SCENARIOS 1. Spending all your money on wants and not having enough left over for needs. 2. Setting up a budget that allows you to plan for wants and needs. 3. Living paycheck to paycheck. 4. Saving up an emergency fund equal to 3-24 months of your income. The size of your emergency fund should be based on your earning ability. If you have a hard time finding a job or if your chosen industry is shrinking, you should have more saved. If you are confident in your ability to earn income, you might have less saved. 5. Writing paper checks to pay bills and mailing them in stamped envelopes. 6. Using the Internet to pay bills online. 7. Buying what you want when you want it, without regard to price. 8. Using the Internet to comparison-shop, finding the best deal before you buy. 9. Paying full price at the store. 10. Using coupons to save a few bucks at the store. 11. Eating out with friends a few nights a week. 12. Eating and entertaining at home. 13. Buying the biggest home for which you can get a loan. 14. Buying a home that meets your needs. 15. Buying a new car every few years. 16. Keeping the car you have for as long as you can. 17. Eating out at lunchtime every day. 18. Bringing a bag lunch from home. 19. Buying new clothes every month. 20. Finding ways to make the clothes you have last a little longer.

Lesson Questions 1. What does it mean to live beneath your means? a. You are able to meet your short-term and long-term financial objectives. b. You spend more than you earn. c. You spend most of what you earn. d. You only spend money on things you need.

Budgeting

2. If you have enough money to pay your bills each month but not enough to save, it probably means you are: a. Wealthy b. Successful c. Living above your means d. Living within your means 3. Why do people use a credit card to buy something they are unable to afford now? a. They are poor. b. They may be living above their means. c. They are taking advantage of compounding interest. d. All of the above. 4. People who want immediate gratification often a. Pay cash for all items. b. Buy something they can’t afford, using a credit card. c. Decide not to make purchases. d. None of the above.

Lesson Review  Ask the class, “How does this lesson put the importance of handling money into perspective?”  Ask students, “Why is it important to live within your means?”  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.

B2 Can I Afford That? Vehicles

Can I Afford That? Vehicles

Duration  20-40 minutes

Lesson Overview  This lesson will help students identify and understand both the explicit and the hidden costs involved with purchasing a vehicle. Students will apply this learning to determine the affordability of a vehicle.

Big Idea  A budget impacts your financial wellness. | There are specific steps associated with creating a budget. | A budget aligned with your financial goals and can help you prepare for life events. | There are different types of expenses that impact ones short- and long-term finances. | Your purchases and expense decisions impact your budget. | Major expenses should be planned for in advance. | There are different types of loans that give you the ability to borrow money. | There are reasons and consequences to taking on debt.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are all the costs associated with purchasing and owning a car?

Skills  Students will understand all the costs incurred with the purchase of a car and will be able to determine the affordability of a vehicle.

Vocabulary  Hidden costs: costs that are not usually included in the purchase price or monthly payment of an item.

Anticipatory Set

Inform students that they have a total of $400 to spend on car-related expenses each month. Emphasize that they need to purchase a car as soon as possible because the car they have been relying on has broken down and is beyond repair.

B3 Budgeting

Pose the following car-purchasing scenario.

You visit a car dealership and immediately see three cars you like: • The car that costs $250 per month. • The car that costs $350 per month. • The car that costs $500 per month.

Have students select which car payment they can afford in the Warm-Up Activity in their student guides

Lesson Explanation

Ask participants: “Is anyone planning on purchasing a car in the next few years?” Let them know this activity will help them prepare for a car purchase.

Ask the following question: “When the car salesperson provides you with the monthly car payment information, what do you think that payment actually covers?”

Provide students with the definition of a hidden cost, a brief explanation, and the following example: • You buy a gift for your friend for $25. • However, you also need to buy a card, gift wrap, and a bow for $10. • The price of the card, gift wrap, and bow is not included in the price of the gift and can be considered a hidden cost. • Hidden costs are things you needed to complete the gift but that were not included in the original gift price.

Guide a brief group discussion based on the preceding question. Discussion should also help participants start thinking about whom they should trust for advice when making financial decisions.

Inform participants that the car salesperson has only provided the monthly loan payments for the car itself. He or she has not provided the additional, essential car-related expenses.

B3 Can I Afford That? Vehicles

Lesson Activity: Vehicle Considerations

Instruct students to go to the Vehicle Considerations Activity in the Student Guide.

Pose the following question and tell participants to write their answer in the Student Guide: • What are the additional car-related expenses you should expect to incur on top of the monthly car payment? • Potential responses might include o gas; o insurance; o registration; o maintenance; o parking (if applicable).

Ask the class if they have you ever seen a No Down Payment car advertisement. Present the following information: • Each state is different. You should research this information prior to making a purchase. In states that charge tax, title and license fees, the additional costs typically range from two to three thousand, depending on the state.

Ask students how much money they will need to purchase a $20,000 car that advertises “no down payment?”

$0 $750 $1,500  $2,500+

Lesson Explanation

Tell students, “As you have seen, there are a lot of costs associated with buying a car besides just the monthly payment. Clearly it is important to develop a plan for such a large purchase.

Have students refer to Table I in their Student Guide and explain that this is what it might look like for people who have no clear plan for buying a car.

B3 Budgeting

TABLE I: NO CLEAR PLAN You see an advertisement and decide to go buy a new car from the dealership.

You check out a few cars on the lot, find one you like, and decide to purchase it.

You have some marks on your credit which takes your interest rate from 5% all the way up to 12%, increasing your payment by $150 per month.

You decide to buy it anyway, and drive off happy.

A month later, you realize you can’t afford the car you bought — and you’re surprised about the insurance cost.

A year later, you are shocked by the cost to register the car, and you don’t have the money saved.

You decide to sell the car but are “upside down” (meaning you owe more on the loan than the car’s current value).

The dealer gives you a deal you can’t pass up, sells you a new car, and waives the upside-down portion of your loan.

Next, have students refer to Table II for an example of what it looks like when people buy a car with a clear, well thought-out plan.

B3 Can I Afford That? Vehicles

TABLE II CAREFULLY THOUGHT-OUT PLAN This month: Get an idea about how much you need to save by looking at vehicles you may want and finding out how much you’ll need for a down payment.

Next month: Create a savings plan to set aside money each month.

In the next three months: Start building your credit so you can qualify to buy the vehicle.

This year: Find out how much insurance and registration may cost per month. Complete a preliminary budget. Always BBB — Budget Before Buying!

Six months prior to purchase: Pre-qualify for a loan.

Five months prior: Research the vehicle. Look at Consumer Report articles, talk to friends with car expertise, and talk to your mechanic.

Three months prior: Reevaluate the decision to purchase the vehicle, to make sure it aligns with your goals. If it does, begin searching for a vehicle by shopping at several dealerships and deciding on features.

One month prior: Enter into a longer-term negotiation strategy.

Purchase date: Do not get upsold for any other items. Ensure that you’re within budget and that all your goals are met with this purchase.

B3 Budgeting

Lesson Activity: Purchasing a Car

• Divide students into four groups. Have them complete the Purchasing a Car Activity in the Student Guide. • Each groups budget is listed below as well as in their student guides • The point of the activity is to have students look through the car choices and pick the one that they can afford based on the information they’ve been given. • Make sure they look at the information to make informed decisions. • For example, the Toyota Camry has a down payment of $2,100. But it also has a registration fee of $325 that will need to be paid at time of purchase. So the real down payment is $2,425. • Another example: While the registration fee is paid at time of purchase, it would also be wise for students to divide the registration fee by 12 and add that to their monthly “payment” account since they will need to pay the registration again, one year from purchase. • Electric / hybrids cars require no gas in this activity. Students can use the monthly funds allocated to gas, if they buy an electric or hybrid vehicle.

GROUP 1 GROUP 2 Monthly Payment: $2,300 Monthly Payment: $400 Est. Gas Cost: $200 Est. Gas Cost: $600 Affordable Down: $12,000 Affordable Down: $6,000 Extra Savings for Down: $8,000 Extra Savings for Down: $2,000

GROUP 3 GROUP 4 Monthly Payment: $500 Monthly Payment: $250 Est. Gas Cost: $120 Est. Gas Cost: $120 Affordable Down: $3,000 Affordable Down: $4,000 Extra Savings for Down: $2,000 Extra Savings for Down: $0

B3 Can I Afford That? Vehicles

New Tesla Model S New Chevy Volt $106,000 and $10,600 down. $42,000 and $4,200 down. Total Monthly Expense: Monthly Payment $2,380 Monthly Payment $920 ELECTRIC ELECTRIC ______

Total Down Payment:

______Registration fee $980 per year Registration fee $570 per year Tax $8,200 one time Tax $3,700 one time

____ Initial here to choose this car. ____ Initial here to choose this car.

Used 2009 BMW 5 Series Used Smart Car Coupe New Toyota Camry 17,700 miles in good shape 100,000 miles in good shape $21,000 and $2,100 down. $72,000 and $14,400 down. $19,500 and $3,900 down. Monthly Payment $50 Monthly Payment $1,500 Monthly Payment $440

Registration fee $890 per year Registration fee $310 per year Registration fee $325 per year Tax $6,300 one time Tax $1,700 one time Tax $1,800 one time

____ Initial here to choose this car. ____ Initial here to choose this car. ____ Initial here to choose this car.

Used 1989 Honda Civic Used Scion xB Initial the phrase that 100,000 miles in fair shape 12,000 miles in good shape describes you: $1,400 and must pay full amount $7,900 and $2,400 down. Monthly Payment $0 Payment $150 _____ I’m green. I ride my bike, Add $50 per month - maintenance Add $30 per month-maintenance walk or take public transportation. _____ I live close to work, combine my trips and don’t drive much. _____ I live close to work but take a lot of weekend driving trips.

Registration fee $80 per year Registration fee $980 per year ____ I drive every day of the week Tax $120 one time Tax $820 one time and take weekend driving trips

____ Initial here to choose this car. ____ Initial here to choose this car.

B3 Budgeting

Lesson Questions

1. Which of the following is an example of a cost that is not associated with a car loan payment? a. Principal. b. Interest. c. Registration d. None of the above. 2. If someone says you have been “upsold,” what does that mean? a. You have purchased exactly what you intended to purchase. b. You have purchased less than you intended to purchase. c. You have not been advised as to the available extras. d. You have purchased more than you intended to purchase.

Lesson Review  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.

B3 Can I Afford That? Renting

Can I Afford That? Renting

Duration  20-60 minutes

Lesson Overview  By the completion of this lesson, students will be able to identify all the costs associated with renting a place to live. Participants will understand the rental application process and be able to determine the affordability of renting a residence.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are the hidden costs of renting a place to live?

Skills  Students will understand the costs associated with renting a place to live and how landlords qualify tenants for a lease.

Vocabulary  Hidden costs: Costs not usually included in the purchase price or monthly payment for an item.

Anticipatory Set

Have students write down in the Warm-Up Activity in the Student Guide at least five hidden costs that they will incur when renting a place to live.

Discuss their responses as a class.

Lesson Explanation

Pose the following question to participants: “When you see the dollar amount listed on an advertisement to rent an apartment, do you think that amount represents the only expense you would have if you rent that apartment?”

B4 Budgeting

Explain to participants that, when you purchase or rent a house or apartment, there are a number of expenses you must pay each month in addition to the rent or mortgage.

Share the following list and explain each expense: • Electricity • Gas • Water, sewer, and trash • Cable TV and Internet • Repairs • Homeowner’s or renter’s insurance • Furniture and applicances

Tell students that these are all extra costs incurred when you rent. Say, “To determine whether you can afford the place you want, you need to look at the monthly rent price PLUS all the hidden costs before you decide.”

Explain that when you rent an apartment or home, it’s important first to make sure you include all the hidden costs in the amount you want to pay per month.

HOUSING BUDGET Electricity ...... $100 Gas (Heat) ...... $ 20 Water, sewer, trash ...... $ 30 Cable TV and Internet ...... $100 Renter’s insurance ...... $ 50 Furniture and appliances ...... $ 0 Parking ...... $ 50 Rent in your area ...... $1,500 to $2,000

• Tell students also to consider having a roommate to help offset costs, if rent in their area is high. • They might also look into renting a place where utilizes or furniture are included in the monthly rent. • It is also important to be sure they have enough money for the deposit. Most landlords will require a security deposit and one to two months’ rent at signing. These are one-time expenses but they must be prepared to meet all the costs of moving into a new place.

B4 Can I Afford That? Renting

Aside from knowing the affordability of a place, they must consider that potential landlords look at the following when deciding whether to rent to a given tenant: • Income • Credit history • Rental history • Criminal background • Pets

Present and explain the BBB philosophy. • The acronym BBB stands for Budget Before Buying. • This financial philosophy suggests that you should always budget and include all of the costs associated with an item before you buy it. • It is important to make a clear decision about how much you are willing to spend— prior to shopping for an item. This approach is particularly important when you make major purchases like a car or home. • It is also extremely important to set clear spending limits and to not digress from these limits. • Setting a spending limit mitigates the possibility of becoming emotionally involved in the purchase. Emotional attachments often lead to spending well beyond one’s budget.

Ask the students what they think “rental history” means. Wait for their responses. • Rental history is similar to credit history. It is a record of one’s prior experience as a renter. • Landlords check with each applicant’s prior landlords to verify what type of tenant the applicant was in his or her previous rentals. • Negative rental history can determine whether a landlord will rent to someone. • Positive rental history is great. If you have a positive rental history, you can negotiate rent and other expenses with the landlord.

Ask students why they think a landlord or property manager would want to know someone’s criminal background. Discuss why this would be important from a landlord’s perspective.

Then ask why knowing whether a potential renter has pets is important and discuss their responses.

B4 Budgeting

Lesson Activity: Would You Rent to Me?

Instruct students to go to the Would You Rent to Me? Activity in their Student Guide. This activity can be done in small groups or individually.

Students must complete the application based on one of the scenarios given below.

After they have completed the rental applications, have students alternate turns being the landlord and the renter. Each student should have a chance to play both roles. For example: • One student is the renter. • The remaining student(s) plays the landlord and determines whether he or she would rent to the renter described in the scenario.

Give each group the following Landlord Information to use in determining whether they would rent to the applicants. This information is also in their student guides. When students are the landlord, be sure they are able to provide reasoning as to why they declined to rent to an applicant.

LANDLORD INFORMATION Mortgage paid by landlord per unit: $1,100

Required Income: 2.5 times the mortgage per unit

Median required credit score/history: 650—Fair (Some lower scores are accepted with a high deposit and good rental history.)

Pet Deposit: cats/small dogs $350 (Some will consider large pets, depending on credit and rental history.)

Criminal background requirements: Clean record (Any misdemeanors must be at least 7 years prior— NO FELONIES.)

Rental history: Majority of prior landlords must recommend. NO EVICTIONS.

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Assign each student or group one of the potential renter scenarios. Be sure to give the information from the scenarios to use when filling out their rental applications.

RENTER 1 RENTER 2 Income ...... $2,500 Income ...... $3,500 Credit score/history ...... 550—Poor Credit score/history .... 750—Good Criminal background ...... NONE Criminal background ...... NONE Pets ...... NONE Pets ...... Large dog Rental history ...... 1 out of 3 Rental history ...... 3 out of 3 prior landlords recommend. prior landlords recommend. Available Funds: $1000 Available Funds: $5000 RENTER 4 RENTER 3 Income ...... $3,200 Income ...... $3,000 Credit score/history ...... 650—Fair Credit score/history ...... 600—Fair Criminal background Misdemeanor Criminal background ...... NONE (7 years ago) Pets ...... NONE Pets ...... NONE Rental history ...... 3 out of 4 Rental history ...... 2 out of 4 prior landlords recommend. prior landlords recommend. Available Funds: $2000 Available Funds: $2000

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Residential Rental Application Application Date Application Number or ID Equal Housing Opportunity

APPLICANT INFORMATION First Name Last Name Middle SS#

Current Address City State and Zip

Date of Occupation – Full or Part Time Yearly Income Home Phone Cell Phone Birth

Employer Employer Address

How Long on Job Employer Contact Number In Case of Emergency Notify

Current Landlord Landlord Phone Years with Landlord Lease Expiration Date

Current Rent Auto Lic Plate Pets? If Yes, What Kind How Many and Size

APPLICANT’S BANK REFERENCES Checking

Savings

Credit Cards/Other

CO-APPLICANT’S BANK REFERENCES Checking

Savings

Credit Cards/Other

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CO-APPLICANT INFORMATION Legal Name of Last Middle SS# Applicant-First

Current Address City State and Zip

Date of Occupation – Full or Part Time Yearly Income Home Phone Cell Phone Birth

Employer Employer Address

How Long on Job Employer Contact Number In Case of Emergency Notify

Current Landlord Landlord Phone Years with Landlord Lease Expiration Date

Current Rent Auto Lic Plate Pets? If Yes, What Kind How Many and Size

APPLICANT’S REFERENCES (Other than Relatives) Name Address Phone 1. 2. CO-APPLICANT’S REFERENCES (Other than Relatives) Name Address Phone 1. 2. YOUR CREDIT HISTORY Have you declared bankruptcy in the past seven (7) years? Yes _____ Bi _____ Have you ever been evicted from a rental residence? Yes _____ Bi _____ Have you had two or more late rental payments in the past year? Yes _____ Bi _____

ADDITIONAL INFORMAITON: Please give us any additional information that might help the owner/management to evaluate your applications.

NOTICES: I/We hereby warrant that all representations set forth above are true. To verify the above statements, I/we direct those persons named in this application to ask questions about me/us. I/we waive all rights of actions for consequences as a result of such information. I/we agree and authorize and give permission to the management company, owner or servicing company to perform a credit check on me/us. I/We agree to pay $______for the credit check as permitted by state law. APPLICANT: PLEASE DONOT WRITE BELOW (FOR OFFICE USE ONLY) Credit Fee $: ______Date: ______Security Deposit $:______Date: ______’ Credit Report Requested Date: ______Review Date: ______by ______+++______Approved Y_____ N_____ OFFICE NOTES:

If the application is not approved or accepted by the owner or agent, the deposit will be refunded, the application hereby waiving any claim for damages by reason of non-acceptance which the owner or agent may reject. I recognize that as a part of your procedure for processing my application, an investigative consumer report may be prepared whereby information is obtained through personal interviews with others with whom I may be acquainted. This inquiry includes information as to my character, general reputation, personal characteristics and mode of living, as permitted by state law. Name of Applicant ______Date: ______

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Lesson Activity: My Readiness to Rent

Instruct students to complete the My Readiness to Rent Activity in their Student Guides. SCENARIOS 1. Do I know the essential features (e.g., size, location, etc.) that I need in my accommodations? 2. Do I have enough money for the first and last months’ rent, plus a deposit? 3. Do I have basic furniture, bedding, and household equipment? 4. Can I pay the rent without being late for a single payment? 5. Do I have references and proof of income? 6. Can I deal calmly and clearly with landlords/real estate agents? 7. Do I understand the basic rights and responsibilities of being a tenant? 8. Can I fill in a condition report accurately and fully? 9. Can I keep good records of tenancy matters, including copies of all documents and records of all phone and other contacts made with agents/landlords? 10. Can I manage household tasks such as cleaning, cooking, and budgeting? 11. Can I get along with neighbors? 12. Do I know where to get assistance if I have a problem with my landlord/agent?

Lesson Activity: Lease Agreement

Have students review the Landlord-Tenant Law and Residential Lease Agreement in their Student Guide, and answer the following questions: 1. What does the “covenant of quiet enjoyment” ensure for a tenant? If the Tenant pays rent and adheres to the terms of the lease agreement, he/she is entitled to peacefully and quietly have, hold, and enjoy the Property. 2. According to the lease agreement, how long may a tenant’s guest stay in the rental without prior written consent from the landlord? a. One week b. Two weeks c. One month d. Three months 3. Who is allowed to smoke in the property? a. Tenants and tenants’ guests/visitors b. Tenants only c. Guests only d. No one

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4. According to the provisions of the lease agreement, it is fine for the tenant to run a small home business out of the property. a. True b. False 5. How much will the tenant pay if his/her rent check is late? $25.00 6. Who is responsible to pay for liability insurance covering the property? a. The tenant b. The landlord c. The city d. The state 7. Which of the following represent repairs for which the landlord may charge the tenant at the end of tenancy? (Mark all that apply.) a. Rain or water damage caused by the tenant leaving windows open. b. Large holes in the walls where the tenant hung pictures. c. Unclogging the kitchen drain. d. Replacing the carbon monoxide alarms. e. Rewiring the electrical system. f. Replacing a torn screen door. 8. The tenant may not use the security deposit as a substitute for paying rent. a. True b. False 9. Who is responsible to pay the electric and gas bills for the property during the tenancy? a. The tenant b. The landlord c. The city d. The state 10. How much notice must the landlord give the tenant if the landlord decides to revoke prior consent for the tenant to have a pet dog on the property? a. 7 days b. 21 days c. 30 days d. 60 days

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LANDLORD TENANT LAW Landlord-tenant law governs the rental of commercial and residential property. It is composed primarily of state statutory and common law. A number of states have based their statutory law on either the Uniform Residential Landlord and Tenant Act (URLTA) (http://www.law.cornell.edu/uniform/ vol7#lndtn) or the Model Residential Landlord-Tenant Code (http://www.law.cornell.edu/uscode/ text/42/3604). Federal statutory law may be a factor in times of national/regional emergencies and in preventing forms of discrimination.

The basis of the legal relationship between a landlord and tenant is grounded in both contract and property law. The tenant has a property interest in the land (historically, a non-freehold estate) for a given period of time. See State Property Statutes (http://www.law.cornell.edu/wex/state_statutes3#property). The length of the tenancy may be for a given period of time, for an indefinite period of time (e.g. renewable/cancelable on a month-to-month basis), terminable at any time by either party (at will), or at sufferance if the agreement has been terminated and the tenant refuses to leave (holds over). See Restatement of the Law 2d Property: Landlord and Tenant §§1.4-1.8 (http://www.ali.org/index.cfm? fuseaction=publications. ppage&node_id=40). If the tenancy is for years or is periodic, the tenant has the right to possess the land, to restrict others (including the landlord) from entering upon it, and to sublease or assign the property. The landlord-tenant agreement may eliminate or limit these rights. The landlord- tenant agreement is normally embodied in a lease. The lease, though not historically or strictly considered a contract, may be subject to concepts embodied in contract law. See Contracts; § 1.103 of the URLTA (http://uniformlaws.org/ ActSummary.aspx? title=Residential+Landlord+and+Tenant+Act).

The landlord-tenant relationship is founded on duties proscribed by either statutory law, common law, or the individual lease. What provisions may be contained in a lease is normally regulated by statutory law. See §1.403 of the URLTA (http://www.uniformlaws.org/shared/docs/residential%20landlord%20and %20tenant/urlta%201974.pdf). Basic to all leases is the implied covenant of quiet enjoyment. This covenant assures the tenant that his possession will not be disturbed by someone with a superior legal title to the land, including the landlord. See Restatement 2d §4.1- 4.3 (http://www.ali.org/index.cfm?fuseaction=publications. ppage&node_id=40). A breach of the covenant of quiet enjoyment may be actual or constructive. A constructive eviction occurs when the landlord causes the premises to become uninhabitable.

Housing codes were established to ensure that residential rental units were habitable at the time of rental and during the tenancy. Depending on the state, housing code violations may lead to administrative action or to the tenant being allowed to withhold rent. The habitability of a residential rental unit is also ensured by warranties of habitability which are prescribed by common and/or statutory law. See §2.104 of the URLTA (http://www.uniformlaws.org/shared/docs/residential%20landlord%20and%20tenant/urlta% 201974.pdf). A breach of the warranty of habitability or a covenant within the lease may constitute constructive eviction, allow the tenant to withhold rent, repair the problem and deduct the cost from the rent, or recover damages. See URLTA §§4.101 & 4.104 & 4.105 (http://www.uniformlaws.org/shared /docs/residential% 20landlord%20and%20tenant/urlta%201974.pdf).

Unless the lease states otherwise, there is an assumption that the tenant has a duty to pay rent. State statutes may provide for a reasonable rental value to be paid absent a rental price provision. See URLTA §1.401(b) (http://www.uniformlaws.org/shared/docs/residential%20landlord%20and%20tenant/urlta% 201974.pdf). In commercial leases rent is commonly calculated in part or whole as a percentage of the

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tenant’s sales. Rent acceleration clauses that cause all the rent to become due if the tenant breaches a provision of the lease are common in both residential and commercial leases. Summary eviction statutes commonly allow a landlord to quickly evict a tenant who breaches statutorily specified lease provisions. Self-help as a method of eviction is generally restricted. Some states do not even allow it for tenants who have held over after the end of a lease. See URLTA §4.207 & Restatement 2d. §14.2 (http://www. uniformlaws.org/shared/ docs/residential%20landlord%20and%20tenant/urlta%201974.pdf). Landlords are also restricted from evicting tenants in retaliation of action the tenant took in regards to enforcing a provision of the lease or applicable law. See URLTA §§ 4.197 & 5.101 (http://www.uniformlaws.org /shared/docs/ residential%20landlord%20and%20tenant/urlta%201974.pdf).

Federal law prohibits discrimination in housing and the rental market. See Civil Rights Act of 1866 (http://www.law.cornell.edu/uscode/text/42/1982) & 42 U.S. Code, Chapter 45, Federal Fair Housing Act (http://www.law.cornell.edu/uscode/text/42/chapter-45).

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Residential Lease Agreement

THIS LEASE (the "Lease") dated this _____ day of ______, 20____ BETWEEN: ______(the “Landlord”) OF THE FIRST PART AND ______(the "Tenant") OF THE SECOND PART

IN CONSIDERATION OF the Landlord leasing certain premises to the Tenant, the Tenant leasing those premises from the Landlord and the mutual benefits and obligations provided in this Lease, the receipt and sufficiency of which consideration is hereby acknowledged, the parties to this Lease agree as follows:

Leased Property

1. The Landlord agrees to rent to the Tenant the apartment, municipally described as #1234, Anywhere Town, Mytown, MyState, Zip (the "Property"), for use as residential premises only. Neither the Property nor any part of the Property will be used at any time during the term of this Lease by Tenant for the purpose of carrying on any business, profession, or trade of any kind, or for the purpose other than as a private single-family residence. 2. No guests of the Tenants may occupy the Property for longer than one week without the prior written consent of the Landlord. 3. No pets or animals are allowed to be kept in or about the Property without the prior written permission of the Landlord. Upon thirty (30) days’ notice, the Landlord may revoke any consent previously given pursuant to this clause. 4. The Tenant agrees and acknowledges that the Property has been designated as a smoke-free living environment. The Tenant and members of Tenant's household will not smoke anywhere in the Property nor permit any guests or visitors to smoke in the Property. Term 5. The term of the Lease is a periodic tenancy commencing at 12:00 noon on January 2, 20__ and continuing on a year-to-year basis until the Landlord or the Tenant terminates the tenancy. 6. Any notice to terminate this tenancy must comply with the Rental Act of [Your State]. Rent 7. Subject to the provisions of this Lease, the rent for the Property is $______per month (the "Rent"). 8. The Tenant will pay the Rent on or before the First of each and every month of the term of this Lease to the Landlord at #1234, Anywhere Town, Mytown, MyState, Zip or at such other place as the Landlord may later designate. 9. The Landlord may increase the Rent for the Property upon providing to the Tenant such notice as required by the Act. 10. The Tenant will be charged an additional amount of $_____ per infraction, for any late Rent. Security Deposit 11. On execution of this Lease, the Tenant will pay the Landlord a security deposit of $_____ (the "Security Deposit").

B4 Can I Afford That? Renting

12. The Landlord will return the Security Deposit at the end of this tenancy, less such deductions as provided in this Lease but no deduction will be made for damage due to reasonable wear and tear nor for any deduction prohibited by the Act. 13. During the term of this Lease or after its termination, the Landlord may charge the Tenant or make deductions from the Security Deposit for any or all of the following: a. repair of walls due to plugs, large nails or any unreasonable number of holes in the walls including the repainting of such damaged walls; b. repainting required to repair the results of any other improper use or excessive damage by the Tenant; c. unplugging toilets, sinks and drains; d. replacing damaged or missing doors, windows, screens, mirrors or light fixtures; e. repairing cuts, burns, or water damage to linoleum, rugs, and other areas; f. any other repairs or cleaning due to any damage beyond normal wear and tear caused or permitted by the Tenant or by any person whom the Tenant is responsible for; g. the cost of extermination where the Tenant or the Tenant's guests have brought or allowed insects into the Property or building; h. repairs and replacement required where windows are left open which have caused plumbing to freeze, or rain or water damage to floors or walls; i. replacement of locks and/or lost keys to the Property and any administrative fees associated with the replacement as a result of the Tenant's misplacement of the keys; and j. any other purpose allowed under this Lease or the Act. For the purpose of this clause, the Landlord may charge the Tenant for professional cleaning and repairs if the Tenant has not made alternate arrangements with the Landlord.

14. The Tenant may not use the Security Deposit as payment for the Rent. 15. Within the time period required by the Act and after the termination of this tenancy, the Landlord will deliver or mail the Security Deposit less any proper deductions or with further demand for payment to: ______, ______, [State], or at such other place as the Tenant may advise. Quiet Enjoyment 16. The Landlord covenants that on paying the Rent and performing the covenants contained in this Lease, the Tenant will peacefully and quietly have, hold, and enjoy the Property for the agreed term. Inspections 17. At all reasonable times during the term of this Lease and any renewal of this Lease, the Landlord and its agents may enter the Property to make inspections or repairs, or to show the Property to prospective tenants or purchasers in compliance with the Act. Renewal of Lease 18. The Tenant may renew this Lease as follows: TBD. Landlord Improvements 19. The Landlord will make those improvements to the Property that are set out in the list attached to this Lease.

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Utilities and Other Charges 20. The Landlord is responsible for the payment of the following utilities and other charges in relation to the Property: electricity and natural gas. Insurance 21. The Tenant is hereby advised and understands that the personal property of the Tenant is not insured by the Landlord for either damage or loss, and the Landlord assumes no liability for any such loss. The Tenant is advised that, if insurance coverage is desired by the Tenant, the Tenant should inquire of Tenant's insurance agent regarding a renter's policy of insurance. 22. The Tenant is responsible for insuring the Property for damage or loss to the structure, mechanical or improvements to the building of the Property for the benefit of the Tenant and the Landlord. Such insurance should include such risks as fire, theft, vandalism, flood and disaster. 23. The Tenant is responsible for insuring the Property for liability insurance for the benefit of the Tenant and the Landlord. 24. The Tenant will provide proof of such insurance to the Landlord upon request. Abandonment 25. If at any time during the term of this Lease, the Tenant abandons the Property or any part of the Property, the Landlord may, at its option, enter the Property by any means without being liable for any prosecution for such entering, and without becoming liable to the Tenant for damages or for any payment of any kind whatever, and may, at the Landlord’s discretion, as agent for the Tenant, rent the Property, or any part of the Property, for the whole or any part of the then unexpired term, and may receive and collect all rent payable by virtue of such renting, and, at the Landlord's option, hold the Tenant liable for any difference between the Rent that would have been payable under this Lease during the balance of the unexpired term, if this Lease had continued in force, and the net rent for such period realized by the Landlord by means of the renting. If the Landlord's right of re-entry is exercised following abandonment of the Property by the Tenant, then the Landlord may consider any personal property belonging to the Tenant and left on the Property to also have been abandoned, in which case the Landlord may dispose of all such personal property in any manner the Landlord will deem proper and is relieved of all liability for doing so. Attorney Fees 26. In the event that any Action is filed in relation to this Lease, the unsuccessful party in the Action will pay to the successful party, in addition to all the sums that either party may be called on to pay, a reasonable sum for the successful party's attorney fees. Governing Law 27. It is the intention of the parties to this Lease that the tenancy created by this Lease and the performance under this Lease, and all suits and special proceedings under this Lease, be construed in accordance with and governed, to the exclusion of the law of any other forum, by the laws of the State of MyState, without regard to the jurisdiction in which any Action or special proceeding may be instituted. Severability 28. If there is a conflict between any provision of this Lease and the applicable legislation of the State of MyState (the "Act"), the Act will prevail and such provisions of the Lease will be amended or

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deleted as necessary in order to comply with the Act. Further, any provisions that are required by the Act are incorporated into this Lease. 29. In the event that any of the provisions of this Lease will be held to be invalid or unenforceable in whole or in part, those provisions to the extent enforceable and all other provisions will nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Lease and the remaining provisions had been executed by both parties subsequent to the expungement of the invalid provision. Amendment of Lease 30. Any amendment or modification of this Lease or additional obligation assumed by either party in connection with this Lease will only be binding if evidenced in writing signed by each party or an authorized representative of each party. Assignment and Subletting 31. The Tenant will not assign this Lease, or sublet or grant any concession or licence to use the Property or any part of the Property. Any assignment, subletting, concession, or licence, whether by operation of law or otherwise, will be void and will, at Landlord's option, terminate this Lease. Damage to Property 32. If the Property, or any part of the Property, will be partially damaged by fire or other casualty not due to the Tenant's negligence or willful act or that of the Tenant's employee, family, agent, or visitor, the Property will be promptly repaired by the Landlord and there will be an abatement of Rent corresponding with the time during which, and the extent to which, the Property may have been unrentable. However, if the Property should be damaged other than by the Tenant's negligence or willful act or that of the Tenant's employee, family, agent, or visitor and the Landlord decides not to rebuild or repair the Property, the Landlord may end this Lease by giving appropriate notice. Care and Use of Property 33. The Tenant will promptly notify the Landlord of any damage, or of any situation that may significantly interfere with the normal use of the Property or to any furnishings supplied by the Landlord. 34. The Tenant will not make (or allow to be made) any noise or nuisance which, in the reasonable opinion of the Landlord, disturbs the comfort or convenience of other tenants. 35. The Tenant will keep the Property reasonably clean. 36. The Tenant will dispose of its trash in a timely, tidy, proper and sanitary manner. 37. The Tenant will not engage in any illegal trade or activity on or about the Property. 38. The Landlord and Tenant will comply with standards of health, sanitation, fire, housing and safety as required by law. 39. The Landlord will use reasonable efforts to maintain the Property in such a condition as to prevent the accumulation of moisture and the growth of mold, and to promptly respond to any written notices from the Tenant in relations to accumulation of moisture and visible evidence of mold. 40. The Tenant will use reasonable efforts to maintain the Property in such a condition as to prevent the accumulation of moisture and the growth of mold, and to promptly notify the Landlord in

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writing of any moisture accumulation that occurs or of any visible evidence of mold discovered by the Tenant. 41. The Tenant agrees that no signs will be placed or painting done on or about the Property by the Tenant or at the Tenant's direction without the prior, express, and written consent of the Landlord. Notwithstanding the above provision, the Tenant may place election signs on the Property during the appropriate time periods. 42. If the Tenant is absent from the Property and the Property is unoccupied for a period of four consecutive days or longer, the Tenant will arrange for regular inspection by a competent person. The Landlord will be notified in advance as to the name, address and phone number of the person doing the inspections. 43. The hallways, passages and stairs of the building in which the Property is situated will be used for no purpose other than going to and from the Property and the Tenant will not in any way encumber those areas with boxes, furniture or other material or place or leave rubbish in those areas and other areas used in common with any other tenant. 44. Footwear which are soiled or wet should be removed at the entrance to the building in which the Property is located and taken into the Tenant's Property. 45. At the expiration of the term of this Lease, the Tenant will quit and surrender the Property in as good a state and condition as they were at the commencement of this Lease, reasonable use and wear and tear excepted. Carbon Monoxide Alarm 46. Prior to the Tenant taking possession of the Property, the Landlord will ensure that any carbon monoxide alarm in place is operational. Upon possession, the Landlord will provide the Tenant with working batteries, for all carbon monoxide alarms. The Landlord will be responsible for the repair and replacement of any missing or non-functional carbon monoxide alarm upon written request of the Tenant. 47. The Tenant will keep, test, and maintain in good repair all the carbon monoxide alarms in the Property. The Tenant must provide the Landlord or the Landlord’s agent with a written notice if any carbon monoxide alarm needs its batteries replaced or if the alarm is stolen, removed, missing, or not operational. Further, the Tenant must notify the Landlord, or its agent, in writing of any deficiency in any carbon monoxide alarm that the Tenant is unable to fix. 48. No person may remove any batteries from, or in any way render inoperable, a carbon monoxide alarm except as part of the process to inspect, maintain, repair or replace the alarm or batteries in the alarm. Hazardous Materials 49. The Tenant will not keep or have on the Property any article or thing of a dangerous, flammable, or explosive character that might unreasonably increase the danger of fire on the Property or that might be considered hazardous by any responsible insurance company. Rules and Regulations 50. The Tenant will obey all rules and regulations posted by the Landlord regarding the use and care of the building, parking lot, laundry room and other common facilities that are provided for the use of the Tenant in and around the building containing the Property.

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Address for Notice 51. For any matter relating to this tenancy, the Tenant may be contacted at the Property or through the phone number below. After this tenancy has been terminated, the contact information of the Tenant is: a. Name: John Doe. b. Phone: 234-567-9087. c. Email: [email protected]. d. Post termination notice address: ______, ______, [State]. 52. For any matter relating to this tenancy, whether during or after this tenancy has been terminated, the Landlord's address for notice is: a. Name: John Smith. b. Address: #123, ______, ______, ______. 53. The contact information for the Landlord is: a. Phone: 123-456-7890.

General Provisions 54. All monetary amounts stated or referred to in this Lease are based in U.S. dollars. 55. Any waiver by the Landlord of any failure by the Tenant to perform or observe the provisions of this Lease will not operate as a waiver of the Landlord's rights under this Lease in respect of any subsequent defaults, breaches or non-performance and will not defeat or affect in any way the Landlord's rights in respect of any subsequent default or breach. 56. This Lease will extend to and be binding upon and inure to the benefit of the respective heirs, executors, administrators, successors and assigns, as the case may be, of each party to this Lease. All covenants are to be construed as conditions of this Lease. 57. All sums payable by the Tenant to the Landlord pursuant to any provision of this Lease will be deemed to be additional rent and will be recovered by the Landlord as rental arrears. 58. Where there is more than one Tenant executing this Lease, all Tenants are jointly and severally liable for each other's acts, omissions and liabilities pursuant to this Lease. 59. Locks may not be added or changed without the prior written agreement of both the Landlord and the Tenant, or unless the changes are made in compliance with the Act. 60. The Tenant will be charged an additional amount of $25.00 for each N.S.F. check or checks returned by the Tenant's financial institution. 61. If the Tenant moves out prior to the natural expiration of this Lease, a re-rent levy of $0.00 will be charged to the Tenant. 62. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Lease. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa. 63. This Lease and the Tenant's leasehold interest under this Lease are and will be subject, subordinate, and inferior to any liens or encumbrances now or hereafter placed on the Property by the Landlord, all advances made under any such liens or encumbrances, the interest payable on any such liens or encumbrances, and any and all renewals or extensions such liens or encumbrances. 64. This Lease may be executed in counterparts. Facsimile signatures are binding and are considered to be original signatures.

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65. This Lease will constitute the entire agreement between the Landlord and the Tenant. Any prior understanding or representation of any kind preceding the date of this Lease will not be binding on either party except to the extent incorporated in this Lease. 66. The Tenant will indemnify and save the Landlord, and the owner of the Property where different from the Landlord, harmless from all liabilities, fines, suits, claims, demands and actions of any kind or nature for which the Landlord will or may become liable or suffer by reason of any breach, violation or non-performance by the Tenant or by any person for whom the Tenant is responsible, of any covenant, term, or provisions hereof or by reason of any act, neglect or default on the part of the Tenant or other person for whom the Tenant is responsible. Such indemnification in respect of any such breach, violation or non-performance, damage to property, injury or death occurring during the term of the Lease will survive the termination of the Lease, notwithstanding anything in this Lease to the contrary. 67. The Tenant agrees that the Landlord will not be liable or responsible in any way for any personal injury or death that may be suffered or sustained by the Tenant or by any person for whom the Tenant is responsible who may be on the Property of the Landlord or for any loss of or damage or injury to any property, including cars and contents thereof belonging to the Tenant or to any other person for whom the Tenant is responsible. 68. The Tenant is responsible for any person or persons who are upon or occupying the Property or any other part of the Landlord's premises at the request of the Tenant, either express or implied, whether for the purposes of visiting the Tenant, making deliveries, repairs or attending upon the Property for any other reason. Without limiting the generality of the foregoing, the Tenant is responsible for all members of the Tenant's family, guests, servants, tradesmen, repairmen, employees, agents, invitees or other similar persons. 69. During the last 30 days of this Lease, the Landlord or the Landlord's agents will have the privilege of displaying the usual 'For Sale' or 'For Rent' or 'Vacancy' signs on the Property. 70. Time is of the essence in this Lease. Every calendar day except Saturday, Sunday or national holidays will be deemed a business day and all relevant time periods in this Lease will be calculated in business days. Performance will be due the next business day, if any deadline falls on a Saturday, Sunday or a national holiday. A business day ends at five p.m. local time in the time zone in which the Property is situated.

IN WITNESS WHEREOF My Name and John Smith have duly affixed their signatures on this _____ day of ______, 20____.

______Tenant: My Name Landlord: John Smith

The Tenant acknowledges receiving a duplicate copy of this Lease signed by the Tenant and the Landlord on the ______day of ______, 20____.

B4 Can I Afford That? Renting

Lesson Questions 1. How do you calculate the cost of renting a place to live in order to determine whether renting is an option for you? a. Add the rent to the associated expenses and determine whether the total aligns with your personal finance objectives. b. Estimate the exact rent costs and the cost of utilities. c. Identify the exact amount of rent that is owed each month to a landlord. d. All of the above. 2. In reality, what does BBB (Budget Before Buying) mean? a. Always budget. b. Always include the associated costs of the item before your purchase it. c. Do not digress from clear spending limits. d. All of the above.

Lesson Review  Reiterate the importance of rental history and knowing your expenses prior to renting.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.

B4 Budgeting

Let’s Learn to Budget!

Duration  30-60 minutes

Lesson Overview  In this lesson, students will learn about budgeting. Students will learn what a budget is and how budgeting is used to maintain one’s finances. Students also will learn the budgeting process and apply these lessons in a practical setting to further their financial literacy skills.

Big Idea  A budget impacts your financial wellness. | There are specific steps associated with creating a budget. | There are tools to assist with budgeting. | A budget aligned with your financial goals and can help you prepare for life events. | Saving money impacts your short- term and long-term budget. | There are different strategies and steps involved in starting a savings plan. | There are ways to increase the amount of money you save. | There are different types of expenses that impact ones short- and long-term finances. | Your purchases and expense decisions impact your budget. | There are strategies to decrease and manage your expenses. | Major expenses should be planned for in advance.

Essential Questions At the end of the lesson, your students should be able to answer the following:  What is a budget?  Why are budgets important?  How do you maintain a working budget?

Skills  Awareness of the importance of budgeting and an understanding of how to budget.

Vocabulary  Budget  Income  Expenses  Gross pay  Take-home pay  Variable expenses

Let’s Learn to Budget

Anticipatory Set

Have students answer the following questions in the Warm-Up Activity in the Student Guide. • Why is it important to budget? • How does a budget help you?

Facilitate a discussion about their responses.

Lesson Explanation

Tell the students: “The purpose of this lesson is to help you understand the importance of developing and following a budget. During this lesson, you will learn about the costs associated with purchasing the things you need for everyday living and you will learn how to create a budget for these items.”

Ask the following questions, but listen to their responses before announcing the answers: • What percentage of lottery winners waste all of their earnings within a few years? Answer: A Staggering 70%. • What percentage of NBA and NFL players are broke or bankrupt within five years of retirement? Answer: A staggering 60%.

Explain that people without money skills often make poor financial choices, regardless of how much money they have.

Tell the students: “These statistics confirm how important it is to become financially literate. You don’t want to be one of these statistics. Learning to budget makes a huge difference in your life, regardless of how much money you have.”

Lesson Activity: Let’s Learn to Budget

Say, “During this activity you will play a game to learn about the importance of budgeting. Let’s get started!”

Go through the following steps to set up the game. • Organize participants into groups of 3-4, or allow them to do the activity on their own (depending on group size).

B5 Budgeting

• Instruct each group to select a Character Worksheet from the selections presented in the Student Guide and at the end of this lesson activity. • Explain to the groups that the objective of the game is to help the character they’ve selected to reach his/her stated goal. • Play the videos: A5 - Anna and A5 - Kyle.

Provide the groups with the following additional instructions. • Appoint one person in the group to read your selected character’s story to the entire group. • Work collaboratively to adjust the character’s lifestyle choices found in the “Current Expenses” column to lifestyle-aligned expenses in the “New Choices” column so that he/she can achieve his/her stated goals. Dollar amounts for different expense changes are described in the Let’s Learn to Budget Expense Chart found after the character worksheets in the Student Guide. • Once the character’s new expenses are completed, have students answer the discussion questions on the page after their character worksheet.

Reassemble the groups into a whole class. • Ask one person from each group to read the group’s selected character’s story to the entire class. • Ask a different person from each group to explain to the class how his/her group helped the character reach his/her goals. • Supplement the group presentations by facilitating a full class discussion on the financial strategies presented by each group. • Record the key ideas from the discussion. • Wrap up the game by reviewing the key ideas captured during the full class follow- up discussion.

Let’s Learn to Budget

Character: Anna Income: $5,000 Take-home pay: $3,050 (after federal, state, FICA taxes)

Anna has a well-paying job in sales. She doesn’t like her job much, but it pays the bills. She has always loved design and working with animals. She wishes she could be designing marketing material and advertisements for a nonprofit that helps abused animals.

Anna graduated from college with a Bachelor’s Degree in Communications. Since high school, she has been volunteering once per month for a nonprofit that helps abused animals. Her resume for her dream job is not the strongest, but it would be good enough to get her an interview. To strengthen her chances of getting the job, she’s practicing her interviewing skills with friends and creating marketing material to show potential employers.

She recently interviewed for a position at a job she would love to have, but the pay is too low for her to pay her current bills. Her take-home pay at the potential job would be only $2,700. Right now her gross income is $5,000 a month and she brings home $3,050 after taxes.

Anna’s Goal: To find a way to accept her dream job at the lower take-home rate and still meet her expenses. Can you help? Use the following worksheet to calculate new choices for Anna that will allow her to meet her goal.

ANNA’S CURRENT EXPENSES ANNA’S NEW CHOICES $800 Housing _____ Housing $ 550 Car (incl. gas & insurance) _____ Car (incl. gas & insurance) $ 700 Needs (electric, phone, food) _____ Needs (electric, phone, food) $ 400 Clothes _____ Clothes $ 500 Entertainment _____ Entertainment $ 75 Medical Insurance _____ Medical Insurance $ 200 Toys _____ Toys Credit Card Debt $3,650 at 22% Credit Card Debt $3,650 at 22% $65 Minimum monthly payment _____ Minimum monthly payment $370/mo. to pay off in a year $370/mo. to pay off in a year $ 150 Student Loan Debt _____ Student Loan Debt $ 150 Travel _____ Travel $200 Friends & family _____ Friends & family $0 Savings _____ Savings $50 Giving back _____ Giving back $3,840 Monthly Expenses _____ Monthly Expenses $2,700 Take-Home Pay $2,700 Take-Home Pay

Anna is adding debt of $790 per month. New Choices Outcome:

B5 Budgeting

What kind of lifestyle does Anna live? ______

Notes: Recommendations for Anna ______

Is Anna able to do everything she wants to do? Yes No

Does Anna have enough free time to fully experience life? Yes No

How would you describe Anna’s spending habits? Frugal Average Over-spender

What (if anything) is getting in the way of Anna’s enjoyment of fun activities with her friends? ______

Let’s Learn to Budget

Character: Kyle Income: $2,700 Take-home pay: $1,625 (after federal, state, FICA taxes) Kyle just graduated from college and has taken a job as a brand rep. He is into action sports and is working with a start-up clothing company called Ethika. His pay is pretty low but he is able to travel around the country and go to all the surf, skate, motocross, and snow contests. He makes $2,700 gross and takes home $1,625 after taxes. The company also pays for his travel and food, covering about 10 days out of each month. Kyle has built a reputation as a good worker and has developed a good network of people in the industry. He recently received an offer to rep for another company at the same time he works as a rep with Ethika. Kyle has spoken with his boss, who said it was OK as long as it didn’t take away time from his current job. The second job would give Kyle additional take-home pay of $175 per month for only four extra work hours per week. Kyle’s Goal: To have six months or rent, car, needs, medical, and student loan debt in his savings account within one year. These expenses total $1,225 per month so Kyle needs a total of $7,350 saved. Currently he has $5,900 saved. Kyle has met with many people and has asked a successful businessperson from his network to be his mentor. He thinks once he starts his own business, he can be earning $5,000+ each month within a year. Can you help him meet his goal?

KYLE’S CURRENT EXPENSES KYLE’S NEW CHOICES $400 Housing _____ Housing $350 Car (incl. gas & insurance) _____ Car (incl. gas & insurance) $250 Needs (electric, phone, food) _____ Needs (electric, phone, food) $0 Clothes _____ Clothes $100 Entertainment _____ Entertainment $75 Medical Insurance _____ Medical Insurance $0 Toys _____ Toys $0 Credit Card Debt Credit Card Debt $3,650 at 22% $150 Student Loan Debt _____ Minimum monthly payment $0 Travel $370/mo. to pay off in a year $100 Friends & family _____ Student Loan Debt $122 Savings _____ Travel $50 Giving back _____ Friends & family $1,625 Monthly Expenses _____ Savings $1,625 Take-Home Pay _____ Giving back

_____ Monthly Expenses Kyle has $0 money left over but is saving $122 each month, and has the potential to earn $1,625 Take-Home Pay another $175. New Choices Outcome:

B5 Budgeting

What kind of lifestyle does Kyle live? ______

Notes: Recommendations for Kyle ______

Is Kyle able to do everything she wants to do? Yes No

Does Kyle have enough free time to fully experience life? Yes No

How would you describe Kyle’s spending habits? Frugal Average Over-spender

What (if anything) is getting in the way of Kyle’s enjoyment of fun activities with his friends? ______

Let’s Learn to Budget

Character: Carl Income: $3,520 Take-home pay: $2,147 (after federal, state, FICA taxes) Carl likes to live large. He has a brand-new car, the latest clothes, and rents an expensive apartment. Although he appears wealthy, he has no money in the bank. He has $12,650 in credit card debt and has to work two jobs just to pay his bills. This month he is late on his car payment, so the credit card company has increased his minimum credit card payment. People in Carl’s life are starting to become upset with him. He never has enough money to take his girlfriend out. When he goes out with friends, he never pays his fair share and they’re getting tired of subsidizing him. He’s taking a big risk because he has no medical or car insurance. If he gets sick or has an accident, he risks being sued and having money automatically deducted from his paycheck until the judgment is paid. Carl asked both his employers for a raise, but was denied. He messed up a few times at work because he was worried about his bills, so he cannot be promoted within his company. He works 65 hours a week: at an office mail room during the day and as a security guard at night. His gross pay is $3,520 per month but after taxes he only brings home $2,147 (rounded). Carl’s Goal: To pay off all his debt in one year and take a trip with his friends that will cost $1,000. Can you help?

CARL’S CURRENT EXPENSES CARL’S NEW CHOICES $1,200 Housing _____ Housing $ 750 Car (incl. gas & insurance) _____ Car (incl. gas & insurance) $ 700 Needs (electric, phone, food) _____ Needs (electric, phone, food) $ 400 Clothes _____ Clothes $ 100 Entertainment _____ Entertainment $ 0 Medical Insurance _____ Medical Insurance $ 0 Toys _____ Toys Credit Card Debt $12,650 at 22% Credit Card Debt $3,650 at 22% $360 Minimum monthly payment _____ Minimum monthly payment $1,286/mo. to pay off in a year $370/mo. to pay off in a year $ 0 Student Loan Debt _____ Student Loan Debt $ 0 Travel _____ Travel $0 Friends & family _____ Friends & family $0 Savings _____ Savings $0 Giving back _____ Giving back $3,150 Monthly Expenses _____ Monthly Expenses $2,147 Take-Home Pay $2,147 Take-Home Pay Anna is adding debt of $790 per month. New Choices Outcome:

B5 Budgeting

What kind of lifestyle does Carl live? ______

Notes: Recommendations for Carl ______

Is Carl able to do everything he wants to do? Yes No

Does Carl have enough free time to fully experience life? Yes No

How would you describe Carl’s spending habits? Frugal Average Over-spender

What (if anything) is getting in the way of Carl’s enjoyment of fun activities with his friends? ______

Let’s Learn to Budget

Character: Melanie Income: $5,000 Take-home pay: $3,050 (after federal, state, FICA taxes) Melanie is a single mom who can’t count on money from her ex-husband. She just took a job as a brand representative for a linen company, and works 50 hours per week. She makes $5,000 gross and takes home $3,050 after taxes. When she is working outside the office, the company also pays for her food, covering about ten days out of each month. Melanie has built a reputation as a good worker, and has developed a good network among people in the industry. She has always enjoyed sewing and picks up side jobs from time to time. Her sewing machine is old, and she misses out on jobs because it takes her three times longer to complete projects than it would with a newer machine. Melanie’s Goal: To have six months of rent, car, needs, medical, and student loan debt in her savings account within one year. Currently, she already has $5,900, and the latest sewing machine will cost her $2,000. If she invests in the sewing machine, she could earn an extra $400 per month. She has met with many people and has asked a successful businessperson from her network to be her mentor. She thinks that within a year her sewing business can be earning $1,000 to $2,000 more each month. Can you help Melanie meet her goal?

MELANIE’S CURRENT EXPENSES MELANIE’S NEW CHOICES $800 Housing _____ Housing $550 Car (incl. gas & insurance) _____ Car (incl. gas & insurance) $700 Needs (electric, phone, food) _____ Needs (electric, phone, food) $400 Clothes _____ Clothes $100 Entertainment _____ Entertainment $75 Medical Insurance _____ Medical Insurance $200 Toys _____ Toys $0 Credit Card Debt Credit Card Debt $3,650 at 22% _____ Minimum monthly payment $370/mo. to pay off in a year $150 Student Loan Debt _____ Student Loan Debt $150 Travel _____ Travel $200 Friends & family _____ Friends & family $122 Savings _____ Savings $50 Giving back _____ Giving back $3,497 Monthly Expenses _____ Monthly Expenses $3,050 Take-Home Pay Tonya is adding debt of $447 per month. $3,050 Take-Home Pay

New Choices Outcome:

B5 Budgeting

What kind of lifestyle does Melanie live? ______

Notes: Recommendations for Melanie ______

Is Tonya able to do everything she wants to do? Yes No

Does Melanie have enough free time to fully experience life? Yes No

How would you describe Melanie’s spending habits? Frugal Average Over-spender

What (if anything) is getting in the way of Melanie’s enjoyment of fun activities with her friends? ______

Let’s Learn to Budget

Let’s Learn to Budget Expense Chart Directions: Use the chart below to help your characters accomplish their goals.

HOUSING (includes rent, water, and gas/electricity) TOYS $400— You get a small bedroom and share a $100— You don’t buy a lot of new toys but you bathroom with two other roommates in an like to get things you want from time to time. unsafe location. $200— You like your toys but try to limit your $650— You have a few roommates in a safe purchases to only a few each month. location with a small bedroom but your own $500— You have to have all the latest gadgets. bathroom. $1,200— You have the master bedroom in a TRAVEL nice, furnished loft at the center of town. $100— You do a little traveling but usually stay in the homes of friends or family. CAR (includes monthly payment, insurance, and gas) $200— You save up to take one big vacation a $300— Your car looks like a piece of junk, but year. it’s paid for and gets you around. $300— You and your friends try to do at least $500— You have a nicer-looking used car that one mini-vacation a month and a big vacation gets good gas mileage. every year. $900— You’re turning heads with your ride and your friends always want you to drive. CREDIT CARD MINIMUM PAYMENTS $50— You only use your credit card for BASIC NEEDS emergencies you can’t cover with savings. $400— This covers electric, Internet, cell phone, $100— You don’t buy anything with your credit and really cheap food. card but you used it for a vacation last year. $800— This covers electric, Internet, cell phone, $250— If you want it, you get it. basic cable, and healthier food at home. You can eat out a few times a week. SAVINGS $1,400— This covers electric, Internet, cell $50— You save a little here and there. phone, deluxe cable channels, home phone line, $150— You save regularly each month. and good healthy food. You can eat out most $250— You keep your emergency fund high and meals and enjoy nicer meals occasionally. also save for big purchases. CLOTHING GIVING BACK $50— You pick up a new piece of clothing every $50— You give small amounts when the other month and have decent clothes for most opportunity presents itself. occasions. $100— You give a little each month to charity. $175— You get a complete new outfit every $200— You believe it is very important to pay it month or two. forward. You have a few charities to which you $450— You get a complete new outfit, with give regularly. accessories, every month. ENTERTAINMENT $100— You go out with friends a couple of times a month and try to find free or inexpensive things to do for fun. $200— You usually go out with friends to eat at least once a week while keeping a close eye on your budget. $300— You go out with your friends often and don’t monitor your spending too closely.

B5 Budgeting

Lesson Activity: Budget Chart

Inform participants that now they will use what they learned to complete their own current budgets in class. • Have students complete the Budget Chart Activity in their Student Guides. Either “In College” for current or soon to be college students, or “Standard” for student groups not attending college. Have them enter their answers into the “Current” column and record any areas where they want to cut back (in the case of expenses) or where they want to earn more (in the case of income) in the “Goal” column. • Walk them through each main section of the Budget Chart and encourage them to seek clarification from you about any budgeting items they find confusing.

Tell students that they may not know all the exact numbers, but encourage them to make an educated guess for now and complete the activity by entering the exact numbers when they get home. Explain that most people do not have a budget, and having one in place now will give them a big advantage.

Let students know that this is a monthly budget. • Be sure to remind them how to account for bills they pay annually by dividing the annual number by 12 to get the monthly cost. For instance, if they pay for a gym membership each year at an annual cost of $288 — divide that number by 12, and they need to save $24 per month. • Also remind them to allocate their annually or semi-annual income according to the same principle. If they receive $6,000 every 6 months, they would budget $1,000 per month.

Inform the students that “variable Expenses” are where most people get off track. These are areas where people really don’t know how much they spend. Give them these three suggestions to help them understand how much they spend on day-to-day expenses: 1. Pull out a set amount of cash for a week, and see how long that lasts. 2. Record all your day-to-day expenses on your phone or on a sheet or paper. 3. Closely monitor your purchases with an ATM card and add them up at the end of the month.

Assure participants that creating a budget is a cumulative and gradual process, and that they may need to revise their budgets several times prior to developing one that is final and sustainable. Emphasize that the revision process is critical.

Let’s Learn to Budget

BUDGET CHART – In College

Money Coming In Expenses Employment Income Current Goal Living Expense Current Goal Employment Income Rent / Residence Hall Federal Income Tax - Renter Insurance State & Local Tax - Utilities (elec, gas, water) Social Security/Medicare - Cable/Satellite Tips Internet Net Income Phone Other Other Income Total Parents Grants School Expense Scholarships Tuition & Fees Other Books & Supplies Income from Loans* Total Total Travel Expenses Total Income Transportation/Car pymt Insurance Registration Money for Savings Gas Emergency Fund Maintenance Retirement Plans Parking Pass Investments Total 0 Short Term 'Fun' Savings Charities Variable Expenses Total Groceries / Meal plan Clothes Total Income - Personal Items Total All Expenses Credit Card Payments Total Savings Entertainment Money Left Over Eating Out Other Annual Loan Debt Total 0 Loan Debt at Graduation Total All Expenses

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BUDGET CHART - Standard

Money Coming In Expenses Employment Income Current Goal Living Expense Current Goal Employment Income Rent / Mortgage Federal Income Tax - Taxes / Insurance State & Local Tax - Utilities: Electric /Gas Social Utilities: Water / Security/Medicare - Garbage Tips Cable/Satellite Net Income Internet Phone Other Income Other Rental Properties Total Stock Market Entrepreneurial Endeavors Travel Expenses Interest Income Car payment Other Insurance Total Registration Gas Total Income Maintenance Other Total 0 Money for Savings Emergency Fund Other Expenses Retirement Plans Student Loan Debt Investments Credit Card Debt Short Term 'Fun' Savings Groceries Charities Clothes Personal Items Total Entertainment Eating Out Total Income - Other Total All Expenses Total 0 Total Savings Money Left Over Total All Expenses

Let’s Learn to Budget

Lesson Questions 1. If you are wealthy, you will … a. Not be involved in your own personal financial choices. b. Probably make some poor financial choices but continue to work toward your financial goals. c. Make the best choices on which your close network agrees. d. Not need to continue your financial education. 2. Which of the following is the best example of a variable expense? a. Rent. b. Gym membership. c. Utility bills based on usage. d. Car payment. 3. The elements of a budget include: a. Planned expenses. b. Planned income. c. An evaluation of the difference between one’s income and one’s expenses. d. All of the above.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.

Account Management

Students will be introduced to the banking process. They will learn how to locate a bank or credit union with which they want to do business, what accounts they should have open, and how to handle those accounts in a professional manner.

Account Management

DURATION LESSON TITLE LESSON ID (MINUTES) Banking Basics A1 20-40 Banking Essentials A2 20-40 Debit Card v. Credit Card A3 10-30

Account Management

Banking Basics

Duration  20-40 minutes

Lesson Overview  In this lesson, students will learn about banks and credit unions, develop an understanding about the differences between the two, and learn the benefits and disadvantages of banking at either type of institution. This information is intended to help them make informed decisions about where they would like to bank.

Big Idea  There are various financial institutions that offer a variety of products & services.| There are factors you can use to select financial institutions and professionals that are best suited for your needs. | You have rights and responsibilities when working with a financial institutions and professionals.| There are costs associated with various financial services. | There are strategies you can use to manage your financial accounts.| Financial records include many different types of personal information.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a bank?  What is a credit union?  What are the advantages and disadvantages of credit unions?  What are the advantages and disadvantages of banks?

Skills  Understanding the differences between banks and credit unions, and the advantages/disadvantages of choosing to do business with each.

Vocabulary  Bank  Credit union  ATM  Online banking

Anticipatory Set

Ask students to answer the following Warm-Up Activity question in their Student Guide: “Why should you put your money in a bank?”

Banking Basics

Once they’ve completed the assignment, talk about their answers as a class.

Lesson Explanation

Tell students, “First, I’d like to talk about what you do with your paychecks. Where do you think is the best place to cash your checks?”

Listen to their responses, then go over the options. • Check-cashing business For every $1,000 cashed, you pay about $50. • Payday lenders For every $1,000 cashed, you pay about $175. • Bank or credit union Pay about $0 to $15 per month. Ask them what they would like to do with an extra $50 to a few hundred dollars each month.

Tell students: “In this section we will be talking about opening up a bank account. I know some of you are unable to open an account with a bank or credit union because of past history; however, we will provide the forms to help you do so.” • How you manage your money today will determine whether you achieve financial freedom tomorrow. An important aspect of money management is having the right accounts open. • Your bank accounts are the center of your finances. At minimum, everyone needs to have a checking and savings account open. All your money will transfer from these accounts to pay your bills and to fund your investments.

Explain that as business models go, banks are pretty simple. They use your money to make loans to other accountholders. • Savers - deposit money and earn interest • Borrowers – borrow money and pay a higher interest rate to the bank

Say, “Banks make lots of green by lending money to people at higher rates than they pay the people who deposit money. For example, you deposit money in a savings account and earn 2.25% interest. Then the bank can lend money to customers at 8%. The bank earns the difference.

Explain that banks and credit unions are very different, although their functions are essentially the same. In essence, their function is to serve consumers by providing them with accounts

A1 Account Management

where their money is held. Yet there are many differences between the two types of institutions.

Tell students, “It is important to know what bank s and credit unions are so you can make an informed decision about where you put your money.” Explain the differences between banks and credit unions.

BANKS CREDIT UNIONS Banks are companies which are Credit unions are nonprofit organizations. That profit driven. means any money they make in the course of doing business must be reinvested in the credit union. There are small banks and large They are smaller and usually locally based. They banks. serve the community and are not profit-driven. Banks are run by Boards of Everyone who joins a credit union becomes a Directors that serve the member and has a say in major decisions. For stockholders and others vested in example, the members elect the Board of the company. Directors.

Explain why people bank at credit unions: • They serve a smaller population of the community. • Since they serve a smaller population of the community, they can offer their clients better services. For example, they can offer higher interest on savings accounts and lower interest rates on loans.

Explain why people bank at banks: • Banks tend to be larger organizations and thus can offer more convenience. • They may charge more or higher fees and/or have lower rates on savings accounts and loans. However, there are usually more branches, easier access, and more automated teller machines (ATMs).

Where you bank is a personal choice. Some people prefer convenience and choose large banks. Some would rather bank at a smaller place, have a sense of ownership, and feel more familiar with the organization.

Remind students to choose the financial institution that best serves their needs. They should look for the best account choices and think in the long-term. For example, if they want to save to purchase a home, a credit union may be a better choice because of the interest rates they give to members.

Banking Basics

Tell students, “In order to decide which bank or credit union is right for you and your money, first you need to consider your expectations and purpose for opening an account. Is it for business, pleasure, savings, wage-depositing, eventual loans, or something else?” • First you want to choose a bank or credit union that offers online banking. In today’s economy, it’s a feature you can’t do without. With online banking you can check balances from the comfort of your own home or office. You can pay your monthly utilities, cell phone, and credit card bills electronically without ever writing a check. • Next, look at the costs. Banks have to be competitive, so it pays to compare fees for opening and running an account. There are often fees for both checking and savings accounts. The bank also may charge separate fees for such things as receiving statements in the mail; online banking; and multiple checkbooks. • Make sure to ask and compare all potential fees before settling on a particular bank. • Finally, you want a bank that’s convenient to where you work or live. Since you can now access your accounts online or by phone, many bank transactions can be done without visiting the bank in person. However, it’s important to check out the convenience of ATM locations.

Say, “Remember that you want to build a long-term relationship with the bank you choose. You’ll find that, the longer you remain a good customer, the more benefits you’ll receive. Then the next time you need a car loan, investment account, student loan, or home loan you may get better terms because of that positive relationship.”

Lesson Activity: Banks vs. Credit Unions

Have students determine whether each feature is an advantage or disadvantage of either a bank or credit union. Instruct them to mark their answers in their Student Guide.

A1 Account Management

BANKS + - CREDIT UNIONS + - Large and smaller Smaller and regionally located Typically have a lot of Typically may not have a lot of branches and ATMs branches or ATMs Typically do not offer the best Typically have good rates on rates on savings accounts savings accounts Charge fees for some Do not charge fees for accounts accounts For-profit companies Nonprofit so profits are reinvested in the credit union Serve their investors and Serve their members stockholders (customers)

Discuss the advantages and disadvantages as a class. What may be a disadvantage for some, others may feel neutral on.

Ask students, “Okay, what if you’re unable to open an account because of past mistakes?”

Explain that ChexSystems identifies people who have made mistakes with former bank accounts. Banks and credit unions get a ChexSystems report prior to approving your account. Negative items stay on your account for 5 years. If you have a negative ChexSystems report, here’s how to clear it.

Review the process with the class. • Order a copy of your report at https://www.consumerdebit.com/consumerinfo/us/es/chexsystems/report/index.htm

• If you owe balances to banks or credit unions, consider paying them off. Before making the payment, ask them to provide you with a letter stating that you have paid in full. • If there’s an error in reporting or the bank is out of business, dispute the claim using the provided letter template. To complete the form, just replace all the text you see in italics with your own information. ChexSystems has 30 days to review and respond to your inquiry.

There are some banks and credit unions that will give you a second chance. Some may require that you deposit a certain amount of money or open another financial product such as a CD or savings account.

Banking Basics

Say, “This process may take a little time but saving $30 to a few hundred a month in check- cashing and payday lender fees will make it worthwhile. Look at it this way: If you spend four hours clearing up your negative ChexSystems report and it saves you $400 a year, you just made $100 per hour!”

For those who are unable to open a bank account, give the following homework assignment: • Search for a bank or credit union that will allow you to open an account immediately. • There are several websites that list banks that might open your account. One of these sites is http://chexsys.tripod.com/goodbanks.html.

A1 Account Management

CHEXSYSTEMS FORM LETTER

Mail to:

ChexSystems, Inc. 7805 Hudson Road, Suite 100 Woodbury, MN 55125

Your Full Name Social Security Number ID number (listed on ChexSystems Report) Address Contact Number Name of the bank you are disputing Bank’s Address Account Number

This letter is about the issue with (account number, bank) which I dispute and which I would like your help in clearing. I am disputing both the validity of the alleged debt and the validity of your report.

The Fair Debt Collection Practices Act requires evidence that has my signature and shows I have a contractual obligation to pay. As you are aware, any negative mark on my ChexSystems report for a debt I don’t owe is in violation of the Fair Credit Reporting Act (FCRA). Therefore please delete the entry in question.

My permission is required before you take any action that could negatively affect my rating with credit reporting agencies.

Full Name Signature

Banking Basics

Lesson Questions 1. Which of the following statements is true regarding banks and credit unions? a. They offer completely different services. b. Their members own part of the financial institution. c. They typically have the same interest rates. d. They both typically provide savings, checking, and other types of accounts. 2. Which of the following statements is true about credit unions? a. They are nonprofit organizations. b. The Board of Directors serves the shareholders. c. They usually charge higher fees than banks. d. They usually pay lower interest on savings accounts.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.

A1 Account Management

Banking Essentials

Duration  20-40 minutes

Lesson Overview  In this lesson, students will develop knowledge about how the banking process works. They will understand bank accounts, ATMs, and why banking is important to financial literacy.

Big Idea  There are various financial institutions that offer a variety of products & services.| There are people and tools that can help you manage your financial accounts.| There are factors you can use to select financial institutions and professionals that are best suited for your needs. | You have rights and responsibilities when working with a financial institutions and professionals.| There are costs associated with various financial services. | Management financial accounts should align with your financial goals. | There are strategies you can use to manage your financial accounts.| Financial records include many different types of personal information.| Properly managed accounts can reduce expenses and protect your information.| There are ways to manage your accounts that provide you maximum benefits and protection.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is the purpose of a bank?  What conveniences do ATMs provide?  What is a checking account:  What is a savings account?

Skills  Understanding how the banking system works, including checking and savings accounts, ATMs, online banking, and automatic bill pay.

Vocabulary  Checking account  Savings account  Emergency fund  Bank transfers  Overdrawn  Direct deposit

Banking Essentials

Anticipatory Set

Instruct students to complete the Warm-Up Activity in their Student Guides. • What is the difference between a checking and savings account?

Lesson Explanation

Tell students there are several different types of accounts you can open at a bank or credit union. At the minimum, you should have a checking account and a savings account. Explain the bank accounts. • A checking account is where most of your transactions will take place. This is the “brain” of your bank account and will handle most of your financial ins and outs. For this reason, checking accounts pay little or no interest. • A savings account pays interest for each day you leave your money on deposit. These are the accounts where you deposit money for short-term and long-term savings. As your account balance grows, the effect of compound interest can be really exciting.

Once you have chosen the bank that best suits your needs, immediately open both a checking and a savings account. This is the first step to getting your finances in professional order.

Your savings account is where you will build your emergency fund - enough cash set aside for six months of your expenses. Savings also will be the resting spot for your long-term savings before you move that money into an investment. You also want to have money set aside for fun. It helps if you keep your “fun fund” separate from your long-term account. That way you will know exactly how much you have to spend on vacations, toys, and clothes for you, and gifts for others. • Savings and checking accounts can be linked so you can transfer money between accounts with ease. Easy transfer can make saving money automatic, plus all your accounts can be monitored smoothly. • It’s important to have a good understanding of your account balances, so you know how much money you have available to spend at any time. In the past you may have balanced or seen people balancing their checkbooks by hand. That’s what we had to do 40 years ago. In today’s age online banking balances your accounts for you. • Use the online banking feature to write checks, pay bills, and transfer money. The system does the math for you, but it’s important not to spend more money than you have in the account or you’ll risk being overdrawn. “Overdrawn” means you spent

A2 Account Management

more money than you have in th e account and are left with a negative balance. Avoid overdraft fees by making sure you have enough money to pay your bills.

Tell students: “There’s no time like the present to get in the habit of keeping your finances organized and paying your bills on time. Using automatic online bill pay makes banking a breeze. The banking automatically sends a check or electronic transfer to pay each bill every month, for a given amount and on the date you select.” • Automating your finances will save you time, protect your credit, and help you earn more interest. • There are important steps you can take to automate your finances. • These steps are part of the automated money management system.

Use the following steps to introduce and explain the automated money management system: • Display the following list: o Open a checking and savings account o Set up direct deposit for your paycheck o Set up automatic bill pay o Have a portion of your money automatically sent to savings and an investment account every month

• Poll the following questions: o How many of you like to write checks every month? o How many of you like to lose money? Tell student, “It’s important to keep accurate banking records to avoid overdraft fees. It is strongly suggested that you get into the habit of doing all your banking transactions online. For people who do not automate, the process is more difficult.” Next, explain the steps in detail.

Say, “Here are the steps to follow to automate your finances: 1. Open checking and savings accounts. • Explain that a bank is a business so students should shop around to find one with the best deals — like free checking, online banking, competitive interest rates, etc. • Encourage students to open checking and savings accounts this week if they do not already have them. 2. Have your paycheck directly deposited into your account every pay period. • Explain that direct deposit is safer. o You don’t have to worry about losing your check, spilling coffee on it, the dog eating it, etc. o It saves you time and money.

Banking Essentials

o You don’t have to pay anyone to cash your check or waste gas money and time driving around to get it cashed.

3. Set up automatic bill pay so your bills are paid on time automatically every month. • Automatic bill pay saves you time and money. • If you pay your bills the old-fashioned way, you spend more than $2 in stamps for every five bills you mail. That might not sound like a lot but think of it as two items from the Dollar Menu of your favorite fast-food restaurant. • If you accidentally pay your bills late, you will be forced to pay a late fee on each late bill. Late fees really add up quickly — $20 to $30 on average. • Automatic bill pay also protects your credit by ensuring that everything is paid on time every month. A few late bills can really hurt your credit score. 4. Have a portion of your money automatically put into savings and into your investment accounts. • Build your savings account up to six months’ worth of your monthly bills for emergencies. • Once the emergency money is saved and you become educated about investment options, you can consider investing your money. • If you don’t see it, you are much less likely to spend it! • Every time you get a raise at work, make a habit of automatically saving and investing half of your pay increase before you ever get used to the extra money. It will add up quickly! 5. Open an account with Mint.com or a similar service to track all your finances. • Explain that sites like www.mint.com can help you track all of your financial information in one spot. 6. Complete your personal budget on an Excel spreadsheet. 7. Create a savings plan that aligns with your personal and financial goals. 8. Monitor and measure your day-to-day spending. • Track all your expenses for a month. Put them into categories, and decide whether you’re spending too much or too little in any one area. 9. Review your budget often, especially when you’re starting out. Make changes as you go along and as your circumstances change.

Tell students, “Those who do automate their finances can use the automated money management system to track everything in one pace.” Explain the diagram.

A2 Account Management

Point out that using the automated money management system has many potential benefits. Review the benefits with the students.

• PROFESSIONALISM. The checks are typed out by the bank, instead of hand-written. • TIMELINESS. Payments are sent like clockwork. • ACCURACY. The bank keeps accurate records and up-to-the-minute reporting. • TIME-SAVING. Your accounts are balanced automatically, which saves you time.

Although the system is convenient, be sure to check your bank statement every month. Just one mistake—by the bank, by you, or by a third party—might cost you hundreds of dollars or more! The sooner you catch mistakes, the easier they are to fix. In cases of fraud, identifying the fraudulent charges early saves you money too.

Lesson Activity: Let’s Bank Divide students into three groups; give them the scenarios below; and instruct them to complete the Automatic Finance System within their groups.

SCENARIO #1 You have an income of $4,000 per month. You want to set up $1,500 worth of bills on auto-pay each month. You want to save $12,000 this year. Be sure to set up enough money to be automatically deposited into your savings each month to achieve this goal. You also want to save and invest some money each month. As a group, determine a good amount to start doing this. You have an income of $5,500 per month.

SCENARIO #2 You want to set up $2,500 worth of bills on auto-pay each month. You want to save $12,000 this year. Be sure to set up enough money to be automatically deposited into your savings each month to achieve this goal. You also want to save and invest some money each month. As a group, determine a good amount to start doing this.

Banking Essentials

Lesson Activity: Concept to Practice

Tell students, “I’m going to ask you to complete these activities on your own as part of initiating your automatic finance plan Activity #1: Locate a bank with which you want to do business. Remember that when you open a bank account, you are potentially establishing a relationship that may last quite a few years. Large national banks offer many services, some of which you may not use now but may need in the future. Building a long-term relationship with a bank means one day you will receive preferred treatment.

Make sure the bank you choose offers online banking. It simplifies your life and makes all your banking transactions available at the click of a button. It also gives others the impression that your bills are handled by a professional accountant. Use the steps we went through earlier to help you decide on the bank that’s best for you.

Activity #2: Once you have chosen the bank that best suits your needs, do the following: 1. Open a checking account and a savings account. 2. Set up direct deposit with your employer. 3. Set up the automatic bill payment system. 4. Set up an automatic savings plan. 5. If you have money to invest, set up an automatic investment plan.

Lesson Questions 1. Which type of bank account is typically the one you use to pay your bills? a. Savings account. b. Checking account. c. Investment account. d. Automatic online bill-pay account. 2. What is the role of an emergency fund? a. To have money set aside for wants. b. To invest in the stock market, real estate, or a business enterprise. c. To fall back on in case of a job loss or unexpected expenses. d. All of the above.

A2 Account Management

3. A checking account is a. A savings account that pays the depositor a high rate of interest. b. A credit account. c. A transactional account that allows the account holder to make deposits and withdrawals. d. An investment account.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.  Reiterate the importance of automating one’s finances.

A2 Debit Cards vs. Credit Cards

Debit Cards vs. Credit Cards

Duration  10-30 minutes

Lesson Overview  Students will gain an understanding about what debit cards and credit cards are, how they work, and the differences between them.

Big Idea  There are various financial institutions that offer a variety of products & services.  There are costs associated with various financial services.  There are strategies you can use to manage your financial accounts.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a credit card?  What is a debit card?  What are some differences between credit cards and debit cards?  Why is it important to recognize differences between credit cards and debit cards?

Skills  Understanding what debit cards and credit cards are, how they work, and the differences between them.

Vocabulary  Debit card — also known as an ATM card. This alternative to cash allows you to withdraw money directly from your bank account.  Credit card — gives users a loan with arrangements to make payments on their purchases.

Anticipatory Set Display the following quote: “The only reason a great many American families don’t own an elephant is that they have never been offered an elephant for a dollar down and easy weekly payments.” — Mad Magazine

Discuss the quote with the students and ask them to share what they think it means. Have them write their answers in the Warm-Up Activity in their Student Guides.

A3 Account Management

Ask students what they would do in order to purchase something they really wanted but did not have the money for. Would they save, borrow, use credit? Talk about the benefits and disadvantages of their ideas.

Lesson Explanation

Debit Cards • Debit cards are linked to a bank account. • When you use a debit card the amount of the purchase is automatically deducted from your bank account. • When you use a debit card you cannot make a purchase for more than the balance in your bank account. (If you have $400 in your account and want to make a $500 purchase, you will be unable to do that with a debit card.) • A debit card is an alternative to carrying cash. • When you use a debit card at some stores, you can ask for cash back with your purchase. The amount of the cash would also be deducted from your account.

Credit Cards: • A credit card is a loan from a bank, store or company. • The lender pays for the purchase at the time of the purchase and you must pay the lender back over time. • The lender of your credit card charges you interest each month until the bill is paid in full. • When you use a credit card, if you do not pay off the card in full each month you end up paying more than the amount for which you purchased the item because of interest and fees. • Many credit cards offer bonuses like gifts and airline miles with each purchase. Educated credit card users who pay their bills in full each month can reduce the cost of other purchases. • In some cases, credit cards offer greater protection in case of theft.

The best way to manage a credit card is to be the company’s worst customer. Credit card companies make their money when customers carry a balance from month to month. Plan and budget for your purchases properly so you can pay your credit card bills in full each month.

A3 Debit Cards vs. Credit Cards

Carrying a small debt for two, COMMON MISTAKES WITH CREDIT CARDS maybe three months is not ideal, but is not the end of the world. If Disorganized bill paying (common late fees you start carrying balances longer are $35 or more. than three months, that can be a Paying only the minimum payment. good indicator that you’re Not having a budget in place. developing a debt management Lacking financial and savings goals. problem. Overspending. Not understanding how to most effectively If you can’t handle credit card debt, pay off debt. you need to literally “cut it out”— snip your plastic cards into pieces before you get into real trouble! If you understand the dangers of using credit cards, you can learn how to use them to your advantage. For instance, traveling with a credit card is much safer than carrying a pocketful of cash. Credit cards allow you to rent cars easily and, in an emergency, a credit card can be a lifesaver. However, it is suggested that you not apply for a credit card until you have your emergency fund in place. Before you put credit cards to work for you, you must prove to yourself that you can live successfully within a budget. When you have no credit history, a good option is to get a secured credit card. Secured cards often have high interest rates, but they do offer you the convenience of a credit card while you work on building a credit history. How do secured cards work? You secure the card by depositing cash in the credit card company’s bank. This balance you cannot touch unless you choose to close your credit card. Your cash deposit serves much like collateral for a loan. For example, deposit $300 with the credit card company and you’ll be approved for a $300 limit on the credit card. If you decide to close the card and your account is in good standing, you receive your initial $300 back. And after you have established a proven track record of managing the card, you can apply for an unsecured card (one that does not require a cash deposit as collateral).

Lesson Activity: Using Credit Cards

Give each student an amount of fake money in a debit account (either $200 or $500). Tell them they each also have a credit card with a $500 limit to use for purchases, with a 28% interest rate each month.

Have the students select what they want to purchase from the choices in their Student Guides:

A3 Account Management

• Dinner for two $75 • Brand new outfit $150 • Three DVDs $60 • Day at the amusement park $100 • Lunch with friends $35 • Four video games $200

Ask the students to tell you what they can afford to purchase with their debit cards, based on the amount you gave them. Have them say whether they can purchase more than one item or not, based on their amounts.

Ask them to tell you whether they would consider purchasing something with credit and, if so, why. Ask them when it is appropriate to use credit. Talk about these points.

Share that if students used credit and spent $1,000 for the year, and just made the minimum payments, they will have paid $280 extra after one year. And if they do not pay the balance in four years, they could pay more than $1,000 in extra expenses.

Ask whether this knowledge changes their perspective on using credit versus debit to make purchases.

A3 Debit Cards vs. Credit Cards

Lesson Questions 1. Which statement is NOT true about debit cards? a. They are also called ATM cards. b. They give users a loan with arrangements to make payments. c. They are alternatives to cash. d. They allow you to withdraw money directly from your bank account. 2. Which statement is TRUE about credit cards? a. The credit card company lends you money to make a purchase. b. They are linked to bank accounts. c. You may not make a purchase for more than the available balance. d. You can ask for cash back with your purchase.

Lesson Review  Discuss the importance of knowing the difference between credit cards and debit cards.  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about their answers to the Essential Remarks Questions.  Reiterate the importance of knowing the difference between credit and debit cards.

Credit Profile

In this unit students will identify the correlation between their credit history and their financial reputation as well as develop a basic understanding of what credit history is and how to maintain, build or repair their credit.

Credit Profile

DURATION LESSON TITLE LESSON ID (MINUTES) What is Credit C1 20-40 Credit History C2 20-40 Identity Theft C3 20-40

Credit Profile

What Is Credit?

Duration  20-40 minutes

Lesson Overview  In this lesson, students will develop an understanding of credit. Students will learn how credit functions for making purchases, what finance charges are, and why credit is needed in one’s financial life.

Big Idea  Your credit history is graded and maintained by credit bureaus.  There are organizations that review your credit report.  Your credit history impacts your personal finances.  There are benefits to having positive credit history.

Essential Questions At the end of the lesson students should be able to answer the following:  Why is credit important?  What is an interest rate?  Why do you pay interest on your purchases with a credit card?  How can you have a credit card and not pay finance or interest charges?

Skills  Recognize the advantages and disadvantages of using credit.

Vocabulary  Interest rate — rate charged for borrowing money from a lender, usually calculated as a percentage of your total balance owed.  Interest — the fee charged by a lender for borrowing money. The amount is usually determined based on an interest rate.  Lender — a company, organization, or person that lends money to a consumer.  Grace period — the time a lender allows between a purchase and payment during which they do not charge any interest. A typical grace period is 30 days.  Opportunity cost — the cost incurred by taking one action over another.

C1 What Is Credit?

Anticipatory Set

Ask students to answer this question in their Student Guide: Do you think people are more likely to buy something they do not need when they use a credit card? Make sure students explain why they believe their answers. Once students are finished, have them share their answers and facilitate discussion. Tell students, “In this lesson, we will discuss how (when you use credit) it adds up to less money in the bank. However, if you choose to pay the money you borrow back within the grace period, using credit can have benefits.

Lesson Explanation Ask the students what the difference is between buying something with a debit card and buying something with a credit card. Listen to their responses, then provide the following explanations.

• A credit card is a system the bank (or lender) sets up to lend you money to pay for a purchase. The lender charges you interest on credit purchases – interest is an amount of money on top of the cost of the item. The longer you take to pay off the item, the more interest you will pay to the lender. • Make sure students understand that when they use a credit card for a purchase, they will pay the lender interest on the purchase until they pay off the item. Explain that this is how the lender makes money. • Tell students that to avoid interest accrual they must pay off the purchase in full each month or, at least, as soon as possible. • As an alternative to using credit, they can save up for purchases and pay with cash. • Point out the benefits and drawbacks of using credit when a person has good versus bad credit, as well as the benefits of using cash savings.

C1 Credit Profile

Good Credit Bad Credit Purchases $1,000 Purchases $1,000 Interest rate 7% Interest rate 27% Monthly payment $10.28 Monthly payment $23.45 Years to pay in full 12 Years to pay in full 12 Interest paid $480.87 Interest paid $2,377.10 Actual Cost $1,480.87 Actual Cost $3,377.10

Making Purchase in the Future with Savings Making Purchase Now with Savings Purchases $1,000 Purchases $1,000 Amount saved each month $125 Amount saved each month $125 Months to save $1,000 8 Months to save $1,000 8 Interest earned on savings $30 Savings interest forgone $30 Actual Cost $970 Actual Cost $1,030

By spending money now and not investing it in savings, the students have incurred an opportunity cost— the cost of taking one action over another. Although the purchase will still only cost $1,000, they have lost or “spent” an extra $30 by purchasing now by not investing that money. So why do people have credit cards?

Explain that credit cards can be an excellent tool to help you build your credit rating.

Emphasize the importance of paying credit cards back in full the same month. By using a credit card and paying it off in full, they will build credit without incurring any interest expenses. Essentially, they’ll be building their credit rating for free.

WARNING: Before obtaining any credit cards make sure you have at least six months of your bills saved, a working budget, and the ability to control spending. Also be sure to commit to yourself to paying back the balance in full each month. Only by doing so can you build your credit rating and avoid paying interest. Many individuals and couples slowly increase their credit card debt over months only to realize years later that the amount has grown to a difficult-to-manage amount; they end up wasting hundreds of dollars on interest.

C1 What Is Credit?

Lesson Activity: What’s the Best Payment Option? Explain to students that they will participate in an exercise and complete the activity in their Student Guide individually or in small groups.

• Have students look at the items in the grid and determine the best method for purchasing the items. • Choices are save money over time; buy now with cash, or by now with credit. • Instruct students to check the column under the option they believe is best. • Remind them to be sure to be able to defend their reasoning.

Save Buy now Buy now Item Cost money with with cash over time credit New computer $800 New clothes for summer $500 Birthday present for a friend $100 Brakes for your car $250 New TV for your room $475 Extra money you have: $400 Amount of credit: $1,000

Once the activity is complete talk about their choices. Ask them to provide their reasoning for why it is the best option. Challenge their reasoning to determine if there are equally viable options. Encourage students to reflect upon their answers and add suggestions. Remind them that they want to carefully build their credit over time, so using credit for purchases on some level is okay.

C1 Credit Profile

Lesson Activity: Credit versus Cash Present the video titled C1 - Tyler Christopher. Direct participants to the Credit versus Cash Activity in the Student Guide, and give them approximately five minutes to answer the questions.

Tyler Christopher is best known for his role as Nikolas Cassadine on the ABC daytime drama General Hospital, a character which he originated in 1996 and played off-and-on until 2011. He was nominated for a Daytime Emmy for the role in 1998, 2005, and 2006. Tyler currently plays on the TV show The Lying Game. Follow Tyler on Twitter at @Tyler2929. • Did Tyler Christopher really need the purchases he made with the credit card? Why or why not? Answer: No, he used the credit card to go out and party. • How could Tyler Christopher have used his credit card to build his credit in college rather than ruin it? Answer: Making small purchases each month and paying the credit card in full can help a college student build credit without having to make expensive interest payments. • How did Tyler’s choices about credit hurt him in the future? Answer: When he needed to buy a car, he had to have his dad co-sign for him. As an adult, it was embarrassing for him to require his dad’s help. When the participants are finished, allow each participant time to share a few responses with the whole group.

Supplement the preceding discussion by presenting the following key concept: • By using a credit card and paying it off in full, you will build credit without incurring any interest expenses. • Essentially, you will be building your credit rating for free.”

C1 What Is Credit?

Lesson Activity: Apply for Your Credit Card Have students visit www.StudentExperienceCard.com and complete the questions in their Student Guide.

Do not mention this fact to students, but www.StudentExperienceCard.com is a fake credit card application website. It has extremely unfavorable terms for the applicant, but has large alluring offers for “bonus cash”. The terms that should have caught their eye are: • 99% APR interest rate. • The ability to go over the initial $500 credit limit resulting in a 2% penalty of the entire balance if the balance exceeds the limit. • Their financial information can be sold to anyone without consideration of negative financial impacts on the card holder. • The automatic bill pay option charges $295 per year. The “$100 bonus cash” is automatically used to pay part of the first year’s subscription fee. Applicants are automatically registered for this service upon application. • For the first 24 months, the card can only be used to pay for the subscription fee and any other fees associated for the card. It cannot be used for anything else until the 24 month probationary period is over.

Once the students complete their activity, facilitate a short discussion on the importance of reading the terms and conditions before applying for a credit card.

C1 Credit Profile

Lesson Questions: 1. Which of the following is the correct definition of “interest”? a. The time a lender allows between a purchase and payment due. b. The fee charged by a lender for borrowing money. c. The rate associated with stock investments. d. The amount a person can purchase. 1. Making a purchase now with money that could have been saved and built interest is an example of a. A credit card purchase. b. A debit card purchase. c. Opportunity cost. d. Good credit. 2. What is credit? a. An arrangement for future payment of a loan or purchase. b. Purchasing an item with cash. c. Purchasing an item with an EFT from your bank account. d. None of the above.

Lesson Review  Ask the class, “How does this lesson make you think about credit and how to use it?”  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

C1 Credit History

Credit History

Duration  20-40 minutes

Lesson Overview  In this lesson, students will learn about credit history. They will learn how credit history represents one’s financial reputation, and they will comprehend the importance of building a positive payback record with lenders.

Big Idea  There are benefits to having positive credit history.  Your credit history is graded and maintained by credit bureaus.  There are organizations that review your credit report.  Your credit history impacts your personal finances.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a credit report or credit history?  Why is it important to have a good credit score?  What doors are opened by having a positive credit score?  Why is a negative credit score bad?  What are some important ways to get and keep good credit?

Skills  Explain what information is contained in your credit history and report.  Recognize how they use and interpret your credit report data  Recognize that credit bureaus assign a personal credit score based off your credit history.

Vocabulary  Credit report — a detailed report about a person’s credit history, which outlines payback records and amounts of debt owed and paid, to help lenders determine creditworthiness for future lending.  Credit score — a measure of credit risk, determined by one’s credit history using standard forms of measurement.  Financial reputation — the worthiness of a person’s personal financial payback history. The worse the reputation, the less likely the person is judged to pay back debts.

C2 Credit Profile

Anticipatory Set Have students answer the questions in their Student Guide by filling in the two-column chart.

What doors does What doors does having good grades open? having bad grades close? EXAMPLE: Professional Opportunities EXAMPLE: Dream Job

Have students share responses with the class. Compile common answers. Talk about why these opportunities are important. To facilitate discussion, ask questions such as: • What doors does having good grades open? • What doors does having bad grades close? • What benefits / disadvantages do they bring? • Why is it important to get good grades? Explain that a credit score is like your report card: it will open doors if it’s high and close them if it’s low. Your credit score — also called a credit rating — can affect your life in lots of ways.”

• Money. Good credit saves you money. Someone with good credit can save thousands of dollars off the total costs of an average-priced car and significantly more on a mortgage. • Jobs. Nowadays lots of employers do credit checks prior to hiring new employees. Since there are so many people who have made credit mistakes, people with excellent credit ratings stand out. • Access to Capital. If you have poor credit, your ability to qualify for loans (college, auto, home, credit cards, etc.) is severely limited. If you do qualify for a loan, you’ll receive poor terms (higher interest rates and other restrictions). People with good credit ratings get better loan terms and have an easier time completing the application process. • Emotions. Getting turned down for credit is embarrassing. And not being able to get your dream home or car when you want it can be disappointing.

C2 Credit History

Lesson Explanation Have the students consider and discuss the following questions: • Who wants to save thousands of dollars off their next car purchase? • Who wants to purchase a home one day? • Would you like to save a hundred thousand dollars off your home purchase? • Who wants to receive the VIP treatment when they apply for a loan? This is what we will be showing you today. Explain that credit refers to your ability to borrow money to pay for something. Such borrowed money also includes credit cards. Credit is used to buy cars, houses, and major appliances. Credit also can be used to pay for college tuition and supplies. A credit report is a detailed record of your credit activities. It lists any credit card accounts or loans that you have, the balances you owe on these accounts, and how regularly you pay on your accounts. Your credit score is calculated based on your credit report.

A financial reputation is other people’s beliefs or opinions about your ability to manage your finances. Institutions will lend money to people who have good financial reputations. Institutions do not want to lend money to people who have poor financial reputations.

• Ask to borrow something from a student. When you get the item tell the student that you are not going to pay him or her back and walk away. • Ask to borrow something else from another student – promise that you will pay him or her back. • Continue to ask students to borrow items, alternating in whether you will pay them back or not, until a student turns you down. Then ask that student why? • Pose the following questions to the whole group: o Why should this participant allow me to borrow the item? o Why shouldn’t this participant allow me to borrow the item? o Can I be trusted? CREDIT REPORTS Explain to students that a credit report is like a report card that grades you on whether and how well you pay back money you borrow from lenders. • If you pay back what you borrow all the time you get an A. If you pay your lenders late you get a C. And if you don’t pay lenders back at all, you get an F. • If your credit receives a grade A, it’s easy to borrow things because people know you will pay them back.

C2 Credit Profile

Ask students: “What credit grade did I have when I borrowed things and didn’t pay them back?” Wait for responses and discuss. (They should say “F.”)

Explain that credit grades are computed as scores. The higher the score, the better the grade. For example, a score of 740 equals grade A whereas a score of 550 equals grade F.

Ask students to write down things they might expect to get if their credit scores are high. Examples: less interest to pay when borrowing; more opportunities to borrow for large purchases like houses or cars; “rewards” from some credit cards that amount to free money/goods/services.

Ask them to think about what they do or should do to get good scores. Then ask them to share what they think people might do to keep their credit scores high. Give them lots of hints for this one and point them in the right direction.

• Pay bills on time. Use online and automatic bill pay to avoid late payments. • Keep your debt (the amount of money you owe on credit cards) low. • Have insurance to protect yourself – medical problems are the largest cause of bankruptcy and if you get in an accident that insures another without car insurance your future wages can be garnished, which will become a negative mark on your credit report. • Protect yourself from identity theft – check your credit rating at least once per year for free by visiting www.AnnualCreditReport.com. • Build your credit rating – when you’re young and starting out you have no credit, which puts you in bad credit territory. You need to use credit to build your credit rating. Explain that in school, if a student never completed any tests, classwork, or homework, how would they be graded? This same notion applies to credit.

FICO GRADES 720 or higher A = Excellent 660 to 720 B = Good 620-660 C = Average 560 to 620 D = Poor 560 or less F

C2 Credit History

CREDIT BUREAUS A credit bureau collects and stores credit information on consumers. There are three main credit bureaus: Equifax, Experian, and TransUnion. Each keeps its own records and individual credit scores. Your credit score is a report card of your credit history for the past 7-10 years. The grading system they use is called a FICO (for the Fair Isaac Corporation) score. Let’s explore what the FICO score evaluates. Five data categories influence your credit score, to varying degrees: • 35% — Payment history • 30% — Amounts currently owed • 15% — Length of your credit history (The longer the better, but don’t worry about this one too much:you will build your history over time.) • 10% — New credit (the number of recently-opened accounts) • 10% — Types of credit used Credit bureaus look at all five areas when scoring your credit, but the payment history and amounts currently owed have the biggest impact. So keeping your balances low and paying your bills on time are the two most important steps toward maintaining good credit! Following is a more comprehensive list of strategies for having a great credit score. CREDIT SCORE IN PRACTICE. Assume you were in the market to by a $25,000 car. Without an excellent credit rating, you pose a higher risk to lenders, which will increase your interest rate and closing costs. You are literally giving money away. Take this example for instance: If you have good credit, you will receive a lower interest rate. But with bad credit, your interest rate increases. In the example shown, you would end up paying $4,200 more over the five-year term of the loan if you had bad credit.

Line Item Good Credit Bad Credit Price of Car $25,000 $25,000 Interest Rate 6.25% 12% Monthly Payment $486 $556 Years to Pay Off 5 5 Actual Cost $29,160 $33,360 Difference in Price +$4,200

What would you rather spend that money on?

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STEPS FOR GETTING AN “A” CREDIT SCORE Review with the class steps you can take to get an A credit rating on your credit report. • Get a complimentary copy of your credit report. • Identify the areas you need to work on and create a credit plan to address those areas. o If you’re already in debt, create a debt reduction/debt payoff plan. o If you don’t have a credit history yet, first save six months’ worth of your bills, have a working budget, and have the ability to control spending. Then get a credit card, use it each month, and pay it back in full each and every month.

• Review your medical and auto insurance to ensure that you have adequate protection in place in case something happens. • Review your credit report annually and three months prior to any major purchase. • Consider signing up for credit protection plans. • Build up your available credit over time and keep your debt load to a minimum. • Limit inquiries — don’t have your credit report run too often. Be aware and conscientious about things that might impact your credit rating.

DEVELOPING A CREDIT PLAN Here are some things to consider when you’re developing your Credit Plan.” • Identify the areas where your credit needs improvement. (Examples: stop paying your bills late; lower your total debt; or build your credit rating). Verify that your plan still makes sense once you get a copy of your credit report. • List the areas you need to work on, in order of importance. • Write down how you will remedy each area. • List any larger purchases you’ll need to make—the ones for which you would have to get a loan, like a car or a home. • Create a credit timeline to ensure that you’ll qualify for the best terms at the time when you need to make those major purchases. • Take action on your credit each month and work your plan to your best advantage. • If your credit score is low, there are several things you can do to improve and repair your credit.

o Get a free copy of your credit report from all 3 credit bureaus (Experian, TransUnion and Equifax) by visiting www.AnnualCreditReport.com.

C2 Credit History

o Dispute the negative items on your credit report using the form letters we’ve provided. The credit bureau has 30 days to verify the information or the item drops off your report. o Continue your letter-writing campaign. You can expect some items to drop off, while others won’t. o If you still owe money to lenders that have put bad marks on your credit, contact each lender directly. o Negotiate a settlement (30 – 50 cents on the dollar is common). As part of your negotiation, ask the company to provide a letter stating that the bad item will be removed from your credit report. Wait to receive the letter before you pay that lender.

Lesson Activity: How Others Perceive Your Credit Score Ask for two student volunteers. • Tell the volunteers to walk around the classroom (or via virtual meeting place) and complete a scavenger hunt to collect: pen, binder, book, backpack, and one shoe. (The selected students may not use their own items to fulfill the scavenger hunt EXCEPT their own shoe.) • Have them leave the room for a few seconds and explain to the class that when the volunteers come back, they will be instructed to ask their peers to borrow something. Tell students in the class that when the other two students return each will have a credit score on his/her back. Explain that the volunteers will ask students to borrow certain items. Tell the students in class to treat the two students with credit scores on their backs as follows:

• For the student with the higher credit score number on his/her back, tell the students they should: o be extra polite; o give the student whatever he/she asks; o even offer the student their chair to sit in while they get the item the student asked to borrow; o offer them things they didn’t even ask for; o tell them to have a great day, take care, etc.

C2 Credit Profile

• For the student with the lower credit score number on his/her back they should: o say no; o only let the student borrow something if he/she puts down a deposit of one shoe; o act surprised that the student would even ask; o guard their stuff as the student walks by. When the students return, tape a paper on each of their backs with a credit score written on it. (One reads: “740, A+ Credit”, the other reads: “540, F Credit”). Have the volunteers turn around so the class can see their numbers. Tell the class not to reveal what the numbers are.

Once the activity is complete, thank the volunteers and talk about what happened during the activity. Facilitate a discussion around the following questions:

• Ask students why the two borrowers were treated differently. Answer: The one with the lower score has a history of not paying back things they borrow. In contrast, people with higher credit scores typically pay people back on time. • Ask the two borrowers how they felt during the activity?

Lesson Questions 1. A credit score is: a. A detailed report about a person’s credit history. b. A report that outlines payback history and debts owed. c. A report to help lenders determine one’s creditworthiness for future lending. d. All of the above. 2. Which of the following actions will limit your possibility of getting and keeping an “A” credit rating? a. Creating a debt reduction plan if you are in debt. b. Having adequate medical and auto insurance. c. Keeping debt load to a minimum. d. Checking your credit each time you pay off an account. 3. Your credit history … a. Allows you to make purchases that you pay for at a future date with interest. b. Is a debit card. c. Is a profile that reflects your payback history. d. Is debt that should be avoided.

C2 Credit History

4. A credit bureau: a. Collects and stores consumer credit information. b. Collects and stores consumer purchase data. c. Collects and stores consumer medical information. d. Collects and stores consumer investment information. 5. Which of the following categories influence your FICO score? a. Outstanding debt b. Payment history c. Types of credit used d. All of the above 6. Your credit history is: a. A report of your assets. b. A detailed budgeting plan. c. A detailed account of your credit situation. d. A detailed report of your tax payments. 7. Good credit means: a. You keep your financial commitments most of the time. b. You honor only the debts that are the most important. c. You build wealth through a sustainable investment plan. d. You honor your commitments and pay all your bills on time. 8. To build an excellent credit rating, you should: a. Get a complimentary copy of your credit report each year. b. Create and follow a debt reduction plan. c. Set up an automatic payment system to pay your bills. d. All of the above.

Lesson Review  Ask students how this lesson put in perspective the importance of credit history.  Direction students to complete the Essential Questions in their Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions Remarks  Reiterate the importance of maintaining a positive financial reputation.

C2 Credit Profile

Identity Theft

Duration  20-40 minutes

Lesson Overview  In this lesson, students will learn various methods of identity theft and the importance of keeping personal financial data private. They will be introduced to various statistics about consumer identity theft, resources to monitor personal data, and ways to prevent identity theft — and catch it if it does occur.

Big Idea  There are different types of fraud and fraudulent behavior. | Fraud can negatively impact your personal finances.| There are different ways an individual can protect themselves from fraud. | There are different actions you can take to recover from fraud. | There are ways to ensure your credit is protected and information is accurate. Your credit history impacts your personal finances. | You have rights when it comes to your credit report. | There are methods to recover from negative credit history. | There are specific steps to rebuilding credit history. | There are agencies that can assist in rebuilding your credit profile.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is identity theft?  How can I protect myself from identity theft?  Why is identity theft bad?

Skills  Know the various methods of identity theft, how to take preventive measures to prevent identity theft, and how to deal with identity theft.

Vocabulary  Identity theft  Personal identification information  Fraudulent charges/reporting

Anticipatory Set Read over the situation with students and have them write their responses in the Student Guide Warm-Up Activity.

C3 Identity Theft

You work hard to save your money and purchase a nice HDTV and Wii for your bedroom. It took you almost a year to save the money but now you are enjoying the TV and video game player with your little brother. Then you wake up the next morning and see that it is all gone. How could this have happened? Someone has stolen it while you were sleeping. All you worked for gone without you having a chance to defend yourself. How does this make you feel? Make sure students only focus on how the scenario makes them feel. They do not need to figure out who took the stuff. Help them concentrate on the feelings.

Once they have completed the assignment, talk about their answers/feelings as a class.

Tell them that this is how someone feels when they get their identity stolen. Someone takes their personal information and uses it to ruin someone’s credit history and their financial reputation before they even realize it has happened.

Lesson Explanation Identity theft occurs when a criminal uses another person’s personal information to take on that person’s identity. Although identity theft can occur online, most occurs via stolen wallets and personal identification documents.

For the National Crime Victimization Survey (NCVS), the definition of identity theft includes three general types of incidents: • unauthorized use or attempted use of an existing account; • unauthorized use or attempted use of personal information to open a new account; • misuse of personal information for a fraudulent purpose.

STATISTICS Ask students to guess how many cars were stolen in America last year (according to the National Insurance Crime Bureau). Answer: One million cars were stolen.

Ask students to guess how many identities were stolen in America last year (according to the Social Security Administration). Answer: Nine million identities were stolen.

Approximately 15 million US residents have their identities used fraudulently each year, representing financial losses totaling more than $50 billion.

C3 Credit Profile

• On a case-by-case basis, that means approximately 7% of all adults have their identities misused with each instance resulting in approximately $3,500 in losses. • Close to 100 million additional Americans have their personal identifying information placed at risk of identity theft each year when records maintained in government and corporate databases are lost or stolen. • These alarming statistics demonstrate that identity theft may be the most frequent, costly, and pervasive crime in the US. Discuss/explain common methods used to steal personal, private information and preventive measures one can follow to avert identity theft:

C3 Identity Theft

METHOD PREVENTION

Old hard drives Consistently erase/delete information

Hacking Make your passwords harder, and change them on a set cycle (i.e., quarterly)

Pharming — Hackers redirect you to a website Check the URL of any website that asks for without your knowledge, and attempt to collect personal information. your information fraudulently. Use only secure sites when making transactions. The website URL should begin with https. Virus protection and firewalls should be installed and updated. Use settings that block or warn you about suspicious websites.

Dumpster diving — people dig through your trash Use a shredder to destroy documents. seeking information.

Mail theft — going through your mailbox or Use paperless bills and pay attention to your forwarding mail to another location. mail. Get a mailbox at the U.S. Post Office. Opt out of pre-approved credit cards by visiting www.optoutprescreen.com.

Stealing your purse or wallet Don’t carry your social security card, and limit other information that thieves could get their hands on. Keep your personal information in a secure place at home.

False scanners on ATMs Pay attention — fake scanners can sometimes be identified if you are aware.

Phishing — someone calls or emails you Order a free copy of your credit report from the pretending to be another company and tries to three credit bureaus: Experian, Transunion, and get your information. Equifax. Visit www.MyAnnualCredtReport.com to secure your report annually.

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TYPES OF IDENTITY THEFT Ask the students “What are the main types of identity theft?” Listen to responses, then go over the information below.

• Social Security Identity Theft. If someone uses your SSN to get a job, the employer may report that person’s income to the IRS using your SSN. When you file your tax return you won’t include those earnings. IRS records will show you failed to report all your income. The agency will send you a notice or letter saying you got wages but didn’t report them. The IRS doesn’t know those wages were reported by an employer about which you’re unaware. If someone uses your SSN to file for a tax refund before you do, the IRS might think you already filed and got your refund. When you file your return later, IRS records will show the first filing and refund, and you’ll get a notice or letter from the IRS saying more than one return was filed for you. • Driver’s License Identity Theft. If your government-issued identification—driver’s license, passport, or Medicare card—has been lost, stolen, or used fraudulently, contact the agency that issued the identification. o Contact the appropriate agency in your state. o Department of Motor Vehicles for drivers licenses and ID cards o Social security office for Medicare card o US Department of State – Bureau of Consular Affairs for passports. o Cancel the lost or stolen item and get a replacement. o Ask the agency to put a note in your file so no one else can get a license or ID in your name.

• Financial Identity Theft. “Existing accounts” are bank/credit accounts for which you already have a card, accounts that you personally opened. When your wallet gets stolen, existing accounts often are hit quickly, within a matter of hours. The thief knows that as soon as you notice the cards missing, you’ll report them and they’ll no longer work. More importantly, thieves also know that if they use the card after it’s reported stolen they run a higher risk of being caught.

o Banks have had to deal with identity theft for a while now, and have clear-cut guidelines for how to handle a hijacked account. Most often damage is negligible, a few hundred dollars and the inconvenience of wasted time. Sometimes your money is tied up while the bank investigates the problem, but even then you’re only looking at a couple of months.

C3 Identity Theft

o Credit card companies, too, have dealt with identity theft for several years. The difference between your ATM card with the VISA logo on it and your VISA credit card is that the ATM card takes money directly out of your personal account. But money spent using the credit card is essentially a loan. So while the identity thief takes your money with an ATM card, they are taking a loan in your name when they use your credit card. In other words, the credit card company is out the money, not you. Although it’s often called credit card fraud, this type of fraud is generally accepted as one of the main forms of identity theft.

• Medical Identity Theft. A thief may use your name or health insurance numbers to visit a doctor, get prescription drugs, file claims with your insurance provider, or get other care. If the thief’s health information is mixed up with yours, your treatment, insurance and payment records, and credit report may be affected. Signs of medical identity theft include:

o A bill for medical services you didn’t receive. o A call from a debt collector about a medical debt you don’t owe. o Medical collection notices on your credit report that you don’t recognize. o A notice from your health plan saying you reached your benefit limit. o A denial of insurance because your medical records show a condition you don’t have. • Insurance Identity Theft. Insurance identity theft is closely related to financial identity theft and medical identity theft. It can affect your finances and healthcare treatment, but by nature insurance identity theft puts its victims through a special type of hell. • Children’s Identity Theft. The Children’s Online Privacy Protection Act (COPPA Rule) was put in place to protect kids’ personal information on websites and online services—including apps—directed to children under 13. The COPPA Rule also applies to a general audience site that knows it’s collecting personal information from kids that age. • Criminal Identity Theft. Criminal identity theft is just as difficult a problem to resolve as medical identity theft. Like medical identity theft, criminal identity theft has a way of coming back to haunt you even after you think you it’s been resolved. The easiest way to detect criminal identity theft is to get caught speeding. The officer who stops you will run your license and registration. If there are warrants out for your arrest, they will give you a pretty set of matching silver bracelets and free public transportation to the local precinct. • Mortgage Identity Theft. In a real estate investment scheme, mortgage fraud perpetrators persuade investors or borrowers to purchase investment properties, generally at fraudulently inflated values. Borrowers are persuaded to purchase rental properties or land under the guise of quick appreciation. Victims pay artificially inflated prices for these investment properties and, as a result, experience personal financial loss when they discover the true value. Analysis of FBI cases opened in FY 2010 revealed that 43% of FBI field offices have reported such activity, with losses exceeding $76 million.

C3 Credit Profile

o Equity skimming schemes occur when mortgage fraud perpetrators drain all the equity out of a property. For example, perpetrators charge inflated fees to “help” homeowners profit by refinancing their homes multiple times and skimming the equity from their property. A perpetrator also will help a homeowner establish a home equity line on a property. The perpetrator then encourages the homeowner to access these funds for investment in various scams. o Foreclosure rescue schemes are often associated with advance fee/loan modification program schemes. Perpetrators convince homeowners that they can save their homes from foreclosure through deed transfers and paying up-front fees. This “foreclosure rescue” often involves a manipulated deed process that results in the preparation of forged deeds. In extreme instances, perpetrators may sell the home or secure a second loan without the homeowner’s knowledge, stripping the property’s equity for personal enrichment. For example, the perpetrator transfers the property to his name via quit claim deed and promises to make mortgage payments while allowing the former homeowner to remain in the home paying rent. The perpetrator profits from the scheme by remortgaging the property or pocketing fees paid by desperate homeowners. Often the original mortgage is never paid by the perpetrator and foreclosure is only delayed

IDENTITY THEFT PREVENTION Explain that there are many ways to prevent one’s identity from being stolen. Go over the examples that follow:

• The National Do Not Call Registry offers an opportunity to limit the telemarketing calls you receive. Once you register your phone number, telemarketers covered by the National Do Not Call Registry have up to 31 days from the date you register to stop calling you. • For Credit and ATM or Debit Cards: o Don’t disclose your account number over the phone unless you initiate the call. o Guard your account information. Never leave it out in the open or write it on an envelope. o Keep a record of your account numbers, expiration dates, and the telephone numbers of each card issuer so you can report a loss quickly. o Draw a line through blank spaces on charge or debit slips above the total so the amount can’t be changed. o Never sign a blank charge or debit slip. o Tear up copies and save your receipts to check against your monthly statements. o Cut up old cards—cutting through the account number—before you throw them away. o Open your monthly statements promptly and compare them to your receipts. Report mistakes or discrepancies as soon as possible. o Carry only the cards you’ll need.

C3 Identity Theft

• For ATM or Debit Cards: o Don’t carry your PIN in your wallet, purse, or pocket or write it on your card. Never write a PIN on the outside of a deposit slip, an envelope, or anywhere it could be lost or viewed. Memorize all your PINs. o Carefully check all your ATM or debit card transactions; funds for each item you purchase will be quickly transferred out of your checking account. o Regularly check your account activity, especially if you bank online. Compare the current balance and transactions to those you’ve recorded. Report any discrepancies immediately. o Read the Privacy Notices, which explain the personal financial information a company collects; whether the company intends to share your personal financial information with other companies; what you can do to limit sharing; and how the company protects your personal financial information.

• Use only a secure server to access the Internet. Cyber hackers can get into your system and steal critical personal and financial information. • Shred. Shred. Shred. If you feel like you’re shredding every piece of paper that enters your home, you’re doing it right. Invest in a shredder – it’s worth it. • Keep your Social Security card, passport, license, and other valuable personal information hidden. A lockbox (or safety deposit box) is a good idea. Leaving the lockbox out in the open isn’t. • Avoid writing or printing your phone number or Social Security number on checks. • Get a mailbox that locks. • Opt out of unnecessary (sometimes risky) credit or insurance offers. Call 1-888-5OPTOUT and alert all 3 credit bureaus that your name is not for sale. • Never provide your social security information or private contact information over the phone–unless YOU initiated the phone call. • Delete any suspicious email. If it seems strange, it is. If it seems too good to be true–it is. o If you’re communicating with a business, be sure that electronic data is encrypted (secure) and that their security systems are audited. o Watch for people who may try to eavesdrop and overhear information you give out verbally. A great example is not saying your phone number aloud in a supermarket when you’ve forgotten your loyalty/discount card.

C3 Credit Profile

WHAT TO DO IF YOU’RE A VICTIM OF IDENTITY THEFT If you find yourself victim to identity theft, acting fast limits your liability for unauthorized charges. Report a lost or stolen card to the card issuer as quickly as possible. Many companies have toll-free numbers and 24-hour service for such emergencies. • Contact your ATM or debit card issuer. • Write a follow-up letter to confirm that you reported the problem. • Update your files.

Your maximum loss: If you report:

Before any unauthorized charges are made $0 Within 2 business days after you learn about the loss or $50 theft More than 2 business days after you learn about the $500 loss or theft, but less than 60 calendar days after your statement is sent to you More than 60 calendar days after your statement is All the money taken from your sent to you ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.

If your identity is stolen you should contact the following agencies: • The three credit bureaus: Trans Union, Equifax, Experian • The Federal Trade Commission • The IRS • Internet Crime Complaint • Local police department • Report scams to your state Attorney General • If you’re outside the US, file a complaint at econsumer.gov • If you get unsolicited email offers or spam, send the messages to [email protected] • If you get what looks like lottery material from a foreign country through the postal mail, take it to your local postmaster. To help prevent your identity from being stolen, check your credit annually to check for any errors on your report. You may check your report at www.annualcreditreport.com for free once per year.

C3 Identity Theft

The Federal Trade Commission also can assist consumers with identity theft issues. Visit ftc.gov/idtheft for more information about minimizing your risk. The following suggestions are taken from the FTC website at: http://www.consumer.ftc.gov

• Place a 90-day initial fraud alert on your credit report. The alert tells anyone who uses your credit report that they must take reasonable steps to verify who is applying for credit in your name. To place this alert, contact one of the three nationwide credit reporting companies. The one you contact must notify the others. • Place a seven-year extended fraud alert on your credit report. To do this, provide an identity theft report to each credit reporting company and explain how potential creditors can contact you. The credit reporting companies will put your contact information on the extended fraud alert to tell potential creditors they must contact you before issuing credit in your name. • Get one free copy of your credit report and a summary of your rights from each credit reporting company when you place a 90-day initial fraud alert. If you place an extended fraud alert with a credit reporting company, you have the right to two copies of that company’s credit report about you in a 12-month period. These are in addition to the free credit report to which everyone is entitled annually from each credit reporting company. • Have credit reporting companies block fraudulent information from appearing on your credit report. You must send them a copy of a valid identity theft report, proof of your identity, and a letter stating which information is fraudulent. Then the credit reporting companies must tell any creditors who gave them fraudulent information that it resulted from identity theft. Creditors may not turn fraudulent debts over to debt collectors. • Dispute information on your credit report—if you think it’s fraudulent or inaccurate—with a credit reporting company. The credit reporting company must investigate your dispute and amend your report if you are right. • In many states, you have the right to place a freeze on your credit report. A credit freeze makes it less likely that an identity thief could open a new account in your name. The form letters on the following pages can be used to assist with reporting fraudulent charges applied to your account(s).

C3 Credit Profile

Form Letter Asking a Business to Remove Fraudulent Charges from Your Account

[Date]

[Name of Company] [Fraud Department or Billing Inquiries] [Address] [City, State, Zip Code]

RE: [Account Number (if known)] [Your Name] [Your Address] [Your City, State, Zip Code]

Dear Sir or Madam:

I am writing to dispute [a] fraudulent charge[s] on my account in the amount[s] of [$______], and posted on [dates]. I am a victim of identity theft, and I did not make [this/these] charge[s]. I request that you remove the fraudulent charge[s] and any related finance charges from my account, send me an updated and accurate statement, and close the account (if applicable). I also request that you stop reporting this inaccurate information and report the correct information to all of the nationwide credit reporting companies (CRCs) to which you provided it.

Enclosed is a copy of my Identity Theft Report, credit report, and account statement showing the fraudulent items related to your company that are the result of identity theft. Also enclosed is a copy of the Notice to Furnishers of Information issued by the Federal Trade Commission, which details your responsibilities under the Fair Credit Reporting Act as an information furnisher to CRCs.

Please investigate this matter and send me a written explanation of your findings and actions.

Sincerely, [Your Name]

C3 Identity Theft

Form Letter to Dispute Fraudulent Errors on Your Credit Report

[Date]

[Name of Company] [Address] [City, State, Zip Code]

RE: [Your Name] [Your Address] [Your City, State, Zip Code]

Dear Sir or Madam:

I am a victim of identity theft and I write to dispute certain information in my file resulting from the crime. I have circled the items I dispute on the attached copy of my credit report. The items I am disputing do not relate to any transactions that I made or authorized.

Please remove or correct this information at the earliest possible time. I dispute the [name of source, like “Company” or “Court”] [name of item, like “account” or “judgment”] because [explain why the item is inaccurate]. As required by section 611 of the Fair Credit Reporting Act, a copy of which is enclosed, I am requesting that the item[s] be removed [or request another specific change] to correct the information.

[If possible — I have enclosed copies of documents that support my dispute.]

Please investigate and correct the disputed item[s] as soon as possible.

Sincerely,

[Your Name]

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Lesson Activity: Identifying Identity Theft Divide students up into three groups and direct them to the Identifying Identity Theft Activity in the Student Guide.

• Explain to the groups that you will give them each a prompt. • They are then going to create a skit based on their prompt about identity theft. Once they have created their skits, each group will perform its skit in front of the class. • The class will then try to guess what is going on in the skit.

GROUP 1 One person has worked for a long time to build good credit. The person has very little credit and pays off all of his/her credit cards every month. One day he/she tries to buy a new car, and finds out that he/she is being denied a loan due to poor credit.

GROUP 2 One person with bad credit wants to buy a house very badly. He/she knows someone who knows someone who can get him/her a new social security number for $250. The person buys the new number and buys the house of his/her dreams. Two months later, two police officers come knocking on the door. The person is shocked —he/she thought he/she hadn’t done anything wrong.

GROUP 3 One person finds a wallet on the floor. The person takes all of the money from the wallet and uses the credit cards. The owner of the wallet finds out what happened, using online banking, and calls the police.

Let students practice the skits for about 10 minutes. Then have them act out the skits and talk about the scenarios. Explain why each one is a form of identity theft and illustrates the importance of protecting your personal identifying information.

C3 Identity Theft

Lesson Activity: Identity Theft Check Tell the students that you will be able to check if their identities are being tampered with currently or in the past. To do this you will need some of their information.

Have students fill out the Identity Theft Check form in their Student Guide. Tell them that they will turn the activity sheets in to you (course instructor) when completed. For students that do not know their social security or driver license numbers by memory, tell them you will contact them later tonight to collect the needed information right before you start checking the group’s identity theft status.

Allow students a few minutes to complete and tell them to remove the forms from their workbooks. Before the form leaves their possession tell you have something to confess. Ask them how many filled in their Social Security numbers and other highly personal information. • Explain that you had no intention of doing any check for them and you were about to have all the information you need to steal their identities. For those who didn’t know their social security or driver’s license numbers, tell them that you did not yet have all the information, but that by the end of the next day you probably would have if you had not revealed to them that this was a scam. • Joke about a purchase you could make or a trip you could take using their stolen information. • Tell the students that they should always pause and question why a requesting party needs highly personal information, especially your social security number. Tell the students to take their forms home with them and thoroughly destroy them. Do not simply throw the form in the trash. Present the video titled C3 - Identity Theft.

Supplement the preceding discussion by presenting the following key concepts: • In 2010, roughly ten million adults were victims of ID fraud; that number is now up to 11.6 million adults in 2011. (Source: Javelin Strategy & Research) • An FBI Uniform Crime Report found in a LoJack ad that in 2010 737,000 cars were stolen in the US, with a 56.1% recovery rate.

C3 Credit Profile

Lesson Questions: 1. Which of the following represent(s) ways in which identity theft occurs? a. Online. b. Via old computer hard drives. c. Stealing wallets. d. All of the above. 2. What do shredding and changing passwords have in common? a. They both make it easier for identify thieves to steal information. b. They have nothing in common. c. They help prevent identity theft. d. They eliminate “dumpster diving.”

Lesson Review  Ask the class how they might change some of their online behaviors in order to protect themselves from identity theft.  Ask what other questions or concerns this lesson brings up.  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

Loans & Debt

Students will develop a basic understanding of loans and the loan qualification process. Students will gain awareness of types of debt, investment in one’s education and the dangers of defaulting on loans.

Loans & Debt

DURATION LESSON TITLE LESSON ID (MINUTES) Good Debt v. Bad Debt L1 10-30 Cost & Benefits of College L2 20-30 Quantifying Your College Decision L3 20-40 Invest in Your Future L4 30-40 Funding College L5 30-40 How to Pay Off Debt L6 30-40 Car Loans L7 20-40 Loan Manager L8 20-50 Loan Qualification L9 10-30 Consequences of Default L10 20-30

Note to Instructor: This unit contains lessons and activities specific to students preparing for, currently enrolled in or recently exited from college. While this information is still valuable to all (especially parents of college students), please be sure to gauge its relevancy in regards to your anticipated audience when designing your student experience.

Loans & Debt

Good Debt vs. Bad Debt

Duration  10-30 minutes

Lesson Overview  In this lesson, students will identify the differences between types of debt. They will learn to distinguish between good debt and bad debt, and will know how to determine what type of debt is best to build a positive credit history.

Big Idea  There are different types of loans that give you the ability to borrow money.  There are reasons and consequences to taking on debt.  There are different forms of debt that can offer benefits and/or consequences.  Debt can increase risk and potential reward.  Debt can be a part of your financial plan.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is good debt?  What is bad debt?  What type of debt is a home loan considered, and why?  What type of debt is a credit card considered, and why?

Skills  There consequences to taking on debt.  There are different reasons to take on debt.  There are different forms of debt that can offer benefits and/or consequences.

Vocabulary  Good debt — helps people get into a better financial situation, and is achieved through increase in value of an asset (property, investment, personal skill level) or through case flow (income).  Bad debt — does not offer potential to improve one’s financial situation, and is typically incurred when people make unnecessary purchases.

L1 Good Debt vs. Bad Debt

Anticipatory Set Display the following question and instruct students to write their answer in the Warm-Up Activity in the Student Guide: What is good debt and what is bad debt? Make sure they explain how they reached their conclusions.

Once they complete the question, talk about their answers as a class. Facilitate discussion about good debt and bad debt to warm them up for further explanation.

Lesson Explanation Discuss the importance of using credit to establish a positive financial reputation. Explain that it is nearly inevitable that they will take out some form of debt over the course of their lifetime. To build positive credit history, explain that it is important to strive to obtain debt that is good, rather than bad.

Explain the following points: • Any debt, as a whole, is not good. However, some types of debt are considered good because of the investment value they hold. • Any type of debt — good or bad — increases their risk. • Acquiring debt on investments can help them get a higher return on their investment—meaning they are able to make more money but also carry greater risk. Go through the types of good debt and bad debt below. Facilitate discussion while you explain.

GOOD DEBT Investment Loans. For investment experts with high-level knowledge and a trusted team of advisors, investment loans can help gain leverage to earn higher return on investment.

Loans for Income-Producing Real Estate. This is considered good debt because when you rent the place to tenants to pay down your loan, you may earn income. If you purchased real estate in the right area at the right time, the property can increase in value.

Business Loans. For entrepreneurs looking to expand and grow their businesses, taking on a business loan may help.

Education Loans. Student loans and other investments that finance one’s education can be good debt, depending on how well you plan. Since individuals with degrees tend to make more over a lifetime (typically around $500,000 more) than those without higher education, this investment can be considered a good debt. However, student loans are bad debt if you drop

L1 Loans & Debt

out before finishing the degree. Also, if you choose an expensive school to study a profession that doesn’t pay well, that debt also can be considered bad. Minimize student loan debt to avoid the stress associated with paying it back. Typically, not interest is accrued and no student loan payments are required while the student is in college.

Home Loans (for a property you live in). This may be considered good or bad debt, depending on your investment strategy. Purchasing a home may be a good investment because, in many locations, the value can increase over time. In other locations, home prices decline over time, and this bad debt causes people financial strain.

BAD DEBT Credit Cards. Essentially, any type of credit card is considered bad debt. Credit cards carry high interest rates and finance charges. Retail stores, banks, and other companies offer credit cards to consumers. Regardless of who issues a credit card, typically it is considered bad debt. However, a credit card can be good debt if you pay the money you borrow back in full each month; that helps increase your credit score and you incur no interest charges.

Personal Loans are cash loans from a bank or company. These types of loans are an unwise investment. Like credit cards, they carry high interest rates. While you may believe you need to access cash fast, this type of loan is not the best choice.

Payday Loans are similar to personal loans. However, in most cases you guarantee to pay the loan off with your next paycheck. Therefore the amount loaned is usually limited to the amount of your paychecks. They also hold high interest rates and allow the lender to deduct the amount of the loan from your next paycheck.

Car Loans. Since a car declines in value and offers no income, car loans are classified as bad debt. However, in today’s age you often need a car to earn income; in that case the loan would qualify as good debt. To help ensure that your car purchase leans toward the good debt side, keep these tips in mind: • purchase used cars (new cars lose up to 30% of their value immediately); • shop for a good deal; minimize unneeded extras; and • shop for the best car loan. Explain to students that some bad debt is unavoidable; but it is important to identify the situation and determine which debt is best to use if cash is not an option.

Talk about the differences between bad and good debt. Discuss why each type of debt is considered good versus bad.

L1 Good Debt vs. Bad Debt

Lesson Activity: Good Debt or Bad Debt Break students into small groups. Have them complete the charts in their Student Guide to identify whether each type of debt is good or bad and why.

Help students complete the activity as needed and then briefly discuss their answers as a class.

Lesson Questions: 1. Which of the following is most likely to be an example of a “good” debt? a. Personal loan b. Business loan c. Payday loan d. Car loan 2. Which of the following is most likely to be an example of a “bad” debt? a. Investment loan b. Payday loan c. Educational loan d. Home loan 3. A student loan is: a. A good debt. b. A bad debt. c. Maybe a good debt, maybe a bad debt depending on many factors.

Lesson Review  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks  Reiterate the importance of knowing the difference between good debt and bad debt.

L1 Loans & Debt

Costs & Benefits of College

Duration  20-30 minutes

Lesson Overview  Students will be introduced to evaluating the costs versus the benefits of obtaining a college education. Students will identify and understand their motivations to attend college and use those motivators to develop written goals for the next five years.

Big Idea  There are reasons and consequences to taking on debt.  Debt can be a part of your financial plan.  There is specialized vocabulary we use for loans and other financial terms.  There are tools that help us calculate loan payments.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are my most important motivators?  How can I make the best decisions for my educational future?

Skills  Ability to calculate the return on investment of a college education.  Knowledge of college funding sources.  Ability to create a sensible financial plan for attending college.

Vocabulary  Cost/benefit analysis  Motivators  Intrinsic  Extrinsic  Goals

Anticipatory Set Ask students to complete the questions in the Warm-up Activity in their Student Guide. Facilitate discussion based on their responses.

What are your personal goals and motivations for college education?

L2 Costs & Benefits of College

Lesson Explanation: Ask yourselves, do I have to go to college to succeed in my chosen professional field? If yes, okay. But if the answer is no, what else could you do besides attending college?

If you answered that college is essential, think about what is essential about a college degree for succeeding your field.

Now think about the benefits of a college education for your financial future and the other areas of your life. • Have students think about whether a college degree is or is not something that will help them in the future. • Mention that most people will have at least three careers in their lifetimes. • Tell students that their college plans need to give them flexibility as professionals, by preparing them for possible alternative careers. • They need to think about their own professional longevity and factor that into the benefits of college. Explain “intrinsic” and “extrinsic” motivators: • Intrinsic motivators are internal. They are what you receive when you do something just for the sheer enjoyment and satisfaction of doing it. • Extrinsic motivators are external. They are things you will get for doing something – for example, rewards like money, prizes, or social approval; or avoidance of punishment for not doing it.

Lesson Activity: Your College Motivators Direct students to the Your College Motivators Activity in their Student Guide. Have them write down motivators in each of three categories: Financially, Professionally, and Personally. Instruct them to be as specific as possible in their descriptions. Have them consider how their motivators will fit in with college and its potential challenges. Next, have students look at the list of motivators provided and check the three that are most important to them.

• I like to feel proud of myself. • I like to impress other people. • I like doing new and different things. • I like it when other people are proud of me and tell me I did a good job. • I like to have fun.

L2 Loans & Debt

• I like making money. • I like to do things that are easy. • I like saving time. • I like to do things that are difficult. • I like to meet other people’s expectations. Then ask students to use the spaces provided to describe whether they think the motivators they just selected are intrinsic or extrinsic and why.

MOTIVATOR ______Is this motivator Intrinsic or Extrinsic

Why? ______

Explain that we hear a lot about the value of a college education, but we also hear a lot about the rising costs. College is an excellent investment in yourself. The benefits of a college education for your sense of self, your knowledge level, and your earning potential – generally speaking – are quite substantial. However, you can’t simply decide to go to college without considering and actually thinking through the costs. Depending on your circumstances, college may or may not provide the kind of return you expect. It is especially important to consider your personal situation and how college will affect you in today’s economy given the prospects for the 21st century job market.

Ask students, “To date, what have you heard and what do you know about paying for college?” Listen to their answers.

Ask how many of the participants have read something in the media recently or heard or watched something in the news about student debt and the cost of college. Depending on their responses, follow up using these talking points: • Many of you probably have the ingrained idea that college — higher education — is essential to getting a job and even more essential to living your dreams. • Most of you have probably seen advertisements and information about available grants – that is, money to use toward education that you don’t have to pay back. o How many of you have heard of the Pell Grant? o How many of you have heard about subsidized and unsubsidized loans? Well, these kinds of financial resources, at least in theory, will help reduce the cost of college, right? Yet, according to The Project on Student Debt in 2013-14, approximately one million college students were told that they could not have access to federal student loans.

L2 Costs & Benefits of College

• Of course, private companies also offer loans for higher education. But private loans usually have a much higher price tag. Tell students that college is not only a straight financial investment, but an investment in yourself – one that places demands on you that go far beyond a basic loan repayment schedule.

• Develop a mind map: Under the heading College Benefits and Costs, establish the following keywords as related concepts: o Personal o Financial o Professional o Emotional o Social Each of these subheadings represents an aspect of life on which a college education will have an impact. If you get a college education, it will affect all these areas of your life in some way. Likewise, if you don’t get a college education, all these areas of your life will probably be affected.

As an example, mention that one benefit of college may be that it “enhances knowledge and skill sets,” “broadens horizons,” or “encourages critical thinking.”

As example of costs under the Personal heading, you might mention “workload can increase stress or anxiety,” “requires time away for work,” or “creates substantial time management challenges.”

Ask, “How do you think college will benefit your personal life/financial future/ professional life/ emotional well-being/ social life?”

Lead a discussion along the following lines: • It’s fairly easy to recognize how college will affect you financially and professionally.

o Financially, it is going to cost money. You have to factor in repayment schedules once your education is finished. At the same time, though, college education gives you the potential to earn more. You need to calculate the difference for your financial future with or without college.

o The professional prospects are fairly easy to predict. For the most part, unless you’re quite lucky or especially talented, you have much better professional prospects when you have a college degree. What about the other areas? • Personal life. College education can help you become more comfortable in your own skin. You can learn a lot about yourself in college – most people do. You can also

L2 Loans & Debt

meet likeminded people which may draw you into more meaningful, emotionally satisfying relationships. Socially – again, you will meet lots of people and make connections you would not otherwise make. You will probably come away from college with a new social network. It’s not a coincidence that social networks like Facebook emerged from college systems. You can potentially expand your social horizons by attending college. • Emotional well-being. College is often demanding and stressful – how demanding and how stressful depends on where you go and what you study, what kind of student you are. But it is also rewarding. You learn about yourself, which benefits your emotional well-being, helps you become more grounded, and better able to deal with stress. Most people mature a lot in college. That maturation can happen, of course, without college, but for many people college is the first step away from home life with one’s parents. Here’s something else to consider, though: college is not just about the here and now.

Whether or not you go to college affects the whole course of your life. When you consider the return on investment, even in the areas beyond the financial, you have to consider what your whole life will be like if you don’t go to college, and if you do.

Think about this: a college degree will cost you money and create a financial burden. That can cause considerable stress, especially in the immediate aftermath post-graduation when your debt is most substantial. If you face any other life issues, like say you become ill or disabled, your stress will be much greater. And you might experience other hardships due to college debt. You might not be able to get a nice house, or you might experience credit issues if you default on your student loans.

Lesson Activity: Cost Benefit Analysis Ask students to consider and write in the Cost Benefit Analysis Activity in the Student Guide at least five benefits of college in each of the target life aspects.

Then ask them to consider the drawbacks and costs associated with attending college in each life area. Have them write their answers in their Student Guide. Facilitate a discussion based on their answers.

L2 Costs & Benefits of College

Lesson Questions 1. Motivators that originate internally and provide results that may not be tangible: a. Intrinsic motivators b. Behavioral motivators c. Extrinsic motivators d. Intangible motivators 2. What is not a category that is included in your cost benefit analysis for attending college? a. Social a. Public b. Professional c. Emotional

Lesson Review  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L2 Loans & Debt

Quantifying Your College Decision

Duration  20-40 minutes

Lesson Overview  Students will learn to evaluate college options that support their goals and chosen career fields.

Big Idea  There are ways to evaluate loans and their impact on your personal financial plan.  There are reasons and consequences to taking on debt.  Debt can be a part of your financial plan.  There are tools that help us calculate loan payments.  There are consequences to not paying debt.  Major expenses should be planned for in advance.  There are things you can do to prepare to qualify for a loan.  Loan decisions should align with your personal financial goals.

Essential Question At the end of the lesson, students should be able to answer the following:  What is the best college option for my chosen career?

Skills  Ability to create a sensible financial plan for attending college.  Ability to make a checklist to estimate college expenses.

Vocabulary  Higher education  Training school  Community college

Anticipatory Set Have students complete the Warm-up Activity in the Student Guide by answering the following questions: • How many years of higher education are required for my desired occupation? • Is a college education required?

L3 Quantifying Your Decision

Lesson Explanation:

Tell participants to think about the following questions: • What is it about college that is necessary for your profession? • Do you simply need to acquire a particular type of knowledge? • Or do you need to learn a particular skill? • Is it important to have a college degree from a high-caliber university? • Does that matter in your chosen field? Explain that not everyone benefits equally from a college degree, even in terms of professional aspirations. There are alternatives to college. Let’s think about those. • There are specialized training schools for some fields. Is that a possibility for you? • You can also obtain a lot of basic college credits from community colleges. The benefit of community college is that most community college credits have a lower price tag than a four-year college or university, even when course content and teaching are virtually identical. If college aligns with your goals and fits with your important motivators, chances are you should put in the effort and work toward getting a degree. But although there are many benefits to college that you may not realize until you get there, if you find that your goals and motivators don’t fit with college, finding an alternative may be your best route.

Lesson Activity: College Options Direct students to the College Options Activity in the Student Guide. You may go through each form separately with the whole class or address questions as they arise.

• If computers and internet access are readily available for all students, ask them to spend 20 – 30 minutes researching college options and their respective costs. • If such access is unavailable, assign as research homework and have them use their research to complete the following activities. Instruct students to complete the activity by answering the questions.

• Based on the research you did, how many years of higher education (education after high school) will you need? ______years • Is college a good option for you?  Yes  No • Does the business or job that you desire require a college education?  Yes  No

What other options may fit your situation best?

L3 Loans & Debt

Now that you know the education requirements for your chosen career, research your college options. Finding which college best suits you is a difficult choice in life. Take time to browse a few possibilities to begin looking at all the financial aspects. In order to really look at the financial differences, you will research five different types of colleges. Write down the name and tuition per year for one of each of the following: 1. State college in your home state 2. State college in another state 3. Private college 4. Community college 5. Technical college In addition to choosing the college that best fits you, one of the most difficult things about college can be figuring how you will fund it. There are lots of options out there for you!

Have students take a minute to brainstorm some things you will need to consider when planning to finance your college education. Have them write their answers in the workbook.

Lesson Explanation Another extremely important part of reckoning the cost of college is calculating college expenses. Ask students: • What do you think your college expenses will be? • What types of expenses do you need to include? Examples: tuition; books; room and board; rent; food. Listen to their responses, then prompt further discussion by asking: • What about travel costs? • What about your paper and pens (stationery)? • What about cell phones and computer access? • What about entertainment while you are in college? Unless you are extremely well-disciplined, you will sometimes want to let your hair down a bit and go out, right? Well, entertainment costs money. You need to make allowances for that. • What about health care costs? • Do any of you have children? Single parents often get a lot of encouragement to go or go back to college. They’re told it’s the route to a better life for both them and their kids – and that’s probably true. However, if you have children or even are just in a position where you have to care for someone, then you have a dependent and you must factor their needs into your college costs, too.

L3 Quantifying Your Decision

• What about emergencies? You can’t predict the future, but you have to try to prepare for it, right? o What if you had to fly or drive home an extra time during the college semester? o What if you find yourself needing books beyond your prescribed reading list? o What if you have to move unexpectedly or have to buy yourself a new computer because your old one broke? It happens. And you have to make some allowances.

Lesson Activity: Developing a Checklist of College Expenses Ask students to consider and forecast their potential college expenses. Reiterate that these expenses are in addition to base tuition at their colleges of choice.

Suggest that creating an Excel sheet at home will help them track their expenses as they grow or as they consider new items they had not thought of initially.

Lesson Activity: Running the Numbers Now, by estimating, we are going to calculate the amount you will take out in student loans in order to receive the higher education you desire.

Pick three of the schools you researched above, and fill out the information below.

SCHOOL #1, 2, 3 • How much will your total tuition be: $______• Will you be eligible for the National Pell Grant?  Yes  No Go to http://studentaid.ed.gov/types/grants-scholarships/pell. This website will also help you assess your expected aid. Feel free to play around and see what you are eligible for. $______• Will you be eligible for any additional scholarships or grants that you have found  Yes  No If so, calculate the amount you believe you will receive: $______• Will you be working?  Yes  No If not, you will need to add in monthly living expenses as part of your student loans. • Go to the college’s Financial Aid website. They will often provide “expected living costs.” If not, do your best to estimate your monthly living expenses in college. Include rent, food, car, books, gas, etc. $______Total Needed in Student Loans: $______

L3 Loans & Debt

Lesson Questions 1. If you decide to attend college rather than receive a trade certificate, what is one way to reduce the total cost of your degree? a. Go to a university out of state. b. Negotiate better tuition expenses with your financial aid officer. c. Attend a community college to gain transferable credits then transfer to a university. d. Max out student loans. They will remain in deferment as long as you are in college. 2. All high-paying, satisfying careers require a college education. a. True b. False

Lesson Review  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L3 Invest in Your Future

Invest in Your Future

Duration  30-40 minutes

Lesson Overview  In this lesson, students will gain in-depth knowledge of how to calculate return on investment by pursuing higher education, to demonstrate how continued education is an investment in their financial independence later in life.

Big Idea  There are ways to evaluate loans and their impact on your personal financial plan.  Major expenses should be planned for in advance.  There are reasons and consequences to taking on debt.  Debt can be a part of your financial plan.  There are tools that help us calculate loan payments.  There are consequences to not paying debt.  There are things you can do to prepare to qualify for a loan.  Loan decisions should align with your personal financial goals.

Essential Questions At the end of the lesson, students should be able to answer the following:  How is college an investment?  What is ROI?  What is one way to see ROI from attending college?

Skills  Ability to calculate the return on investment of a college education.  Students will understand how to achieve a good return on investment from higher education to promote their financial independence.

Vocabulary  ROI (Return on Investment) — the profit or return from the original invested amount.  Income potential  FAFSA  COA – Cost of attendance, or the amount of money one needs to attend a given institute of higher education.

L4 Loans & Debt

Anticipatory Set Read the following quote to students and have them write what they think it means in the Warm-Up Activity in the Student Guide.

“If you must work for money, find a way to work and be happy. That is financial intelligence.” ~Robert Kiyosaki Discuss the quote and why it is important to pursue one’s personal passion when choosing a career and higher education.

Lesson Activity: A College Degree Is Valuable! Hook the participants into the session by presenting the video C7 - Student Debt Documentary. Upon conclusion of the video, pose the following questions: • What are some of the lessons we can learn from this video? • Does anyone share any of the concerns raised in the video? • What are some actions you might take to mitigate these concerns?

Lesson Explanation Present the following information to participants to help them understand the benefits of earning a college degree:

• Georgetown’s Center on Education and the Workforce study reflects that o a doctoral degree holder will earn $3.3 million over a lifetime, o a college graduate will earn $2.3 million, and o those with just a high school diploma will earn $1.3 million. • A recent study conducted by the College Board reflects that college graduates earn 80 % more on average than high school graduates, which can add up to more than $1 million over a lifetime. Of course, the college you attend also has an impact on your earning potential. Today we will be talking about ways you can maximize the return on this important investment. We will also talk about how to protect your investment and how to reduce the risks associated with investing in a college education. • How do you define return on investment? • What is a return on investment or ROI?” Let’s talk about how you work out the return on investment for college by looking purely at numbers.

L4 Invest in Your Future

So how do you calculate ROI? The short answer is that you take the total cost of attendance for your chosen college and work out what you will actually pay out to meet that cost. If you have a lot of financial aid, you know your out-of-pocket expense will be lower. You probably still will bear some costs for your college education, but chances are it will be much lower and thus you will have a higher ROI. Example: if you invested $100 into your education in a specified time period and made $50 more in the next time period than you would have that is a 50% ROI. (50 divided by 100 = 0.5).

Tell students that regardless whether they attend college, trade school, or vocational school, higher education is an investment. Explain that receiving any type of education beyond high school will increase income potential over one’s lifetime.

• Discuss the income potential of a massage therapist and that person’s entrepreneurial possibilities. Examples: Own a day spa; personal massage therapist; work at a spa or doctor’s office, etc. Explain that this type of training can be attained at a vocational school. • If the students choose to pursue college, they must determine which school is the best choice for a good ROI. Example: If they want to become a personal fitness coach who makes an average of $40K per year, is it smart to receive a degree from Harvard that costs $420K? • Discuss how college loans may be suitable as an investment towards their futures. Explain that it is important to be careful when choosing a college, because college loans are loans for school that must be repaid when college is complete. Describe the following individuals and have students compare the two and determine which option is the better investment: 1. A graduate with $180,000 in student loans who earns $38,000 per year. 2. A graduate who got the same degree for $28,000 and who earns $36,000 per year. Give students the following tips to prepare for college and determine the best investment option for their educational investments. • Attend a community college. • Apply for scholarships. • Fill out the FAFSA. • Work with a college planner. • Apply for federal, state and college scholarships. Sometimes more expensive schools can actually be cheaper depending on the aid package a student receives.

L4 Loans & Debt

Advise students that once they have worked out the cost, they need to look at the annual repayments they will make on any loans. Then look up the average salary for their profession earned by people with college degrees, and compare that to the average salary for professionals in that field who do not have college degrees.

Explain that they can also look at the return on investment over a period of years. A great tool for assessing ROI is http://www.payscale.com/college-roi. This organizes a scale of cost and annual ROI per college. The ROI appears as a percentage and you can search for the schools or types of schools that interest you. You can also look at the return with or without financial aid, on campus, off campus, or off campus with family.

The tool can also look at ROI by major as well as by a number of other categories. This tool is well worth looking into.

Lesson Activity: Which Would You Choose? Direct students to the Which Would You Choose Activity in the Student Guide, and walk through the following education investments students can pursue. Allow them to work in small groups together (if preferred), and have them determine the best option and its ROI. SCENARIOS 1. You are a teller at your local bank. Your boss suggests that if you attend a banking seminar and complete the coursework you will receive a raise of $250 more per month. The seminar costs $500 that you must pay out-of-pocket. • What is the ROI after the first year? Answer: $3000 / $500 = 600% ROI • Is the ROI positive? Answer: Yes • When do you break even? Answer: After 2 months • Will this seminar benefit you in the future? Answer: Yes • Will you make more money over time? Answer: Yes 2. You have a desire to become an accountant. The degree will cost you $35,000 at your local university and you will graduate in 4 years. You will pay for all of this with student loans. The average accountant in your area makes $50,000 per year. Or you can choose to go to work right away and earn $35,000 per year; however, you will be unlikely to receive any major raises. • What is the ROI on this degree? Answer: 15k / [35k + (35k * 4)] = ~ 8.5% ROI • How beneficial will attaining the degree be? Answer: Marginally; similar to other investments such as stocks

L4 Invest in Your Future

• Without considering student loan interest, when will you break even on this decision? Answer: 11.66 Years • Considering the ROI shown in this example, what choice would you make? After the students complete the scenarios, ask them if they understand how an education is a ROI. Discuss each scenario and how each situation has benefits to receive a ROI.

Lesson Questions: 1. What is typically a person’s first large investment? a. An automobile. b. A house. c. A college or trade school education. d. A high school education. 2. What does ROI stand for? a. Refund of Interest. b. Refund of Investment. c. Return on Investment. d. Return of Interest.

Lesson Review  Instruct students to answers the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks  Encourage students to conduct the financial aid research projects outlined in their student guides.

L4 Loans & Debt

Funding College

Duration  30-40 minutes

Lesson Overview  Students will understand the various options for funding a college education.

Big Idea  There are strategies to decrease and manage your expenses.  Major expenses should be planned for in advance.  Expenses can be modified over time to stay in alignment with your financial goals.  There are ways to evaluate loans and their impact on your personal financial plan.  There are things you can do to prepare to qualify for a loan.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is the difference between a grant and a loan?  How is a scholarship different from a grant?  What are the special categories for federal aid eligibility?  What criteria does FAFSA use to define a veteran?

Skills  Knowledge of college funding sources.  Understanding of various mechanisms to fund college (e.g., FAFSA, scholarship, grants, loans).  Knowledge of special niches who receive special college fund programs (e.g., veterans, immigrants).

Vocabulary  Scholarship — a type of financial aid, often based on academic achievement that does not need to be repaid (unless a student withdraws from a program or otherwise does not meet other specific requirements for the scholarship award to apply).  Direct loan — a federal student loan, made through the William Ford Federal Direct Loan Program, for which eligible students and parents borrow directly from the U.S. Department of Education.  EFC — expected family contribution or the amount of money you or your family is assessed to be able to pay toward your education.

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 Eligible noncitizen — a U.S. National, U.S. Permanent Resident, or someone who falls into a special immigration category that entitles them to federal student aid.  FAFSA —Free Application for Student Financial Aid.  Financial Need — difference between the cost of attendance (COA) and your expected family contribution (EFC).  General Educational Development (GED) certificate — a certificate students receive if they’ve passed a specific, approved high school equivalency test. Students with a GED certificate are eligible to receive federal student aid.  Regular student — a student enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate, or other educational credential.  Satisfactory academic progress — a school’s standards for acceptable work toward a degree or certificate offered at a given institution (varies by school) Grant — a type of student aid often awarded based on financial need and which usually does not need to be paid back unless a student withdraws from a program.

Anticipatory Set Instruct students to complete the Warm-Up Activity in the Student Guide. • What are the funding sources for college? Be as specific as you can.

Lesson Explanation Tell students they will first need to calculate return on investment for college and create a checklist of their likely expenses. (They may have to “guesstimate” tuition costs until they know exactly which school they will attend.) Then they need to plan exactly how they will pay for college.

They must look not only at how to fund their college education, but also how to fund it using the greatest possible amount of money sources that don’t have to be paid back. They should avoid loans – especially high-interest loans – as much as possible.

Ask students, “So what do you do? First, let’s make sure you’re clear on the types of funding that exist.”

Repeat the question from the Warm-Up Activity.

L5 Loans & Debt

• What are the funding sources for college? Be as specific as you can. Say, “Be as specific as you can. By that I mean, say ‘Pell Grants’ instead of just ‘grants,” okay? Then we can add ‘special grants’ and break that down into specifics as well.

SCHOLARSHIPS are available for almost anyone seeking money for college. Whether you have good grades or bad, whether you’re an athlete or bookworm, president of the debate club or social wallflower, it makes no difference: there are scholarships available for you. It doesn’t matter where you are in life, either – whether you are just getting ready to graduate from high school, in college now, or an adult considering going back to school, there is scholarship money to fit your situation.

GRANTS are another way to get college money that you don’t have to pay back. Scholarships are similar to grants in the sense that both award you money for school. The difference between scholarships and grants is that most scholarship money is merit-based – that is, scholarships are awarded based on your personal accomplishments or background – while grants are mostly need-based, that is, awarded based on personal need. LOANS that are subsidized provide money to students based on need. Subsidized loans give you a break on the interest rate and payment terms. For example, the interest may not start to accrue until after you graduate. If you’re going to get a loan for school, a subsidized loan is your best bet. Federal Perkins Loans and Federal Stafford Loans are two of the subsidized loans that may be good choices to help you finance your college education. However, the subsidized Federal Stafford Loan is not offered for graduate or professional degrees. OTHER PROGRAMS can help you pay for school. • One of the largest is the Reserve Officer Training Corps (ROTC) program, which lets you go to school now with the promise of serving in the military later. • AmeriCorps and the Peace Corps have similar programs available to college students. • In addition, your school may offer a variety of work-study programs that will help you get the money you need.

Provide students the following tips on reducing total financial need and discuss how students can minimize their college debt.

Graduate on Time. An extra year in college cost you an extra year of payments. You should meet with your Academic Advisor to set up a graduation plan. During the meeting, ask your Academic Advisor

L5 Funding College

to help you identify any prerequisite courses you will need, to avoid unpleasant scheduling situations and encountering any financial surprises during your course of study.

Reduce Living Expenses. You can reduce living expenses by cutting meal costs, living with roommates, and using public transportation.

Get a Job or Secure a Paid Internship. Ideally you should secure employment in a field related to your major. Working while you are in college gives you opportunities to earn money, build work experience, establish a network of professional references, and expand your professional and personal interests. It’s important to cast a wide net when seeking employment; consider opportunities to work and (perhaps) study in emerging international markets.

Apply for Scholarships. Research consistently indicates that millions of dollars set aside for scholarships go unclaimed each year. A scholarship literally is free money. Any scholarships you apply toward college expenses can significantly reduce the amount of money you need to borrow.

Build and Maintain a Good Credit Rating. The higher your credit rating the easier it will be to qualify for loans that offer the best terms.

Research Student Loan Forgiveness Programs. Organizations such as the Peace Corps and Teach for America offer “loan forgiveness” benefits. To learn more about these programs, visit the following website: http://www.finaid.org/loans/forgiveness.phtml

Lesson Activity: Do you Have to Pay it Back? Have students categorize funding sources according to whether they represent money that must be paid back or money that does not need to be repaid.

FUNDING SOURCE HAVE TO REPAY? Pell Grants (if you meet certain requirements for need) Yes No State Grants (if you meet certain requirements for residency, etc.) Yes No Subsidized Student Loans Yes No Unsubsidized Student Loans Yes No Work/Study Grants and Benefits Yes No Working (Personal Income) Yes No Parents/Family Yes No Private Loans (from Banks, for example) Yes No

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Scholarships (from colleges or private donors) Yes No Subject-Specific Grants or Scholarships Yes No Have students consider whether funding sources have just basic requirements for eligibility (such as government grants) or whether they come with long lists of eligibility requirements (like many scholarships).

Lesson Explanation Federal student aid should be a first stop for most students and certainly should be the principal aid source. Applying for Federal Student Aid is also pretty straightforward and it’s easy to become familiar with how it works.

Tell them the best strategy is to go to the government’s student aid website. In fact, they should bookmark the page so that they stay familiar with it, and can revisit it from time to time. They should be sure to keep up-to-date with any changes in the instructions and stay on top of the eligibility requirements.

The basic information they need to know, though, includes the following. • First, your eligibility to borrow from the government as a student depends on your categorization as dependent or independent.

o A dependent student is someone who can be claimed by another individual as a dependent on the other individual’s taxes. If another individual is responsible for more than 50% of your lifestyle expenses, then you are considered a dependent. Those that claim you (the dependent) can obtain what’s known as a PLUS Loan. PLUS loans are very similar to Stafford unsubsidized loans, except they carry a higher interest rate and the primary individual on the loan account is not you, but rather the individual that claims you as a dependent. o An independent student (and also in this category are dependent undergraduate students whose parents cannot obtain PLUS loans) is one who basically takes care of him or herself financially, no longer lives at home, and is financially independent from parents or guardians OR is age 26 or older. Based on this breakdown, you have amounts you can borrow based on where you are in school. • A first-year undergraduate can borrow up to $5,500 as a dependent student via subsidized and unsubsidized loans. • A first-year undergraduate student can borrow up to $9,500 as an independent student via subsidized and unsubsidized loans. This table provides additional information and examples for reference.

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Year Dependent Students Independent Students (except students whose parents are (and dependent undergraduates whose unable to obtain PLUS Loans) parents are unable to obtain PLUS Loans) ANNUAL LOAN LIMIIT ANNUAL LOAN LIMIIT 1st-Year $5,500—No more than $3,500 of $9,500—No more than $3,500 of this Undergraduate this amount may be in subsidized amount may be in subsidized loans. loans. 2nd-Year $6,500—No more than $4,500 of $10,500—No more than $4,500 of this Undergraduate this amount may be in subsidized amount may be in subsidized loans. loans. 3rd-Year and $7,500—No more than $5,500 of $12,500—No more than $5,500 of this Beyond this amount may be in subsidized amount may be in subsidized loans. Undergraduate loans.

Graduate or Not Applicable (all graduate and $20,500 (unsubsidized only) Professional professional students are Students considered independent)

Subsidized and Unsubsidized AGGREGATE LOAN LIMIT $31,000—No more than $23,000 $57,500 for undergraduates—No more of this amount may be in than $23,000 of this amount may be in subsidized loans over the course subsidized loans over the course of of one’s entire education one’s entire education. $138,500 for graduate or professional students—No more than $65,500 of this amount may be in subsidized loans over the course of one’s entire education. The graduate aggregate limit includes all federal loans received for undergraduate study.

L5 Loans & Debt

There are, of course, eligibility requirements for loans and other government aid. These are the basics. You must:

• Demonstrate financial need. • Be a U.S. citizen or an eligible noncitizen. • Have a valid Social Security number. • Be registered with Selective Service, if you are male. (You must register between the ages of 18 and 25.) • Be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program. • Be enrolled at least half-time to be eligible for Direct Loan Program funds. • Maintain satisfactory academic progress in college or career school; • Sign statements on the Free Application for Federal Student Aid (FAFSA®) stating that o you are not in default on a federal student loan and do not owe money on a federal student grant and o you will use federal student aid only for educational purposes • Show that you’re qualified to obtain a college or career school education by having a high school diploma or a recognized equivalent such as a General Educational Development (GED) certificate or completing a high school education in a homeschool setting approved under state law. The full list of requirements at https://studentaid.ed.gov/eligibility/basic-criteria .

FAFSA (FREE APPLICATION FOR FEDERAL STUDENT AID) Ask if anyone knows what the Free Application for Federal student Aid is.

• Basically, this is the online application for federal aid. Once you submit it, the information you provide forms the basis for your financial aid package. • But what are the particulars of student aid eligibility for the special categories — eligible noncitizens and veterans? Because special categories of students are less common (as the title suggests), you may find that the financial aid staff at your college do not know all they need to know about your financial aid eligibility.

Eligible non-citizens, for instance — and especially those who have approved petitions under the Violence Against Women Act (VAWA) — can struggle to demonstrate their eligibility for financial aid. One reason is because non-citizens must have their status verified through the immigration service.

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Those eligible for financial aid under VAWA should consult the following page of the Department of Education’s website (http://ifap.ed.gov/dpcletters/GEN1007.html). It may be necessary, when a student as submitted their aid application online, for them to present this information to the financial aid department of their college.

What about other special categories, though? What about veterans? Does anyone know the FAFSA definition of a veteran? According to FAFSA instructions, you are a veteran for financial aid purposes if:

• You are currently serving or have engaged in active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard. • You are a National Guard or Reserve enlistee who was called to federal active duty for purposes other than training. • You were a cadet or midshipman at one of the service academies AND o were released from service under a condition other than dishonorable, OR o are not a veteran now but will be one by a given date (usually the end of the school year, i.e., June 30 of the next school year). If you meet these criteria, you may be eligible for special types of aid, which should be included in your financial aid package based on your FAFSA application.

It is important to be aware that documentation is required to verify your benefits. Usually you have to complete and submit a Veterans Educational Benefits Certification form to the Financial Aid and Scholarship Office.

If you are a veteran, be sure to take note of the contact information for the United States Department of Veteran Affairs (USDVA). http://www.benefits.va.gov/gibill/

Lesson Activity: Aid Eligibility Instruct students to follow the steps listed in the Aid Eligibility Activity in the Student Guide and answer all of the questions. There may be several “on the fence” responses as they determine whether they are eligible for certain aid.

• Tell them to check “I’m Not Sure” for the ones where they’re unsure. • If Internet access is available, refer them to the websites for which URLs are provided or have them write their questions in the “Additional Research” section of their Student Guide to research when they get home.

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Lesson Questions 1. What is the maximum amount an individual can receive in Federal loans for his or her undergraduate education? a. $5,500 b. $23,000 c. $31,000 d. There is no limit as long as the student is going to school at least part-time. 2. Anyone still living with their parents is considered a dependent in regards to their Federal Student Aid application a. True b. False 3. When a loan is subsidized it means: a. All the interest must be paid as it is accrued b. No interest is added to the loan balance while the student is in school c. The loan balance will be forgiven if the student graduates with good academic standing d. The loan can be paid back over a longer period of time after graduation.

Lesson Review  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L5 How to Pay Off Debt

How to Pay Off Debt

Duration  30-40 minutes

Lesson Overview  In this lesson, students will learn to manage the stress of carrying a debt load, and methods for creating a debt payoff plan. They will understand how to minimize the risks and maximize the rewards of obtaining a higher education.

Big Idea  There are methods monitor and help you evaluate your debt load. | There are solutions to deal with excess debt. | There are various loan repayment methods available. | There are debt management strategies. | There are organizations and professionals that can help you manage debt. | There are ways to manage debt that align with your personal financial goals. | There are debt exit methods that help you reduce the risk of borrowing.

Essential Questions At the end of the lesson, students should be able to answer the following:  Why is it important to minimize stress before making financial decisions?  How can you minimize risks and maximize rewards of higher education?  What steps can you take to establish a payoff plan for future debt?

Skills  Ability to evaluate the risks and rewards of obtaining higher education.

Vocabulary  Stress management  Minimize risks  Maximize rewards  Debt payoff plan  Subsidized loans  Unsubsidized loans  Student Loan Forgiveness Program

L6 Loans & Debt

Anticipatory Set Instruct participants to go to the Warm-up Activity in the Student Guide and answer the question: “How does reducing or eliminating student loan debt help you achieve those dreams?” When participants are finished, allow each participant time to share his/her responses with the whole group.

Lesson Explanation: Tell students some of you may already have some debt. If you are already in debt, there are steps you can take to get yourself out of that situation. • Contact all your creditors and ask them: o Your current interest rate; o How much you owe; o the minimum monthly payment; o Whether they can reduce your interest rate; and o Whether they have any specials. • List all your debts on a spreadsheet, listing the credit card with the highest interest rate first. THIS TIP ALONE • Pay the maximum amount on the credit card CAN SAVE YOU with the highest interest rate, and make just the minimum payments on the credit cards with 3-12 YEARS OF lower interest rates. EXTRA PAYMENTS. • Once the highest-rate credit card is paid off, start working on paying off the card with the next highest interest rate and continue to make minimum payments on lower-rate cards. If you’re truly unable to pay off your credit cards, there are some extreme measures you can take. Keep in mind that these options will ruin your credit rating for 7 to 10 years.

You must become an expert in the choices available with each option before you make a decision.

• Get as much information as possible and talk to experts. • Remember that a lot of the “experts” you talk with are really salespeople — if they stand to make money from your decision, they’re not impartial. • So do lots of research and only believe what you’ve carefully researched to be true.

L6 How to Pay Off Debt

• Back up information by consulting more than one source.

Lesson Activity: Stress Management Ask students to think about their current or future student debt and ask them how it makes them feel when they think about it. Encourage them to share but don’t require them to. If no one is willing to share, tell them some common feelings you’ve heard from past classes.

Ask, “When you think about your student loan debt, do you have any physical reactions?” Some common physical conditions are tension, needing to move, unable to sleep, headaches, etc.

Let students know that when it comes to any type of financial situation, these emotions and physical reactions are common. It is important for students to become able to control these emotions so they can make logical, thoughtful decisions about their finances.

Tell participants you will guide them through an activity that will help them control their emotional responses to financial decisions.

• Ask them to close their eyes and dwell on their student loan debt. Give them about 30 seconds. • Have them shake out their bodies, roll out their necks, and move for 30 seconds. Then have them sit comfortably with their eyes closed and spines straight. • Say: “Release any tension and anxiety you’re experiencing. Calm your mind by allowing yourself to breathe naturally for a few minutes.” • Say: “Now take a few moments to breathe in deeply and slowly through your nose; hold for no more than 1 second. • “Now steadily empty your lungs by exhaling all the air out through your mouth.” The exhale should not be forceful or constraining. • “Inhale slowly and deeply through your nose; fill your lungs with as much air as possible. Hold your breath with your lungs filled for just a moment, and then exhale through your nose.” • “Now, breathe normally. Listen to your breath. Empty your mind – try not to think about anything.” • “Slowly and mindfully open your eyes.” Ask students how they feel now. Let them know it’s important to make financial decisions when they’re not under stress and at times when they feel a sense of confidence.

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Share, “This exercise will help you release the stress. And confidence is achieved through knowledge. Today we will give you the knowledge to feel confident about paying off your student loan debt.” Ask whether they are ready to feel confident and have the knowledge that will help you make the right financial decisions for yourself.

Listen to their responses, then say, “Then let’s get started.”

Lesson Activity: Risks and Rewards Instruct participants to go to the Risks and Rewards Activity in the Student Guide, and go over the questions.

• What are five risks you believe are associated with pursuing and investing in a college education? • How can you reduce, manage, or eliminate those risks? • What are five rewards you believe are associated with pursuing and investing in a college education? Read and clarify the instructions. Give participants a few minutes to complete the activity.

When students are finished, allow each student time to share his/her responses with the whole group.

Lesson Explanation Tell students they should know all of their student loan information inside and out. That means learning when they need to contact someone – either their loan servicer or their school – to get information or update their personal data.

Ask whether students know when they should contact their financial aid office, versus their loan servicer, for help. Then present the following information (also provided in the Student Guide).

Contact your Financial Aid Office for information about: • loan status, • loan cancellation within 120 days of disbursement, and • loan disbursement amounts and timing. Contact your Loan Servicer when you: • change your name, address, or phone number;

L6 How to Pay Off Debt

• graduate; • drop below half-time enrollment; • stop going to school; or • transfer to another school. • need help making your loan payment; • have a question about your bill; or • have other questions about your student loan.

Lesson Activity: Student Loan Questions Direct students to the. Instruct them to answer the series of questions in the Student Loan Questions Activity regarding whom to contact regarding their financial aid and loans while they are in college and after they complete college.

Whom should you contact for information about your loan status or loan cancellation within 120 days of disbursement, or for information about disbursement amounts and timing information? Your loan servicer The financial aid office at your school Whom should you contact when you change your name? Your loan servicer The financial aid office at your school Whom do you contact when you graduate? Your loan servicer The financial aid office at your school Advise students to go online and find the contact information for both the financial aid office and loan servicer, and write down the contact information in the Student Guide.

Lesson Activity: Drowning in Debt Hook participants into the session with the following question: • How many think that landing a job that pays $42,000 per year right after college would be sustainable and comfortable? Explain the following:

L6 Loans & Debt

• If you land a job that pays $42,000 per year, your approximate monthly take-home pay would be $2,500. This amount will vary slightly based on your state of residence, but that’s a good estimate. • In terms of managing college debts, the best way to pay off credit card and student loan debt is to stay out of it! Play the video entitled C9 - Sara. Have students help Sara make the proper decision about handling her credit card debt. Sara has three credit cards. • She owes $8,000 on a credit card with a 27% rate. • She owes $5,000 on a credit card with a 22% rate. • She owes $6,000 on a credit card with a 14% rate. • She owes $0 on a new credit card and can transfer up to $10,000 from her other credit cards. She would receive 0% interest for 6 months; after that the interest rate becomes 18%. What should Sara do? Play the video entitled C9 - Rob. Have students help Rob make the proper decision about handling her credit card debt. Rob has three credit cards. • He owes $20,000 on a Perkins loan with a 5% interest rate. • He owes $10,000 on a Stafford loan at 7% interest. • He can qualify for a student loan consolidation that would consolidate the debt into a single payment. The new loan would be for $30,000 with an interest rate of 8%. Should Rob consolidate his loans?

L6 How to Pay Off Debt

Give participants approximately 10 minutes to complete the activity. When students are finished, allow each student time to share his/her responses with the whole group.

CALL TO ACTION Accurately calculate your current loan balance(s). Contact your loan companies. Keep an organized account of the balance, terms, interest rates, payments, and any other relevant details. Create a rough plan for reducing your loan debt. Create a rough plan for paying your loans.

Lesson Activity: Create Your Loan Payoff Plan Instruct participants to go to the Create Your Loan Payoff Plan Activity in the Student Guide. Read and clarify the instructions. Give participants approximately 10 minutes to complete the activity and answer the questions.

1. I seek [have] a job that pays $______take-home pay per month. 3. I keep my monthly expenses at or below $______4. This plan allows me to allocate $______per month toward paying off debt. 5. At this rate I will be debt-free in ______years.

Creditor Name Type of Amount Interest Min Avail Important Loan Owed Rate Paymt Bal Terms

Subsidized Loan 1 Student $12,860 6% $108 $0 15 year payoff

Stafford (unsub) Student $20,009 6.8% $177 $0 15 year payoff

Perkins Loan Student $15,020 5% $159 $0 10 year payoff

Grad Plus Student $5,000 7.90% $47 $0 15 year payoff

Visa #1 Credit card $567 27%% $20 $433

MasterCard Credit card $2,245 24% $32 $255

Discover Credit card $8,967 22% $149 $33

Visa #2 Credit card $6,200 0% $62 $5,800 1 year at 0%, then 9.9%

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6. Using the example above, toward which debt should the maximum payment be applied? Visa #1 7. Using the example above, what debt should the minimum payments be applied toward? a. Perkins Loan b. Visa #2 c. Subsidized Loan 1 d. All besides the one with the highest interest rate 8. Using the example above, which balances should be transferred to Visa #2? a. Visa b. Stafford, Unsubsidized c. MasterCard d. Discover e. Visa, MasterCard and as much of the Discover balance that will fit. Remind students how important it is to reduce their debt while in school, and move them to start planning now.

L6 How to Pay Off Debt

Lesson Questions: 1. If you are unable to pay off the entire balance you owe in credit card debt, the best way to pay off the balance is to _____. a. Make minimum monthly payments. b. Pay off the card with the lowest interest rate first. c. Pay the maximum your budget allows on the card with the highest interest rate. d. Pay the maximum payment on the card with the highest balance. 2. Which of the following is an example of minimizing college debt? a. Graduating on time. b. Living alone in an apartment. c. Owning a car while on campus. d. Limiting employment prospects to your major area of study.

Lesson Review  Instruct students to answers the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L6 Loans & Debt

Car Loans

Duration  20-40 minutes

Lesson Overview  In this lesson, students will learn about car loans. They will understand the qualifying process for car loans, and how their personal credit score is correlated with loan qualification.

Big Idea  Loan decisions should align with your personal financial goals. | There are tools that help us calculate loan payments. | There are costs involved with getting a loan. | Loan qualification guidelines impact loan terms you receive. | There is a process lenders go through to qualify you for a loan. | There are things you can do to prepare to qualify for a loan. | Major expenses should be planned for in advance.

Essential Questions  How can your credit score affect the car loan for which you qualify?  How does a car loan affect your credit score over time?

Skills  Students will develop basic understanding of the car purchasing process and qualification for auto loans.

Vocabulary  Car loan  Down payment  Co-signer

Anticipatory Set Instruct students to complete the Warm-Up Activity in the Student Guide by answering these questions: • What is a car loan? • Why is it a good or bad idea to get one? Once they have completed the assignment, talk about their answers as a class.

Lesson Explanation Explain to students that the definition of a car loan is a loan from a bank for the purchase price of a car. You pay the loan back over time with a predetermined amount of interest.

L7 Car Loans

A car loan is considered bad debt because the car declines in value and no income is received (unless you earn money driving a limo, cab, or bus). However, car loans can be helpful since many people cannot afford the purchase price of a vehicle; paying off a car loan over time creates a good example of payback history and can help build a person’s credit.

Your credit report score determines the type of car loan for which you will qualify. The better your credit, the better loan terms you will receive.

When you apply for a car loan, lenders want to be sure you can repay the loan. Lenders look at several key areas to decide whether you qualify: • Credit report. The better your credit score, the lower your interest rate—which translates into lower payments. • Income. Lenders evaluate your income compared to the debts you owe (this relationship is called your debt-to-income ratio).Your ideal situation will be a consistent employment history with little debt. • Equity. The more cash you can put down up front, the less you’ll need to borrow. A large down payment makes loan qualification easier. Before you head off to the car dealership, go to your bank, credit union, or an independent car lender to pre-qualify for a loan. If you already have financing, you’ll get a better deal. Shop around for the best auto loan just like you shop around for the best car price. Budget Before Buying (BBB) before getting any loan. Plug the cost into your budget and make sure it fits. Never enter into any loan agreement that you can’t truly afford. The worst type of car loan is an upside-down loan. What does that mean? Upside-down is when the amount you owe on the loan is greater than the value of the car. For example, let’s say you purchase a new car for $20,000 on a seven-year loan. After paying on the car for three years, you still owe $12,687. But what if, after three years, the car is only worth $9,000? You would owe $3,687 more than the car is worth!

What happens if I can’t keep up with my car payments? If you miss several months of car payments, the lender will contract with a repossession (“repo”) company. “Repo” companies send people to take the car back, typically on the back of a tow truck. You lose the car, all the money you’ve paid monthly, and your down payment too. On top of that, your credit history will be seriously damaged. You’ll have major difficulty qualifying for another car loan. Don’t be that pathetic person who calls the police to report a car stolen only to find out the lender took it back due to lack of payment.

L7 Loans & Debt

Lesson Activity: Buying a Car Direct students to the Buying a Car Activity in the Student Guide. Ask for two student volunteers. Have the volunteers sit in front of the group, facing the other participants.

• Instruct each volunteer to think of a car they would like to purchase. • Inform the volunteers that they are going to explore what it is like to buy a car. • Tell the class that these two car buyers have just spent the last couple of hours test- driving the car of their dreams. • Ask the two volunteers about their dream car choices, and refer to these choices throughout the activity. Tell the class, “The first thing a car salesperson does after you test drive a car is run your credit. That means they get on the computer and obtain a report containing all your financial records. If you owe anyone any money, if you’ve ever been late paying bills, if you have a lot of debt on credit cards – they will see those things immediately.”

• Hold up a folded piece of paper. Turn to the two volunteers and say, “I have your credit reports here.” • Smile at the first volunteer and say, o “Very impressive credit (sir/ma’am). o Would you like a glass of water or juice? o You are a valuable customer, and I really want your business. o This will be an easy process for you. o All we need is the paystub from your most recent month of employment; a small down payment of $1,000, which you’ll give us today; and proof of insurance. o You can drive off in this car today. Are you excited? You do have a driver’s license, right?” • Now turn to the second volunteer. Look at the participant solemnly and say, o “Well, it looks like your credit report has a few shady areas, to put it nicely. o You’ve got some serious damage on your credit report — late payments, failure to pay back loans. The idea of lending you money to buy this car is a very risky one for us. o So we’re going to need your tax records for the last two years, copies of your paychecks for the last six months to prove you have enough income to pay us, and copies of your bank records for the last three months. o We are also going to need a large down payment of $4,000 today, because your credit score is so low.

L7 Car Loans

o We are also going to ask that you have somebody cosign your loan; cosigning means they promise to make your car payments if you can’t. Your cosigner also needs to give us all the financial information we require from you.” o Oh, and because you have to pay a higher interest rate on your loan, your monthly car payment will be $500.” o Redirect your attention to the first volunteer and say, o “Your payments are a lot less – only $300 per month; you will save over $12,000 on this 5-year loan. You will have a lot more money because you have good credit. o What do you want to do with your extra money?” (Encourage the student to save, invest, give back, etc.) o Redirect your attention to the second volunteer and ask, o “What would you done with the extra money your classmate is going to save?” o How did it feel to be treated so poorly by the Car Salesperson, especially when you observed how well your classmate was treated?” Pose the following questions to the whole group: “Who would want to pay $300 a month instead of $500 for a car?”

Emphasize the following points to the whole group:

• The first student volunteer saved $12,000; that’s money he/she saved, instead of paying it to the lending company in the form of interest. • I can think of a lot of things I can do with $12,000 – what about you? • People with good credit pay less for everything they finance; those with poor credit pay more for everything they finance. How does this make you feel? What will you do to avoid paying more?

L7 Loans & Debt

Lesson Questions: 1. Why is a car loan considered a “bad” debt? a. It takes a long time to pay off. b. The bank must charge a high interest rate. c. The car may decline in value before the debt is paid. d. The car will appreciate in value at the time the loan is made. 2. Why do people with good credit pay less for most things? a. They are better negotiators than people with bad credit. b. They are more conservative purchasers than people with bad credit. c. They only pay cash. d. They are less of a credit risk.

Lesson Review  Instruct students to answers the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L7 Loan Manager

Loan Manager

Duration  20-50 minutes

Lesson Overview  In this lesson, students will learn the process by which lenders qualify an applicant for a loan. They will explore the loan preparation and approval procedures.

Big Idea  There are different types of loans that give you the ability to borrow money. | There is a process lenders go through to qualify you for a loan. | There are things you can do to prepare to qualify for a loan. | There are reasons and consequences to taking on debt. | There is specialized vocabulary we use for loans and other financial terms. | There are tools that help us calculate loan payments. | Some lenders and financial institutions are involved in deceptive loan practices. | There are costs involved with getting a loan. | Loan qualification guidelines impact loan terms you receive. | There are consequences to not paying debt. | Borrowers have rights and responsibilities.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is collateral?  What is a lender?  What do I need to bring with me when I submit a loan application to a lender?

Skills  An understanding of how lenders qualify applicants for loans, and the preparation process to submit a loan application for approval.

Vocabulary  Loan  Lender  Collateral  Assets

Anticipatory Set Instruct students to write their answer to the following question in the Warm-Up Activity in their Student Guides.

L8 Loans & Debt

Pretend you want to apply for a loan. What are some things you think a loan manager would review to decide whether to approve your loan? Once they have completed the assignment, talk about their answers as a class.

Lesson Explanation Supplement the preceding discussion by presenting the following key concepts: • A loan is a sum of money that you borrow. You must repay the loan. • A lender is a person or organization that lends money. Most lenders charge interest for a loan. For example, if you borrow $100 from a lender, that money is called the ‘principal’ amount of the loan. The lender can ask you to pay back the principal plus $10; the $10 is the interest payment. If you divide the $10 interest amount by the $100 principal amount, the result is a percentage called the interest rate. In this scenario, $10 divided by $100 yields an interest rate of 10 percent. As a borrower, your goal is always to get the lowest interest rate; a good credit rating can help you achieve that goal.

• An asset is anything of value that you own. For example, your bicycle is an asset. • In the world of financial management (money), risk refers to the possibility of financial loss. • Collateral is something you pledge as security for a loan. If you do not repay the loan, the lender keeps your collateral. Lenders estimate the value of your collateral to reduce their risk. There are high-risk loans, and there are low-risk loans.

The following scenario is an example of a low-risk loan: • Your friend borrows $20 from you. He gives you his bike as collateral; the bike is worth $100. You will keep his bike until he repays the loan. If he doesn’t repay you, you can sell his bike for $100. When you sell his bike for $100, you will earn back your $20 plus an additional $80. The following scenario is an example of a high-risk loan: • Your friend borrows $250 from you. He gives you his bike as collateral, which is worth $100. You will keep his bike until he repays the loan. If he doesn’t repay you, you can sell his bike for $100; however, you will lose $150. Lenders look closely at your collateral. For example, if you buy a car and receive a car loan, your collateral will be the car until you have paid back the loan. If you don’t pay back the loan, the lender will take the car.

\ L8 Loan Manager

• If you purchase a $20,000 car and pay $10,000 as a down payment, the lender would have $10,000 in collateral. This is a relatively safe loan for the lender. • However, if you do not offer a down payment, the loan would be much riskier for the lender, which would mean that you would probably pay a higher interest rate. • When you apply for a loan, the lender will look at your credit history, debts, income, employment history, assets, and residency status to form an overall impression of your ability to repay the loan. Ask students why credit history is important to lenders during the loan qualification process. Listen to their answers, and explain that lenders look at your past credit history to determine how well you have paid other people back.. Ask students the following questions, and listen to a few answers. • How do you think lenders view your income? • What would a lender be looking for in terms of income?” Listen to a few answers. To lenders, income represents the amount of money you receive and helps them evaluate your ability to repay money you borrow.

• Ask students to define debt and ask them to give you two reasons why lenders look at debt during the loan approval process. Then explain that lenders prefer low debt so they feel sure you can continue making payments. • Ask students to define assets and listen to some answers. Then tell them that lenders look at the amount of money you have saved. Then in case of job loss, the lender knows whether you have money set aside that you can use to repay the loan. Lenders look at the overall picture to determine whether you qualify. They want to see that they have a good loan and you are not high-risk.

• A high-risk applicant is one whose financial situation indicates that he or she would experience difficulty repaying a loan. • A high-risk applicant might have a poor credit rating, little or no income, few or no assets, or a lot of debt. • If you are a high-risk applicant, it may be difficult to apply for and receive a loan. Stability is also a factor at which lenders look when a person applies for a loan. If a person moves a lot, or has had a lot of different types of jobs within a short time, he or she appears to be instable. Instability is a high risk to lenders. If you are a high-risk applicant, it will be more difficult to qualify for a loan.

L8 Loans & Debt

Lesson Activity: The Loan Manager Instruct participants to go to The Loan Manager Activity in the Student Guide. Read and clarify the instructions. Give participants approximately 10-15 minutes to complete the activity based on the following scenarios.

You received a thousand dollar check and … Your friend Tom had his car break down and he needs to buy a car quickly to get to work. He needs to borrow $900 for the full down payment. Do you lend it to him? Collateral Minimal. Tom only has $200 for a down payment. Credit Tom has no credit history. Income Tom is making $1,000 per month. Debt Tom’s total debt is $1,400 on credit cards. His total monthly payments — including debts, rent, and insurance — come to $800 per month. Assets Tom has $200 in a savings account. Overall Tom has a spotty job history and he has jumped fields several times – cashier, salesperson, stylist, and pet groomer. Would you let Tom borrow money? Why or why not? Samantha is trying to move to college but her student loan has been delayed. She needs $900 to help meet expenses. Collateral No collateral Credit Good but short history. She has opened a few credit cards over the last year and has always paid them back in full and on time. Income Samantha makes $1,200 a month. Debt Zero now but she is requesting a $5,000 loan for her first year in college. Her other expenses — rent, insurance, and cell phone — total $450 per month. Assets She has saved $2,000 from holiday and birthday money and deposited it in a CD rather than savings to earn higher interest. The only problem is that account restrictions do not allow her to remove the money for another 6 months. Overall She has been working for a marketing company for the last 2 years and is studying event promotion in college. Would you let Samantha borrow money? Why or why not?

\ L8 Loan Manager

When students are finished, allow each student time to share a few responses with the whole group.

Supplement the preceding discussion by posing the following questions: • If Tom gave you his car as collateral, would you lend him money? • If Samantha paid you an extra $100, would you lend her money?” • What would you need from each person in order to lend them money?

Lesson Questions: 1. Which of the following statements is NOT true? a. A loan is a sum of money that you borrow. b. A loan must be repaid. c. A lender is an organization that lends money. d. Collateral is anything you own. 3. If you purchase a vehicle and obtain a loan to pay for the vehicle, what is the collateral? a. Your word that you will pay for the vehicle. b. The vehicle. c. The loan. d. The person lending the money.

Lesson Review  Instruct students to answers the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L8 Loans & Debt

Loan Qualifications

Duration  10-30 minutes

Lesson Overview  In this lesson, students will learn more about the loan qualification process.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a fixed rate loan?  What is an adjustable rate loan?  What is debt-to-income ratio?

Skills  Understanding of the process to qualify for a loan.

Vocabulary  Fixed rate loan  Adjustable rate loan  Debt-to-income ratio

Anticipatory Set Instruct students to complete the Warm-Up Activity in the Student Guide by answer the question: “What are three things you know about qualifying for a loan?” Once they have completed the assignment, discuss their answers as a class.

L9 Loan Qualifications

Lesson Explanation Tell students that the first step in choosing the right loan is to clearly define your goals for the purchase. Explain that having set goals for a purchase helps you achieve the proper balance of terms, cost, interest rate, and features.

There are some questions they should answer prior to searching for any type of loan: • What payments can you afford? • What is your risk tolerance? • Are you trying to pay down the principal balance? • How does the purchase or investment fit into your overall financial plan? You can’t predict everything but a well thought-out action plan will be your ally in finding the best possible loan.

Remember that your goals may change over the years so you should allow flexibility in the loans you choose.

It’s important to know the types of loans available. Today’s lending market offers loans to fit your unique needs. Which one is right for you? • Fixed rate loan. Payments stay the same for the entire loan length. • Adjustable rate loan. Payments change on a scheduled basis. Explain the process of qualifying for a loan. Lenders look at five areas when determining your eligibility to qualify for a loan.

• Credit. Credit is the first thing a potential lender will look at to qualify a loan applicant. Maintain an excellent credit status, and qualifying for a loan will be much easier. • Debt-to-income ratio shows the lenders you have the ability to afford monthly loan payments. If you make $4,000 per month and your monthly payment totals $3,800, that doesn’t look good for you. The lender will be thinking, “How can that person afford to pay me?” This is why you create a sensible budget plan – to avoid getting into overly-indebted situations. • Liquid Assets are defined as money you have readily available, like money in your checking or savings accounts. On average, lenders want to see at least three months of loan payments in an account. I suggest you have at least six months of payments set aside in addition to the down payment before you take on any loan. • Equity equals the value of the purchase minus any outstanding debts against it. During the loan qualification process, equity can be loosely defined as how much of your own money you put in. For example, the more money you give as a down payment, the easier it will be to qualify for a loan.

L9 Loans & Debt

• Collateral is the asset you pledge in order to receive the loan. Usually the purchase item itself serves as collateral for a loan. That means that the lender really owns the item (i.e., the car or property) until the loan is paid off. If you default on the loan, the lender will take back the item. Carefully consider your comfort level with the payments prior to making any purchase or investment decision.

Lesson Questions 1. Which of the following is a good way to obtain the best possible loan? a. Be flexible. b. Define your goals for the purchase. c. Accept what is offered. d. Be inflexible about the interest rate. 4. Which of the following is NOT an area at which lenders look when determining whether you are eligible for a home loan? a. Debt-to-income ratio b. Credit c. Education d. Assets

5. What are four items lenders look for when qualifying an applicant? a. Credit, cash, education and income. b. Credit, equity, assets, and debt-to-income ratio. c. Equity, cash, report score, and debt. d. None of the above.

Lesson Review  Direct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L9 Consequences of Defaulting

Consequences of Default on Student Loans

Duration  20-30 minutes

Lesson Overview  Students will learn about student loan debt, interest rates, and payback terms. They will understand the consequences of defaulting on a student loan, and will receive strategies for avoiding and recovering from default.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is loan default?  How can loan default be avoided?  What does it mean when you consolidate your loans?

Skills  Understanding the consequences of defaulting on a student loan.  Knowledge of how to avoid and recover from default.  Knowledge of debt, interest rates, and payback terms.

Vocabulary  Default — failure to pay a loan according to the terms agreed to in the promissory note. For most federal student loans, you will default if you have not made a payment in more than 270 days.  Deferment  Forbearance  Loan consolidation

L10 Loans & Debt

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide to answer the question: • What is loan default?

Lesson Explanation So you’ve decided to go to college. You get as much money as you can via grants and scholarships, but you still have to take out a student loan. You go for a government loan, too, so you receive a certain amount in a subsidized loan and a certain amount in an unsubsidized loan. At some point, you will have to repay your student loans.

Let’s review how that works.

Ask students, “What are the important things to know about student loan repayment?” • Understand the terms of your loan • Understand the repayment process (how and when) • Manage your borrowing (i.e. don’t borrow more than you need) • Keep track of your loans online • Maintain your records • Stay in touch with your loan service Follow these steps and you should be well on your way to avoiding default outright. • Keep track of all the types of loans you have. Make sure to review the details of your loans carefully before you sign. • Manage your borrowing by creating a budget (use a college expenses checklist to guide your budget). Contact your school’s financial aid office to keep track of smaller loan amounts. • You probably will have to get some form of financial awareness counseling before you actually receive payout on your loan. You should pay close attention to this financial counseling. Listen and take notes. • Make sure to keep track of your loans online via the Department of Education website, https://studentaid.ed.gov/log-in • Keeping good records means filing important loan documents, including your financial aid award letters, your loan counseling materials (those should include entrance and exist counseling materials), promissory notes, tracking how much you borrow and from whom, information on payment schedules, loan disclosures, records for monthly payments, and any other paperwork documenting deferment and forbearance.

L10 Consequences of Defaulting

• You should also keep records – contact information – for your loan services and the financial aid department for your school. Ask whether students know when they should contact with their loan servicer, then review the following information.

Contact your loan service provider when: • You are struggling with monthly payments • You graduate • You withdraw from school • You drop to less than half-time enrollment • You change your name, address, phone number, or social security number • You transfer to another school • You experience a life change that could affect your loan payments Ask students what they should do when they can’t make a payment. Emphasize the first thing is to try working around the problem.

Then ask what they might do if they cannot make a loan payment on time, and review the following strategies. • Change your payment due date. • Switch to a different repayment plan. • Organize a deferment or a forbearance. • Try to consolidate your loans. Ask the class, “What is deferment?”

Explain that deferment basically is an approved delay to your repayment schedule. Usually it is only a one-time agreement but if you are facing hardship — for instance short-term unemployment — you may be able to extend the deferment.

You can usually get a deferment if you meet certain criteria. The following table shows situations where someone might be eligible for a deferment of a federal student loan payment.

L10 Loans & Debt

Is Deferment Available? (If yes, for how long?) Situations When You May Apply for Deferment Direct FFEL Perkins Loans loans Loans During a period of at least half-time enrollment Yes Yes Yes in college or career school During a period of study in an approved graduate Yes Yes Yes fellowship program or in an approved rehabilitation training program for the disabled During a period of \unemployment or inability to Yes Yes Yes find full-time employment (up to (up to (up to 3 years) 3 years) 3 years) During a period of economic hardship (includes Yes Yes Yes Peace Corps service) (up to (up to (up to 3 years) 3 years) 3 years) During a period of service qualifying for Perkins No No Yes Loan discharge/cancellation During a period of active duty military service Yes Yes Yes during a war, military operation, or national emergency During the 13 months following the conclusion of qualifying active duty military service, or until you return to enrollment on at least a half-time basis, whichever is earlier, if • you are a member of the National Guard Yes Yes Yes or other reserve component of the U.S. armed forces and • you were called or ordered to active Yes Yes Yes duty while enrolled at least half-time at an eligible school or within six months of having been enrolled at least half-time

Ask the class, “What is forbearance?”

Explain that forbearance is similar to deferment. Typically forbearance either cuts your monthly loan repayments or stops your loan repayment requirement for up to 12 months. There are two types of forbearance.

Discretionary. A discretionary forbearance is something you can usually get for either financial hardship or illness.

L10 Consequences of Defaulting

Mandatory. Mandatory forbearance comes about if you meet certain eligibility criteria. • If you are serving in a medical or dental internship or residency program and meet other specific requirements you may receive a mandatory forbearance. • If the total amount you owe each month for all of your student loans is 20 percent or more of your monthly gross income, you may qualify for mandatory forbearance. • If you find yourself serving in a national service position and you receive a national service award, you may qualify for forbearance. • You can qualify for partial repayment under the US Department of Defense Student Loan Repayment Program. • Finally, if you are a member of the National Guard and have been activated by a governor, you may get a deferment if you don’t qualify outright for a military deferment. Ask, “How do you request a deferment or forbearance?” Usually you request a deferment through your financial aid office. • For Direct Loans and FFEL Programs, you should contact your loan servicer. • For Perkins Loans, you must contact the school you were attending when you received the loan – that’s why having relevant contact information is important. Most of the time, though, repayment happens on time or within the parameters outlined above.

Then ask the class, “What happens if you miss a repayment and end up in default? What does it take to default on a loan?”

Explain that if someone defaults on a loan, on any direct loan program, or a program via the Federal Family Education Loan (FFEL) Program owed to the U.S. Department of Education, the debt goes to a default resolution group. Some loans will be assigned to another type of collection agency – called a guaranty agency – for collection.

The more important information to have, though, is how to get your loan out of default. Ask if students know how to get out of default on a student loan.

• You can get out default by repaying your loan in full. • You can rehabilitate a loan by contacting your loan servicer and working out an affordable payment plan. o Once you have a plan in place, if you make all the agreed-upon payments on time, you will get the loan out of default.

L10 Loans & Debt

• Loan consolidation usually involves reorganizing your loans at a fixed interest rate. A direct consolidation loan is something you can organize through the Department of Education, too. You can consolidate various loan types. Go over the list of loan types (from https://studentaid.ed.gov/repay-loans/consolidation) 1. Direct Subsidized Loans 2. Direct Unsubsidized Loans 3. Subsidized Federal Stafford Loans 4. Unsubsidized Federal Stafford Loans 5. Direct PLUS Loans 6. PLUS loans from the Federal Family Education Loan (FFEL) Program 7. Supplemental Loans for Students (SLS) 8. Federal Perkins Loans 9. Federal Nursing Loans 10. Health Education Assistance Loans 11. Some existing consolidation loans

Lesson Activity: Avoiding Default Direct students to answer the questions in Avoiding Default Activity in the Student Guide, using all the information just provided.

Lesson Questions 1. What actions can an individual take when their loan is already in default? a. Switch to a different payment plan b. Request a deferment or forbearance c. Attempt to consolidate the loans in default d. All of the above.

2. Who should you contact if you are having trouble making your loan payments a. The US Department of Education b. Your loan servicer c. Your college Financial Aid Office d. None of the Above

L10 Consequences of Defaulting

Lesson Review  Direct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

L10

Jobs & Careers

This unit provides students with knowledge about various types of ways to earn income. Students participate in lessons that help them pick up the skills they need to get hired, move up within a company, and transition to other careers. Students will be introduced to networking, and will identify the importance of networking to build business relationship, contacts, and potential job opportunities. Students will learn that networking goes beyond meeting people; rather, it means forming lasting relationships based on trust and mutual respect.

Jobs & Careers

LESSON DURATION LESSON TITLE ID (MINUTES) Identifying Passions J1 10-40 Career Changes J2 20-30 Resumes & Job Applications J3 30-120 Interviews J4 30-120 Growing & Shrinking Industries J5 20-30 Don't Get Lost In The Crowd J6 20-30 Prepare for Your Dream Job Today! J7 20-40 Networking in Your Field J8 20-30 Networking & Mentors J9 10-30

Jobs & Careers

Identifying Passions

Duration  10-40 minutes

Lesson Overview  Participants will identify their passions and talents to become able to identify relevant careers that involve those passions and talents.

Big Idea  Your passions, aptitude and skills affect employment and your earning potential.  There are employment and income opportunities that align with your strengths, lifestyle goals and interests.

Essential Questions At the end of the lesson, students should be able to answer the following:

 What am I passionate about?  What do I enjoy doing in my spare time?  What am I good at?  What is a dream job that I would love to have?

Skills  Your passions, aptitude and skills affect employment and earning potential.  Describe how your passions, interest, values and talents can affect career choice.

Vocabulary  Passions  Talents  Skills  Traditional careers  Non-traditional careers

Anticipatory Set Read or display visuals of the following quotes for students: “Find out what you like doing best and get someone to pay you for doing it.” ~Katherine Whitehorn “Spend your days doing what you love. Start by figuring out what you like to do, then find a way to get paid doing it.” ~Vince Shorb Direct the students to write what they think these quotes mean in Warm-Up Activity of the Student Guide. Discuss the quotes and student responses as a class.

Identifying Passions

Lesson Explanation There are so many exciting careers out there besides typical ones. If you want to start your own business, any kind of business, you should start by getting a job in the field to gain skills and experience. To facilitate discussion, suggest a few career fields and ask students to name as many careers within that field that would be suitable for someone with that passion. For instance: SPORTS athlete; sports physical therapist; coach; team manager; team owner; team public relations; sports merchandise developer or retailer

ENTERTAINMENT actor; film crew; film editor; publicist; entertainment journalist; photographer; screenwriter; graphic designer; artist; musician

MEDIA journalist; publisher; reporter; editor; graphic designer; web designer; public relations; photographer; literary agent; broadcaster; marketing or advertising executive Be sure to encourage students to include both traditional and nontraditional jobs. Discuss their responses.

Lesson Activity: Aligning Skills with Passions Direct students to the Skills that Align with Passions Activity in the Student Guide. Instruct them to write down their biggest interests. Examples: sports; fashion; reading; cars; helping others. When they’ve finished writing their interests, have them brainstorm possible careers around those interests. Instruct them to write down at least ten possible careers within each field of interest. Next, have them write a paragraph about possible volunteer or internship work they could do using skills from each chosen career. Have them explain the importance of such volunteer work.

Jobs & Careers

Lesson Questions 1. What type of career should you strive to obtain? a. One that makes enough money for my immediate needs only. b. One that earns enough to meet my current obligations as well as potential future needs. c. One that fits my interests d. Both B and C. e. None of the above. 2. How can I learn which career fields really align with my interests? a. There’s no way to really find out; just pick and hope you get it right b. Sample career fields by volunteering your time and learning the tricks of the trade c. Ask you friends; their collective advise should help you figure out what you want

Lesson Review  Discuss the importance of spending just a few hours every now and then to sincerely think about their careers.  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

Changing Careers

Duration  20-30 minutes

Lesson Overview  Students will gain in-depth understanding of how to successfully change careers while remaining financially sound.

Big Idea  There are strategies you can use to increase your value and make yourself more marketable in the job marketplace.| There are steps you can take to improve employment options.| There are strategies you can incorporate to increase your earning potential.| Your passions, aptitude and skills affect employment and your earning potential.| There are employment and income opportunities that align with your strengths, lifestyle goals and interests. | Your value in the global workforce is increased by the skills you possess.| Employers offer various benefits as part of a salary package.| Your income can vary.| Employee benefits can influence your employment choices.

Essential Questions At the end of the lesson, students should be able to answer the following:  Why do people make career changes?  Why do people make job changes?  When is it financially smart to make career changes?

Skills  In-depth knowledge of the benefits and consequences of career changes.

Vocabulary  Job  Career  Career change  Job security  Job satisfaction

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide and ask them to write down the differences between a job and a career. Discuss their responses as a class.

Jobs & Careers

Lesson Explanation Share the following facts with students: • The average person changes careers three times in his/her lifetime. • The average person changes jobs about ten times in his/her lifetime. Ask the class why they think people with jobs change so many more times than people with careers. Discuss job security and job satisfaction.

• In the past, people would work for a single company for their entire lives. • Today it’s different. It’s okay to switch jobs in order to earn higher pay or to pick up new skills. Explain the importance of seeking jobs or careers that provide opportunity to build the skills to take your career to the next level. • Share that getting paid just $1 less per hour could cost them over $100,000 in earning and investment income over the course of their lives. • Tell students that it is important to make sure your money is in order so you can make career changes—either when you want to, or when you have to. Read the following scenarios and have students identify which scenario represents someone who could handle a career change without being financially wiped out.

1. You hate your job. Your boss is a jerk. You have no money saved, and you have bills totaling $1,500 a month. Your boss just got done yelling at you and embarrassing you in front of your co-workers. You want to quit. Could this person financially handle a career change? Why or why not?

2. You hate your job, your boss is a jerk, and you have $10,000 saved and bills totaling $1,500 a month. Your boss just got done yelling at you and embarrassing you in front of your co-workers. You want to quit. Could this person financially handle a career change? Why or why not?

As they share ideas, explain the importance of not burning bridges and handling oneself professionally. Facilitate discussion. Clarify that making good financial decisions always leaves a person with options.

Lesson Activity: Money for Change Refer students to the scenarios in the Money for Change Activity in the Student Guide. Explain that each student is going to complete these with a partner.

Changing Careers

Have each pair read through the scenarios and determine the best decision for each person. Make sure they answer all the questions. Facilitate discussion about their answers. SCENARIOS 1. Fred is bored with his job. He does the same thing every day. Since he works for a small company, there is almost no chance for promotion. He would like to go back to school to pursue his dream of becoming a graphic artist. Art school costs $5,000 and will take 6 months to complete. All the classes he needs are offered during the day. His current job hours are 9-5. He has $20,000 in the bank. His basic monthly expenses are: Apartment...... $550 shares with a roommate Electricity/Water/Garbage...... $200 Cable...... $70 basic cable Internet...... $30 Cell Phone...... $50 basic coverage Miscellaneous...... $100 Food...... $250 Car...... $0 paid for Credit Cards...... $0 none Total ..... $1,250

2. James is sick of his job. It pays great, but he frequently ends up working nights and weekends and his boss is a very difficult person to work for. He would like to go back to school to pursue his dream of becoming a nurse. He can get scholarships to pay for nursing school, but would have to cut his hours at work in half to attend school. His current salary is $4,300 a month. He has $24 in savings. His basic monthly expenses are: Apartment...... $1,500 lives alone Electricity/Water/Garbage...... $200 Cable...... $150 premium channel package Internet...... $50 the fastest speed Cell Phone...... $200 all the extras Miscellaneous...... $500 Food...... $600 eats out a lot Car...... $800 drives a sports car Credit Cards...... $300 Total ..... $4,300

Jobs & Careers

Lesson Questions 1. Which of the following is a potential risk associated with changing jobs? a. Lower seniority. b. Unknown factors like work environment and management. c. Learning curve regarding protocol, processes and workflow. d. All of the above. 2. What is the most important consideration when deciding to make a career change? a. You do not like your boss. b. You don’t like what you are doing. c. You have enough money saved to handle the change. d. Your friends urge you to make the change.

3. When it is financially smart to switch careers? a. When a person can cover his/her monthly expenses while taking advantage of a good job opportunity. b. When a person feels like it is a good opportunity. c. When a person is tired of dealing with his/her boss. d. None of the above.

Homework Activity Students determine the skills for their dream jobs by looking at online job postings and listing the skills they must develop to obtain those jobs. Then students will search for a job that will help them gain the needed skills.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks  Encourage students to complete the Homework Activity.

Resumes & Job Applications

Résumés and Job Applications A Chance to Shine!

Duration  30-120 minutes

Lesson Overview  In this lesson, students will learn the main components of a resume and how to create a résumé that highlights one’s strengths. Students will comprehend the importance of selling oneself to potential employers in a résumé and on a job application.

Big Idea  Your passions, aptitude and skills affect employment and your earning potential.| There are employment and income opportunities that align with your strengths, lifestyle goals and interests. | There are strategies you can use to increase your value and make yourself more marketable in the job marketplace.| There are steps you can take to improve employment options.| There are strategies you can incorporate to increase your earning potential.| Your network can increase exposure to potential opportunities. | Your value in the global workforce is increased by the skills you possess.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a résumé?  What is a job application?  What is the importance of using a résumé  Why is it important to take a standard completed job application with you to every company at which you apply?

Skills  Students will know the components of a résumé and a job application, and will comprehend the purpose and importance of selling oneself in a résumé.

Vocabulary  Résumé  Job application  Pitch

Jobs & Careers

Anticipatory Set Instruct students to answer the following question in the Warm-Up Activity in the Student Guide. Discuss their answers and facilitate a brief discussion. • What is a résumé and why is it important?

Lesson Explanation Explain that to get paid doing what you love, you need a good résumé. A résumé is your first point of contact with a potential employer. • When you apply for a job, you usually fill out an application. • When you apply for a career or a high-paying job, you need a resume. Discuss the similarities and differences between applications and résumés.

Explain that there is a whole industry built around writing résumé. People charge anywhere from $50 to $300 to write a résumé that helps a client stand out among the crowd of potential job seekers. Many people who apply for the same position are likely to have similar educational or career backgrounds.

It’s important to master the key components of an outstanding résumé. Ask students why they think it’s so important to have a great résumé.

• Remind students that the résumé is their first point of contact with potential employers. • If you do not stand out on paper, you will be less likely to get an interview. That means you might spend added weeks, months, or even years searching for a job.

Lesson Activity: It’s All about the Pitch After directing the students to the It’s All about the Pitch Activity in the Student Guide, divide the class into groups of four. Give each group a small bag of chips or other items (Doritos, Cheetos, pretzels, etc. — but avoid nuts as many people have peanut allergies). Each group must have a different bag item.

• Tell students that all the chips are tasty, but they can only choose (hire) ONE bag to consume. • Ask each group to write a “pitch” convincing you that you should eat their bag. • Give them permission to be silly but have them focus on the unique qualities of their chips. • Have each group present its pitch to the class. • Vote on the best pitch. J3

Resumes & Job Applications

Explain that a pitch is like the professional summary or objective statement of a resume. In their résumés, their task is to “pitch” themselves to an employer — just like they pitched their bag of chips.

• The, have students write out three unique qualities about themselves and practice selling them to their groups. • As a class, discuss what would make someone stand out in a résumé. o Volunteer work in their field o Membership in professional organizations o Work experience, etc.

Building your résumé now will help you significantly in the future. • Remember the old adage: “Practice makes perfect.” • If you start building your résumé now, by the time you’re ready to enter your dream career you will have a great résumé that stands out! Discuss ways to gain the advantage that will get a résumé seen. In times of high employment, your résumé will be mixed in a huge stack. How can you stand out? • Internships • Inside connections • Work with company-supported nonprofits • Informational interviews

Lesson Activity: Apply! Tell the students to review the sample job applications and résumé in the Apply! Activity in the Student Guide. • Go through the pertinent points of each so that students understand the importance of completing both the application and a résumé. • Suggest that they complete the sample application and bring it with them to each job interview. Before most interviews, you will need to have this information with you in order to complete the company’s job application. If you have the sample application on hand, you will be better equipped to answer the questions on a company application “on the spot.”

Instruct students complete the blank job application and résumé in the Student Guide. • Be sure to reiterate that resumes are like pitches: they highlight skills and uniqueness. • Mention that students with little or no work experience may have difficulty highlighting skills in their Professional Summaries.

Jobs & Careers

• Explain, “Even if you have little work experience, you already have many proven skills that translate well into the workforce.” • Provide the following as examples: o Writing school reports/papers = Experience in topic research and reporting. o Group projects = Ability to lead and/or effectively work with a team. o Juggling multiple classes and assignments = Prioritization and time management skills. o Participating in class = Ability to build and maintain professional interpersonal working relations with people around you.

Help students as needed. When they have completed the activity, discuss the process and offer advice on any issues they encountered while completing the application and résumé.

Note: Depending on the age and experience of your students you may want to lightly touch on the following topic or go into the full details as provided. For those with felony convictions: Even if you have made mistakes in the past, that doesn‘t have to stand in the way of getting your dream job. Let‘s talk about the interview process if you have a felony conviction.‖ Describe your conviction honestly and concisely. For those with multiple convictions, let your potential employer know that you made bad decisions when you were younger that snowballed, but you‘re beyond that now. For those where it was just one incident, let the employer know it was a moment when you didn‘t think and you‘ve regretted it every day since then. In both cases let your potential employer know that you have gained knowledge from your mistakes and are excited about the future. Then move on to discuss how you have put that behind you and illustrate your present qualifications for the job. This is where your hard work after your release comes in. Volunteering with nonprofit organizations is a great way to fill in your resume after a conviction. Find a nonprofit that you‘re passionate about or consider volunteering for an organization that directly relates to your conviction. For instance, if you were convicted for a felony DUI, volunteer for MADD (Mothers Against Drunk Driving).

Resumes & Job Applications

This shows the employer not only that you regret what you did but that you‘re turning the situation into a positive and facing it head-on. You can close out this discussion by saying something like, ―I hope this doesn‘t impact my ability to get hired here. After reading the job description and doing some research on the company, I know I my (skills and strengths also listed in the job description) would be valuable and I can help your company be even more successful.‖ Then move on; don‘t say another word about it unless the employer asks

Jobs & Careers

Employment Application Information Sheet

POSITION APPLYING FOR: ______

How did you hear about this job? ______

Desired Salary ______When would you be available to start? ______

What hours are you willing to work? ______Would you be able to work weekends? Yes No

Briefly describe any special skills/training ______

PERSONAL INFORMATION

First Name ______M.I. ____ Last Name ______

Current Address: Street ______Apt. ____ City ______State _____Zip ______

Home Phone _____-______-______Cell Phone ______-______-______Email ______

Social Security # ______-____-______Driver’s License # ______State ______

I am a US citizen or otherwise authorized to work in the United States on an unrestricted basis: Yes No

Have you ever been convicted of a felony: Yes No

Position Applying For: ______

EMPLOYMENT HISTORY Present or Most Recent Employer: Company Name ______

Address ______City ______State _____Zip ______

Your Position/Title ______Dates Employed ______to ______

Salary ______Duties ______

Reason for Leaving ______

Supervisor ______, Title ______May we contact? Yes No

Prior Employer: Company Name ______

Address ______City ______State _____Zip ______

Your Position/Title ______Dates Employed ______to ______

Salary ______Duties ______

Reason for Leaving ______

Supervisor ______, Title ______May we contact? Yes No

EDUCATION

High School ______City/State ______J3

Resumes & Job Applications

Honors and/or Awards ______

Dates Attended ______Did you graduate? Yes No If not, did you receive your GED? Yes No

Technical/Vocational School ______City/State ______

Honors and/or Awards ______

Dates Attended ______Did you graduate? Yes No

Degree or Certification:______Specialty: ______

REFERENCES

Reference #1 Name ______

Address ______

Phone ______-______-______Email ______

Reference #2 Name

______

Address ______

Phone ______-______-______Email ______

Reference #3 Name

______

Address ______

Phone ______-______-______Email ______

Reference #4 Name

______

Address ______

Phone ______-______-______Email ______

Jobs & Careers

Sample Resume from Workbook: YOUR NAME

1234 Your Address, Your City, Your State Phone – 555-555-5555 | Email – [email protected]

Professional Summary Summarize your professional / academic experience to give potential employers a glance at why you are best for the job Write your summary here: ______

______

Professional Experience Name of Company You Worked For City and State of Company Location Dates Employed – Month. Year – Month, Year Your Title 1 – 3 sentences summarizing your responsibilities and duties

 Bullet points of your accomplishments while employed with company

Resumes & Job Applications

Write your experience here: ______

______

______J3

Jobs & Careers

Education School Name School Location Years Attended; Year - Year

 Degree Earned Degree Emphasis (Concentration) List your degree(s) here: ______

______

Resumes & Job Applications

Skills: Include skills that are relevant to the job position. For example, if you are skilled in video editing, but the job you are applying for does not include any need for video editing, don’t include it. You can bring it up during the interview. Write your skills here: ______

______

Affiliations: List any associations, organizations or clubs you belong to here: ______

______

Jobs & Careers

Lesson Activity: Build & Refine Direct students to the Build & Refine Activity in the Student Guide. Explain that employers understand that they cannot expect you to know and be able to do everything on the job from day one. However, they do expect you to be able to perform the majority of the stated duties in the job description and to quickly learn those duties you don’t fully know yet.

Have students take a moment to consider both basic and advanced skills they would need for a job they want, and that they can achieve in the SHORT-TERM to help them along their career paths. There are no wrong answers. They should list all the skills they think they would need, regardless whether they have those skills or not. Coax out the skills they need to acquire to be good competitors in the workforce.

Tell students, “You will develop an action plan to build skills in those areas where you may be lacking. If acquiring a skill seems too distant, think about the prerequisite skills you need to develop to get to a position where you can learn the skills you desire.”

ACTION PLAN STEPS SAMPLE ACTION PLAN List the job. Job: Intern for Marketing Firm List skills needed for Skill: Excellent business communications via both the job. phone and email. Reason for each skill Communication with clients and partner companies is that will help you be a a daily necessity for marketing firms. Good better candidate for communication skills will help me stand out from the the job. competitions. How you will gain Volunteer to answer phones in the school office, each skill. participate in fundraising telethons, read a business Date by which you will communications book. gain each skill. Ten months from today.

Discuss students’ answers and the challenges they encountered. Encourage them to further develop and refine their action plans.

Remind students that a plan helps keep important goals in focus and on schedule.

Resumes & Job Applications

Lesson Questions 1. As a job applicant, how can you highlight features on a résumé that the employer is likely to be seeking? a. Networking. b. Look at the company’s website to find out who will be conducting the interview. c. Hire a professional to complete a standardized resume you can send to all potential employers. d. Read the job posting and adjust your resume to highlight the skills the employer requires. 2. To demonstrate that you are a viable job candidate, what should make up most of your résumé? a. Education, grade point average, and extracurricular activities. b. References and referrals. c. Relevant job and internship experience. d. A clear statement of objectives. 3. Résumés and job applications are the same. a. True b. False Homework Activity Have students locate a resume template that applies to their industry or career of choice. They can start by entering “resume template [field]” into their search browser. (Examples: “resume template IT project manager,” “resume template physical therapist,” or “resume template bank teller.”) Another strategy might be to contact a person they know who works in their chosen industry and ask if that person would be willing to share a copy of his/her resume.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks  Reiterate the importance of having your résumé stand out.  Provide the following online résumé resources to students:  http://career-advice.monster.com/resumes-cover-letters/resume- samples/sample-resumes-by-industry/article.aspx  http://www.resume-resource.com/resume-examples-by- professional-writers/ J3

Jobs & Careers

Mock Interviews

Duration  30-120 minutes

Lesson Overview  Students will learn the components of a job interview and will participate in a mock interview to practice and master interview skills.

Big Idea  There are steps you can take to improve employment options.| There are strategies you can incorporate to increase your earning potential.| Your passions, aptitude and skills affect employment and your earning potential.| There are employment and income opportunities that align with your strengths, lifestyle goals and interests. | There are strategies you can use to increase your value and make yourself more marketable in the job marketplace.| Your network can increase exposure to potential opportunities. | Your value in the global workforce is increased by the skills you possess.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are three interview tips?  Why is it important to “connect the dots” between your résumé and an interview for a potential job?

Skills  They will apply this understanding to determine wants from needs when making purchases.

Vocabulary  Interview  Qualifications  Strengths  Weaknesses

Anticipatory Set Instruct students to use the Warm-Up Activity in the Student Guide to explain what this statement means to them. “An interview is a chance for an applicant to ‘connect the dots’ between their past experience and what they can do for an employer.”

Discuss their answers. Talk about the importance of verbally explaining one’s qualifications for a job, rather than just relying on a resume. J4

Mock Interviews

Lesson Explanation An interview is the employer’s chance to meet and get to know people before they hire them. It is your opportunity to show the employer that you are the best candidate for the job.

You should take time to research the company and find out everything you can about the company’s mission and goals, to prepare for the interview. Researching the company shows the employer that an applicant is serious about the job, and will work hard.

Go over the following interview tips:

• Do your research. The majority of employers will ask you to tell them three reasons why you would be an asset to the company. Before an interview, identify three key strengths you have that you feel will benefit the company. Focus on those during the interview. For example, o I read that your company does a lot of work in Japan. o I am fluent in Japanese, and have recently taken a Japanese business etiquette course. • Always make your answers relevant to the job/career for which you’re applying. Share personal stories to build a connection with the interviewer. o For example, if the interviewer asks you about your weaknesses, say something like: “I sometimes have been known to take on large workloads and tasks that typically would require a few people to complete.” o At my last job I did ____ (something that relates to the job). I worked overtime and weekends for 6 weeks straight to get it done. • Illustrate your key points with stories or examples from your life. For example: o Question: Do you work well in a team environment? o Answer: I really learned to work well in a team environment when I spent a summer in Africa building a school with people from all over the world.

Jobs & Careers

Lesson Activity: Mock Interview Ask them to complete the mock interview questions in the Mock Interview Activity in the Student Guide. When they are finished, put students in pairs and give them the following instructions: • Instruct all students to pick one of the job descriptions to base their answers around. Give students 10 – 15 minutes to answer the mock interview questions. • Choose one person to play the interviewer first. • That person will have approximately 5 – 10 minutes to conduct an interview with their partner. • Then they will switch roles. • Ask each other the mock interview questions from their Student Guide activity. • Each student will place a check mark in the rubric in his/her partner’s Student Guide to give the partner feedback. When all students have completed the mock interview, call the class back together and discuss what they learned from this lesson. Answer any further questions.

SAMPLE INTERVIEW QUESTION SUGGESTION FOR RESPONSE What are the strengths you bring to Focus on your top 3 strengths – share the table? a story that emphasizes some or all of your strengths. Why should we hire you? Focus on your top 3 strengths – share a story that emphasizes some or all of your strengths. How can you benefit our Focus on your top 3 strengths — organization? share a story that emphasizes some or al of your strengths. Why did you quit your last job? Put a positive spin on your answer. Be sure to emphasize that you want to grow with a company. What are your weaknesses? Be sure to choose one on which you can put a positive spin. Why do you want to work here? Do your homework before the interview. Research what the company offers. What makes you better than the Example: “I’m not sure about the other candidates we are other candidates but I know at my interviewing? last job I _____ (focus on key strengths and personal stories). How much are you looking to get Examples: “I really want to work for paid? this company. I’m sure we can come to an agreement.” “How much do you typically pay someone with my background?” J4

Mock Interviews

Student Grading Rubric

Reasons for Hiring Appropriate Answers Relevant Examples

4 Gave 3 reasons they Answered questions being Used relevant should be hired. All asked and restated each examples/stories from their reasons were relevant to question. life to illustrate the character the job for which they traits/qualifications being were applying. asked about.

3 Gave 3 reasons why they Answered most of the Used relevant should be hired but they questions being asked and examples/stories from their were not all relevant to restated each question. life to illustrate their the job for which they character traits/ were applying. qualifications being asked about most of the time.

2 Did not give all three Didn’t clearly address the Used examples/stories but reasons why they should question being asked and did not clearly illustrate the be hired or not, but all didn’t restate each character their reasons were question. traits/qualifications being relevant. asked about.

1 Forgot to give any reasons Did not answer questions in Did not give clear examples. why they should be hired complete sentences or or the reasons they gave answers were completely were completely irrelevant off-base. to the job for which they were applying.

Jobs & Careers

#1 — SERVICE MANAGER FOR A MOUNTAIN BIKE COMPANY Required Professional Background: At least 2 years experience in a senior mechanic or service manager role Service writing experience Effective scheduling of repairs, bike builds, and work orders Mechanic scheduling Working to budgets Target and metric setting for mechanics and bike builders Inventory control A successful candidate can expect a permanent, year-round position with a competitive, negotiable salary with medical and dental benefits. In addition, the company believes in continuous development of their employees with potential for advancement within a progressive expanding company.

#2 —PRODUCT GRAPHIC DESIGNER FOR AN ACTION SPORT DESIGN FIRM Education and Training: Bachelor’s degree in graphic design or 1+ years equivalent work experience. Proficiency in Macintosh-OSX environment; a commanding knowledge of Adobe InDesign, Photoshop, Illustrator, Keynote, and PowerPoint. The ability to work between Adobe and Microsoft programs seamlessly. A portfolio of work that clearly demonstrates creativity, originality, and problem-solving. We expect to see process. Service writing experience Effective scheduling of repairs, bike builds, and work orders Mechanic scheduling Working to budgets Target and metric setting for mechanics and bike builders Inventory control A successful candidate can expect a permanent, year-round position with a competitive, negotiable salary with medical and dental benefits. In addition, the company believes in continuous development of their employees with potential for advancement within a progressive expanding company. Skills and Abilities: Clear knowledge of graphic design skills that do not rely solely on the computer. These skills include sketching and drawing, brainstorming, typography, use of scale and color and overall layout intuition. Strong ability to craft larger ideas into influentially written, oral and visual presentations so they may be presented to other creative as well as senior management. Ability to work on multiple projects simultaneously and adjust priorities to meet evolving deadlines. Organized approach to problem-solving and project management as well as the knowledge of when to elevate concerns vertically to senior management. Must work well in a team-based environment and possess the ability to handle constructive criticism. Experience with action sports industry a plus. Organized approach to problem-solving and project management as well as the knowledge of when to elevate concerns vertically to senior management. Must work well in a team-based environment and possess the ability to handle constructive

Mock Interviews

#3 — Associate Wovens Designer

We are looking for a creative individual that will embody the ethereal spirit of our brand and convey the Bohemian, high-end aesthetic through soft, natural, hand-sketched designs, presentation boards, and tech packs. THE IDEAL CANDIDATE WILL HAVE: A strong awareness of trend.

A natural inclination towards originality and newness, in both silhouette and detail.

3-5 years design expertise in wovens, with emphasis on dresses and skirts.

Prove ability to embrace a signature look and possess an eye for innovation.

#4 — Public Relations Representative

KNOWLEDGE, SKILLS, AND ABILITIES Intermediate concepts, principles, and practices of public relations.

Knowledge of media outlets, venues, and marketing, including social media.

Types of stories and information of interest to journalists.

AP style.

Libel and slander laws

Skill in operating standard office equipment and using required software applications, including Microsoft Office and Adobe Photoshop.

Operating electronic media publishing software, including Web 2.0.

Ability to communicate effectively, both orally and in writing.

Write and edit effective and efficient communications and publications including the use of various creative genres.

Prove ability to partner with other functional areas to accomplish objectives.

Ability to incite enthusiasm and influence, motivate, and persuade others to achieve desired outcomes.

Jobs & Careers

Lesson Questions 1. Why should an applicant take time to research the company before a job interview? a. It shows that the applicant knows how to conduct research. b. It allows the applicant to tailor his/her resume and interview to touch on points the company considers most important. c. It shows that the applicant can do almost any job for the company. d. It shows the prospective employer that the applicant knows which positions he/she would consider if hired. 2. If you are asked in an interview about your weaknesses, you should _____. a. State that you don’t believe you have any weaknesses. b. Identify three major weaknesses. c. Identify three major weaknesses and explain why they are weaknesses. d. Identify one of your weaknesses but turn it from a negative into a positive.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks  Reiterate the importance of verbally explaining one’s qualifications in a job interview.

Growing/Shrinking Industries

Growing and Shrinking Industries

Duration  20-30 minutes

Lesson Overview  Upon completion of this lesson, students will be able to identify industries with a shrinking or growing job market. Knowing this information will help them choose career paths that have potential for growth over time.

Big Idea  Employers offer various benefits as part of a salary package.  Your income can vary.  Employee benefits can influence your employment choices.  Your income and benefit needs change over time.  There is a broader economic system that impacts your financial goals.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a shrinking industry?  What is a growing industry?  Why is it important to know about shrinking and growing industries?

Skills  Ability to identify possible career choices in shrinking or growing industries.

Vocabulary  Shrinking industry  Growing industry

Anticipatory Set Instruct students to answer the following question in the Warm-Up Activity in the Student Guide. How many people do you know who have changed jobs or careers at least once? ______Twice? ______Three times? ______More than three times? ______Discuss their responses as a class.

J5 5 Jobs & Careers

Lesson Explanation Remind students that the average person changes careers three times in a lifetime, and the average person changes jobs ten times in a lifetime. • In a downed economy, many people are being put in positions where they are forced into career changes. • Many people also are going back to school or taking additional training to make their skills more marketable. While it is important to follow your dreams, it is also important to be able to pay your bills every month. Your best bet right now is to try to fuse what you enjoy doing with a job or career that is rapidly growing. If you are passionate about a shrinking industry, that’s OK. You can still make money in that field, but it may require more effort on your part. If you are up for the challenge, you can be successful in any industry you want.

Present the following information:

• The Bureau of Labor Statistics says the top ten industries with the largest projected employment growth between now and 2018 are: 1. Management, scientific, and technical consulting services 2. Services for the elderly and people with disabilities 3. Home health care services 4. Computer systems design and services 5. General merchandise stores 6. Physician Offices 7. Nursing care facilities 8. Employment services 9. Local government (not including hospitals and education) 10. Full-service restaurants

Ask students: “What do you notice about the top growing industries?”

Talk about why these jobs are on the rise. For example, Baby Boomers are reaching retirement age; people are living longer; etc.

• The Bureau of Labor Statistics predicts the following industries to have the largest wage and salary employment declines between now and 2018: 1. Department stores 2. Electronic component manufacturing 3. Motor vehicle parts manufacturing 4. Postal Service 5. Printing and related support activities 6. Cut-and-sew apparel manufacturing 7. Newspaper publishing J5

Growing/Shrinking Industries

8. Support activities for mining 9. Gasoline stations 10. Wired telecommunications carriers

Ask students: “What do you notice about the top declining industries?”

Talk about why these industries are declining. For example, people use the Internet to get information; order products, send email vs. snail mail; getting rid of land lines, etc.

• The Bureau of Labor Statistics predicts the occupations with the largest projected employment growth between now and 2018 are: 1. Registered Nurses 2. Home Health Care Aides 3. Customer Service Representatives 4. Combined Food Preparation and Service Workers (including fast food) 5. Personal and Home Care Aides 6. Retail Salespersons 7. Office Clerks – General 8. Accountants and Auditors 9. Nursing Aides, Orderlies, and Attendants 10. Postsecondary Teachers 11. Construction Laborers 12. Elementary Schoolteachers 13. Truck Drivers (trailer and tractor-trailer) 14. Landscaping and Groundskeeping Workers 15. Bookkeeping, Auditing, and Accounting Clerks 16. Executive Secretaries and Administrative Assistants 17. Management Analysts 18. Computer Software Engineers, Applications 19. Receptionists and Information Clerks 20. Carpenters 21. Medical Assistants 22. Office Supervisors 23. Practical and Licensed Vocational Nurses 24. Security Guards 25. Waitresses and Waiters 26. Maintenance and Repair Workers 27. Physicians and Surgeons 28. Child Care Workers 29. Teacher Assistants

J5 5 Jobs & Careers

Ask students whether the industry they are pursuing is shrinking or growing? Talk about traditional and non-traditional careers in these industries. Help students see how their passions can fit into any industry.

Lesson Activity: Interests, Skills, and Careers Have students individually complete the questions in the Interests, Skills & Careers Activity in the Student Guide. Instruct them to share their answers with a partner once they’ve finished writing them down.

Reconvene as a class. Talk about their responses and how they fit into growing industries based on the lesson explanation. • What are your five greatest interests in life? • What are your five greatest skills? • Which of the top five jobs/careers best incorporate your skills and interests? • What steps would you have to take to transfer into a job/career in a growing field?

Lesson Questions 1. What is a risk associated with entering into a career in a shrinking industry? a. Less job opportunities. b. Increased competition when it comes time for advancement. c. Increased potential for income insecurity. d. All of the above. 2. Which of the following describe job market risks? a. Expanding network and industry connections. b. Payroll deduction and wage garnishment. c. Outsourcing and automation. d. On-the-job training.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

Don’t Get Lost in the Crowd

Duration  20-30 minutes

Lesson Overview  Participants will understand the skills they need to stand out among their peers in the workforce. Students will learn to market themselves in the global community to avoid being outsourced and to increase their income potential.

Big Idea  There are steps you can take to improve employment options.  There are strategies you can incorporate to increase your earning potential.  Your network can increase exposure to potential opportunities.  Your value in the global workforce is increased by the skills you possess.  There is a broader economic system that impacts your financial goals.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is outsourcing?  How is outsourcing hurting the outsourcing nation’s workers?  What can you do to stand out in the marketplace?

Skills  Students will understand the importance of building skills that will transcend any economic climate.

Vocabulary  Money management  Outsourcing

Anticipatory Set Instruct students to answer the following question in the Warm-Up Activity in the Student Guide. Then facilitate a brief discussion. • Why is it important to stand out when applying for a job or starting a business?

Lesson Explanation: Ask, “What is outsourcing?” Present the definition and discuss the term. Make sure the students have a solid understanding of outsourcing before moving on. J6 5 Jobs & Careers

• Outsourcing – the practice of having various job functions completed outside a company, rather than within the company. Explain that many people do not like outsourcing because companies are outsourcing to other countries and, as a result, the outsourcing nation’s workers are losing jobs.

Ask, “Why do you think companies outsource to other countries?”

Explain that people in other countries can work much more cheaply because of the difference in the cost of living.

Define “cost of living” for students. DEFINITION: Cost of living – the average cost of basic necessities for survival.

Discuss how outsourcing can affect students as they enter the workforce. Present the following scenario to illustrate the concept:

TERRY is a good writer and is proficient in using Microsoft Office products, speaking on the phone, and general office duties. She lives in Los Angeles CA. She gets paid $15 per hour and needs to earn at least that much to cover her expenses. HOWEVER SAFU has very similar skills to Terry’s. He lives in India, and works for $4 per hour. He needs to earn that much to cover his expenses. Terry’s company is looking to cut costs. From a business perspective, do you think the company should outsource to India?

Discuss how Terry may be affected by the results. Then explain the following.

JACKIE is a freelance copywriter. She writes many different types of information for nearly any type of company or website. Her work is completed primarily online, and she has worked with many people whom she has never met in person. Since most of her work is conducted online, she has to constantly sell herself to the global community. Discuss why marketing yourself to a global community is always important. • What doors does global marketing open? • How can it help you avoid being outsourced from a local job? Explain the importance of developing the necessary skills not to have to worry about one’s career or job being outsourced.

Don’t Get Lost in the Crowd

If you develop skills and ways to sell yourselves, you will stand out in the marketplace and create more job security. Reiterate the importance of always marketing oneself to a global community.

How can you set yourself up so your job won’t be outsourced to someone that will work for less? Higher quality, more skills, networking, communication? • Talk about what they need to do to stand out in the marketplace. • Discuss what Terry can offer her employer over Safu in India. Facilitate discussion to show how their ideas apply to their work setting to avoid outsourcing.

Explain how students can gain skills that will help them stand out in the workforce. Examples: college, internships, mentors, coaches, reading, talking, watching videos, listening to radio, watching TV, documentaries, seminars, courses, workshops.

Lesson Activity: Stand Out in a Crowd! Direct students to the Stand Out in a Crowd Activity in the Student Guide. Divide the class into 3 groups – one group to represent Rafiki, one group for Suzanne and one group as the owner of Smart Solutions.

• Give students who represent potential employees a few minutes to write in their Student Guide what their selling points are and why they are better than the competition. The student in each group who represents the owner can use this time to consider the level at which cutting costs starts to potentially hurt customer service. What are some possible unforeseen effects of cutting costs and outsourcing to India? • Instruct the students to act out the role plays in their individual groups. One student is a native (local) worker for the company; the second student is a worker from another country who can complete the work for less money; the third student is the company owner. • In each group, two students must think of the way they are best suited for the job. Remind them to think back to when they completed their mock interviews, particularly about the Terry scenario from the explanation to come up with ideas. • Once the two “workers” have pitched their ideas to the “owner,” the owner must make a decision.

J6 5 Jobs & Careers

ROLE-PLAY SCENARIOS RAFIKI lives in India and has a company comprised of employees who are fluent in English and Spanish – that is, they can read, write, and speak both languages. He is trying to contract with the owner of Smart Solutions to manage the company’s Customer Service Department. He has proposed to the owner to provide 24/7 customer support to Smart Solutions customers for $10,000 a month, which covers 20 employees and their services. He pays his employees around $3/hour.

SUZANNE lives in Kansas and is manager of the Customer Service Department at Smart Solutions. She does not want the owner of Smart Solutions to outsource her department, as it will result in the loss of 20 jobs. She is trying to convince the owner to stay in-house with these services, as they provide exceptional customer service and have been awarded the Best Customer Service Providers Award for the last three years from the Customer Service Workers Union. Between office costs, payroll, and human resources, it costs Smart Solutions $100,000 per month for their Customer Service Department OWNER OF SMART SOLUTIONS As the owner of Smart Solutions, you are trying to think of ways to cut costs in this tough economic climate. You want to find the best deal without compromising the service to which your customers are accustomed. Listen to Rafiki’s and Suzanne’s arguments, and determine the best option for Smart Solutions. After completing the activity once, have students switch roles, and repeat the role-play activity. If you wish, mix up the groups to remove any advantages the previous “owner” might have acquired within the original group (if time and classroom size allow). Continue repeating the activity until each student has had a chance to play every role.

Reconvene the class and discuss their thoughts about the activity. Tie the activity back to why they need to always sell themselves to employers. If they stand out in the global community, they will never need to worry about working in a profession that may be outsourced.

Don’t Get Lost in the Crowd

Lesson Activity: Robot Invasion Explain how the fast-food industry is talking about replacing human workers with robots. They’re taking their cue from major manufacturers who already employ robots in the assembly lines. It’s important not only to consider industry growth and decline trends but also the skills that make up an industry’s workforce.

• Robots are very expensive. Not only does the robot itself cost a lot to build, but there are many costs associated with designing the robot’s functions, integrating them into an assembly line, making sure that skilled robot-support employees are hired and handling the re-assignment or termination of the human workers the robots replaced. • Human workers also are very expensive! They require paid time off, retirement funds, health insurance, taxes and other benefits on top of the wages they’re paid. Humans get sick, tired and socialize during work hours. Though there is nothing wrong with that, those are drawbacks that robots do not have! As technology gets older, it becomes cheaper to make. Did you know that the first computer hard drives to be sold to the public cost about $6,500 per megabyte back in 1955? Now you can buy a simple flash drive—which performs the same function as a hard drive—for just a few dollars and it can hold thousands of megabytes of data.

• The point at which it is cheaper for a company to design, build, install, and integrate robots compared to employing a human worker is the point at which the industry begins to use robots more and more. It is critical to ensure that your skills are always more valuable than what a simple robot can perform.

Instruct student to complete the questions in the Robot Invasion Activity in the Student Guide. • List some types of jobs that could be automated by a robot. • Consider your desired job. Could it be automated by a robot? • What skills make a human being better than a computer or robot? • Do you possess those skills? If not, how will you develop them?

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Lesson Questions 1. Which of the following is an example of outsourcing? a. A company hires a freelance writer to write a company brochure. b. A northern Indiana appliance company hires a company from southern Michigan to serve as its repair staff for the appliances it sells. c. A company hires a firm in India to take customer service calls. d. All of the above. 2. What is the company advantage of outsourcing? a. Expanded employee pool and payroll. b. Lower costs of living. c. Potential to hire contract workers without having to provide benefits. d. Expanded human resources department.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks  Reiterate the importance of standing out from the competition, including foreign workers and robots.

Prepare for Your Dream Job

Prepare for Your Dream Job Today

Duration  20-40 minutes

Lesson Overview  Students will recognize and plan to develop the skills necessary to prepare them for their dream jobs. They will create timelines that map out the necessary steps toward achieving their goals.

Big Idea  There are steps you can take to improve employment options. | There are strategies you can incorporate to increase your earning potential.| Your passions, aptitude and skills affect employment and your earning potential.| There are employment and income opportunities that align with your strengths, lifestyle goals and interests. | There are strategies you can use to increase your value and make yourself more marketable in the job marketplace.| Your network can increase exposure to potential opportunities. | Your value in the global workforce is increased by the skills you possess.| Employers offer various benefits as part of a salary package.| Employee benefits can influence your employment choices.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a job description?  Why is it important to set personal goals?  What steps are you going to take to get your dream job?

Skills  Ability to develop skills and create a timeline to attain one’s dream job.

Vocabulary  Job description  Personal goals  Dream job

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide and have them write down what this statement means to them. “Success is the sum of small efforts, repeated day in and day out.” Robert Collie Discuss their answers and why it’s important to prepare for the future today.

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Lesson Explanation Explain the importance of preparing for the future now. Discuss why it’s important to begin looking into potential dream jobs today, rather than waiting until later.

• Becoming established in a career takes years of preparation. • If students start preparing today, they will set themselves up for successful futures. Ask the students if they have ever read a job description before. Discuss job descriptions and why they’re important to understand. Talk about what a job description includes, and what they should look for to determine whether they qualify for a job.

Show them the job descriptions in the Dream Job Activity in the Student Guide. Explain that students should look through job descriptions for positions within their potential careers. Reading job descriptions now will help them prepare to receive the right type of education and work experience to attain their dream job later.

Review the sample job descriptions, and help students identify the required skills for each job. Explain the importance of reviewing skill sets listed in employment advertisements to learn what skills they need for their chosen careers.

Be sure students understand the importance of analyzing their dream jobs today to prepare to get those jobs in the future.

Prepare for Your Dream Job

#3 — ASSOCIATE WOVENS DESIGNER We are looking for a creative individual that will embody the ethereal spirit of our brand and convey the Bohemian, high-end aesthetic through soft, natural, hand-sketched designs, presentation boards, and tech packs. THE IDEAL CANDIDATE WILL HAVE: A strong awareness of trend. A natural inclination towards originality and newness, in both silhouette and detail. 3-5 years design expertise in wovens, with emphasis on dresses and skirts. Prove ability to embrace a signature look and possess an eye for innovation. To apply, please send an updated rèsumè along with three hand sketches that you feel define the company brand.

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#4 — PUBLIC RELATIONS REPRESENTATIVE KNOWLEDGE, SKILLS, AND ABILITIES Intermediate concepts, principles, and practices of public relations. Knowledge of media outlets, venues, and marketing, including social media. Types of stories and information of interest to journalists. AP style. Libel and slander laws Skill in operating standard office equipment and using required software applications, including Microsoft Office and Adobe Photoshop. Operating electronic media publishing software, including Web 2.0. Ability to communicate effectively, both orally and in writing. Write and edit effective and efficient communications and publications including the use of various creative genres. Prove ability to partner with other functional areas to accomplish objectives. Ability to incite enthusiasm and influence, motivate, and persuade others to achieve desired outcomes. Demonstrated ability to organize and prioritize multiple tasks and meet deadlines. REQUIRED EDUCATION AND PREVIOUS EXPERIENCE Bachelor’s degree in English, journalism, communications, or a related field. At least three years of journalism, marketing, event or entertainment management or social media experience. OR any equivalent combination of experience, education, and/or training approved by H R

#5 — INTERNATIONAL MARKETING REPRESENTATIVE GRAND VACATION SALES BASIC QUALIFICATIONS Minimum of one year work experience in a direct sales or marketing position. Bilingual fluency in Japanese and English required, both verbal and written. Proven proficient computer skills. Excellent customer service skills. Excellent communication skills. Thorough understanding of the local area and its attractions. Flexible schedule required, including nights, weekends, and holidays. PREFERRED QUALIFICATIONS: 1+ years work experience in sales and marketing. Minimum of 6 months experience of relevant timeshare industry. Minimum of 6 months experience selling and booking tours, activities, concierge service. Exceptional customer service with the ability to resolve guest relations issues.

Prepare for Your Dream Job

Lesson Activity: Dream Job Timeline Direct the students to the Dream Job Timeline Activity in the Student Guide. Have students create timelines to pursue their dream jobs.

Have each student create a basic job description or bulleted list of skills he or she will need for the desired job. Have them use the examples in the Student Guide for ideas. Examples: • Doctor. Must major in a science-related field, go to medical school, volunteer at a hospital, etc. • Teacher. Needs a college degree, patience, ability to give presentations, eye for detail, etc. Have students estimate the timelines they will follow to achieve their dream jobs. • Larger prerequisites like achieving a Bachelors degree will obviously span a few years. • Smaller accolades like gaining basic proficiency in another language or teaching themselves confident public speaking can be achieved in a shorter time frame.

Lesson Questions 1. Why is a timeline important to attain your dream job? a. It helps you develop necessary skills. b. It helps you recognize needed skills. c. It helps map out steps toward reaching a goal. d. It helps create a job description for the dream job. 2. How can someone prepare to land the job they desire? a. Apply for the job. b. Research the qualifications for the job and start building those skill sets. c. Network with people in the industry. d. Both B and C.

J7 5 Jobs & Careers

Homework Activity If they have access to a computer and the Internet, have students locate job descriptions for their specific dream jobs. Sites like www.monster.com and www.careerbuilder.com are great places to search.

• Help students as needed with the search process. • Have students create timelines for completing the process. (Timelines are located in the Student Guide.) • What to include: o What they can do now o Their goals o When they will start to work toward each goal o When they will complete each goal o A date by which they want to reach their dream job • Have students share their completed timelines in groups or with the entire class.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

Networking in Your Field

Duration  20-30 minutes

Lesson Overview  Students will gain an understanding of networking and how building a network can benefit their professional lives. Students will learn pertinent strategies to network with professionals in the field they aspire to enter. Thus, they will prepare for their career today and get to know individuals already established in their field of interest.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is networking?  Why is networking important to business?  How does networking contribute to financial independence?  Why should you learn how to network in the professional field you want to enter?  Is networking online important?  What is an elevator pitch?

Skills  Knowledge of the definition of networking, and strategies to build a professional network.  Strategies for networking in the professional field they aspire to enter.

Vocabulary  Networking  Mentor  Elevator pitch

Anticipatory Set Stand opposite to students and tell them you are going to choose ten students to join you. Select and tell them to come to front of the class to be recognized. • The students you choose are going to be exempt from a major test, homework, or something else they would be excited about skipping. J8 5 Jobs & Careers

• The remaining students will have to do the test or homework that the “chosen ten” don’t have to do. Pick a few students and pretend they’re your close friends. Greet them with “high fives” and handshakes. Address each student as if you are very close, saying “Hey, what’s up?” Try not to let your awesomeness overwhelm your students.

Then ask the remaining crowd of students if they would like to be part of the chosen ten. Tell them you’ll accept cash, candy, school supplies, etc. Choose the highest bidders.

Ask the students if they’ve ever heard the saying, “It’s all about who you know.’” Add that if you don’t know somebody influential, the second most important thing to people often is, “What can you do for me?”

Explain that, in this exercise, you chose your friends first. Next, you chose the people who could give you something of value.

Have the students use the Warm-Up Activity in the Student Guide to write down what this type of selection means to them, and also give some situations where they might experience such a selection process.

Lesson Explanation Ask, “What is networking?” Answer: Networking is the practice of making contact and exchanging information with other people who have interests similar to yours.

Networking is one of the most important business skills in today’s age. We live in a world where “It’s all about who you know.”

• That statement isn’t 100% true, but knowing the right people is very important to your career. • Having the right skills and knowing the right people can take you far in any business venture or career opportunity. Networking really is just building long-term friendships in your areas of interest. It’s finding others who have common interests and goals, and keeping in touch. Example: • You attend a luncheon for business professionals in your field. • You meet people at the luncheon and then find them on Facebook or follow them on Twitter. • Then you email them to thank them for the lovely conversation. You don’t need to call them every week or feel obligated to go golfing once a month. If your networked acquaintances become close friends; that’s great! But the basics of networking is J8

Networking in Your Field

simply building relationships based on common ground and remaining present in that relationship (even if it’s just a phone call twice a year to catch up on business activities)

Ask, “What type of benefits do you think networking offers?” Listen to responses and discuss. Examples: • getting a job, • friendships, • activity partners, • business opportunities, • exposure to new experiences, • potential investment opportunities, • new clients, • referrals. Networking is not only for business; it helps you experience life more fully.

Explain that the key to successful networking is talking about future goals, listening closely when others talk about their future goals, and keeping organized records for future reference.

• Keep an organized list of contacts and back it up frequently. • Try to secure information to support at least two forms of contact. Examples include Facebook, LinkedIn —a great networking site for business professionals — email, Twitter, Skype, phone number. • If you prefer social media as your main method of networking, be sure your online profile looks professional. That wild party in the Bahama’s? You probably could clean up a few of those pictures. • Be sure to keep accurate notes. In the same way that your network may be able to help you, you should be aware of their needs and how you can help them. That way, when someone mentions a need for a business or idea you can quickly respond with “Great! I know “a guy”, let me see if he might be interested with that.” While some people view business cards as obsolete, they still are a vital part of traditional networking when you attend conferences, meetings, luncheons, etc. Business cards are great providers of contact information which cost very little to produce. You can order 200 cards for about $20 online.

If you work virtually (online), then create a good signature for your outgoing emails. Include all your pertinent contact information and a link to your website.

As a business professional you need to network daily. You work 8 hours a day for your 9 – 5? Just look at your work day as an 8 ½ hour day: 8 to your main job; and ½ hour to keeping up with your network.

• Building and maintaining relationships with friends is important too. J8 5 Jobs & Careers

• Maintaining contacts in your professional field, from high school, and from college are important networking steps. Remember: you never know what influential person your friends or contacts may know. So stay in touch with everyone, and you may open up a great business opportunity.

Explain that students should make some form of contact with their entire network on a regular schedule. • Contact can be made through Facebook, Twitter, or email. • Be active and participate in social and/or extracurricular activities. • Get involved with community service, student groups, etc. Ask students why they think it’s important to network. Listen to and discuss their responses.

Lesson Activity: Network Hiring Direct students to the Network Hiring Activity in the Student Guide, and ask them to complete the scenario by choosing a new Project Manager after reviewing each candidate’s profile. This activity can be done either individually or in small groups.

SCENARIO You are the hiring manager(s) for a profitable company. You are hiring a new Project Manager. The person you seek must be reliable, hardworking, a team player, and someone with whom you can work closely.

CANDIDATE A She is a great applicant who found your company online. She graduated from college with a 4.0 GPA, has been working in the field for two years, and has taken professional training courses to continue her learning. CANDIDATE B He is a close friend with whom you went to college for four years, and you have many mutual friends. He graduated with a 3.5 GPA, and has one year of work experience in the field. He hasn’t taken any professional training course but you personally know that he is a hard worker and great team. Which person would you hire? Why? Students should justify their decisions by answering the questions in the Student Guide.

When students have completed the activity, facilitate discussion and ask about the factors that influenced their decisions.

Networking in Your Field

Lesson Explanation To begin networking in the field where you aspire to work, you must set clear business or career goals for yourself.

If you don’t know exactly what you want to do, start by listing the things you enjoy doing and think about how you want to live your day-to-day life.

Ask students, “What is an elevator pitch?” Listen to their ideas.

Explain that they should be able to share their future business goals in 30 seconds. This brief 30-second summary is called an elevator pitch because 30 seconds is the length of an average elevator ride.

• Your elevator pitch should be polished and clear. Then when people speak to you, you’re prepared with a well-thought-out answer that will help you reach your goals.” • When you ask people, “What’s up?” or “What have you been up to?” many of them reply, “Nothing,” or reveal very little information. Those people just missed an opportunity to find like-minded friends. Present an example of an elevator pitch: I just started putting together some ideas to promote an all-age nightclub at The Alley. I’m working on getting a website up and I’m excited about seeing it all come together. What’s going on with you?

Elevator pitches are relaxed and informal but always state your current projects and what you’re currently working on. The person you’re talking to may know somebody who can help.

When professionals network, they should emphasize their willingness to learn. It’s important to remember that people, by nature, want to help.

• It’s important to be well-educated in those areas where you want to excel. While you may not have a college degree, you should know enough to hold a good conversation. Follow news and blogs regularly. • You should seek ways to help others accomplish their goals while they help you accomplish yours. Look for ways to partner instead of always focusing on yourself. Example: “How can we help each other?” instead of “How can this person help me?” • It helps to hang out at locations where the people you need to know hang out. Ask students where they would hang out, for instance, if they wanted to get into the action sports industry. Examples: sports contests; trade shows; parties; etc. Ask students to share some of the industries that interest them. Discuss how they might network in those industries. Example: by attending trade shows or professional organization meetings.

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If you’re starting a business, research the competition. Pay close attention to your competitors’ partners.

There are many ways to take networking virtual. • Search online to learn the major players in their target businesses. • Look for trade organizations, blogs, and other businesses in a similar area. Facebook and LinkedIn are the most common ways to network online with other professionals. Students should consider having a professional page on both networks but should remember these two words of caution before creating their pages:

1. Do not post personal information such as your address, city of location, or specific places where you hang out. Remember that people you meet through social media are not always who they seem to be. Exercise extreme caution. 2. Be strongly cautious about the dangers of posting questionable material!! What you write online will never go away, even after you delete it. Once it’s posted, it exists in cyberspace forever … so think before you post! Here’s a good rule: When you’re about to post think, “Is this something I would want my future employers to see?”

Start a business account with a professional name for both Facebook and LinkedIn.

• A simple way to start is to add all the groups related to any area you think will help you reach your goals. • Write a personal note to the leader of each group. Let that person know, in a sentence or two, what you’re about and what you are looking to accomplish. Offer your support for their group’s activities. Sample Message: Thanks for joining ______group. I’m in high school/college now but am working to get into this field. Keep up your commendable efforts, and please let me know if I can help in any way. (Sign your name, then add: “P.S. By the way, do you have any suggestions for someone looking to get into this field?”) • Make sure to have your elevator pitch ready to respond to questions on these sites. • Be real and be yourself. Don’t pretend to be an expert in your field if you are not. Remember, people naturally want to help others and being truthful and humble will attract more help. • Continue to add people to your network and keep in touch from time to time. Send relevant news or other information to your network contacts. • Follow this simple rule: Give more than you ask for.

Networking in Your Field

Lesson Activity: Elevator Pitch Have students answer the questions in the Elevator Pitch Activity in the Student Guide. • What is the project you are working on? • What message do you want to give to your market or potential advisors? • What makes your business or product stand out from the competition?

Help them outline their business ideas, using the elevator pitch outline. When they have finished writing their elevator pitch, have them practice saying it with a partner.

Finally, have students share their pitch with the class. Then lead a discussion about what it was like to make the pitches.

Lesson Questions 1. Why is networking one of the most important business skills a person can have? a. It provides automatic entry into an interview. b. It provides more job possibilities. c. It results in having the right skills. d. It results in being hired. 2. Which of the following statements is true? a. Business cards are outdated. b. Social media lacks networking possibilities. c. You should not stay in touch with former business associates. d. You should use business cards where possible, use social media, and strive to build lasting relationships. 3. How can you benefit from developing a network? a. You may receive opportunities to help others accomplish their goals. b. A network may open up future job and business opportunities. c. It may help you develop friendships. d. All of the above. 4. What is an “elevator pitch?” a. A personal description you give when you arrive at a business meeting. b. What you say immediately upon meeting someone new. c. A short summary of your future business goals. d. All of the above.

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Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

Networking & Mentors

Networking and Mentors

Duration  10-30 minutes

Lesson Overview  Students will understand the definition of a mentor and the importance of having a mentor to build financial independence and become successful in their career fields.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a mentor?  Why is it important to have a mentor?  What benefits do you gain by having a mentor?

Skills  Understanding the definition of a mentor and the value of having one.

Vocabulary  Mentor

Anticipatory Set Have students answer the following question in the Warm-Up Activity in the Student Guide. Why do you think you might need a mentor?

Tell them that a mentor can help you get a job, obtain a promotion, or start a business. Mentors can even give advice on personal issues you’re trying to figure out.

Explain that mentorship is a relationship with a person experienced in the field or area where you seek help. Most mentorships are built over many years.

Jobs & Careers

Lesson Explanation: To find a mentor on their own, first they need to identify someone they admire and respect. Ask, “Can you think of anyone like this in your life right now?” Facilitate discussion.

Review the following tips for finding a mentor: • Identify your goals and the type of mentor who might help you reach them. Think about the skills you'd like to develop and locate mentors who can help you develop those skills. • Clarify exactly what you want to gain from the mentoring relationship. • Understand your own personality and communication style. Look for a mentor who complements your qualities, someone who can help you round out your abilities. Examples: o If you’re shy, you might want a mentor who’s outgoing. o If you’re best at written communication, you might want a mentor who’s good at public speaking. • Before you ask someone to be your mentor, ask that person for a piece of advice on a specific topic. Evaluate how well the advice works to help you decide whether you’re a good fit. • Avoid asking your direct supervisor to be your mentor, because that could affect your work interactions and place restrictions on the mentoring relationship. Here are some places to look for a mentor: o College alumni organizations (ask at the career center) o Professional organizations in your field o Social networks o Friends of friends or family o Internships o Ask your boss or employer Ask, “Can you think of other places to look for a mentor?” Discuss their responses. Explain that both personal and professional mentors are important.

Networking & Mentors

Lesson Activity: Find a Mentor Direct students to the Find a Mentor Activity in the Student Guide, and instruct them to review the Tips for Finding a Mentor. • Have students list 10 ways in which they actively plan to pursue finding a mentor. • When they’ve completed their lists, have them share their ideas with the class. • Discuss similarities, identify new ideas, and give advice on action steps toward finding a mentor.

Lesson Questions 1. Which of the following is NOT true about a mentor? a. A mentor can help you get a job. b. A qualified mentor can be a person experienced in the field you seek to enter. c. A mentor can give you advice on personal issues. d. All of the above. 2. Which of the following tips is the LEAST LIKELY to be helpful when seeking a mentor? a. Select a person you respect. b. Tell the mentor you are not exactly sure what you want to gain from the mentor relationship. c. Ask the possible mentor for a specific piece of advice before selecting that person as your mentor. d. Select a person whose strengths complement your strengths or fill in one of your weaknesses.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

Entrepreneurship

Students will gain knowledge about the benefit of starting a business and how to identify types of businesses at which they would be successful. Participants will develop the skills relevant to starting a business now.

Entrepreneurship

LESSON DURATION LESSON TITLE ID (MINUTES) Be An Entrepreneur - Is It Right For You? E1 40 What Is a Social Entrepreneur? E2 60 Entrepreneurial Mindset E3 60 Internet-Based Businesses E4 60 How to Start Your Own Internet Business E5 60 Calculating Risks E6 60 Creating a Social Enterprise E7 90 Magazine Enterprise E8 90

Entrepreneurship

Becoming an Entrepreneur Is It Right for You?

Duration  20-40 minutes

Lesson Overview  Students will gain knowledge about the benefit of starting a business and how to identify types of businesses at which they would be successful. Participants will develop the skills relevant to starting a business now.

Big Idea  There are benefits and drawbacks to being an entrepreneur.  There are factors to consider before starting a business.  A business plan can guide your entrepreneurial endeavors.

Essential Questions At the end of the lesson, students should be able to answer the following:  Why should I consider starting my own business?  How do my passions relate to starting my own business?  What are three benefits of starting my own business?

Skills  Students will understand the benefits of starting a business and how entrepreneurship compares to having a job and/or a career.

Vocabulary  Income  Product  Service  Entrepreneurship  Vested

Anticipatory Set Instruct students to answer the question in the Warm-Up Activity in the Student Guide: What are some benefits to owning your own business? Discuss their responses as a class. Explain that having your own business enables you to • make your own hours, • have unlimited income potential, • create something you can sell, and • focus on your passions.

Becoming an Entrepreneur

Lesson Explanation Starting your own business is a way to generate income for yourself, with the flexibility of working when and how you want. • Your business can be full-time or part-time depending on your schedule. • Your business can provide supplemental income to your “day job” or “9-to-5 job.” • Or it can be your primary income source. Having your own business is great because you can mold it into whatever you desire.

Unlike a job, you can sell your business. Many successful business entrepreneurs have sold their start-up companies. • The YouTube founders sold their company for $1.8 billion. • MySpace sold for $580 million to Rupert Murdoch’s Fox News Corporation.

Go through the ups and downs of starting a business. Compare and contrast jobs, careers, and entrepreneurship. UPSIDES • Lifestyle. The personal freedoms associated with being an entrepreneur are unrivaled. You are the decision-maker about everything. You can work your own schedule, make your own hours, and control your own income. • Choosing Your Colleagues. You can choose the people with whom you conduct business. It’s a great feeling talking business at the beach with your friends (who are also your business partners). • Financial Rewards As a business owner, you have the ability to control how much you earn. When you want to make more money, you simply work more efficiently. There is no income cap on your own business earnings – the sky’s the limit! Well, in fact, you are limited, but only by your ability to think of new, creative ways to make a profit. And unlike working a regular job, you are creating a company that has value. That value can be sold, borrowed against, and leveraged. For instance, if you start an Internet-based company with revenue of $100,000 per year, you can sell that company to someone else. People may buy an existing, profitable Internet business for five times its annual earnings. So in this example, you could sell your company for $500,000. That’s how entrepreneurs can afford penthouses.

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• Tax Benefits. Business owners enjoy several tax benefits, which helps them keep more of the money they earn. It has been said that being self-employed is “the last great tax shelter.” • Skill Set Growth. Being a business owner means you are responsible for everything that happens within your company. Consequently, you will be learning many new skills and probably handling a stack of paperwork (nobody said it would be sunshine and rainbows all the way!).

DOWNSIDES • Financial Insecurity. You must take the rough with the smooth, and owning your own business is no different. Being in charge may mean sacrificing the security of a regular paycheck (and regular work hours). At the start the income stream probably will be uneven; or it may take time to turn a profit, and you’ll need a second source of income to tide you over. • Health Insurance. Employer health plans and other benefits you get with a regular 9-5 job are now your responsibility, and are likely to reduce your bottom line. Fortunately many companies offer individual insurance. • Decisions, Decisions. Although being the primary decision-maker is a key benefit of entrepreneurship, it also can be difficult. All the business decisions fall to you. Setting up an office, hiring staff, marketing – you must handle everything. In time you will build a network of advisors, but at the beginning making all the decisions can be challenging. Explain that your own business will provide either a product or a service. • If you love to create jewelry, you can make your own jewelry and sell it on the Internet. This is providing a product. • If you love to write, you can start a blog and attract advertisers to the site. Then you will get paid each time a viewer clicks through on an ad. This is providing a service (writing). Whatever your passion or talent may be, you can start a business based on that. Now present the following examples.

Becoming an Entrepreneur

Share the following scenarios with the students: 1. Jack loves baseball. He grew up playing Little League and after high school he played on his college team. He wants to supplement his income, so he started a business that teaches children baseball basics at weekend clinics. Jack has the best of both worlds. During the week, he works at his career as a teacher. On weekends, he runs baseball clinics, pursuing his passion for baseball. Discuss this example. Explain how Jack is making money by pursuing his passion.

2. Bethany is a full-time college student. Her life goal and dream is to own a bakery. Like most college students, she is on a tight budget. To help earn extra cash, Bethany has started a baking business on the side. She supplements her income by baking cakes in her spare time for weddings, birthday parties, and other events from her mother’s kitchen. She is getting a lot of practice toward her future ambition of owning a bakery. Discuss this example. Explain the benefits Bethany gets from her baking business.

Tell students: “You can start a business now for free.” • All you have to do is research what you want to do. • Begin networking with others. Many are intimidated by the immensity of starting a business. What you start does not have to be HUGE from day one. It can be something small you do on Sunday evenings at first. Overtime you will learn what works, what doesn’t and who else around you are interested in your industry. Companies are built over time and you’ll be able to recognize when it is time to take your weekend business full throttle and take the plunge; moving away from your 9 to 5 and onto your own business full time.

Encourage participants to get friends involved with your vision, and add that getting a job in the industry where they want to start a business is a good idea too.

Encourage students to start their own business now. Say, “Focus on doing what you enjoy; keep the money you invest in your business low; and gain the skills you need to become a professional entrepreneur.”

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Lesson Activity: Benefits & Drawbacks Direct students to the Benefits & Drawbacks Activity in the Student Guide and tell them to write down their thoughts about the benefits, drawbacks, and main idea for each scenario. SCENARIOS TOM has worked at Starbucks for the past 8 years. He is still in the same position at which he started. He decides to move on. What will he receive?

ALEXANDRA has been working for Enron for the last 30 years. She has no money saved for retirement, but is counting on the company’s pension plan to pay her $5,000 per month. The company goes bankrupt. How much will she receive? Little or nothing.

TADAO has been working for a company for 12 years. He has moved up the corporate ladder and has saved over $300,000 in a retirement account. His company matched his contributions with an additional $300,000. He was fully vested. Will Tadao be able to get retirement money from his employer? Answer: Yes, since he was vested he can move his retirement plan. (NOTE: Define “vested” for students: After a certain length of time specified by the employer, an employee becomes eligible to receive a predetermined percentage of salary contributed by the employer into a pension or qualified benefit program.

SALVADOR started a company that has grown over the last 10 years. He is making about $100,000 per year and has a good reputation in the industry. He has decided to sell his business. How much could he receive? The amount depends on many factors (income, future growth, assets, expenses, industry, team, etc.). Salvador may be able to sell his business and earn a nice paycheck. Businesses typically sell based on a multiplier of income. If he can sell at three times his business income, he could walk away with an extra $300,000. Or he may choose from other options, like taking a monthly income or bonuses.

Becoming an Entrepreneur

Lesson Questions 1. Which of the following is a benefit of starting your own business? a. Limited income potential. b. Ability to work with the people you choose. c. Financial security. d. Ability to delegate decisions. 2. What has been called “the last great tax shelter”? a. Being self-employed b. Financial security c. Health insurance plans d. A company’s pension or retirement plan

OPTIONAL HOMEWORK: If the first portion of the lesson caught a few student’s attention, encourage them to read the rest of the lesson when they get home. It contains additional information that potential entrepreneurs will find very useful in formulating their new business as well as follow up resources.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

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What Is a Social Entrepreneur?

Duration  60 minutes

Lesson Overview  Students will understand social entrepreneurship and how having an entrepreneurial mindset can benefit their professional lives.

Big Idea  Becoming a social entrepreneur gives a person the opportunity to earn money while making a difference in the world.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a social entrepreneur?  What do social entrepreneurs do?  How are social entrepreneurs different from traditional entrepreneurs?

Skills  Knowledge of social entrepreneurship and examples of how it works.  Ability to identify a social cause around which to create a social entrepreneurial business.

Vocabulary  Social entrepreneur — a person who applies basic entrepreneurial principles to address a social problem.  Social enterprise — an ethical for-profit business that donates a portion of its revenues toward helping a social cause.

Anticipatory Set Direct students to the Warm-Up Activity and write the answers to the questions in their Student Guide. • What do you think a social entrepreneur is • How is a social entrepreneur the same as or different from an entrepreneur? Discuss their responses and explain and define what a social entrepreneur is.

A Social Entrepreneur

Lesson Explanation: Doing Well by Doing Good Explain the definition of social entrepreneur to students. A social entrepreneur is a person who applies basic entrepreneurial principles and tactics to organize, create, and manage a business that addresses a social problem to evoke both revenue and social change. • Essentially, a social entrepreneur has a business that centers on “doing well by doing good” to benefit a certain cause. • By becoming a social entrepreneur, one not only earns money for oneself, but also makes a big difference in the world. • The service, good, and/or products produced from the company benefit someone or something in need. Review the following examples of social entrepreneurship.

BLAKE MYCOSKIE In 2006, Blake Mycoskie traveled to Argentina where he discovered that many of the children had no shoes. Blake created TOMS Shoes, a company that donates one pair of shoes to a child in need for every pair that is purchased.

Ask the students: • How is Blake a social entrepreneur? • What good does his cause perform for society? • How does he still make money on the venture?

ROY AND LOUISE VAN BROEKHUIZEN On December 26, 2004, one of the deadliest disasters in history struck Indonesia, killing more than 285,000 people. Homes and businesses were destroyed. The survivors were left devastated, jobless, and homeless. So Roy and Louise van Broekhuizen launched Laga Handbags. This company was set up to teach women affected by the disaster a skill that could earn them money. They craft the Laga Handbags, and then Roy and Louise market the bags worldwide through the internet, store sales, and Laga Handbag parties. Sales income allows Laga Handbags to continue its efforts to provide income, refuge, and assistance to victims of disaster while they rebuild their lives.

Roy says, “We are dedicated to providing a secure future for as many victims of disaster as possible. With your help, we will achieve that goal. When you order a Laga Handbag, know that you are helping create a better and brighter future, and that you can make a difference.” Find out more at www.laga-handbags.com.

• Facilitate a discussion about the Laga Handbag story.

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Explain that a social entrepreneur is someone who creates an ethical for-profit organization and also commits time, money, and/or resources to solving social problems. • Talk about Bill and Melinda Gates and the foundation they established to help others. • Mention Oprah Winfrey and how she continues to “pay it forward.” Talk about why students should consider a business that helps others and makes a profit. Ask students to think of some causes they are interested in and people they would like to help. • Why are these causes important to them? • How would it feel to know they can make a positive difference?

Lesson Activity: Designing a Social Enterprise Refer students to the Designing a Social Enterprise Activity and review the Tips to Making a Difference in the Student Guide.

• Find a cause or mission in which you believe deeply. Ask yourself: What are the things happening in the world that make me feel like I want to make a difference? • Research organizations already involved in the causes about which you feel passionate. Do a simple web search or use tools like www.charitynavigator.org or www.mtdn.com. Also research business enterprises, social enterprises, and people who are making a difference in your chosen causes. Volunteering your time will help you learn even more about each organization. • Set a clear, big-picture goal for what you want to achieve. EXAMPLE: I will feel great knowing that I did my part to reduce the 50,000 daily deaths that occur due to extreme poverty by 50% by October 17, 2016. • Decide how you would like to participate. Focus on things you like to do and how your talents can best serve others. Volunteer for a nonprofit, start a social enterprise or business enterprise, or start your own nonprofit. • Take action. Now that you’ve found a cause you like and identified how you want to participate, go out and make a difference. Think about how you can make a real difference: volunteering; blogging about issues; raising awareness online; voting; fundraising; creating a website; putting on events; or starting a social enterprise. One simple way to make a difference is to stop patronizing companies that don’t align with your values and only do business with ones that do. • Build a network of like-minded friends and keep focused on the outcome.

A Social Entrepreneur

Note that a social enterprise can start out small and grow over time. For example, tell students, “Maybe you have a lot of friends on Facebook and enjoy communicating with others on the site. You can easily find other groups and organizations that align with your values; then promote those values to your friends.”

Explain that this could grow into creating their own Facebook group or fan page and building a following. Later, they may be able to market products or services to the group in order to raise funds that will support both them and their outreach efforts.

• Divide students into groups of three or four. (If online, students may complete the activity individually.) • Have each group (or individual) come up with an idea for a company that helps a social cause. • Have them write a mission statement describing the cause they want to benefit, then write three to five points describing how their company will benefit the world. • Encourage students to think of recent events, such as o The Great Recession o Hunger in Africa o Haiti earthquake o Hurricane Katrina o Tropical Storm Sandy When the activity is complete, have each group or individual share their ideas. Talk about how each company will help the world.

Lesson Questions 1. Which of the following is a primary way in which a social entrepreneur differs from a traditional entrepreneur? a. A social entrepreneur has an extensive Facebook profile. b. A social entrepreneur has a nonprofit company. c. A social entrepreneur contributes a portion of profits to addressing a social problem. d. A social entrepreneur works to build a network of like-minded friends. 2. Which of the following represents a way to use the social enterprise model to make a difference in the world? a. Volunteer time for an organization that has values aligned with your own. b. Set a clear goal for the social change you want to achieve. c. Write a blog to raise awareness about your chosen cause. d. Host an event to raise funds for your cause3. e. All of the above. E2 5 Entrepreneurship

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

Entrepreneurial Mindset

The Entrepreneurial Mindset

Duration  60 minutes

Lesson Overview  Students will understand the definition of an entrepreneur and an entrepreneur’s skill sets so they can assess whether they possess those qualities.

Big Idea  Entrepreneurs possess certain skills and personality traits that make it easier for them to be their own bosses.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are three traits of an entrepreneur?  What skills do entrepreneurs possess?  How are social entrepreneurs different from other people?

Skills  Knowledge of qualities possessed by a successful entrepreneur.  Ability to identify which entrepreneurial qualities they posses and which they need to acquire.

Vocabulary  Entrepreneur — a person who organizes and operates his or her own business, taking on greater than normal financial risks to do so.  Trait — a quality that describes one aspect of an individual’s personality.  USP (unique selling point) — a feature that sets a service or product apart from its competition.

Anticipatory Set Have students answer the question in the Warm-Up Activity in the Student Guide: Do you think you have what it takes to be an entrepreneur? Facilitate a discussion about their answers.

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Lesson Explanation: What Does It Take? Review the sample traits of entrepreneurs below with students, and ask them if they have ideas about other important traits to add to the list.

Imaginative Self-starters

Can see the bigger picture Goal oriented

Study and evaluate trends Honest

Creative Learners

Risk tolerant Persuasive

Motivated Organized

Understand their own strengths Financially responsible and weaknesses Competitive Explain that most entrepreneurs aren’t great in all of these areas but typically possess several of the traits on the list. They also have the ability to supplement areas where they’re lacking by hiring good people or finding ways to enhance their skills.

Tell students that not everyone is cut out to be his or her own boss, but if they find themselves longing to be in control of their lives — and if most of the traits listed can be used to describe them — then they’ve already got a head start toward becoming successful entrepreneurs.

Share with students that when we think about building a better mousetrap, most of us think that, in order to hit it big with a winning product, we must come up with a new and unique idea. But in reality, most successful business venture ideas are evolutionary rather than revolutionary.

Every successful entrepreneur goes through a period of struggle before finding the product idea or business venture that makes them successful., In many cases, the key to finding the idea is to look at something ordinary from daily life and say, “I can do that better!”

Direct students to the story of “The Snuggie” and how the owner of Snuggie had an entrepreneurial mindset.

EXAMPLE: The “Snuggie” The Snuggie is an excellent example of a hot product that evolved from an everyday item. Scott Boiden just added sleeves to a blanket and marketed it on late-night television. Now he’s made over $60 million in sales. Scott uses some of his earnings to host fundraisers for Ronald McDonald House.

Entrepreneurial Mindset

Boiden’s main talent is marketing. Gary Clegg is actually credited with the original Snuggie idea, which he dreamed up while watching television and wishing he had a blanket that would stay on while leaving his hands free. Although Snuggie is a for- profit company, they also have created a Snuggie to raise awareness for breast cancer and donate funds to support other nonprofit organizations. Explain that a service or product that does something better than the competition has a unique selling point (USP) that set it apart in the market. The Snuggie’s USP is its sleeves which (according to the commercials) will help you stay warm and cozy while allowing you the freedom to eat and change channels. You might even be able to save money by turning your thermostat down while wearing one.

Lesson Activity: Are You an Entrepreneur? Quiz Have students complete the Are You and Entrepreneur quiz in the Student Guide. Review their answers and use the answer key below to grade their responses. Facilitate discussion.

1. Are you a self-starter? a. If you point me in the right direction, I’ll get there. b. If I set my mind to it, I’ll make it happen. c. If I have to, I’ll get it done. 2. Do you get along well with others? a. I already have plenty of friends. b. I like to talk to people and am easy to get along with. c. Most people are annoying. 3. Are you a good leader? a. I can make people do what I want. b. I can usually motivate people to do things. c. I know when to let people do their own thing. 4. Are you responsible? a. I can take over when needed. b. I’m usually in charge of making sure things get done. c. If someone else wants to do it, why not let them. 5. Are you organized? a. I like to take things as they come. b. I typically have a plan before I get started. c. I do pretty well as long as things don’t get too complicated.

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6. Can you keep track of records? a. I’ve got a good memory and that’s more important. b. It’s not the most fun I’ve ever had, but I can do it. c. I’m busy getting the work done, but I can do it if I have to. 7. Are you a hard worker? a. Hard work never got my parents anywhere. b. If I enjoy what I’m doing, I hardly notice the time pass. c. I work hard enough to get the bills paid. 8. Are you trustworthy? a. I’m usually up front, but sometimes little white lies are easier. b. I never say things I don’t mean. c. Who cares as long as people think I am. 9. Are you able to make decisions? a. I can make a decision if given plenty of time to think it over. b. My first choice is usually the best one. c. I’ve been known to change my mind pretty often. 10. Do you follow through? a. I generally finish things that I start. b. Nothing gets in my way once I’ve made up my mind. c. If a job’s not going well, it’s best to move on.

Explain to students what their answer selections to the quiz indicate:

• If you most frequently selected “b,” then you definitely have an entrepreneurial mindset. It’s a wonder you’re not in business already! • If you most frequently selected “a,” you’re off to a great start. Take some time to get some additional training or help with the areas where you answered “a” and make an effort to develop good habits. • If you most frequently selected “c,” then you should probably look for a successful entrepreneur for whom you could work, in the hope that you’ll pick up some tips and motivational tools that will help you if you’re serious about becoming an entrepreneur yourself.

Entrepreneurial Mindset

Lesson Questions 1. A USP (unique selling point) is a feature of a service or product that … a. Sets it apart from its competition. b. Proves its value in the open market. c. Offers an opportunity to give back to a charitable cause. d. Makes it easier to market online. 2. Which of the following are characteristics of someone with an entrepreneurial mindset? a. High tolerance for risk b. Already having a revolutionary idea c. Meticulous attention to detail d. Leadership skills e. All of the above f. “a” and “d” only

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

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Internet-Based Businesses

Duration  60 minutes

Lesson Overview  Students will understand how the Internet can be used as an effective business tool to start, create, manage, and operate a business from home. Students will learn pertinent definitions and skills to start a variety of successful Internet-based businesses.

Big Idea  The Internet offers an excellent platform for designing, managing, and succeeding with a startup entrepreneurial venture.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is an Internet startup business?  How can the Internet be used for business?  What are two different business models that can earn income online?

Skills  Knowledge of various business models for Internet startups.  Ability to take the first steps toward starting an Internet business.

Vocabulary  Affiliate marketing — an Internet-based marketing practice where a business pays an individual for each customer or visitor brought about through the individual’s marketing efforts.  Click-and-mortar — a business model where a company has both offline and online presences (also known as “bricks-and-clicks.”  Content advertising — content-based advertising placement such as that pioneered by Google, also classified ads, and “pay for performance” (PfP) models.  E-commerce — commercial transactions that take place over the Internet.  Incentive marketing or pay for performance (PfP) — a business model used in online advertising where an ad agency charges a marketer for results achieved by the ad campaign.  Monetize — to convert something into a venture that earns money.  Virtual merchant — a retail sales business that has only an online presence, rather than a brick-and-mortar storefront.

Internet-Based Businesses

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide and have them write down their thoughts about the following quote from Mark Victor Hansen, author of the Chicken Soup book series:

“There’s enough business for every young entrepreneur to make a fortune. That’s what’s so beautiful. We’re in the most opportune time in human history.” Have students think of three to five websites where they regularly visit or shop on a monthly basis. Explain that these website are companies. Someone had to start those companies. Discuss how the sites were once internet startups and why it’s important to understand Internet startups.

Lesson Explanation: The Power of an Internet Startup Explain that the power of the Internet has leveled the playing field by making it possible for anyone to start a business and earn income. In fact, the majority of the top-earning websites in the world are run by talented young men and women under the age of 30.

• The internet has opened up the world of global commerce to anyone, not just the big corporations that had traditionally controlled the market. • Now anyone with a computer and a credit card can easily set up a website overnight and be ready to sell products or services to customers from around the world. • Advances in technology and the new world economy also give businesspeople access to resources and suppliers without ever having to leave their desks. • This opens up many potential business models to individuals that have never been so readily available, such as importing or exporting, self-publishing, software publishing, affiliate marketing, incentive marketing and virtual merchants, or e- retailers (like Amazon) who have only an online presence. • With the explosion of E-commerce and the increasing availability of Internet access around the world, small businesses now can easily gain visibility in foreign markets. They either can locate unique or less expensive products to import for sale in this country, or export their own products for sale abroad, either wholesale to other distributors or retail to foreign consumers.

Explain that self-publishing — the publishing of books and other media by the author rather than by a third-party publisher — is a popular example of a successful new Internet business model.

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The ability to sell e-books, videos, software, and other digital content directly to the consumer without having to go to the expense of a big print run or other production and packaging expenses, has made many entrepreneurs wealthy while at the same time providing consumers better access to specialized information.

Discuss that both affiliate marketing and incentive marketing are business models where an individual or business puts up a content-based website, and then partners with other websites. The agreement is that they will get paid either • for sending traffic or sales to the partner (affiliate marketing), or • for getting site visitors to perform some action like signing up for a newsletter (incentive marketing). • In this model, the website is monetized — earns money — from the affiliate to pay for performance fees.

Explain that other traditional business models have been reinvented and redefined by the Internet, such as drop-shipping, content advertising, auctions, and broadcasting. Talk about the new drop-shipping business model:

• Individuals and businesses sell another company’s products online through their own website or auction site, without ever having to touch the product. • You simply take orders from customers, then turn around and place the orders with a supplier who has agreed to ship directly to the customer for you.

Tell students that the Google AdSense program pioneered content advertising, where advertisers pay to have their ads displayed on other relevant websites. The advertiser pays on a per-click or per-impression basis, and the website that displays the ads gets a portion of the fees.

Explain that auction websites like eBay, eBid, Overstock, uBid, and Yahoo! Auctions allow individuals and businesses to sell anything and everything online, either for a fixed price or to the highest bidder. Sellers can list new or used items and are only charged minimal fees, typically an initial listing fee plus a small percentage of the final sale price.

Discuss how information broadcasting has traditionally been limited to those companies able to make large investments in media outlets, print and/or broadcast equipment.

The business model of selling information or content through subscription services (e.g., HBO, online newspapers) or selling advertising space within content (e.g., magazines, television commercials, classified ads) has easily translated to the Internet.

• Bloggers earn income from the ads that show up alongside their blog posts.

Internet-Based Businesses

• Membership sites earn monthly fees for accew3ss to clip art, templates, coaching, educational materials, and other information.

The Internet is the single biggest advance for small businesspeople everywhere. The surge in Internet use has led to a growing number of Americans working from home or starting home- based businesses.

Explain that in this Information Age, anyone with Internet access can instantly obtain information that was previously difficult or impossible to find. This makes it both easy and inexpensive for people to start Internet-based business ventures.

One of the greatest benefits of the Internet is that there is no commute. You have more productive hours in the day when you’re able to work online from home, or you can easily “moonlight” with your online startup after hours while keeping your day job as a safety net.

More businesses today involve creating, processing, and moving information. By relying on technology like computers, fax machines, and video conferencing, starting and running a successful business has become much less complicate.

Lesson Activity: Choose the Marketing Method

EXAMPLES OF ONLINE MARKETING METHODS Article Marketing Paid advertisements Auto-responder email systems Partners & affiliates Blogs Point-of-purchase upsells Directory submissions Press releases DMOZ listing Search engine optimization (SEO) Forum posts Social bookmarking: Digg, Del.icio.us. StumbleUpon Google AdWords (pay-per-click advertising) Social media: Facebook, Twitter, Instagram Google indexing Testimonials (both giving and receiving) Opt-in mailing lists Webinars & teleseminars

Direct students to the Choose the Marketing Method Activity in the Student Guide. Go through the examples of online marketing methods. Make sure students have a solid understanding.

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Instruct students to read the scenarios and decide which online marketing method would be most successful in each scenario and why.

Scenario 1: Sally is launching prettyribbons.com, a site where ribbon enthusiasts may purchase unique ribbons. Scenario 2: Ralph is launching showithere.com, a site where children can display art and videos they create. Scenario 3: You have an idea for an Internet-based business.

Lesson Questions 1. The increased level of global Internet access has done which of the following? a. Made it possible to run more classified ads. b. Increased revenues for traditional publishing firms. c. Created new business models for starting entrepreneurial ventures. d. Increased traditional information exchange among the broadcast media.

2. The Information Age has meant which of the following to individuals? a. They can gain access to specialized information much more easily. b. More business models for startup businesses are available to them. c. They have increased opportunity to work from home and avoid the commute. d. All of the above.

3. A blogger receiving income from an ad that appears next to his or blog post online is an example of… a. Social bookmarking b. Article marketing c. A webinar d. Social media marketing

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

Starting an Internet-Based Business

How to Start Your Own Internet-Based Business

Duration  60 minutes

Lesson Overview  Students will learn the skills they need to develop in order to start their own Internet-based company.

Big Idea  There are specific steps a person can take to start an Internet-based business with little or no startup funds.

Essential Questions At the end of the lesson, students should be able to answer the following:  Why should you start an online business?  What skills are needed to start an Internet-based business?  How can your online business appear larger than it is?  What are some possible funding streams for a startup Internet business?

Skills  Ability to identify a few funding sources for an online startup business.  Knowledge of the steps involved in starting an Internet-based business.

Vocabulary  Angel investor — an affluent individual who backs emerging entrepreneurial ventures.  Bootstrapping — starting a business without outside investors.  Domain name — the address or URL of a particular website.  Hosting — a service where a web server4 maintains and serves files for one or more websites.  URL — Uniform Resource Location or web address of a site.  Venture capital — money and resources made available to startup firms and small businesses that exhibit exceptional growth potential.

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Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide and have them write down their thoughts expressing what the following quote means to them. Discuss their responses.

“Opportunity is missed by most people because it is dressed in overalls and looks like work.” ∼ Thomas Edison

Lesson Explanation: Starting Your Online Business Tell students there is an old adage that says, “If you do what you love, you’ll never work a day in your life.”

Explain that more and more entrepreneurs are realizing their dream of establishing a business online. Now that students understand how to use the Internet for business and the types of business models available, their next move is to go from planning to action. Tell them to remember that the hardest part of any journey is the first step.

Before they begin, they will want to identify some sources of funding. Maybe they have a little seed money they can use to get going, and can start their business without outside funds (called bootstrapping). If not, here are a few potential funding sources.

• Angel investors – there are websites that connect startup companies with wealthy individuals interested in funding entrepreneurs. Check out AngelList (http://www.angel.co) or Invstr.com (www.invstr.com) to find out how it works. • Crowdfunding. At other sites you can trade rewards (like free products, service coupons, or stock shares) for funding. Two examples are Kickstarter (https://www.kickstarter.com) and Fundable (https://www.fundable.com). • Friends and family. Folks in your personal network might help you get going. Again, you can trade a reward or a stock interest in the company for their donations. • Loans. Many small businesses borrow their startup funds. A good place to start looking is the U.S. Small Business Administration (www.sba.gov). STEPS TO STARTING AN INTERNET-BASED BUSINESS STEP 1 Get a domain name. Create multiple choices for your domain name because the first one you think of might not be available. Choose a few possible domain names for your website that are easy to remember and that relate well to your type of business and your target market. Then purchase a domain name. STEP 2 Set up a website. Be sure to set up a website for your business once you’ve registered the domain name.

Starting an Internet-Based Business

• No matter how large or small the business, every company needs a website in this Information Age, even if it’s merely a one-page site with contact information. • A website is the single best marketing tool you can have for your business. It will help build your company’s identity and brand around the clock.

STEP 3 Make your business look big. The next and probably most important step to starting an Internet-based business is to create a larger presence. • When you’re just starting out, odds are you don’t have a huge amount of cash to spend. So focus on doing everything within your power to make it appear that your company is established and perhaps larger than it is in reality.

• The best way to appear big is to avoid doing things that make your business seem small or inexperienced. o For example, every company needs business cards but it’s surprising how many startups go for those fancy but “free” business cards that come with the printing company’s logo on the back. o Free business cards not only make an enterprise seem small, they also make the company look cheap. • The same principle applies to your email address and web-hosting service. Do not use free services and expect to be taken seriously. o Free hosting accounts typically come with advertising banners that you can’t remove, and you don’t want to waste your efforts marketing someone else’s business. o Using a Yahoo, Gmail, Hotmail, or other free email account as your main business address will make your potential customers question your professionalism. • There are technology tools that you can use to make your small business look big, such as virtual phone systems that route calls and faxes to and from all your phone numbers without having to hire a receptionist or secretary.

STEP 4 Dress, act, and look the part. Wear business attire whenever you visit with potential customers, funders, or partners, or when you attend business-related functions and seminars. • People really do form opinions of you based on their first impressions. Dress professionally and people will think of you as a professional. • If you need an actual meeting space to get together with potential clients, look for office or meeting space that you can borrow or rent by the day or by the hour. E5 5 Entrepreneurship

• Many home-based businesses will not need office space. Many times you can hold meetings by phone conference or video chat. • If your business does need full-time office space but you can’t afford to hire support staff yet, you might look for co-op office space where you rent an individual office and share a receptionist with others in the same building. • Have a professional sounding voicemail recording.

Step 5 Set up the process your customers can use to pay you. One method is to start a relationship with a bank to process credit card payments in a secure way to your website. An even easier way is to set up a PayPal account to which customers can pay online for their purchases.

Step 6 Market your business. • One simple way to start your marketing efforts is to create an email newsletter. • Another way is to write a blog on your website and make it available via an RSS feed.

Lesson Activity: Financing My Startup Direct students to the Student Guide, and have them complete the following activity either in pairs or individually. Tell them to think of a company they would like to start and brainstorm — alone or with a partner — about the items they’ll need to pay for as they start the company.

Tell students to estimate the startup expenses they’ll need for their business. Using the chart in the Student Guide, they should list in Column A each item needed and its estimated cost; then in Column B, they should write down a few potential sources of startup funds.

Estimated Startup Expenses Potential Sources of Funds Item Estimated Cost

Starting an Internet-Based Business

Lesson Questions 1. One example of a crowdfunding website is … a. AngelList b. PayPal c. Kickstarter d. Gust 2. The term bootstrapping refers to … a. Starting a business without outside investors. b. Connecting angel investors with entrepreneurs. c. Brainstorming various business models. d. Preparing a market analysis and feasibility study. 3. Why should you avoid using a free email account like Yahoo or Hotmail as your business address? a. It’s too difficult for potential customers to access. b. It doesn’t help build your company’s brand. c. It doesn’t support your domain name. d. It will make you look unprofessional.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

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Calculated Risks

Duration  60 minutes

Lesson Overview  Students will learn about calculated risks involved in business ventures, and how calculated risks help them achieve significant rewards within such a venture.

Big Idea  A business venture is unlikely to succeed if we always play it safe. Some risks are worth taking.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a calculated risk?  Why should you take calculated risks in business?  How can calculated risks help you achieve significant results?

Skills  Knowledge of the value of calculated risks.  Ability to calculate and minimize risks in a business venture.

Vocabulary  Calculated risk — a risk that has been given thoughtful consideration and for which the potential costs and potential benefits have been weighed and considered.  Dedication — selfless devotion to a purpose, cause, or project.  Feedback — a reaction or response to a particular process or activity.  Perseverance — steadily pursuing a course of action or a purpose, in spite of difficulties, obstacles, or discouragement.  Reward — a benefit resulting from some event or action.  Risk — exposure to a chance of loss or damage.  Time risk — time and effort spent in a business venture that one risks losing if the business fails.

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide and have them write down their answers to the following questions: Do you like to take risks? Why or why not? Discuss their responses. E6

Calculated Risks

Lesson Explanation: You Can’t Win if You Don’t Try Explain that you can’t win big in the marketplace by doing things only a little bit better than the competition. People are generally trained throughout life to play it safe. When faced with decisions, most people choose the safest or most certain alternative.

However, if you begin a business venture with the goal of minimizing risk, you’re already starting from a point of weakness. We suggest that you minimize financial risk when starting a business venture; however, taking “time risk” is recommended.

• Time risk is when you put time and effort into a business and risk losing that time you invested if the business doesn’t go as planned. • The good thing about time risk is that you often gain valuable skills in the process.

Customers will forgive you if you take a risk and fail. But they will ignore you if you never take any risks at all. Everything is a learning experience.

Review the statement: “There is no failure; only feedback.” • If you’re getting feedback that something you’re doing isn’t working, that isn’t failure. That’s valuable information that you should view as a learning experience. • The only possible failure would come from not listening to and learning from all the feedback you receive.

The less risk you’re willing to take, the less chance you have of success. If you aim at nothing, you’ll be sure to hit it. If you want a chance at realizing your dreams, you actually have to reach for them.

People everywhere be3come self-designated experts and talk all the time about how they could do things better if they were in charge. Explain to students that in order to succeed, they need to be doers, not talkers. That means they have to take some risks.

Review the keys to being a successful risk-taker: • Don’t Be Too Critical Perfect is the enemy of good.” If you consistently wait to take any risks until you think all the pieces are in place, you’ll never get anywhere. It’s up to you to put the pieces of the puzzle together. • Don’t Give in to Fear Fear is a very real thing but it has no place in decision-making. It gives you false signals that keep you from taking any risks at all. • Go for It Look around at other successful people and the risks they took. You must be willing to do whatever it takes to make your business work.

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Explain that any time you take a risk, there is a chance of failure. The difference between successful and unsuccessful people is how they deal with failure and mistakes. • Successful people look at mistakes and missteps as learning experiences, and take them as opportunities to grow and evolve. • If you keep making the same mistakes over and over, or if your instinct is to just give up after one setback, you’ll never achieve success.

It’s easy to get discouraged, fear rejection, and focus on negatives — especially if the people around you don’t share your vision. But it’s up to you to decide whether you would rather be a talker or a doer.

The future is unknown and thus risky by definition. But you can reduce your fear and chances of failure by learning to take calculated risks. • People told the Wright brothers that human flight was impossible. Yet now you can get from New York to London in about eight hours. • Prior to the popularity of the fax machine in the 1980s, most people would never have dreamed that you could instantly transport a copy of a document from one place to another. • Alexander Graham Bell probably never imagined being able to drive down the road while talking on the phone.

Never let anyone tell you that you can’t do something. When you have vision and determination, you can do anything you set your mind to.

Lesson Activity: Potential Risks and Rewards of my Business Direct students to the Potential Risks and Rewards Activity in the Student Guide, and have them use the charts to complete the following activities, in pairs or individually.

Instruct students to list the potential rewards they could receive from their business, along with the steps they need to take to get there.

POTENTIAL REWARDS STEPS TO ACHIEVE REWARDS

Calculated Risks

POTENTIAL RISKS STEPS TO MINIMIZE RISKS

Next, have them list the potential risks and ways they can minimize those risks.

Lesson Explanation: Dream Big Imagine all of the best possibilities that could come from your business (e.g., helping others, wealth, fame, ability to travel, support your family), and list them in the chart. Next, rank the importance of each outcome to you and your long-term goals on a scale from 1 to 10 — 1 being MOST important, and 10 being LEAST important.

POTENTIAL OUTCOME RANK (1 TO 10)

Lesson Questions 1. Which of the following is a potential benefit of taking “time risk?” a. Maximizing your chances of failure. b. Realizing your long-term financial goals. c. Minimizing your fear of making a mistake. d. Picking up valuable skills from your time investment. 2. One key to being a successful risk-taker is … a. Focus on the negatives. b. Avoid being too critical of yourself. c. Create mental images of the possibilities for success. d. Strive to become a perfectionist. 3. You can do anything you set your mind to if you have … a. Vision and determination. b. Market analysis and a business plan. c. Risk and feedback. d. Time risk and venture capital.

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Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

Creating a Social Enterprise

Duration  90 minutes

Lesson Overview  Students will receive an overview of the skills and resources needed to start a business, then practice the skills and identify the resources they need to start their own businesses.

Big Idea  There are important action steps to follow toward creating or growing a successful business.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a business plan?  What is an executive summary?  What are three items in which people should invest when they start a business?

Skills  Ability to identify the action steps to starting or growing a business.  Knowledge of how to conduct a market analysis.  Knowledge of how to write a business plan.

Vocabulary  Business plan — a summary of how a business owner, manager, or entrepreneur intends to organize and entrepreneurial endeavor and implement activities necessary for the venture to succeed.  Market research — an organized effort to gather information about markets or customers.  Marketing plan — a written document that details the necessary steps to achieve one or more marketing objectives and priority actions toward reaching those goals.  Strategic plan — a written document that describes an organization’s short-, mid-, and long-term goals or objectives and priority actions toward reaching those goals.  Strategic planning — an organization’s process of defining its strategy or direction, and making decisions on allocating its resources to pursue this strategy.

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Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide, and have them write down their thoughts about the following quote:

“There is no excuse for not being able to find a solution to any problem your business might face, with the vast amount of information and expertise available online. There are a multitude of valuable resources online for business startups.” Vince Shorb

Lesson Explanation: Action Steps for Starting / Growing a Business Explain that there are action steps to take toward creating a viable business, then review the action steps listed below.

• Conduct market research • Develop some financial projections and a timeline for your business • Identify what you need to get started • Using the outline provided, write up a business plan for your venture • Develop a marketing plan • Participate in seminars, trade shows, and classes that would be beneficial for your business • Review your progress each week • Update and revise your goals, strategies and business plan as needed • Keep it simple – pick 2–3 tasks to complete each day • Stay focused!

STEP 1. The first step is to do some research. Check other Internet sites similar to your own idea, and study the feasibility of the business you want to start.

• Analyzing the market and competition for your product or service is a critical element of your marketing plan. Market research also points up alternative approaches to the market, helps you develop short- and mid-term goals, and supports accurate profit estimates. • Once you have a product or service, market research is the next step to determine whether there is a market, how profitable the market might be, and your position within that market. • Go through the questions below to conduct market research: o Is my product or service constantly in demand? o Can I create demand for my product or service? o Is there much competition for my product or service? o Can I compete effectively in terms of quality, price, and delivery? E7

Creating a Social Enterprise

• Explain that you need to know whether there is constant or seasonal demand for product or service; the amount of competition; and whether current market prices will yield the profits you need to meet your goals. • Once all the questions have been answered, you’ll be better able to perform the necessary market research and use the information you gather to increase your profit potential. • Have students keep all the data they collect and analyze organized. They should maintain a notebook or folder of data and information on their computer so that they can easily find and refer to the information as needed. • Do the research necessary to answer the following questions: o Who are my customers and where are they located? o What need could I fill for my customers? o Is my product or service affordable? o Is my market growing or declining? o What is the economy like in my product or service area? • Market research doesn’t have to be difficult, time-consuming, or expensive. Use the following sources: The information many businesses need can be found from the following sources: o Trade associations and journals o Regional planning organizations o Chambers of Commerce o Local banks and realtors o U.S. Government publications o Customer surveys

STEP 2. Next, prepare a business plan. At minimum, your business plan should include a summary describing the servicer or product you plan to sell; the business information (legal name, business mode, and financial analysis); and the results of your market research. Market research and analysis form the foundation of your business plan.

• Review the main parts of a business plan (also presented in the Student Guide call-out): o Executive Summary — a summary of the key points or elements of your plan (basically like an introductory paragraph of a long book report). o Company Summary — adds clarity on what your business is about, your history, and where you want to go. o Products and Services — what your business will sell to generate revenue.

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o Market Analysis Summary — explains your potential customers and main competitors. This summary also covers packaging, pricing, and how you will get the message out. o Web Plan Summary — explains how you will use the web to enhance your business. o Management Team — explains how the business will be run and who the members will be. o Financial Analysis — the budget fro your business. This analysis lists how much it will cost to start the business, and how much to run it.

Explain that, to get started, your initial business plan can simply be well-researched information written as bullet points or action steps. Once your business is running, you may need a professionally-written plan but initially you should just write something that gives you direction. Consider the following: STARTUP COSTS include supplies or equipment needs, initial marketing costs, and other expenses you must cover before you sell to your first customer. • Keep startup costs minimal; remember, running your own company is a learning experience. OPERATING COSTS – the day-to-day expenses of running your business. Examples: supplies, rent, electric bills, and wages. • Most business owners evaluate operating costs on a monthly basis. Some expenses are not incurred each month, so develop a budget to account for these expenses over the course of the year. • For example, you might pay your tax planner $300 once per year. You could budget for that expense: $25 per month ($300 divided by 12 months = $25). TIME WITHOUT PAY —calculate the time you’ll spend without pay during startup. • For example, if your bills total $1,000 a month and starting the business will take six months, ask yourself: “Do I have $6,000 saved?” • If not, you can start your business part-time while you work at another job. • Starting a business while also holding down a job greatly reduces your risk.

Lesson Activity: Write a Business Plan Direct students to the Write a Business Plan Activity. Explain that early in the planning process, they must determine the cost to launch their business. Tell them that they will now create a business plan for a potential company they want to start.

• Students may work in small groups or individually. E7

Creating a Social Enterprise

• Instruct them to follow the template provided in the Student Guide, which includes: o Executive summary o Company summary o Products and services o Market analysis summary o Web plan summary o Management team o Financial analysis • Provide help and answer any questions. • Suggest that they complete the Executive Summary last. • Allow students freedom to complete the exercise in whatever manner is most comfortable for them: for example, bullet points; paragraphs; or drawings. • Remind students that the goal of the business plan is to give initial direction.

Lesson Questions 1. The main purpose of a business plan is to … a. Generate funding sources. b. Organize market research for easy retrieval. c. Provide direction and prioritize actions. d. Develop a set of bullet points. 2. Business owners conduct market research to … a. Identify the demand for their product or service. b. Characterize the competition for their product or service. c. Generate revenue. d. Develop a legal name for the business. e. All of the above. f. “a” and “b” only. 3. Which of the following is a key section of a business plan? a. Operating costs b. Goals and strategies c. Market analysis summary d. Search engine optimization.

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4. Why is it important to calculate your time without pay when you start a business? a. To identify your target market and competition. b. So you can set aside enough money to live on while the business gets going. c. To analyze the day-to-day expenses of running the business. d. To guide the Executive Summary of your business plan.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

Magazine Enterprise

Duration  60-90 minutes

Lesson Overview  Students will use budgeting, entrepreneurial, and marketing skills to create a mock magazine.

Big Idea  Creating a mock magazine is a good way to practice skills of budgeting, income, saving, entrepreneurship, and marketing.

Essential Questions At the end of the lesson, students should be able to answer the following:  How do magazines earn income?  How do magazines earn profits?  Why is budgeting important when starting a business?

Skills  Knowledge of the processes involved in a magazine enterprise.  Understanding how magazines earn income and generate profits.

Vocabulary  Magazine enterprise — the business of producing and running a magazine.  Magazine advertisements — space in a magazine that is sold to companies for selling or promoting their products. Social enterprise — an ethical for-profit business that donates a portion of its revenues toward helping a social cause.

Materials  Magazines that students have gathered  Tape  White stickers or post-it notes  Scissors  Stapler  Six sheets of high-quality card stock (8.5” x 11”)

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide, and have them write their answers to the question: What are five things you know about starting your own business? Discuss their responses.

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Lesson Explanation: How a Magazine Enterprise Works First, ask students to describe the business of a magazine to you. Listen to their responses and discuss.

Explain that a magazine generates the majority of its income from advertisements, just like many websites (e.g., CollegeHumor.com, CNN.com).

Then explain the business of advertisements in magazines. Being able to sell advertisements is what makes a magazine successful. Magazines earn profits if they succeed in selling advertising space for an amount that exceeds the costs of putting together and running the magazine.

Display a magazine to the class or online, or have students look at their own magazines they’ve gathered. Have them look at some of the magazine’s advertisements.

Lesson Activity: Creating a Mock Magazine Direct students to the Creating a Mock Magazine Activity in the Student Guide, and tell them they will be putting together a mock magazine, for which they will need to generate $6,400 in monthly income based on the budget shown (also presented in the Student Guide).

Office rent $2,000 Staff (writers, illustrators, etc.) $1,500 Utilities $500 Printing costs $1,200 Subtotal Expenses $5,200 Monthly Savings Goal $1,200

Total $6,400

Explain that students will be practicing skills of budgeting, income, saving, entrepreneurship, and marketing.

• Divide students into four teams; if completing online, have them work individually. Each team will work on one section of the magazine. If completing individually, each student will choose one section of the magazine to complete.

Magazine Enterprise

• Students will complete each of the following tasks: Layout Decide where the ads, articles, and illustrations go and tape all the pieces together. Writing Write short articles to put in the magazine. • Write 2-4 short articles that the full-page advertisers would like. For example, the advertiser of a football product would like articles related to football. Illustrations Draw a few pictures related to the articles. Sales Come up with one or two reasons why the magazine enterprise will work, to pitch to potential advertisers. • Have students choose and cut out ads from the magazines you’ve gathered and label them as follows: o Four full-page ads – use a white sticker or post-it to label each $1,000. o Four half-page ads – use a white sticker or post-it to label each $600. o The total equals $6,400 in potential ad revenue. • After students have labeled the ads, they will “pitch” to you and try to convince you to buy advertising space. If completing online, students will write two one-line sales pitches they would use to try to sell ad space to a potential advertiser. o The messages and pictures in their articles match the ads. o Suggest ways they might make the magazines more enticing for an advertiser. o Mention topics like target markets and return on investment from the ads. • Once students have completed all the tasks, they should staple the pages together into a mock magazine.

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Lesson Questions 1. A magazine earns income by … a. Selling advertising space. b. Illustrating articles with appropriate pictures. c. Budgeting carefully. d. Writing high-quality article content. 2. Which of the following are potential “pitches” to sell magazine advertising space to companies? a. The magazine reaches the company’s target market. b. Advertising is how the magazine generates income. c. The magazine employs top-notch illustrators. d. The advertising space offers a high return on investment. e. Both “a” and “d.” f. Both “b” and “c.”

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions. Remarks

Economic & Government Influences

This unit provides students with an overview of taxes, how they affect one’s take-home pay, and how to budget accordingly. Students will build an in-depth understanding of the taxation process to build financial literacy.

Economics & Government

LESSON DURATION LESSON TITLE ID (MINUTES) Taxes G1 20-50

Economics & Government

Taxes

Duration  20-50 minutes

Lesson Overview  This lesson provides students with an overview of taxes, how they affect one’s take-home pay, and how to budget accordingly. Students will build an in-depth understanding of the taxation process to build financial literacy.

Big Idea  The government taxes you.| Taxes impact your personal finances and there are consequences for tax errors.| Tax rates vary based on your financial situation.| There are different tax forms for different situations.| There is information you should keep to complete your taxes. | Tax professionals offer different services and benefits.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are taxes?  Why do we have to pay taxes?  How do taxes affect the take-home pay on my paycheck?

Skills  Basic understanding of taxes and how taxes affect one’s finances.

Vocabulary  Gross income — amount of income prior to any tax or payroll deductions.  Net income — amount of income after any tax or payroll deductions.  Deductions  Audit  Social Security  Medicare  Medicaid

Anticipatory Set Instruct students to answer the question in the Warm-Up Activity in the Student Guide. “What are taxes?” Once they are finished, discuss their answer as a class.

Taxes

Lesson Explanation We pay taxes to help pay for government services in our country, state, and city. If we did not pay taxes, the government would not receive the income it needs to provide the services we need. • What services does the government provide for its citizens? Examples: Military, public safety (police, fire), government agencies, public officials (mayors, state representatives, governors, the President, etc.), welfare assistance. Listen to the students’ responses and facilitate a discussion. • Do you think it is fair that we help pay for government services? • Do you think the government is best qualified to manage these services? • Do you think the federal government spends money in a way that aligns with your values?

Compare private enterprise with government-run organizations. Listen to responses. Explain that if we all contribute even a little, it helps everyone.

Ask, “For every $100 you make, how much do you think you will keep?” Answer: They will keep about $50 to $70 out of every $100.

Explain that the rest goes to the government in the form of federal tax, state tax, Social Security, and Medicare. Federal tax deductions range between 10% and 35% of your income. Over 60% of federal taxes are used to pay for defense, Social Security income, and Medicare. Discuss the graphics.

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Photo: John R. Coughlin/ CNN Money. Source: Government Accountability Office Explain Social Security Income and Medicare, which were established during the Great Depression so that people would have some type of retirement fund to pay into and receive upon retirement.

Now these systems are in jeopardy of bankruptcy. Depending on your age, you probably will receive little or no benefits from SSI (Social Security Income) or Medicare.

Discuss how many people — including themselves — will pay into Social Security and Medicare, yet may not receive any benefits because of how the system is set up. This is because a large population now is retired, yet less income is being paid into the system. Ask the students:

• How does that make you feel? • Do you agree with how the money is spent?

Taxes

Lesson Activity: Tax Reform Instruct students to write the answer to this question in the Tax Reform Activity in the Student Guide: How would you suggest that your tax dollars be spent?

Point out that certain services are needed for a healthy society. Simply eliminating services like Medicare would have a profound impact on the elderly and lower-income families. Just because students do not use services for which they pay taxes does not necessarily justify eliminating those services.

Lesson Explanation Point out how payroll deductions affect net income and explain the following terms: • Gross income: Amount of income prior to any tax or payroll deductions. • Net income: Amount of income after any tax or payroll deductions. Provide the following information about taxes. • The first federal statutes imposing the legal obligation to pay a federal income tax were adopted by Congress in 1861 and 1862 to pay for the Civil War. • The 1862 law levied a 3% tax on incomes above $800 (which was about $18,000 in today’s money), rising to 5% for incomes above $10,000. • Employers have to pay state and federal tax plus SSI and Medicare - an additional 7.65% tax (6.2% Social Security tax and 1.45% Medicare tax) - on each employee. • Consequences of not paying taxes include levies, garnishment, fines, and jail time. • In fact, taxes are so important, the government has an ARMY of employees dedicated to double checking that everyone is paying their fair share of taxes. The IRS employs approximately 90,000 individuals! Say, “Actor Wesley Snipes was sent to jail for not paying his taxes.” Talk about why people may not want to pay taxes, then discuss why it is a crime not to pay taxes.

Next, describe the tax preparation process. Discuss how and when you must complete tax returns, and explain the process of getting professional help. Mention the risks of completing your tax returns yourself. • Missing out on deductions that would lower your taxes; • Risk of penalties and mistakes; and • It is a “red-flag” to the IRS and is more likely to result in an audit – a process in which the IRS requires you to prove everything you stated in your tax forms.

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Explain why we strongly suggest that students do not complete their own tax returns. Describe the benefits of using a tax advisor who is … • A professional in the field; and • Knows tax law and all the possible deductions/savings you might receive. Talk about questions you should ask potential tax advisors. Then have students discuss the reasons for asking each question:

• How many years have you been in your respective field? • Are you knowledgeable about real estate matters? • What are your fees and how are you paid? • What are your credentials? • To what professional boards do you belong? • Have you ever had any disciplinary action? • What is your past experience? • What other services do you offer? Besides the questions listed above, you should also ask potential tax planners whether they are available year round for questions.

When first starting out, taxes will be pretty easy to manage. But you should hire a professional with whom you can grow as your investments and income grow.

Lesson Activity: Paychecks and W2s and W4s — Oh My! Direct students to the Paychecks — Oh, My! Activity in the Student Guide. (All sample forms illustrated also appear in the Student Guide.) As you review the sample paycheck on the next page, instruct students to circle and highlight:

 Tax deductions

 Medicare or SSI deductions, federal and state tax deductions.

 Other payroll deductions.

 Net income, gross income, and YTD income.

Taxes

SAMPLE PAYCHECK

123 – John R. Doe Pay Period 06/02/06 to 06/16/06 Required Deductions Federal Income Tax 00.00 00.00 Earnings FICA – Medicare 06.08 12.16 Hours Rate This Period YTD WI State Income tax 00.00 00.00 50 9.00 450.00 900.00 FICA – Social Security 25.92 51.84 Gross Pay 450.00 900.00 Other Deductions Health Insurance 00.00 00.00 401K 00.00 00.00 Parking 00.00 00.00 NET PAY $418.00 $836.00

Your Employer Check Number: XXXXXX 1234 Some Street Pay Date: 06/19/06 Milwaukee, WI ZIPCODE

Pay *** Four hundred eighteen dollars and 00 cents****************************$418.00

To the Order of John R Doe 555 Some Street Milwaukee, WI ZIPCODE

Describe the W2 and W4 forms to students. Explain when they will be asked to complete a W4 and why the form is important for completing one’s taxes.

G1 5 Economics & Government

SAMPLE W2 FORM

a. Control number 22222 Void 03-000240  OMB No. 1545-0008 b. Employer Identification number 1 Wages tips, other compensation 2 Federal Income tax withheld 99-9876543 25312.50 2522.33 c. Employer’s name, address, and ZIP code 3 Social security wages 4 Social security tax withheld Johnson Technical Services Corp 25312.50 1569.38 850 Tech Drive 5 Medicare wages and tips 6 Medicare tax withheld Suite 400 25312.50 367.06 7 Social security tips 8 Allocated tips Anytown USA 15237

d. Employee’s social security number 9 Advance EIC payment 10 Dependent care benefits 221-00-9123 c. Employee’s name, address, and ZIP code 11 Nonqualified plans 12a See instructions for box 12 Dana T Brenner D | 179 Klein Road 120.00 13 Statutory Retirement Third-party 12b | employee plan sick pay Arnold PA 15068    12c | 14 Other 12d | PA Sui 5.12 15 State Employer’s state ID number 16 State wages, tips 17 State income tax 20 Local wages, tips 19 Local income tax 20 Locality name PA| 510430704 25312.50 708.76 25312.50 253.12 Allensburg

Wage and Tax Department of the Treasury—Internal Revenue Service Form W-2 Statement For Privacy Act and Paperwork Reduction Copy 1 For State, City, or Local Tax Department Act Notice, see separate instructions. Copy D For Employer.

When talking about the W4 form, explain that each time you start a new job or need to change your tax deduction, you must fill out a W4 form.

• The W4 tells the government how many allowable deductions from your taxes you have. The more deductions you have, the lower the amount of tax that will be taken out of each paycheck. It is very important to calculate your deductions correctly, because if you have too many you may owe on your next tax return; if you do not have enough, you will receive a refund. Explain how the W4 relates to taxes and the types of deductions: • Dependents: o Spouse o Children o People you live with 50% of the time • Assets: o Houses o Investments

Taxes

Describe the steps to complete a W4 form, then have students complete the W4 on their own. Provide help as need. Tell the students that these forms may look intimidating, but they are actually designed with very clear instructions.

Facilitate a brief discussion around all of the sample forms and answer any questions student may have.

G1 5 Economics & Government

Taxes

Lesson Questions 1. Approximately what percent of his/her income will the average person making over $60,000 per year pay toward taxes? a. 5–10 percent b. 11–20 percent c. 21–60 percent d. 61+ percent 2. Which of the following is the most accurate definition? a. Gross income is the amount earned before taxes. b. Gross income is the amount received after taxes. c. Net income is the amount set aside for Social Security. d. Net income is the amount earned before taxes. 3. The approximate monthly take-home pay for a person making a $42,000 per year salary would be: a. $3,500 b. $4,200 c. $2,500 d. $4,000

4. Federal income tax pays for your retirement. a. True b. False 5. The money you pay in federal income tax can be used by the government to pay for items to which you are ethically opposed. a. True b. False

Lesson Review  Ask the class, “How does this lesson make you think about your current credit history or (most likely) your LACK of a credit history?”  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

G1 5

Risk Management & Insurance

In this section students will develop an understanding of insurance and ways to manage risk. Within this instruction participants will learn about the various types of insurance including medical, car, and renter’s insurance and will understand why purchasing insurance is necessary.

Risk Management & Insurance

DURATION LESSON TITLE LESSON ID (MINUTES) What's My Risk? R1 20-30 What is Insurance? R2 20-40 What Insurance Do I Need I: The Basics R3 20-40 What Insurance Do I Need I: Advanced R4 60-90 How Insurance Policies Work R5 20-40 Insurance Claims R6 10-40 Choosing an Insurance Company R7 20-40 How to Reduce Your Risk R8 10-30 Estate Planning R9 30-40 Prepare for Disaster R10 20-30

Risk Management & Insurance

What’s My Risk?

Duration  20-30 minutes

Lesson Overview  Students will learn how to identify types of risk they are taking, and begin to determine their overall risk factors in given situations. Students will identify the following types of risk: avoidance, reduction, sharing, or retention.

Big Idea  Life involves financial risks and each person has a different risk tolerance.  Financial risks can be managed through financial planning.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is risk avoidance?  What is risk reduction?  What are risk sharing and risk retention?

Skills  Ability to identify risk avoidance, reduction, sharing, or retention.

Vocabulary  Risk avoidance — to avoid becoming involved or to eliminate yourself from a situation to avoid risk.  Risk reduction — to take measures to reduce your overall risk in a given situation.  Risk sharing — to take measures to share your risk with another through insurance or risk transfer.  Risk retention — to accept a given risk and budget to prepare for that risk.

Anticipatory Set Have students write the answer to the following question in the Warm-Up Activity in the Student Guide. What types or risk are there?

Discuss why it’s important to explore different types of risk.

What’s My Risk?

Lesson Explanation We all take risks. However, did you know that there are four types of risk?

The definitions are presented in the Student Guide. Encourage students to follow along as you explain each definition.

1. Risk Avoidance. To avoid becoming involved or to withhold from a situation to avoid risk. Example: Joel loves to ride his dirt bike. His friend Jack wants to ride at Pike’s Peak, a very dangerous hill in their town. Joel tells Jack he’ll join him but later feels it is a bad idea. The night before the ride, he sends Jack a text to let him know he’s decided not to go. 2. Risk Reduction. To take measures to reduce your overall risk in a given situation. Example: Jenny got a flat tire in a bad area on her way home from work. Luckily, she has a spare tire and her brother taught her how to change a tire. She changed her tire in 15 minutes, rather than waiting 3 hours for a tow truck to arrive. 3. Risk Sharing. To take measures to share your risk with another, through insurance or risk transfer. Example: We were snowed in for almost two weeks and unable to leave our cabin. Fortunately, my mom had enough emergency supplies to last a month so we didn’t have to worry. 4. Risk Retention. To accept a given risk and budget to prepare for that risk. Example: I rented a beach cruiser during a three-day weekend trip to the beach but it was stolen. I didn’t purchase insurance for the rental because the insurance would have cost $50 per day and I only had to pay $100 to replace the stolen bike. Address any questions and make sure students have a solid understanding of the types of risk before you move on.

Lesson Activity: What’s the Risk? Direct students to the What’s the Risk? Activity in the Student Guide. After dividing the students into small groups, instruct the groups to come up with one scenario for each type of risk. Encourage students to use the examples provided with the definitions above to guide them.

Risk Management & Insurance

Have the groups read scenarios to other groups. The group being read to should try to guess the type of risk described in the scenario. Share a few scenarios as a class, and discuss why it is important to know the types of risk.

Lesson Questions 1. To accept a given risk and prepare for it by budgeting is an example of a. Risk avoidance. b. Risk reduction. c. Risk sharing. d. Risk retention. 2. A teenager obtains his/her driver’s license. The teen’s father decides to increase the family’s amount of insurance for collision coverage. The father’s decision is an example of a. Risk avoidance. b. Risk reduction. c. Risk sharing. d. Risk retention.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

What Is Insurance?

Duration  20-40 minutes

Lesson Overview  Students will understand a general definition of insurance. They will receive an overview of the insurance industry and be introduced to the concept of purchasing insurance.

Big Idea  Insurance can protect your personal finances.  Different types of insurance have different costs and protections.  There are organizations and professionals that can assist you with your insurance needs.  Life involves financial risks and each person has a different risk tolerance.  Financial risks can be managed through financial planning.

Essential Questions At the end of the lesson, students should be able to answer the following:

 What is insurance?  Why is it important to have insurance?  For what items do you need insurance coverage?

Skills  Understanding of insurance and why obtaining certain types of insurance is necessary.

Vocabulary  Insurance  Risk management  Liability

Anticipatory Set Instruct students to answer the question in the Warm-Up Activity in the Student Guide: What do you think insurance is? Listen to their answers and discuss insurance in general terms (nonspecific to a type of insurance).

R2 Risk Management & Insurance

Lesson Explanation Ask, “What do you think is the main function of insurance?” Listen to responses and discuss.

Explain that insurance is a form of risk management. It’s an agreement stating that something is protected if it’s damaged, hurt, or stolen. Essentially, when you purchase insurance on something it helps protect your investment. If anything happens to an item covered by the insurance policy, you can receive funds from the insurance company to have the item replaced or fixed, or as a cash settlement. Facilitate a discussion.

Next, ask students, “Why do you think people purchase insurance?” Listen to their answers and guide their responses. Examples: To insure cars, homes, belongings, or themselves (medical, dental, and life).

Ask, “Why is it important to insure these things?” Tell students that people purchase insurance to have protection against the “what if’s” in life.

You never know when you may get some type of illness, break your arm, or need medication. It’s important to have medical insurance to cover these costs. Some countries provide universal care for its citizens. The citizens collectively pay for their health care with their taxes. In other countries, such as the US, the government requires all citizens to purchase health insurance; very similar to the way you are required to buy auto insurance. For those that do not carry health insurance, they are charged a fine that is collected from your taxes at the end of the year.

• A note on the US fine for not having health insurance: Many individuals do the math and say “My monthly premiums would be WAY more expensive than the fine at the end of the year. I’ll just pay the fine.” While they are correct that many individual’s premiums over a year will be greater than the fine at the end of the year, they are mistaken in their analysis of the situation. The government does not want to punish those that do not have insurance, it wants to incentivize or provide a small push to get the insurance. What this individual has not calculated is that they may be one accident away from bankrupting his or her family. In the same way, you need to insure your car to protect against any damages that might happen to the vehicle. For example, if you get in an accident, your insurance will help pay to repair or replace the car.

It’s also important to insure your belongings if you rent an apartment or house. Renter’s insurance protects the items and belongings in your rental property if anything happens to the property. For example, renter’s insurance would protect your belongings from theft or from damage caused by deterioration of the building (like leaky pipes or roofs). If something happens to your belongings the insurance company pays to fix them, or you are reimbursed for the purchase price.

R2 What Is Insurance?

Many people buy life insurance to make sure their families will be taken care of if they should pass away. Funeral costs are surprisingly high and it takes some time to recover financially from the loss of a family member’s income. Life insurance provides a lump sum payment to handle the immediate costs of burial and memorial as well as supplement the family’s income as to maintain their standard of living.

A lot of times, the risk of something bad happening is very low. So why do you need insurance?” Give the following examples.

EXAMPLE #1 Ashley just got a new car. She’s never been in an accident and is a very responsible driver. Ashley doesn’t want to purchase car insurance because her risk is very low. She thinks, “Why should I pay for something I may never use?

Talk about why it’s still important to purchase car insurance. • Having auto insurance is the law in many states. • Just because you’re a good driver, that doesn’t mean accidents can’t happen. • Can you afford to replace or repair your car if it’s damaged? • Can you guarantee that everyone else on the road is a great driver and won’t hit your car or, worse yet, hit your car and flee the scene never to be found? Explain the idea of liability. If you have a car accident and you’re partly or wholly at fault, you can be held liable (responsible) for the damages to the other person’s car and for any injuries they suffer. • If you have no insurance, you’ll have to pay for the damages or injuries out of your pocket. • If you can’t pay, the other person can sue you. Explain that many people think they can’t be sued because they don’t have any money. This notion is false — it’s completely wrong. • Someone can sue you — and for a lot of money. • If you lose, the courts can garnish your wages until the judgment is paid in full! • Even a minor fender bender at a traffic light can EASILY cause $100K in damage. Example: Expensive cars can run up to $20,000 just to replace a bumper! • Medical bills can skyrocket out of control if you injure others in a car accident. Car insurance not only covers the vehicles or property damaged, but also medical bills of those injured. EXAMPLE #2 Robert just got hired working part-time at a retail store. His employer provides medical insurance, but Robert’s check will be deducted $100 per month ($50 per check) for the insurance. Robert has not been to a doctor in two years. He thinks the health insurance is not worth purchasing. He’s a student and really needs the extra money, so he opts not to get the medical insurance.

R2 Risk Management & Insurance

Discuss why it’s important to have medical insurance, even though you may be young and healthy. Consider the following reasons:

• Can you afford to pay for a doctor’s visit without insurance? o Depending on the type of doctor and practice, each visit can cost from $95 to $265. o If you have insurance, your co-pay would be $5 – $50 per visit. • Are you absolutely certain you won’t hurt yourself or catch some type of virus? • Do you have allergies, wear contacts or glasses, or need any type of regular prescription medication? Can you afford those contact or medications without insurance? o On average, generic prescription medications start around $50 for a 30-day supply. o If you have insurance, your co-pay would usually be around $5 – $20.

Highlight why it’s important to have insurance, even though you may not need it very often. Remind students again what insurance is: a way to manage risk; protects your investment; protects against damage, loss, or theft; protects your finances from lawsuit.

Lesson Activity: Insurance Game Explain to students that you are going to play a game. You will need a set of dice for every 6–8 students and 20 faux raffle tickets per student for some type of prize (healthy snacks, day off from homework, etc.).

Explain to the class that the student with the most tickets at the end of the game wins. Here’s how the game is played.

• You can choose to give me three tickets now to cover car, medical, and renter’s insurance—or you can keep all 20 tickets. • If you don’t give me any tickets, you will have to spend tickets every time something happens. • Students in each group will alternate turns rolling the dice and follow the guidelines below. • If a student runs out of tickets, they are bankrupt.

R2 What Is Insurance?

If student Consequence Consequence Circumstances rolls: With insurance Without insurance

Get 1 extra Doubles Nothing happens. They are safe. Get 1 extra ticket ticket

3 They fall and hurt their leg Pay 1 ticket Pay 4 tickets

4 They get into a car accident. Pay 1 ticket Pay 6 tickets

Their apartment is broken into and 5 Pay 1 ticket Pay 5 tickets they need to replace their electronics.

They get the flu and need prescription 6 Pay 1 ticket Pay 4 tickets antibiotics and blood tests

Someone hits their car in the parking 7 Pay 1 ticket Pay 3 tickets lot

A pipe burst in their apartment and 8 Pay 1 ticket Pay 6 tickets ruins their couch and TV

A rock hits their car and breaks the 9 Pay 1 ticket Pay 5 tickets windshield

They trip and fall and sprain their 10 ankle. They need crutches, an x-ray Pay 1 ticket Pay 8 tickets and pain medication

They want to get a flu shot for 11 Pay 1 ticket Pay 3 tickets protection

The roof collapses and damages all 12 Pay 1 ticket Pay 10 tickets their belongings

When the game is complete, discuss again the benefits of having insurance. Ask students what playing the game taught them about insurance.

R2 Risk Management & Insurance

Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket Insurance Insurance Insurance Ticket Ticket Ticket

R2 What Is Insurance?

Lesson Questions 1. Why does purchasing insurance help protect your investment? a. Insurance may pay for all of any loss. b. Insurance may pay for losses that are insured. c. Purchasing insurance is the law. d. Purchasing insurance is necessary if you do not have the money to pay for losses. 2. If the risk of something happening is low, why should people purchase automobile insurance? a. They shouldn’t if they don’t want to. b. They shouldn’t if they can pay for damages. c. It may be required by state law and protect them from lawsuit. d. It may be easier to be sued and have their wages garnished.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

R2 Risk Management & Insurance

What Insurance Do I Need? (The Basics)

Duration  20-40 minutes

Lesson Overview  Students will receive an overview of the various types of insurance and gain basic knowledge about how to determine the types of insurance they need.

Big Idea  Insurance can protect your personal finances.| Different types of insurance have different costs and protections. | There are organizations and professionals that can assist you with your insurance needs. | Financial risks can be managed through financial planning. | Financial decisions align with your financial plan and risk tolerance. | Insurance should be modified as your needs change.

Essential Questions At the end of the lesson, students should be able to answer the following:

 What are the three basic types of insurance that I need to obtain?  What type of bill is the leading cause of bankruptcy and can be prevented by insurance?

Skills  Understanding various types of insurance and how to determine what type of insurance they need.

Vocabulary  Health insurance – coverage for medical and health care needs.  Automobile insurance – protection against losses related to owning and/or driving a car.  Renter’s insurance – coverage for one’s belongings in a rented living space.

Anticipatory Set Instruct students to answer the following questions in the Warm-up Activity in the Student Guide. • What type of bill is the leading cause of bankruptcy? Answer: Medical bills • How could this bill be avoided? Discuss how medical bills can be avoided and how medical insurance plays a role. R3

What Insurance Do I Need (Basics)

Lesson Explanation In review, ask students why it’s important to have insurance, and discuss their answers. Then ask what kinds of insurance they think are important to have and talk about their responses. Explain that it’s important to have the following types of insurance:

• Health insurance includes vision, medical, and dental. Health insurance is a must. If you don’t get sick often, there are cheaper forms of insurance that will protect you in case of a major medical emergency. • Automobile insurance covers both you and your vehicle. Automobile insurance is a must. Talk to your insurance agent and make sure you have enough coverage. • Renter’s Insurance covers your personal belongings in the place you rent. Renter’s insurance is important for people who have nicer things. If you just have a 20-year-old TV and a couch you found in the alley, renter’s insurance may not be so important. Explain that students are going to learn extensively about renter’s, health, and automobile insurance.

Tell students that insurance protects your financial future by reducing your risk. Without insurance, if you have an accident or any health problems, you’ll probably face a large bill. If you’re unable to pay, that can have a negative effect on your credit.

• In today’s age, it’s vitally important to have automobile and health insurance. • Lack of health insurance is one of the biggest causes of bankruptcy. • With all the expensive cars on the road today, even a little fender bender without insurance can force you to make payments to the courts for years. Explain that, now, you will go over the basic insurance types in more detail. AUTO INSURANCE. It is vital to purchase and maintain car insurance. Without car insurance, you take a huge amount of risk – to yourself, to others, and to your future finances.

• If you get in an accident without car insurance and you cause $80,000 in damages and medical costs, the courts will likely determine that you are responsible to pay the money. • The court can garnish your wages (automatically take money out of your paychecks) to repay the money you owe. Your income would be severely stifled for many years to come. Shopping for insurance can take some time, but you can obtain quotes fast on the Internet. Make sure to read the policies and special provisions carefully to make sure you are evaluating comparable coverage.

Risk Management & Insurance

There are strategies that help people keep their automobile insurance premiums low. For example: • Good driver discounts. Insurance premiums increase if you have speeding tickets or accidents on your record. If you get too many tickets, you may not be able to find insurance at all. • Good car. Sports cars or four-wheel-drive (4WD) vehicles cost more to insure. o Insurance companies figure the insured driver will be driving fast or off-road, which increases risk. o It costs a bundle to insure the driver of a flashy car. • Longevity discounts. Many companies reduce premiums for their long-term customers.

HEALTH INSURANCE. Health insurance is a form of risk management that protects individuals from unpredictable healthcare costs. Health insurance gives you access to medical and preventive care. • An insurance policy is a contract between an individual and an insurance company that transfers loss from the individual to the insurance company, for a fee.

• Many employers provide health insurance; all you have to do is pay a certain amount of the premium through a payroll deduction.

• People are now legally required to purchase health insurance due to the Affordable Care Act. Visit www.healthcare.gov to register.

Paying health insurance premiums may seem like a waste of money, especially to healthy people. But having health insurance protects you from sky-high medical bills if you get injured or experience a sudden illness. • It may be tempting to think, “I never get sick,” and to opt out of health insurance if you have to pay for it. • Don’t make this mistake. A simple fall and broken limb could cost you thousands, even tens of thousands to fix. • Any catastrophic accident or illness could lead to bankruptcy if you have no insurance. When you purchase health insurance, your choices typically will fall in one of three categories: 3. Traditional fee-for-service health insurance plans are usually the most expensive choice, but offer the most flexibility in choosing health care providers. 4. Health Maintenance Organizations (HMOs) offer lower co-payments and cover the costs of more preventive care, but your choice of health care providers is limited. The National Committee for Quality Assurance evaluates and accredits HMOs. Find out

What Insurance Do I Need (Basics)

whether one is accredited in your state by calling 1-888-275-7585 or visit www.ncqa.org. 5. Preferred Provider Organizations (PPOs) offer lower co-payments like HMOs but give more flexibility in selecting providers. A PPO gives you a list of providers to choose from. If you go outside the HMO or PPO provider network, you may have to pay part or all of the cost. All health policies are not the same, so you should carefully review and understand your policy. Here are the most important aspects to consider:

• Doctor and medical facilities availability. Make sure the doctors, hospitals, and medical groups you want to use are contracted with your insurance company. • Premium (monthly cost). The monthly fee should be affordable; you should be able to maintain that premium over time within your budget. • Deductible. The amount you must pay out-of-pocket before the health insurance plan pays its share. • Co-payment. The amount you have to pay before the health plan pays. The co-payment is a lot like a deductible, but is applied to individual services that are usually waived from the deductible (except for prescription drugs). • Exclusions. Not all services are covered in every plan. A lot of new plans don’t cover maternity or brand-name prescriptions. Exclusions can reduce premiums, but also your options for covered healthcare. • Out-of-pocket maximums. This is the amount where, once you have paid this much, your obligation ends under co-insurance and the insurance company pays 100% of any additional costs.

o For example, you have an insurance policy that requires you to pay 20% of all medical bills. If you are in a severe car accident resulting in total medical bills of $100,000 you would need to pay $20,000 if you did not have an out of pocket maximum.

o Now let’s assume the same scenario, but you have a $5,000 out of pocket maximum. You would then pay 20% on the first $25,000 of medical bills (totaling $5,000) then the insurance company would take care of the remaining $75,000. GROUP POLICIES. Many consumers have health care coverage from their employers. Others have medical care paid through a government program such as Medicare, Medicaid, or the Veterans Health Administration.

Risk Management & Insurance

• If you lose your group coverage from an employer as a result of unemployment, spousal or parental death, divorce, or loss of “dependent child” status, you may be able to continue your coverage temporarily under the Consolidated Omnibus Budget Reconciliation Act (COBRA). • You pay for COBRA coverage. When one of these events occurs, you must be given at least 60 days to decide whether you want to purchase the coverage. MEDICARE AND MEDICAID. These health insurance programs cover seniors, the disabled, or those with low incomes. • Medicaid provides health insurance for people with low income, children, and pregnant women. Eligibility is determined differently by state. • Medicare provides health insurance for people who are 65 years or older, some younger people with disabilities, and those with kidney failure.

• Contact the Centers for Medicare & Medicaid Service for more information on benefits.

• Most states also offer free or low-cost coverage for children who have no health insurance. Visit www.insurekidsnow.gov or call 1877-KIDS-NOW (543-7669) for more information.

THE AFFORDABLE CARE ACT (ACA) is intended to lower health care costs, provide more health care choices, and enhance the quality of health care for all Americans. Major provisions affecting consumers include: • Coverage for seniors who hit the Medicare Prescription Drug maximum including a rebate for those who reach the gap in drug coverage. • Expanded coverage for young adults, allowing them to stay on their parents’ plan until they are 26 years old. • Providing access to insurance for uninsured Americans with pre-existing conditions. • Expanded preventive care (for example, wellness visits and mammograms) to Medicare and Medicaid participants. • Medical coverage to children not eligible for care under Medicaid. • For more information about the law as well as basic information about health insurance, go to www.healthcare.gov.

What Insurance Do I Need (Basics)

DENTAL INSURANCE is another type of health insurance. While it may not be as important to have dental coverage as medical, dental policies are relatively inexpensive, and employers often offer dental as part of a benefit package.

RENTER’S INSURANCE protects you in the event of theft, fire, or damage to your rental building, and is relatively inexpensive. Take inventory of your belongings and what it would cost to replace each item. • If you just have an old couch and a few clothes, you probably don’t want to take on the added expense of renter’s insurance. • On the other hand, if you have designer clothes, computers, furniture, and other items that would cost you a lot to replace, take a look into renter’s insurance. CHOOSING POLICIES: The challenge is to make sure you have enough medical, automobile, and renter’s insurance to protect you in case of unexpected events. Here are the steps to follow:

1. Try to imagine the unexpected events for which you’re at risk. 2. Contact the companies with which you currently have your insurance, plus two other companies. 3. Ask a lot of questions and take good notes. 4. Consult with a trusted, knowledgeable friend who can help you sort through all the information. 5. Make a decision whether to keep your policies the same, or make changes so you are better protected.

Lesson Activity: What’s That Insurance? Direct students to the What’s that Insurance Activity in the Student Guide. Instruct students to create their own definition of health (medical), automobile, and renter’s insurance. Encourage them to be creative and have fun with the definitions.

Once their definitions are complete, have each student share one with the class. Have the class guess what type of insurance is being described based on the definition provided.

Risk Management & Insurance

Lesson Questions 1. What type of insurance can protect against lawsuit, wage garnishments, and/or credit problems? a. Automobile b. Homeowner’s c. Medical d. All of the above 2. Which of the following is an important factor to consider when choosing a health insurance policy? a. The availability of COBRA coverage. b. Doctor and medical facility availability and convenience. c. The Affordable Care Act. d. The National Committee for Quality Assurance. 3. What was the primary goal of the 2010 Affordable Care Act? a. To provide and enhance quality health care for all Americans. b. To reduce the co-payments charged by HMOs. c. To protect rental units from fire damage. d. To encourage more health care companies to allow people to sign up online.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

What Insurance Do I Need (Advanced)

What Insurance Do I Need? (Advanced)

Duration  60-90 minutes

Lesson Overview  In this lesson students will gain advanced understanding of various types of insurance and how to determine which policies, components, and coverage amounts they need. They also will learn how to monitor insurance policies as their circumstances change.

Essential Questions At the end of the lesson, students should be able to answer the following:

 What is the purpose of each of the following types of insurance: disability, long-term care, and property (homeowner’s)?  What are two important reasons to monitor your insurance policies over time?

Skills  Advanced knowledge of insurance policies and concepts.  Ability to monitor insurance policies over time and make informed decisions about coverage.

Vocabulary  Homeowner’s insurance – covers property you own.  Disability income insurance – pays a portion of a person’s income if the person cannot work for an extended time.  Long-term care insurance – covers health expenses for retirees that are not covered by health insurance or Medicare.  Policy riders – extra options one can choose to augment an insurance policy.  Umbrella policies – extra coverage on one’s existing insurance policies.

Risk Management & Insurance

Anticipatory Set Instruct students to answer the following question in the Warm-up Activity in their Student Guide: • Besides the three basics (automobile, health, and renter’s), what are some other types of insurance? Discuss their answers.

Lesson Explanation: Types of Insurance Explain that there are a few more types of insurance beyond the basics, must-haves such as health and auto insurance that become important to have once people own properties, become established in their careers or gain dependents: • Disability Income Insurance pays you a percentage of your income if you become disabled for an extended period of time. • Long-term Care Insurance covers retirees’ health expenses that are not paid by health insurance and/or Medicare. • Property Insurance covers any properties you own. • Umbrella Policies – provide additional coverage on the insurance policies you have – plus additional protection that covers accidents and other issues that medical, property, and auto insurance policies don’t. • Wills or Trusts – although not insurance per se, wills or trusts help your family avoid probate if you pass away. You won’t need a will or a trust until you have things with significant monetary value or items with moderate monetary value but significant sentimental value. Wills and trusts will be important to get once you start to acquire assets. We are now going to go over these types of insurance in more detail.

What Insurance Do I Need (Advanced)

Lesson Explanation: Disability Income Insurance Many people overlook disability coverage. While your own death may seem unlikely now, the chances of becoming disabled – that is, unable to work for an extended time – are greater than most people realize.

• The odds of a disability are high. At age 40, the chances of a disability lasting 90 days or more is 21%. • Coverage can also be used to fund buy-sell agreements, key-person indemnification, and business overhead expenses. • The older you get, the higher your chances of being disabled for longer periods of time. While you may not think disability insurance is important, consider what would happen if you were unable to work for six months. You would still have to pay your rent, make your car payments, and deal with a host of other expenses. Your bills aren’t going to go away just because you’re injured.

Your coverage for medical, dental, life, and disability insurance through your employer will be limited to your time of employment. When you change jobs, you should compare benefits so you understand any changes.

• For example, you may have to pay more for your health insurance at the next employer, or the coverage may not be as generous. • And if you take time off from work between jobs, you must plan for an inevitable gap in insurance coverage—especially health insurance. Insurance helps you reduce risk and protect your financial future. Make sure you have the right coverage so you, your family, and your money are safe.

The Social Security Administration (SSA) provides long-term disability benefits based on your salary and the number of years you have worked and contributed to the Social Security system. Social Security Disability Income Insurance (SSDI) replaces only a limited portion of your salary. It does not affect most people’s contracts because the waiting period before you can collect is 12 months, and the qualifications to receive benefits are very strict. To learn more about SSDI and to read Social Security’s fact sheets as well as actuarial publications, go to www.ssa.gov/disability.

Employer Group Disability Explain to students that employers often provide a basic coverage amount for long-term disability. You may be automatically enrolled, or you will be given the option to join at your employer’s open enrollment period.

Risk Management & Insurance

Sometimes employers offer the option of paying on a pre-tax or post-tax basis. • If you pay on a pre-tax basis, your benefits will be subject to income tax upon collection of benefits. • If you pay on a post-tax basis, your benefits will not be subject to income tax as they have already been taxed. • Some employers also allow you to purchase additional coverage. Keep in mind that this coverage is typically not portable and you can usually only get it with a medical exam at the time you’re first offered coverage. • Even if you have group long-term disability, your coverage is most likely less than you think it is. A supplemental policy can provide you with a significant amount of additional coverage. • The majority of group plans pay a pre-tax benefit, which means that any benefits are subject to income tax when you collect them. • There is usually a maximum monthly benefit. • Bonuses and commissions typically are not covered. Every disability insurance policy has certain core parameters that differ from company to company.

You should become familiar with some of the common terms and phrases used in disability insurance policies:

Benefit Amount. This is the maximum monthly benefit for your policy. The worksheet below will help you determine your need. Occupational Disability Definition. The definition of disability is the most important part of the policy because everything else stems from it. Some policies pay benefits only if you are unable to perform the duties of any occupation for which you are reasonably qualified by training, experience, and education. However, depending on the definition of disability being used, the own occupation rider is usually not necessary and can significantly add to your premium. Elimination Period. This is the number of days you must pay for covered services before the insurance company will make payments. It is also known as a “waiting” period, and is comparable to a deductible. Benefit Period. This is the length of time for which your benefit will be paid. This is usually a set number of years (example: 5 years) or to age X (such as to age 65). Most policies allow a policy holder to continue the coverage past age 65 with a decreased benefit period of 1 or 2 years. R4

What Insurance Do I Need (Advanced)

Lesson Activity: Calculate Group Disability Coverage Instruct students to complete the Calculate Group Disability Coverage Activity in their Student Guides.

For group disability coverage, here’s how to calculate current coverage and how much additional individual disability insurance coverage may be available to you.

4. Multiply your current annual gross income by the percent of salary provided by your policy $______(a) 5. Enter your estimated income taxes that will be due on your after-tax, long-term disability benefit (usually 35-40%) $______(b) 6. Subtract (b) from (a). This is the value of your current group disability coverage $______(c)

An individual disability program will usually need to replace about 70%+ of your after-tax income.

Lesson Explanation: Policy Riders Explain that most insurance policies have riders, or extra options, which you can choose to augment the policy. Some common riders: • Non-cancelable (guarantees against future premium increases) • Residual or partial disability rider • Extended/transition benefit • Cost income provision, cost of living adjustment • Future increase option • Catastrophic disability benefit rider • Supplemental social insurance rider.

Most policies are guaranteed renewable. THIS IS VERY IMPORTANT.

“Guaranteed Renewable” guarantees that the insurer cannot terminate the policy as long as the premiums are paid, and the insured doesn’t have to reapply at any point to continue coverage. Premiums cannot be raised based on an individual’s circumstances. However, they can be increased for an entire class of policyholders. No other aspect of the policy can be changed.

Risk Management & Insurance

Lesson Explanation: Long-Term Care Insurance Long-Term Care Insurance coverage pays for expenses that are not covered by health insurance and/or Medicare. Here are some facts about long-term care insurance:

• Fifty percent of all Americans age 65 and older will require some type of long-term care assistance (California Partnership for Long Term Care Comprehensive Brochure, August 2004). • Nursing home care is expensive. The 2010 average daily rate in the U.S. for a private room in a nursing home was $206 ($75,190 annually) and a semi-private room is $185 a day (Genworth Financial 2010 Cost of Care Survey). • During the last 20 years, nursing home rates have increased at an average over 5% per year; they are likely to increase at the same rate in the future. • Thirty-five percent of people who enter a nursing facility stay between one and five years (National Center for Policy Analysis, A Long-Term Solution to a Medical Problem, 11/17/1995: 2004 National Nursing Home Survey) • Twenty-one percent of people in nursing facilities remain for more than five years (California Partnership for Long Term Care, 2005). • The average length of time people spend in a nursing home is 2.4 years (MetLife Market Survey of Nursing Home and Assisted Living Cost, 10/2007). How much long-term care insurance do you need?

Explain that the amount of long-term care insurance people need depends on whether or not they can go without insurance (self-insure) as well as how much the daily cost of care will be where they live. Students should estimate what they may need and their amount of other assets, and balance those with a premium that they can afford (even if increased by 25%).

What about Medicare? Medicare only pays for skilled care in a nursing facility for a short period – no longer than 100 days – and only if the patient meets all of Medicare’s requirements for receiving daily skilled care. Medicare does not cover long-term custodial care or in-home care.

Determine if the policy pays on an indemnity basis (a specified amount to the policyholder up to a daily maximum or monthly maximum regardless of the actual cost of care). Example: If $150 in daily medical charges is incurred and the policy has a $200 daily payout, the insured can use the extra $50 for any qualifying expenses.

What Insurance Do I Need (Advanced)

Every long-term care insurance policy has certain core definitions and parameters that can differ from company to company.

Explain that long-term care policies allow you to customize the various components to fit your needs and budget. It’s important to understand each of these components and if it fits your financial plan. Components vary in definition from company to company. When comparison shopping, the components should be the same so you get as close as possible to an “apples-to- apples” comparison.

• MAXIMUM DAILY (OR MONTHLY) BENEFIT. The maximum specified dollar amount that will be paid on a daily basis for services covered under a policy. Research facilities and services in the area you plan to live during retirement to find out the current daily cost of care. • ELIMINATION PERIOD. The number of days that you must pay for covered services before the insurance company will make payments (also known as a waiting period; comparable to a deductible). Policies have different definitions for elimination period. • BENEFIT PERIOD. The number of days for which benefits will be paid. Most current policies allow you to carry over unused benefits. For example, if you are using half of your daily maximum benefit, your benefit period would be twice as long. • INFLATION RIDER. An inflation rider increases your benefit to keep pace with inflationary increases in the cost of long-term care. Typically options are none, 5% simple and 5% compound. • OTHER RIDERS. Other riders include assisted living benefits, survivorship benefits, restoration of benefits and non-forfeiture benefits. • DISCOUNTS. Always ask what discounts are available. Common discounts are for Preferred Health & Marital/Couples Discount. Companies will usually offer a discount to married couples, couples that share a child, and domestic partners.

Lesson Explanation: Property Insurance Property or homeowner’s insurance pays claims for damages to your home, garage, and other outbuildings, as well as for loss of furniture and other personal property due to damage or theft (both at home and away from home). In addition, homeowner’s insurance pays for additional living expenses if you rent temporary quarters while your house is being repaired.

Review the information on what homeowner’s insurance usually covers.

• Most homeowner’s policies will not protect you from a flood, a hurricane, or an earthquake loss. You may be able to purchase coverage for these contingencies by R4

Risk Management & Insurance

adding an earthquake or flood endorsement to your insurance policy, or through the National Flood Insurance Program (NFIP). • Homeowner’s insurance also includes liability for bodily injury and property damage that you may cause to others through negligence, for accidents happening in and around your home, or accidents happening away from home for which you are responsible. • Homeowner’s insurance also pays for any injuries occurring in and around your home to anyone other than you or your family. Medical payments coverage also pays claims for injuries outside your home that you, a family member living with you, or your pet cause.

• Homeowner’s policies generally provide limited coverage for money, gold, jewelry, and stamp and coin collections. Be sure to ask about exclusions. Many property policies on the market today exclude certain types of damage. Ask the insurer, agent or broker exactly what causes of loss and what items are NOT covered. If you want full coverage, make that clear to the insurance company at the time of writing. Ask whether the policy excludes or limits coverage for damage due to water, earthquakes, earth movement, mold, construction defects, or other common perils. Take good notes and store the information in a safe place. Umbrella policies. You can add more personal liability with a stand-alone “umbrella” policy. This is a cost-effective way to increase your liability coverage by $1 million or more, in case you are at fault in an accident or someone is injured on your property. It supplements the insurance you already have for home, auto, and other personal property.

Lesson Explanation: Choosing the Right Agent Explain to students that while much of their health, life, and disability insurance may be covered through employers, they will be responsible to choose automobile insurance. And people who are unemployed or self-employed must shop for all types of insurance coverage that they need. Choosing an insurance agent to help explain all the available options is a good idea.

Many people choose insurance based on the cheapest rates. But going for the lowest rate can actually cost more in the long run for those who select a substandard company that doesn’t come through when they need it. Pick an established insurance company with competitive rates, one that offers all types of insurance (auto, home, renter’s, and life).

Find an experienced agent who knows the business inside and out and has a proven track record. A knowledgeable agent can help pick the best insurance to protect both you and your bank account. You won’t pay any more by going through an agent than you would buying direct. R4

What Insurance Do I Need (Advanced)

Lesson Explanation: Monitoring your Policies Life changes. It’s important to monitor all your insurance policies to make sure they still fit your current situation, especially if you’ve had a major life change (such as a change in income or a new dependent). Monitoring Disability Insurance EXCLUSIONS. Sometimes a disability excludes a certain illness or injury. The exclusion can be removed after a certain period. For example, if you have knee surgery, the insurance company may exclude any disabilities related to the knee for a certain period of time. However, the insurance companies usually do not remove an exclusion automatically; you must request removal. CHANGE IN EMPLOYER. Have you gained or lost your group long-term disability coverage, or is it the same? CHANGE IN INCOME LEVEL. Has your income increased or decreased? Your disability benefit should be adjusted accordingly either by increasing coverage or decreasing coverage. FUTURE PURCHASE (OR INCREASE) OPTIONS. Do you have these options? When are they available and are you eligible? Know the terms and make sure to take advantage if you are eligible. The insurance company typically will notify you, but there is no guarantee that they will do so. Monitoring Long-term Care Insurance Find out the types of care covered under your policy. Many older, long-term care policies did not pay for any type of home care or relatively newer types of care like adult day care. Review the options to consider if you receive a premium increase.

1. Do nothing. Keep everything as is and pay the new premium. • Can you afford this new premium? • Are the benefits still worth the extra premium? 2. Adjust different components of the policy to reduce the premium. Ask yourself if you make any of these changes to the policy, will the coverage still be worthwhile? • Reduce the daily benefit amount • Increase the waiting period • Shorten the benefit period • Change your inflation rider – if you have a compound inflation rider, can you change a simple inflation rider? Can you reduce the inflation rider percentage (for example, from 5% to 4%)? • Change/remove other riders. R4

Risk Management & Insurance

3. If your policy has a contingent, non-forfeiture benefit, consider taking it if you cannot afford the premiums (provides a paid-up, reduced pool of benefits). 4. Cancel the policy.

Monitoring Property (Homeowner’s) Insurance Raising your deductible is the best way to keep your premium affordable without reducing your protection.

Review the options for reducing one’s premium:

Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.

• Ask your insurance agent about discounts. You may be able to get a lower premium if your home has safety features such as deadbolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material. Persons over 55 years of age or long-term customers may also get discounts. • Insure your house, NOT the land under it. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner's insurance to buy, you will pay more than you should. • Act now. Don’t wait until you have a loss to find out if you have the right type and amount of insurance. • Get replacement coverage, not an “actual cash value” policy. Make certain you purchase enough coverage to replace what is insured. An "Actual Cash Value" policy is cheaper but pays only what your property is worth at the time of loss – your cost minus depreciation for age and wear. • Ask about special coverage. You may have to pay extra for computers, cameras, jewelry, art, antiques, musical instruments, stamp collections, etc. Remember that flood and earthquake damage are not covered by a standard homeowner’s policy. The cost of a separate earthquake policy will depend on the likelihood of earthquakes in your area.

Homeowners who live in areas prone to flooding should take advantage of the National Flood Insurance Program. For more information on homeowner’s insurance in your state, contact your state insurance regulator. Shopping around can save you hundreds of dollars a year.

What Insurance Do I Need (Advanced)

Lesson Questions 1. In an insurance policy, an exclusion is: a. A cause of loss that is always covered by the policy. b. A cause of loss that is not covered by the policy. c. A special type of coverage. d. A type of coverage that changes over time. 2. What is an “umbrella” policy? a. An insurance policy that covers properties you own. b. An insurance policy that provides coverage in the event of death. c. An insurance policy that provides additional coverage on the insurance policies you already have. d. An insurance policy that protects your assets and exists in the form of a will or trust. 3. What does long-term care insurance cover? a. Your income if you are unable to work for an extended time. b. Your loved ones in the case of your death. c. Health expenses for retirees that are not covered by health insurance or Medicare. d. An accident that occurs due to your negligence.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Lesson Closing  Discuss students’ answers to the Essential Questions.

Risk Management & Insurance

How Insurance Policies Work

Duration  20-40 minutes

Lesson Overview  In this lesson, participants will build understanding about the details of insurance policies. Students will learn about deductibles, premiums, and other important facets of insurance policies.

Big Idea  Different types of insurance have different costs and protections.  There are organizations and professionals that can assist you with your insurance needs.  Insurance should be modified as your needs change.  Financial decisions align with your financial plan and risk tolerance.  Insurance can protect your personal finances.

Essential Questions At the end of the lesson, students should be able to answer the following:

 What is an insurance policy?  What is an insurance premium?  What is a deductible?  What is the difference between liability, collision, and comprehensive auto insurance?

Skills  Knowledge of the details of insurance policies and premiums, and the ability to make informed policy decisions.

Vocabulary  Insurance premium, the payment made to an insurance company in exchange for an insurance policy guaranteeing protection or coverage on the insured item.  Deductible — amount of loss you pay out of pocket to the insurance company on a damaged item.  Insurance policy —a contract that describes the terms and conditions of insurance, including type and amount of coverage, premiums, and deductibles.  Coverage limits — maximum amount paid by the insurance company on a given claim.

How Do Insurance Policies Work?

Anticipatory Set Instruct students to answer the following question in the Warm-Up Activity in the Student Guide: What are three reasons why you need to have insurance on a vehicle? Facilitate a brief discussion.

Lesson Explanation Many people just choose an insurance company based on the lowest premium, but going cheap could actually cost you more in the long run. It’s important to choose an established insurance company with competitive rates; one that offers all types of insurance (auto, home, life) and that knows the business inside and out.

It’s also important to look for an experienced agent with a proven track record. • A knowledgeable agent can help you pick the best insurance to protect you and your bank account. • Once you find an agent with whom you’re comfortable, it’s important to understand the elements of insurance. Ask, “What is an insurance policy?” Definition: An insurance policy is a contract that describes the terms and conditions of insurance, including type and amount of coverage, premiums, and deductibles.

Ask, “What is a premium?” Definition: An insurance premium is the payment made to an insurance company in exchange for an insurance policy guaranteeing protection or coverage on the insured item.

Explain that all insurance policies include both the actual policy and the premium. This defines the coverage and the amount you will pay for the coverage.

There are two other aspects of insurance policies students need to be aware of before purchasing: deductible amounts and coverage limits.

Definition: The deductible is the amount of loss you pay out of pocket to the insurance company on a damaged item. • If you get in a car accident and have $4,000 in damage and a $500 deductible, the insurance company will pay everything but $500. • The $500 is your responsibility. Definition: Coverage limit is the maximum amount paid by the insurance company on a given claim. • Example: Your insurance covers only $50,000 in damages and you have $60,000 in damages. • The company will only pay up to the coverage limit. R5

Risk Management & Insurance

Explain that EVERY insurance policy contains a deductible and coverage limits. Even medical insurance policies contain these elements.

• For example, medical coverage usually has a co-pay, which is similar to a deductible – it is the out-of-pocket expense you must pay when you see a doctor. • Many health insurance policies only pay up to a certain amount (coverage limit) on various medical procedures. For example, if your insurance company only covers $5,000 toward the birth of a child, then you must pay the rest because you have reached the coverage limit. There are three basic types of automobile insurance: • Liability • Collision • Comprehensive Explain the differences between liability, collision, and comprehensive insurance.

Liability Insurance insures the driver for the cost of any damage or injury caused to someone else during an accident. Liability is the type of insurance states require drivers to carry, and it is a State law in the majority of states in the U.S. Collision Insurance pays to repair or replace the policyholder’s vehicle, and may cover bodily injury to the policyholder in case of an accident. Comprehensive Insurance covers other types of damage to the vehicle besides collisions, such as animal hits, fire, theft, flood, or vandalism. A main difference between these types of insurance is the policy coverage limits. Many automobile insurance companies also will cover bodily injury, property damage, uninsured motorist, and underinsured motorist. The policy will describe individual coverage limits for each type of coverage.

Explain the differences in coverage between liability, collision, and comprehensive insurance to the students: • Three numbers describe liability insurance, such as 50/100/25. These numbers refer to the amount of coverage usually covered by the policy. • For example, 50/100/25 coverage means $50,000 for bodily injury to a single individual / $100,000 for total bodily injury to everyone in an accident / $25,000 for property damage. Collision insurance tends to have higher coverage limits and may include property damage, bodily injury, uninsured motorist, and underinsured motorist. Some policies cover rental car service while your car is being repaired.

How Do Insurance Policies Work?

• Comprehensive insurance will have a separate coverage limit and a separate deductible. • The lower the deductible, the higher your premium will be. Explain that automobile coverage is similar to property insurance coverage, as they both cover medical and property damage.

Renter’s insurance policies have coverage limits, premiums, and deductibles, too. However, renter’s insurance coverage limits pertain to personal property. Examples: electronics; personal clothing; furniture; appliances.

Deductibles and premiums work the same with a renter’s insurance policy as they do with health and automobile insurance.

Lesson Activity: Get the Specifics Direct students to the Get the Specific Activity in the Student Guide and have them look through the two sample insurance policies provided. Instruct students to circle on each policy (1) the coverage limits, (2) the premium amount, and (3) the deductible. Discuss their choices briefly, then ask:

• Why it is important to know about premiums, coverage limits, and deductibles? • How does this knowledge improve financial literacy? Facilitate discussion.

Risk Management & Insurance

Date (MM/DD/YYYY) ACORD™ CERTIFICATE OF LIABILITY INSURANCE 05/22/2004 PRODUCER FAX THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMAITON ONLY AND CONFERS Very Best Insurance Agent NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. 555 1st Street INSURERS AFFORDINGT COVERAGE NAIC # Anytown, CA 99999 INSURED INSURER A:_Fly By Night Ins Company______Intelligent Policyholder INSURER B:______INSURER C:______123 Main Street INSURER D:______

Anytown, CA 99999 INSURER E: COVERAGES THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED NOT WITHSTANDING ANY REQUIREMENT, TERM, OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS, AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INS ADDL TYPE OF INSURANCE POLICY NUMBER POLICY EFF POLICY EXPIRATION LIMITS LTR NSRD DATE (MM/DD/YY) DATE (MM/DD/YY) GENERAL LIABILITY EACH OCCURRENCE $ 1,000,000 ABC XYZ 01/01/2004 01/01/2005 DAMAGE TO RENTED PREMISES  COMMERCIAL GENERAL LIABILITY (ea occurrence) CLAIMS MADE  OCCUR $ 50,000 MED EXP (any one person) $ A ______PERSONAL & ADV INJURY 5,000 $ 1,000,000 ______GENERAL AGGREGATE $ 2,000,000 GEN’L AGGREGATE LIMIT APPLIES PER PRODUCTS COMP/OP AGG_____ $ 2,000,000 POLICY PROJECDT LOCATION AUTOMOBILE LIABILITY ABC XYZ 01/01/2004 01/01/2005 COMBINED SINGLE LIMIT  ANY AUTO (ea accident) $ 1,000,000  ALL OWNED AUTOS BODILYINJURY $ (per person)  SCHEDULED AUTOS A BODILY INJURY $  HIRED AUTOS (per accident)  NON-OWNED AUTOS PROPERTY DAMAGE $  ______(per accident) ______GARAGE LIABILITY AUTO ONLY – EA ACCIDENT $ ANY AUTO OTHER THAN EA ACC $ AUTO ONLY AGG $ EXCESS/UMBRELLA LIABILITY ABC XYZ 01/01/2004 01/01/2005 EACH OCCURRENCE $ 1,000,000 OCCUR CLAIMS MADE AGGREGATE $ 1,000,000 A $ DEDUCTIBLE $ RETENTION WORKERS COMPENSATION AND EMPLOYERS’ WC STATU- OTHER LIABILITY TORY LIMITS $ ANY PROPRIETOR, PARTNER, EXECUTIVE, OFFICER, EL EACH ACCIDENT $ MEMBER EXCLUDED? EL DISEASE - EA EMPLOYEE $ If yes, describe under EL DISEASE – POLICY LIMIT $ SPECIAL PROVISIONS below OTHER ABC XYZ 01/01/2004 01/01/2005 $500,000 - $1,000 Deductible A Props / Sets / Wardrobes Loss of Use $20,000 – 48 hour Deductible All Risk, Replacement Cost DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES / EXCLUSIONS ADDED BY ENDORSEMENT /SPECIAL PROVISIONS

Certificate holder is named as Additional Insured as respects General Liability and Automobile Liability including form #CA9947 and Loss Payee as respects Props, Sets, and Wardrobes, and Loss of Use, rented/leased to the named insured.

CERTIFICATE HOLDER CANCELLATION SHOULD ANYOF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION ABC Rental Company DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL ______DAYS 987 Oak Avenue WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT. BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE Anytown, CA 99999 INSURER, ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENTATIVE

How Do Insurance Policies Work?

PROTECTORS FIRE & CASUALTY CO.

THIS IS NOT A BILL POLICY NUMBER 10-91-8880-4 HOMEOWNERS RENEWAL DECLARATIONS POLICY

NAMED INSURED AND MAILING ADDRESS: POLICY PERIOD: SMITH, JOE AND JANE 1201 A.M. STANDARD 1234 OAK STREET TIME AT THE INSURED RESIDENCE HOMETOWN, FL 12345-6789 FROM: 6/1/06 TO: 6/1/07 THE RESIDENCE COVERED BY THIS POLICY IS LOCATED AT THE ABOVE ADDRESS UNLESS OTHERWISE INDICATED

PROTECTORS FIRE & CASUALITY COMPANY RENEWAL CERTIFICATE P.O. BOX 12345 PREPARED MAR 11, 2006 BOSTON MA 01234 DATE DUE PAY AMOUNT 6/1/06 $479.53 IF YOU HAVE MOVED, PLEASE CONTACT YOUR AGENT FULL PAYMENT BY DATE DUE EXTENDS POLICY PERIOD TO JUNE 1, 2006 COVERAGES / LIMITS SECTION I A DWELLING $100,000 POLICY NUMBER OTHER STRUCTURES $10,000 10-91-8890-4 B PERSONAL PROPERTY $50,000 C LOSS OF USE ACTUAL LOSS SUSTAINED

DEDUCTIBLES—SECTION I COVERED LOSS $500

MORTGAGEE: TRUST BANK HURRICANE: SPECIAL 2V DEDUCTIBLE P.O. BOX 000 THIS POLICY CONTAINS A SEPARATE DEDUCTIB TALLAHASSEE FL FOR HURRICANE LOSSES, WHICH MAY RESULT IN 34567-8910 HIGH OUT-OF-POCKET EXPENSES TO YOU.

FORMS, OPTIONS AND ENDORSEMENTS: SECTION II SPECIAL FORM 3 PP-7923 L PERSONAL LIABILITY $100,000 JEWELRY AND FURS $2,500/$5,000 OPT JF DAMAGE TO PROPERTY SILVERWARE THEFT $5,000 OPT SILG OF OTHERS $500 HOME COMPUTER $10,000 OPT HC M MEDICAL PAYMENTS $1,000 REPLACEMENT COSTS/CONTENTS OPT RC TO OTHERS (EACH PERSON)

SPECIAL DISCOUNTS: SMOKE DETECOTRS DEAD-BOLT LOCKS FLORIDA-SPECIFRIC ENDORSEMENTS FIRE EXTINGUISHERS SINKHOLD FL 7210.4 BURGLAR ALARM ORDOMAMCE;AW FE 7310.4 APPROVED STORM SHUTTERS TOTAL DISCOUNTS: 20% OR $176 PER YEAR SURCHARGES (REQUIRED BY FLORIDA LAW): EMERGENCY MANAGEMENT SERVICES $2.00 FLORIDA HURRICAN CATASTROPHE FUND $4.53 Thanks for letting us serve you … Agent: BROWN, BONNIE Telephone: 904-555-1234

Risk Management & Insurance

Lesson Questions 1. The amount of loss you pay out-of-pocket to the insurance company on any damages to goods is called: a. A premium. b. A deductible. c. A policy. d. The coverage. 2. Coverage limits apply to which kind(s) of insurance policies? a. All policies b. No policies c. Health policies only d. Automobile policies only.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

Insurance Claims

Duration  10-40 minutes

Lesson Overview  In this lesson, students will get an overview of the insurance claim process to help them develop understanding of the insurance industry and what’s involved in filing a claim.

Big Idea  Your ability to understand contracts will impact your financial decisions.  Financial risks can be managed through financial planning.  Contracts impact your financial decisions.  Insurance can protect your personal finances.  There are organizations and professionals that can assist you with your insurance needs.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are insurance claims?  What are some important elements of insurance claims about which you should be aware?  How can insurance adjusters affect an insurance claim?

Skills  Knowledge about insurance claims and how they relate to insurance coverage and policies.

Vocabulary  Insurance claim  Insurance adjuster

Anticipatory Set Instruct students to answer the following question in the Warm-Up Activity in the Student Guide. What is an insurance claim? Discuss what this means and how it is important to know what this means. Definition: An insurance claim is a request made by an insured person to reimburse damages incurred that are covered by the person’s insurance policy.

Risk Management & Insurance

Lesson Explanation Explain insurance claims to students, and discuss how an insurance claim progresses from the incident to review by an insurance representative.

Some people think submitting an insurance claim is a smooth and easy process. But that may not always be true. You may think — since you pay your premiums — that you’re entitled to quick access to the money you’re owed for damages.

That’s not true.

You must follow a process and take certain measures to obtain any money the insurance company owes on a claim.

Explain that an insurance claim is a paper request presented to the insurance company requesting reimbursement or payment of damages.

When a claim is made to an insurance company, the insured person filing the claim must make a written and/or verbal statement to the company. • The statement must include details about the incident and justify why the insurance company should get involved in the payment process. • The statement is a crucial piece of the claim, as most companies use the statement to determine eligibility for payment. • Some companies are in the business of paying as little money as possible on a claim. The insured person must submit written records of all financial expenses involved with the claim.

• You must submit all receipts for items purchased or bids/estimates of how much the damaged item will cost to repair. • If you submit records incorrectly, the insurance company will find a reason to pay you less (or not at all). Be truthful at all times. If you lied on your insurance application or during the claims process, your claim will be denied. Disclose all information truthfully.

If the person making the claim passes all requirements of the claim process, his or her claim may be paid. However, it is important to realize that claims often are denied because insurance companies are trying to cut down on expenses.

• It is important to get legal counsel or have a trusted advisor who knows how to work effectively with insurance companies. • Take careful notes and document everything to stay aware of the status of the claim process at all times. R6

Insurance Claims

Lesson Activity: Insurance Claims Direct students to the Insurance Claims Activity in the Student Guide. Explain that the point of the activity is to give students an idea of the insurance claims process.

• Divide students into pairs. • Assign one of the roles to each student. • Have students role-play, using their assigned roles. • Let students alternate roles to get both the insurance company’s and the policyholder’s perspectives. • Review and discuss their thoughts about the claims process.

ROLE-PLAY ROLES: INSURANCE AGENT You must take a statement about the car accident and be very critical of the policyholder. The agent acts in the best interest of the company, meaning their goal is NOT to pay claims to save money. The agent is trying to get a job promotion and knows that the company wants to pay the minimal amount possible. The agent in this case only wants to award the policyholder $1,900 total although the repairs look like they will cost $4,275. POLICYHOLDER You were rear-ended on the freeway and the driver fled the scene. You were driving carefully and being cautious and you have never had a prior accident. You documented the whole incident, filled out and obtained a copy of the police report, and are now trying to file a claim to get your car fixed. You have received three quotes that average $4,275. The insurance agent only wants to pay $1,900.

Risk Management & Insurance

Lesson Questions 1. Which of the following statements is true about insurance claims? a. The claim process is easy and smooth. b. The insurance company’s payment to you has an impact on the company’s profits, so some companies may try to avoid paying your claim. c. The details of the incident are insignificant in the claim process. d. It is important to disclose as little information as possible when you request payment. 2. Which of the following is a likely reason why many insurance claims are denied? a. Insurance companies do not deny claims. b. The deductible is paid by the insurance company. c. The insurance company is trying to cut down expenses. d. None of the above.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

Choosing an Insurance Company

Duration  20-40 minutes

Lesson Overview  In this lesson students will gain knowledge of how to evaluate the standards and professional qualifications of insurance companies and agents.

Essential Questions At the end of the lesson, students should be able to answer the following:

 Why should I obtain a financial strength rating for an insurance company with which I am considering doing business?  What other questions should I ask to evaluate an insurance company?  What credentials should I look for in an insurance agent?

Skills  Knowledge of how to assess the quality of an insurance company and/or agent.

Vocabulary  Insurance ratings agencies –Agencies that evaluate the financial strength of insurance companies.

Anticipatory Set Instruct students to answer the following question in the Warm-up Activity in their Student Guides: • What are some ways to evaluate an insurance company? Discuss their answers.

Risk Management & Insurance

Lesson Explanation: Rating Agencies Determining the financial strength of an insurance company you’re considering doing business with is highly important because an insurance policy is a long-term commitment. Assess company strength by looking at rating agency assessments of any companies you are considering. Rating agencies evaluate insurance companies by examining their financial condition and operating performance, using specific criteria.

• The ratings agencies assign ratings of a company’s financial strength and ability to meet obligations to policyholders. • Insurance companies are rated by these third-party agencies on a regular basis and the agencies offer their ratings and analysis online for free. However, some insurance companies are not rated by all the rating services. • There are four main rating agencies, and each agency’s rating system varies in stringency and methodology. All the agencies consider a company’s financial leverage, management stability, recent performance, overall financial health, and external factors such as competition, diversification, and market presence. The websites for the top four rating agencies are provided in the Student Guide.

Websites for the Top Four Rating Agencies

AM Best ...... www.ambest.com Fitch...... www.fitchratings.com Moody’s ...... www.moodys.com Standard & Poor’s ...... www.standardandpoors.com

A good rule of thumb is simply to identify the top-rated companies that offer the particular type of policy you want. Don’t worry too much about the details. An insurance company with a top rating from at least three of the four agencies is in great standing. Here are some other considerations:

• Does the insurance company hold itself to official ethical standards? Each carrier adheres both to its own ethical practices and to basic guidelines dictated by each state’s respective insurance department. (Find a directory of each state’s insurance department at www.naic.org.)

Choosing an Insurance Company

• How many complaints – and of what nature – are filed against the company in question? Most insurance carriers won’t have a spotless record, but some are worse than others. Each state’s department of insurance maintains data on the number of complaints filed against an insurance company, as well as pending class-action lawsuits. To find your state’s Department of Insurance, go to the website of the National Association of Insurance Commissioners (NAIC) at www.naic.org. Also, run an online search for the company name to find out if negative comments exist on unofficial review sites

Lesson Activity: Get an Agency’s Rating Instruct students to complete the Get an Agency’s Rating Activity in their Student Guides.

NOTE: This activity is designed to be done on a computer with access to the Internet. If you are in a setting with no computers or Internet access, this activity may be assigned as homework.

1. Conduct an online search for a company that sells a particular kind of insurance in your area by entering in your browser search box the term “[type] insurance [your city] [your state].” Examples: auto insurance Mapleton, Illinois; health insurance Los Angeles California”.

2. Next, choose three insurance companies listed in the first page of your search results. Choose companies with which you already do business, ones you have heard of, or ones indicated as having good reviews (for example, on Yelp or Google Reviews).

3. Then go to the A.M. Best Company’s consumer insurance page at http://www3.ambest.com/consumers/. At the top of the page you will see a search box with the question, “How Does Your Insurer Rate?”

4. Enter the name of one of the insurance companies you obtained in your earlier search results and click the “Find” button. The website will bring up the Standard & Poor’s financial strength rating for that insurer.

5. Repeat the process for your other two companies.

You should choose a company with at least an “A” rating to meet your insurance needs.

Risk Management & Insurance

Lesson Explanation: Choosing an Agent Insurance is complex. Paying an experienced professional a reasonable commission and/or fee to find you the right policy and company to suit your specific needs may be worth the money. Working with a qualified insurance adviser gives you an objective opinion and helps you weed through the options. However, if you are comfortable with your understanding of your needs and the products available, going to a website that offers comparisons can work. Keep in mind that companies offer the same premium no matter how you buy the policy – through an agent or on a website.

• Choose an advisor who represents multiple companies. If an agent represents only one company, he or she can offer you only that company’s products – which may not necessarily the best products in the marketplace or the best for your personal needs. • The policy you buy through an agent or broker will include a commission based on the total premium for the policy. Ask questions to make sure the commission and/or fee is reasonable. Beware of paying both a fee and commission. You can negotiate fees, and sometimes commissions are negotiable, too.

REMEMBER Becoming educated helps you get the right insurance for your needs. You are in charge. It’s your money. If what’s offered is not absolutely right for you, say, “No!”

STATE COMPLIANCE Any person selling insurance must be licensed. Just like an attorney who has to pass the bar exam in any state where he/she intends to practice, insurance salespeople are required to pass an exam administered by each state’s department of insurance, as well as to enroll in continuing education seminars on a regular basis.

• The representative you ultimately select must be licensed in the state where you, the insured, either work or live. • Find a directory of state departments on www.naic.org.com. • The resources and compliance standards within state insurance departments are more lax in some states than in others. R7

Choosing an Insurance Company

• On most state insurance departments’ websites you can research whether an insurance representative is licensed.

PROFESSIONAL DESIGNATIONS Life insurance agents may earn professional designations, including • Chartered Life Underwriter (CLU) and • Life Underwriter Training Council Fellow (LUTCF). Agents who are also financial planners might have credentials like • Chartered Financial Consultant (CFC), • Certified Financial Planner (CFP), or • Personal Financial Specialist (CPA–PF). These designations indicate advanced training and passing rigorous exams. They let you know the agent is serious about professional development.

• CLU is the only designation that specifically focuses strictly on life insurance and is by far the most comprehensive in the life insurance arena. • A Chartered Property Casualty Underwriter (CPCU) can help with topics related to homeowners and auto insurance. INSURANCE TIPS

• Shop around and be sure you understand the basis for any rejection or modified premium you encounter. • Check rating services to learn the financial stability of companies you are considering. • Choose the appropriate type and amount of insurance for your property and lifestyle. Be sure you are fully covered for disability, long-term care, flood, earthquake, etc., but cut unnecessary riders and review your policies annually. • Be honest when filling out your application. If you fib or omit anything, your entire policy may be voided, usually at claim time. • Take advantage of discounts such as multiple policy discounts, home safety, low mileage discount, marital discounts, and preferred health reductions. • Read your policy carefully. Make sure you fully understand your policy and all its terms. • Cover yourself. Be aware that premium notices may not always reach you in the mail. Save copies of your insurance policies, notes from conversations with your insurance agent/broker, and other important documents in a safe location. Store electronically or keep copies outside the home.

Risk Management & Insurance

• Reduce your risks. Some ideas include o Quit smoking o Eat healthfully and exercise regularly o Perform household maintenance that reduce hazards such as fire hazards or potential water damage. o Drive safely (watch your speed and avoid tailgating)

• Pay your premiums more frequently to reduce total cost. • Increase your deductible. Generally you’ll see significant savings if you pay more out-of- pocket when you make a claim.

Lesson Questions 1. The four insurance ratings agencies rate an insurance company’s . a. License status. b. Available discounts. c. Compliance with state laws. d. Financial strength. 2. What must insurance salespeople do to remain compliant with state laws? a. Pass a licensing exam and take ongoing professional development courses. b. Register with the four ratings agencies. c. Earn important professional designations. d. Eat a healthy diet and exercise regularly. 3. Besides financial stability, which of the following is an important consideration when choosing an insurance company? a. Its long-term commitment to the community. b. Its adherence to ethical standards of practice. c. Whether its stock is publicly available. d. Its marketing strategies.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Lesson Closing  Discuss students’ answers to the Essential Questions.

How to Reduce Your Risk

Duration  10-30 minutes

Lesson Overview  Students will learn how to reduce overall risk in financial situations, including insurance. They will also build understanding of preventive measures that help people avoid insurance claims and financial risk.

Big Idea  Financial risks can be managed through financial planning.  There are different ways an individual can protect themselves from fraud.  Insurance should be modified as your needs change.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is risk analysis?  How do you reduce your financial risk?  Why is it important to try to reduce your risk?

Skills  Ability to reduce overall financial risk.

Vocabulary  Risk analysis  Financial risk  Risk prevention  Risk reduction

Anticipatory Set Instruct students to answer the following question in the Warm-Up Activity in the Student Guide. What is risk? Definition: Risk is the possibility of loss or damage to something. Relate discussion to understanding financial risk.

Risk Management & Insurance

Lesson Explanation While it’s important to have insurance to provide security if something happens, it’s also important to understand risk and to make efforts to reduce your risk.

Ask, “Why do you think it’s important to reduce risk?” Listen to responses and discuss students’ answers.

Explain that it’s important to reduce risk because it saves money in the long run. • For example, if you are a lower risk to insurance companies your insurance will cost less. • If you have a lot of speeding tickets, you are considered high-risk and will pay more than a low-risk person who has no speeding tickets. • Demonstrate that if you save money for emergencies out of each paycheck, you reduce your financial risk if you become temporarily unemployed or switch jobs. Tell students that if they strive to live lives where they always try to reduce risk, they will save time and money long-term. • For example, if you make a point always to be punctual at work, you will probably be punctual everywhere. • Being punctual at work increases your job security, and your friends will be happy that you’re always on time to social events. Here are some ways to reduce risk of unemployment: • Continue your education through college and/or professional development. • Save money for emergencies. • Be punctual and professional on the job. These steps reduce your risk of unemployment, and allow you to “live to work” rather than “working to live.”

Talk about ways to reduce risk while driving: • Never talk on the phone or text while driving. Not only is it against the law in most areas, you are driving a ton of metal at lethal speeds! Distractions should be minimized if not eliminated for your sake as well as other’s. • Adhere to all rules of the road. • Don’t speed, cut people off, etc. Explain that the point is always to be aware of safety and take every opportunity to reduce risk. Reduce risk, and you save time and money. You will become more financially independent over time.

How to Reduce Your Risk

Lesson Activity: Reducing Financial Risk Direct students to the Reducing Financial Risk Activity in the Student Guide, and instruct them to write down ten ways they can reduce risk. Encourage students to think of reasons relevant to driving, working, and saving money.

When students have completed the activity, have them share their steps toward reducing risk.

Lesson Questions 1. How will reducing your risk in the eyes of insurance companies benefit you? a. You will receive lower insurance rates. b. The insurance companies will pay out more. c. You will be less subject to accidents. d. You will be able to pay any amount of damage. 2. What is risk-based pricing? a. The cost of the deductible and premium added together. b. The amount of money the insurance company pays toward your claim.

c. Basing your insurance price on the risk you pose to the insurance company. d. All of the above.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

Risk Management & Insurance

Estate Planning

Duration  30 – 40 minutes

Lesson Overview  Students will receive an overview of the estate planning process and take the first steps toward developing an estate plan.

Big Idea  Creating an estate plan with one’s family guides decisions about where a person’s possessions will go if he or she passes away.

Essential Questions At the end of the lesson, students should be able to answer the following:

 What is a will?  What is a trust?  What are the steps that should be included in the estate planning process?

Skills  Knowledge of the estate planning process.

Vocabulary  Will – a document specifying how a person’s assets will be distributed upon that person’s death.  Trust – an arrangement where a trustee holds legal title to a property for a beneficiary.  Probate – the process of administering a person’s estate when there is no will or trust in place.

Anticipatory Set Have students answer the Warm-up Activity question in their Student Guides: • If you were on vacation in Europe and unexpectedly needed to ask a family member to watch your house and pay your bills, do you have a clear plan that would tell them how to do it? Discuss why it might be important to plan ahead for contingencies.

Lesson Explanation: Wills and Trusts If you do not have a written will or a living trust, who will decide where your kids and assets go if you pass away? Without a will, the court gets to decide where the assets of the deceased go without that person’s input.

Estate Planning

A few lines is better than no will at all; however, you’ll be better protected if you get a form online or talk to a lawyer.

Ask students: What do you think a will is? What do you think a trust is? Listen to their responses.

Facilitate discussion and explain the following points.

• A will or trust is a way to plan ahead, just like when people create financial plans for the immediate future. A will or trust is a financial plan for distributing a person’s assets when that person is no longer here. • Living trusts pass a person’s assets to his or her heirs without going through probate. Avoiding probate saves many costs associated with probate courts and potential taxes. Avoiding probate also helps maintain privacy. Go over the definitions of common estate planning terms:

• ESTATE PLANNING. Preparing a plan for distribution of your assets and responsibilities before passing away. Estate planning may include wills, trusts, and assigning power of attorney. • WILL. Designates which beneficiaries will receive the assets of your estate after you pass away. A will can also establish who will take care of your minor children. • TRUST. An arrangement where a trustee holds legal title to property for a beneficiary. You can be the trustee of your own living trust. • PROBATE. The process of administering a person’s estate after he or she passes away. Explain that if there are instructions (will, trust) given by the deceased, the probate court will follow those guidelines. If there are no instructions given, the court takes control and decides what happens to the estate.

Risk Management & Insurance

Lesson Activity: Write a Simple Will

Instruct students to complete the Write a Simple Will Activity in their Student Guides.

Do you trust the state with your kids, your money, or your possessions? If not, then write a will right now. Use the following form:

SIMPLE WILL In case I pass away, I want [guardian of choice]______to look after my children. In case I pass away, I want [name(s) of intended heir(s)]______to inherit [item(s)]______[name(s) of intended heir(s)]______to inherit [item(s)]______

Additional Notes:

______

______Signature Date

______Witness Date

Estate Planning

Lesson Explanation: Estate Planning Action Plan Tell students that once they understand the basics of estate planning, they can develop their own action plans.

• It’s important to have both a will and a trust. Get your wishes down on paper and be as clear as possible. • Be sure not to place your family in a difficult financial situation. For example, if your budget is tight, don’t ask for an expensive funeral. Explain that the general rule is: Once you have anything of value, you should write out a will. There are plenty of free forms online. Once you start to amass greater wealth, you may want to hire a lawyer to craft a living trust for you.

It’s good to have a discussion with your parents (and/or families) about their plans. Store your will in a secure place and send a copy to one of your loved ones for safekeeping.

• You know the importance of having an estate plan that clearly describes what you want to happen with your assets and/or dependents if you pass away. • You understand the basic terminology associated with estate planning. • You have a written will in place and a commitment to update it on a regular basis. For those with a larger number of assets or dependents,

• you have set aside time to research and talk with experts about the estate plan that will best protect you and your family. • You have scheduled a day each year to review your estate plan. • Each time you make changes to your will or trust, you send updated copies to loved ones.

Lesson Activity: Estate Planning Instruct students to answer the questions in the Estate Planning Activity in the Student Guide. • How will having an Estate Plan help me? • How can having a will or trust help my loved ones? • What steps can I take immediately towards setting up my Estate Plan?

Risk Management & Insurance

Lesson Questions 1. If a person passes away without having written a will or trust, who will decide what happens to that person’s assets? a. The person’s family. b. The state. c. The life insurance company. d. The county sheriff’s office. 2. What is probate? a. The process of administering a person’s estate when there is no will or trust in place. b. A document kept in the custody of a third party. c. An asset held by a lender as collateral. d. An area or amount of land or property. 3. Which of the following is a good reason to avoid probate? a. To make sure your beneficiaries have been designated. b. To provide adequately for your dependents. c. Because your estate plan is not fully developed. d. So your heirs will not have to pay probate court fees and taxes.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Lesson Closing  Discuss students’ answers to the Essential Questions.

Prepare for a Disaster

Prepare for a Disaster!

Duration  20-30 minutes

Lesson Overview  Learn preventive measures to prepare for a disaster. Students will be educated on the risk disasters bring, and will receive an overview of disaster statistics and the supplies needed to be prepared.

Big Idea  Life involves financial risks and each person has a different risk tolerance.  Financial risks can be managed through financial planning.  Insurance can protect your personal finances.  Insurance should be modified as your needs change.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a disaster?  How do you prepare for a disaster?  Why is it important to be prepared for disaster?

Skills  Students will understand the importance of preparing for disasters and what items are essential in disasters.

Vocabulary  Disaster  Disaster preparation  FEMA

Anticipatory Set Instruct students to answer the following question in the Warm-Up Activity in the Student Guide. Why is it important to prepare for disasters? Facilitate discussion based on their responses.

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Risk Management & Insurance

Lesson Explanation Disasters can happen anytime, anywhere. Part of financial security is being prepared for disaster. The advent of disasters over the last five years underscores the importance of being ready and prepared.

The federal government recommends having 72 hours’ worth of supplies set aside in case of a disaster. However, having a minimum of three months’ worth of food, water, and supplies is best.

Remember a disaster can be natural — like a storm or volcano eruption — or caused — like an attack by another country. Regardless, it is important to have supplies on hand.

As already stated, the government recommends having 72 hours’ worth of supplies on hand. However, keep in mind: • It took 5 days to get aid to Hurricane Katrina victims in Louisiana. • It took about a week to get water to earthquake victims in Haiti. While having enough supplies to last 72 hours is recommended, you never know how much damage a disaster will cause or how difficult it will be for aid to reach you.

Ask students, “What supplies should you have in the case of a disaster?” Listen to their responses.

Lesson Activity: Survival Game Direct students to the Survival Activity in the Student Guide. After dividing students into small groups, assign each group a certain amount of emergency items.

• Tell the groups that they have survived a horrific natural disaster. In the rural area where they live, it will take three weeks for help to reach them. • Money is no longer worth anything, and people are trading supplies for survival. Notes for instructor: There are enough of every resources except construction / repair tools. Either the students will figure out to equalize their resources and simply trade the tools around so all groups can survive in a collaborative effort or the groups will descend into anarchy by constantly raiding one another for the needed resource.

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Here’s how the game works:

Resources

There are 6 resources the group must have each and every time period (turn). If your group goes more than 2 turns without a resource or multiple resources, your group loses. Every time period your group consumes 1 unit of the following resources:

Food Water Medical Supplies Fire Starting Materials

For example, if your group has 9 units of water in time period 4, at the start of your turn in time period 5 your group will have 8 units of water left; assuming no one raided you and you conducted no trade. These resources are measured in units per time period. So if you have 4 water units, your group has enough water to last 4 time periods. The size of your group does not matter.

The other three resources are constant and are not consumed. If your group has 1 unit of the following resources you have enough of that resources for your whole group for the rest of the game. If you have more than one of these resources, you could use it to trade.

Sleeping Bags Construction / Repair Tools

Game Mechanics

Each group will take their turns in sequence (Group 1, then Group 2, ect). At the start of their turn they can choose one of the following actions:

Trading

Barter is highly recommended as some groups have an excess of what other groups need. Barter is conducted by one group offering a trade of their resources in exchange for another group’s resources. For a barter to be successfully completed, both groups must agree that the trade is agreeable and equitable. If one group is feeling extra generous during their turn, that is great! However, the trade must be mutually agreed upon.

A group may only trade with one group per turn.

Mark any resources trades in the second chart in your workbooks (positive numbers for resources received during a trade and negative numbers for resources given to the other group as a trade) and update your resources in the next time period at the start of your next turn. Be R10

Risk Management & Insurance sure to subtract 1 unit of each of the consumable resources in addition to any trades. Don’t update your inventory until the beginning of your next turn since other trades or raids may occur before your next turn.

When trading consumable resources be sure to forecast out your own group’s needs. If there are 5 time period left in the game and your group trades all but 3 of your water resources, your group will not survive to the end of the game unless you receive additional water units.

Raiding

If desperate, groups can opt to raid another group. The raiding group will choose the target group to raid and roll a die. Only a 5 or a 6 results in a successful raid. Successful raids can take up to 3 units of any 2 resources from the target group. Any other number than 5 or 6 results in the raiding group becoming injured from their attack. If the raiding group rolls a 3 or a 4 both groups are injured. Injured groups cannot raid any other groups for 2 time periods and consume double the resources for 1 time period.

A group may only raid one group per turn.

Mark any resources raided in the second chart in your workbooks (positive numbers for resources taken during raids and negative numbers for resources lost if you were successfully raided) and update your resources in the next time period at the start of your next turn. Don’t update your inventory until the beginning of your next turn since other trades or raids may occur before your next turn. Be sure to subtract 1 unit of each of the consumable resources in addition to any trades.

Roll to Rescue

If your team does not initiate trade and does not raid during their turn, you can roll to be rescued. You need a double 1 or a double 6 for the rescue helicopter to find you. If successfully rescued, all your resources are destroyed in the panic to board the helicopter.

If another group initiates trade with your group or raids you, you can still use your turn to be rescued.

Your instructor has assigned you a group number. Place your starting supplies in the first time period’s column.

Air Drop

After all groups have taken their turn the instructor will roll. The government is in the region, but does not yet have the manpower for dedicated search, rescue and evacuation. As a measure of relief, the government is air dropping supplies randomly in hopes that survivors will find them. If the instructor rolls any double each group will receive 2 units of each of the consumable resources via air drop. R10

Prepare for a Disaster

Group 1 Group 2 Ample supplies for each person in the group. Moderate supplies for each person in the group. • Water: 20 • Water: 13 • Food: 20 • Food: 13 • Medical Supplies: 5 • Medical Supplies: 8 • Fire Starting Materials: 16 • Fire Starting Materials: 7 • Sleeping Bag: 1 • Sleeping Bag: 1 • Construction / Repair Tools: 0 • Construction / Repair Tools: 0

Group 3 Group 4 Minimal supplies for each person in the group. Dangerous level of supplies for the group.

• Water: 9 • Water: 4

• Food: 9 • Food: 6

• Medical Supplies: 8 • Medical Supplies: 15

• Fire Starting Materials: 10 • Fire Starting Materials: 3

• Sleeping Bag: 2 • Sleeping Bag: 0

• Construction / Repair Tools: 1 • Construction / Repair Tools: 2

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Risk Management & Insurance Time Period 1 Period Time Period Time Period Time Period Time Period Time Period Time Period Time Period Time Period Time Supplies Your Supplies Starting

2 3 4 5 6 7 8 9

Water

Food Medical

Supplies Fire Starting

Tools

Sleeping Bag Construction

/ Repair Tools

Injured?

Time Period 1 Period Time Period Time Period Time Period Time Period Time Period Time Period Time Period Time Period Time Supplies Trades / Raids Starting

2 3 4 5 6 7 8 9

Water

Food Medical

Supplies Fire Starting

Tools

Sleeping Bag Construction

/ Repair Tools

Injured?

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Prepare for a Disaster

After the specified amount of time, discuss the process. Ask students how they felt about being stranded or without survival supplies?

The point is for them to understand bartering and how their perspectives change during disaster conditions.

Discuss how the lack or abundance of supplies affected their interactions. Did they feel: Protective? Insecure? Powerful? Frustrated?

Reiterate the importance of being prepared, both financially AND for emergency situations.

DISASTER PREPARATION CHECKLIST RECOMMENDED BY FEMA* 1 gallon of water per day per person Water should be in sealed, unbreakable containers A good supply of non-perishable canned foods Non-electric can opener A change of clothing, raingear, and sturdy shoes for each person Blankets and sleeping bags A first-aid kit A battery-powered radio Flashlight Batteries Important documents: Insurance policies ID cards Birth Certificates and Social Security Cards Cash Pertinent medical information Know your escape route and how to shut off the gas and water in your dwelling. Have a communication plan to get in touch with family and friends.

* The Federal Emergency Management Authority (FEMA) is the US government agency responsible for disaster relief.

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Lesson Questions 1. Which of the following statements is typically NOT true about a major disaster? a. It can be a natural event. b. It can be caused by a person. c. You can expect to receive aid immediately. d. You can expect to have only the supplies you have on hand until aid workers arrive. 2. Of the following list of disaster supplies, which is NOT recommended by FEMA? a. First-aid kit b. Perishable food c. Water d. Cash

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss students’ answers to the Essential Questions Remarks

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Evaluating Your Current Retirement Situation

In this unit participants will gain an understanding of the importance of long- term planning. Within this instruction students will learn the importance of cash flow, personal financial plans, wills and trusts. Exploration of money, lifestyle choices and relationships will help participants proactively prepare for their financial future.

Current Retirement Situation

LESSON DURATION LESSON TITLE ID (MINUTES) Questions about Retirement S1 30-60 Retirement & Family S2 20-30 Retirement & Income S3 30-40 Retirement Plans S4 30-40

Current Retirement Situation

Questions about Retirement

Duration  30-60 minutes

Lesson Overview  Students will learn to clearly define their retirement goals, identify their emotional relationships with money, and clarify their tolerance for risk. Big Idea  There are many considerations when evaluating investment options. | There are strategies for making good investment choices. | There’s a relationship between your values, emotions and personal finances. | Your values and emotions will influence your financial decisions. | Financial decisions impact your future. | There are strategies you can use to adjust your emotional state to make logical financial decisions. | There are benefits and risks to investing.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is the new definition of retirement?  What are some important questions people need answered about retirement?

Skills  Clear notion of retirement goals.  Understanding of the emotions involved in money decisions.  Knowledge of one’s risk tolerance.

Vocabulary  Risk tolerance – the amount of risk a person is capable to handle comfortably.

Anticipatory Set Have students write a few sentences in the Warm-up Activity in their Student Guides to take a first stab at defining how they want to spend their retirement. Discuss what they wrote.

Lesson Explanation: Road to Retirement - Current Road Conditions Each of us has a different vision of retirement. For some people, it means spending more time with family. For others, it might signify traveling the world. Others might still need to work, but want to have a sense of financial security. S1 Questions about Retirement

Even though there are millions of different retirement goals a person might have, there is one thing everyone has in common. We all have to pay for our senior years. The definition of retirement has changed over the years.  The old definition of retirement was “withdrawal from one’s position or occupation or from active working life.”  But for many people the new definition of retirement is “achieving a state of financial wellness and security so they can live the lifestyle they desire.” In this new retirement age, some people will still have to work. The goal is to have enough financial security to earn income doing something you enjoy and feel passionate about. Tell students there are many compelling reasons to start planning for retirement as soon as possible. Here are some common ones:  Have enough money to feel secure.  Be able to work if it aligns with your passion.  Be able to live the lifestyle you want to live.  Be able to take care of your family.  Rid yourself of the worries and stress that go hand-in-hand with bills and debt.  Be free to do what you want when you want.  Have independence and security.  Be able to make a difference in the world.  Freedom from worrying about having enough money to enjoy life.  Be able to purchase things like toys or travel. Read each of the following quotes to students to start them thinking about their ideal retirement. “Retirement has been a discovery of beauty for me. I never had the time before to notice the beauty of my grandkids, my wife, the tree outside my very own front door. And, the beauty of time itself.” Hartman Jule “I enjoy waking up and not having to go to work. So I do it three or four times a day.” Gene Perret “Retirement gives us the freedom to spend our days following our passions and making a lasting difference in the world.” Vince Shorb

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Then facilitate a discussion about the following quotes which illustrate the important link between personal financial status and retirement: “The question isn’t at what age I want to retire; it’s at what income.” George Foreman “It’s nice to get out of the rat race but you have to learn to get along with less cheese.” Gene Perret “Retirement is like a long vacation in Las Vegas. The goal is to enjoy it to the fullest, but not so fully that you run out of money.” Jonathan Clement I want you to start thinking about your retirement. Once you’re retired, what will you be doing? How do you envision a typical day? We’ll go over some strategies to get you to the place where you can actually live that ideal life. Share your personal opinions about what retirement means to you. Be vulnerable and open. Showing that you’re willing to share personal and emotion-based thoughts will open participants up and help them feel safe to reciprocate. Lead into their discussion with “Now that I’ve shared a little about myself and how I view retirement, would any of you be willing to share what retirement means to you?” Discuss their answers. Engage, acknowledge, and connect with each individual who shares. Here are some important questions people often ask about retirement:  When should I start saving?  What is a reasonable amount of monthly income for retirement?  What about Social Security?  How can I make sense of all the confusion surrounding investments?  Is real estate a good investment anymore?  Is a savings account enough to put away for retirement?  Who can I trust with my money? Explain that to understand how to stay on course down your road to retirement, it’s important to know how people get off course. Let’s review the common reasons why people get into financial problems.

S1 Questions about Retirement

Lesson Activity: Getting Off Course Direct students to the Getting Off Course Activity in the Student Guide. Instruct them to place a checkmark next to each area where they feel they need to improve.  Do not clearly define how much money you need to live the lifestyle you desire once you retire.  Lack a clear financial plan.  Do not have a trusted financial mentor, advisor, or coach.  Poor financial choices due to the lack of financial knowledge.  Lack the confidence they need to make necessary financial moves.  Poor financial choices due to emotions. Fear and greed motivate most choices.  Take advice from the wrong people. Most advice comes from unqualified salespeople and friends.  Had a few problems that snowballed.  Unrealistic expectations of investment returns.  Do not invest properly due to lack of knowledge.  Do not take advantage of employee benefit plans or tax laws.  Continue with poor financial habits they developed at an early age.  Do not properly plan their estate.

Most people have a lot of check marks on the list, and that’s okay. You’re learning how to avoid these common pitfalls and stay on track with your dreams.

Lesson Explanation: Money and Emotions

Managing your money can be scary, exciting, worrisome, motivating, or stressful; but don’t wear your heart on your sleeve. Responding to money emotionally could result in hasty decisions based on your emotions instead of on logic. Try to keep your emotions in check. Before making a financial move, determine that you’re making a decision for the right reason, not just as an emotional response.

Emotions make us do things that we wouldn’t normally do. Have you ever liked someone so much that you did something risky to show off, or got so nervous that you put your foot in your mouth? That’s because emotions block out logical thinking.

The biggest negative emotions that affect people when they make financial decisions are greed and fear. They want more money and at the same time are scared of losing what they have. S1 Current Retirement Situation

Your levels of happiness, sadness, and stress all have an impact on how you view your money situation and make decisions to change it. People who manage their money while carrying this emotional baggage make bad decisions more often than someone with a clear, relaxed, business-focused mind.

Discuss briefly each of the following questions with the students.

 How do you feel about your current financial situation?  How do you feel when you make small financial decisions?  How do you feel when you make large financial decisions?  How do you feel when you think about retirement?  How do you feel when you talk to your loved ones about money?

Lesson Activity: Money and Emotions Direct students to the Money and Emotions Activity in the Student Guide, and read the scenario presented. Instruct students to complete the activity by identifying what feelings Cynthia may experience while going through each of the situations.

SCENARIO EMOTION(S) Cynthia gets her 401K statement and it’s gained 10% in one month.

The next month, Cynthia’s 401K statement shows a loss of 12%.

Cynthia thinks she should move the money, but she’s not sure what investment would be best.

A friend tells Cynthia about a stock that’s ready to shoot up. This friend knows someone who works for the company and is putting his entire savings into the investment.

Cynthia pulls her money out of her investments and uses it all to buy the “hot” stock tip. It’s down 35% this week … but she’s holding on.

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Ask if students have ever felt those types of emotions when making financial decisions, or describe an emotional response you experienced when making a money management decision.

Discuss why it’s important to identify and become aware of emotional responses as they develop their own personal financial literacy.

Lesson Explanation: Financial Stress Now that students have identified the connection between emotions and money, they need to learn how to stay emotionally detached during financial decisions. Let students know that emotions skew facts and logic; they’ll end up making emotion-based decisions instead of fact- based decisions. Discuss each of the equations below. 1 + 1 = 2 This is simple and straightforward. No emotional attachment. 1 + 1 + stress, worry, fear = -1 Fear will keep you from taking a risk. Fear is what forces someone to save money in their mattress or in a mason jar. 1 + 1 + greed, overconfidence = 5 Greed will force you to take a risk that might not be wise. Overconfidence will blind you from potential mistakes. Sometimes that “5” can be a “—2” (negative two). Inform participants that, when they become too emotionally connected to a financial decision, it’s like wearing blinders that obscure the right decision.

Lesson Activity: Financial Stress Indicators Direct students to the Financial Stress Indicators Activity in the Student Guide and instruct them to use the graphic to answer each of the questions.

How do you feel about your current financial situation?           Not Stressed Highly Stressed How do you feel when you make small financial decisions?           Not Stressed Highly Stressed S1 Current Retirement Situation

How do you feel when you make large financial decisions?           Not Stressed Highly Stressed How do you feel when you think about retirement?           Not Stressed Highly Stressed How do you feel when you talk to your loved ones about money?           Not Stressed Highly Stressed Then have students place a checkmark next to each of the stress reduction tips they choose to follow. Encourage students to solidify their commitment to follow these strategies.

STRESS REDUCTION TIPS  Only invest with risk capital — that is, money you can afford to lose.  Gain a high-level knowledge base about any investments you’re considering  Build a team of trusted advisors.  Before making any decision, take time to evaluate it logically.

 Reduce the influence of emotions by partaking in an

activity that reduces your stress levels. Weigh your options at times when your emotions have less impact — during exercise, prayer, meditation, deep breathing, a relaxing morning cup of coffee, or whatever method works for you to reduce your emotional response.

Lesson Explanation: Risk Tolerance It’s important to be emotionally and financially comfortable with the investments you make. With most investments, the greater risk you’re willing to take, the greater the potential returns.

S1 Questions about Retirement

As you gain more knowledge about financial matters, build a trusted team and a solid financial foundation, your risk tolerance may change. Then you might feel more comfortable to make investments that offer a higher return.

Clarify that they should focus on determining the level of risk they can handle comfortably.

Lesson Activity: Risk Tolerance Direct students to the Risk Tolerance Activity in the Student Guides and have them circle the answer that best describes how they would handle each of the situations. 1. You won $20,000 in a contest. What do you do with that money? a. You invest it all into a hot stock tip that you think will quadruple your money. b. You decide to spread it across various investments that you feel can generate good returns. c. You want to keep the money safe, so you put it into an investment that gives you minimal growth but cannot lose money. 2. You invested in a few stocks and now you’re down 50%. Your account started at $20,000; now you’re at $10,000. What do you do? a. You let it ride and hope it goes up. b. You sell and make other investments you believe will be better. c. You sell and put the money into a safe investment that offers low returns but where you can’t lose money. 3. In which of the following would you rather invest? a. A stock where you can lose all your money but which has the potential for huge returns. b. An investment where you can limit your losses, but your gains are likely to be average. c. An investment where you cannot lose money, but you are making consistent, small returns each year. Discuss what the results mean:  If you answered mostly “a,” you probably have a high risk tolerance.  If you answered mostly “b,” you’re open to taking some risks, but preserving capital is important to you.  If you answered mostly “c,” you are risk-averse and prefer to avoid investments that offer any risk.

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Encourage students to take the more detailed risk assessment developed by two university personal finance professors: Dr. Ruth Lytton at Virginia Tech, and Dr. John Grable at Kansas State University.

Students can access the test at http://njaes.rutgers.edu/money/riskquiz. The URL is noted in the Student Guide.

Emphasize that it’s important to stay within one’s risk tolerance levels. They should stick with investments that they can handle emotionally.

Tell students that, as they gain knowledge, build advisor teams, and accumulate risk capital, they may feel more comfortable making riskier investments that fit into their investment plan.

Lesson Questions 1. Which of the following is one of the compelling reasons to start retirement planning as soon as possible? a. To indicate what will happen to my dependents if I should pass away. b. To make sure I have adequate insurance coverage for all my properties. c. To avoid feeling emotional about financial decisions. d. To rid myself of the worries and stress associated with debt and bills. 2. What are the most common emotions influencing money decisions? a. Greed and anger. b. Love and disgust. c. Fear and greed. d. Trust and respect.

Lesson Review  Remind students to stay in touch with their emotions as they consider financial decisions and begin their retirement plans.  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Discuss the answers to the Essential Questions. Remarks

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Retirement & Family

Duration  20-30 minutes

Lesson Overview  Students will comprehend how family and personal relationships affect their financial planning, and vice versa. They will learn the importance of open communication with loved ones about money. Big Idea  Your values and emotions will influence your financial decisions. | There are factors that influence your decisions. | You are able to make financial decisions that align with your goals. | There are tools and techniques to help you set and prioritize your financial goals.

Essential Questions At the end of the lesson, students should be able to answer the following:  How do relationships affect money?  Why is it important to have open communication about money?

Skills  Understanding of how family and relationships can affect one’s long-term financial planning.

Vocabulary  Financial communication

Anticipatory Set Direct students to the Warm-up Activity in the Student Guides and have them answer the questions.  Is there one person in the world to whom you tell everything? If so, who is that person?  Would you give that person complete access to your finances and your financial plans? Why or why not? Discuss their responses.

Lesson Explanation: Relationships and Money Tell students that it’s important to understand how personal relationships and communication affect money.

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Instruct students to rate (on the scale of 1 to 10) their communication level about personal financial matters with family and parents, and spouse/significant other about personal financial matters.

Rate your level of communication with your family.           Nonexistent Excellent Rate your level of communication with your spouse or significant other.           Nonexistent Excellent

Explain that money issues often cause disagreements in relationships. Money is a leading cause of divorce, so it’s important to discuss financial matters as part of getting to know each other.

 Share any stories about couples that you know (or have as clients) where money has impacted their relationship.  Be sure not to mention names. Tell students that many couples and families have issues around discussing finances, and have trouble being open with each other about their spending/saving habits.

Talk about how family and other loved ones can greatly affect one’s long-term financial planning, for example:  Having to take care of a parent financially;  Deciding whether to have children;  Lifestyle choices of loved ones. Many people find it important to talk with their parents or other close family members about their financial situations, too. Have students review the Discussion Points for Families in the Student Guide.

 Do your parents and loved ones have a plan to take care of their own retirement, or will you be taking care of them?  Do your parents or loved ones have healthcare coverage?  Do your parents or loved ones have long-term care insurance? Can they afford to pay for assisted living on their own, or will they need to live with you?  Do your parents or loved ones have enough funds to pay for their funerals?  Do your parents or loved ones have a will or living trust in place?  Is each sibling clear about his/her responsibilities if a parent or loved one passes? S2 Retirement & Family

If they do not have all the answers to the aforementioned questions, it’s a good indicator that they should set up a time to have a financial discussion with their loved ones.

Explain that while such a conversation can be challenging, they should remember that they’re doing a great service for their families.

Financial matters are also important to discuss once a relationship starts to get serious and you begin talking about a future together.

 Learn about each other’s financial goals. If you’re measurably more frugal than your partner, he/she may have an issue with you saving money. On the other hand, you may have an issue with your partner spending excessively.  Make sure you ask a new partner about his/her credit history and debt situation.  Observe a new partner’s spending habits. For example, is he always buying things he doesn’t need? Is she really cheap? Or is he/she somewhere in the middle? This is very important to consider. Explain the importance of sharing and learning about your partner’s savings and investments. Tell them to ask about major expenses they may be planning.

Create family financial goals together. Building this bigger vision will influence your future financial decisions.

Homework Activity: Financial Communication Game Encourage students to play the Financial Communication Game Homework Activity in the Student Guide with their spouses or loved ones – anyone who may have an impact on their personal financial situation. The game helps open lines of communication about finances.

Explain how to play the game.

1. Before starting the game, make sure you’re currently on good terms and are both open to communicate. If you had a recent argument or if there’s tension in the air, wait to play the game. Also, if you are seeking counseling, work with your counselor to facilitate the game. 2. Together, brainstorm your financial and retirement goals. Initially, write down every thought. Just write – do not judge. 3. Once each of you has put ideas on paper, discuss each one together. Prioritize and list them in order of importance. You will disagree on some items. If, after a minute or two, you are unable to reach consensus, mark that item for later discussion. 4. During the game, be sure to remind each other that you’re doing this because you care about each other. That will help you stay on course. S2 Current Retirement Situation

5. This game typically requires multiple meetings and planning to ensure proper alignment. Remind students that opening lines of communication about money helps proactively address the leading cause of relationship problems. This communication will help them build stronger relationships and financial foundations.

Lesson Questions 1. What is the leading cause of relationship problems? a. Infidelity b. Children c. Money d. Cooking 2. What financial issues should you discuss with your partner/spouse/significant other? a. Each other’s credit and debt history. b. Your plans for major expenses in the future. c. Your financial goals. d. What savings and investments you have. e. All of the above.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.  Get a commitment from students to complete the Financial Communications Game Homework Activity with a loved one.

Lesson Closing  Discuss students’ answers to the Essential Questions.

S2 Retirement Income

Retirement Income & Net Worth

Duration  30-40 minutes

Lesson Overview  Students will identify various potential sources of income available to them upon retirement, and learn to calculate their net worth. Big Idea  There are ways to align your investments with your personal financial goals. | There are many considerations when evaluating investment options. | A budget aligned with your financial goals and can help you prepare for life events. | A budget should be modified as your budget as your financial goals and situation change. | A savings plan should adjust over time to stay in alignment with personal goals. | Expenses can be modified over time to stay in alignment with your financial goals. | There is a broader economic system that impacts your financial goals. | The economy and financial markets impact your investment.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are four potential sources of retirement income?  How is a person’s net worth calculated?

Skills  Ability to estimate retirement income.  Knowledge of how to calculate net worth.

Vocabulary  Social Security – a benefit program that provides retirement income to workers aged 62 and older.  Pensions – employer-sponsored retirement plans that provide income to people who participated in the plans while employed.  Entrepreneurship – owning and operating one’s own business.

Anticipatory Set Instruct students to turn to the Warm-up Activity in their Student Guides and write their answers to finish the following sentence:  When I retire, I expect to receive income from the following sources: Discuss their answers.

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Lesson Explanation: Retirement Income Sources For people who hope to achieve financial freedom at some life stage, planning a retirement budget is essential. The first step in the process is to identify the sources of any future income you expect to have coming in to support your retirement years. Then you can adjust your expenditures based on your expected income and your lifestyle goals.

Review the list of retirement income sources:

1. SOCIAL SECURITY INCOME (SSI) is a retirement benefit offered at age 62 and older. If you start claiming SSI at age 62, your benefits will be about 30% less than if you wait until age 67. If you wait until age 67, you will qualify for full payments. In 2012, a worker who retired at age 66 would receive a maximum check of about $2,500. Find out the benefits you may receive by requesting an estimate from the Social Security website http://www.socialsecurity.gov/estimator/.

SSI benefits are predicted to be significantly reduced in the future. From the Social Security website: “Your estimated benefits are based on current law. The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 77 cents for each dollar of scheduled benefits.” Although they suggest using 77 cents to calculate your potential benefits, government organizations often publish “best case scenario” figures. Ideally, you should build a retirement plan that does not depend on SSI benefits. Discuss briefly why SSI benefits will likely be reduced: due to factors such as the national debt, people living longer, and changes in the workforce.

2. PENSIONS. A pension is a type of retirement plan that provides people with an income after they retire. Pensions come in various forms. The pension may be distributed as a defined benefit or defined contribution. A defined contribution provides an income source dependent upon the employee’s contribution and investment performance. A defined benefit typically provides retirement income based on an employee’s salary and number of years they were involved in the plan. A hybrid plan combines features from both. 3. ASSETS. Compared to Social Security and pension plans, you have much greater control over your assets. An asset is something of monetary value that you own and control with the expectation that it will provide future benefits to you and your family. Some examples of assets are stock holdings, IRAs, home equity, bonds, treasury notes, rental properties, precious metals, or mutual funds. Asset income may come from interest, rental payments, royalties, dividends, or other sources. You also can sell assets to help fund retirement.

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4. ANNUITIES. Annuities are insurance products that pay income to investors. Annuities may be used as a retirement strategy for people who seek an income source upon retirement. Investors can set up an annuity to provide income for a specific period of time, usually designed to span their lifetime. Annuity income depends on your investment, length of payments, performance, and the type of annuity selected. There are two common annuity types:  Fixed income provides a guaranteed payout; or  Variable income is determined by performance of the underlying investments. 5. EMPLOYMENT. Continued employment is another potential source of income during retirement. Some retirees choose jobs that provide medical benefits to reduce their costs for health coverage. To achieve true financial freedom, you want to be in a position where you don’t have to work, but rather choose to work in order to fulfill other lifestyle goals. If you seek to work after retirement, try to find a job that aligns with your passions and strengths. Look for a job that fits your lifestyle goals and fulfills you on every level. 6. ENTREPRENEURSHIP. Entrepreneurship is an investment of time, energy, and money which can yield excellent returns. While it’s not for everyone, working for oneself can be rewarding and lucrative. Creating a business that aligns with your passions might provide a few hundred dollars of supplemental income, or could even become your main income stream. Your own business can be a fun project to help you stay active. At the end of the day, we’re all business owners. We’re in the business of building brighter and better futures for ourselves. Starting a business is an investment, and you must manage risk. Never invest more than you can afford to lose.

Lesson Activity: Retirement Income Direct participants to the Retirement Income Activity in the Student Guides and have them estimate their income at retirement age.

Point out that they may not know all the answers right now, but encourage them to make their best guess in each area and do further research at home to get a more accurate figure.

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Instruct students to estimate their income from each source, and then add up the figures to project their total retirement income.

Lesson Explanation: Net Worth Explain to student that they can calculate their current net worth by using this formula:

Assets (investments, real estate, savings, etc.)

LESS Liabilities (debt, liens, etc.) EQUALS Net Worth

Visit www.financialeducatorscouncil.org/calculator/access/NetWorth.html to access the NFEC’s Net Worth Calculator.

Explain that when you build up a large enough net worth to live your desired lifestyle, you can live life on your own terms. Net worth is the measure of your net economic position. You calculate net worth by totaling your assets and subtracting your liabilities (loans, debt, etc.) from the asset figure.

$ 65,000 For example, let’s say you have $65,000 in savings – 6,000 but you owe $6,000 on personal loans – 10,000 and have credit card debt of $10,000. $ 49,000 In this example, your net worth would be $49,000.

Net worth is important to give you a good idea of your financial starting point. The chart of Assets and Liabilities on the next page provides examples of assets and liabilities that are important to consider.

Lesson Activity: Retirement Income Estimate your income at retirement age. Social Security $______For any area about which you’re Assets $______unsure, just try to make your best estimate. Annuities $______Employment $______Entrepreneurship $______Other $______

Total Estimated Income at Retirement $______

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ASSETS

Stocks. Any individual stocks that are not part Home. Use the current value of your home to of your retirement accounts. calculate its worth as an asset. Mutual Funds. Any mutual funds that are not Other Real Estate. The value of any other real part of your retirement accounts. estate you may own. Cash Value of Life Insurance. Some life Automobiles. The total value of all automobiles insurance policies, such as whole life that you own. Do not include leased and universal, have cash value. Term vehicles. life policies, on the other hand, have no Metals. The value of gold, silver, or other cash value. precious metals in your possession. Savings Bonds. Count any savings bonds that Retirement Accounts. The current total are not included in your retirement balance of your retirement accounts. accounts as assets. Include IRAs, 401(k) savings, SEP IRAs, Checking and Savings Accounts. The current variable annuities, and any other total balance of your checking and retirement savings accounts. savings accounts. Bonds If you own any Treasury, municipal, or . Cash. commercial bonds that are not part of Include any cash on hand. your retirement accounts, include them in the Assets column.

LIABILITIES

Home Mortgage Principal. This is the current principal balance remaining on your mortgage — that is, the amount you would have to pay to own your home free and clear.

Other Mortgage Principal. The current principal balance for any other real estate mortgages you have. Include mortgages on rental property, undeveloped land, commercial property, or any other real estate.

Credit Card Debt. Your total credit card debt.

Auto Loans. Total amount currently outstanding on your auto loans.

Student Loans. Total amount, if any, that you currently owe in college or student loans. Enter the total outstanding amount even if your student loans are currently deferred.

Other Loans. Total amount of any other loans.

Current Retirement Situation

Lesson Activity: Net Worth Direct students the Net Worth Activity in the Student Guide and instruct them to calculate their financial net worth using the chart.

Assets Liabilities Personal Residence Real Estate Mortgages Rental & Other Properties Retirement Loans Physical Metals (Gold, Silver, etc.) Student Loans Jewelry, Art, etc. Credit Card Debt Automobiles Payday Loans Other Personal Loans Auto Loans US Government Bonds Life Insurance Loans Corporate Bonds Margin Account Loans Municipal Bonds Other Bond-Based Mutual Funds Other Other Other Other

Stocks

Stock-Based Mutual Funds Variable Annuities Other Annuities Life Insurance with Cash Value Business Partnership Interest Other

Savings Account Checking Account TOTALS Money Market Account Total Assets Certificate of Deposit Total Liabilities Other Assets minus Liabilities = Net Worth

Retirement Income

Lesson Questions 1. To what level are Social Security payments predicted to drop by the year 2033? a. 10 cents on the dollar. b. 50 cents on the dollar. c. 77 cents on the dollar. d. 85 cents on the dollar. 2. What is net worth? a. Total assets minus total liabilities. b. Checking balance minus savings balance. c. Annuities minus bonds. d. Mortgages plus cash on hand. 3. A mutual fund is an example of a(n)… a. Principal b. Debt c. Liability d. Asset

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.  Remind students to estimate their SSI benefits at the Social Security website and to research their potential income from any sources about which they were unsure.

Lesson Closing  Discuss students’ answers to the Essential Questions.

Current Retirement Situation

Retirement Planning & Taxes

Duration  30 – 40 minutes

Lesson Overview  In this lesson students will learn more in-depth about tax planning strategies and some of the investment vehicles for retirement income. Big Idea  There are ways to create an investment plan to increase your financial wellbeing. | There are ways to align your investments with your personal financial goals. | There are many considerations when evaluating investment options. | There are strategies for making good investment choices. | Effective investing requires good decision-making skills. | The government taxes you. | Taxes impact your personal finances and there are consequences for tax errors. | Tax rates vary based on your financial situation. | You can minimize tax consequences to increase your wealth.

Essential Questions At the end of the lesson, students should be able to answer the following:  What are the four basic concepts in the tax code with which I should be familiar?  What are the three types of investment tax benefits?  What are the two primary investment vehicles for retirement income?

Skills  Understanding the importance of developing a relationship with a qualified tax planner.  Ability to develop financial plans for various life stages.

Vocabulary  Tax Code – the set of laws governing U.S. federal taxes.  Defined contribution plan – a pension plan that provides income depending on the employee’s contribution and the investment performance.  Defined benefit plan – a pension plan that provides income at retirement based on the employee’s salary and the number of years the employee participated in the plan.

Retirement Planning & Taxes

Anticipatory Set Direct students to the Warm-up Activity in their Student Guides and have them write down their responses to the following questions:  Do you think the tax rate will increase or decrease over the next ten years?  Explain why you think the tax rate will increase or decrease. Discuss their responses, then explain that, in this section, you will be covering the Tax Code.

Lesson Explanation: Tax Benefits In 2010, there were over 70,000 pages to the Tax Code, and tax laws change on a regular basis. Learning about the Tax Code is important because, if you mess up on your taxes, you can go to jail or be fined. So you really need to learn the 70,000 pages before filing your own taxes.

Are you excited about reading 70,000 pages? Here’s an alternative: Find a tax planner you can trust!

It’s extremely important to have a qualified tax planner to help you maximize your tax savings.

Explain that tax planning is a critical part of a long-term financial plan. There are many financial products and strategies that help people retain more of the money they earn. Examples of investments that sometimes provide tax benefits include  401K plans;  IRAs;  home ownership;  starting a business; and  municipal bonds. With tax planning in mind, there are two important points to consider:

1. Do not base your entire financial plan on the current tax code. 2. Find a highly qualified tax planner.

The tax code can change at any time, and politicians regularly try to adjust the code.

NOTE: This would be a good time for a political joke.

 Tell students they should locate a tax planner who is available for year-round questions.  They should always consult their tax advisor before they make any financial decisions.

Current Retirement Situation

 It is also suggested that they connect their financial team with their tax planner so that their entire team is in the loop about their financial decisions. Explain that there are financial products and strategies that allow investors to legally pay less in taxes. Locating a qualified tax planner is essential to long-term success. A tax planner will help you use tax laws to your advantage and play an instrumental role in your overall financial team.

Tell the class that besides developing a relationship with a qualified tax advisor, there are some basic things that they should know that are contained within those 70,000 pages of Tax Code.

 INTEREST. Typically, interest earnings that can be derived from a savings account, bond, CD, and other types of interest-bearing investments are taxed as ordinary income.  CAPITAL GAINS. Profits from the sale of a property or investment are called capital gains and will be taxed. Assets held less than 12 months are usually taxed as ordinary income, while assets held over 12 months are usually taxed at a 15% federal income tax rate.  PRIMARY RESIDENCE. If you sell your home, you may be able to avoid a capital gains tax.  DIVIDENDS. Currently, income derived through dividend-paying stocks is taxed at 15%; however, many political leaders are calling for this tax to increase. Remind participants that all the tax policies can change at any time and this course is for educational purposes only; not specific tax advice. That’s why it’s critical for any individual to have a trusted and highly-qualified tax planner.

Explain the three types of tax benefits offered through investments.

1. TAX-DEFERRED. Taxes are paid later with tax-deferred investments. You are able to invest the money that the government would have taxed. This can improve your overall returns. Tax- deferred investments can include 401(k) plans, 403(b) plans, and IRAs. With tax-deferred plans, you will not pay taxes until you withdraw the money. For some, this may provide an extra benefit if the tax rate you pay at retirement is less than your current tax rate. 2. TAX-DEDUCTIBLE. This feature allows a person to deduct the amount invested from their gross income, lowering a person’s overall tax liability. Tax-deductible investments can include 401(k) plans, 403(b) plans, Simplified Employee Pension Plans (SEP), Keogh, and IRAs. 3. TAX-FREE. Tax-free investments provide returns that are free from federal income tax and, in some cases, state tax. Roth IRAs, municipal bonds, and 529 plans – assuming monies are used

Retirement Planning & Taxes

for schooling – are all examples of tax-free investments.

Inform participants that employee-sponsored retirement plans (or pension plans) can help them reach their retirement goals.

Lesson Explanation: Qualified Retirement Plans A “qualified” retirement plan (or pension plan) is for employees (and/or their beneficiaries), and is eligible to receive certain tax benefits from the IRS. Explain that there are two types of qualified retirement plans.

DEFINED CONTRIBUTION PLAN provides an income source that depends upon the employee’s contribution and investment performance.  Benefits are based on the amount contributed by employee and any gain, loss or expense.  Participants have their own individual accounts and often have to make the investment decisions. Participants have some control over how much they contribute; however, there are some guidelines they must follow. They also have control over their investment performance.  Participants do not receive a guaranteed retirement benefit. It depends on their contributions and investment choices.  Depending on the plan, the employer may contribute. If an employer contributes, there are often vesting requirements to receive the employer contribution benefits.  It is important to select a beneficiary. If you don’t select a beneficiary, the money is payable to your estate when you pass. Your beneficiaries may lose out on benefits.  Mandatory distributions start at age 70½.

DEFINED BENEFIT PLAN provides income at retirement typically based on the employee’s salary and the number of years they were involved with the plan. These plans are professionally managed and the employee has no control over the investments.  These plans provide tax-deferred savings.  The employer provides the retirement benefits.  The plan is professionally managed, and may be insured through Pension Benefit Guaranty Corporation (PBGC). PBGC insured pensions for 44 million Americans and benefits for 1.5 million whose pensions failed (according to their website in 2012).  Participants do not select the investments made.  Participants may or may not need to contribute monies, depending on the plan.

Current Retirement Situation

 These plans provide tax-deferred savings.  Plan benefits are often calculated based on participant’s salary and years of employment.  Participants typically receive benefits in accordance with their vesting. Vesting is the amount of time necessary to receive benefits; vesting requirements differ from plan to plan.  Participants do not have an individual account in their name.  Some plans offer inflation adjustments.  Typically, participants cannot receive lump sum payments.  Benefits are typically not payable until the participant reaches retirement age; mandatory distributions start at age 70½. Although not a third type per se, there are also hybrid plans that combine features from both defined contribution and defined benefit plans.

Lesson Explanation: Investment Vehicles There are various investment vehicles for retirement planning. Students probably have already heard about IRAs and 401(K) plans. Following is some further information about both plans.

401(K) PLAN. A 401(K) is an employer-sponsored retirement plan in the United States and some other countries which allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal.

INDIVIDUAL RETIREMENT ACCOUNT (IRA). An IRA is a retirement plan account that provides some tax advantages for retirement savings in the United States. There are a number of types of IRAs, which may be either employer-provided or self-provided plans. The types include:

 A ROTH IRA differs from most other IRAs. Contributions are made with after-tax assets, so all transactions within the IRA have zero tax impact and the withdrawals are tax-free. For example, if you wanted to invest $1,000 of your earned income, and you are in a 20% tax bracket, you would have $800 to put toward your Roth IRA. Assuming you invest this amount for 5 years, that would give you a total investment of $4,000. Over 20 years at 10% return (a higher-than-average return used for ease of math), your investment would grow to $26,909 of tax-free money. You could withdraw that and have the entire $26,909.  A TRADITIONAL IRA often has tax-deductible contributions so the money is taxed only when it is withdrawn at retirement.

Retirement Planning & Taxes

With a traditional IRA you’re able to invest pre-tax dollars, so you would invest the entire $1,000 of your earned income. If you invest this amount for 5 years, that would give you a total investment of $5,000. As in the example above, if you keep your investment over 20 years at 10% return, your investment would grow to $33,736. However, you would be required to pay taxes on this amount. Assuming you are in the 36% tax bracket, you would net $21,527. Instruct students to view the retirement plan table in their student guides for further details on their retirement plan options.

Simple IRA 401(K) 430(B) Roth IRA IRA Tax Benefits Tax-deferred growth Contributions are pre- Tax-deferred growth Tax-free growth and Tax-deferred growth. and pre-tax tax; distribution taxed as and pre-tax withdrawals. contributions. ordinary income. contributions. Eligibility Participant has min Some income limits. Designed for of $5,000 earnings in employees of public any two preceding schools and tax- years, and is exempt orgs. like expected to earn hospitals, public $5,000 in curr year. welfare orgs., etc. Contribution Up to 100% of 401(K) and Roth 401(K) Varying amount 2012 max of $5,000 2012 max of $5,000 compensation with combined with a limit of limitations; cannot ($6,000 over age 50); (%6,000 over age limits of $11,500 $17,000 each year for exceed 100% of not tax deductible. 50). Tax deductibility ($14,00 if over 50). those under 50. annual Contributions made depends on MAGI Restrictions also apply to compensation. Those with after-tax (Modified Adjusted the combined over age 50 can monies. Gross Income). employee/ employer make additional contributions. contributions. Important Must wait two years Immediately vested Deadline April 17th. Deadline April 17th. Dates before making any with their own moves (rollover, contributions. withdrawal, etc.) Withdrawal Tax-deferred Tax-deferred Tax-deferred Contributions are Withdrawals investment. Investor investment. Investor investment. Investor withdrawn tax-free. (contributions and pays taxes at pays taxes at pays taxes at Earnings federally earnings) are taxable withdrawal. withdrawal. withdrawal. tax-free after 5-yr when distributed. aging requirement and one other condition: 59½; qualified home purchase; disability; or death. Penalties If under age 59½, 10% early withdrawal 10% early 10% unless Withdrawal before 25% penalty for penalty with exceptions. withdrawal penalty exception applies: 5- 59½ may receive distributions made Principle withdrawal not with exceptions year aging; 59½; 10% penalty. within first 2 yrs, allowed. before age 59½. qualified home reduced to 10% after purchase; disability; two years. or death. Minimum Age 70½. Age 70½. Age 70½. N/A Age 70½. Distribution Requirements (MDR)

Current Retirement Situation

Lesson Activity: Retirement Planning Instruct students to write a brief history of their potential financial lives in the Retirement Planning Activity in their Student Guides. Ask them to write how they envision their financial lives looking between various age ranges.

Tell students that, while it may be hard to think very far into the future, it’s most important to describe long-term goals clearly, and the next ten years should be very detailed. Include net worth, cash flow, and lifestyle choices such as trips, toys, living arrangements, cars, relationship, family choices, etc. Guide participants through the following example.

GUIDELINES Investments: Write about the type of investments that interest you, and how much time you will devote to study.

Net Worth and Cash Flow: Indicate how much you will have (net worth), and how much money will come from cash flow.

Lifestyle: List things you will have; things you’ll experience during this time; how you feel about your money situation; and how you picture your day-to-day life.

SAMPLE: BETWEEN AGES 40—50

Investments: My main investment will be in my education. I will begin to study about the investments I am interested in making and building a team that can advise me. I also plan to increase my savings by $200 each month by reducing my expenses.

Net Worth and Cash Flow: By the time I reach 46, I want to have $30,000 saved and invested. I also will have my employer-sponsored retirement plan fully funded each year.

Lifestyle: I will stay focused on doing what I know I like now – travel, meeting new people, experiencing new cultures. I will pay for these activities by reducing my overhead and expenses on areas that aren’t as important to me.

Retirement Planning & Taxes

Lesson Questions 1. What are capital gains? a. A portion of one’s gross annual employment income. b. One’s net worth minus investments. c. Profits from the sale of a property or investment. d. A tax advantage on a defined benefit plan. 2. Which type of qualified employer-sponsored pension plan allows participants control over how their money is invested? a. Defined contribution plan. b. Defined benefit plan. c. Municipal bond. d. Guaranteed retirement benefit. 3. Which type of Individual Retirement Account (IRA) has zero tax impact when the money is withdrawn? a. Defined benefit plan. b. Self-directed IRA. c. Roth IRA. d. Traditional IRA.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.  Get their commitment to spend 30 minutes a week planning for investments and retirement.

Lesson Closing  Discuss students’ answers to the Essential Questions.

Investments

In this unit participants will gain an understanding of what investing is. Within these lessons they will learn about a variety of investment strategies and techniques to increase long-term financial security.

Investments

LESSON DURATION LESSON TITLE ID (MINUTES) Why People Invest V1 40-60 Introduction to Investing V2 20-30 Preparing to Invest V3 30-40 Compound Interest V4 30-60 Risk & Potential V5 10-20 Building a Team of Trusted Advisors V6 30-40 Types of Investments V7 30-45 The Stock Market V8 40-60 Investing in Real Estate V9 50-60 Investment Diversification V10 50-60 Investment Checklist V11 20-30

Investments

Why People Invest

Duration  40-60 minutes

Lesson Overview  In this lesson students will be introduced to the reasons why people learn about investing. They will comprehend the process of creating a retirement budget, including planning for inflation and predicting future income and expenses.

Big Idea  There are benefits and risks to investing. | There are different types of investments. | There is a specialized vocabulary associated with investing. | The economy and financial markets impact your investment. | There are tools and formulas to calculate the costs and return on an investment. | There are resources available to help with investment decisions.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is investing?  Why do people invest?  What is inflationary risk?

Skills  Knowledge of reasons to invest.  Understanding of inflationary risk and how to calculate future expenses based on an average inflation rate.  Ability to create a viable budget for retirement.

Vocabulary  Investing – putting money to use by expending it into something that offers a potential return.  Net worth – a measure of one’s economic position, calculated by subtracting liabilities from assets.  Inflation – an ongoing rise in the cost of goods and services.

Anticipatory Set Tell students that this discussion will be about investing. Instruct them to write their personal defiinition of “investing” in the Warm-Up Activity in the Student Guide. Discuss their responses.

V1 Why People Invest

Lesson Explanation: Why People Invest Explain that there are many reasons why people invest money. The top reason why people invest is to see a return (profit) on the investment. Review the following with students.

• FINANCIAL SECURITY. Many people decide to learn about investing because they want to become financially secure. They don’t want to worry about bills or being able to afford things they want. • LIFESTYLE. Earning money through investments helps you afford your desired lifestyle. Investing gets your money working for you, instead of you having to work for every dollar. And investments can provide you more free time to enjoy life. • RETIREMENT. Most people today rely on Social Security (SSI), a social welfare program that provides monthly payments to people over the age of 65; and Medicare, a program that provides medical insurance coverage to seniors; for their retirement incomes. SSI and Medicare have been projected to be bankrupt by 2033, so you should put an alternative plan in place. • BEAT INFLATION. Inflation is defined as “too many dollars chasing too few goods.” Inflation drives prices up. Putting your money to work for you through investing can help you become financially comfortable and give you the freedom to live the lifestyle you choose. There are two ways to achieve financial comfort:

o Build up your net worth; and o Build up your cash flow. It is also important for students to understand the meaning of the following terms: • NET WORTH is the measure of your net economic position – that is, how much money you have after your liabilities are subtracted from your assets. • CASH FLOW is the amount of money you have coming in on a regular basis from your investments or other sources (such as salaries, bonuses, income from rental properties, etc.). Have students look at the Inflations Charts provided in their Student Guides to see how inflation has affected the purchasing power of the dollar over the years.

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V1 Why People Invest

Historical US Inflation Rates

Year Percent Year Percent Year Percent Year Percent Year Percent 1921 -11.1 1941 11.3 1961 0.7 1981 8.4 2001 1.1 1922 -0.6 1942 7.6 1962 1.3 1982 3.7 2002 2.6 1923 3.0 1943 3.0 1963 1.6 1983 4.2 2003 1.9 1924 0.0 1944 2.3 1964 1.0 1984 3.5 2004 3.0 1925 3.5 1945 2.2 1965 1.9 1985 3.9 2005 4.0 1926 -2.2 1946 18.4 1966 3.5 1986 1.5 2006 2.1 1927 -1.1 1947 10.2 1967 3.6 1987 4.0 2007 4.3 1928 -1.2 1948 1.3 1968 4.4 1988 4.7 2008 0.03 1929 0.0 1949 -2.1 1969 6.2 1989 5.2 2009 2.63 1930 -7.0 1950 8.1 1970 5.3 1990 5.7 2010 1.63 1931 -10.1 1951 4.3 1971 3.3 1991 2.6 2011 2.93 1932 -9.8 1952 0.4 1972 3.6 1992 3.3 1933 2.3 1953 1.1 1973 9.4 1993 2.5 1934 3.0 1954 -0.7 1974 11.8 1994 2.8 1935 1.5 1955 0.4 1975 6.7 1995 2.7 1936 2.2 1956 3.0 1976 5.2 1996 3.0 1937 0.7 1957 3.6 1977 6.8 1997 1.6 1938 -1.4 1958 1.4 1978 9.3 1998 1.7 1939 -0.7 1959 1.0 1979 13.9 1999 2.7 1940 1.4 1960 1.7 1980 11.8 2000 3.7

Lesson Activity: Inflation Quiz If you live on a fixed income when you retire, inflation can have a big impact on your financial situation. It is essential that you understand and plan for the effects of inflation.

Instruct students to answer the questions preceding the Case Study in the Inflation Quiz Activity in the Student Guide.

Then go over the Case Study with the students and have them answer the inflationary risk questions that follow, to ensure that they have a good grasp of the topic.

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If you are earning 1% in a savings account and inflation is at 3%, will you be able to purchase more or less next year?  More  Less What if you are earning 7% on a stock market investment with 3% inflation, would you be able to purchase more or less next year?  More  Less What if your bank offered you a CD at 4% but you had to keep your money in the CD for 5 years. What are the risks? ______

In Year #1 of the example above, if the inflation rate was 3% for all 5 years, would that give you more or less purchasing power?  More  Less If inflation jumped to 8% in Year #2, would that investment still make sense for you?  Yes  No ______

CASE STUDY The Federal Reserve is a company that acts as the central bank of the United States. It is not part of the government; however, the Federal Reserve is designed to work within the overall economic and financial policies established by the government. The Federal Reserve is primarily funded by interest on US government securities. One of the Reserve’s duties is to regulate money supply. In 2010, the Reserve increased money supply by $600 billion. This is commonly referred to as “printing money,” although nowadays they’re able to create money electronically. Knowing what you now know about inflation, what do you think happened to the inflation rate in 2010 :  Increase  Decrease What do you think will happen to the purchasing power of the dollar: Will you be able to purchase more or less with $1.00?  More  Less

Explain that many factors go into inflation, but the Federal Reserve increasing the money supply is one of the leading contributors. That process also is known as monetary inflation. For instance, if you have $100 now, in 33 years – using a 3% inflation-adjusted figure rounded to the nearest dollar – that $100 would amount to about $40 in purchasing power.

V1 Why People Invest

Now we will take a look into the future to estimate your budget at retirement. Because most people do not have a good retirement budget in place, many are forced to go back to work after only a few years of retirement. Explain how it is important to estimate a budget for when they reach retirement and to plan ahead for the impact of inflation.

Lesson Activity: Budget at Retirement Direct students to the Budget at Retirement Activity in the Student Guide. Have them use the Net Worth Chart to list their assets and liabilities. To determine their net worth, they will subtract the total cost of liabilities from the total value of assets.

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Assets Liabilities  Personal Residence  Real Estate Mortgages  Rental & Other Properties  Retirement Loans

 Physical Metals (i.e., gold, silver)  Student Loans  Jewelry, Art, etc.  Credit Card Debt  Automobiles  Payday Loans  Other  Personal Loans  Auto Loans  US Government Bonds  Life Insurance Loans  Corporate Bonds  Margin Account Loans  Municipal Bonds  Other  Bond-Based Mutual Funds  Other  Other  Other  Other

 Stocks  Stock-Based Mutual Funds  Variable Annuities  Other Annuities  Life Insurance with Cash Value  Business Partnership Interest  Other

 Savings Account  Checking Account TOTALS  Money Market Account Total Assets  Certificate of Deposit Total Liabilities  Other Net Worth (Assets minus Liabilities)

V1 Why People Invest

Lesson Explanation: Future Living Expenses Next, the students will have to calculate their possible living expenses in the future. To do this, have the students first decide what they think the inflation rate will be. Ask how they might determine inflation rates, and why calculating inflation might be important for investing.

Tell students that there is no crystal ball for determining inflation but gaining knowledge, keeping up-to-date with monetary policy, and having a trusted team in place provides a good start.

You have set aside assets, savings, and investments for retirement, but you know that you need to also consider inflation. You don’t know what the rate of inflation is exactly but over the past five years the average inflation rate comes out to be 3%.

Using a 3% inflation rate and expenses totaling $2,000 per month, add inflation to your expenses. Here’s what you would enter into your calculator:

$2,000 X 1.03 = $2,060.

That figure estimates your expenses to increase by $60 at the end of the first year. To calculate inflation for 5 years, simply keep multiplying each new total by 1.03. For example:

Year $2,000 X 1.03 = $2,060 1

Year $2,060 X 1.03 = $2,121 2

Year $2,122 X 1.03 = $2,185 3

Year $2,185 X 1.03 = $2,251 4

Year $2,251 X 1.03 = $2,318 5 Now have students go back to the Net Worth Chart in the Student Guide, and instruct them to place a checkmark next to each item that will be affected by inflation.

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Lesson Activity: Future Impact Calculator Direct the students to the Future Impact Calculator Activity in the Student Guide, and instruct them to perform the following steps in order to determine the amount to be entered into the correpsonding steps in the activity grid.

1. Add up all the items that will NOT be adjusted by inflation; 2. Add up those items that will be adjusted by inflation; 3. Multiply the inflation-affected expenses by the inflation rate; 4. Then add the non-inflated expenses to that total. Since math turns many people off to the learning process, take a moment to reassure the participants that this calculation will be easy.

FUTURE IMPACT CALCULATOR Monthly Expense of Items Not Affected by Inflation ______Monthly Expense of Items Affected by Inflation ______Estimated Inflation Rate ______Inflation-adjusted Expenses ______Year Year 10 Year 20 Year 30 Total Expense ______Items Affected by Inflation + Year Year 10 Year 20 Year 30 Items Not Affected by Inflation

What steps will you take now to ensure that your income is enough to support your retirement lifestyle? What expenditures will you reduce at retirement to ensure that your lifestyle goals are met?

Finally, have students complete the charts “Budget Now” and “Budget at Retirement”. If they have more liabilities than assets in the net worth calculation, they will need to include a monthly payment towards this “expense” to compensate. They can either used detailed, year- to-year forecasts of inflation related expenses or, for simplicity, take the average and apply that to their budget charts.

V1 Why People Invest

Lesson Questions 1. How do you calculate your net worth? a. Subtract your assets from your liabilities. b. Total up your assets and liabilities. c. Add up your income and expenses and adjust for inflation. d. Subtract your liabilities from your assets. 1. Over the past five years, what has been the average rate of inflation in the US? a. 1% b. 3% c. 6% d. 12% e. 25% 2. When the Federal Reserve increases the money supply, what happens to the purchasing power of the dollar? a. It does not change b. It goes up c. It goes down d. It goes up briefly, and then goes down e. It goes down briefly, and then goes up 3. Precious metals (such as gold or silver) that you own are an example of: a. An asset b. A liability c. An annuity d. A bond

Lesson Review  Instruct participants to complete the Essential Questions in the Student Guide.  Discuss some of the reasons for investing. Encourage students to make a commitment to learn more about investing in order to secure their futures.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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Introduction to Investing

Duration  20 – 30 minutes

Lesson Overview  Students will learn the types of assets and how to calculate cash flow and return on investment. They will understand how these calculations relate to their net worth and ability to achieve financial freedom.

Big Idea  There are different types of investments.  There is a specialized vocabulary associated with investing.  There are tools and formulas to calculate the costs and return on an investment.  There are many considerations when evaluating investment options.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is cash flow?  What is net worth?  What does ROI stand for and what does it mean?  What does financial freedom mean to you?

Skills  Ability to determine one’s cash flow.  Ability to calculate return on investment (ROI).

Vocabulary  Cash flow – difference between money available at the beginning and end of an accounting period.  Tangible assets – things of value that have physical form.  Intangible assets – things of value that do not have physical form.  Return on investment (ROI) – an investment’s financial yield divided by its cost.

V2 Introduction to Investing

Anticipatory Set Direct students to the Warm-up Activity in their Student Guides and instruct them to write down what each of the quotes means to them. “When you’re making money doing what you love, you are already retired.” “Many describe the new retirement as having the freedom to do what you want to do, when you want to do it.” When they have finished, discuss their answers.

Lesson Explanation: Preparing to Invest Tell students that the purpose of investing is to achieve financial freedom. They want to be able to live the lifestyle they want, without worrying about paying bills and making ends meet. Financial freedom means you’ll be able to retire and spend time doing things you want to do. To become financially free it’s important to get your money starting to grow for you, instead of having to work for every penny. Go over the following definitions having to do with investments and financial freedom. • CASH FLOW is the difference between the money you have available at the beginning and end of an accounting period. o Positive cash flow: Cash coming in is greater than cash going out. o Negative cash flow: Cash going out is greater than cash coming in. o Breakeven cash flow: Cash coming in and cash going out are the same.

• NET WORTH equals Assets minus Liabilities. • ASSET is any item of economic value owned by a person or corporation o Tangible assets include gold, real estate, stocks. o Intangible assets are things you own that have value but are not physical in nature. EXAMPLES include copyrights, trademarks, brand recognition, and community goodwill. Discuss whether intangible assets are more or less secure than tangible assets and ask participants whether they have any intangible assets.

• LIABILITY is a loan and/or other obligation you have to pay. • RETURN ON INVESTMENT (ROI). This performance measure helps investors compare the return offered by one investment to returns on other investments. ROI is calculated by dividing an investment’s financial yield by its cost. The result is expressed as a percentage or ratio.

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Lesson Activity: Investment Definitions

Direct students to the Investment Definitions Activity in their Student Guides, which is comprised of three portions. Have them complete each portion immediately after you have reviewed the term’s definition.

1. CASH FLOW You receive a $1,500 check from a tenant on a rental property that you own. That month, your mortgage, insurance, taxes, and other rental property- related expenses for that unit come to $1,300. Complete the following statement:

In the example above, the rental property provides the owner a [type] ______cash flow of [amount] $______per month. Answers: positive cash flow of $200 per month 2. ASSETS Which are more secure: __X__tangible assets or _____ intangible assets?

Why?

3. ROI (Return on Investment) Assume you purchased $1,000 worth of stock. After a year, the stock is worth $1,100. What did you earn on the investment? $______[financial gain] Use the formula to determine the percentage of ROI. ______÷ ______= ______%. [Financial Gain] [Cost of Investment] [ROI] Answers: financial gain is $100; ROI is 10%

V2 Introduction to Investing

Lesson Questions 1. Having a break-even cash flow at the end of an accounting period means: a. You had more cash going out than coming in. b. You had more cash coming in than going out. c. You had a net worth higher than your amount of assets. d. Your cash going out and cash coming in were the same. e. Your bank account is empty. 2. Tangible assets might include: a. Real estate and stocks. b. Net worth and liabilities. c. Clothing and food. d. Copyrights and trademarks. 3. ROI is calculated by: a. Dividing net worth by investments. b. Dividing tangible assets by intangible assets. c. Dividing financial gain by the cost of the original investment. d. Multiplying risk times potential return. e. Multiplying assets times liabilities.

Lesson Review  Instruct participants to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.  Advise students that the things they learned in this lesson are great tools to help set goals toward retirement and financial freedom. When people reach a stage where their cash flow can support their lifestyle, or when they have a large enough net worth that they can draw money from that investment for a lifetime, these are good indicators of financial freedom.

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Preparing to Invest

Duration  30- minutes

Lesson Overview  In this lesson, students will understand reasons why people invest and the steps to take toward becoming prepared to ivnest.

Big Idea  Compounding interest is an important principle that describes how investments grow. There are tools and formulas to calculate the costs and returns of an investment.

Essential Questions At the end of the lesson, students should be able to answer the following:  Why do people decide to invest?  What are some of the basic principles that affect how investments perform?  What is a Ponzi scheme?  What are some ways to become prepared to invest?

Skills  Knowledge of the ivnesting basics and the financial market principels behind investment success.  Ability to prepare for investing.

Vocabulary  Investing — bying assets that you think will go up in value.  Net worth — the measure of how much wealth you have in assets.  Cash flow — the amount of money you have coming in on a regular basis from your investments.  Portfolio — a ummary of how your money is invested across financial markets.  Leverage — the ability to control large amounts of a commodity with a comparatively small amount of capital.  Risk capital — money you can afford to lose without encountering dangerous financial circumstances.

Materials  Calculator

Preparing to Invest

Anticipatory Set

Instruct students to answer the following question in the Warm-Up Activity in the student guide: What do you think the word investing means? Facilitate a brief discussion about their responses.

Lesson Explanation Explain that there are many reasons why people ivnest money. The top reason people invest is to see a return (profit) on the investment. Review the following reasons why people invest.

• Financial Security: Many people decide to learn how to invest because they want to feel financially secure. They don‘t want to worry about bills or being able to afford things they want. • Lifestyle: Earning money through investment can help people afford their desired lifestyles and things they want. Investing also gets people‘s money working for them (instead of them having to work for every dollar). Investments can help free up time so people can live their desired lifestyles. • Retirement: Most people today rely on Social Security (a social welfare program that provides monthly payments to people over the age of 62) and Medicare (a social welfare program that provides medical insurance coverage to older people) to retire. Unfortunately, for people under age 35 today, the SSI and Medicare systems will likely be bankrupt by the time you reach retirement age. You probably will receive no or very limited benefits. This means you must plan for your own retirement early. • Beat Inflation: Inflation is defined as ―too many dollars chasing too few goods. When this happens, prices go up. Tell students that if they don’t invest, they will actually lose money. Explain that inflation varies widely but many people use a rough 3% figure to calculate average annual inflation.

1950 1960 1970 1980 1990 2000

Average. Income $3,216 $5,199 $9,357 $19,173 $28,906 $41,343 New Car $1,511 $2,610 $3,979 $7,201 $16,012 $24,800

New House $8,450 $12,675 $23,400 $68,714 $123,000 $134,120 Loaf of Bread $0 .14 $0 .20 $0 .24 $0 .51 $0 .70 $1 .26

Gallon of Gas $0 .18 $0 .26 $0 .36 $1 .19 $1 .34 $1 .72

Gallon of Milk $0 .84 $1 .04 $1 .32 $2 .02 $2 .78 $3 .24 Minimum Wage $0 .75 $1 .00 $1 .60 $3 .10 $3 .80 $5 .15

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Have students read the following case study which is presented in the Student Guide.

CASE STUDY The Federal Reserve is the central bank of the United States. It is not part of the government; however, the Federal Reserve is designed to work within the overall economic and financial policies established by the government. The Federal Reserve is primarily funded by interest on US government securities. One of the Reserve’s duties is to regulate money supply. In k2010, the Reserve increased money supply by $600 billion. This is commonly referred to as “printing money,” although in today’s age, they use technology to create money electronically. Knowing what you now know about inflation, what do you think might happen to inflation based on this increase in the money supply? Will inflation increase or decrease?

Explain that many other factors go into inflation, but money supply is one of the leading contributors.

Lesson Activity: Calculating Inflation Direct students to the Calculating Inflation Activity in the Student Guide. Instruct them to calculate the value of $100 in 33 years, using a 3.1% inflation-adjusted figure rounded to the nearest dollar. Guide students to calculate the answer. Answer: About $41.

Lesson Explanation: Investment Basics Tell students that they can earn money while they sleep, vacation, and shop. This becomes possible when they earn profit and income by investing their savings in the stock market, bonds, real estate, and entrepreneurial endeavors. Being financially comfortable provides people with the freedom to live whatever lifestyle they choose. You can achieve financial comfort in two ways: 1. Build up your net worth, and 2. Build up your cash flow.

Preparing to Invest

Net worth is the measure of how much money you have. Cash flow is the amount of money coming in on a regular basis from your investments. Your net worth and cash flow income should be working for you all the time. There are some basic principles that affect whether investments will be successful or not. Go over the following concepts with the students.

INVESTING BASICS — A BRIEF GLOSSARY Three types of income: Active — earned through work. Passive — earned without labor on your part, like income received from rental properties. Portfolio — returns that come from financial market investments. THE LAWS OF INVESTING

Supply and Demand —When more people want a product, supply prices go up. When fewer people want that product, prices go down.

Assets and Liabilities — Easy as ABC. Assets produce income whereas liabilities cost you money (for example, cars). Try to get assets, not liabilities. Length of Investment — Basically, a dollar in hand today is worth more than a dollar that will be received in some future year.

Rate of Return — Return on investment (ROI) refers to the percentage of profit or revenue generated from a specific activity.

Cash Flow — The income generated through investments. Leverage — The ability to control large dollar amounts of a commodity with a comparatively small amount of capital.

Lesson Activity: Investment Scenarios Direct students to the Investment Scenarios Activity in the Student Guide and instruct them to write their answers the questions. 1. If you are earning 1% in a savings account and inflation is at 3%, are you able to purchase more or less next year? 2. What if you were earning 7% on a stock market investment with 3% inflation, would you be able to purchase more or less next year?

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3. What if your bank offered you a CD at 4% but you had to keep your money in for 5 years, what is your risk? 4. In year one, if the inflation rate was 3%, would that give you more or less purchasing power? If inflation jumped to 8% in the second year, would that investment still make sense for you?

Lesson Explanation: Preparing to Invest Remind students that the reduction and/or elimination of pension and SSI benefits now make it critical that they become educated investors.

Remind them that investing is basically buying assets that they think will go up in value. Assets are things like real estate, stocks, gold, or a business. Assets do not always increase in value, so any time you invest, you risk losing some or all of your money.

Explain that participants need to take the time to become educated investors and get their money working for them.

Go through the following steps to prepare for investing:

CONSISTENCY The first step to achieving financial success is following a consistent, long-term investment plan. Adopting a regular savings plan forms the foundation of your investing career. Your savings forms the backbone of a plan that provides you with money to invest on a regular basis.

Building wealth over time is all about taking the long view, and not getting bogged down in short- term gains. Building financial freedom takes time. But that doesn’t mean you shouldn’t get involved now. Success can come faster than you think!

By learning simple investment lessons you can begin making money while you sleep. If you start investing early and consistently, you’ll harness the power of compounding interest.

CHECK YOURSELF Emotions make us do things we wouldn’t normally do. This is especially true with investing. The negative emotions most likely to affect people when they invest are greed and fear. Many people just chase the almighty dollar. They want more and more – yet when they start to lose money, they become scared and freeze up.

Another emotional crutch for some people is to fall in love with a stock, or a company, or a piece of real estate. Despite warning signs telling them to sell, they foolishly continue to hold on to it, even as it depreciates in value!

Preparing to Invest

People who carry emotional baggage when they invest are likely to make bad decisions more often than people with a clear, relaxed business focus.

CONTROLLING YOUR EMOTIONS Controlling your emotional responses to risk will be an important part of your investment plan.

“Get rich quick” schemes are a dime a dozen — someone calling you with a “hot” stock tip, or begging you to invest in a sweet deal. These types of salespeople are trying to stir up your emotions by selling you an improbable dream. Ponzi schemes, bank fraud, and the Enron collapse are some good examples of investment scams in which people lost millions. Don’t let that happen to you. Gain the knowledge you need to make educated financial decisions for yourself.

When someone approaches me with an investment idea, the first question I ask is, “Do you invest in this yourself?” If the answer is “No,” – which it often is – I thank them for their time and politely decline.

It’s good to listen to other people’s investment ideas, but never let them convince you to get involved before doing your own research. Check out their claims by looking online, reading books, and talking to trusted advisors. The more you know about money matters, the more successful you’ll be – and the more fun you’ll have doing it!

Always continue to learn and think for yourself. Put your money on your mind, and keep your mind on the money. Soon you could be making $10,000 a month in interest alone!

Talk about Ponzi schemes. Explain that a Ponzi scheme is an investment fraud where people invest and their return on the investment is paid from the money of new investors. So people who invested in 2012 were paid their return using the investment money from people who invest in 2013. Talk about the fraud committed by top investment banking firms and Enron.

Discuss how these frauds affected different types of investors: • those who lost their life savings; • those who lost a significant amount of money; and • those who only lost a small portion of their investment.

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Lesson Activity 3: Preparing to Invest Direct students to the Preparing to Invest Activity in the Student Guide and have them answer the questions there.

Rate your current investment confidence level:           Low High

Do you want to invest within the next few years?  Yes  No

Instruct participants to use the Preparing to Invest Checklist in the Student Guide as they prepare to invest in their future.

PREPARING TO INVEST CHECKLIST Before you consider investing be sure to have six months’ worth of expenses put away in your emergency fund. Be free of credit card debt and have a working budget in place that allows you to save money each month. Only use risk capital for investments. Risk capital refers to money that you can afford to lose without putting you in dangerous financial circumstances. Have a team of trusted advisors and mentors at your disposal. Create an overall investment plan and determine how the investment you are considering fits into your plan. Gain expert-level knowledge on each specific investment you are considering by conducting due diligence research. Due diligence means you educate yourself on the investment and do your homework before committing your hard-earned money. Determine the risk and potential reward. All investments have a certain amount of risk and reward. Ideally, you want to earn the highest return (reward) with the least amount of risk. Have an exit plan in place in case the investment doesn’t go as planned.

Preparing to Invest

Lesson Questions 1. Which of the following is the best definition of investing? a. Too much money chasing too few goods b. Being able to feel financially secure c. The ability to live one’s desired lifestyle d. Buying assets you believe will increase in value 2. Why do people invest? a. To fund their retirement b. To achieve financial security c. To be able to live a certain lifestyle d. To beat inflation e. All of the above 3. Your cash flow is… a. The total funds in your checking and savings accounts. b. The total of outstanding bills you owe. c. The amount of money your investments bring in regularly. d. Your total annual salary minus deductions. 4. Which of the following represents a common percentage used to calculate inflation? a. 1% b. 2% c. 3% d. 5% e. 8% 5. Which of the following are important members to include on your team of investment advisors? a. Personal trainer b. Tax planner c. Financial mentor d. Religious leader e. Friends in your network f. All of the above g. b, c, and e only

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Lesson Review  Discuss how emotions play an important part in preparing to invest and in determining how much investment risk people are willing to take.  Instruct students to answer the Essential Questions in the Student Guides.

Closing Activity/  Discuss their answers to the Essential Questions. Remarks

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Compounding Interest

Duration  30-60 minutes

Lesson Overview  In this lesson students will understand the power of compounding interest and how it relates to investments. They will learn the Rule of 72 and some strategies for preparing oneself to invest.

Big Idea  Compounding interest is an important principle that describes how investments grow. There are tools and formulas to calculate the costs and returns of an investment.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is compounding interest?  What does the Rule of 72 tell you.

Skills  Knowledge of how compounding interest works.  Understanding the Rule of 72.  Ability to prepare for investing.

Vocabulary  Compounding interest – the principle where invested money earns interest both on the principal and on the accumulated interest.  Rule of 72 – the formula for calculating how long it will take for invested money to double.

Materials  Calculator

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide and ask them to write down what the following quote means to them:

“The most powerful force in the universe is compound interest.” Albert Einstein

When they’ve finished, facilitate a brief discussion about their answers.

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Lesson Explanation Ask students,“What if I could show you how saving just $100 a month could grow into a million dollars?” People who start saving and investing $100 per month before they’re 30 years old have a good chance of becoming millionaires.

This happens due to the principle of compounding interest. Compounding interest allows money to grow off of itself. The younger a person starts to invest, the larger that person’s money can grow. Understanding the principle of compounding interest is a critical piece of preparing to invest.

The beauty of compounding interest is that you make money BOTH on the money you deposit AND on the interest your investments pay you. So interest is calculated not only on the initial principal, but also on the accumulated interest your money generates over time.

That’s the definition of compounding interest: the process by which the value of an investment increases exponentially because it earns interest both on the principal and on the prior interest payments. Here’s what compounding interest would mean to someone who started investing at age 18: Based on a 12% Rate of Return If you invest this much You can be a millionaire per month … at this age! $100 57 $200 51 $400 46 $700 41

But no matter your age, you can still take advantage of compounding interest. There are various investment strategies to help you get better returns on your money. But do you see how just a simple savings plan and compounding interest can work in your favor?

Lesson Activity: A Penny a Day Direct students to the A Penny a Day Activity in the Student Guide and explain that you have a business proposition for them. • You need someone to work for you for one month. • Display a penny or a picture of a penny. • Say, “On the first day you work for me, you will earn one penny. Then I will double your salary each day for the entire 30 days that you work for me. Will you take the offer?”

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• Then ask whether they would rather work for you for one month if you paid them $100,000. • Ask which choice will ultimately earn them more money at the end of the month? • Have students go to the blank calendar page in the student guide.

Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7

Day 8 Day 9 Day 10 Day 11 Day 12 Day 13 Day 14

Day 15 Day 16 Day 17 Day 18 Day 19 Day 20 Day 21

Day 22 Day 23 Day 24 Day 25 Day 26 Day 27 Day 28

Day 29 Day 30

• Have students compute how much money they will have earned at the end of the month if they took the penny offer. NOTE: The table below contains the correct daily amounts earned and is NOT provided in the Student Guide.)

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COMPOUND INTEREST CALCULATIONS

Day 1 $.01 Day 11 $10.24 Day 21 $10,485.76

Day 2 $.02 Day 12 $20.48 Day 22 $20,971.52

Day 3 $.04 Day 13 $40.96 Day 23 $41,943.04

Day 4 $.08 Day 14 $81.92 Day 24 $83,886.08

Day 5 $.16 Day 15 $163.84 Day 25 $167,772.16

Day 6 $.32 Day 16 $327.68 Day 26 $335,544.32

Day 7 $.64 Day 17 $655.36 Day 27 $671,088.64

Day 8 $1.28 Day 18 $1,310.72 Day 28 $1,342,177.28

Day 9 $2.56 Day 19 $2,621.44 Day 29 $2,684,354.56

Day 10 $5.12 Day 20 $5,242.88 Day 30 $5,368,709.12

Give students just 60 seconds to calculate. Afterward, discuss the game with the students. Ask whether they would have made as much if their pennies only doubled for 7 days, 14 days, and 21 days.

Reiterate how powerful compounding interest can be.

V4 Compounding Interest

Lesson Activity: Compounding Interest Direct students to the Compounding Interest Activity in the Student Guide. Instruct them to take out their calculators to complete the following activity.

If you invest $10,000 that earns a return of 10% per year. At the end of one year, you will have made $1,000: $10,000 X .10 = $1,000 This is how much you earned.

Now calculate your total account balance at the end of the year by multiplying $10,000 X 1.1 = $11,000. This is the new balance in your account.

Next calculate how much you would have in your account if you earned 10% a year from your $10,000 investment for 15 years. $10,000 * 1.1 = $11,000 $11,000 * 1.1 = $12,100 $12,100 * 1.1 = $13,310 and so on.

Round to the nearest dollar: $______Answer: $41,772 Understanding this principle will be critical when they begin investing later.

Explain that compound interest is powerful because you earn interest on the money you initially saved or invested, and then as you earn interest, the interest money earns interest as well.

Tell students the earlier they begin saving for retirement, the longer their money has a chance to grow.

Lesson Explanation: Rule of 72 The Rule of 72 says that if you divide 72 by the non-decimal interest rate (10, not 0.1) you are receiving from an investment the answer tells you how many years it will take for that money to double. This principle helps illustrate that the earlier you start saving for retirement, the better the chances that your money will double. Teach participants this simple formula to figure out when their money will double. Divide 72 by the non-decimal interest rate (for instance, “10” not “0.1”) you are receiving from an investment. The answer tells you how many years it will take for that money to double.

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EXAMPLE: If you have $10,000 in savings and are earning a 10% interest rate, your money will double in 7.2 years. 72 ÷10 = 7.2

Lesson Activity: Rule of 72 Direct participants to the Using the Rule of 72 Activity in the Student Guide and instruct them to answer the questions.

1. How long will it take to double your $10,000 at 5% interest? Answer: 14.4 years 2. If you put your $10,000 in your piggy bank at 0% interest, how much will you have when you retire? ______Answer: $10,000

Share the following statements: • If you start investing your money and learning more about investments at any age, you have an excellent chance to improve your financial situation.

Lesson Questions 1. According to the rule of 72, if you earn a 10% interest rate how long will it take for your money to double? a. 1 year b. 72 years c. 7.2 years d. It depends on the type of investment.

2. Interest earned both on an original investment of money and also on the interest the original money has accumulated is called _____ interest. a. Simple a. Nominal b. Compound c. Real

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3. If you invest $1,000 and earn 8% interest, to what amount will your investment have grown after 1 year? a. $1,800 b. $920 c. $1,080 d. It depends on the type of investment. 4. Compounding interest on your investments is beneficial because_____. a. It protects you against investment risk. b. It allows you to earn interest on the money you initially saved or invested, and then as you earn interest, the interest money earns interest as well. c. It provides a way for you to diversify your investments. d. You are able to calculate a return on investment (ROI). 5. How will the “Rule of 72” help you when you consider various investments? a. It will let me know when my investment has increased 72%. b. It lets me know when my investment will double. c. It can reduce my risk. d. All of the above.

Lesson Review  Discuss how emotions play an important part in preparing to invest and in determining how much risk people are willing to take when investing.  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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Risk & Potential

Duration  10-20 minutes

Lesson Overview  Students will understand that every investment carries a certain amount of risk and reward, and learn to manage risk by conducting due diligence on any specific investment they consider.

Big Idea  There are benefits and risks to investing.  The economy and financial markets impact your investment.  Financial risks can be managed through financial planning.  Financial decisions align with your financial plan and risk tolerance.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a financial risk?  What are three different types of financial risk?  What is risk capital?  What is due diligence?

Skills  The ability to calculate and balance risk and reward on investments.

Vocabulary  Risk capital – money one can afford to lose without encountering hardship.  Due diligence – educating oneself on any investment one is considering.

Anticipatory Set

Instruct students to turn to the Warm-up Activity in their Student Guides and write down their answers to these questions: • What does financial risk mean to you? • What are some events that might cause an investment to lose money? Facilitate a discussion about their answers.

Risk & Potential

Lesson Explanation: Risk Management Before making any investment, it is important to know your risk.

Review the various types of risk with the class.

• INFLATION RISK. The value of an asset or income decreases due to the reduced value of the currency. The purchasing power of the investment return declines. • LIQUIDITY RISK. This risk is commonly associated with real estate and refers to the inability to convert an asset to cash. With stocks that have a high trading volume, typically your liquidity risk is low – with the exception of when there is a significant market correction. • INTEREST RATE RISK. When interest rates rise, the value of a fixed-rate investment will decline in value. • BUSINESS RISK. The potential for a company in which you have invested (in a stock or bond) to go out of business, become bankrupt, or be unable to pay back their bond obligations. Enron, Blockbuster, and Wicks Furniture are a few examples of companies that are now out of business. Diversification (holding a variety of investments) helps minimize your business risk losses. • OPPORTUNITY RISK. When you’re presented with a better investment option than the one to which you’ve committed your money, that’s called opportunity risk. Because you’re already tied up in a project, you cannot act on the new opportunity and you potentially lose profits. • CREDIT RISK. Credit risk is a specific risk for bondholders where the bond issuer cannot make interest or principal payments. • MARKET RISK (aka Systematic Risk). The uncertainty and movement of financial markets is termed market risk. This type of risk affects all securities in the same asset class in a similar manner. Changes in interest rates, tax base, and other factors all affect your potential return on investment. Some events that can increase your market risk include: natural disasters, major policy changes, and events that can impact the overall market (like the collapse of Bear Sterns). • REINVESTMENT RISK. This risk mainly applies to those bondholders whose bonds are coming due who are seeking a bond investment with equal or greater interest and the same amount of risk. If they’re unsuccessful, their income can be reduced or they may have to invest in riskier bonds. • POLITICAL RISK. Government action that might change the value of the investment is a risk that must be considered.

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Lesson Explanation: Importance of Noting Risk and Potential Explain that risk capital is money you can afford to lose without encountering dangerous financial circumstances.

• You should only invest risk capital. • You should gain knowledge about each investment type you are considering. • You should have a team of trusted advisors and mentors at your disposal. Emphasize the importance of creating an overall investment plan and determining how each investment you consider fits into your plan. Tell them to conduct due diligence research on each specific investment they consider.

Explain that due diligence means educating yourself on the investment you’re researching. You need to do your homework before committing your hard-earned money.

Determine the risk and potential reward. Every investment carries a certain amount of risk and reward. Ideally, you want to earn the highest return (reward) while taking the least amount of risk.

Discuss the need to have an exit plan in place in case the investment doesn’t go as planned.

Lesson Activity: How Much Can I Lose? Direct students to complete the How Much Can I Lose? Activity in the Student Guides.

1. You buy a piece of real estate for $200,000 and make a $20,000 deposit. How much can you lose? Nothing Your investment of $20,000 More than your original investment 2. You invest $3,000 to purchase 100 shares of a stock values at $30 a share. How much can you lose? Nothing Your investment of $3,000 plus any trading fees More than your original investment and trading fees

Risk & Potential

Lesson Questions 1. The inability to convert an asset into cash defines which type of risk? a. Opportunity risk. b. Political risk. c. Market risk. d. Liquidity risk. 2. Which of the following is a key method for managing risk in one’s investment plan? a. Investing as much of one’s money as possible in the stock market. b. Choosing investments with potential for the highest returns. c. Using the Rule of 72 to determine how long your investment will take to double. d. Conducting due diligence research on every investment one is considering. 3. You should only invest . a. Risk capital. b. Money borrowed on a credit card. c. In real estate. d. Interest. e. All of the above.

Lesson Review  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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Building Your Team of Trusted Advisors

Duration  30-40 minutes

Lesson Overview  Students will learn how to build a team of trusted advisors and the role advisors play in one’s investment planning.

Big Idea  Your network can increase exposure to potential opportunities.  There are many considerations when evaluating investment options.  There are resources and individuals available to help with investment decisions.  Effective investing requires good decision-making skills.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a trusted advisor?  Why is it important to have trusted advisors in business?  What are three things I should ask a potential advisor?

Skills  Knowledge of the key members of a financial team.  Knowing what questions to ask potential members of one’s team of advisors.

Vocabulary  Trusted advisor – professional who helps you make informed decisions related to his or her area of expertise.  Mentor – an experienced and trusted friend who can help you in your career field.

Anticipatory Set Direct students to the Warm-up Activity in their Student Guides and have them write the answer to the question: • What is a trusted advisor? Discuss their answers and the importance of knowing what “trusted advisor” means.

Team of Trusted Advisors

Lesson Explanation: Your Rock-Solid “A” Team Tell the class that in this section, they will learn about trusted financial/business advisors. They’ll learn pertinent skills to identify reputable advisors while still making sound financial decisions. Over the course of your lives, you will have to interact with many professionals who will help you with your financial endeavors. It’s important to work with trusted, reputable, and established professionals within any given field. Many financial planners, investment bankers, realtors, loan officers, and other financial professionals often work on commission. That means they may not always give the best advice. Explain that participants should build a financial team that includes the following professionals:

• FINANCIAL MENTOR. A mentor could be someone you know who successfully manages his/her own money, someone whose advice you feel comfortable soliciting. The more knowledgeable, experienced people you have around you, the better decisions you will make. But never take anyone’s advice without doing your own homework. You’re looking for a helpful guide, not a puppet master! Although some people may seem to know how to manage their money properly, appearances can be deceiving. Always do your own research as a backup. Perhaps one day you will become an experienced mentor yourself!

• TAX PLANNER. Having the right tax planner on your team will keep more money in your pocket when April 15 (Tax Day) comes around. The complicated tax code is more than 17,000 pages long, so having a tax planning professional is critical. Boning up on basic tax knowledge doesn’t hurt, though, since about one-fourth to one-third of your income goes to paying taxes if you work for someone else. Besides the questions listed below, ask your tax planner: “Are you available year-round for questions?” If you’re first starting out, your taxes will be pretty easy to manage, but we still don’t advise you to do them yourself. Hire a professional with whom you can grow as your investments and income grow.

• COLLEGE PLANNER. If you or your children are going to college, finding a talented college planner is a must. It will be important to determine your (or your child’s) return on investment for obtaining the college degree. How much will the education cost, compared to the increased earning potential with the degree?

• ATTORNEY. Legal questions often arise when you review contracts and other documents, so finding an efficient attorney is a good idea. Any time you need to sign a contract, hire an attorney who specializes in the relevant field. An inexpensive way to

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hire an attorney is through pre-paid legal companies, which typically offer several different plans. Choose the plan that best fits your needs. Sometimes you might feel you don’t get straight answers from legal folks. Remember that they’re trying to limit their own liability. To avoid this problem and get better answers, consider reviewing all contracts yourself first, writing down any specific questions you have prior to asking the attorney for review. You’ll expand your knowledge and get a better grasp of the business side of investing.

• REALTOR AND MORTGAGE PROFESSIONAL. If you own or plan to purchase a home, the expert assistance of a realtor and/or mortgage professional will be critical to your advisement team. They can help you calculate the mortgage you can afford, obtain financing, and research and select the perfect property for your needs.

• FINANCIAL ADVISOR. Finding a trusted financial advisor can help you achieve your financial objectives and forms an important member of your investment team. Find an advisor who believes in furthering your education and who takes the time to truly understand your investment objectives.

• INSURANCE AGENT. Many people just choose insurance companies based on the cheapest rates. But choosing by price alone might actually cost you more in the long run. Pick an established insurance company with competitive rates, one that offers all types of insurance (auto, home, life) and that knows the business inside and out. Select an experienced agent who can address your unique situation. Ask participants to discuss whether they already have built or are in process of building a winning team. Use the following questions as discussion points: • What were some of the choices you made to build your team? • How did this team help you determine your financial decisions? • Did you take advice from friends or family? Why or why not? Explain that the key to building relationships is to reach out prior to needing help. That way, you’ll find people who are willing to build a relationship. • If you plan to buy a home in the next few years, you may want to start early to find a realtor. • When it comes to financial decisions, its best never to be rushed. Early planning is a good idea. • Finding someone who is willing to work with you now and help you prepare is a sign of a trusted advisor. Explain the difference between a trusted advisor and a mentor. • A trusted advisor is someone who works in a field (real estate, investments, law, etc.) who will help you with your needs in that area.

Team of Trusted Advisors

• A mentor is a person with years of experience who can help you in your career field. Mentors are not selling you anything. They are your trusted friends who give you advice on a wide range of topics from life to business. Review the list of basic questions participants should ask each potential member of their team: • How many years have you been in your respective field? • What are your fees and how do you get paid? • What are your credentials? • What professional boards do you belong to? • Have you ever had any disciplinary action? • What is your past experience? • What other services do you offer? • How many other people do you advise? Emphasize that students should be sure to choose people who not only are educated, but whom the students like on a personal level. You will develop long-term relationships with your advisors. Choose people you enjoy being around. • If a financial planner, realtor, lawyer, or tax professional is a close, trusted friend who has been successfully managing and investing money for many years, that person may be an excellent resource for you. • If you do not have such a reliable, close friend, interview many potential brokers/ financial planners. Explain that while it’s important to have a great team on their side, they shouldn’t lean on their team like a crutch. Ultimately, your financial decisions are your own. The advisor just informs you about all the options surrounding the decision. Remind participants how important it is to interview advisors before choosing to work with them. It’s also important to remember that financial professionals and other service providers are paid on commission. That means they only get paid if you invest. Share these important tips: 1. You want to find one who will give you the best possible advice – not someone just looking after his/her own interests. 2. Certain financial professionals are experts in a particular service, but not in others. 3. Don’t rely entirely on one financial advisor. 4. Ensure that your financial experts are in agreement about your investments.

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Lesson Activity: Investment Protection Direct students to the Investment Protection Activity in the Student Guide. Instruct them to consider each situation and write down their thoughts about both, as well as ideas on how they might protect themselves. 1. A mortgage broker recommends to a family that makes $2,500 a month that they get a loan at payments of $1,000 per month. What he doesn’t tell the family is that, • in the second year, the payments increase to $1,500; • in the third year payments will be $2,000; and • by the fifth year payments will be $3,000 per month. This escalated payment schedule is mentioned in the 40 pages of legal disclaimers the family received, but they didn’t read all those pages because the documents were confusing.

How could this family have protected themselves from getting a mortgage that was bad for their situation?

2. In 2008, one of the largest investment banking firms in the country was recommending that people purchase an investment while secretly betting that the investment would lose money. As a result, the investment firm made millions while the people lost millions. How could the people who became prey to this scandal have protected themselves?

Facilitate discussion around why some firms do these types of things.

Lesson Questions 1. Which of the following are two professionals you should have on your team of trusted advisors? a. Professor and health care professional. b. Doctor and event planner. c. College planner and tax planner. d. Accountant and pastor. 2. What is the primary role of a financial advisor? a. To make your final investment decisions for you. b. To help you get a mortgage. c. To protect you from banking fees. d. To inform you about all the options surrounding a financial decision.

Team of Trusted Advisors

3. Which of the following is an important question you should ask a potential member of your team of trusted advisors? a. What is your past experience? b. How much do you earn? c. Do you have any hot stock market tips? d. Where did you go to school?

Lesson Review  Review that while having a team of trusted advisors is essential, the final responsibilty for making financial and investment decisions rests with the participants. They should still conduct their due diligence research to beocme informed about every financial decisions they’re considering.  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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Types of Investments

Duration  30-45 minutes

Lesson Overview  In this lesson, students will receive an overview of the various investment options that are available. They will understand the concept of opportunity cost and how to minimize opportunity cost when choosing the best investment option in a given situation.

Big Idea  There are different types of investments. | There are different investment principles and strategies. | There are ways to align your investments with your personal financial goals. | The risk and reward of different investment options varies. | There are many considerations when evaluating investment options. | There are strategies for making good investment choices. | There are resources and individuals available to help with investment decisions. | Effective investing requires good decision-making skills. | There are ways to create an investment plan to increase your financial wellbeing.

Essential Questions At the end of the lesson, students should be able to answer the following:  Name four types of investments currently available.  What is opportunity cost?  What is the relationship between risk and reward when making investments?

Skills  A basic understanding of the available investment options.  Ability to calculate risk and reward.  Knowledge of the definition of opportunity cost and how it can be minimized.

Vocabulary  Investment  Opportunity cost — the idea that when you choose one investment, you will have less money available for other investment options.  Liquidity — the ability to turn an investment into cash.  Risk and reward — the potential to lose money on an investment, balanced against the potential investment returns.

Types of Investments

Anticipatory Set Have students turn to the Warm-up Activity in the student guides and allow them about five minutes to write down their answers to the following question:

• Why should I learn about investments as part of my long-term financial planning strategy? When they have finished, have students share their answers with the group. Listen and facilitate discussion about their answers. If needed, give a few prompts: achieve higher returns, keep up with inflation, prepare for retirement.

Lesson Explanation: Investment Basics In this section, we will briefly go over some different investment options that are available. Each investment offers different qualities that will help you determine whether it fits your investing strategy.

With every investment you choose to make, there will be less money for other investments. This notion is called “opportunity cost.”

Explain that opportunity cost is relevant to investing because every time someone invests in one option, that person may be passing up a more lucrative opportunity.

Review the following chart with the students.

Explain that each type of investment offers different levels of potential risk and reward. In general, the greater the risk you take of losing your money, the higher the potential reward (return) on an investment.

Another thing to consider when choosing an investment is the investment’s liquidity.

To make the best investment decision with the lowest opportunity cost, it is important to be well-informed about all the types of investments there are and their potential risks and rewards. Then you are better able to make informed decisions and minimize opportunity costs.

Review the various types of investment options with the students.

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SAVINGS ACCOUNTS Returns Are low, typically below inflation. In 2014, most savings interest rates are less than 1%. Benefit Include ability to access money quickly and safety of principal. Risks There is low risk of capital loss because banks are insured by the FDIC (credit unions, by the NCAU). Liquidity You can access your money instantly (although with larger amounts, you may experience some delay. Low cost to access money. CERTIFICATE OF DEPOSIT (CD) Returns Are low, but often higher than savings accounts. The more money you have to invest in CDs, the larger return you can earn. In 2012, CD rates for one year were about 1%. Benefit Money Market accounts have similar qualities to CDs but are typically shorter in term, often with maturity dates of one year or less. Risks There is low risk of capital loss because CDs are insured by FDIC (banks) or NCAU (credit unions). The longer the term of a CD, the higher the risk that it will earn a return less than inflation. Liquidity CD liquidity varies. You may pay a fee to access the money. There will be minimal or no cost — if you wait until the maturity date. If you sell before the CD maturity date, you will probably pay penalties. ANNUITY. Investors can opt to set up an annuity to provide income for a specific period of time, a term which can end during their lifetimes. Returns Varies. Income is dependent on the amount of your investment, length of payments and performance, and what type of annuity you choose. Two common types of annuities are fixed annuity, which provides a guaranteed payout; or variable annuity, where income is determined by the performance of the annuity’s underlying investments. Benefit Include the potential to generate a future income stream; some annuities offer capital protection. Risks Vary with type of annuity. Common risks include lack of liquidity and inflation risk. There is also a smaller risk that you’ll lose your capital investment if the insurance company that insures the annuity fails. Liquidity Most annuities allow for some type of distribution penalty-free; however, you probably won’t be able to access all your money immediately without paying penalties.

Types of Investments

INDIVIDUAL STOCKS Returns Varies depending on market conditions and investment strategies. Benefit Stocks have the potential to earn returns greater than the rate of inflation. Risks You can lose 100% of your money. Liquidity You can sell stocks any time the market is open. Many stocks can be traded after hours. MUTUAL FUNDS Returns Varies greatly depending upon type of mutual fund investment. Benefit Include the availability of a wide selection of mutual fund options that meet a variety of investment goals. The returns you can expect are tied to the amount of risk you’re willing to take. Risks Risk varies greatly depending on the type of mutual fund in which you invest; with some funds, you can lose your entire capital investment. Liquidity Most mutual funds are liquid and, like shares, can be sold the same or next day at Net Asset Value (NAV). There are different types of mutual fund classes that you can choose. Some penalize for early withdrawal. COMMODITIES Returns Varies greatly. Benefit Commodities may provide a hedge against inflation. Risks There is a risk of losing some or all of your money. Liquidity In most markets, you can access your money quickly.

EXCHANGE TRADED FUND (ETF) Returns Varies depending on the type of ETF you choose. Benefit ETFs provide broad market exposure and typically have lower operating expenses than mutual funds. You can buy and sell ETFs when the market is open, compared to mutual funds which only allow sales at the close of market. Risks You can lose some or all of your money. Liquidity Most ETFs offer a high degree of liquidity.

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Explain to students that, if they purchase one SPY ETF share, they will own a fraction of all 500 stocks on the S&P 500. They can choose sector ETFs, like ones that track the financial markets or technology markets, for example. The trading fees on ETFs are typically lower than on mutual funds, depending on how many shares are purchased.

BONDS Returns Varies widely based on type of bond. Bonds have a price and yield proportional to their risk. Returns on municipal bonds (issued by cities, counties, etc.) vary, depending on safety of investment, but can range from 2% to 5%. Returns on corporate bonds range by risk from 4% to as high as 20% for very high risk bonds, aka “junk” bonds. Benefit Bonds are typically less volatile than stocks, and are often used to stabilize portfolio value. Income is received at regular intervals. Some bonds have tax advantages. Risks Varies. If you choose a high-risk bond and the company that issued the debt goes bankrupt, you could lose your entire investment. This is known as business risk. There is also inflation risk. Bond prices have an inverse relationship with interest rates: when one rises, the other falls. So if you sell before the bond matures, you could lose money. Liquidity Typically bonds are less liquid than stocks. If a bond is downgraded or in default, you might have trouble getting out of the investment.

Discuss the Standard & Poor’s recent US Treasury debt rating change from AAA to AA. In 2011, the S & P lowered the long-term credit rating of the US from AAA (the highest rating) to AA+, based on the country’s rising public debt burden and the ongoing controversy in debates about fiscal policy. Facilitate discussion with students about what this means to the US.

REAL ESTATE Benefit Investing in real estate has several benefits: appreciation (property goes up in value); cash flow (rental and income producing properties); and potential tax benefits and leverage. Risks Depreciation, falling housing prices, and being unable to sell are risks of owning real estate. Most people get loans to buy real estate. If you lose your job or have financial hardships, you may not be able to pay back the loan. Then you might have to “short sell” the home (sell for less than the house is worth) or be foreclosed (the lender takes back the home). In both cases, you could lose more money than you’ve invested, plus it would hurt your credit rating. Liquidity In good real estate markets, you can sell within a few months. In bad real estate markets, it may take years to sell at a discount. Cost of sale is about 8% of the home sales price.

Types of Investments

Lesson Activity: Opportunity Cost Have students complete the scenarios in the Opportunity Cost Activity. In each scenario, they are to identify the type of investment they would choose to minimize opportunity cost in that situation. 1. You are looking to purchase a rental property in six months. You have $25,000 in your checking account that is not earning any interest. You would like to see the $25,000 working for you. What investment(s) would you consider with this scenario? ANSWER: Short-term investment with very low risk capital, maybe a CD. 2. You are looking for an income stream when you retire. You have calculated exactly how much you need to live, and you don’t have any extra money to make riskier investments. Which investment sounds right to you in this situation? ANSWER: A longer-term investment that offers some capital protection would be appropriate for this type of situation; possibly an annuity, money market account, or low-risk mutual fund. 3. You are young and willing to take educated investment risks that earn high returns. What investment options may be best for you? ANSWER: Higher risk investments in the stock market, commodity market, or real estate could be an option for this type of investor. 4. You need to access your money in a month. Where could you put your money? ANSWER: Low-risk, low-return investments — maybe a savings account or a short-term CD. 5. You want to save money to eventually purchase a home. You plan to buy a home within five years but will do so sooner if your money earns good returns. What are the types of investments to consider in this situation? ANSWER: This type of person may benefit from a diversified portfolio that combines different risk and return levels. Once the activity is complete, discuss the answers as a class. Talk with students about which options are best, which are risky, and which are safe.

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Lesson Questions 1. What is opportunity cost? a. The liquidity of an investment. b. The idea that when you choose an investment option, you will have less money available to invest in other options. c. The risk of losing one’s capital. d. The cost of buying a stock. e. The benefit an investor receives from taking a higher risk. 2. When choosing investments, the relationship between risk and reward is best stated as: a. The higher the risk, the lower the potential reward. b. The lower the risk, the higher the potential reward. c. The higher the risk, the higher the potential reward. d. The higher the reward, the easier it is for the investor to calculate risk. e. There is no relationship between risk and reward. 3. In investing, the term liquidity refers to: a. How quickly the investment can be turned into cash. b. The value of the investment in whole dollars. c. The ability of the investment to keep pace with inflation rates. d. The perceived ability of the investor to pay back his or her debts. e. The value of the investment according to the consumer price index.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.  Review the idea of opportunity cost and how it can be minimized by balancing the amount of risk one is willing to take against the potential rewards of an investment.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

V7 The Stock Market

The Stock Market

Duration  40-60 minutes

Lesson Overview  In this lesson, students will learn the definition of a stock, how trading works, the basic principles of the stock market, why and how an investment portfolio can be diversified.

Big Idea  There are benefits and risks to investing. | There are different investment principles and strategies. | There are ways to align your investments with your personal financial goals. | The risk and reward of different investment options varies. | There are strategies for making good investment choices. | There are ways to create an investment plan to increase your financial wellbeing.

Essential Questions At the end of the lesson, students should be able to answer the following:  What is a stock?  What are the two basic principles of supply and demand?  What is the difference between day traders, short-term investors, and long-term investors in the stock market?  How can having a diversified portfolio help me?  What are the possible drawbacks of having a diversified portfolio?  What is dollar cost average?

Skills  Knowledge of the basic principles of the stock market.  Understanding of how to diversify one’s portfolio and why diversification is important.  Basic grasp of dollar cost averaging.

Vocabulary  Stock — a share of a company or other financial security, representing partial ownership in that company.  Stock market — the piece of the U.S. financial market in which stocks are listed and traded.  Supply — the quantity of stock shares available for sale.  Demand — the number of stock shares investors are willing to purchase at a given price.  Diversification — spreading investments among many different securities or sectors to reduce the risk of owning any single investment.  Dollar cost averaging

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Anticipatory Set Have students turn to the Warm-up Activity in the Student Guides and write down their answers to the questions: • What is a stock? • What does diversification mean? When they have finished, have students share their answers with the group. Listen and facilitate a discussion about their answers.

Lesson Explanation: What Is the Stock Market? Let’s talk about the stock market. Did you know that when you own a stock, you own part of the company?

Remind students that there are many different types of financial markets: stock, bond, option, and commodities markets are just a few.

The stock market is one piece of the overall US financial market.

The stock market trades the stock of companies and other financial securities. A stock is genuine, partial ownership in a company. If you own 10,000 shares of a company with 1,000,000 outstanding shares, you would own 1% of that company.

The stocks of companies are listed and traded on stock exchanges. The stock of companies in the United States is listed on several different exchanges, for example, the New York Stock Exchange (NYSE) and the NASDAQ.

Explain that during trading, stocks are bought and sold by bidding. When the bid price (the price at which a buyer is willing to buy) and the ask price (the price at which a seller is willing to sell) match, a sale takes place. This means that prices can fluctuate day-to-day, and the worth of a stock you own can change depending on demand for that company’s stock.

So how does buying and selling stocks work? A stockbroker is the middleman. He sells or buys stock on your behalf. The reason is that stock transactions must be made between two members of the exchange – you can’t just walk into a stock exchange and start trading stocks. So you’re going to be using a broker to invest in stocks. In addition, stockbrokers may also offer financial advice to their clients on which stocks to buy. (Bear in mind, they’re on commission – everyone’s after your hard-earned money!) Therefore, a basic stock market transaction works like this:

YOU  BROKER  ELECTRONIC EXCHANGE  BROKER  YOU

V8 The Stock Market

HINTS FOR SUCCESS: A Few Important Lessons Don’t listen to “hot stock tips.” Most of the time, they are wrong and move people away from their overall investment strategy. You’ve probably already received bogus stock tips in your email spam. That’s where these tips belong – in your junk folder! Don’t invest in individual stocks unless you are highly-educated or have a trusted team. It can be trick to pick a winner out of a bag of hundreds or thousands of stocks. Be careful who you take advice from. Wall Street is full of conflicts, and everyone wants a piece of your money.

Lesson Activity: Auction Game Tell students you are going to play “The Auction Game” so that they can experience how buying and selling stock works. • Hold up an item, any item, and offer it for sale. • Have students bid on the item. • Once you have a high bidder, tell students about a problem with the item they just bought. • Let students bid again on the item now that they know about the defect. Wrap up the game by letting students know that the stock market moves based on the prices at which people are offering to purchase a stock. People’s perception on the stock change and so too does the stocks perceived value.

Lesson Explanation: Basic Principles of the Stock Market Before you buy or sell one single share of stock, you’ll want to understand the basic principles of the stock market.

SUPPLY AND DEMAND This is a fundamental rule of economics. The stock market runs according to this rule. • Supply is the quantity of stock shares available for sale. • Demand is the number of stock shares investors are willing to purchase at a given price.

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If supply is greater than demand, in the case of stocks, then the price will naturally fall. If supply is less than demand, the price will go up.

This principle explains why stock prices go up and down, but the reason for greater interest (or lack of interest) in a stock is more related to the company’s performance, gossip about the company’s future, and/or technical factors.

RISK AND RETURN Just like supply and demand, risk and return have a correlative relationship, or at least they should if you’re getting a good deal.

• If you’re investing in something that carries a low level of risk, then you probably can’t expect to earn high returns. • The opposite is true of high-risk ventures. In that case you would expect higher returns in exchange for risking your money. For instance, if you invest your money in a brand-new company that has no proven track record, that investment is high-risk. The company could easily go out of business, and you would lose everything. On the other hand, it could be highly successful, in which case you would make a lot of money.

Once you have established a solid savings account and have acquired a lot of knowledge on how to choose individual stocks, it’s okay to allocate a small portion of your portfolio to riskier investments, but not before!

OWNERSHIP As amazing as it sounds, owning a stock makes you co-owner of the company. With ownership, you gain a voice in the company’s business. You can vote at meetings and take a real interest in the inner workings of the company. You act through an appointed group of individuals called the Board of Directors. This board acts in your interest while the company’s management acts in the company’s best interest. The company’s management (CEO and other executive staff) answer to the Board of Directors.

Tell students there is an important difference though— “limited liability.” That means that if something bad happens in your company, they can’t haul you off to prison for it.

STREET TALK You’ve probably heard the word on the street. Now learn the lingo of Wall Street.

• Share — A share is an ownership unit of a company issued to shareholders. • IPO —Initial Public Offering (IPO) is the first sale of a corporation’s common shares to public investors. The main purpose of an IPO is to raise capital for the corporation.

V8 The Stock Market

• P/E Ratio —The price/earnings (P/E) ratio represents a stock’s present price in relation to its per share earnings from the past year. • Moving Averages —Technical investors look at charts and evaluate the stock price in relation to the average of a stock’s closing price for a specified number of previous closing prices. This can indicate whether stock is moving up or down – which is important for analysis because once a stock starts moving in a particular direction, it tends to gain strength and continue moving in that direction. • Volume — equals the daily number of shares of a security that are traded. This is another indicator. Increased volume on increasing prices shows accumulation. Increased volume on lower prices shows distribution. Price/volume relations can determine which way a stock will move. • Consolidation —occurs when a stock pulls back after a move up or down, and temporarily trades in a narrower range on lower volume. • Odd Lot — order to buy or sell less than 100 shares of a stock. • Stop Loss —This is a sell order placed under current stock price to limit losses in case a stock price goes down. For example, your stock is currently at $20. You want to sell if it drops to $18, so you would simply put a Stop Loss order in at $18. The stock is sold automatically once it reaches that level.

Lesson Explanation: Approaches to Trading Now explain how different people invest in the market.

• DAY TRADERS usually try to profit from short-term price conditions, so they like to connect with fast, impulsive sellers and buyers. These traders often place several trades to several hundred trades per day. • SHORT-TERM INVESTORS are keen to buy a stock. Then if the stock moves up, they get their money (and profit) back out quickly. If the stock moves down, they cut their losses and sell.

Those short-term profits that traders and short-term investors generate can be tempting, but unless you’re extremely experienced, it’s wiser to adopt a long-term mentality. • LONG-TERM INVESTORS are often called “buy and hold” investors. They purchase stock in hopes of generating large gains over a period of time. No investing style is necessarily better than another; but until you have a lot of education and experience, it’s probably best to focus on long-term investments.

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ACTIVE VS. PASSIVE PORTFOLIO MANAGEMENT. You also can weigh the pros and cons of active vs. passive management of your stock portfolio. Active management is considered an art: stock picking and market timing. Passive management is more of a “buy and hold” approach.

Lesson Explanation: Diversification Diversification is defined as spreading investments among many different securities or sectors to reduce the risk of owning any single investment. For example, if you put money into a SPY (A&P 500 Index ETF), you literally own a fractional interest in every one of the 500 stocks that make up that index. If one stock in the S&P 500 has bad news and drops 50% of its value, you’re only invested in 1/500th of that stock, and you won’t see too much negative effect from that. In comparison, if you just owned that stock by itself, you would have lost 50% immediately. Diversification can be an important step toward developing a successful investment formula and a winning portfolio.

Lesson Activity: Diversification Direct students to the Diversification Activity in the Student Guide and have them answer the questions in Part I.

PART I Person A invests $100,000 of his money in a startup company that many people think will take off. Person B invests $10,000 of his money in the startup mentioned above; $30,000 in real estate; and the remaining in a few different mutual funds. If the startup company’s stock price skyrockets, who will make the most? Person A Person B

If the startup company fails, who will lose the most? Person A Person B

In what ways can Person A generate a positive return on investment? In what ways can Person B generate a positive return on investment?

Let students know there are a few types of diversification. Explain asset classes. Point out that asset classes include stocks, real estate, bonds, cash, commodities, and other investments.

Tell the class that it’s important to know about asset classes so you can manage your risk through diversification.

V8 The Stock Market

What would happen if you had all your money in real estate, and the real estate market collapsed?

Explain that knowing what asset classes are can help us diversify our portfolio and thus reduce our risks. Point out that there are two types of diversification, and give examples of each. 1. Diversification BETWEEN different asset classes; and 2. Diversification WITHIN an asset class. Next, instruct students to complete PART II of the Activity.

PART II • All of a family’s investments are held in mutual funds. They decide to invest in an individual stock. Which of the following describes this action? Diversification BETWEEN asset classes or Diversification WITHIN an asset class.

• A family owns a home and decides to invest in an ETF and some physical gold. Which of the following describes this action? Diversification BETWEEN asset classes or Diversification WITHIN an asset class.

How can having a diversified portfolio benefit you? What are the possible drawbacks of having a diversified investment portfolio?

Lesson Explanation: Types of Funds Explain that mutual funds, index funds, and ETFs can help some investors diversify their portfolios.

• A mutual fund is a type of managed investment that pools money from many investors to purchase securities that align with the mutual fund’s stated investment objectives. • An index fund is a type of mutual fund whose portfolio is designed to track the components of a market index and can give investors increased diversification, broad market exposure, and low operating expense. Share examples of market indexes like the S&P 500, the NASDAQ 100, the Wilshire 5000, and the Dow Jones Industrial Index.

• An ETF (exchange traded fund) is a security that tracks a basket of assets like a commodity, sector, index, or other area. It acts similarly to an index fund, but trades like a stock. Examples include S&P 500 ETFs — called “spiders” (SPY) — and Wilshire 5000 ETFs — called “vipers” (VTI)

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SCENARIO There was an investor who wanted to invest in technology stocks. He had a good idea about which stocks he was interested in, and this is what he found: Technology stock 1 ...... $300 per share Technology stock 2 ...... $50 per share Technology stock 3 ...... $150 per share Technology stock 4 ...... $100 per share If he wanted to invest in each of these stocks, it would cost him $600 plus trading fees. He also found a mutual fund that owns the exact stocks he was interested in trading. The investor could also choose to purchase the mutual fund.

Review the scenario with the class.

Clarify that mutual funds are investment vehicles made up of funds collected from various investors. They are operated by professional money managers whose goal is to successfully fulfill the mutual fund’s stated objective.

Common goals include income or capital gain. Read the prospectus to learn more about a mutual fund’s stated goal. Mutual funds can invest in stocks, bonds, and other assets.

Explain that Net Asset Value (NAV) is a figure that calculates the mutual fund’s price at the close of the market. Purchase and sale of mutual funds occur only at the end of the market day. Investors are unable to sell during typical market hours.

There are thousands of mutual funds, and most fit within a smaller subset of categories. Read the examples below and spend some time explaining the terms that are underlined.

• Aggressive Growth Funds — try to maximize capital gains, may leverage their assets by borrowing money, and may trade in stock options. • Growth Funds —are similar to aggressive growth funds, but usually do not leverage their investments (borrow money) or use stock options. • Growth Income Funds — The goal is to generate dividend income and growth. • Income Funds — The main focus is on generating dividend income. • International Funds — hold stock of companies around the world. • Asset Allocation Funds — don’t just invest in stocks; they also may have bonds, real estate, metals, and money market and other mutual funds.

V8 The Stock Market

• Sector Funds— invest in a specific sector of the stock market. For example, a technology fund would buy tech stocks. • Bond Funds — invest in corporate and government bonds. • Money Market Funds — are mutual funds that invest solely in government-insured, short- term debt instruments. • Equity Fund — Essentially, this is a mutual fund with a portfolio consisting primarily of stocks, as opposed to a mix of bonds and other commodities. There are several different types of equity funds. • Growth— These are stocks believed to be the fastest-growing companies in the market. On the other hand, they rarely provide dividend income and are considered higher risk. • Income —Investing in securities that pay interest or dividends to provide income. • Growth & Income — A combo of the two above, providing both growth and income. • Value — Investing in large or mid-sized companies that may be undervalued. • Small, Medium & Large —Based on size, these funds invest in emerging (small), mid-sized (medium), or established (large) cap. • Sector — Stocks in a single market sector carry more risk than investing across many sectors; however, the potential rewards are greater. Sector funds may include funds that just invest in computer chip companies or telecom companies. • Fixed Income and Money Market — These are low-risk funds that earn much lower returns, on average. They work as interest-bearing investments with reduced risk, compared to equities. If you’re a long way from retirement, you probably won’t need these low-risk funds in your portfolio yet. If you’re closer to retirement, you may want to consider these funds. • Balanced — As the name implies, a mutual fund that invests into the money market, bonds, preferred stock, and common stock. Explain that a “sales”, “charge” or “load” is levied on the purchase or sale of mutual fund shares. Review the common load types. • Front-end loan — paid when shares are purchased (Class A shares). • Back-end load — paid when shares are sold (Class B shares). • Level load / low load — paid annually (Class C shares). • No-load fund — no sales load is paid up front or on the sale; however, fees like exchange fees, account fees, etc., are paid (Class C shares).

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EXCHANGE TRADED FUNDS (ETFs) are investment funds that trade like a stock. Investors can invest in a variety of ETFs. Some ETFs track broad range indexes like the S&P 500 (SPY). If an investor purchases one SPY ETF share, he can own a fraction of all 500 stocks on the S&P 500.

Investors can choose sector ETFs — for example, ones that track the financial markets or technology markets.

The trading fees on ETFs are typically lower than those on a mutual fund. This is dependent on how many shares are purchased. ETFs trade like a stock, and can be bought or sold.

Lesson Explanation: The Joy of Index An index is a group of stocks that collectively represents a larger group. Index funds basically allow investors to buy a bunch of stocks that mimic the performance of the entire stock market, in the hope of replicating a successful trend. Since you’re investing in the overall performance of the market, the risk of investing in a single stock can be reduced. Broad market indexes allow you to generate investment returns similar to overall market performance. When you invest in the S&P 500 broad market index, you are actually purchasing a fraction of all the 500 stocks in that index. Broad market indexes that closely match the overall return of the stock market earn higher returns for investors than the average mutual fund. The smallest broad-based index is the Dow Jones Industrial Average, with 30 industrial stocks. The largest is the Wilshire 5000, with over 5000 stocks in one fund. • The Dow Jones Industrial Index The Dow is an average of the 30 most significant stocks traded on the New York Stock Exchange (NYSE). This is the oldest and one of the most observed indexes in the world. Companies whose stock is traded on the Dow include McDonald’s, Home Depot, Verizon, Coca-Cola, Microsoft, and American Express. • The Standard & Poor’s 500. The S&P is a basket of 500 stocks from leading companies in leading industries. The performance of the S&P gives a broad snapshot of the performance of the overall US equities market. This is one of the best broad-based indexes for beginning investors. Amazon, Johnson & Johnson, Disney, Motorola, Office Depot, and Wells Fargo are among the stocks that make up the S&P index. • NASDAQ 100. One hundred of the largest domestic and international non-financial companies are on the NASDAQ stock exchange. This exchange is heavily weighted with technology stocks.

V8 The Stock Market

• Wilshire 5000. These are all publicly traded companies in leading industries, representing the broadest index for the US equity market. It has grown from 5,000 to more than 6,500 stocks. Investing in mutual funds, index funds, or ETFs is something you should only do when you have some knowledge and the guidance of professional, trusted advisor. You can see that you have a lot of choices in the stock market. SO WHERE DO YOU INVEST? There are more than 10,000 mutual funds. And having too many choices can be overwhelming, which definitely won’t help your decision process. Keep it simple. If you don't understand an investment, don't buy it. Choose investments that suit your age, risk tolerance level, and financial goals. Each person is different and it’s important to have a clear investment strategy before putting money at risk. For instance, some people may be able to invest more conservatively as they approach retirement age; others who are behind on their retirement savings may need to be more aggressive. Choose an overall investment strategy and investments that suit you.

Lesson Explanation: Dollar Cost Averaging Tell students that now they will learn how the theory of compound interest can be applied to their stock market investments. They will learn the technique of dollar cost averaging.

Explain that the technique of dollar cost averaging allows people to make investments by slowly buying smaller amounts of the index over a longer period of time. This simple technique can help investors to reduce their risk and maintain a consistent investment plan over time. If the price goes down, you’re able to buy more shares, so when the index goes back up you own more shares. The effect of dollar cost averaging is that it spreads the cost basis (prices at which you purchase the index) over several years, insulating you from short- term price corrections.

There are two key elements to creating a dollar cost averaging plan:

1. Budget the exact amount of money you can invest. 2. At set specific intervals —weekly, monthly, or quarterly — invest that money into the same investment. Explain that participants can increase or decrease their investments in an orderly and planned fashion, and their advisors can set up an automatic withdrawal plan that will automatically transfer money from their checking accounts.

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Using the sample plan to explain A SAMPLE PLAN how dollar cost averaging works. Monthly Cost per # Shares

If you were to invest $100 per Investment Share Purchased month, you would own 131 shares Jan $100 $10 10 after one year. Your investment would have increased in value by Feb $100 $9 11.1 $376. In comparison, if you did Mar $100 $8 12.5 not follow a dollar cost averaging Apr $100 $9 11.1 plan, and purchased $1,200 worth May $100 $7 14.2 of shares at once, in 2013 your return would be $240. You would Jun $100 $6 16.6 own 120 total shares ($1,200 Jul $100 $8 12.5 investment divided by $10 per Aug $100 $10 10 share = 120 total shares). Sep $100 $12 8.3 Discuss this method of investing Nov $100 $13 7.7 and its effectiveness, and ask the students for their thoughts on Dec $100 $11 9.1 investing over a one-year period Jan $100 $12 8.3 rather than all at once. TOTAL SHARES: 131.4

Lesson Activity: Dollar Cost Averaging Direct students to the Dollar Cost Averaging Activity in the Student Guide, and have them answer the questions. • What are your thoughts about dollar cost average? • What benefits do you see in developing a dollar cost averaging plan? • Describe a situation where following a dollar cost averaging plan would earn you a lower return than investing a lump sum.

V8 The Stock Market

Lesson Questions 1. A stock is … a. A type of bond. b. An example of the relationship between risk and return. c. An investment method. d. A share in a company, representing partial ownership of that company. 2. Which of the following best describes the principle of supply and demand? a. If supply is greater than demand, the price will go down. b. If demand is greater than supply, the price will go down. c. If supply goes up, the demand will fall. d. If demand increases, the supply will increase. 3. What is the main purpose of investment diversification? a. To spread the returns over a longer period of time. b. To reduce the risk of owning any single investment. c. To help budget one’s investment dollars more wisely. d. To identify different types of asset classes. 4. What are the two key elements of dollar cost averaging? a. Budgeting the amount you have to invest and investing a set amount at specific intervals. a. Choosing an asset class and trading stocks. b. Developing a quarterly plan and diversifying your portfolio. c. Day trading and maximizing long-term gains.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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Investing in Real Estate

Duration  60 minutes

Lesson Overview  In this lesson, students will understand the real estate investment process and the benefits and risks of owning property. Big Idea  Learning the process of investing in real estate, its risks and benefits, will help students create a workable budget for buying property. Essential Questions At the end of the lesson, students should be able to answer the following:  What is equity?  What is a mortgage?  Name one benefit of investing in real estate. Skills  Understanding the process involved in real estate ivnestment.  Ability to create a budget to plan for property ownership. Vocabulary  Mortgage — charigng real property as security for a loan on that property, with the condition that the purchase amount will be paid back over time.  Closing costs — the expenses over and above the purchase price that buyers and sellers incur as part of a real estate transaction.  House-poor — being broke as the result of the expenses of owning a home. Materials  Sample budget

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide and instruct them to write down their answer to the question: Why do you think real estate is an investment?

When they’ve finished, facilitate a brief discussion about their responses.

Lesson Explanation: Why Buy Real Estate? Explain that home ownership provides a number of benefits. As with all major purchases, you should crunch some serious numbers before you take that leap to buy a property. If you have a good working budget, you will know what you can honestly afford., This section gives you a quick guide to planning an accurate, realistic budget.

Invest in Real Estate

Tell students that it is vital to understand all of the costs associated with home ownership when planning their budgets. Finanically successful people make sure they can afford a purchase before they ever consider buying. That’s why it is so important to understand all the associated costs. During the proces process, you must answer two questions: • What monthly payment can you afford? • What is the approximate dolalr range of homes you can buy? If you are buying a home in which you intend to live, here is a snapshot of the expenses to include in real estate ownership.

• Mortgage Payment — Just like an automobile loan, you make an initial down payment and then make monthly payments toward the remaining balance. • Property Taxes — Each region of the country has different tax rates, so property taxes will vary from place to place. Taxes typically are calculated at between 1% and 3% of the purchase price. Contact a local real estate agent to find out the exact property tax rate for the area in which you are considering purchasing property. • Insurance — You must have homeowner’s insurance to protect against such perils as fire, wind, and earthquake damage. Not only is insurance important to have, but some lenders will not issue a mortgage on an uninsured property. Contact an insurance agent for a rough insurance quote on potential homes you’re considering. For example, in states like Florida, where hurricanes are an annual event, residents pay much higher insurance premiums than those in safer locations. • Association Dues — Condominiums, town homes, or planned unit developments often charge a monthly or annual fee to support the Homeowner’s Association. • Maintenance — Costs to maintain real estate are directly affected by the age and condition of the property. A real estate agent or a registered home inspector can help you estimate maintenance costs, or you could ask a friendly builder or knowledgeable family member to take a look. Generally, newer well-kept properties require lower maintenance. Later, we will discuss the importance of obtaining a property inspection report which will detail probably future maintenance costs. Explain that when you buy or sell a home, there are fees associated with the process. • For the Buyer: Loan closing costs should be calculated at 2.5% of the loan amount. • For the Seller: Closing costs will be around 7%-8% of the selling price. Sellers pay a commission for a full service real estate agent; the commission is negotiable but likely to cost 5%-6% in most area. Careful consideration and budget planning will be the keyt to your real estate investment success.

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Tell students that a house appreciating in value will make you money, but what about being “house poor?” Explain that “house poor” means being broke dur to the expenses of owning a home. Being “house poor” usually is a result of bad budet planning — or no budgeting at all!

• Emphasize to students that they need to make sure they can afford a home to avoid getting into a “house poor” situation. • Talk about the recent real estate crisis of 2008 to illustrate this concept. Review the benefits of property ownership.

• Leverage — As a property owner, you have the enviable ability to control a property of greater value than the cash you originally invested. You gain leverage by borrowing money, typically from a financial institution. For instance, say you purchase a property for $100,000. Most people get a loan for the majority of that amount. They may have $20,000 for a down payment, and then borrow the remaining 80% from a mortgage company. The $80,000 represents the loan amount and is referred to as the principal balance. Thus, you control a much larger asset as you pay down the 80% loan over time (mortgage payments). • Equity Growth — Paying down the principal balance in regular increments gives you predictable, steady equity growth over time. Each time you make a mortgage payment you pay down a portion of the balance you owe. It’s like a built-in savings account. • Tax Benefits — Real estate owners have many available tax benefits. Check with your tax advisor to learn more. • Appreciation — Appreciation is a real estate term for the increase in value of land and buildings. If you purchase a house for $200,000, for example, and the property appreciates 10%, the value of the house is now $220,000. If it appreciates 10% again the next year, the value grows to $242,000. • Higher Return on Investment Potential — Given the leverage real estate investment offers, and the fact that your investment appreciates on the total property value, your ROI is much higher than you would encounter with other investments. For example, if you purchased $10,000 worth of stocks and got a 15% return, you would earn just $1,500 for the year; and stock investments also carry much greater risk. • Cash Flow — Rental property owners generate cash flow via monthly income they collect from tenants. Now go over the risks of real estate investing.

• Liquidity — Selling a property can take years, depending on market conditions. When the market is strong, the average time to sell in most communities is two to six months. In bad market conditions, the property can be listed for years before it sells.

Invest in Real Estate

• Change in Loan Market — Lenders can change their rules at any time. Changes in loan terms affect future buyers and your ability to sell the property. • Market Conditions — Fluctuations in market conditions can quickly change your situation. It’s important for property owners to view the long-term market outlook, both nationally and in the local community. • Maintenance— Repairs on a home can be quite costly. Be sure to have enough money saved and the right insurance so that you’re adequately prepared for contingencies.

Lesson Activity: Breaking It Down Direct students to the Breaking It Down Activity in their Student Guide. Go through the sample budget for purchasing a home. Explain the process so that students understand the importance of budgeting and being financially prepared before purchasing a home.

Here’s an example of costs to include in your budget:

Purchase price $100,000

Down payment at 10% of purchase price $ 10,000

Mortgage payment (based on $90,000 at 6.5% interest) $ 874

Property tax $ 105

Insurance $ 40

Association dues $ 0

Maintenance $ 45

Total monthly payment $ 1,064

Explain that some costs — like taxes and insurance — may increase or decrease. Be sure to budget out a few years in advance when considering the cost of home ownership.

• Group students into pairs. Have each pair work together to come up with ten reasons to purchase a home, and write their lists in the Student Guide. • Ask students to share their responses with another group or with the whole class.

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Lesson Questions 1. What does it mean to be “house poor?” a. Being broke due to the costs of owning a home. b. Owing more than the home’s value. c. Creating a budget to plan for costs. d. Paying a high association fee. 2. Property tax rates vary according to … a. Time. b. Owner’s age. c. Region. d. Size of the home. 3. Which of the following percentages of the purchase price might a real estate buyer expect to incur in closing costs? a. 1% b. 2.5% c. 8% d. 12% e. 20%

Invest in Real Estate

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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Investment Diversification

Duration  60 minutes

Lesson Overview  Students will learn the definition of investment diversification and why diversification is important. Big Idea  Learning to diversify one’s investments is an essential component of a successful investment formula because it helps reduce risk. Essential Questions At the end of the lesson, students should be able to answer the following:  What is investment diversification?  How do people benefit from investment diversification? Skills  Understanding the meaning and importance of investment diversification.  Ability to create an ivnestment formula by choosing between various investment options. Vocabulary  Diversification — spreading investments among many different securities or sectors.  Asset class — a group of ivnestments that behave similarly in the marketplace.  ETF — Exchange Traded Fund Materials  Newspaper business section OR  Access to stocks online.

Anticipatory Set Direct students to the Warm-Up Activity in the Student Guide to answer the following question: What does diversification mean?

Definition: Diversification is defined as spreading investments among many different securities or sectors to reduce the risk of owning any single investment.

Facilitate a brief discussion about their responses.

V10 Investment Diversification

Lesson Explanation: The Importance of Diversification Diversification is an important step toward developing a successful investment formula. Explain the following example: • If you put money into a SPY (S&P 500 index ETF), you literally own a fractional interest in every one of the five hundred stocks that make up that index. • So if one stock in the S&P 500 has bad news and drops 50% of its value, you’re only invested 1/500th, so you won’t see too much negative effect. • In comparison, if you just owned that stock by itself, you would have lost 50% immediately. Make sure the students understand the importance of diversification.

Have students look at the various stock listings in the business section of the newspaper, or look the listings up online. Note which stocks have gone up or down; point out some different funds and indexes. Then show diversification among different mutual funds and asset classes.

Explain what would happen if the entire stock market took a 50% hit. • If you had all your money in the stock market, you would lose 50% of your money. • If you also had money in real estate, bond funds, or other investments, the loss would be reduced. Show students that diversification provides a form of protection for those who invest. It’s better to lose some money than to lose all of it. Diversification of assets protects people from losing everything.

Go over the basic types of investments:

• BONDS are investments where you buy debt from someone (usually a government body or corporation) so that they have the cash now. In return, you receive payment at a fixed interest rate from them over a long period of time. • MONEY MARKET INSTRUMENTS are things like certificates of deposit (CDs), Treasury Bills, and money market funds. They’re short-term, low-return investments that usually mature within one year. • MUTUAL FUNDS are various securities (stocks, bonds, or money markets) bundled into a group. You can buy shares of the whole group. Mutual funds are a fairly safe, simple way to diversify. • STOCKS. When you buy stocks, you buy a percentage (called a share) of a company. If the company does well, then stock usually goes up — and vice versa.

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• REAL ESTATE. Real property includes things like homes, land, and buildings. • BUSINESSES. Buying or starting a business is another type of investment you can choose.

Lesson Activity: The Investing Game Direct students to the Investing Game Activity in the Student Guide and tell them they are going to play The Investing Game. Divide class into small groups and explain how the game works.

• Each group will have $100,000 to invest in whatever way they see fit among any of the following three investment options. o Individual Stocks o Mutual Funds o Real Estate • Tell students that it’s completely up to them how they choose to invest their money and how much (if any) they invest in each option. • Explain that the game will be completed in four rounds. After each round they will learn how well each of their investment funds did. Example: They might put $70,000 in real estate, $10,000 in individual stocks, and $20,000 in mutual funds in the first round. They will find out how well their investments did at the end of each round. Then they will have the option to reinvest any money they earned, or reassess their investments based on any losses they incurred. • Allow students five minutes to decide how to distribute their $100,000 among the three investment choices. • Begin Round 1. o Have each group tell you how they invested their money. o Track their decisions on paper or by filling out an online form. o Once all the groups have recorded their options, read the results for Round 1. • After Round 1 is complete, allow students to reassess and reinvest as needed. • Repeat for four rounds.

V10 Investment Diversification

CALCULATING GAME OUTCOMES Round 1 Results Individual stocks students lose 50% of original investment. Mutual funds students receive 30% increase on original investment. Real estate students’ equity increases 40% on original investment.

Round 2 Results Individual stocks students gain 50% of original investment. Mutual funds students receive 5% increase on original investment. Real estate no market gain.

Round 3 Results Individual stocks students lose 10% of original investment. Mutual funds students lose 10% increase on original investment. Real estate students’ equity increases 40% on original investment.

Round 4 Results Individual stocks students lose 5% of original investment. Mutual funds students receive 5% increase on original investment. Real estate students’ equity increases 10% on original investment.

Once all four rounds are complete, talk about the game. Ask how it felt to lose some money and gain some money? Ask who gained money overall, and who lost money overall? Facilitate discussion around the game outcomes.

Close the activity by allowing the students an opportunity to answer the reflection questions in their Student Guide.

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Lesson Questions 1. Why is investment diversification important? a. Because it guarantees a higher ROI. b. Because the stock market is too difficult to understand. c. Because individual stocks have better returns than mutual funds. d. Because it helps protect against risk. 2. Investing in the S&P 500 index is less risky than investing in an individual stock because… a. Your investment is distributed across all 500 stocks in the index. b. It’s the same as owning real estate. c. You automatically receive a 15% rate of return. d. Your original investment is amortized over time. 3. Three of the basic types of investments are: a. Risk, Management, and Insurance. b. Diversification, Trading, and Exchange. c. Bonds, Mutual Funds, and Real Estate. d. Financial Institutions, Banks, and Credit Unions.

Lesson Review  Instruct students to complete the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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Investment Checklist

Duration  20 – 30 minutes

Lesson Overview  Students will identify the steps they should take to prepare for implementing their investment plan, and make a commitment to take those steps. Big Idea  There are benefits and risks to investing. | There are different types of investments. | There are different investment principles and strategies. | The economy and financial markets impact your investment. | There are ways to align your investments with your personal financial goals. | The risk and reward of different investment options varies. Essential Questions At the end of the lesson, students should be able to answer the following:  What are the steps I should take to prepare for investing? Skills  Knowledge of the important steps to prepare for investing.

Vocabulary  Due Diligence

Anticipatory Set Direct students to the Warm-up Activity in their Student Guides and have them write the answer to the question: “What steps should I take before I start investing?” Discuss their answers.

Lesson Explanation: Becoming Prepared to Invest Tell participants that there are many compelling reasons why they should begin investing to get their money working for them, instead of having to work for every dollar they earn. But before they take the plunge and start investing, there are some important steps they need to take to become prepared.

The most important thing they need before they invest is knowledge. Knowledge forms the foundation of your investment strategy and financial planning. Once you have gained a solid knowledge base about all the available investment options, your next most important step is to build a trusted team of advisors.

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Another key compone7nt of investment preparation is freeing up risk capital to use for your investments. Before implementing any investment strategy you should build up an emergency savings fund that equals between 6 and 24 months’ worth of your expenses. Then if your income source were to dry up (for example, if you lose your job), you could still meet your obligations for that number of months. Once you have an emergency fund that would last you 6-24 months and a working budget that includes a good savings plan, you can start building up risk capital that you can afford to invest. Minimizing bad debt should be an important focus of your budget. Finally, you need to develop an overall investment plan that aligns with your lifestyle goals and matches your risk tolerance. You should include an exit plan in case an investment doesn’t perform as predicted. Don’t forget to conduct due diligence research on every investment you’re considering.

Lesson Activity: Investment Preparation Checklist Direct students to the Investment Preparation Checklist Activity in their Student Guides and instruct them to complete the KNOWLEDGE section.

Have them circle the number that represents their current financial knowledge level and underline the number that represents the knowledge level to which they plan to improve their personal financial knowledge within one year.           Low High Tell participants that the next most important step is building a trusted team.

Ask students why trust is so important and discuss their responses. Then have them go to the TRUSTED TEAM portion of the Activity and check off each team member they already have in place or plan to add within the next year.

 Tax planner  College planner  Attorney  Financial mentors  Financial advisors  Insurance agent  Realtor or mortgage professional Remind participants that before they consider investing, they need to be sure to have 6 to 24 months of emergency funds put away. Having a 6-24 month emergency fund in place means that if they suddenly have no income, they could still pay their obligations for that many months. The amount they need to save varies depending on their skill level and ability to find new employment if they lose their current job.

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Investment Checklist

Instruct students to complete the EMERGENCY SAVINGS section of the Activity.

 I currently have months in emergency savings.  Within one year I will have months of emergency money saved.  I have a working budget in place. 

Review the definition of risk capital – money that they can afford to lose without being in dangerous financial circumstances. Then have the students complete the RISK CAPITAL section of the Activity.

Once I build up my emergency fund, I will start to save risk capital. Risk capital is money that I can invest without risking dangerous financial circumstances. I will start saving risk capital to invest by [date] ______. Next, tell the class that they must have minimal bad debt, and have a working budget in place that allows them to save money each month. Instruct them to complete the MINIMAL BAD DEBT portion of the Activity.

If your investments are earning 6% and you’re paying 24% interest on credit card debt, what action should you explore? Why? If you owed $20,000 on a credit card at a 0% interest rate and you received $20,000, would it be better to pay off your credit card or to invest that money? Why? Discuss the questions with students. Be sure to point out the risk involved in the second example when you invest with borrowed money.

Explain the importance of creating an overall investment plan and determining how each investment being considered fits into that plan, then have students fill out the PLAN section of the Activity.

I will have solid ideas on my investment and retirement plan by the end of this coursework. Check here  if over the next 12 months you will take time to finalize your plan, even if you don’t yet have enough money saved to risk yet.

Discuss why it’s important to have an exit plan in place in a case an investment doesn’t go as planned. Tell them they should conduct due diligence research on each specific investment they consider.

Tell them that due diligence means educating yourself on the investment you’re researching and doing your homework before committing your hard-earned money. Instruct them to complete the DUE DILIGENCE portion of the Activity.

Check here  if you will perform due diligence on the specific investments or companies in which you consider investing.

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Lesson Questions 1. What is the first, most important step you should take before you start investing? a. Conducting due diligence b. Having a trusted team c. Gaining knowledge d. Borrowing money e. Selling off assets 2. Why is minimizing bad debt important to an investment plan? a. Bad debt carries high interest rates that will decrease the amount you earn on your investments. b. Having bad debt looks negative on a budget. c. Bad debt increases the brokerage fees you have to pay. d. Having bad debt will interfere with your exit plan. 3. It’s a good idea to start creating an overall investment plan even if you don’t yet have enough money saved to risk investing. a. True b. False

Lesson Review  Get the students’ commitment to take the necessary steps to prepare for investing.  Instruct students to answer the Essential Questions in the Student Guide.

Closing Activity/  Facilitate a discussion about the answers to the Essential Remarks Questions.

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