1. Unit 5: Personal Finance
SSEPF1: Apply rational decision making to personal spending and saving choices.
Use a rational decision making model to evaluate the costs and benefits of post-high school life choices (i.e., college, technical school, military enlistment, workforce participation, or other option).
Create a budget that includes a savings or financial investment plan for a future goal.
SSEPF2: Explain that banks and other financial institutions are businesses that channel funds from savers to investors.
Compare services offered by different financial institutions, including banks, credit unions, payday lenders, and title pawn lenders.
Explain reasons for the spread between interest charged and interest earned.
Give examples of the direct relationship between risk and return.
Evaluate the risk and return of a variety of savings and investment options, including: savings accounts, certificates of deposit, retirement accounts, stocks, bonds, and mutual funds.
SSEPF3: Explain how changes in taxation can have an impact on an individual’s spending and saving choices.
Define progressive, regressive, and proportional taxes.
Explain how an increase in sales tax affects different income groups.
Explain the impact of property taxes on individuals and communities.
SSEPF4: Evaluate the costs and benefits of using credit.
Describe factors that affect credit worthiness and the ability to receive favorable interest rates including character (credit score), collateral, and capacity to pay.
Compare interest rates on loans and credit cards from different institutions.
Define annual percentage rate and explain the difference between simple and compound interest rates, as well as fixed and variable interest rates.
SSEPF5: Describe how insurance and other risk-management strategies protect against financial loss.
List and describe various types of insurance such as automobile, health, life, disability, and property.
Explain the costs and benefits associated with different types of insurance, including deductibles, premiums, shared liability, and asset protection.
SSEPF6: Describe how the earnings of workers are determined in the marketplace.
Identify skills that are required to be successful in the workplace, including positive work ethics, punctuality, time management, teamwork, communication skills, and good character.
Explore job and career options and explain the significance of investment in education, training, and skill development as it relates to future earnings.

2. Essential Questions
What would be the disadvantage of putting your savings under your mattress?
What are some places that you could invest your money that might cause it to gain interest/grow.

3. Money makes money. And the money that money makes more money
Money makes money. And the money that money makes more money. — Benjamin Franklin

4. Saving and Investing Saving – the absence of spending
Savings – dollars that become available to borrowers/investors
Financial Investment – The action or process of investing money for future profit or material result
Financial System – the institutions that allow the transfer of money between savers and borrowers
Financial Assets – a claim on the property or income of a borrower
Savings account, certificate of deposit (CD), government or corporate bond

5. Financial Institution
Financial Institutions – entity that channel funds from people who have extra money (savers) to those who do not have enough money to carry out a desired activity (borrowers).
Banks, credit unions, finance companies, life insurance companies, pension funds, etc.
Mutual Funds – sell shares, pools money from investors into a portfolio of investments (stocks, bonds, commodities, etc.) to reduce risk
Diversification – strategy of spreading out investments to reduce risk
“don’t put all your eggs in one basket”

6. Risk and Return
Risk – the level of uncertainty in any financial investment
Risk-return trade-off – potential return rises with an increase in risk
Low risk, low return (bonds, savings accounts, certificates of deposit, fixed interest accounts, etc.)
High risk, high potential returns (stocks, real estate, art and collectibles, etc.)

7. Risk vs. Return

8. The Bond Market
Bond – IOU, certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond
Corporate, municipal, U.S. Federal
Principal – (par value) initial amount borrowed , $1000
Rate – the interest rate that the bond issuer will pay to the bondholder
Interest – rate at which the bond will be repaid, 6%
Term – length of time until the bond matures, 30 years
Date of maturity – time at which the loan will be repaid,
Credit risk – the risk or loss by an investor arising from a borrower that does not pay some interest or principal
Default – failure to repay a borrowed loan
Municipal bonds – bonds offered by local or state government
Federal bonds – U.S. Treasury bonds are offered by the federal government
Corporate – bonds offered by firms

9. What is a bond video

10. Simple and Compounding Interest
Simple Interest - calculated only on the principal amount.
Formula for Simple Interest = P x R x T
Principal = P
Interest rate = R
Time = T
Compound interest – Earning interest on the principal PLUS SIMPLE NTEREST. Both Interest and principal earn interest
“The most powerful force in the universe is compound interest” Albert Einstein n

11. Simple vs. Compounding Interest

12. The Stock Market
Stock – partial ownership of a firm through the purchase of a share
Disney, Microsoft, Babies ‘r Us, etc.
Shares – issued to represent a portion of stock in the company
1 share of a company, company has 1,000,000 shares, you own 1/1,000,000 of the business
Difference between Stocks and Bonds
Owner of shares in a company is a part owner of the company
Owner of bonds is a creditor of the company/institution
Stockholders enjoy benefits of profits while bondholders receive interest on their bonds
Stocks have a higher risk than bonds, but a potentially higher return

13. The Markets for Insurance
One way to deal with risk is to buy insurance
Auto, fire, health, dental, annuity, flood, car etc.
Insurance – transfer of the risk of a loss, from one entity to another, in exchange for payment.
Geico, Progressive, State Farm, All State, etc.
Person facing a risk pays a fee to insurance company to absorb all or part of risk
Insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy.
Premium - an amount to be paid for an insurance policy
Deductible - The amount you have to pay out-of-pocket for expenses before the insurance company will cover the remaining costs
Coverage - the total amount and type of insurance carried
Why have insurance?
You may not face the risk (may never be in a car accident, get sick, house flood, etc.)
Pay the insurance premium to receive peace of mind

14. The Markets for Insurance
Role of insurance - not to eliminate the risks, but to spread the risks around more efficiently
Insurance price is reflective in risk of the individual and market
Auto insurance in SFLA is higher than in SGA

15. Credit
Credit - A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date.
Mortgages, credit cards, car financing, personal loans, business loans, student loans, etc.
Finance - the management of money; borrowing, lending and the profit’s made and paid in interest based on credit.
Lender - A private , public or institutional entity which makes funds available to others to borrow
Secured Loans - a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan
Unsecured Loans - unsecured debt refers to any type of debt or general obligation that is not collateralized

16. Credit
Finance Charges – interest and fees accumulated through the use of credit
Credit Report - A report containing detailed information on a person's credit history, including identifying information, credit accounts and loans, bankruptcies and late payments, and recent inquiries. It can be obtained by prospective lenders with the borrower's permission, to determine his or her creditworthiness.
Credit Score - A credit score in the United States is a number representing the creditworthiness of a person, the likelihood that person will pay his or her debts.
Credit Bureau - consumer credit reporting agency, a company that collects information from various sources and provides consumer credit information on individual consumers for a variety of uses
Equifax, Trans Union, Experian

17. Essential Questions 4 + 5
4. What are the important elements of insurance?
Insurance helps to cover our _______. The total money you pay to the insurer for coverage is called the __________. The money that you must come out of pocket on before the insurance kicks in is called the _________.
risks
premium
deductible
5. What is credit and examples?
Credit is a ____________ agreement between a ___________ and a borrower. Borrowing for a home is called a _________, for a car is called ____________. The cost of credit is ____________.
contractual
lender
mortgage
financing
interest

18. EOC Practice Question
How can financial institutions help you increase and better manage your money?
When you turned sixteen, your parents promised that you could get an after-school job to start earning your own money. You have worked at this job, getting regular paychecks for 3 months. You plan to use the money you earn from this job to buy a used car, but your salary is not high enough to save enough money by the target date of the start of your junior year in high school.
Which of the following methods do you think is the BEST way to put your money to work for you?
Keep all of your money in a shoebox in your closet. Promise yourself that you won’t spend any money on other things until you reach your goal.
Put your money in a bank savings account. It’ll earn some interst and you can withdraw what you need at any point.
Place your earnings in a certificate of deposit account. It’ll raise higher interest, but you will be limited in the flexibility of withdrawing funds.