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Consumers, Savers and Investors Chapter 6
JA Economics Consumers, Savers and Investors Chapter 6
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Building on what you know
Page 78 Building on what you know Teens spent $159 billion in 2005 What do you do with your paycheck? Spend it? Save part of it? Save all of it?
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Gross Domestic Product
Page 78 Gross Domestic Product Final value of all goods and service produced in the country in one year. Gross Domestic Product was almost 12 trillion dollars in 2004
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Sources of Income Page 79 Teens’ major source of income are: Parents
Odd jobs Part time jobs Full time jobs Gifts
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Sources of Income - work
Page 79 Sources of Income - work Wage – by the hour Salary – by the week, month or year Depends on: Skill Job Education Performance Entrepreneurial drive Look at page 79 at the chart for median monthly income
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Sources of Income - wealth
Page 80 Sources of Income - wealth The value of things you own Add together the value of: Possessions Bank account Savings Investments Equals your “net worth”
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Influences of Wealth Page 81 Disposable income – money after taxes
Savings depends on: Income Earn more, save and invest more Expectations Confidence = spending Concern = saving Current Interest Rate higher rate=incentive to save Taxes
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Personal Budget Page 82 Write down your desired career.
Look on page 79 and find the category that career falls under. Create a budget using the following slides equations.
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Average consumer budget
Page 82 Average consumer budget Housing – 33% Transportation – 17% Food – 12% Retirement – 8% Personal taxes – 6% Health care – 5% Entertainment – 5% Apparel – 4% Other – 10%
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Budget’s Influences Page 83 Setting Financial Goals Estimating Income
Goal to increase income Goal to save money Estimating Income Be honest Be certain Planning Expenditures Prioritize your wants
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Saving and Investment Decisions
Page 85 Saving and Investment Decisions Safety FDIC Federal Deposit Insurance Corporation Rate of return % of interest > rate = > risk Liquidity
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Where to put your savings
Page 87 Where to put your savings Savings deposits - safe Certificate of Deposit Higher interest rate Non liquid Money market - safe Lower % than CD Pensions and retirements fund Tax deferment
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Where to put your savings
Page 88 Where to put your savings Corporate stock High risk Corporate bonds Certificate of indebtedness Mutual funds Buy a share of a fund Fund owns a pool of assets Savings bonds
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Page 90 Consumer Credit Borrowing money to buy now what you can’t afford Principal and interest must be paid back Shop around for better terms Finance charge Annual percentage rate Monthly rate of 2.5% Equals 30% APR
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Advantages of Credit Page 90 Immediate possession Flexibility Safety
“I want it NOW!” Flexibility Time your purchase for sales Safety Not carrying cash Emergency funds Financial cushion Character reference Credit history
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Disadvantages of Credit
Page 90 Disadvantages of Credit Overspending Easy to spend money Higher cost Merchants pay a fee to credit card companies = higher marginal costs Impulse buying Ignore future sales
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Obtaining and using credit
Page 93 Obtaining and using credit Character Personal qualities Willingness Honesty Capacity Ability to repay Capital Money in bank, property, house Collateral – used to secure the loan
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How to establish credit
Page 93 How to establish credit Open a savings account Have a telephone bill Co-signer for first loan
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Consumer Protection Right to safety Right to be informed
Unsafe products Right to be informed What, terms, and risks of purchase The right to choose Illegal to restrict market competition The right to be heard Ability to contact producers 1962
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Better Business Bureau
Sets standards in business ethics
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