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Laura EwingPresident/CEO

1801 Allen Parkway, Houston, TX 77019

P: 713.655.1650 F: 713.655.1655

laura@economicstexas.org

Helping young people learn to think, choose, and make better economic and financial choices in a global economy

Cindy ManzanoDirector of Smarter Texas

1801 Allen Parkway, Houston, TX 77019

C: 713.503.5338F: 713.655.1655

cindy@economicstexas.orgwww.economicstexas.org

www.smartertexas.org

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Financial Fitness For Life– Spiraled Curriculum

• Kindergarten – Grade 2• Grades 3 – 5 • Grades 6 – 8 • Grades 9 – 12

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• Free lessons for grades 2-8–Coming June 2014: Lessons for grades 2-3

funded by

– Lessons for grades 4-6 funded by

– Lessons for grades 7-8 funded by

–www.smartertexas.org under Resource tab

The TCEE programs are made possible by the following TCEE partners.

copyDR.

EnviroChemServices, Inc.

Trout Foundation

John Anderson

Less B. FoxRBC Wealth Management

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Why do we need it?

Personal Financial Literacy is making thoughtful, well-informed decisions about important aspects of finances.

7Nationwide Financial Capability Study

Financial Industry Regulatory Authority in 2012:• 39% of individuals in Texas used a form of non-bank borrowing,

i.e. an auto title loan, pay day loan, pawn shop loan, or other high interest uneconomical source of debt

• 54% of individuals in Texas broke even or spent more than their annual income

• 57% of individuals in Texas did not have enough money saved to cover expenses for three months

• 67% of individuals in Texas scored 60% or less on a financial knowledge test, which comprised of questions regarding basic economics and finance concepts encountered in everyday life

Student Loan Debt– Average student loan debt• 2010 – $24,000 • 2011 – $25,250• 2012 –$33,000

– Total student loan debt:• 2010 – 850 billion dollars• 2012 – over 1 trillion dollars

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2013 Student Loan Debt as Reported by Forbes– The total outstanding student loan balance is $1.2 trillion. – Reasons for rising student debt:

• Rising cost of education• Students with little to no credit history are being approved for

thousands of dollars loan• Students don’t understand the terms of getting a loan• Students did not save or plan for the cost of college

– After graduation:• Loan debt exceeds annual salary• Many can’t find a job• Graduates are delaying buying a home or car• Unable to start a business• Unable to save for the future

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. . . then why get a higher education?

– The demand for higher education in the job market is increasing.

– The potential to earn more increases as the level of education increases.

– The percent of unemployment decreases as educational attainment increases.

Higher education is still the best investment in your future.

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TCEE Grade 7, Lesson 2Personal Budget

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The student is expected to: Math 7.13B identify the components of

a personal budget, including income, planned savings for college, retirement, and emergencies; taxes; and fixed and variable expenses and calculate what percentage each category comprises of the total budget

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VocabularyBudget

A tool that helps people manage their money and plan for the future.

A budget is a plan to manage income and expenses.

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CREATE A MONTHLY BUDGETStep 1: Calculate the monthly net income.Step 2: Categorize monthly expenses. Step 3: List categories and their total in

budget worksheet.

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Step 1: Calculate the monthly net income.

Employee: Barney Smith

Pay Period:July 2013

Gross Pay $1930.00

Deductions:Federal Income Tax

$289.90

Social Security Tax $119.66

Medicare Tax $27.99Medical Premium $100.00

Total Deductions

Net Income

Below is Barney’s semi-monthly net income.

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Step 1: Calculate the monthly net income.

Employee: Barney Smith

Pay Period:July 2013

Gross Pay $1930.00

Deductions:Federal Income Tax

$289.90

Social Security Tax $119.66

Medicare Tax $27.99Medical Premium $100.00

Total Deductions $537.55

Net Income

Below is Barney’s semi-monthly net income.

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Step 1: Calculate the monthly net income.

Employee: Barney Smith

Pay Period:July 2013

Gross Pay $1930.00

Deductions:Federal Income Tax

$289.90

Social Security Tax $119.66

Medicare Tax $27.99Medical Premium $100.00

Total Deductions $537.55

Net Income $1392.45

Below is Barney’s semi-monthly net income.

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Step 1: Calculate the monthly net income.Barney’s semi-monthly net income $1392.45.

What is his monthly net income?

$2784.0

19Step 2: Categorize Monthly Expenses.

House payment $900 Electricity $122

Clothes $120 Retirement Savings $150

Car payment $240 Gasoline and car maintenance $170

Entertainment $200 Cell phone $89

Emergency savings $100 Water and gas $52

Restaurants $175 Groceries $275

Car insurance $120 Miscellaneous $71

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Step 3: List categories and their total in the budget worksheet.

Monthly Budget WorksheetMonthly Net Income:

Expenses

Cost

Percentage of Monthly Net

Income

Housing: Food:

Utilities: Savings:

Transportation: Other:

Total Expenses:

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Step 3: List categories and their total in the budget worksheet.

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Why is it important to create a budget based off the net income rather than gross pay?

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Theo’s Budget

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Vocabulary Fixed expenses are those

expenses that remain the same each month.

Variable expenses are those expenses that vary from month to month.

25BALANCE BETTY’S BUDGET Barney’s girlfriend, Betty, is still in

college. She is determined not to get a loan to pay for tuition and books. Therefore she lives at home and works part-time. She knows that if she can save $300 every month, she will have enough money to pay for next semester’s college tuition and books. Every month Betty spends more money than she makes. Her father has been giving her money when she overspends. He has explained that he will no longer bail her out.

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Texas Reality Check Now it is time for you to take a reality check. Have you thought about your future? What will your budget look like? What type of an occupation do you need to afford this budget? The following simulation will help you make these decisions.

Go to the following website: http://www.texasrealitycheck.com

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TCEE Grade 7 Lesson 4Know Your Worth

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The student is expected to: Math 7.13C: create and organize a

financial assets and liabilities record and construct a net worth statement

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EngageWhat does it mean to be wealthy?

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Net worth is the value of what you own minus what you owe.

$30,000

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Activity 7.4-1a Work in pairs.

Use the Activity 7.4-1a sheet and the blue and yellow cards to determine each families net worth.

When you are finished read teachers notes, step 8-9 on page 3.

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Chalkboard SplashWhat could Family B do to increase their net worth?

Determine if idea is increasing income or decreasing debt.

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Budget or Net Worth? Budget is a tool used day to day to

make sure your expenses don’t exceed your income.

To determine if you are getting out of debt or if you are increasing your wealth, one needs to analyze their net worth.

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Calculate Your Net Worth While Budgeting to Maintain Perspective by Eric Ravenscraft “An increase in net worth meant that I was

unquestionably spending less than what I earned, which is the key to personal finance success. An increase in net worth meant that all of the hard day-to-day choices I was making were actually adding up to something big.”

“It was exhilarating. Each time I calculated that number, I could clearly see the impact that my choices were having even if they weren't really evident in my day-to-day life.”

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TCEE Grade 7 Lesson 6Smart Shopping

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The student is expected to: Math 7.13F: analyze and compare

monetary incentives including sales, rebates and coupons

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TCEE Grade 8 Lesson 1Saving for My Future

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The student is expected to: Math 8.12C: explain how small

amounts of money invested regularly, including money saved for college and retirement, grow over time

Math 8.12D calculate and compare simple interest and compound interest

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Saving for your education is an investment in yourself.

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ACTIVITY 8.1-1Spending and Earning Money to Save

MonthlyHow I spend my money:

Trade-offs I can make:

Other sources of income:

Total Monthly Savings:

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Bankrate.com

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Calculating Interest

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TCEEGrade 8Lesson 2Borrowing Money

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The student is expected to: Math 8.12A: solve real world problems ‐

comparing how interest rate and loan length affect the cost of credit

Math 8.12B: calculate the total cost of repaying a loan, including credit cards and easy access loans, under various rates of interest and over different periods using an online calculator

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When Joaquin sat down to negotiate his auto loan with the dealership, he was told that he could borrow $15,000 at 6% interest for 3 years. His payments would be $456 per month. Joaquin explained that he could not afford $456 per month and he wanted a better deal. The car dealer agreed to give Joaquin a better deal. He told him that he could bring down his monthly payments to $289 per month for 5 years.

Was this a better deal?

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Activity 8.2-1Decoding Loans with APR

According to Investopedia, “The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.” [Source: http://www.investopedia.com/terms/a/apr.asp]

Bottom line: Always ask for the APR when getting a loan.

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What is a Payday or Title Loans? Easy access loans are sometimes

called title loans or payday loans. They make it “easy” to get a loan. The high cost is due to the short time period of the loan and to the fee. When the interest rate or fee is calculated over the short time period, the Annual Percentage Rate (APR) will be huge.

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How do payday loans work? A borrower signs over a personal check for

collateral to get quick cash. The lender, who advertised 15% interest, agrees not to deposit the check until payday.

Let's say you want to borrow $200 until you get your next paycheck in two weeks.

Calculate the fee: 15% of $200 is $30. You write a check to a payday lender for

$230 The $30 fee you pay on the loan calculates

to an Annual Percentage Rate (APR) of 391%. 

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Decoding Loans with APR

 Common Small

LoanEasy Access

LoanLoan Amount $1,000 $1,000Term 12 months 14 daysInterest Rate 7% n/aFinancial Fee n/a $300*

Annual Percentage Rate 7.22% 782%Payment $86.63 per month n/a

Total Repayment  *1st 14 day fee is $300, if renewed an additional $300 fee is required.

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Decoding Loans with APR

 Common Small

LoanEasy Access

LoanLoan Amount $1,000 $1,000Term 12 months 14 daysInterest Rate 7% n/aFinancial Fee n/a $300*

Annual Percentage Rate 7.22% 782%Payment $86.63 per month n/a

Total Repayment  $1039.56  *1st 14 day fee is $300, if renewed an additional $300 fee is required.

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Decoding Loans with APR

 Common Small

LoanEasy Access

LoanLoan Amount $1,000 $1,000Term 12 months 14 daysInterest Rate 7% n/aFinancial Fee n/a $300*

Annual Percentage Rate 7.22% 782%Payment $86.63 per month n/a

Total Repayment  $1039.56 $1300*1st 14 day fee is $300, if renewed an additional $300 fee is required.

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St. Louis Federal Reserve: All About Credit Step 1 – Divide the sum of the fees and finance

charges ($300) by the amount financed. $300 ÷ $1000.00 = .3

Step 2 – Multiply the answer by the number of days in a year .3 x 365 = 109.5

Step 3 – Divide the answer by the term of the loan in days. 109.5 ÷ 14 = 7.821

Step 4 – Move the decimal point two places to the right and add a percent sign. 7.821 becomes 782% (rounded) to state the annual percentage rate.

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Online calculator

Go to bankrate.comChoose CalculatorsChoose AMORIZATION

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Important TipsWrite 3-4 important tips about loans that you would like to share with a family member.

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A Student’s Story

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Assessment Question Brandon has reached his credit card limit of

$5000.00. Since Brandon has a poor credit history, the annual interest rate on this credit card is 22%. Using an online calculator, Brandon determined that if he pays $180.00 per month and does not make any additional purchases with this card, it will take him 39 months to pay off the credit card. Which of the following represents the total interest Brandon will pay in when his debt is paid off?

A $858.10B $1100.00C $2020.00D $1544.40

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TCEEGrade 8Lesson 3Methods of Payment

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The student is expected to: Math 8.12E identify and explain the

advantages and disadvantages of different payment methods

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ATM or Debit Card

1: On the 25th of every month, Tamesha pays her rent by writing the amount on a small official preprinted note that contains information about a checking account. She puts this note in an envelope and drops it off at the post office.

Online Banking

2: Inga goes to the store to buy groceries. To pay for the groceries, she slides her card through a card reader and enters a special code.

Credit Card

3: On the 30th of every month, Maribel pays her rent by first driving to bank to make a withdrawal and then driving to the real estate agency to make the payment.

Check

4: It’s time for Binh to get the oil changed in his car. The payment for the oil change shows up on his monthly bill for the card.

Cash

5: On the 28th of every month, Blake pays his rent by logging on to the computer. He goes to his bank’s website and enters his password for access. Then he types in the needed information to make the payment.

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Methods of PaymentCredit Card

A credit card is a small plastic card issued by a financial company. This card has a magnetic strip on the back. When the card is swiped through a card reader, the owner of the card is borrowing money from the financial company to make the payment. Here’s what happens when the card is swiped: The amount of the purchase is transferred from the

financial company who issued the credit card to the store’s account. The owner of the credit card will pay for all purchases charged to the card soon after the bill or statement arrives.

Purchases using a credit card can also be made on the Internet. Inputting the credit card information allows the credit card holder to borrow money from the credit card company to make the purchase.

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Visual 8.2-3

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ACTIVITY 8.3-2

Read story. Find clues that reveal advantages or

disadvantages about the method of payment

Record advantages and disadvantages in interactive notebook.

Look for additional clues in Activity 8.3-1 and Visual 8.3-1.

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ATM or Debit Card

An ATM or debit card is a small plastic card issued by a financial institution. This card has a magnetic strip on the back. The card is swiped through a card reader and a Personal Identification Number (PIN) is entered. This process will allow for the owner of the card to make a payment or withdraw funds. The money is immediately transferred from the owner’s checking account.

Methods of Payment

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Online Banking

An electronic payment is a process of using the Internet to make a payment. This process requires that the account owner input secure information via the Internet. Accessing his or her bank account to make a payment means that the money will be transferred out of the account for payment.

Methods of Payment

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VocabularyInsufficient Funds: This term describes the circumstance of not having enough money in a checking account to make a payment or to withdraw money.

Overdraft Protection: Financial institutions offer an overdraft protection service. This means that if there is not enough money in the account, the bank will authorize the withdrawal, purchase or electronic payment for a fee.Overdraft fee: This is a fee charged by the financial institution for making a purchase against your checking account in which there is not enough money in the account to cover the payment.

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Overdraft Protection Scheduled cell

phone payment in 2 days for $50

Today you withdraw $20

Next day, cell phone payment is processed

Overdraft fee is $30

Balance $60

Balance $40

Balance -$10

Balance -$40

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No Overdraft Protection Scheduled cell

phone payment in 2 days for $50

Today you withdraw $20

Next day, cell phone payment is denied due to insufficient funds

Possible consequences:

Balance $60

Balance $40

Late fee

Report to Credit Bureau

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Cash

Methods of Payment

73More about credit cards

Credit card companies offer fraud protection

Credit card can affect your credit history

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More about debit cards

Understand overdraft protection Report unauthorized charges or stolen

card immediately.

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CHECK FOR UNDERSTANING For which methods of payment is the

consumer using his or her own money?   For which method of payment is the

consumer borrowing money? What precautions should a consumer

consider when using a credit card?   What precautions should a consumer

consider when using a debit card? What precautions should a consumer

consider when using an online bank? What precautions should a consumer

consider when using cash?