Welcome to

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© Family Economics & Financial Education - Revised May 2009 - Life in...United States Simulation - Bancroft-Notebook Cover and Profile Page 1

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

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Welcome to

Life in…United States

…a Family Finance Simulation

Developed by: Family Economics & Financial Education Project

Take Charge America Institute - University of ArizonaFunded by a grant from Take Charge America, Inc.

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Objectives

Demonstrate the relationship between income and education

Provide realistic insights into the costs of living associated with the spending plan process

Apply financial literacy reasoning in order to make informed, financially responsible decision (MSC for PFLE Standard 1).

Develop skills to plan and manage money effectively by identifying financial goals and developing spending plans (MSC PPFLE Standard 3).

© Family Economics & Financial Education – Revised April 2007 – Life in…Simulation page 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Life In…United States

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Video Clip

http://www.moneytalks.ucr.edu/english/intro.html

Video – Making Your Dreams Come True

5 min – load and run at least once before class start



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What is “Life In…” ?

Family finance simulation Emulates the “real life” constraints households

encounter when managing their finances All costs are national averages

– United States Census Bureau, United States Department of Labor, Bureau of Labor Statistics, United States Department of Agriculture, National Coalition on Health Care, and various private businesses

Simulation is an average community in the United States– 25 individuals in 18 households

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Day 1

Record your choice of a student partner (optional) and the identity of a selected scenario from highlighted options).

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3.18.4.G1Background

information

Background Information– Describes individual and/or family values,

needs and wants– Family dynamics and lifestyle choices are

explained?Who is in the community?

?Create a poster including your family name, all family members and ages, occupation(s), two things you value or enjoy doing, and interesting habits

?Who is in the community??Create a poster including your family name, all family members and ages, occupation(s), two things you value or enjoy doing, and interesting habits

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Career descriptions

Occupational Outlook Handbook guides– Nature of work, working conditions,

training required, job outlook and earnings Read carefully to learn more about

your new identity

?Conditions of your job?Identify 3 work conditions characteristic to your job, training required, and median earnings

?Conditions of your job?Identify 3 work conditions characteristic to your job, training required, and median earnings

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3.18.4.G1What are

Spending plans? Spending Plan

– A financial statement used to assist in money management comprised of income and expenses

Income - money earned or received Expenses - money spent

– Fixed Expenses - stay the same every month, due on a certain date

– Flexible Expenses - vary month to month, can be decreased or eliminated

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Major expenditure Percentages

Identify the average percent of net income spent in a specific category

Use as a guide when making spending decisions– Percentages should be

adjusted to meet individual values, needs and wants

Other includes items such as:– Clothing– Personal care– Entertainment– Donations

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What to complete

Goal of “Life in…” – Make spending plan decisions to meet the

needs of the family by balancing their income and expenses

Assignments to complete– Setting a Financial Goal worksheet 3.18.4.A1

– Guided Spending Plan worksheet 3.18.4.A2

– Spending Plan Statement 3.18.4.A3

– Life in…United States Reflection Essay 3.18.4.B1

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Life in…United States

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Day 2 / 31. Set with your partner,

roommate or spouse, and read your paper copy of your selected scenario.

2. Complete paycheck pretest

3. Open excel spreadsheet from V drive, and save as instructed to the H.

4. Open the adobe file - general notebook on the V drive as a reference

5. Listen to discussion of paycheck main ideas

6. Follow directions on pg 2 of general notebook to complete rows 9-25 of spreadsheet

7. Complete paycheck posttest, using clickers

8. Listen to discussion of saving and investing main ideas

9. Continue to follow directions on pg 2 of g. ntb to complete rows 25-29 of spreadsheet.

10.(Print spread sheet)

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Education vs. Income

Job announcement envelopes– The color your name is printed in on the front of the

envelopes represents your obtained level of education

– All children are printed in brown

Who is in our community? – Orange: less than 9th grade– Light pink: high school drop out– Green: high school graduate or GED– Sky blue: some college

– Red: associate’s degree– Navy: bachelor’s degree– Purple: graduate degree– Black: doctorate degree

? How does having individuals with various levels of education benefit a community?

? How does having individuals with various levels of education benefit a community?

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Who are you?

Review your profile– Remember to consider the family’s values,

needs and wants when making decisions All items printed in red text must be

included in the spending plan

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Setting a financial goal

Set a financial goal– Financial goals provide direction when creating

a spending plan – Behind Spending Plan tab, complete each

section of a SMART goal• Review profile and consider the families values,

needs and wants• Set SMART financial goal

– Complete question #2 on the Guided Spending Plan• Don’t forget to include the dollar amount of the goal

in the spending plan!

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3.18.4.G1Understanding the

paycheck Under the profile tab review the

paycheck(s) for your scenario Review all elements of a paycheck

– Gross income– Payroll deductions– Net income

? Why do some paychecks have additional withholding for retirement

and medical and others do not?

? Why do some paychecks have additional withholding for retirement

and medical and others do not?

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Pg 11 & 12 of Notebook

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3.18.4.G1Complete the

following:

Based upon your paycheck, complete question #3 in the Guided Spending Plan: – Record gross income – Record all paycheck deductions – Calculate net income

For dual-income families, add both paychecks together (show your work on the spreadsheet)

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Saving

Saving versus Investing– Saving: income not spent on current

consumption– Investing: spending intended to gain by

adding to the assets, not available for immediate withdrawal

Saving– A person should save 10% of net income? Why should families have 3-6 months

income saved for emergencies?? Why should families have 3-6 months

income saved for emergencies?

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Saving

Guided Spending Plan question #4

Calculate what 10% of your families net income is

Determine what amount you will be saving or investing and record it? How much, if any, was dedicated to savings and why?

? How much, if any, was dedicated to savings and why?

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Day 4

1. Paycheck quiz retake and Housing pretest.

2. Recap and review savings

3. Housing information4. Continue to complete

rows 30-45 as directed on pg 3, and 13-18 of g. ntb (adobe file on V) Record your decision details in the appropriate row.

Save your work!!!

If you are not finished with rows 1-45, ask to borrow a “general notebook, and finish for homework.

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Housing

Housing, on average, is 30% of an households net income

Calculate what 30% of your families net income is

The information sheet describes basic terminology, renting vs. buying, mortgages and how to determine insurance costs and various types of insurance – Review this to make the

best spending plan decision

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Housing

Purchase Assume a 20% down

payment has been made on a 30-year mortgage with a 6% interest rate

Must include all items in red in your spending plan:– Mortgage– Insurance– Property taxes– Repairs and maintenance

Rent Assume a deposit has been

made Must include all items in red

in your spending plan– Rent– Laundromat (when

applicable) If you have a pet, your rental

unit must allow for them and applicable fees must be paid

Renter’s insurance is not required, but recommended– $15.83/mo. for $25,000

coverageOnly choose a house available for the type of location in which you live!

Only choose a house available for the type of location in which you live!

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Housing Amenities

Required amenities– Power– Water/sewer– Garbage

Some rentals include all or some of the required amenities

Optional amenities– Internet– Cellular phone– Land line in home– Cable/Satellite– Recycling

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Housing

Guided Spending Plan Question #5– Determine whether to

rent or buy• Unless indicated in the

profile

– Select a home and amenities

– Record all housing expenses

– Identify which housing and amenities options were chosen

Select additional housing expenses – Under the “Average

Expenditures” tab – Record cost(s) in the

“other” section Calculate your housing

sub-total– Is it approximately

30% of net income?

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Housing Reflection

? What might influence a family to spend more or less than 30% of net income for housing?

? What might influence a family to spend more or less than 30% of net income for housing?

? Will utility bills be higher during different seasons of the year?

? Will utility bills be higher during different seasons of the year?

? How does the housing selected fit with the family’s values, needs and wants?

? How does the housing selected fit with the family’s values, needs and wants?

? Did you choose to rent or purchase a home and why?

? Did you choose to rent or purchase a home and why?

? Was renter’s insurance selected? Why or why not?

? Was renter’s insurance selected? Why or why not?

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Day 5

1. Complete transportation pretest.

2. Correct housing pretest.3. Discuss transportation

slides4. Continue to complete

rows 46-51 as directed on pg 3, and 19-24 of g. ntb (adobe file on V) Record your decision details in the appropriate row.

Save your work!!!

If you have not finished up to row 51, borrow a general notebook to finish for homework.

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Transportation

Transportation, on average, is 20% of a households net income

Calculate what 20% of your households net income is

The information sheet describes basic terminology, new vs. used, automobile financing, how to determine insurance costs and various types of insurance – Review this to make the


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Online resources for real life

http://autofinancing101.org/index.cfm




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Transportation

Transportation options: Purchasing new:

– Not pre-owned, warranty, wide selection

Purchasing used:

– Costs less, lower insurance rates, depreciates more slowly

Alternative options:

– Less expensive than a vehicle

– Availability is limited in some locations

Things to know: Assume down payment,

license, registration and other fees have been paid

All items in red must be included in the spending plan– Payment– Insurance– Fuel costs– Repairs and maintenance

If an alternative option is chosen, it must be appropriate for the location

Some profiles indicate transportation choices the family has made

Some profiles indicate transportation choices the family has made

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Transportation

Guided Spending Plan Question #6– Determine new, used, or alternative options

• Unless indicated in the profile• If a family already owns a vehicle, only insurance, fuel,

and repairs and maintenance must be included

– Select transportation– Identify which transportation option(s) was

chosen– Record all transportation expenses

Calculate your transportation sub-total– Is it approximately 20% of net income?

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3.18.4.G1Transportation

Reflection

? What might influence a family to spend more or less than 20% of net income for transportation?

? What might influence a family to spend more or less than 20% of net income for transportation?

? How does the transportation selected fit with the family’s values, needs and wants?

? How does the transportation selected fit with the family’s values, needs and wants?

? Did you choose new, used, or alternative options and why?

? Did you choose new, used, or alternative options and why?

? What are ways a family can reduce their transportation expenses?

? What are ways a family can reduce their transportation expenses?

Insurance – Protecting What You Have

What do you have that you could not replace without great

sacrifice?

What do you have that you could not replace without great sacrifice?

How to Insure that it is Protected

• Don’t leave it lying around, unprotected.

• Put your savings in a bank that is FDIC insured.

• Cost = Free


• Drive safely, and don’t loan your car to friends.

• Car Insurance- Cost factors:– Grades - Honor roll discount– Type of car - Choose car

carefully– Marital Status - Single people

pay more than married– Individual or Family member –

will your parents let you join the family plan?

– Amount of mileage per year– Credit history matters– Driving Record– Deductibles and coverage– Previous claims – it may be

better to pay the repair yourself if it is small

– Choice of company – shop around

– Location – Compare zip codes and rates

Cost - $70-__________ per month


• Lead a healthy lifestyle– Decisions regarding drugs,

alcohol, tobacco, nutrition, sexuality, peers, sports, weight management, etc

• Health Insurance– If your parents have it, you can

stay on their plan if and while you are a full time student until you turn 23.

– Choose a career / job that offers group health insurance – more affordable

– If you are a non tobacco using healthy adult, you can shop around for a policy. Cost approximately $250 a month.

– If you have health problems, contact advocacy groups for the health problem for some advice.

Cost - $ 250-________________per month


• Keep your possessions locked and fire protected.

• Homeowner or Renter Insurance will cover the cost or the replacement cost of your possessions – if you can prove you owned them and they were stolen or destroyed by fire. – Keep receipts and photos

in a safe place– Shop around for the best

price with the best terms.

Cost - $10-__________ per month


• Protect your social security # and your mail

• Request a free credit report every year

• Identity Theft Insurance will protect you to some degree. Shop around for the best identity theft insurance termsCost - $10-__________ per month

For all of your insurances…

• Remember to set the money aside for your deductible in case you have to spend it.

• Example– If my house is hit by lightning and catches on

fire, my share of the bill will still be $1,000.00 (my deductible), so I would still need to have that amount in savings, in addition to paying my premium for the policy every month.

In the Future….

• Life Insurance will help protect your family if you die and can no longer earn money to take care of them.

• Don’t wait too long to get life insurance, because the older you are, the more it costs.

• Shop around

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Insurance

Insurance, on average, is 7% of a households net income


The information sheet describes basic terminology, how to determine insurance costs and various types of insurance – Review this to make the


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Insurance

Health Disability Life

What is it?

Provides financial protection for injury and illness

Replaces a portion of income if unable to work because of injury or illness

Provides a specific sum of money to beneficiaries if an individual dies

When is it

needed?

Always!Almost always

If others depend upon an individual for financial support (families with children)

My be provided by the employerMy be provided by the employer

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Health Insurance

1. Determine if health insurance is provided by employer

– If provided, analyze what family members are protected

2. If not provided, determine if it will be purchased separately

3. If so:– Identify the age of the

oldest individual being covered

– Review the appropriate plan

• 1 individual = single• 2 individuals = single +

dependent• More than 2 = family

plan

– Select from the row of the appropriate age and column of the appropriate plan

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Disability Insurance

1. Determine if disability insurance is provided by employer


3. If so:– Monthly net income x .02 = monthly cost

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Life Insurance

1. Determine if life insurance is provided by employer


If so:– Identify who will be

insured – Must be purchased for

each individual being insured separately

Select the amount of coverage– $100,000– $250,000– $350,000

Determine if your scenario uses tobacco or not

Determine the monthly cost

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Insurance

Guided Spending Plan Question #8– Determine if insurance is provided by employer

or will be purchased– If necessary, select insurance options– Record all insurance expenses

Calculate your insurance sub-total– Is it approximately 7% of net income?

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Insurance Reflection

? If insurance was not provided by the employer, how did insurance costs impact the spending plan?

? If insurance was not provided by the employer, how did insurance costs impact the spending plan?

? What factors influenced the choice whether or not to purchase insurance?

? What factors influenced the choice whether or not to purchase insurance?

? If life insurance was selected, how was the coverage amount chosen?

? If life insurance was selected, how was the coverage amount chosen?? If disability insurance was not chosen, what would happen if an individual was injured and could not work for 6 months?

? If disability insurance was not chosen, what would happen if an individual was injured and could not work for 6 months?

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Food

Food, on average, is 15% of a households net income


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Types of Food Plans

Thrifty– Generic brands– Canned fruits and

vegetables– No junk food– Chicken and hamburger

Low-cost– Generic brands– Some fresh fruit and

vegetables– Chicken, hamburger,

turkey, ham

Moderate-cost – Mostly fresh fruit and

vegetables– Both name brand and

generic– Variety of meats

Liberal– Organic – Name brands– Fresh fruit and

vegetables– Variety of meats

including steak and lobster

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Food

Guided Spending Plan Question #7– If the profile indicates the amount spent on food,

record it– Food tab is for adults only– Cost of food at home for adults chart:

• Determine if you are allocating food for an individual or 2 adults

• Identify which food plan is affordable and fits with your scenario

• Identify the age of the adult(s) • Record the food plan selected and amount

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Food

Cost of eating out– Go to the Average Expenditures tab– Analyze the average costs based upon income level– Determine and record the amount

Cost of food for children– Go to the Cost of Raising Children document behind

the cost of raising children tab– Select the appropriate table based upon single or two-

parent families and income– Record the proper amount in the “food at home”

category Calculate your food sub-total

– Is it approximately 15% of net income?

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Food Reflection

? How was the cost of food at home plan selected?

? How was the cost of food at home plan selected?

?Will the cost of food vary depending on where an individual lives? Why or why not?

?Will the cost of food vary depending on where an individual lives? Why or why not?

? What impact does eating out have on a spending plan?

? What impact does eating out have on a spending plan?

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3.18.4.G1Costs of raising

children If you have children, go to the Cost of

Raising Children tab1.Select the appropriate table based upon

single or two-parent families and income2.Find the row for the oldest child3.Add together the costs of:

Clothing + Healthcare (could be reduced if insured) + Childcare + Education + Miscellaneous = Total cost

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3.18.4.G1Cost of Raising

Children

Total cost is based on families with 2 children

If there are not two children:– Single parent family

• 1 child = total cost x 1.35• 3 or more children = total cost x .72

– Two-parent family• 1 child = total cost x 1.24• 3 or more children = total cost x .77

Record total on the Guided Spending Plan #9

? Will child care costs vary depending on where an individual lives? Why or why not?

? Will child care costs vary depending on where an individual lives? Why or why not?

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Credit card statements

America’s Debt A 2007 survey of college students said that one-

third of students reported having two credit cards or more, while 12% had three or more credit cards.

Many students believe they will make much more money after college than they will actually earn. Students take on debt because they expect to be able to repay it.

College students carry an average of $1,035 of credit card debt (this does not include college loans).

Source: Buffalo State College, Financial Literacy Key to Prevent College Student Credit Card Debt, October 2007, http://www.newswise.com/articles/view/534061

?Why do so many young people have credit card debt??Why do so many young people have credit card debt?

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Credit card statements

Congratulations!– Your monthly credit card bill has arrived

Guided Spending Plan Question #10– Identify how much debt, if any, was

received– Need to include at least the minimum

payment?How will credit card debt impact other spending plan decisions?

?How will credit card debt impact other spending plan decisions?

?How long do you estimate it will take to pay off your debt?

?How long do you estimate it will take to pay off your debt?

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3.18.4.G1Personal Profile

Expenses

Review personal profile and record all expenses printed in red– Hobbies, activities, medical expenses, pets,

charity donations, extra bills, habits, etc. Expenses identified in red are valued or

necessary and can not be eliminated Incorporate any expenses not already

included in the Average Expenditures section of the Guided Spending Plan question 11

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Average Expenditures

Guided Spending Plan Question # 11

Review the average expenditures for:– Entertainment– Personal Care– Health Care– Apparel & Services– Contributions– Education and

Reading

Based upon your scenarios income level select expenses

These are flexible expenses based upon averages– Therefore, you may

choose to allocate more or less money to each category

Record expenses and total them

Remember to allocate enough money to cover all members of the

family!

Remember to allocate enough money to cover all members of the

family!

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3.18.4.G1Average Expenditures

Reflection? What average

expenditures were selected and why?

? What average expenditures were selected and why?

?How do the expenses and amounts selected reflect your family’s values, needs, and wants?

?How do the expenses and amounts selected reflect your family’s values, needs, and wants?

? Did you chose to allocate more or less money in a certain category and why?

? Did you chose to allocate more or less money in a certain category and why?

?If an individual is insured, why would they still have health care expenses?

?If an individual is insured, why would they still have health care expenses?

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Chance cards

Each day brings new surprises…– Why a spending plan is a “plan” for how to

allocate your money– Spending plans are always evaluated and

adjusted based upon life's events Guided Spending Plan Question #12

– Identify what chance card was received– Incorporate that chance card into your

spending plan

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3.18.4.G1Chance Cards

Reflection

?Would insurance have protected against the risk?

?Would insurance have protected against the risk?

?Are you financially prepared for unexpected events?

?Are you financially prepared for unexpected events?

? What impact does the chance card have on your spending plan?

? What impact does the chance card have on your spending plan?

?If received, how was extra money allocated and why?

?If received, how was extra money allocated and why?

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3.18.4.G1Balancing the spending

plan Guided Spending Plan Question #13

1. Transfer all income and expense subtotals throughout the worksheet onto this chart

2. Subtract the total expenses from the total income

Your balance must equal zero– Make changes as necessary

• If there is a net gain, where will the extra money be allocated?

• If there is a net loss, identify what changes may be made?

Identify decisions made to have the spending plan balance

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Evaluating your goal

Were you able to reach your SMART goal?– Why or why not?

Re-write your goal to reflect what your spending plan indicates

Guided Spending Plan Question #14

?How did setting a goal before creating the spending plan help you make financial decisions?

?How did setting a goal before creating the spending plan help you make financial decisions?

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3.18.4.G1Creating the Spending

Plan Statement

Write your revised goal on the Spending Plan Statement

Transfer all income and expense information to the Spending Plan Statement

Identify the percentage of net income spent on each category

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Discussion

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Reflection

?How does your percent allocation in categories compare with the national average?

?How does your percent allocation in categories compare with the national average?

?If there was a net gain, how was the money allocated?

?If there was a net gain, how was the money allocated?

? How does this process emulate real life?

? How does this process emulate real life?

?If there was a net loss, what changes were made to the spending plan?

?If there was a net loss, what changes were made to the spending plan?

? How did working with a partner and discussing options influence decisions? Was it hard, easy?

? How did working with a partner and discussing options influence decisions? Was it hard, easy?

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