Financial literacy: income and decisions (lesson 1)

Objectives

Students will be able to:

1. Explain how limited personal financial resources affect the choices people make.
2. Identify what they gain and what they give up when they make choices.
3. Make effective decisions as consumers, producers, savers, investors, and citizens.
4. Understand what determines the real buying power of money to make better decisions as active citizens in the economy.
5. Design a budget plan.

Educational standards

A. economics

Council for Economic Education and the National Association of Economics Educators and the Foundation for Teaching Economics , Voluntary National Content Standards in Economics (1997): (External Link)

• Standard 1: Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

• Standard 2: Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something; few choices are all-or-nothing decisions.

• Standard 11: Money makes it easier to trade, borrow, save, invest, and compare the value of goods and services.

B. personal finance

JumpStart Coalition for Personal Financial Literacy, National Standards in Personal Finance (2007): (External Link)

• Financial Responsibility and Decision Making: People make choices because they have limited financial resources and cannot have everything they want. A first step toward reaching financial goals is to identify needs and wants and rank them in order of importance. A decision-making process can help people make money decisions. Financial choices that people make have benefits, costs, and future consequences.

• Planning and Money Management: A budget is a plan for spending and saving income. A budget identifies expected income and expenses, including saving, and serves as a guide to help people live within their income. A personal financial plan should include the following components: financial goals, a net worth statement, and income and expense record, an insurance plan, a saving and investing plan, and a budget.

Materials

• Transparencies and/or power point visuals

• Copies of the educational activities

Procedure

Step 1.- Use these or similar questions to start students thinking about the functions and properties of the money and how it relates to them (refer to Visual 1):

• What’s the purpose of money? Imagine that for one day, money didn’t exist. What would be the impact on daily life?

• Does the value of money stay constant? What are some factors that might affect the value of the dollar?

• Has anyone here opened a savings account at a bank? What are the reasons you decided to do so?