Category Chapter 1

May 27 2015

Why Should I Invest?

“Simply put, you want to invest in order to create wealth.  It’s relatively painless, and the rewards are plentiful. “

This article from The Motley Fool website explains why investing is a smart idea.  The article begins with information about the importance of goals.  Then asks the question, “What are you saving for?”.  The article also explains the power of compounding and provides specific examples to illustrate how time, rate of return, and age can make a tremendous difference.

The article also summarizes 9 common pitfalls to avoid including: doing nothing, starting late, investing before paying down credit card debt, etc.

Note:  this is one of a series of articles provided by The Motley Fool website.  Hopefully, students will use this article as a starting point and will use more of the educational materials available on this site.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of beginning a savings and investment program sooner rather than later.
  • Explain the power of compounding examples in this article to illustrate the difference in potential returns.
  • Discuss the 9 common pitfalls that often keep people from starting a savings and investment program.

Discussion Questions

  1. What are the advantages of starting an investment program sooner rather than later?
  2. Where can you get the money you need to begin a savings and investment program?
  3. What do you consider the biggest pitfall that keeps you from starting a savings and investment program?
May 20 2015

Financial Literacy Month

April was Financial Literacy Month; however, every month should involve efforts to better understand personal financial planning principles and practices. The website 360 Degrees of Financial Literacy offers a wide range of tools and information to help people develop money management skills at every stage of life.

Other resources to provide financial planning assistance include the:

Teaching Suggestions

  • Have students talk ask people to describe their definition of “financial literacy.”
  • Have students obtain financial literacy suggestions using online research.

Discussion Questions 

  1. What are the common elements of financial literacy?
  2. How might a person improve their financial literacy?
May 9 2015

How Much You Have to Earn to Be Considered Middle Class in Every US State

“Pew defined middle class households as those earning 67%-200% of a state’s median income.”

A recent analysis from Pew Charitable Trusts’ Stateline blog found that the middle class shrunk in every state in the U.S. between the years of 2000 and 2013–the most recent data available.  This article by Libby Kane and Andy Kiersz also provides a detailed table that displays the median income and middle class incomes for each of the 50 states.  Finally, the information in this article points out that the definition of middle class often depends on where you live.  For example, you can feel middle class even if you earn$250,000 a year in some areas of the country which is about five times the $52,250 median income for the entire United States.

For more information, click here. 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss what it means to be middle class in the United States.
  • Stress how income relates to financial planning, investing, and the time value of money.

Discussion Questions

  1. While the median income for the United States is $52,250, the median income and the middle class incomes for each state vary. What factors account for the difference in these income amounts from one state to the next?
  2. Assume you are offered a new position within your company that will pay $6,000 more than your current annual salary. If you take the new position, you will have more responsibility and it will require that you work longer hours and travel away from home and family on a regular basis.  Do you feel the extra money is worth the changes that will be required if you take the new position?
  3. If you decide to take the new higher-paying position, what would you do with the extra money?
May 6 2015

How This Couple Retired in Their 30s to Travel the World

This is a very interesting interview that describes how one young couple decided to take charge of their finances, pay off their debts, and accumulate a nest egg to fund an early retirement.    

When Jeremy graduated from college, he started working for Motorola and earned $40,000 a year.  But his desire to keep up with his friends, family, and co-workers led him to buy a new car and a three-bedroom home.  He was quickly in debt, but fortunately he realized he wanted to live debt free.

Using an interview format, this article describes the steps Jeremy (38) and Winnie (33) took to save enough money to retire while they were in their 30s.  It also describes their current lifestyle and how they spend their money and time since they retired.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Explore why people often feel the need to keep up with friends, family, and co-workers.
  • Discuss the specific steps that Jeremy and Winnie took to take control of their finances.

Discussion Questions

  1. What steps did Jeremy and Winnie take to get out of debt? Would you be willing to take these steps in order to live debt free?
  2. Once Jeremy and Winnie were debt free, what techniques did they use to save and invest their money?
  3. Jeremy and Winnie retired in their 30s. Does the idea of retiring in your 30s or 40s, or 50s appeal to you?  Explain your answer.
Feb 18 2015

The Seven Baby Steps (Dave Ramsey)

“Get out of debt the same way you learned to walk–one step at a time.”

This article describes Dave Ramsey’s seven steps that anyone can take to get out of debt and begin to manage their personal finances.  These seven basic principles have been taught by Mr. Ramsey via radio, books, Financial Peace University, live events, and online.  Listed below are the seven steps discussed in this article.  Note:  You can get more information about each step by clicking on the “Learn More” tab.

  1. Begin by creating a $1,000 emergency fund.
  2. Pay off all debt using the debt snowball .
  3. Save 3 to 6 months of expenses in a savings account.
  4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement accounts.
  5. Create a college funding plan for your children.
  6. Pay off your home mortgage early.
  7. Build wealth and give.

For more information, click here. 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Ask students visit the Dave Ramsey website.
  • Discuss some or all of the seven baby steps described in this article. Reminder:  Students can get more information by clicking on the “Learn More” tab.

Discussion Questions

  1. How can the seven baby steps help you manage your personal finances?
  2. Do the steps in this article make you want to change your priorities and what’s important in your life? Justify your answer.
Feb 14 2015

Newly Married with $52,000 of Debt

My Wife and I Never Discussed Money Before Getting Married–and Ended Up with $52,000 of Debt

Prior to tallying up our debt, we’d talked about traveling internationally, starting a family, and, some day retiring comfortably. There was so much we wanted out of life, but . . .”

This is an excellent article that describes what can happen when a soon-to-be-married couple doesn’t talk about finances.  Fortunately, the two people in this article–Deacon and Kim Hayes–realized they had a problem and then took steps to get their finances back on track.

Specific steps this couple took can make a big difference over time.  Among the suggestions included in this article are:

  • Writing down all your assets, debts, income, and expenses.
  • Prepare a budget and review each item for opportunities to save money.
  • Replacing a newer, expensive car with an older car.
  • Selling unwanted or unneeded items online.
  • Using any extra money to repay debt.
  • Establishing an emergency fund.
  • Saving and investing a specific amount each month.

Consider This:  Deacon Hayes–the author of this article–became a financial planner and now shares his story with his clients.

For more information, Click Here. 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss why engaged couples need to discuss their finances before they get married.
  • Stress how easy it is to get in debt and how hard and how much time it takes to get out of debt.

Discussion Questions

  1. Assume you are dating someone who seems to spend more than they make. In this situation, would you continue to date this person?  Explain your answer.
  2. One of the suggestions included in this article is that people write down their assets, debts, income, and expenses. How can this suggestion help a young-married couple plan their financial future?
  3. Assume you have credit card debts and an automobile loan that total $75,000. What specific steps can you take to reduce or eliminate your debt?
Feb 7 2015

Wedding Costs and Marriage Success

The average cost of a wedding is nearly $30,000 and the average engagement ring cost is about $5,500.  However, a high-cost wedding does not ensure a long-term marriage.  A study by two economists at Emory University concluded that “marriage duration is inversely associated with spending on the engagement ring and wedding ceremony“.

Other findings of the research included:

  • spending between $2,000 and $4,000 on an engagement ring was associated with a 1.3 times greater chance of divorce compared to spending between $500 and $2,000.
  • spending between $2,000 and $4,000 on the engagement ring was associated with two to three times the probability of reporting being stressed about wedding-related debt relative to spending between $500 and $2,000.
  • spending less than $1,000 on the wedding is associated with an 82 to 93 percent decrease in the chance of reporting being stressed about wedding-related debt relative to spending between $5,000 and $10,000. 

While money is important in marriage and life, being materialistic can result in relational difficulties.

For additional information on the wedding costs and marriage success, click here:

For the research paper, click here:

Teaching Suggestions

  • Have students research actions that may be taken to reduce wedding costs.
  • Have students interview people about their experiences related to planning a wedding. 

Discussion Questions 

  1. What financial difficulties might result from overspending for a wedding?
  2. How might a couple reduce weddings costs?
  3. Describe actions that might be taken to as alternatives for an expensive wedding.
Jan 14 2015

Raise a Glass and Toast the U.S. Economy in 2015

According to Mark Hamrick, Washington Bureau Chief, at Bankrate.com, “We go into 2015 and put the very bitter memory of 2007, 2008 behind us.”

With the national unemployment rate down to 5.8 percent, 2015 should be a good year for the economy.  According to Hamrick, “The economy has really done a great job of damage repair, with acceleration here recently with the quality of jobs being added.”  This trend will continue as employers are expected to continue adding workers in 2015 at a monthly pace of about 200,000 each month.

In addition to a lower unemployment rate, projected U.S. economic growth of nearly 3 percent over the next 12 months and stock prices near record highs should continue to fuel the nation’s economy.  On the down side, expect the Federal Reserve to raise interest rates around June 2015.  Also, there is the unknown factors of political and social unrest around the world and the typical global economic problems that could be a drag on the economy.

For more information, click here.

Teaching Suggestions

Note:  There is a 2 minute video that accompanies this article that you may to use as part of your classroom presentation.

You may want to use the information in this blog post and the original article to

  • Discuss the current state of the economy.
  • Explain why unemployment rates, interest rates, political and social unrest, and global economic problems can affect the U.S. economy.

Discussion Questions

  1. Although many economists and investors are enjoying the economic recovery over the last few years, many individuals do not share the same optimism. How do you feel about the nation’s economy?
  2. Are you optimistic about your own economic future? What specific steps can you take to improve your personal economic future?
Dec 3 2014

Dangers of not teaching children about money management

Financial difficulties in a household can create anxiety for children. To minimize these apprehensions, parents should begin communicating about money at an early age to help children grow up to be financially literate adults.  Rather than allowing the youngsters to arrive at their own conclusions, a proactive approach can help the children avoid the mistakes of their parents. Without an open discussion, children will likely grow up lacking financial knowledge.

Suggested actions for developing good money habits among children are:

  • teach them to budget since this is the foundation of successful personal finance.
  • develop wise spending decisions for wise choices and avoiding impulse buying.
  • create an understanding of the rewards of work with a system of work-for-pay chores, which go beyond basic required chores, such as a clean room.
  • develop an appreciation for delayed gratification with saving for a goal.

For additional information on wise money management for children, go to:

http://www.bankrate.com/finance/smart-spending/the-danger-of-not-teaching-kids-about-cash.aspx?ec_id=cmct_02_comm_PF_mainlink

http://www.bankrate.com/finance/financial-literacy/4-money-lessons-for-children-to-master-1.aspx

 

Teaching Suggestions

  • Have students research various actions that might be taken to better involve children in family money management decisions.
  • Have students create interview questions that they might ask when trying to determine if parents are teaching their children wise money management habits.

 Discussion Questions 

  1. Describe various problems associated with not involving all household members in family money management activities.
  2. What actions would you take to teach young people about wise money management?
Nov 19 2014

10 Things Rich People Know that You Don’t

“People don’t become wealthy by accident, here’s how they do it’

This article describes 10 habits that anyone can develop that will improve their financial management skills—regardless if they want to be the world’s next millionaire or if they just want to live comfortably.  For more information about each of the 10 items below, please see the original article.

  1. Start saving and investing early in life
  2. Automate savings and investments so deposits are made automatically on a regular basis
  3. Maximize contributions to retirement and investment accounts
  4. Never carry a credit card balance
  5. Live like you’re poor and adopt a “less is more” attitude
  6. Avoid the temptation to live beyond your means
  7. Be goal oriented and know what you consider to be important
  8. Get educated and learn about investments before investing your money
  9. Diversify your portfolio and avoid the temptation to put all your eggs in one basket
  10. Spend money to make money by hiring a qualified and experienced financial adviser, accountant, and, if needed, an estate planner

For more information go to http://www.marketwatch.com/story/10-habits-of-high-net-worth-women-2014-07-02?page=1

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of making smart decisions as opposed to foolish decisions.
  • Tie the suggestions in this article to material in the text.

Discussion Questions

  1. Which of the ten habits described in this article can you use now to help manage your personal finances?
  2. The first suggestion, “start saving and investing early” is a basic principle we stress in the text. What are the advantages of starting early?