While car ownership has been a cultural milestone in our society, this tradition is diminishing with a trend toward renting or borrowing rather than owning. This situation is partially related to fewer teenagers opting to obtain a driver’s license. Also, fewer young people are buying homes, giving preference to the flexibility of renting.
The owning of “stuff” is shifting toward “decluttering” and choosing instead to rent items as needed. A strong belief that overconsumption is putting our planet at risk is driving the rise of the sharing economy. In addition, there is a growing trust to value exchanging items with “real people” rather than buying from major companies.
In addition to Zipcar, which rents vehicles by the hour, other rental business models include:
Ann Taylor’s Infinite Style service that allows a person, for a $95 monthly fee, to rent up to three garments at a time.
SnapGoods rents cameras, power tools and home appliances, such as blenders.
Frankfurt airport has a service that allows travelers to store winter coats when flying to warmer climates. Other businesses are considering a service to rent cold weather clothing to travelers arriving from tropical areas.
Since about one-third of new vehicles are leased, Cadillac created the “Book By Cadillac” program allowing a person to exchange up to 18 vehicles a year.
The many empty stores in malls create opportunities for “swap meets” and “rental fairs” for various products, using these spaces to also build connections in the local community.
For additional information on renting instead of buying, click here.
Have students locate examples of sharing economy businesses and rental companies in your community and online.
Have students talk to others to obtain ideas for new types of rental businesses.
What do you believe are the benefits and drawbacks of renting instead of owning?
Describe actions that might be taken to determine needs and ideas for rental businesses in a community.
The Personal Financial Satisfaction Index (PFSi), reported by the AICPA (American Institute of Certified Public Accountants) is at an all-time high. This quarterly economic indicator measures the financial situation of average Americans. PFSI is the difference between (1) the Personal Financial Pleasure Index, measuring the growth of assets and opportunities, and (2) the Personal Financial Pain Index, which is based on lost assets and opportunities. The most recent report had a Pleasure Index 68.1 in contrast to a Pain Index of 42.1, resulting in a positive reading of 25.9, the highest since 1994.
While the stock market is high, unemployment is declining, and inflation is low, remember the economy is cyclical. Be sure to consider and plan for your long-term goals. Stay aware and position your financial plan appropriately to safeguard finances when the economy is in a downturn. Also, analyze your cash flow to an attempt to increase savings, including an appropriate emergency fund.
For additional information on financial satisfaction, click here.
Have students create an action plan for situations that might be encountered in times of economic difficulty.
Have students create a team presentation with suggestions to take when faced with economic difficulties.
What are examples of opportunities that create increased personal financial satisfaction?
Describe actions a person might take when faced with economic difficulties.
“The sky is falling! If my chosen candidate doesn’t win, the markets are doomed and so are my investments.”
In this article, Bijan Golkar points out that a presidential election can cause excitement or despair depending on if you are a Republican or a Democrat and who the major parties nominate for the highest and most powerful office in the world.
The article discusses market returns both before and after a presidential election year and some of the underlying reasons for market volatility. Then the article stresses the importance of a person’s long-term goals and a plan for long-term growth as opposed to “emotional investing.” Finally, the article discusses the pros and cons of our economy that could affect investment values.
“Interest rate changes are among the most significant factors affecting bond return.”
When it comes to how interest rates affect bond prices, there are three cardinal rules.
When interest rates rise–bond prices generally fall.
When interest rates fall–bond prices generally rise.
Every bond carries interest rate risk.
This article describes how each of the “3 cardinal rules” described above affects a bond investment. It also explains the role the Federal Reserve plays in determining interest rates in the economy. Specifically it describes the federal funds rate, the discount rate, and basis points for bond investments.
Finally, this article provides information on where to find economic indicators that measure not only changes in interest rates but also other economic indicators for the nation’s economy.
“The presidential election is eight months away but ‘political risk’ is already being felt on Wall Street, as money and politics collide in a flurry. . .”
In this article, Adam Shell describes how the circus-like 2016 presidential race is creating uncertainty on Wall Street. This uncertainty centers on the candidates and how they promise to deal with select industries, trade, tax policy, and globalization.
For example, many of Donald Trump’s campaign speeches are protectionist in nature and some on Wall Street worry that Trump will build a wall around the United States choking off globalization and world trade.
For Wall Street, Hilary Clinton is also problematic. She has been a vocal critic of the pricing practices of the pharmaceutical industry. She is also a proponent for more regulation on the financial industry and has suggested that banks involved in speculative investments should pay a “risk fee.”
As the campaigns develops between establishment and anti-establishment candidates, it should be an interesting run up to the November elections that could impact Wall Street and investors.
“Falling gas prices have put consumers in a good mood.”
According to a survey conducted by the National Association of Convenience Stores (NACS), more than 4 in 5 Americans indicate falling gas prices impact their feelings about the nation’s economy and as a result they will spend more during the upcoming holiday season. In fact, more than one in four consumers (26 percent) expect to increase their spending during the 2015 holiday season–a 7-point jump over the past month and the highest percentage this year. Also the survey finds that women are more optimistic than men. For retailers, this statistic is even more encouraging because women do more holiday shopping when compared to men.
“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.
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.
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?
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?
If you decide to take the new higher-paying position, what would you do with the extra money?
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.
Saving money or earning extra income can be as easy as using an app to rent a car or lend someone your backyard tools. With about 5,000 sharing companies, organizations and programs in operation, consumers could save hundreds and even thousands of dollars a year.
The main focus of the sharing economy is car and bicycle rentals, home sharing, and shared nanny services. But consumers can also borrow drills, saws, ladders, lawn mowers through a community tool shed.
To avoid obvious dangers, be sure to use a sharing service that screens potential customers with background checks and identity verification. Technology can increase trust with online profiles and reviews from users.
There is also money to be made in the sharing economy by providing rides to others or renting out an extra bedroom. Before getting involved in the sharing economy, be sure to have proper insurance coverage and an understanding of tax implications. Participants in the sharing economy also note the social benefits of connecting with others from around the world.
For additional information on the sharing economy, go to: