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JA Economics Consumers, Savers and Investors Chapter 6
JA EconomicsConsumers, Savers and InvestorsChapter 6
Building on what you know
Teens spent $159 billion in 2005
What do you do with your paycheck? Spend it? Save part of it? Save all of it?
Page 78
Gross Domestic Product Final value of all goods and service
produced in the country in one year.Consumption as a Percent of GDP,
2004Government PurchasesInvestmentConsumer Spend-ing
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Sources of Income Teens’ major source of income are:
Parents Odd jobs Part time jobs Full time jobs Gifts
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Sources of Income - work Wage – by the hour
Salary – by the week, month or year
Depends on: Skill Job Education Performance Entrepreneurial drive
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Sources of Income - wealth The value of things you own
Add together the value of: Possessions Bank account Savings Investments Equals your “net worth”
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Influences of Wealth Disposable income – money after taxes Savings depends on:
Income Earn more, save and invest more
Expectations Confidence = spending Concern = saving
Current Interest Rate higher rate=incentive to save
Taxes
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Personal Budget Write down your desired career.
Look on page 79 and find the category that career falls under.
Create a budget using the following slides equations.
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Average consumer budget Housing – 33% Transportation – 17% Food – 12% Retirement – 8% Personal taxes – 6% Health care – 5% Entertainment – 5% Apparel – 4% Other – 10%
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Budget’s Influences Setting Financial Goals
Goal to increase income Goal to save money
Estimating Income Be honest Be certain
Planning Expenditures Prioritize your wants
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Saving and Investment Decisions Safety
FDIC Federal Deposit Insurance Corporation
Rate of return % of interest > rate = > risk
Liquidity
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Where to put your savings Savings deposits - safe
Certificate of Deposit Higher interest rate Non liquid
Money market - safe Lower % than CD
Pensions and retirements fund Tax deferment
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Where to put your savings Corporate stock
High risk Corporate bonds
Certificate of indebtedness Mutual funds
Buy a share of a fund Fund owns a pool of assets
Savings bonds
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Consumer Credit Borrowing money to buy now what you
can’t afford Principal and interest must be paid back Shop around for better terms
Finance charge Annual percentage rate
Monthly rate of 2.5% Equals 30% APR
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Advantages of Credit Immediate possession
“I want it NOW!” Flexibility
Time your purchase for sales Safety
Not carrying cash Emergency funds
Financial cushion Character reference
Credit history
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Disadvantages of Credit Overspending
Easy to spend money Higher cost
Merchants pay a fee to credit card companies = higher marginal costs
Impulse buying Ignore future sales
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Obtaining and using credit Character
Personal qualities Willingness Honesty
Capacity Ability to repay
CapitalMoney in bank, property, house Collateral – used to secure the loan
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How to establish credit Open a savings account
Have a telephone bill
Co-signer for first loan
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Consumer Protection Right to safety
Unsafe products Right to be informed
What, terms, and risks of purchase The right to choose
Illegal to restrict market competition The right to be heard
Ability to contact producers1962
Better Business Bureau http://iowa.bbb.org/consumers/
http://www.bbb.org/us/blog/
Sets standards in business ethics
