Budget Elements Name: Subject: Semester: Todd McLauchlin Personal Finance 30 Winter 2014 Date: Grade: Lesson Length:

TBD 12 60 min

Content Identification: Today's class will serve as both an introduction to the coming units and a way to help connect the concept of budgeting to other personal financial topics. This lesson is not meant to be a thorough lesson in investing, credit, savings, purchasing, fraud or taxation, but instead introduce the elements as aspects of budgeting. To begin it will be helpful to have a definition of some of these terms; therefore the first portion of the class will be spent defining investing, credit, loans, savings, fraud, risk, taxation and purchasing. The definitions will be placed on the students portion of the course webpage (for future reference), but are also included at the end of this lesson plan. We will then spend the second half of the class creating a Google Doc, which will help us form connections between budgeting and the topics to come. The students will add how they think each topic connects to budgeting, in the Google Doc, which can be found at http://goo.gl/fb5VQv The students will also add any points they already know about these topics, either from the definitions we just explored or from prior knowledge. I am budgeting 25 minutes for this exercise, as I expect we can easily spend 5 minutes on each of the 5 topics. However, if we have extra time at the end of class, the students will be given the remaining time to work on their projects. The purpose of this exercise is twofold, first to diagnose what the students already know about a number of personal finance topics, and second, to help connect budgeting to the rest of the course, as budgeting will become the continuous and connecting concept throughout the semester. Outcomes (Objectives): PF(L) 5-Demonstrate understanding of personal budgets and their importance for financial planning. Indicators (Assessment): a. Describe budgeting and explain how it relates to financial problem solving and financial responsibility. b. Identify and describe the key terminology associated with budgeting such as assets, budgets and liabilities.

The students will be able to identify key terms and concepts of personal finance and connect them to the concept of budgeting. The Google Doc will serve as a simple, informal, diagnostic of the overall classes understanding of personal financial topics. Common Essential Learnings: Critical and Creative Thinking Cross-Curricular Competencies: Developing Thinking Prerequisite Learning: An understanding of budgets, budgeting terminology and layout, need vs. wants and long-term and short-term goal will be required for this lesson. Additionally, an understanding of how the items on a budget are connected to each will be beneficial.

Equipment/Materials: The Creating a Budget: Personal Budget assignment and rubric, Google Drive access, internet/computer access and Word Press will all be required. Set: (9 min) 1) The class will begin with a brief summary of the budgeting terms and concepts we have already seen. This will help the student prepare for the budgeting elements we will discuss in this class. We will briefly review income, expense (fixed, variable, required and optional), short/long-term goals and need/wants. Development: (25 min + 25 min) 1) I will move directly from the review into the new material. Terminology can be rather dry at times, and we will break this into two parts to help with that. This class will help serve as a bridge between budgeting and the rest of the course, as well as, it will give me an opportunity to diagnose the overall class knowledge of personal finance topics. 2) I will share with the students the definitions of investing, credit, loans, savings, fraud, risk, taxation and purchasing. These definitions will also be available to the students on the course webpage. 3) Once we have briefly introduced each term, we will conduct an activity, which will ask all the students to sign into one Google Doc at the same time. 4) The students will then contribute ideas, thoughts and comments on how they think each concept is connected with budgeting. They will also add in any knowledge they already have about the topic, including what we just discussed in the definitions. Closure: (1 min) 1) If this exercise is done early, then the students will have the remainder of the class time to work on their budgets. Otherwise, I will inform the students that the next two classes are work periods on the two budgeting assignments, following which we will move on two unit 2. Terms for Defining: Investment: An investment is an asset or position that is purchased with the belief that it will improve the overall financial position of its owner. It hopes it that asset will appreciate, that is they will grow in value, then the investment can later be sold, at a higher price, because of this growth, making the owner a profit. Some examples of investments are investing in your education, by paying to go to university, investing in property by buying a house or land or investing in a business by buying direct ownership of the business. Investments, in a financial sense can also include bonds, savings accounts, Guaranteed Investment Certificates (GICs), Mutual Funds, Index Funds, Stocks, Commodities, etc. Credit: The term credit is a very broad term, it can describe loans, equity to shareholder and even praise for doing something well. The portion of a line of credit, which is currently available to use, is also called credit. This is most commonly seen in credit cards, but can also be found in bank lines of credit. A person can also have bad credit, which means that the person is a high risk to extend credit (such as a credit card). You can also have a credit limit, which is the amount a financial institution is willing to extend to you. Loans: A loan is provided to you by a financial institution, private individual or enterprise. There are many types, some secured and some unsecured. Secured loans are supported by collateral, such as a house, in order to balance against the loan, while unsecured loans do not require collateral and are granted based on the credit of the individual.

Savings: Savings occur when your monthly income is higher than your monthly expenses. Savings can be invested, and the most common way is in a savings account. Savings accounts will pay you interest to have the money held in the savings account and used by the bank, but this amount is typically rather small. Savings can also occur when a projected set of personal expenses come in at a lower value than expected. Fraud: Fraud is defined as the wrongful deception that is intended to cause financial or personal gain for the fraudster. There are many different types of frauds but some of the most common are investment fraud and identity fraud. Investment fraud is when someone creates deliberate falsehoods in financial data or financial information to ensure the investment is in their favor. Identity fraud involves the deliberate use of someone else's personal identity, either for financial gain, directly from the person, or with the intent of fraudulent activities, to gain financial position from someone else. Risk: Risk is being exposed to, or having something of value exposed to, something dangerous, harmful or that can cause loss. In finance, risk involves the possibility of losing the original investment. Risk is tied closely with the thought of return, and it is thought to increase your return potential you need to increase the risk you are exposed to, when investing. The simple reason for this is that in order to encourage investment in riskier positions, the investor must be compensated. To compensate the investor for the increased risk, the return potential must also increase. Taxation: As covered before, a tax is imposed on your income generated through employment, by the government. Under the law, both businesses and individuals must file an income tax return each year to determine whether they owe any taxes or are eligible for a tax refund. Income tax will be covered in greater detail in the coming units. In general, however, a tax is a strain on your powers or resources, and goes beyond income tax to include sales tax, capital gains tax (which is the tax you pay when you sell an item for a higher price than you purchased it for) and property tax. There are also items or investments that are tax free, such as a Tax Free Savings Account, where the contributions, interest and withdrawal of funds does not incur a tax charge. Purchasing: Purchasing is intuitively the act of buying something; however, it can be contrasted against renting and leasing. Renters do not own the item or property, as the purchaser does; instead, they pay the owner a fee for usage of that item. Leases are the legal contracts that lay out the renting details and guarantee that the owner is paid and the renter has usage of the item.