Talk:Life Skills Development/Module Four/Archive

MODULE 4: MONEY MANAGEMENT

Outcomes

Introduction: Dianne, I have checked Budgeting and Consumerism: please make no more changes except to add Consumer guidelines from wikipedia Money Management may be defined as the process of managing money, including investments, budgeting, banking, and taxes. Managing your money is an essential life skill. When you know what you're doing, it really isn't so difficult. Once you've left home, the only person responsible for your financial health is you, so it's good to know the essentials. Managing your money can help reduce the stress levels that you experience throughout your life. It can help you to plan for unexpected events and expenses. A budget is a plan for spending and savings. It is a financial plan of income and expenditure which assists you in managing your finances. Subsequently we will learn about appropriate budgeting principles.Some learners make the choice and become entrepreneurs even while they are formally studying: they provide services such as barbering and manicures for a small financial return form their friends.This module will consider the qualities and the main tools of an entrepreneur.

Outcomes

General Outcomes

At the end of the Module students should be able to;

Outcomes

Units

Unit 1: Budgeting Unit 2: Consumerism Unit 3: Savings and Investment Unit 4: Entrepreneurship

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Introduction

Budgeting is considered as a very important step in assisting and controlling your day to day spending.However budgeting consumes time and energy. This unit will expose trainees to creating and tracking their budget more wisely and economically.

Objectives

Unit 1 of Module on Money Management: Budgeting Upon completion of this unit the learner will be able to: Demonstrate an understanding of basic personal budgeting skills, Practise comparative shopping for basic needs especially nutrition needs, Formulate a personal budget based on current financial resources, as a tool for meeting basic needs and proper financial management.

Reflection

Am I good at handling money? In what way? How do I know when I am overspending? Should I wait until I have a higher income to start budgeting?

Definition

Money Management - managing your personal personal finances and achieving maximum gains

Budget - List of all planned expenses. This includes revenue, total expenditure and capital expenditure

Tracking - capturing and maintaining information about use of finances. It can also guide you to control your budget better.

Hopefully, they'll all add up.

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What is a Budget?

A budget can be described as a tool that can be used to plan income and expenditure. It also serves as a guide to assist you in managing individuals finances.

How to create a Budget.

When creating a budget you need to have specific categories for major expenses as well as miscellaneous expenses. Major expenses include the following; food, clothing, electricity,rent etc.Miscellaneous expenses may cover items that are not of primary importance, however also need to be considered when budgeting for proper management of finances.

Tracking your budget.

The following practices can be followed to assist in tracking ones budget; If you purchase any item you have to write it down. Keep a journal and write down all the unexpected purchases. enter the date as well as totals of the purchase items on the appropriate column.

Determining how much to spend.

It is important for every family to agree and for individual like you to establish your priorities. The following percentages will give you suggestions on what should be spend on your income on some of the major expenditure components. Work out your expenditure using these percentages and using your own disposal income.

How different this expenditure from what you actually spend?

Housing	30%
Transportation	10%
Debt	15%
Saving (short/long term)	10%
Food	10%
Recreation	5%
Others ( eg, clothing, medical bills, gifts, etc)	20%
TOTAL	100%

Activity

Tracking Your Spending:

Keep a record of everything you spend money on to complete an accurate picture of your monthly expenditure.

List every item you have spent money on today. List every item you have spent money on yesterday.

Use this as an example for your Tracking List

Date	Item	Cost
	Bottle of water	$5.00
	2 Cadbury's chocolates	$40.00
	Taxi fare	$10.00
	3 shirts	$89.00
	Running shoes	$$250.00
	Sandals	$350.00
	Total	$744.00

Use the table below to identify your needs and wants.

Item	Cost	Need	Want
Bottle of water	$5.00	/
2 Cadbury chocolate	$40.00		/
Sandals	$350.00	/
Running shoes	$350.00	/
3 shirts	$89.00	/
4 yards of Fabric	$125.00		/

Self Assessment

Question: Do you do much impulse buying or do you do comparative shopping? Write you reflections on the way you use your money. Impulse Buying is your purchase of nonessential consumer goods without prior planning. The decision to buy usually is made at the point of purchase, as, for example, in ice-cream cone purchased from a street vendor or Cadburys' chocolate purchased from the items near the cash register. Comparative Shopping occurs when you decide on comparing prices from various shopkeepers and then make your purchase. You take into consideration prices from other shops and substitute goods before you buy.

Budgeting Activities

Having a budget that details all your income and expenditure will help you to maintain control of your finances and, if necessary, help to illustrate the problems you may be having to your creditors.

Step 1 - Start with the reality of your current situation.

Income to budget Make a conservative estimate of your annual income and divide it by 12 to get a monthly figure.

You also need to work out expenses that do not necessarily occur every month, such as insurance, holidays, car repairs, vet bills etcetera. Estimate how much you spend on these each year and then divide by 12 to determine your monthly cost.

Step 2 - Complete a monthly budget

Crystal is 18 years old. This is her budget for June 2007.She has a disposable income of $2000.00. She is planning to spend more than her income.

Transportation	$400.00
Laptop computer	$500.00
Dog chow	$200.00
Clothing	$100.00
Food	$200.00
Recreation	$300.00
Saving	$486.00
TOTAL	$2186.00

Step 3 - Evaluate and reduce your spending If you have maximised your disposable income, the only alternative solution is to increase your budget surplus by reducing your spending.

The first thing to do is look at your expenses (as detailed in the step 2). Ask yourself the following 3 questions for each category:

• Is this category absolutely necessary?
• If not can we do without it? (Is it a want or a need?)
• If not can you substantially reduce your spending?

Once you have identified the areas where substantial reductions can be made, you will need to think of ways to actually achieve your goal. Below is a list of ideas to help you get started:

• Housing - look for Do It Yourself opportunities and shop carefully for furniture and appliances. Take advantage of genuine sales wherever possible.
• Transport - do what you can to use one car and perform routine maintenance yourself. If you are going to a nearby town try to use public transport.
• Utility Bills- make sure you are with the cheapest supplier for gas and electricity and use only as you need. You would be surprised how much you can save be remembering to turn off the light when you leave a room.
• Food - prepare packed lunches for work and school. When purchasing food prepare a list and stick to it. Try to use money off coupons from papers and magazines where possible.
• Clothing - plan your spending in advance and do not over purchase.
• Insurance - shop around for the best deal and make sure you only get the cover your family really needs.
• Entertainment/Recreation - draw up a list of things you and your family can do in the vicinity of your home that are cheap or completely free. Try to stick to a limit on spending money and holidays and book accordingly.
• Savings - open a separate savings account where you can deposit the required monthly allowance for bills that do not fall due on a regular monthly basis or to deposit monthly amounts to help save for a holiday etcetera.

Assignment

Take a look at the table below and create your own budget to use from this month.

#	Budgeting Priorities	Fixed Expenses	Flexible Expenses	Total
1	Housing
2	Transportation
3	Debts
4	Utility Bills
5	Electricity/Gas
6	Telephone Bills
7	Food
8	Clothing
9	Insurance
10	Entertainment/Recreation
11	Savings
12	Other
13	Total

Checklists of Performance Tasks

Use the checklist below to assess your own work in Budgeting. Let your friend assess your work and write in his/ her assessment form 1 to 4 as indicated.

#	RUBRIC of performance criteria	4	3	2	1
1	I have written my reflections on how I value money
2	I have begun to track in writing how I currently spend my money: beginning with the last two days
3	I have identified my wasteful unnecessary spending over the last two days

Checklists of Performance Tasks

Use the checklist below to assess your own work in Budgeting. Let your friend assess your work and write in his/ her assessment form 1 to 4 as indicated.

#	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok	Will redo by
1	I have stated in my monthly budget what I want to spend on food.
2	I have written a list of nutritious food and the price of each item.
3	I have stated in my monthly budget my house/rent expenses.
4	I have stated in my monthly budget my transportation expenses.
5	I have state in my monthly budget my other expenditure: recreation, vacation etc.
6	I have included in my monthly budget, savings.

Tools for Budgeting

The following tools are helpful for constructing your personal budget. Regardless of the tool used, a budget's accuracy is only as good as the accuracy of your updating budget data; an old budget that does not reflect actual income or expenses is of little use to a current budget.

• Pencil and Paper

A simple budget can be written on a piece of a paper with a pencil, and optionally, a calculator. Such budgets can be organized in three-ring binders or a file cabinet.

• Spreadsheet Software

Spreadsheet software, like Microsoft Excel or OpenOffice.org Calc, helps arrange budgets and performs calculations easily with rudimentary formulas. Spreadsheets can also be used to keep track of expenses.

• Money Management Software

Some software is written specifically for money management. Commercial products such as Quicken and Microsoft Money are designed to keep track of individual account information, such as checking, savings or money-market accounts. These programs can categorize past expenses and display monthly reports that are useful for budgeting future months.

Portfolio Contents

1. Monthly budget including spending on housing, transport,savings etc
2. A list of ways in which a person wastes and saves money each month.
3. A list of nutritious food for a month and the price of each.

Unit summary

In this unit you have learned about controlling spending and why it is necessary to always monitor what you purchase.In addition suggestions have also been provided on how you can plan as well as track your expenditure.Recommendations on what percentage of your budget you can spend on products identified as major or primary have also been provided.

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UNIT 2: Consumerism

Introduction

Today we are bombarded by the ethic of excessive consumption. As learners, we need to think critically and make informed decisions to spend our money wisely. This unit will expose you to a range of appropriate strategies to employ when making decisions about spending.

Objectives

You will be able to Compile a list of shopping guidelines Apply for a loan or make a hire purchase and compute the interest payments and the total cost Evaluate warranties and guarantees Compare prices of different products. Describe advantages and disadvantages of purchasing new and old items Evaluate various insurance schemes in terms of rate of payment and deductible and refunding policies. To examine the objectivity of information in the press in terms of accuracy.

Definition

• Hire Purchase: System for financing the purchase of any equipment where the ownership is vested with the lender until final payment is made. The borrower is required to place a desposit and make periodic, usually monthly repayment at a flat rate of interest.

• Warranty: A promise about a product by a manufacturer or a seller about the durability of any product purchased.

• Guarantee: To accept responsiblity and have obligation to compensate if any purchase product does not meet the expected standards.

• Insurance: Promise of reimbursement in the case of loss paid to people or companies.
  • A Life Insurance: is an investment that is made to ensure a form of security and financial compensation when an unforseen circumstances such as death occurs.
  • Permanent Life Insurance:Provides coverage throughout your life as long as the premium payments are paid on time and you do not cancel the policy. The premium of permanent insurance policy remain relatively level while the policy is in force.
  • Term Life Insurance:Provides a coverage during a specified period of time as long as the premium payment are paid on time.
• General Insurance: Insurance that is not detemine by life insurance for example; automoblies, health, and home owner polices. Paymens are provide for the benefits covered.
• Advertising: It is making known or calling public attention to a product, service or company by paid promotion.

Sub-Topics

1. Consumer shopping guidelines
2. Loans and hire purchase
3. Insurance
4. Advertising

 Topic 1: Consumer Shopping Guidelines

Shoppers today have a large variety of shopping alternatives. Whether you are downtown or in the mall or even on the Internet, getting value for money is always a best practice.

Activity

The following activity can assist you to focus on some key questions when making a purchase. Jane wants to shop for a pair of shoes for graduation ball one month away. She has several alternatives: go to her favorite mall, go downtown to a variety of shoe stores or even go online and search for her ideal shoe. What do you think are the advantages and disadvantages of each choice? Did you come up with any of the following points? Mall: availability of brands and choices but could be expensive. Downtown: availability of some brands but may be cheaper Internet: many choices but will not get to try on. Also needs time for shipping. Jane finally decides to go to the mall. She narrows her choices down to two: Choice 1: Brand X: $ 900 Desired colour Choice 2: Brand Y: $1200 desired colour Help Jane make her choice. What issues would you consider? Consumer Tips (place link) suggest the following issues to consider before making a purchase: fit of shoe stitching on shoe trying on shoe at the end of the day checking materials used eg leather, manmade materials etc. Now you select an item to purchase. Can you come up with a list of guidelines to help you make a proper purchase? Use the Bureau of Standards in your community/country to generate a list of guidelines.

Consumer guidelines:

      CONTENT

Beware of Fraud when you shop or pay your money

How to identify someone who wants to defraud you.

• Contact you without permission by phone, email or in person
• Well spoken and friendly when they come to your door
• Well informed and approached you with professionalism
• Your decision making is often forced
• You are encouraged and enticed
• Payment is required before transaction is completed

Types of Fraud:

Types of Fraud:

a. Affinity fraud

• The con artist gains the trust of certain indiividual or group of people(i.e. religion, race, gender etc) when the time is right will take advantage of the individual or group, usually for money or material goods.

b. Insurance fraud

• The con artist tricks intentionally cause damage or injury to fraudulently collect money from your insurance policy.

c. Pitiful fraud

• A con artist tells pitiful lies about his or her self or family in order to get you to feel sorry and give him money.He or she is well dressed and not a beggar.

d. Email fraud

• Items are offered in advance to get the victim credit card information. Delivery is never made because it is not a legitmate offer in the first place.

e.Credit card fraud There are several types of credit card fraud.

• A credit card of another person is used to charged for a purchase on that card up until the card is cancelled. .

• A[merchant]] (business, service provider, seller, etc.) is "tricked" into releasing merchandise or rendering services, believing there would be reenburshment.The merchant later learns that they will not be paid, or the payment they received will be reclaimed by the card's issuing bank.

Activity

Fraudulent Practices to avoid

Discuss with a friend, a time when an attempt was made to defraud you in one of the ways mentioned above or in another way. Share what was so convincing about this person and his / her offering and how you responded. Discuss if you would respond differently in the future.

#	FRAUD	4	3	2	1
1	I recalled to my friend my experience of an attempt to defraud me,
2	And reflected on the total and long but untrue story I was told.
3	I included in my written reflections the story why it was so convincing what much money I was asked for my response to the request if I could give this same response in the future my reason for this
	TOTAL

Getting justice after fraud:

• What to do if you are ripped off
• Fight Back: Do not let anyone get away with fraud, always take action.
• Become an informed consumer
• Work with the police and warn others to help prevent these crimes

Letter of complaint:

State the facts of the complaint using the Prevatt acroymn- F.A.C.E.S

F: Facts

A: All the facts

C: Cause (of the complaint)

E: Effect, (what is the impact)

S: Solution

Activity

Letter of Complaint

Write a letter of complaint , asking for the specific redress you would like for a faulty purchase, that was very different from the one you had asked to purchase and that you had expected to be in the sealed box you received. Use the format to assist you to write the letter.

Your address Date

Title of person e.g. The Manager

Name of institution/store

Address

Dear Sir/ Madam / or the name if you know it e.g Mr. Akong

First paragraph Write the aim of your letter of complaint - what you want to achieve by this communication.

Second and other paragraphs Write all supporting information. Use F.A.C.E.S

Final paragraph Close politely, and restate exactly what you want the companyto do for you.If you want to add a very serious note, you amywnt to put something like: if you fail to address my complaint within this month, I will be forced to take legal action. I am hoping it will not come to this as I had a cordial customer relationship with your company until this problem arose.

Close Your sincerely, or Yours truly,

Your signature

Activity

Enjoy doing a Role Play with your friend of an oral complaint

You can make a complaint in person, in writing, or by telephone to the company, stating the problem that you are experiencing with the item. Even if you complain in person or by telephone, it is always best to document your complaint in writing. Making a written complaint helps you be consistent in describing the problem in detail chronological order.

• Ensure that you give a clear description of the problem and the redress you are asking for.
• Read the copy of your letter(written above)to refresh your memory and keep it as documentary evidence.
• Have handy, photocopies(not originals) of receipts, warranties or other relevant documentation.
• Give a phone number where you can be reached
• State a deadline for a resolution of your matter.
• Get the name of the person with whom you are speaking
• Jot down the date and time and what you said
• Remain calm at all costs.

Template:ACTIVITY Look at the letter of complaint that Sandra has written. Look at it closely with your friend and note ways it could be improved.Rewrite the letter in paragraphs, according to the guidelines below.

• Writer's address and full date
• Title of specific Manager in the Company, its address, and greeting e.g. Dear Ms. Fulani
• Aim
• Helpful information
  • F: Facts
  • A: All the facts - where, when and details of what
  • C: Cause of the complaint - how and why
  • E: Effect, (what is the impact)
• Polite Close

Pretend that you are the Manager of Payless Ltd.Discuss with your friend how you would respond to this letter of complaint. Give reasons in your response of a few lines.

Payless Ltd

Main Street

St. James

Dear Sir/ Madam,

I wish to inform you that a pair of shoes was bought on Tuesaday 16th March 2007 and it was defected. When I arrived home, one side of the shoe heel was not attached. Also when I tried the other shoe, I discovered that the heel was loose. As a result I was unable to attend my daughter's weddimg. I am requesting reimbursement for the shoe I purchased at your store on Tuesday 16th March. I hope I will be reimbursed by 30th March 2007.

Respectfully Yours

Sandra Rammath

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   Topic 2: Loans and Hire Purchase

Loans from banks, credit unions or other financial institutions can assist a buyer in providing cash. Many items such as cars, homes, vacation or tertiary education cannot be personally financed. Selecting a loan can be difficult especially with hidden charges and different rates. A loan consist of a principal, an interest rate % and a time period in years to payback. A financial advisor can assist you in making a wise decision.

The following activity can assist you to focus on some key questions when selecting a loan:

{{Activity| Sam can obtain a loan from a bank for $10 0000 over a two year period at a rate of 5%. What is his interest? What is his total payback to the bank?

Feedback Interest can be found using this simple mathematicsl formula: Interest$ = Principal$ x rate x time (years) / 100 Interest = $10 000 x 5 x 2 /100 = $1 000 TOTAL to be paid = Principal$ + Interest$ = $10 000 + $1000 = $ 11 000 Did you notice that the total to be paid to bank after two years is $1000 more than the original sum borrowed. This is the interest you owe the bank for the lending facility.

Now you can find the interest to be paid on a loan for $15000 at a rate of 8% over a 21/2 year period.

Hire Purchase is a way of financing items from stores when not purchasing with cash. You may have seen famous furniture stores advertisng hire purchase options of 3 month, no downpayment and 12 month plans. Selecting a hire purchase plan can be tricky as you can pay back much more than you planned. It is important to work out each option and the total payback before making your choice A hire purchase plan consists of a downpayment ,a principal, an installment and a time period in years.

The following activity can assist you to focus on some key questions when selecting a hire purchase plan:

Activity

Lapana can purchase a television set costing $4800 from an appliance store using two HP options: 1. no downpayment, installment $300 every month for 18 months 2. $1000 downpayment, installment $200 every month a bank for 20 months. Which plan should Lapana choose? Feedback HP1: installment$ = $300 number of months= 18 total = $300 x 18 = $5400 HP2: installment$ = $200 number of months= 20 total = $200 x 20 plus downpayment = $4000 + $1000 = $5000 Did you notice that plan 2 is less than plan 1 plan 2 takes longer than plan 1 Lapana will need to weigh whether he prefers to pay less or pay over a shorter time.

  Topic 3. Insurance.

List and describe various types and costs of insurance.

Check the costs and benefits of different types of insurance, sold by at least 2 companies in your community. Include the following: Life insurance Term insurance General insurance: car, home(with or without contents) Health insurance Indemnity insurance

With one of your friends, evaluate the insurance schemes in terms of the Health insurance Does it cover 80% of your medical bills?

Critical illness policy Does it replace your income while you recover from a critical illness, and assists with the 20% of your medical bills that your Health insurance does not cover.

Term and Life Insurance Does it replace your income adequately?

General Insurance Does it put you back in a position before your loss or liability? Indemnity Insurance Is you risk covered adequately? Your Finance company may cover 80% of your mortgage, you cover 10% and they put the rest of the risk with an Indemnity Insurance Company.

Retirement Is your insurance plan registered or unregistered? Do you have an annuity plan ( registered the Government) which allows tax deduction but can only be accessed by age 50 (other wise you get a penalty)? Do you have an unregistered one, from which you can access funds at any time?

In a short report, give reasons why you would recommend any specified one for you or your family.

  Topic 4. Advertising.

Advertising is a very important part of marketing goods and services. Advertising media include both print and electronic. Print media include newspapers, flyers, brochures, posters, banners, signs. Electronic media include television, radio, Internet, Electronic signs etc.

Advertisements are usually prepared by professional teams or agencies. They use a combination of fonts, colours, graphics and text. They are designed for various target audiences for example an advertsiement of baby diapers is geraed to mothers of babdies/toddlers but not necessarily to teenagers.

Sometimes an advertiser may distort the facts in order to promote a product.While this is ethically wrong, many viewers do not easily distinguish between fact and fiction. When reading an advertisement, it is important to ask yourself the following:

1. who/what is the source of the information
2. what is the nature of the claim?
3. Is the claim plausible?

Activity

Don't be fooled by advertisements

1. Examine and discuss with a friend, newspaper and television advertisements about household goods, vacations, purchasing a house/condo and investigate the accuracy ot the information and claims.

Write a short report on your findings.

Include the extent of the appeal to the emotions and how this is done

       the factual content  

       the clarity of information

Portfolio Contents

1. A list of consumer guidelines for a particular product
2. A comparison between two selected loans, two hirepurchase plans for the same product, two insurance plans.
3. A set of at least two recent fraudulent activities - one local/regional and the other international
4. A set of advertisements from both the print( newspaper, brochure, flyer) and electronic media ( Internet web page, banners, television).

Summary

At the end of this unit, the learner will have been exposed to consumer guidelines and will be able to follow and make informed decisions when deciding to purchase any items. You would have also increased your awareness of fraudelent activities and how to avoid them or minimise risk. You have also looked at various loans types and hire purchase plans and how to calculte th etotal to be paid back to the financial institution. Various types of insurances have been discussed with a view to assist the learner to make informed decisions when opting to take any type of insurance. Finally you looked critically at a variety of advertisements both in the print and electronic media.

Self Assessment

You may want to assess how well you have completed all the activities of this unit on Consumerism. Then ask your friend to read your work and also write in his impression ini the relevatn checklists. List of consumer guidelines Reflections on being defrauded Letter of complaint of being defrauded. Comparison of the total cost of a particular large item bought through hire purchase Reflections on oral practices regarding returning goods purchased. List and description of various types and costs of insurance. Reasons and reflections on why you would recommend any specific one. Report on newspaper and television advertisements about household goods, vacations, purchasing a house/condo and investigate the accuracy ot the information and claims.

Checklists of Performance Task

1. Shopping Guidelines

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I wrote consumer guidelines for one product e.g. a shoe
2.	I wrote the information I researched at my local Consumer Affairs Authority
3.	I recalled and reflected on an experience of almost /being defrauded.
4.	I identified any other ways that I or my friends and family were /almost were defrauded e.g. credit card fraud.

2. Identify various components of loans and hire purchase plans

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I listed the components of different loans
2.	I listed the components of different hire purchase plans
3.	I compared the benefits and limitations of at least two different comparable loans
4.	I compared the benefits and limitations of at least two different hire purchase plans for a product I wished to purchase

3. Reflections on insurance plans best suited for my individual needs or that of my family.

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I researched various insurance firms in my community for credibility
2.	I researched various insurance plans
3.	I distinguished among various life insurance plans
**general insurance
**health insurance
**life and term insurance
**annuities

4. Reflections on advertising.

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I identified common components of at least three advertisements
2.	I made judgements on the accuracy and appeal of advertisements
3.	I made an advertisement on my own

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UNIT 3: Savings and Investment.

Introduction

Money without financial intelligence is money soon gone. Money empowers one to make certain choices in life. it determines what you wear to what kind of car you drive. it also impacts our decision to work or how much we give to charity. This empowerment can only be achieved via Financial Intelligence. This unit allows trainees to acquire knowledge on saving and invcesting to improve their short-term and long-term goals.

Objectives

Upon completion of this unit the learner will be able to: Identify different methods of saving Describe different types of investments Explain the importance of saving and investing Discuss the role of financial institutions Differentiate between the terms savings and investment Prepare an investment portfolio

Definitions

Bonds : The loaning of money to a company or a government unit.

Collectables : Refers to items that not antique but expected to appreciate in value.

Corporate Bond : Long-term debt securities of various types issued by private companies to raise capital.

Investments : It can be an asset or an item that is purchased with the hope that it will generate income.

Municipal Bonds : Bonds issued by government authoritie to raise capital to help with financial nedds and projects.

Savings : Generally means putting money aside for a shor term goal that you hope to achieve.

Stock Markets : Is a way for companies to raise money from those with cash to invest.

Real Estate : This encompasses land along with anything permanently affixed to the land, such as buildings.

Reflection

THE BEST WAY TO CREATE THE FUTURE IS TO CREATE IT. Did you have a piggy bank or a special place where you saved your coins when you were very young? When you were a child /teenager, did others come to you to borrow money, when theirs was all spent? or were you the regular borrower? As an adult learner, do you think you shoult wait until you find a better paying job to start saving? What is your investing profile? Can you live with the risk that your investment will decline in value even temprarily? Do you think savers are losers? The answers to the questions listed above and others will be addressed in this Unit. Do not be too concerned if you have not met some of the terms. Read on and discover that some of the concepts that you held previously are changed, modified or proven to be correct.

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What is saving?

"MAKING MONEY IS EASY.KEEPING IT IS THE HARD PART"

One colour for each category

Saving generally means putting money aside for a short term goal that you hope to reach within five years.You save for a dowmpayment of a house or car that you hope to buy in a few years,security is a form of an emregency cash fund. Saving refers to preserving money for future use-typically by putting it on deposit.This is distinct from investment where there is an element of risk. Personal disposable income minus personal consumption expenditure is defined in economics as personal savings.In other words the excess money which is known as surplus that is not consumed immediately by goods and services is what you save.

Different Types of Savings

Saving the Act	Savings the Product
Refers to an increase in one’s assets,Refers to an increase in net worth	Refers to one part of one’s savings accounts, Or it refers to all of one’s assets
An activity occurring over time, a flow variable	Something that exists at any one time, a stock variable.

Assignment

Review your budget from Money Management - Topic 1 -Budgeting and determine what areas, if any, can be reduced, amended or eliminated in an effort to increase your savings total.

Do not pass these kinds of signs by and think that these Conventions are not for you

What is Investment?

"YOU WILL NEVER BE TRULY POWERFUL IN LIFE UNTIL YOU ARE POWERFUL WITH YOUR OWN MONEY.IT'S ALL ABOUT RISK."

An investment is all about risk: it can be an asset or item that is purchased with the hope that it will generate income usually called Portfolio Income.It is advisible for you to diversify your money,that is insead of putting your money in one stock its perferebly wise to invesst in a bunch of companies.Diversification is key when investing;you never want all your money riding on one or two stocks;if they implode,you will be in big trouble.

In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price; these include the purchase of bonds, stocks or real estate property.

ACTIVITY'

Numeracy Skills Calculate the actual cost of 20units whose bid price is $14,00 and offer is $i6.00 pe unit.What is the difference in the prices which is known as capital gain/loss

A share in acompany listed on the stock market cost $40.00.In five years it appreciates to$65.99,by what percent the stock appreciate?I bought 20 of those share initially at $49.99 and i want to sell at the new price.How much profit would i make?

The Different Types of Investments

Cash Investments: are generally the best investments for short-term holding periods. it is mostly invested because it's liquid and secure and can be retrieved at anytime. Some of the cash investments that be found are Banks/Savings Accounts, Money-Market Mutual Funds, Certificates of Desposits and Teasury Bills. Sometimes cash investments are used for long-term goals such as fixed annuities and cash value of life insurance.

Bonds: loaning a company, government or municipality a sum of money in return for income is known as investing in a bond. Municipal Bonds are issued by state and local government agencies. Corporate Bonds are issued by corporations to fund their financial needs, but it does not dilute company ownership.

Stocks: this is when corporations divide their ownership interest into segments or shares of stock.

Self Assessment

QUESTION: What is the difference between Savings and Investments? When we refer to investing, we are talking about investing in stocks or mutual funds or your retirement in a few decades to meet your long term goals.Saving is not the same thing as investing. The big difference is the risk you are willing to take with your money. If you are saving up for a short term goal, such as a down payment on a home that you will want to buy in a few years, paying off your debts, or saving to buy a car or to make a home improvement, that money should never be invested in stocks or mutual funds. If you need your money in less than five years, your money does not belong in stocks. So if you intend to use your money in the next few years, you do not want to run the risk that your account will have taken a downturn just when you need it. You want to play it safe with your savings. You will not have the big upside that stocks offer, but you also will not have any of the downside. Your money will grow, earning interest at a modest rate.

COMPARISON

Savings	Investments
$2000.00 (for ten Years) @ 3% per annum S.I.=(P*R*)/100 S.I.=$600 10 yrs=$2600	$2000.00 (for ten years) @ $20 at yr.1 and $40 at yr. 10 per unit share yr.1=100 shares @ $20 = $2000.00 yr. 10= 100 shares @ $40= $4000.00.

Assignment

Discover ways of saving your money at financial institutions such as Scotia Bank, Royal Bank of Trinidad and Tobago, Republic Bank, Unit Trust, Credit Unions, Sou - Sou plans, etc. Explain what are the advantages and disadvantages of borrowing money from the banks and Credit Unions, as well as how one goes about securing a loan. Explain what the stock market is, how it works and how to invest your money. Discuss the benefits of a savings plan and then create one of your own.

Higher Risk Investments

The decision about the investment you choose will be influence by growth or capital appreciation as well as the profit known as capital gain. The following are examples of high risk investments: 1)Stocks 2)Corporate and municipal bonds 3)Mutual funds 4)Real estates 5)Collectables 6)Future contracts

Higher risk investment choices include:

• Corporate and municipal bonds
• High-quality corporate stock with a history of steady earnings
• Telephone, gas or electrical utility stocks
• Mutual funds that focus on current income

Higher risk investment choices for capital growth include:

• Common stocks in growth oriented companies
• New or small companies that have good future potential
• Mutual funds that focus on capital growth
• Real estate in growth areas

Stocks: When you own shares of stock you become part owner of a company. If the company does well, the value of your stock should go up over time. If the company does not do well, the value of your investment will decrease. Companies distribute a portion of their profits to shareholders as dividends.

Companies issue two types of stock, common and preferred. Common stock is the basic form of ownership in a company. People who hold common stock have a claim on the assets of a firm after those of preferred stockholders and bondholders.

Preferred stock is ownership in a company which has a claim on the assets and earnings of a firm before those of common stockholders but after bondholders. The safety of the principal of preferred stock is greater than that of common stock.

Selecting individual stocks requires time, effort and knowledge. The objective of buying stocks is to choose those that will increase in value over time. The friendly advice, “Buy low and sell high” is easier said than done. Selecting stocks is both an art and a science.

Bonds: When you own a bond you have loaned money to a company or a governmental unit. In return, the borrower promises to repay the amount borrowed plus interest. Corporate bonds are issued by publicly owned companies, while municipal bonds are issued by state or local governments.

The price of a bond will fluctuate as interest rates go up or down. If you hold the bond to maturity you will receive an amount stated on the bond known as the face value. For example, if you buy five corporate bonds at $1,000 each and the bonds mature in 20 years, even if the value of the bond changes over the period of time you hold it, the bonds will be worth a total of $5,000 at the time of maturity. In addition, the borrower may promise to pay you an interest payment twice a year for 20 years. The declared interest of the bond is called the coupon rate.

The risk in purchasing corporate bonds is that the corporation may not be able to pay interest or return your principal at maturity.

Mutual Funds: A mutual fund invests the pooled money of its shareholders in various types of investments. The fund manager buys and sells securities for the fund’s shareholders. Mutual funds are not risk free. Their values rise and fall along with the securities in the fund.

IMPORTANT FACTORS THAT YOU MUST CONSIDERED WHEN INVESTING

1) Risk Tolerance: Can you live with the risk that your investments will decline in value, even temporarily.

2) Time Horizon and Goals: when will you need your money.

3) Knowledge: Your investing knowledge should influence your choice.

Once you have investment portfolio in place it should evolve simalteanously with your life.

Self Assessment

Question: What is the Stock Market? Answer: The Stock Market, also called the equity market, is a way for companies to raise money from those with cash to invest. Investors make money (hopefully) from buying shares in two ways – the income from dividends that the company pays to shareholders and from the capital gain on shares, realised when shares are sold at a higher price.

Self Assessment

Question: How do share prices rise and fall? Answer: Prices rise and fall for a number of reasons. Factors specific to the firm – These are, of course, the perceived prospects of the company, particularly in delivering growth in profits and paying a satisfactory dividend to shareholders. Analysts make the recommendations about whether particular companies are likely to be a sound investment. Changes in these recommendations, for better or worse, can significantly influence the price of a stock. The company’s own news releases are closely monitored. Most large companies report their figures each quarter, and any change in the expected fortunes of the company will be reflected in the share price. Recently there has been a spate of ‘profit warnings’ – companies informing their shareholders and the market that profits will be lower than expected – sometimes causing quite sharp price falls. General market factors – Economic news often has an immediate effect on the stock market. Broadly speaking, economic growth is seen as good for equities since higher growth leads to higher corporate profits. Therefore, any positive news, such as lower unemployment or increased output, is likely to be seen as good for share prices. However, inflation is the enemy of the investor, and positive economic news will not be welcomed by the markets if it is seen to imply increased inflationary pressures.

Assignment

1. Develop a questionnaire that would aid to ascertain the best stock for you to invest in based upon your particular reviewed budget. This questionnaire should seek to obtain the following information: Cost of Stock Interest/Dividend rate Investment types (retirement, US, Money market etc) Length of Investment for returns Projected income based upon investment amount. 2. Visit Investment Agencies (inclusive of banks, credit unions and broker ships) to ascertain which agencies offers the best returns to meet your needs.

What is a Financial Institution

An agent that provides financial services for its participants/clients is known as a financial institution. They facilitate the flow of money through the economy. Some financial institution are Banks, Credit Unions, Online Banks, Stock Brokerages and Asset Management Firms.

Roles of Financial Institution

1) They provide services as intermediaries of the capital and debt markets.

2) They are responsible for those in need of funds by transferring them from investors to companies.

Portfolio Contents

1. A budget showing how you intend to cut back on expenditure.
2. List the ways in which you save and waste money each month.
3. Participate in a project where research and “invest” in a particular stock, observing it to see whether or not you can make a wise decision.

Unit summary

In this unit you learned about putting money aside is simply not enough but placing your savings in banks or credit unions is wiser and more secure. You now understand that investing requires taking risk using your finance on items in hope for future growth and earnings.

Checklists of Performance Task

1. A Savings Plan, showing how you intend to cut back on expenditure

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I attempted to cut back my expenditure
2.	I made detailed accounts of what and how I intend to save from my income
3.	I made an attempt to follow this budget

2. List the ways in which to save and waste money each month

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I listed the ways in which I save money
2.	I listed the ways in which I waste money

3. Reflections on research which local financial institutions are best suited for their individual needs.

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I researched banks
2.	I researched credit unions
3.	I researched online banks
4.	I researched other financial institutions such as Unit Trust Corporations

4. Reflections on factors are most important to consider when choosing a financial institution.

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I discussed interest rates
2.	I discussed the conditions under which they grant loans
3.	I discussed the types of loans offered
4.	I discussed the returns on savings at various institutions

5. Making my Savings Plan

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I have written my reflections on my saving habits
2.	I have listed two ways in which I current waste money and plan to stop.
3.	I have listed two ways in which I plan to save money.
4.	I have state my plans to cost-conscious regarding eating more nutritious food
5.	I have state my plans to cost-conscious concerning my entertainment – e.g. parties, drinking and movies.
6.	I have stated my plans to eat nutritiously as opposed to eating fast food regularly.

6. Create a project where research and “invest” in a particular stock, observing it to see whether or not you can make a wise decision.

	RUBRIC of performance criteria	V. Well Done	Well Done	OK	Not Ok- Will redo by ….
1.	I researched the particular stock
2.	I observed the stock market, paying particular attention to the stock that I “bought”

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