Financial Fitness for Life Training Workshop Consumer Decision Making

1. Financial Fitness for LifeTraining WorkshopConsumer Decision Making University of Illinois at Urbana-Champaign College of Agricultural, Consumer and Environmental Sciences United States Department of Agriculture Local Extension Councils Cooperating University of Illinois Extension provides equal opportunities in programs and employment.

2. Funding for this workshop is provided by: National Council on Economic Education US Dept of Education University of Illinois Extension

3. Instructors • Dr. Angela Lyons, Assistant Professor, University of Illinois Urbana-Champaign • Patricia Hildebrand, Extension Educator, Effingham Extension Center

4. Objectives • Introduce: (1) Financial Fitness for Life (2) Consumer Decision Making (3) Earning Income and Taxation (4) A Job for Me (5) Risk and Insurance • Experience activities to use in the classroom • Answer questions about curriculum and other resources

5. You will receive… • Curricula with lessons and activities to use in the classroom • 6 CPDU’s • Network of colleagues to share experiences • Resources available at U of I Extension

6. Financial Fitness for Life Overview: • Teacher Guide • Student Workouts • Parents’ Guide • CD-Rom and web links

7. http://fffl.ncee.net

8. 5 Themes and 22 Lessons: • The Economic Way of Thinking • Earning Income • Saving • Spending and Using Credit • Money Management

9. Each lesson includes: • Fitness Focus (lesson description and objectives) • Workout (warm-up, exercise, cool down) • Visuals • Student Exercises • Family Activities

10. Meets national and most state content standards in 4 critical areas: • Economics • Language Arts • Mathematics • Personal Finance

11. Topic 1: Consumer Decision Making Grades 6-8: Lessons 1, 2, and 14Grades 9-12: Lessons 3 and 12

12. Key Concepts • Opportunity Cost • Trade-Offs • Alternatives • Criteria • Cost/Benefit Analysis • Incentives

13. 5-Step Decision-Making Process Step 1: Define the Problem. Step 2: List your Alternatives. Step 3: Identify your Criteria. Step 4: Evaluate your alternatives based upon the criteria. Step 5: Make a Decision.

14. An Example Problem: I don’t have enough time to finish 2 big assignments. Alternatives: I can do my math homework or finish my science project. Criteria: I have an A average in math and a C average in science. The math assignment is worth 10% of my math grade; the science project is worth 25% of my science grade. I’ve missed two assignments in math; I haven’t missed any assignments in science. Evaluate: Because I’m not doing so well in science, and the science project is worth more, it’s more important for me to finish the science project (even though I have a missing math assignment). Decision: I’ll finish the science project.

15. An Activity Which Cookie is Best?

16. Directions • Divide students into groups. Distribute 3 types of chocolate chip cookies to each group. Use A, B, and C in the first column to identify the 3 alternatives (different brands of cookies). • Have students list the criteria they will use to judge the cookies across the top row (i.e., taste, color, aroma, crunchiness) • Have the students taste the 3 different brands of cookies.

17. Each group then evaluates the alternatives using the criteria and the following scoring: 1 = lowest (or worst) 2 = middle 3 = highest (or best) • Each group makes a decision about their cookie preference and reasons for their preference. • At the end, reveal the brand names, the costs per box, and the cost per unit. Does this information affect their decisions? What are the opportunity costs of selecting their alternative?

18. What happens when some criteria are more valuable than others? ACTIVITIES: • Students use the decision-making grid to make a decision about buying a personal computer. Students visit stores or use the Internet. They can work in groups or individually (i.e., Exercise 2.3, 6-8, p. 21-23; Exercise 3.3, 9-12, p. 16). • Students select a college using the decision-making grid (i.e., Exercise 3.2, 9-12, p. 13-15).

19. Why do individuals, with the same information, make different decisions? AN ACTIVITY: Panel Discussion Assessment 2.1, 6-8, p. 24-25

20. Choosing the Better Incentive AN ACTIVITY: How do you know a “good” deal when you see it? (Exercise 1.2, p. 7, 6-8)

21. Do your homework!!! • Shop around! Visit stores, read the newspaper, surf the Internet. • Know that you may not be fully informed. • Be aware of sales tactics: • Hidden costs • “Bait and switch” • Deceptive pricing - “special value” items • Deceptive advertising • ACTIVITY: Evaluate credit card offers

22. How do you find a reputable business?

23. Better Business Bureau (BBB) www.bbb.org

24. Federal Trade Commission (FTC) www.ftc.gov

25. National Consumers League (NCL) www.nclnet.org

26. National Fraud Information Center sponsored by the National Consumers League www.fraud.org

27. What’s Going on in Illinois? Office of the Illinois Attorney General www.illinoisattorneygeneral.gov/consumers/index.html Consumer Fraud Hotlines Chicago Springfield Carbondale 800/386-5438 800/243-0618 800/243-0607 TTY: 800/964-3013 TTY: 877/844-5461 TTY: 877/675-9339 Spanish Language Hotline 1-866-310-8398

29. Topic 2: Earning Income, Taxation, and Jobs Grades 6-8: Lessons 3, 5, and 17Grades 9-12: Lessons 4, 6, and 7

30. Why do some jobs pay more than others? • Market varies for different occupations (laws of supply and demand) • People with more natural ability in their occupations tend to earn more. • People who work hard tend to earn more. • People who get along with others and are self-disciplined also tend to make more. • Another important factor is investment in HUMAN CAPITAL!

31. What is Human Capital? • Human capital includes the intellect (natural ability), knowledge (education), experience (skills and training), and attitude (willingness to learn) necessary for success. • People invest in their human capital primarily through education and training. • AN ACTIVITY: The Human Capital Game

32. Why Stay in School? Importance of lifetime earnings!!! (See Exercise 5.2) Sources for Education, Income, and Employment Statistics • U.S. Census Bureau (www.census.gov) • U.S. Bureau of Labor Statistics (www.bls.gov)

33. Uncle Sam Takes a Bite!(9-12: Exercise 7.1 - 7.3; 6-8: Exercise 17.1) Key terms: • Gross pay • Net pay • Deductions • Federal, state, local income tax • FICA (Federal Insurance Contribution Act) • Benefits

35. An Example • Studen The Mint Where Your Paycheck Goes http://www.themint.org/spending/whereyourpaycheckgoes.php

36. Job Application Process • Occupational Self-Assessment • Looking for Job Openings • Letter of Application (cover letters) • Resume • Application • The Interview

37. America’s Job Bank www.ajb.dni.us

38. Monster Jobs www.monster.com

39. CareerBuilder.com www.careerbuilder.com

40. Chicago Tribune Job Listings www.chicagotribune.com/classified/jobs

41. A JOB FOR ME! (a curriculum for young adults entering the workforce)

42. Jobs! Jobs! Jobs! (an interview simulation game)

43. Topic 3: Risk and Insurance Grades 9-12: Lesson 22

44. All Choices Involve Risk! Two basic ways to reduce risk: • Change your behavior or your possessions. • Purchase insurance.

45. How Does Insurance Work? The purpose of insurance is to spread risk over many payers. A pool of people contribute money to buy insurance from an insurance company, with the expectation that only a few will actually experience a loss that will need to be covered. (See example p. 139.)

46. Key Concepts • What is a premium? Deductible? A premium is the fee paid for insurance protection. A deductible is the amount of loss paid by the insured. • What types of insurance are commonly available? Auto, health, renter’s, homeowners, life, disability (see Table 22.1, p. 140) • Is the cost of buying insurance worth the benefit? The general guideline it to not let a large portion of potential loss remain uninsured.

47. An Activity: The Big Risk (p. 142-143) The Scenario: • You have just graduated from high school or college, and you are single. • You own a number of assets you are thinking about insuring: automobile, inherited jewelry, a rare coin set, contents of your rented apartment. • Your employer provides a health insurance plan you can purchase. • You have $2,600/year to spend on insurance; you can spend less.

48. The Simulation: • Divide the class into small groups. Select one student in each group who will NOT purchase any type of insurance. • The rest of the group has budgeted $2,600/year to purchase insurance. Students purchase insurance. They will not be able to insure all items. • Each group receives a deck of cards (ace through queen where ace = 1, 2=2, jack=11, queen=12). The number represents the item(s) affected by an unexpected event • Each group pulls a card 5 times from the deck. Shuffle the cards before choosing one for each year. The simulation represents 5 years. • Students calculate the total amount spent for the 5-year period and compare it to the total amount spent for those who did not purchase any type of insurance.

49. Helpful Resources University of Illinois Extension Consumer and Family Economics www.ace.uiuc.edu/cfe National Council on Economic Education www.ncee.net Illinois Council on Economic Education www.econed-il.org

50. University of Illinois Extension Consumer and Family Economics www.ace.uiuc.edu/cfe