VCEE Scope & Sequence EPF Unit 18 : simplebooklet.com

UNIT 18 - EVENTS AFFECTING THE PLAN (11 days)All teaching resources in this document are free for teachers. Here is how to you access them:1. Many are hyperlinked in the document, so you can get started right away. 2. Lessons that do not have a hyperlink can be found on the lesson plan resource calledVirtual Economics 4.5 or 5.0 (VE). All teachers can and should get this resource for freeby participating in a VCEE training session. Visit www.vcee.org for more information.3. Lessons from Financial Fitness for Life are on VE. They also have educationaltechnology tools that can be found here:https://www.econedlink.org/resources/collection/fffl-9-12/This concluding unit addresses how to cope with uncertainty and change as they affect one’sfinancial plan. The unit first focuses on how to best take advantage of unexpected opportunitiesand how to protect oneself against loss. It then takes a broader view, helping students to analyzeand foresee the effect of government actions and economic events so as to successfully adapttheir budgets and personal financial plans over time.EPF.17 The student will demonstrate knowledge of personal financial planning byb) identifying anticipated and unanticipated income and expensesDay 1 Dealing with unanticipated eventsEPF.14 The student will demonstrate knowledge of the role of insurance in riskmanagementa) evaluating insurance as a risk management strategyDay 1 What is insurance?EPF.14 The student will demonstrate knowledge of the role of insurance in riskmanagement byb) distinguishing among the types, costs, and benefits of insurance coverage includingautomobile, life, property, health, and professional liability insuranceDay 1 Auto insuranceDay 2 Property and professional liability insuranceDay 3 Life and health insuranceEPF.14 The student will demonstrate knowledge of the roles of insurance in riskmanagement byc) explaining the role of insurance in financial planningDay 1 Protection or investmentEPF.17 The student will demonstrate knowledge of personal financial planning byc) examining components and purposes of a personal net worth statementDay 1 Calculating net worthEPF.17 The student will demonstrate knowledge of personal financial planning by1Virginia Council on Economic Education

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EPF.17 The student will demonstrate knowledge of personal financial planning byb) identifying anticipated and unanticipated income and expensesDay 1 - Dealing with unanticipated eventsContent KnowledgeUnanticipated expenses can throw a budget off. Likewise, unanticipated income can too easily bewasted without showing a benefit or progress towards a short-term or long-term goal.VocabularyAllowance - A sum of money paid regularly to a person, often by a parent to a child; sometimespaid in compensation for services rendered.Anticipated Expenses – Regular payments that must be made to cover certain regularexpenditures. These could include rent, utility bills, and groceries.Anticipated Income – Regular receipts of funds that come as part of a contractual obligation.These can include wages, salary payments or certain conditional payments such as scholarships.Bonuses – An amount of money received in excess of a previously agreed upon amount, often inrecognition of exceptional service or completion of an important project.Educational Grants or Scholarships – Funds received to help offset the costs of education.They are often conditional on maintaining grades and/or other factors.Fixed Costs - Costs which remain the same each month.Gifts – Unanticipated receipt of funds or other things of value.Inheritances – Gifts received from another party upon their death, also known as bequest.Salary - A regular payment, often at monthly or biweekly intervals, made by an employer to anemployee, especially in the case of professional or white-collar employees. Salaries are paid forservices rendered and are not based on hours worked.Unanticipated Expenses – Expenses that are not foreseen and may happen at irregular intervals.Examples can include medical expenses, auto or appliance repairs or losses from naturaldisasters.Unanticipated Income – Payments received that are not foreseen or may happen at irregularintervals. These can include bonuses and gifts.Variable Costs – Costs are anticipated but may vary from month to month. Examples mayinclude entertainment, hobbies or certain educational expenses.Wage - Payments for labor services that are directly tied to time worked, or to the number ofunits of output produced.Virginia Board of Education FrameworkExamples of anticipated income:● Salary● Allowance● Wages● Educational grants or scholarships3Virginia Council on Economic Education

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Examples of unanticipated income:● Gifts● Bonuses● InheritancesExamples of anticipated expenses:● Fixed costs, which remain the same each month (e.g., rent, house payment,automobile loan payment)● Variable costs (e.g., video rentals, restaurant meals, sports activities)Examples of possible unanticipated expenses:● Car repairs● Medical bills● Losses from natural disaster or theftTeaching Tips1) Begin the lesson by asking: What would you do if you won a large sum of money in araffle? How much, if any, would you put toward an investment or savings? Why? Howwould you finance a major setback (e.g. apartment catching fire and all of yourpossessions are lost, or a major accident puts you or a member of our family in thehospital)? Have you known people who experienced such a major setback? Were theyable to come back from it relatively unscathed, or did it become a long term problem?2) Explain that having a financial plan will not eliminate the bad, but it can enhance thegood and minimize the bad. Having a “rainy day” fund, or putting unanticipated incomeinto retirement or savings can provide a cushion for unanticipated expenses.3) As an introduction to the following day, ask if they are aware of any strategies in additionto saving, to address unanticipated losses. Probe what they know, or think they know,about insurance, and record their remarks in order to address any misconceptions in thecoming days.Lessons and ResourcesFinancial Fitness for Life Grades 9-12 Lesson 1: How to Really be a MillionaireFinancial Fitness for Life Grades 9-12 Lesson 8: Managing Your MoneyYour Credit Counts Challenge Section 1: Income and Choices4Virginia Council on Economic Education

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EPF.14 The student will demonstrate knowledge of the role of insurance in riskmanagementa) evaluating insurance as a risk management strategyDay 1 - What is insurance?Content KnowledgeEveryday life involves many risks. The degree of loss associated with risk varies according to therisk itself. To guard against risks, individuals and businesses purchase insurance. There is awide array of insurance policies available within the insurance industry. To determine yourinsurance needs, individuals and businesses should first assess their potential risks, financialposition, and financial goals. Overtime, individuals should reassess their potential risks andfinances. For example, one should reevaluate their insurance needs when major events happen intheir life. (i.e. marriage, children, renting/purchasing a home, relocating, etc.) Sometimesindividuals see insurance as a gamble and a waste of money rather than a way to protect theirassets in case of accident. However, it is recommended to evaluate insurance decisions based ona cost/benefit analysis.There are many types of insurance, including automobile, life, property, health, and professionalliability. Individuals have many choices to make in selecting insurance.1VocabularyInsurance – A practice or arrangement whereby a company provides a guarantee ofcompensation for specified forms of loss, damage, injury or death. People obtain such guaranteesby buying insurance policies, for which they pay premiums. The process allows for the spreadingout of risk over a pool of insurance policyholders, with the expectation that only a fewpolicyholders will actually experience losses for which claims must be made. Types of insuranceinclude automobile, health, renter's, homeowner's, disability and life.Virginia Board of Education FrameworkInsurance can reduce financial risk.There are pros and cons of insurance as a risk management strategy in financial planning.Insurance provides protection from loss due to unforeseen or unavoidable events orcircumstances (e.g., illness, death, fire, theft, liability, act of nature, automobile).Teaching Tip1) Share with the class a listing of potential risk that you faced this morning on your way towork. (see list below for suggestions)5Virginia Council on Economic Education

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a. A power outage overnight caused your alarm clock to not work, thus youoverslept and are late to work.b. Your coffee maker did not work, you did not have your morning cup of coffee,and you are in a bad mood. You are rude to your friend. Your friend does notwant to hang around you anymore.c. You trip over the coffee table, fall, and break your arm.d. You are in a car accident on the way to schoole. Your region experienced out of the ordinary heavy rain, your basement is flooded2) Ask your students to assess their potential risks. Ask for volunteers to share their risks.Make a list of risks on the board.3) Discuss the disadvantage of risk: loss. Discuss the potential cost of loss associated withrisks that have been discussed in class.4) Ask the students how they can guard against risk. Make a list of suggested way on theboard.5) Conduct the lesson “Why Insurance and How Does It Work” from the lessons list below.This lesson contains a day in the life of a teenager activity, and an interview with aninsurance policy.6) Show the video on the history of insurance listed in the Lessons and Resources. Aftercompletion, ask students about the protective features of insurance. Who was protected inHammurabi’s time? In medieval times? What were they protected against? How didpooling money provide protection? Why would it matter what the level of risk is? Howdoes risk relate to size of the premium? Does it provide an incentive to reduce risk, ifpossible? How?Lessons and ResourcesVirtual Economics: Insurance Lessons Lesson 1: Why Insurance and How Does It WorkFinancial Fitness for Life Grades 9-12 Lesson 10: Managing RiskVideo curriculumRisky Business: What Every Teenager Needs to Know About Living Smart part 4, Expect theUnexpected: Managing Risk and Insuring Your Future. Available upon request from VCEE.VideoHistory of Insurancehttp://www.youtube.com/watch?v=8AGiWyJXvm06Virginia Council on Economic Education

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EPF.14 The student will demonstrate knowledge of the role of insurance in riskmanagement byb) distinguishing among the types, costs, and benefits of insurance coverage includingautomobile, life, property, health, and professional liability insuranceDay 1 - Auto insuranceContent KnowledgeThe freedom of the open road is very exciting for most teenagers. However, with the reward ofthis freedom comes many a wide range of possible risks. To reduce these risks, many statesrequire drivers to purchase automobile insurance. The Commonwealth of Virginia has anautomobile insurance requirement. To purchase license plates, one must certify that the vehicleis covered by the minimum insurance requirements or pay the uninsured motor vehicle fee.Virginia requires minimum insurance coverage: Bodily injury/death of one person $25,000,Bodily injury/death of two or more persons $50,000 and Property damage o $20,000 forminimum coverage.Evaluating automobile insurance policies can be a daunting task. There are many variables to beconsidered. These variables include such things as Bodily-Injury Liability, Property-DamageLiability, Collision, Comprehensive, Medical Payments, Personal Injury, Deductibles, andDiscounts. Some people purchase minimum coverage and are surprised by what is covered andwhat isn’t. However, it is recommended to evaluate automobile insurance decisions based on acost/benefit analysis. Comparison shopping is also recommended.VocabularyAssigned Risk – A driver or class of drivers that would be denied insurance coverage but mustcarry auto insurance under state law.Collision – Insurance that pays for repairs to an automobile, or replacement of the automobile(minus the deductible in each case), if the automobile is hit by another car.Comprehensive – Insurance that pays for repairs to an automobile, or replacement of anautomobile (minus the deductible in each case), if the automobile is stolen or damaged bysomething other than a collision (for example, by a hail storm).Deductible – Regarding insurance policies: A set amount an insured person must pay per lossbefore the insurance company will pay a claim.Liability – Automobile insurance that pays for costs of bodily injury and property damage whenthe insured person damages someone or something with his or her car.No Fault – In some states, insurance claims are not paid by the party at fault for an accident.Instead, each party in an accident is compensated by their own company, regardless of whichparty caused the accident.Personal Injury Protection – A portion of auto insurance that pays for medical injuries.7Virginia Council on Economic Education

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Uninsured/Underinsured Motorist – Insurance coverage that will pay a driver who is injuredor otherwise suffers damages due to actions of a driver of another vehicle who is uninsured ordoes not cover sufficient insurance to pay all the damages.Virginia Board of Education FrameworkImportant topics to understand about automobile insurance include● deductible● collision● comprehensive● liability● personal injury protection● no fault● uninsured/underinsured motorist● assigned riskUmbrella liability insurance provides additional protection should other policies not besufficient.Teaching Tips1) Ask your students the following and discuss:a. How many have their driver’s license?b. How many have their own car?c. How many have automobile insurance?d. What type of automobile coverage do you have?e. In order to operate a vehicle in the Commonwealth of Virginia, are you requiredto have automobile insurance?2) Have your students access the following website and read about automobile insurancerequirements for the Commonwealth of Virginia.http://www.dmv.state.va.us/webdoc/citizen/vehicles/insurance.asp3) Have your students access the following “Teenagers Guide to Auto Insurance” brochure,or print copies and distribute to your students.http://www.scc.virginia.gov/boi/pubs/auto_teen.pdf4) Instruct your students to read the brochure.5) Assign your students to develop a PowerPoint presentation to persuade a fellow teenagerthe importance of purchasing auto insurance. Have the students discuss each type ofinsurance completely.6) Invite an insurance agent into your classroom to explain different types of automobilecoverage.8Virginia Council on Economic Education

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7) Use Lesson 3 listed below to discuss varying types of auto insurance.8) Use the Risky Business activity below to help students understand the business of autoinsurance underwriting. Are there some things they can do to keep the cost of theirpremium down? Are there factors affecting the cost that are outside of their control?Why is that?Lessons and ResourcesVirtual Economics: Insurance Lessons Lesson 3: Everything You Ever Wanted to Know AboutAutomobile InsuranceOnlineRisky Business: What Every Teenager Needs to Know About Living Smart Activity 4.2,Choosing Sides: Which Drivers Would You Insure? Available upon request from VCEE.http://riskybusiness.councilforeconed.org/resources/wlg/RiskyBusiness.4.2r.pdfSeveral publications on auto insurance from the state Bureau of Insurance can be found at:http://www.scc.virginia.gov/boi/pubs.aspxShow Me the Money (lesson)http://www.econedlink.org/lessons/index.php?lid=388&type=educator9Virginia Council on Economic Education

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EPF.14 The student will demonstrate knowledge of the role of insurance in riskmanagement byb) distinguishing among the types, costs, and benefits of insurance coverage includingautomobile, life, property, health, and professional liability insuranceDay 2 - Property and professional liabilityContent KnowledgeProperty insurance is an important consideration. Without any homeowner’s or renter’sinsurance, an individual would be liable for the entire cost of personal property if a loss occurred.Without adequate coverage, many people are surprised when they have a claim and find out theydon’t have full coverage. Therefore, it is important to have this coverage and periodicallymonitor the coverage as you experience changes in your life. Again, it is recommended toevaluate property insurance decisions based on a cost/benefit analysis. Comparison shopping isalso recommended.Professional liability insurance is a type of insurance purchased by attorneys and health careproviders to protect against malpractice and other litigation.VocabularyEndorsements – a written document attached to an insurance policy that modifies the policy bychanging the coverage afforded under the policy. An endorsement can add coverage for acts orthings that are not covered as a part of the original policy and can be added at the inception of thepolicy or later during the term of the policy.Floaters – A type of insurance policy that covers property that is easily movable and providesadditional coverage over what normal insurance policies do not. This can cover anything fromjewelry to expensive stereo equipment.Professional Liability – Insurance designed to protect professionals from claims due to errors oromissions, also known as malpractice insurance.Umbrella – A liability policy designed to protect assets and future income of a policy-holderfrom claims against them.Virginia Board of Education FrameworkSome concepts to understand about property insurance:● Its purpose is to protect a person from losses due to damage, theft, and liability.● It includes basic coverage, broad form, special form, renter, comprehensive, andcondominium owner,● There are disadvantages of under-insuring and over-insuring.● The insured must pay a deductible toward a loss before the insurance companycontributes. Policies with lower deductibles have higher premiums, and vice versa.● Insurance floaters cover items not covered by standard insurance policies, such as artcollections or jewelry.10Virginia Council on Economic Education

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● Endorsements can be written to change a policy’s coverage.Professional liability insurance is often purchased by attorneys, health care providers, andeducators to protect against malpractice and other litigation.Umbrella liability insurance provides additional protection should other policies not besufficient.Teaching Tips1) Ask your students to take a personal inventory of their belongings. Included on thisshould be a replacement value of the items. You may want to have students compile thislist with prices prior to coming to class.2) Ask students how they would replace these items, if they were lost in a disaster. Do theycurrently have enough saved money to replace the items? If not, ask how they couldguarantee the replacement if such an event occurred. Direct the students’ discussion intohomeowner’s insurance and renter’s insurance.3) Have students access the following link for a Homeowner’s Insurance Consumer’sGuide. http://www.scc.virginia.gov/boi/pubs/hoguide.pdf Following the evaluation ofthis document, instruct students to complete the Homeowners Insurance QuotationWorksheet at the end of the document.4) The following is a link to the Homeowner’s Insurance Sample Premium Table(2011-2012) which can be a good planning tool when budgeting for property insurance.http://www.scc.virginia.gov/boi/pubs/ho_sampprem.pdf5) Also, consider inviting an insurance agent into your classroom. Have them discuss howpremiums are affected by endorsements, floaters, and deductibles. Have them alsoaddress professional liability insurance.Lessons and ResourcesVirtual Economics: Insurance Lessons, Lesson 4: Why Renter’s Insurance?OnlineSeveral publications on homeowners’ and renters’ insurance from the state Bureau of Insurancecan be found at: http://www.scc.virginia.gov/boi/pubs.aspx11Virginia Council on Economic Education

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EPF.14 The student will demonstrate knowledge of the role of insurance in riskmanagement byb) distinguishing among the types, costs, and benefits of insurance coverage includingautomobile, life, property, health, and professional liability insuranceDay 3 - Life and healthContent KnowledgeNot all health insurance plans cover everything. Knowing what is and isn’t covered can helpconsumers make informed decisions.VocabularyCo-pays – The portion of a medical service charge paid by the insured. This is paid first and thebalance of the charge is submitted to the insurer for payment.Dental – A specific type of medical insurance designed to cover care of the teeth and gums.Disability – A type of insurance meant to provide long-term coverage and care if the insured isunable to work due to illness or injury.Major Medical – Insurance that covers most serious medical expenses up to a maximum limit,usually after a deductible has been met.Term Life –delete An insurance policy with a set duration limit on the coverage period. Once thepolicy is expired, it is up to the policy owner to decide whether to renew the term life insurancepolicy or to let the coverage end. This type of insurance policy contrasts with permanent lifeinsurance, in which duration extends until the policy owner reaches 100 years of age (i.e. death).Vision – A specific type of medical insurance designed to cover basic optometric needs like eyeexams, glasses and contacts.Whole Life –A life insurance contract with level premiums that has both an insurance and aninvestment component. The insurance component pays a stated amount upon death of theinsured. The investment component accumulates a cash value that the policyholder can withdrawor borrow against.Virginia Board of Education FrameworkTypes of life insurance include● Temporary insurance (term, decreasing term, level term, and credit life)● Permanent insurance (straight life, limited pay, universal, and variable).Some concepts to understand about health insurance:● Basic health insurance covers doctor visit, routine service, and hospital and surgicalexpenses.● Major medical insurance insures a person from large and catastrophic expensesresulting from illness or injury.● Dental and vision care insurance are generally sold separately from basic insurancecoverage.12Virginia Council on Economic Education

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● Disability insurance offers workers protection in case of job-related injury.● There are both advantages and disadvantages of managed and unmanaged healthinsurance plans.● Co-pays (i.e., payment by the insured for medical services) are requirement of mosthealth insurance plans.Teaching Tips1) Survey the students to determine how risky they are. How many like to rock climb?How many enjoy riding ATVs? How many have ever talked on the phone while driving?How many have not washed their hands before eating in the school cafeteria?2) Ask the students about their last visit to the doctor. Did you pay for the visit? Have youever had a broken bone? What type of medical attention was required? How costly doyou think the medical visits were? Do you have enough saved money to cover suchunforeseen events? Can we always predict when we will need medical attention andbudget for this expense? Direct the students’ discussion into the unanticipated medicalexpenses that tend to occur in life. Explain that health insurance can lessen the cost ofmedical needs.3) Explain that the majority of individuals obtain health insurance through their employer.However, it is worth discussing health insurance for entrepreneurs. Businesses typicallycomparison shop health insurance companies for the best plans for their organization’sneeds. Within the organization there may be several plans available for employees tochoose.4) You may wish to secure health insurance information from the school division’s HRdepartment to use as an example, or ask local businesses that offer health insurancebenefits to provide information.5) Use a PACED decision-making grid to compare different plans or different componentsof plans (compare vision plans, compare dental plans).Lessons and ResourcesVirtual Economics: Insurance Lessons, Lesson 2: The Basics of Life InsuranceOnlineSeveral publications on life and health insurance from the State Bureau of Insurance can befound at: http://www.scc.virginia.gov/boi/pubs.aspxKhan Academy, Practical Money Skills. Term or Whole Life Insurance.https://www.practicalmoneyskills.com/resources/videos/term_and_whole_life_insurance_policies13Virginia Council on Economic Education

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EPF.14 The student will demonstrate knowledge of the roles of insurance in riskmanagement byc) explaining the role of insurance in financial planningDay 1 - Protection or investmentContent KnowledgeInsurance can play an important role in financial planning. Some life insurance can be used aspart of an investment plan.An annuity is a financial product that receives and grows funds from an individual. Later, it paysout a stream of payments to the individual. Annuities are primarily used for retirement.An Individual Retirement Account (IRA) is an investing tool that earns and allocates funds forretirement savings. There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLEIRAs and SEP IRAs.A Health Savings Account is an account that may be offered with high-deductible health plansfor the purpose of saving for medical expenses that high-deductible health plans do not cover.Contributions are made into the account by the individual and/or the employer and are limited toa maximum amount each year. The contributions are invested over time and can be used to payfor qualified medical expenses, which may include dental, vision and over-the-counter drugs.It is important to consider several factors including your financial goals and provisions for yourfamily. Comparison Shopping is recommended as the life insurance industry is in a competitivemarket. Much of the competition focuses on price. Conducting a cost/benefit analysis is helpfulin finding the best value for your money.VocabularyCash Value – the cash amount offered to the policyholder by the life insurance company. Cancellationof the contract – may not apply to some kinds of life insurance contracts.Virginia Board of Education FrameworkInsurance can play the following roles in financial planning:● Protection against risk of financial loss● Assistance for individuals and families preparing financially for risks such asdisability, unemployment, long-term care and death● Provision for retirement income● Accumulation of savings (for family expenses)● Provision of cash value that can be borrowed.It is important to make periodic reviews of insurance coverage.15Virginia Council on Economic Education

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Teaching Tips1) Have students access the following link to calculate their estimated life expectancy.http://www.360financialliteracy.org/Topics/Insurance/Life-Insurance/Life-ExpectancyHave students refer to their financial goals. With both sets of information, students shouldbe encouraged to make a list of insurance needs. Have students contemplate theirretirement goals as well.2) Have students examine different types of insurance from their above list. Life insuranceshould be included. Also have students examine annuities and IRAs. Research could befacilitated using the on-line resources below and/or the previous day’s notes. Studentscould present their findings by means of a PowerPoint Presentation, newspaper article,Prezi Presentation, or short report.Lessons and ResourcesFinancial Fitness for Life: 9-12, Lesson 21: There Is No Free Lunch in InvestingTeaching Financial Crises Lesson 7: The Instruments and Institutions of Modern FinancialMarketsMathematics and Economics: Connections for Life Lesson 11: Cash or Annuity?Online360 degrees of Financial Literacy (American Institute of CPAs)http://www.360financialliteracy.org/Topics/InsuranceBuilding Wealth Guide from the Federal Reserve Dallas (includes planning for, shopping for, andbudgeting for insurance. http://www.dallasfed.org/ca/wealth/index.cfmSeveral publications from the state Bureau of Insurance can be found at:http://www.scc.virginia.gov/boi/pubs.aspx16Virginia Council on Economic Education

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EPF.17 The student will demonstrate knowledge of personal financial planningbyc) examining components and purposes of a personal net worth statementDay 1 - Calculating net worthContent KnowledgeA net worth statement shows one’s financial position.1A personal inventory is needed both toestablish the parameters for insurance coverage, and in case of claims. The inventory is onecomponent of a net worth statement, which is used in making and adjusting the financial plan,and in obtaining credit.VocabularyAsset – Something of monetary value owned by an individual or an organization.Liability – Legal responsibility to pay a debt or for damages or losses one has caused.Net Worth – The current value of a person's assets minus liabilities.Personal Inventory – A listing of all the items in your home, often used in insurance claims.Virginia Board of Education FrameworkAn individual’s net worth statement provides the total value of a person’s financial holdings.Net worth is calculated by deducting liabilities (e.g., debts) from assets (e.g., property).Examples of assets include checking and savings account balances, car value, and personalproperty value.Examples of liabilities include balances on car loans, bank loans, mortgage loans, and creditcards.A net worth statement is useful as an analytical tool for individuals and provides valuable insightto creditors, investors, lenders, and financial advisors.A personal inventory is a list of all of one’s personal property. This is useful in cases of fire,theft, and property damage. This inventory can be supplemented with photographs. It isimportant to keep the record in a safe place away from the primary residence.Teaching Tips1) Ask students to define wealth. Write responses on the board. Ask students to defineassets and liabilities. Again record responses on the board. Then show the relationshipamong the three terms by writing the following equation on the board. Assets =17Virginia Council on Economic Education

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Liabilities + Net Worth Then, take a moment to rearrange the equation to the following.Net Worth = Assets – Liabilities.2) Assign students to take a personal inventory. It does not have to include financial assets,but they should begin by trying to think of all of their personal belongings in their room.Have them research what the belongings would be valued at and/or what it would cost toreplace them. Have them categorize their belongings: furniture, clothing, sportsequipment, electronics, books and music, etc. Don’t ask them to share values, but askthem what categories are the largest. Are they surprised by what they own and its value?Are they surprised by which categories are the largest?3) Have students prepare a net worth statement from a (fictional) personal inventory andinformation about financial assets and liabilities. You may choose to have students usean electronic net worth calculator.http://www.360financialliteracy.org/Topics/Budgeting-Spending/Budgeting-and-Saving/Net-Worth/(language)/eng-US4) Conduct the online Lesson 1 – Budget to Save: What Does It Mean to Be Wealthy.Lessons and ResourcesFinancial Fitness for Life Grades 9-12 Lesson 8: Managing Your MoneyOnlineLesson 1 – Budget to Save: What Does It Mean to Be Wealthyhttp://www.dallasfed.org/educate/pubs/wealth_classroom/01_lesson.pdfCalculating Your Net Worthhttp://www.360financialliteracy.org/Topics/Budgeting-Spending/Budgeting-and-Saving/Net-Worth/(language)/eng-USFederal Reserve Bank of Dallas, Building Wealth Guide. Includes planning for, shopping for, andbudgeting for insurance. https://www.dallasfed.org/-/media/microsites/cd/wealth/index.html18Virginia Council on Economic Education

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EPF.17 The student will demonstrate knowledge of personal financial planning bye) investigating the effects of government actions and economic conditions on personalfinancial planningf) explaining how economics inﬂuences a personal ﬁnancial planDay 1 – Tax policies and financial planningContent KnowledgeTeenagers are often surprised to discover the amount of taxes deducted from their earnings. Thereality is that there are many factors that influence the amount we have to spend and save. Thesefactors include a variety of taxes, inflation, and interest rates. Much of the tax code is written tohelp shape our decision-making about how we spend or save our money. There are taxadvantages to certain expenditure that, if known, may be a factor in our deciding to undertakecertain expenditures (e.g. deductions for mortgage payments, charitable contributions.) Studentsneed to understand that taxes can affect their finances which ultimately should affect theirfinancial planning.VocabularyDeductions – Amounts that are allowed to be subtracted from income before calculating tax.Common deductions include contributions to charity and mortgage interest.Taxes – Compulsory payments to governments by households and businesses.Virginia Board of Education FrameworkGovernment actions, such as changes in taxes, affect personal financial planning.Government tax policies, including what expenses are tax-deductible, influence financialplanning. These tax policies may shift over time.Teaching Tips1) Take this opportunity to review marginal cost and marginal benefit. List the followingitems where all students can see them: charitable contributions, interest on debt, andeducation. Ask students to recall the law of demand. What happens when the price ofsomething is reduced? (We consume more). Ask: “What would be the result if the cost ofeach of the items listed is reduced?” (People will tend to make more charitablecontributions, take on more debt, and pursue more education.)Explore the tax deductions for charitable contributions, for home mortgage interest, andfor education expenses. Remind students that a deduction reduces the amount of incomethat is taxed; therefore, the cost is reduced by the rate of the tax. If one is paying taxes ata rate of 10%, what is the resulting tax benefit of a $1,000 charitable contribution?($100). What is the result of borrowing $100,000 at 8% to buy a home? ($100,000 x .08 x19Virginia Council on Economic Education

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.10 or $800) What is the result of spending $15,000 on tuition and books to attendcollege? ($1,500). How does this act as an incentive to contribute, learn or borrow tobecome a homeowner? What is the impact if the taxpayer pays 15%? 20%?Lessons and ResourcesFinancial Fitness for Life 9-12 Theme 2, Lesson 7: Uncle Sam Takes a BiteAdvanced Placement Economics Macroeconomics Unit 2, Lesson 3: Price Indexes and InflationDay 2 - Economic conditions and ﬁnancial planningContent KnowledgeEconomic conditions change expectations. Expectations change how we choose.Changing economic conditions affect individuals.Changes in national levels of economic activity have a profound effect on students’ futurewelfare, their job opportunities, the level of their prospective earnings, and the prices they willpay for things they buy. It is important, therefore, for students to understand possible causes ofchanges in these levels and how such changes can produce economic problems (such asunemployment and inflation) or opportunities (such as increased employment). Understandingthese forces equips students to predict the economic consequences of proposed governmentpolicies and to make informed choices among alternative public policy proposals.2Students who graduate at a time when unemployment is high will likely find it more difficult tofind a job. In an effort to fight unemployment by stimulating the economy, the Fed may usemonetary policy to keep interest rates low. Low interest rates help students borrowing money forcollege or cars, young families buying homes and entrepreneurs building businesses. At the sametime, low interest rates hurt retirees who may be counting on income from interest on theirsavings.Students who graduate when the economy is growing fast and inflation is the challenge will facedifferent challenges. In a booming economy, there will be “help wanted” signs everywhere.Students will find it easier to get jobs. However, the Fed may start taking actions to fightinflation. Inflation is an increase in the overall price level that reduces the value of money,making prices of goods rise each year. (In 1979-1980 the rate of inflation was over 13%.)Inflation is a problem for savers because their savings lose value each year. It is a problem forpeople on fixed incomes (e.g. retirees) because their income is staying the same while the thingsthey are buying are going up in price. It is a problem for businesses because of the uncertainty it20Virginia Council on Economic Education

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causes. (What will I have to pay for my resources next year? Will I be able to increase my pricesto cover those costs?) Because of the problems inflation causes, the Fed may use monetarypolicy to cause interest rates to rise to slow the economy.Most people would like to have more money. Students, however, often fail to understand that thereal value of money is determined by the goods and services money can buy. Doubling theamount of money in an economy overnight would not, by itself, make people better off, becausethere would still be the same amount of goods and services produced and consumed, only athigher prices. Understanding what determines the real buying power of money and earnings willhelp students make better decisions in their personal and professional lives.2VocabularyDeflation – A sustained decrease in the average price level of all the goods and servicesproduced in the economy.Inflation – A rise in the general or average price level of all the goods and services produced inan economy. Can be caused by pressure from the demand side of the market (demand-pullinflation) or pressure from the supply side of the market (cost-push inflation).Virginia Department of Education FrameworkEPF.17e Monetary and fiscal policy actions can affect personal financial planning.Economic conditions such as inflation and deflation affect financial planning.Planning should anticipate the possibility of inflation or deflation in the future by includingsafeguards against both.EPF.17f Changing economic conditions can influence a personal financial plan in the followingways:· Inflation can negatively impact savings by eroding the purchasing power of savingsover time.· Unemployment can affect financial plans by making it more difficult for individualsto budget, save, and meet financial obligations.· Deflation can reduce the value of assets one might own.· Slow economic growth can lead to a rise in unemployment rates.Fiscal policy actions can affect an individual’s current and future income. For example, actionsof the Federal Reserve System affect interest rates and the availability of credit; thus it isimportant to be aware of what the Fed is doing and to understand what it means to one’s financialassets.Teaching Tips1) This lesson should help students answer these questions:21Virginia Council on Economic Education

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--How can economic conditions such as inflation, deflation or unemployment affect myfinances? What can I do to prepare?--What economic conditions might cause the Fed to change interest rates and in whatdirection? How might that affect my finances?2) If students have previously studied economic conditions such as unemployment andinflation and monetary and fiscal policies for addressing those issues, take some time toreview. If this is new to them, it will be necessary to introduce this content. Content andstrategies can be found in units 8 and 9. Be certain students understand that the economygoes through a business cycle of “booms (high growth often characterized by inflation)and busts (often characterized by unemployment and sometimes deflation)” Explain whois helped and who is hurt by inflation and the costs of unemployment. Introduce the CPI asa measure of inflation, GDP as a measure of economic growth and the unemployment rateas the percentage of people in the workforce who are seeking work and unable to find it.3) Have students look up these current economic indicators--CPI, Unemployment Rate, GDP.How healthy does the economy look? (Most textbooks indicate that a healthy economywould have CPI between 1-3, Unemployment 4-6% , GDP growing at least 3%. Are any ofthe indicators too high or too low?) If inflation is too high, what do students think the Fedmight do to interest rates? (They might raise interest rates and make credit harder to get.)Who might that help? Who might that hurt? If the unemployment rate is too high, what dostudents think the Fed might do to interest rates? (They might lower interest rates andmake credit easier to get.) Who might that help? Who might that hurt?4) Compare the groceries that could be purchased for $10 in 1977 with those that can bepurchased for $10 today and explain how the value of money has changed. Students willbe able to use this knowledge to explain how their lives would be more difficult in a worldwhere money sharply lost its value.25) Ask students how people change their behavior in times of inflation. (People buy inadvance, assuming that prices will be higher in the future.) Ask how savers would beaffected by inflation. (The purchasing power--what their money will buy--falls.) What dosome people do to protect themselves from inflation? (They may buy tangible assets whichtend to increase in value with inﬂation. Remind students that most cars, electronicequipment and clothing, though tangible, decrease in value with time. They may put theirmoney in bonds where rates are adjusted for inﬂation. They may seek jobs whereemployees receive cost of living adjustments.)6) Show the business cycle. Point out that the economy tends to go through these periods of“boom” followed by periods of “bust” but that we don’t know how long each is going tolast. So, knowing that at some point the economy will slow and they might findthemselves unemployed. How should they prepare for this in their financial planning?(Always have an emergency fund that is equal to at least six months of one’s income.Unemployment compensation will not cover your expenses. Engage in continuous learning22Virginia Council on Economic Education

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to keep skills current. In the workplace seek to be indispensable so your employer won’twant to lay you oﬀ.)7) Focus High School Economics Lesson 18, Economic Ups and Downs activity 4 is a onepage handout that asks students what economic conditions they would prefer upongraduation.Lessons and ResourcesFocus High School Economics Lesson 18: Economic Ups and DownsLearning, Earning and Investing Lesson 20: The Stock Market and the Future, Can You Forecastthe Future?Advanced Placement Economics Macroeconomics Unit 4, Lesson 4: The Federal ReserveSystem and Its Tools; Lesson 5: The Money Market and Monetary Policy; Lesson 6: InterestRates and Monetary Policy in the Short Run and the Long Run; Unit 5, Lesson 2: Monetary andFiscal Policy InteractEconedlink Topic (Lesson plan collection): Understanding Fiscal Responsibility.https://www.econedlink.org/resources/collection/understanding-fiscal-responsibility/OnlineEconedlink Economic Data Lesson, Economic Policy Options.https://www.econedlink.org/resources/economic-data-lesson-economic-policy-options/23Virginia Council on Economic Education

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EPF.17 The student will demonstrate knowledge of personal ﬁnancial planning byf) explaining how economics inﬂuences a personal ﬁnancial planDay 1 - Understanding decisions and choicesContent KnowledgeEconomic concepts are not just theory; they are real life tools to help people make choices thataffect their personal well-being.Virginia Board of Education FrameworkKey economics principles that influence personal financial planning include the following:· People must make choices due to scarcity· Every choice incurs an opportunity cost· All choices have consequences· Secondary effects of choices are important· Decisions are made based on marginal analysisApplying these key principles to financial planning means the following:· A budget details how one plans to use limited income to satisfy wants.· There is a tradeoff between spending now and saving· People make decisions about which financial products to consume based on severalfactors, including expected return and the associated risk of the product.· Financial plans and financial products should take into account the goals of theindividualsTeaching Tips1) How to Really be a Millionaire, lesson 1 in Financial Fitness for Life 9-12. If this activityhas not been done previously, it makes a nice summary.2) List the economic concepts from the framework where all students can see them. Askstudents to give examples of how each concept is used in financial planning3) Divide students into groups and assign each one a scenario about an individual or family.The students’ assignment is to produce a financial plan for this family. (All students maybe working on the same family or different ones. Provide enough information for studentsto create a budget. Require the use of a PACED decision model to solve a family choice.Require them to show that they are prepared for unemployment. Tell them to explain howthey will respond to inflation should the economy be faced with that. Be sure theyunderstand the nature of risk and take that into account. Require students to make classpresentations of their plans. Optional, bring in a “pretend” family of guests (principal,24Virginia Council on Economic Education

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