Personal Money ManagementDay 1

Africa

Standard:SS7E4Students explain personal money

management choices in terms of income, spending, credit, savings, and investing.

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Agenda Message:Social Studies GMAS is Wednesday, April 29th. Invest

20-30 minutes a night in studying your Study Guide.

Standard SS7E4: Students explain personal money management choices in terms of income, spending, credit, savings, and investing.

Essential Question for Monday April 27th :What is the theme for Personal Money Management?

Warm-Up:Why do countries need economies?Today We Will:GMAS Review

FIRST FIVE

E.Q. Answer for Monday April 27, 2015:It’s not about how much money you make, it’s all

about how much money you keep.

Warm-Up:To help them manage distribution of resources

ANSWERS

IncomeWhen people go to work, they earn an

income. An income is the total of a person’s earnings that they can then decide how to use.

Broadly speaking a person only has two choices about what to do with income: spending money now for goods and services or saving for the future.

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SavingsSavings are after tax income minus

consumption spending, that is, the money you have not spent after buying things you need or want.

To help people make decisions about using their limited income a budget can be developed.

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BudgetA budget is a; 1. Spending-and-savings plan, 2. Based on estimated income and

expenses, 3. For an individual or an organization, 4. Covering a specific time.

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InvestingFrom an individual point of view, savings

typically become a form of investing, because the savings is put into a bank account, stock, bond, or mutual fund that pays a rate of return (interest).

Investing refers to postponing current consumption or rewards to pursue an activity with expectations of greater benefits in the future.

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Real investment or physical capital investment

Real investment or physical capital investment refers to decisions by businesses to purchase equipment and physical plants and the purchase of new homes by consumers.

The amount of real investment is critical to economic growth. Financial investment and real investment or connected but they are not the same.

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CreditCredit refers to the ability to borrow money.

Some forms of credit commonly used by consumers are car loans, home mortgage loans, and credit cards.

Firms also use credit regularly, either by borrowing from a bank or issuing corporate bonds.

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Government also uses credit when it needs to borrow money to finance a budget deficit (e.g., savings bonds, treasury notes).

Those who can borrow moderate or large sums of money at a reasonable rate of interest are sometimes said to have good credit, while those who cannot borrow such amounts are said to have bad credit.

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Credit is extremely useful to the economy. Most people would have great difficulty in buying a house if the couldn’t borrow the money.

Many people also use credit to further their education.

Many firms would be unable to build new factories if they had to save all the money first.

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In addition, short-term credit is often used by people (through credit cards) as a simple and convenient method of paying for purchases.

However, excessive borrowing can b a problem for households, firms and government.

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