Reading Reading

Harrington Harrington

Consumers & Consumers & SaversSaversChapter 6Chapter 6

ConsumersConsumers

Consumers-anyone who buys goods and Consumers-anyone who buys goods and services for personal useservices for personal use

Sources of income:Sources of income:

1. Wages1. Wages

2. Wealth (Assets, properties)2. Wealth (Assets, properties)

SaversSavers

Savings- setting aside of money, allowing Savings- setting aside of money, allowing its wealth to increaseits wealth to increase What determines if and how people save?What determines if and how people save? 1. Income levels, as we make more money, 1. Income levels, as we make more money,

we save morewe save more 2.Consumer expectations-a) optimistic-2.Consumer expectations-a) optimistic-

spend more/ b) pessimistic- save morespend more/ b) pessimistic- save more 3. Interest rates= high rates, save more3. Interest rates= high rates, save more 4. Taxes- If Gov’t raises taxes= Less savings4. Taxes- If Gov’t raises taxes= Less savings

BudgetingBudgeting

Budgeting- a plan for spending & saving Budgeting- a plan for spending & saving your moneyyour money

*Why budget?*Why budget? 1) create a plan for savings (short term 1) create a plan for savings (short term

vs. Long term)vs. Long term) 2) prevents impulse buying2) prevents impulse buying 3) prevents spending beyond our means 3) prevents spending beyond our means

(Stops debt)(Stops debt)

Budgeting…Budgeting…

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ClosureClosure

Fill out the budgeting worksheetFill out the budgeting worksheet

Day 2Day 2

BudgetingBudgeting Pre-budget planning-3 main thingsPre-budget planning-3 main things 1. list total income (guaranteed income)1. list total income (guaranteed income) 2. List monthly expenses (fixed 2. List monthly expenses (fixed

expenses)expenses) 3. List future expenses and savings goals3. List future expenses and savings goals

Investing your moneyInvesting your money

3 things to consider3 things to consider 1. Safety- what are the chances of losing 1. Safety- what are the chances of losing

your moneyyour money 2. Rate of return- how much interest can I 2. Rate of return- how much interest can I

expect to make? How much will my expect to make? How much will my investment grow?investment grow?

Liquidity- How easily can our investment Liquidity- How easily can our investment be turned back into cashbe turned back into cash

Investment OptionsInvestment Options

1. Banks1. Banks A) savings accountsA) savings accounts

High safety, low return, very liquidHigh safety, low return, very liquid

B) certificate of deposit (CD)B) certificate of deposit (CD) -must allow bank to keep your cash for a certain -must allow bank to keep your cash for a certain

period of timeperiod of time Substantial penalty for early withdrawSubstantial penalty for early withdraw Safe, not liquid higher returnSafe, not liquid higher return (budget worksheet)(budget worksheet)

Investing ContinuedInvesting Continued

Money market AccountMoney market Account Functions primarily like a saving account, as Functions primarily like a saving account, as

well as limited check writingwell as limited check writing The bank invests the $ in the money marketThe bank invests the $ in the money market High liquidity, safe, higher return than saving High liquidity, safe, higher return than saving

accounts but less than CD’saccounts but less than CD’s

Investing ContinuedInvesting Continued

StocksStocks Share ownership in a corporationShare ownership in a corporation ““Dividends” payments to shareholders Dividends” payments to shareholders

when a profit is madewhen a profit is made Risk can vary, somewhat liquid, Risk can vary, somewhat liquid,

moderate returnmoderate return

Investing ContinuedInvesting Continued

Bonds- an I.O.U, safe not liquid, Bonds- an I.O.U, safe not liquid, moderate returnmoderate return

Mutual funds-a special investment Mutual funds-a special investment company where people pool their $ company where people pool their $ together and invest in a variety of together and invest in a variety of locationslocations A relatively new conceptA relatively new concept

Investing ContinuedInvesting Continued

Pension FundsPension Funds Retirement account from your work or Retirement account from your work or

employeremployer -not liquid, very safe, varying return-not liquid, very safe, varying return

Consumer CreditConsumer Credit

Allows us to buy things now & pay for Allows us to buy things now & pay for them laterthem later

This usually causes people to go into This usually causes people to go into debt.debt.

There is often a heavy cost (interest) we There is often a heavy cost (interest) we pay for obtaining & using creditpay for obtaining & using credit