Financial Literacy Sample

America’s #1 Skills-Based College Readiness Program

Cambridge College Success Series

Financial Literacy College Access and Career Success for

Level 1

The Cambridge Advantage:

Student Text

   

Non-negotiable Money Mastery Skills Financial Planning for All Ages Budgeting and Borrowing Made Easy The Do’s and Don’ts of Investing and Saving

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TABLE OF CONTENTS Course Overview .................................................................................................................................................................... UNIT 1 | SET GOALS: MAP YOUR FINANCIAL GOALS What Does Your Future Look Like? ...................................................................................................................... Evaluate Your Financial Attitudes .......................................................................................................................... Financial Well-Being..................................................................................................................................................... Overcoming Financial Challenges ......................................................................................................................... Conclusion ........................................................................................................................................................................ UNIT 2 | BUDGET: GIVE EVERY DOLLAR A PURPOSE What Is a Budget? ......................................................................................................................................................... Creating a Budget ......................................................................................................................................................... Common Budgeting Challenges and Solutions ............................................................................................. Additional Resources and Tools............................................................................................................................. Conclusion ........................................................................................................................................................................ UNIT 3 | SAVE: MANAGE YOUR MONEY WELL Setting Saving Goals .................................................................................................................................................... Deciding Where to Put Your Money.................................................................................................................... Understanding Interest............................................................................................................................................... Conclusion ........................................................................................................................................................................ UNIT 4 | SHOP: BE A SMART CONSUMER Planning for Large Purchases .................................................................................................................................. Comparison Shopping and Researching Purchases..................................................................................... Conclusion ........................................................................................................................................................................ UNIT 5 | BORROW: KNOW ABOUT DEBT Understanding Debt .................................................................................................................................................... Credit Card Debt ............................................................................................................................................................ SAMPLE

Comparing Loans and Borrowing Options ....................................................................................................... Strategies for Paying Off Debt................................................................................................................................ Conclusion ........................................................................................................................................................................ UNIT 6 | PROTECT: KEEP YOUR MONEY SAFE What Is Identity Theft?................................................................................................................................................ Scams and Fraud............................................................................................................................................................ Understanding the Role of Insurance ................................................................................................................. Additional Resources and Tools............................................................................................................................. Conclusion ........................................................................................................................................................................ Error Correction and Suggestion Form ........................................................................................................................

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BUDGET UNIT 2 Give Every Dollar a Purpose SAMPLE

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Give Every Dollar a Purpose · 3

To nh ep faoglel os w1 i1n4g- 1c o1 n8 t ienn tt hi es Student Text.

 –Š‡ ’”‡˜‹‘—• —‹–ǡ ›‘— ‹ ‡† ‘ơ ›‘—” Ƥƒ ‹ƒŽ Œ‘—”‡› learning about all sorts of career options and paths you might Š‘‘•‡Ǥ ‘ǯ– ™‘””› ‹ˆ ›‘— ˆ‡Ž– ƒ Ž‹––Ž‡ ‘˜‡”™Š‡Ž‡†Ǣ –Š‡”‡ ™ƒ• a lot of information to cover and many resources you can use to determine what you want to do or be. No matter what you choose, however, you need to be able to get the most out of every dollar you make. On that note, welcome to Unit 2! This unit explores the essentials of budgeting, which is a crucial skill for managing your money ‡ơ‡ –‹˜‡Ž›Ǥ Š‡–Š‡” ›‘— ƒ”‡ ’Žƒ‹‰ ˆ‘” ‘ŽŽ‡‰‡ǡ •–ƒ”–‹‰ ›‘—” Ƥ”•– Œ‘„ǡ ‘” •ƒ˜‹‰ ˆ‘” ƒ ƒŒ‘” ’—” Šƒ•‡ǡ —†‡”•–ƒ†‹‰ ƒ† ”‡ƒ–‹‰ ƒ „—†‰‡– ‹• ‡••‡–‹ƒŽǤ Š‹• —‹– ™‹ŽŽ ‘˜‡” –Š‡ „‡‡Ƥ–• ‘ˆ „—†‰‡–‹‰ ƒ† Š‡Ž’ ›‘— ”‡ƒ–‡ ›‘—” ‘™ „—†‰‡–Ǥ ‡–ǯ• ‰‡– •–ƒ”–‡†Ǩ

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Give Every Dollar a Purpose · 5

Topic 01

What Is a Budget?

Ti shoenf oplal og we si n1g1 4c o– n1 t1e8n itn the Student Text.

At the most basic level, a budget is a plan. A successful budget (or plan) involves tracking your income and expenses over a •’‡ ‹Ƥ ’‡”‹‘†ǡ —•—ƒŽŽ› ƒ ‘–Šǡ –‘ ‡•—”‡ ›‘— ƒ”‡ Ž‹˜‹‰ ™‹–Š‹ your means and saving for the future. A budget can be as broad ‘” ƒ• †‡–ƒ‹Ž‡† ƒ• ›‘— ‡‡† ‹– –‘ „‡ –‘ Š‡Ž’ ›‘— ’Žƒ ˆ‘” ›‘—” Ž‘‰Ǧ ƒ† •Š‘”–Ǧ–‡” ‰‘ƒŽ•Ǥ

Parts of a Budget

A budget typically consists of income and expenses. Income is the money you make, or that comes in each month, ™Š‡–Š‡” ˆ”‘ ƒ ‘•‹•–‡– Œ‘„ ™Š‡”‡ ›‘— ‡ƒ” ƒ ’ƒ› Š‡ Ǣ ˆ”‘ ‘–Š‡” ‘†† Œ‘„• •— Š ƒ• „ƒ„›•‹––‹‰ǡ ‘™‹‰ Žƒ™•ǡ ‘” †‘‹‰ ‘–Š‡” Š‘”‡•Ǣ ‘” ˆ”‘ –‹’•ǡ ‹–‡”‡•–ǡ ‘” ‘–Š‡” •‘—” ‡•Ǥ Expenses , on the other hand, are the money that goes out, and that list is usually much longer than the income list. Examples of ‡š’‡•‡• ‹‰Š– ‹ Ž—†‡ǣ - Rent - Bills (cell phone, cable, etc.) - Transportation expenses (car payment, gas, repairs, insurance) - Entertainment (going to the movies, music or video streaming subscriptions, etc.) - Eating out - Clothes —Benjamin Franklin SAMPLE INC SAYS . . . "Beware of little expenses. A small leak will sink a great ship."

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- Groceries - ‡”•‘ƒŽ ‹–‡• ȋ–‘‹Ž‡–”‹‡•ǡ Ž‡ƒ‹‰ •—’’Ž‹‡•ǡ ‡– ǤȌ - ƒ˜‹‰•

‘‡ ‘ˆ –Š‡•‡ ‡š’‡•‡• ƒ”‡ ϔ‹š‡† ǡ ‡ƒ‹‰ –Š‡› †‘ǯ– Šƒ‰‡ from month to month. For example, your cell phone bill, car ‹•—”ƒ ‡ǡ ƒ† •–”‡ƒ‹‰ •—„• ”‹’–‹‘• ƒ”‡ Ž‹‡Ž› Ƥš‡† ‡š’‡•‡•Ǥ Ž‡š‹„Ž‡ ‡š’‡•‡•ǡ Š‘™‡˜‡”ǡ ƪ— –—ƒ–‡ ˆ”‘ ‘–Š –‘ ‘–Š ƒ† can be harder to budget for. For example, the amount you spend on eating out may vary depending on how often you go out and where you go to eat. When you start paying utilities, your electricity, gas, and water bills will change depending on how much you use. †‡”•–ƒ†‹‰ –Š‡•‡ ‘’‘‡–• ‹• ”— ‹ƒŽ ˆ‘” ‡ơ‡ –‹˜‡ budgeting. By knowing exactly where your money comes from and where it goes, you can make informed decisions about your Ƥƒ ‡•ǡ ƒ˜‘‹† ‘˜‡”•’‡†‹‰ǡ ƒ† ‡•—”‡ ›‘— Šƒ˜‡ ‡‘—‰Š money for essential needs and future savings. Benefits of Budgeting Š‡”‡ ƒ”‡ ƒ› •‹‰‹Ƥ ƒ– „‡‡Ƥ–• –‘ ”‡ƒ–‹‰ ƒ „—†‰‡–Ǥ ‡ǯ˜‡ mentioned some already (budgets can help you make informed decisions and avoid overspending, for example), but in case ›‘—ǯ”‡ •–‹ŽŽ —•—”‡ ™Š‡–Š‡” „—†‰‡–‹‰ ‹• ˆ‘” ›‘—ǡ Š‡”‡ ƒ”‡ –Š”‡‡ ‘”‡ „‡‡Ƥ–• –‘ „—†‰‡–‹‰Ǥ 1. Budgeting helps you reach your spending goals. By –”ƒ ‹‰ ›‘—” ‘‡›ǡ ›‘— ƒ •‡– •Š‘”–Ǧ–‡” ‰‘ƒŽ•ǡ Ž‹‡ buying a new phone or going on a trip with friends, and Ž‘‰Ǧ–‡” ‰‘ƒŽ•ǡ Ž‹‡ •ƒ˜‹‰ ˆ‘” ‘ŽŽ‡‰‡ ‘” ƒ ƒ”Ǥ ‘™‹‰ your income and expenses can determine how much money you need to save each month to achieve your goals. 2. Budgeting creates good planning habits. It encourages

”‘—–‹‡ ƒ† †‹• ‹’Ž‹‡ ‹ Ƥƒ ‹ƒŽ ƒƒ‰‡‡–ǡ ™Š‹ Š develops lifelong money management skills. Regularly ”‡˜‹‡™‹‰ ƒ† ƒ†Œ—•–‹‰ ›‘—” „—†‰‡– Š‡Ž’• ›‘— •–ƒ› ‘ –”ƒ  ƒ† ƒ Š‹‡˜‡ ›‘—” Ƥƒ ‹ƒŽ ‰‘ƒŽ•Ǥ SAMPLE

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3. —†‰‡–‹‰ ‰‹˜‡• ›‘— ϐ‹ƒ ‹ƒŽ Žƒ”‹–› . Knowing exactly where your money goes can be incredibly freeing. By categorizing your expenses, you can identify areas where ›‘— ƒ —– „ƒ  ‘” ™Š‡”‡ ›‘— ‹‰Š– Šƒ˜‡ ƪ‡š‹„‹Ž‹–› –‘ •’‡† ƒ Ž‹––Ž‡ ‘”‡Ǥ Š‹• —†‡”•–ƒ†‹‰ ”‡†— ‡• Ƥƒ ‹ƒŽ stress and makes managing money less overwhelming.

A PENNY FOR YOUR THOUGHTS ƒ ›‘— –Š‹ ‘ˆ ƒ› ‘–Š‡” „‡‡Ƥ–• –‘ „—†‰‡–‹‰ǫ Š‹ Š „‡‡Ƥ–• ‘ˆ „—†‰‡–‹‰ †‘ ›‘— Ƥ† –Š‡ ‘•– ‘’‡ŽŽ‹‰ǫ

INC SAYS . . . +H\ 7HDFKHU

Discuss the "A Penny for Your Thoughts" questions as a class or consider assigning them as short answer essays either in class or as homework.

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8 · Unit 2 | Budget

Topic 02

Creating a Budget

Now that we have discussed what a budget is and the ‹’‘”–ƒ ‡ ‘ˆ „—†‰‡–‹‰ǡ ‹–ǯ• –‹‡ –‘ ™ƒŽ –Š”‘—‰Š ”‡ƒ–‹‰ ƒ budget. Keep in mind that while your end budget might look †‹ơ‡”‡– ˆ”‘ ›‘—” „‡•– ˆ”‹‡†ǯ• ƒ† „‘–Š ‘ˆ ›‘—” „—†‰‡–• ƒ› Ž‘‘ †‹ơ‡”‡– ˆ”‘ –Šƒ– ‰—› ‹ ›‘—” Š‘‡”‘‘ǯ•ǡ –Š‡ •–‡’• –‘ create a budget will be the same for everyone.

oTnh ep af oglel os w1 1i n1g- 1c 1o 3n tienntthies Student Text.

Step 1: Identify Your Income and Expenses

–ƒ”– „› –”ƒ ‹‰ ƒŽŽ •‘—” ‡• ‘ˆ ‹ ‘‡ǡ ‹ Ž—†‹‰ ’ƒ”–Ǧ–‹‡ Œ‘„•ǡ allowance, gifts, and interest from any bank accounts. List all ›‘—” ‡š’‡•‡•ǡ „‘–Š Ƥš‡† ƒ† ƪ‡š‹„Ž‡Ǥ ‡‡’‹‰ –”ƒ  ‘ˆ ƒŽŽ ›‘—” expenses for at least one week using a notebook or an app can Š‡Ž’ ›‘— ƒ–‡‰‘”‹œ‡ –Š‡•‡ ‡š’‡•‡• ‹–‘ †‹ơ‡”‡– ƒ–‡‰‘”‹‡•Ǥ ‡–ǯ• Ž‘‘ ƒ– ƒ›†‡ǯ• ‹ ‘‡ ƒ† ‡š’‡•‡• –‘ ’”ƒ –‹ ‡Ǥ SAMPLE

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ACTIVITY 1 Directions: Fill in the following tables to answer the question below. Answers are on p. 227. ƒ›†‡ „”‹‰• Š‘‡ ̈́ Ͷʹͷ ‡ƒ Š ‘–ŠǤ Š‡ –ƒ„Ž‡ •Š‘™• Š‹• ‹ ‘‡ ƒ† ‡š’‡•‡•Ǥ ‘‡• ƒ›†‡ Šƒ˜‡ ‡‘—‰Š –‘ ’ƒ› Š‹• „‹ŽŽ•ǫ

MY INCOME ˆ–‡”Ǧ• Š‘‘Ž Œ‘„̈́

͵ͲͲ

‘™‹‰ ‡‹‰Š„‘”ǯ• Žƒ™̈́

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Ͷʹͷ

INCOME TOTAL̈́

FIXED EXPENSES Car paymenẗ́

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͵Ͳ

Car insurancë́

Loans/credit cards̈́

ͳͲ

ʹͷ

ƒ˜‹‰•̈́

$

FLEXIBLE EXPENSES Gas/car maintenancë́

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Cell phonë́ Now try this activity using your own income and expenses. SAMPLE ͵Ͳ Entertainmenẗ́ ͶͲ ‡”•‘ƒŽ ‡š’‡•‡•̈́ ʹͷ $

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ACTIVITY 2 Directions: Fill in the following table with your own income and expenses. Do you have enough to pay your bills?

MY INCOME

INCOME TOTAL FIXED EXPENSES

FIXED EXPENSES TOTAL FLEXIBLE EXPENSES

FLEXIBLE EXPENSES TOTAL SAMPLE

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Step 2: Create Categories

Organize your expenses into categories such as housing (if applicable), transportation, food, and entertainment. You can be as detailed as you need to be to help you keep track of expenses, but try not to be so detailed that sorting your expenses becomes overwhelming.

As you organize your expenses, you also want to make sure you distinguish between needs and wants. Needs are basic things you must have to survive (such as food, clothing, and •Š‡Ž–‡”Ȍǡ ”‡•‘—” ‡• ›‘— ƒ› ‡‡† –‘ †‘ ›‘—” Œ‘„ ȋ•— Š ƒ• ”‡Ž‹ƒ„Ž‡ transportation), and resources that build and protect what you have so you can meet future needs (such as emergency savings and insurance). Wants are upgrades or other things that would „‡ ‹ ‡ –‘ Šƒ˜‡ „—– –Šƒ– ƒ”‡ǯ– ‡••‡–‹ƒŽ ‘” †‘ǯ– Ƥ– ‹–‘ ‘‡ ‘ˆ –Š‡ three categories of needs. This distinction helps you prioritize ›‘—” •’‡†‹‰Ǣ ›‘— Šƒ˜‡ –‘ ‘˜‡” ›‘—” ‡‡†• Ƥ”•–Ǥ SAMPLE

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ACTIVITY 3 Directions: ƒŽ‹›ƒŠ Œ—•– ‘˜‡† ‘—– ‘ˆ Š‡” ’ƒ”‡–•̵ Š‘—•‡ ƒ† ‹–‘ Š‡” ‘™ ƒ’ƒ”–‡–Ǥ Š‡ Šƒ• ƒ Œ‘„ ƒ• ƒ ƒ••‹•–ƒ– –‡ƒ Š‡” ƒ† „”‹‰• Š‘‡ ̈́ ͳǡʹͲͲ ‡ƒ Š ‘–ŠǤ The categories on the next page are things Aaliyah spends money on in a typical month. Do the following for Aaliyah's „—†‰‡–ǣ • Add the monthly costs together to determine how much Aaliyah is spending each month. Write the total at the bottom of the monthly cost column. • Decide whether each item is a need or a want. • Decide which items you think should be included in Aaliyah's budget and which, if any, should be removed.

Monthly cost

Need or want? Your choice

Item

ʹͷͲ

Car paymenẗ́

’‡ ‹ƒŽ–› ‘ơ‡‡ ˆ”‘ ƒ ‘ơ‡‡ shop̈́

͵ͷ

Renẗ́

͸ͲͲ

–”‡ƒ‹‰ servicë́ Dinners out with friends̈́

ͳͷ

͹ͷ

Groceries̈́ TOTAL SAMPLE ͳͲͲ ͳͲͲ ƒ˜‹‰•̈́ Cell phonë́ ͹Ͳ ʹͲ Movie and snacks at the theater̈́

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A PENNY FOR YOUR THOUGHTS: ACTIVITY 3 Did you stay within Aaliyah's budget? If so, was it hard to stay within Aaliyah's budget? If not, which item(s) could Aaliyah do without to stay within her budget? If this were your budget, which items would you remove and why?

Now that you've practiced creating categories and evaluating wants and needs with Aaliyah's budget, it's time to look at your own spending! Using the chart on the next page, keep a spending diary for a week, recording everything (and we mean ‡˜‡”›–Š‹‰ !) you spend money on. Try to look honestly at your spending patterns and habits as you determine what your needs are, what your wants are, and any ideas you might have to creatively save. SAMPLE