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					Guide to Reading
Big Idea
You and everyone around you are
consumers and, as such, play an
important role in the economic
system.
Consumer Rights
       To make good economic decisions as
       consumers, we need to be aware of our
       rights and responsibilities.
Consumer Rights (cont.)
• Consumers have rights, or protections, in
  the free enterprise system.
• Consumers have two types of income to
  spend:
  – Disposable Income: money left after
    taxes are paid
  – Discretionary Income: money left after
    bills are paid
Consumer Rights (cont.)
• Consumerism:
 – Laws (ex. Pure Food and Drug Act)
 – Private groups (Better Business Bureau)
Consumer Rights (cont.)
• Consumer Bill of Rights
  – Right to a safe product
  – Right to be informed
  – Right to choose
  – Right to be heard
  – Right to redress
Consumer Responsibilities
        In addition to rights, consumers also
        have responsibilities.
Consumer Responsibilities (cont.)
• Consumers have responsibilities as well
  as rights.
• Smart buying strategies:
  – Gather information
  – Use advertising carefully
  – Determine the best value
  – Comparison shopping
Consumer Responsibilities (cont.)
 – Look at brand name and generic items
 – Balance costs and benefits
Consumer Responsibilities (cont.)
• Other responsibilities:
  – Initiate problem-solving process for
    faulty goods or services
  – Keep warranty information
  – Respect rights of producers and sellers
  – Report problems to government when a
    settlement cannot be reached
Making Buying Decisions
        Buying a product or service costs more
        than money; it also costs the time it
        takes to make the purchase and the
        opportunity cost of not buying
        something else.
Making Buying Decisions (cont.)
• Many factors are involved in consumers’
  buying decisions.
• Steps:
  – Decide whether to buy an item or not
  – Invest time obtaining product information
  – Balance opportunity cost
Making a Budget—and Sticking to It!
        Making and following a budget can
        help you organize your financial life.
Making a Budget—and Sticking to It!
                                       (cont.)


• A budget is a record of money earned and
  spent to help you match expenses to
  income.
• Basic budgeting terms
  – Income
  – Expenses
  – Balance: leftover money
Making a Budget—and Sticking to It!
                                 (cont.)


 – Surplus: More income than
   expenses (good)
 – Deficit: More expenses than
   income (bad)
Making a Budget—and Sticking to It!
                                (cont.)


• How to Make a Budget
 – List what you spend.
 – Record what you earn.
 – Analyze the data.
 – Try to have surplus.
 – Monitor spending.
Credit
         Credit can be a valuable item in your
         financial toolbox; however, as with all
         tools, you have to know how to use it
         correctly.
Credit (cont.)
• Credit allows consumers to receive a
  good or service and pay for it later.
• Recognizing credit terms
  – A lender gives money to a borrower.
  – A lender charges interest, expressed as
    the annual percentage rate (APR).
Credit (cont.)
– A credit rating evaluates how well the
  borrower will repay the loan.
– The borrower may pledge collateral for
  the loan.
Credit (cont.)
• Sources of Credit:
  – Usually require down payment
  – Banks, savings and loans, credit unions,
    finance companies offer credit
  – Most common—credit cards
  – Can charge high interest rates
Credit (cont.)
• Credit: Benefits and Drawbacks
  – Benefits:
     • Allows you to get what you want
       sooner
     • Teaches financial discipline
Credit (cont.)
  – Drawbacks:
     • Spending more than you can afford
     • Bankruptcy
     • Poor credit rating
Credit (cont.)
• Your Responsibilities as a Borrower
  – Have a plan to make payments
  – Use budget skills
  – Understand credit agreement




                    Methods of Payment
Do you think credit should be hard to
obtain?
A. Yes
B. No
                                A. A
                                B. B
Guide to Reading
Big Idea
We all make economic choices.
Opportunity cost, scarcity, and supply
and demand influence the decisions
we make.
Saving for the Future
         Saving part of your income is the key
         to meeting many of your short-term
         and long-term financial goals.
Saving for the Future (cont.)
• To save is to set aside income for later use.
• Why save?
  – Money for large purchases
  – Emergency aid
  – Luxuries
  – Benefits the whole economy
Saving for the Future (cont.)
• Saving regularly
  – Automatic deposits into savings
    accounts
  – Budgeting for savings
  – Earning interest by saving through
    financial institutions
Saving for the Future (cont.)
• Deciding about your savings
• Trade-offs:
  – Less to spend today
  – More to spend tomorrow
Types of Savings
        A variety of options is available to allow
        you to save money.
Types of Savings (cont.)
• Many ways exist for people to save
  portions of their incomes.
• Savings accounts
  – Earn low interest on principal
  – Financial institutions loan the money to
    others



               The Savings Rate, 1952–2006
Types of Savings (cont.)
• Checking accounts
  – Money for purchases
  – Must keep careful records
  – Debit cards allow paperless money
    transfer




               Types of Savings Accounts
Types of Savings (cont.)
• Money market accounts
  – Allows you to write checks, like a
    checking account
  – Pays interest like a savings account
Types of Savings (cont.)
• Certificates of deposit
  – Type of time deposit
  – Agreement to leave money in financial
    institution for a set amount of time
Investments
        Making wise investments in a variety of
        stocks and bonds is an important part
        of achieving long-term financial goals.
Investments (cont.)
• Investing in stocks and bonds leads to
  higher returns than other types of savings.
• Stocks
  – Shares of stock provide partial
    ownership in a company
  – Stock prices may go up or down, based
    on company performance.
Investments (cont.)
  – Investors may earn dividends.
  – Higher possible return, but at
    greater risk
Investments (cont.)
• Bonds
  – Loans money to company or government
  – Pays set rate of interest over
    several years
  – U.S. government bonds are a very safe
    investment.
Investments (cont.)
• Mutual funds
  – Pools money to invest in different stocks
    and bonds
  – Chosen by financial experts
  – Less risk than investment in individual
    stocks
Guide to Reading
Big Idea
We all make economic choices.
Opportunity cost, scarcity, and supply
and demand influence the decisions
we make.
What Kind of Spender Are You?
        Careful spenders avoid pitfalls, such as
        impulse buying, on their way to
        meeting their financial goals.
What Kind of Spender Are You? (cont.)
• Setting financial goals can help you spend
  money wisely.
• Evaluate your spending to help you meet
  financial goals.




                   Analyzing Advertising
What Kind of Spender Are You? (cont.)
• Beware of impulse buying.
 – Try not to buy too quickly based on
   emotions.
 – Some impulse-buying is okay. Too much
   is bad.
 – Follow guidelines to avoid too much
   impulse buying.
Your Goals and Your Buying Decisions
        The buying decisions you make can
        have a major impact on your life and
        career choices.
Your Goals and Your Buying Decisions
                                             (cont.)


• Consider goals when buying items.
• Long-term goals can conflict with short-
  term goals.
  – Must balance long and short-term goals.
  – Long-term planning can improve
    finances down the road (e.g., saving for
    college will lead to higher income later)
Do you think it is easy to sacrifice
short-term goals for long-term
benefits?
A. Yes
B. No
                                  A. A
                                  B. B
Buying Strategy
• Making consumer decisions involves deciding the
  following:
  • whether to spend your money
  • what you will purchase
  • how to use your purchase
• Comparison shopping involves making
  comparisons among brands, sizes, and stores.
Consumerism
Consumer rights include
• the right to safety
• the right to be informed
• the right to choose
• the right to be heard
• the right to redress
Budget
• A budget is an
  organized plan for
  spending and saving
  money.
• What you do with the
  information in a budget
  is up to you. No one
  can force you to spend
  less and save more
  unless you want to.
Credit
• When buying on credit, the amount you will owe is
  equal to the principal plus interest.
• Financial institutions that provide credit include
  commercial banks, savings and loan associations,
  and credit unions.
Saving and Investing
• It is important to get into
  the habit of saving.
• Individuals have many
  places to invest their
  savings, including savings
  accounts and certificates of
  deposit.
• Shares of stock entitle the
  buyer to a certain part of
  the future profits and
  assets of the corporation
  that is selling the stock.
Possible response:
spend less money
on food and
entertainment
a savings account; an
investment account
consumer
someone who buys a good or service
disposable income
money income left after all taxes on it
have been paid
discretionary income
money income left after necessities
have been bought and paid for
consumerism
a movement to educate buyers about
the purchases they make and to
demand better and safer products
from manufacturers
comparison shopping
buying strategy to get best buy for the
money
warranty
the promise made by a manufacturer
or a seller to repair or replace a
product within a certain time period if
it is faulty
reject
to refuse or throw away
alternative
a choice or possibility
budget
a plan for making and spending
money
income
money received from labor, business,
or property
expense
money spent on goods and services
credit
money borrowed to pay for a good or
service
annual percentage rate (APR)
annual cost of credit expressed as a
percentage of the amount borrowed
collateral
property or valuable item serving as
security for a loan
bankruptcy
inability to pay debts
exceed
to be or go beyond a limit
status
a position or rank
save
to set aside income for a period of
time so that it can be used later
interest
the payment people receive when
they lend money or allow someone
else to use their money
principal
the most important
return
profit earned through investing
stock
ownership share of a corporation
dividend
payment of a portion of a company’s
earnings
bond
contract to repay borrowed money
with interest at a specific time in the
future
mutual funds
pools of money from many people
who are invested in a selection of
individual stocks and bonds chosen
by financial experts.
establish
to bring into existence or create
fund
a sum of money
interval
a break or period of time between two
events
impulse buying
purchasing an item on the spot
because of an emotional rather than
planned decision
evaluate
to assess or find the value of
commit
to perform or bring about ; to pledge
or assign oneself to a particular action
eliminate
to get rid of
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