Money - Sun Sentinel
Transcription
Money - Sun Sentinel
This special education section has been created to help you understand what is going on with the nationÒs economy. It also is designed to teach how stocks, investments and interest rates work. Today, the U.S. dollar is the most widely used currency in the world. In the last year, the United States has faced its biggest financial crisis in more than 70 years. The prices on the stock market dropped way down, banks and insurance companies faced deep troubles and the government was forced to step in with billions of dollars in taxpayer’s money to keep banks and investment firms in business. If you want to understand what’s been going on, you’d do well to pick up a math book, because the nation is being challenged by some very big numbers. Start with $700 billion — or $700,000,000,000 if you write out all the zeroes. That’s the price tag of a financial rescue fund established by the federal government and the U.S. Congress to save some of the nation’s biggest financial companies. These companies made costly mistakes loaning money to people to buy homes that they could not afford. Then the companies passed along the bad loans to other companies that invested in large packages of loans or sold insurance to protect investors if the loans could not be repaid. With many of those companies losing huge amounts of money, the government was forced to use public funds to rescue them so they would not go broke and cripple the nation’s economy. The rescue worked for some companies. They were able to stay in business, and even started paying back the government for loans they got. Others could not be rescued. By the end of the first year, the U.S. Treasury secretary said the nation would not need all $700 billion to save the biggest companies. But the program was extended until October 2010 to deal with “significant challenges” still to come, especially efforts to prevent families from losing their homes to mortgage loans. So just how big is that number $700,000,000,000? Here are two ways to look at it: If you divide $700,000,000,000 by the 308,000,000 people who live in the United States today, it comes out to nearly $2,300 per person — or nearly $9,200 for every family of four. Or if you put a $10 bill on the table every second of every day for 24 hours a day, it would take more than 2,200 YEARS to count. Money-!money-!money" About the Sun Sentinel News In Education program: Throughout the school year, the Sun Sentinel NIE program provides newspapers, both digital and print, to South Florida schools at no charge. Our goal has been to help teachers help their students, promote literacy, encourage hands-on learning using the newspaper, and help students stay upto-date on the world around them. Another key focus of our program is providing curriculum materials, like Focus On Finance, to enhance lessons in the classroom across all subject areas. These complimentary booklets are aligned with the Sunshine State Standards. For more information about Sun Sentinel News in Education and to download educational materials, visit our website at: www.SunSentinel.com/nie 3!!! Can you imagine what it would be like to live in a world without money? You would have to trade goods and services for everything you currently buy with money — an approach called “barter.” Your family would barter to pay for groceries, clothing and other things you need, as well as for trips to the doctor and dentist, or service from the car mechanic. You might have to barter, too —emptying wastebaskets or mopping floors at school to pay for lunch in the cafeteria. How much wastebasket-emptying would you have to do to buy a slice of pizza? And what if the only thing you could offer the video store in barter was something the owner didn’t need — like your old collection of Garfield books? That’s the major problem with bartering: You have to find someone with exactly what you want, and they have to be willing to take exactly what you have to offer. Show! Me!the! M Money! M Quiz In the movie Jerry McGuire, Cuba Gooding Jr. and Tom Cruise got a lot of attention for the line “Show Me the Money!” How much do you know about money? 1) The largest denomination that the U.S. now produces is: a) $100 b) $500 c) $1,000 d) $10,000 2) The golden-dollar coin pictured: a) Basketball player Dwyane Wade b) The world’s richest man, Bill Gates c) Native American Explorer Sacajawea d) Pilot Amelia Earhart 3) Whose picture is on the quarter? a) Richard Nixon c) Ben Franklin b) George Washington d) Abraham Lincoln History!of!Money Anything can serve as money as long as the people who use it agree that’s an acceptable and recognized form of payment. Today, we use paper money, coins and plastic cards to buy goods and services. But throughout history, many other forms of money have been used, including feathers, stones, beads, shells and precious stones. Some examples: s 4HEPEOPLEOF9APANISLANDINTHE0ACIFIC Ocean, used large stone disks as money. The largest ones were up to 12 feet across. s .ORTH!MERICAN)NDIANSUSEDWAMPUMBEADS made from white and purple clam shells. s %THIOPIANSUSEDBARSOFROCKSALTBOUND together with reeds, for money as recently as the 1920s. The earliest known coins were made during the 7th Century B.C. in the part of the world now known as Turkey. The Chinese were the first to discover the convenience of using printed paper documents to represent value — Chinese banknotes were first used in the early 11th century. In the earliest days of our nation, the colonists traded with each other using tobacco, shell beads and imported Spanish “pieces of eight” that were known as dollars. The colonists also issued their own paper money, which they called “bills.” The first paper U.S. dollars —Continental Currency bills — weren’t issued until 1775. 4) The words “E Pluribus Unum” on our coins mean: a) In God We Trust b) Spend Me Wisely c) One Out of Many d) Easy Come, Easy Go 5) If you accidentally rip a dollar bill, you can trade it in for a whole one as long as you: a) Have more than one-half of the original bill b) Know someone at the Treasury Department c) Have all the pieces of the dollar bill The Bureau of Engraving and Printing produces our paper currency. Each day, it prints about 38 million paper notes in different denominations. d) Tape it back together 6) A slang word for dollars is: a) Moolah c) Dough b) Bread d) All of these 7) It’s against the law to: a) Photocopy U.S. currency b) Put money in your mouth c) Fold currency d) Hide money under your mattress Answers on Page 15. 8) Dollar bills wear out after: a) 1 week c) b) 13 to 18 months d) 50 years 10 years 9) When worn-out coins are turned over to the U.S. Mint, they are: a) Melted and recast as new coins b) Made into jewelry for members of Congress c) Given to poor countries as foreign aid d) Burned and spread over farms as fertilizer ACTIVITY: NEWS CENTS Some people believe the th government should stop producing d i new pennies i and d ttake k allll the th existing i ti ones outt of use. They say the penny pe isn’t much good for anything, and it’s a t have to count pennies. Others say waste for businesses to that without the penny, pen many prices would simply be raised to the next higher five-cent level. What do you th think? Look at the Letters to the Editor in today’s Sun Sentinel Digital Edition and read one to see h how it’s written. Then write your own letter arguing whether to keep the penny o p or get rid of it. The United States Mint produces an average of 65 to 80 million coins daily. Sunshine State Standards: LA.4.1.7.1, LA.4.4.2.4, LA.4.4.3.1, LA.5.1.7.1, LA.5.4.2.4, LA.5.4.3.1 4!!! An!American!Snapshot For the U.S. Government, making money means printing dollars and minting coins. But for ordinary people, making money means earning it through a job or a special skill. Here’s a look at how much money people make. Obviously, some jobs pay more than others. This list, based on information from the .ATIONAL!SSOCIATIONOF#OLLEGESAND%MPLOYERSSHOWSHOWMUCHCERtain workers are paid in the first year out of college. Computer Sciences Engineering Economics Nursing $56,921 $56,336 $52,926 $52,129 Of course, people who have been doing these jobs for longer can make more money, in some cases a lot more. But generally, the people who make the most money are athletes and entertainers, since so many people pay to watch them play or perform or make movies. See if this list of salaries from Forbes magazine makes you want TOPRACTICEYOURGOLFSHOTSORTAKEACTINGLESSONS.OTE4HISIS how much these people made in one year!) Director George Lucas TV Host Oprah Winfrey Actor/Director Mel Gibson Writer J.K Rowling Golfer Tiger Woods $ 290 $ 225 $ 185 $ 150 $ 87 million million million million million Allowances Most kids don’t have high-paying, full-time jobs, so many rely on allowances for spending money and for saving. According to a recent survey, about half of all kids get an allowance, and just about everyone has to do chores, whether or not they get an allowance. Here’ s what kids get for weekly allowances, on average: Kids ages 8-9 get: Kids ages 10-11 get: Kids ages 12-13 get: 14-year-olds get: 5!!! $ 4.92 $ 7.55 $ 9.55 $13.47 w who!! is!this! guy@ Here are a few hints: He started a computer company in his garage. He became head of the biggest computer company in the world. So what’s this computer geek have to do with money? Well, he has more of it than anyone else in the world. He’s Bill Gates, founder of Microsoft Corporation, and he is the richest man in the world. He’s worth about $50 billion, according to 2009 estimates by the Forbes financial magazine. That’s a 50 followed by nine zeroes — $50,000,000,000! Of course, being the world’s richest man means you can buy anything you want any time you want. But it doesn’t mean you have stacks of bills and piles of coins sitting in a bank or a closet. Gates surely has a lot of money in the bank. He lives in a fancy house, and he gives a lot of money to charities. But most of his money is in his company, Microsoft. And because Microsoft makes a lot of money by selling its computer programs, the value of his company keeps going up and up and up. How much money is $50 billion ? If you begin counting right now, one dollar per second, and you stayed up all day and night, you’d be finished counting in 1,585 years. ACTIVITY: NEWS CENTS Look in the CLASSIFIEDS section of the Sun Sentinel Digital Edition. Find the Help Wanted ads, Edition ads where jobs are listed according to the alphabet. Research different jobs, compare the salaries and answer these questions: s7HYDOSOMEJOBSPAYBETTERTHANOTHERS s7HYDOPEOPLEWANTTODOSOMEJOBSBUTNOTOTHERJOBS s3HOULDYOUTAKEONLYAJOBTHATPAYSTHEMOSTMONEY Sunshine State Standards: LA.4.1.7.1, LA.4.6.1.1, LA.4.6.2.1, LA.4.6.2.2, LA.5.1.7.1, LA.5.6.1.1, LA.5.6.2.1, LA.5.6.2.2 Take!Charge!of!Your! Money;!Make!A!Budget It seems to happen to all of us. You had some money that you saved up from your allowances or that you earned mowing lawns or babysitting your neighbor’s kids. Then, the next thing you know, most—or all—of your money is gone and you don’t know where it went. That’s because your purchases, even the little ones, can add up fast. But you can do something about it. Come up with a plan for how to spend your money, based on how much money you have. First decide in which categories you spend money, then figure out how much you can spend on each category. (Don’t forget to set aside some of your money for savings!) If you spend too much on one thing, you’ll have to spend less on another. By keeping track of everything you buy, you can make better decisions about whether you really need new wheels for your skateboard or a new pair of boots. Use the worksheet at right to make your own budget. Money I have now: $___________ Money I’m getting soon: $___________ Money I’m going to spend on: Entertainment (Movies, etc.): $___________ Food: $___________ Gifts: $___________ ______________________ $___________ _______________________ $___________ Money I’m going to save: $___________ What’s left over: $__________ ACTIVITY: NEWS CENTS Look through the Help Wanted ads in today’s Sun Sentinel Digit Digital Edition. At random, circle 10 different jobs. What kind of jobs are they? With a pen or marker, write a G on jobs in which workers produce “goods”—things people buy—and an S on jobs in which workers provide a service. Add up jobs as a class. Of which type are there more in the Help Wanted section? Watch!Out!For!Inflation When Wh it comes to money, the h word d “inflation” “ fl ” sounds d as though h h it should h ld b be a good thing. What’s wrong with money becoming inflated? That means you have MOREOFITRIGHT.OTEXACTLY)NTHEWORLDOFFINANCEINFLATIONREFERSTOHOWFAST prices are going up. A low inflation rate — maybe 1% or 2% a year — means prices aren’t going up very fast. A high inflation rate — maybe 6% or 7% — means prices are going up pretty fast. 1 10 TD BANK C00125585 S RS AR LLA OLL DO ND EN T TE 1 5 110 5 10 4 1 ONE NK TD BA 5 854 ONE DOLL C001255 AR R R A A L L OLL DO ED NE TD BANK O ON K BAN D T VE FIIV S OLLAR FIVE D NK TD BA 105 432 54 006 B0 1 TEN S RS A AR OLLLL 2010 DO ND If you’re buying stuff, you want low inflation so you can get more things EN T TE K for your money. Think about it this way: If you have $6 and you want to rent videos BAN 10 TD 854 that cost $3 each, you could go home with two of them. But if the price of a 1255 C00 video rental goes up to $4 or $5, you would only have enough money for one. To figure out whether prices are going up and Do you realize that every time you mow a lawn, buy a movie ticket or by how much, the government sends thousands of people on save babysitting income, you are participating in the nation’s economy? a big shopping trip every month. They visit places like malls, Each year people your age spend more than $50 billion, save billions supermarkets and computer stores to compare prices on certain more and earn money by providing services such as items to their prices the month before. pet-sitting, snow shoveling or taking out the garbage. All the comparisons are put into one big report called So what is the economy? The economy is the total activity of a nation or THE#ONSUMER0RICE)NDEX0EOPLEWHOSTUDYTHEECONOMY region producing and selling goods and services, plus the jobs and wages of pay close attention to inflation because it can often tell them people who live there. whether people will spend more money or less. The purpose of an economy is to produce the goods and services that Generally, higher prices mean people won’t buy as much. If people in a society want. “Goods” are objects people want: candy bars, people don’t buy as much, stores may go out of business and CDs, video games or soccer balls. Services are things someone does for people may lose their jobs. But if prices aren’t rising that fast, someone else that satisfies a want, such as people usually spend more money and businesses do better babysitting, mowing a lawn, cutting hair or cleaning houses. and hire more workers. Youºre!the!Economy e the Economy Sunshine State Standards: LA.4.1.7.1, LA.4.6.1.1, LA.4.4.2.2, LA.5.1.7.1, LA.5.6.1.1, LA.5.5.2.2 5 IVE 6!!! Are!we!Coming!Up!Short@ Americans don’t save much money. We make a lot of money, but we spend nearly every cent of it. A few years ago, Americans saved about 4% of the money they made from their jobs, which is a lot lower than people in a lot of other countries. Last year, we saved almost nothing. Maybe you think that doesn’t really matter. If people want to spend their money, they should spend it. Well, the economy can be looked at as one big circle. Things that happen in one part of the circle can affect other parts, and so on, and so on. Think of it this way. If a family has no savings, they may be forced to stop spending money altogether if something unfortunate happens, such as one of the family members losing a job. If enough people get stuck in the same position, families won’t spend as much money, which means businesses won’t do as well. When businesses don’t do as well, they may not need as many workers. A family that has money set aside in savings has a cushion they can use if they need it. Imagine!this; 1 You deposit $50 in the bank. The company then uses the money to pay its workers. Banking!! Your!Bucks It’s a nice feeling going into a bank to make a deposit, knowing that your money will be safe there, locked up with security guards at the entrances and video cameras on the walls to make sure nothing goes wrong. What most people don’t know is that your money isn’t just sitting in one of those vaults waiting until you’re ready to come back and get it. In fact, your money can take quite a journey without your ever knowing it. When you put your money in the bank, the bank promises to give it back when you ask for it, plus interest. But in the meantime, the bank will probably lend your money—and the money of a lot of other customers—to other people and businesses. These people or businesses pay the bank interest on these loans. A bank makes money by getting back more interest from the people who borrow than they pay out to the people who make deposits. A pretty interesting trip for $50! 4 5 3 AAbakery bakery 2 chef chefgoes goes totothe thebank banktoto borrow borrowmoney money totobuy buyeggs eggstoto make makecakes. cakes. 7!!! The bakery sends your money to the egg company. A worker uses the money to go to the movies. Become!A!Smarter!Saver Saving money doesn’t have to be a hassle. Most people find out that once they start saving and see how easy it can be, they wish they started sooner. Follow these tips to save smarter. sTHINK ABOUT IT. It’s easy to come up with a reason to spend your money, but you might find that there a lot of good reasons to save, too. Don’t automatically look for something to buy as soon as you get some money. sSET A GOAL. If you want to buy a new bike by the time summer gets here, figure out how much the bike will cost and how much you’ll need to save every week to be able to afford it. sMAKE IT FUN. Keep track of how much you’re putting away and reward yourself once in a while for doing a good job. sSPEND SOME, SAVE SOME. Make a point of always putting some money aside when you get your allowance or you make a couple bucks from a job, or get some money for a gift. Today, about 55 million people own U.S. savings bonds. When you buy a savings bond, you are lending money to the government so it can pay its bills. When you cash in the bond, you get the amount that was paid for the bond, plus interest. The!Power!of! Compounding When you put your money into the bank, your money earns interest. But to really understand how much money you might have in the future, you need to know how the bank figures out the interest it pays you. If you keep your money in your account it has the chance to grow through what is known as compounding. That means that your money earns interest and then that money earns interest, too. Suppose you put $100 in an account that pays 5% compound interest once a year. At the end of the year, you get $5, so now you have $105. At the end of the next year you get 5% interest on the $105 — the new amount, not the original $100 — which comes out to $5.25. So now you have $110.25. It’s not such a big deal over a couple years, but eventually compounding can make a big difference. Take a look at the following example of how a $100 investment that earns 5% a year can grow. A simple savings account does oes nott pay as much interest as some other types of investment. As a result, many people put their These th i ““savings” i ” money into i t accounts t called ll d money market k t ffunds. d Th may provide two or even three times as much income as a regular savings account. But there is an Save Your And You Could important thing to know. Money For End Up With Bank savings deposits are insured by the Federal Deposit Insurance Corporation (FDIC) This Long … This Much … for up to $100,000 per depositor. If something should go wrong with your bank, you would always get your money back (up to $100,000). Money market funds, while offering 1 year $105.00 higher returns, are not insured. While they are considered a relatively safe investment, 3 years $115.77 THEREISNOGUARANTEETHATYOUWONTLOSESOMEORALLOFYOURMONEY.OINVESTORHASEVERLOST 10 years $162.89 money in a money market fund, however.) Each person has to decide how much risk is worth taking when deciding whether to open a regular savings or a money market account. 25 years $338.64 Higher!! interest ACTIVITY: NEWS CENTS Take some interest in interest rates. Look in the YOUR MONEY section s of the Sun Sentinel Digital Edition for a table called “Interest Rates” or “Money Rates” to find out the interest rate being offered on different types of investments. Remember, different people have different opinions about interest rates. If you’re borrowing money, you want interest rates to be low so you don’t have to pay back as much. If you’re lending money—buying a bond, for instance—you want interest rates to be higher so you get more money back. Sunshine State Standards: LA.4.6.1.1, LA.5.6.1.1 8!!! 9! sCASH.4HISISVERYSIMILARTOTHEMONEYYOUKEEP INYOURSOCKDRAWERORINYOURPOCKET0EOPLEUSU ALLYHAVESOMECASHEVENTHOUGHITISNTMAKING MONEYOREARNINGINTERESTLIKEASTOCKORBOND BECAUSEITSMONEYTHATISREADYTOSPENDIFYOU NEEDIT#ASHINVESTMENTSINCLUDEINTERESTPAYING -ONEY-ARKET!CCOUNTSWHICHINTURNINVESTIN SUCHTHINGSAS4REASURYBILLSANDBANKCERTIFICATES OFDEPOSIT#$S#ASHINVESTMENTSALSOARESHORT TERM)/5SISSUEDBYGOVERNMENTSCORPORATIONS BANKSANDOTHERFINANCIALINSTITUTIONS List some investments that are risky and some investments that aren’t risky. Research to discover the answers to the following questions: What makes one riskier than another? What can make a riskier investment safer? What can turn an investment that isn’t risky into a risky investment? ACTIVITY: TRY THIS! sBONDS."ONDSAREBASICALLYAN)/5THATABUSINESSORGOVERNMENTGIVESTOYOU WHENYOUGIVETHEMMONEY4HELOANCANBEFORAFEWWEEKSAFEWMONTHSOR MAYBEYEARSDOWNTHEROAD7HILEYOUREWAITINGTOGETYOURMONEYBACK YOUGETPAYMENTSCALLEDhINTERESTv5SUALLYTHELONGERYOUHAVETOWAITTOGETYOUR MONEYBACKTHEMOREINTERESTYOUGET(ERESANEXAMPLE9OUGIVETHE53GOVERN MENTFORTHREEYEARSANDTHEGOVERNMENTAGREESTOPAYYOUPERCENTINTEREST 9OULLGETAYEARFORTHREEYEARSANDATTHE ENDOFTHETHREEYEARSYOULLGETYOURBACK sSTOCKS.3TOCKSARELITTLEPIECESOFACOMPANY7HENYOUBUYSTOCKYOUOWNATINY PIECEOFABUSINESS-ANYCOMPANIESSELLSTOCKSINCLUDING$ISNEY#OCA#OLAAND 4HE'AP9OUMAKEMONEYWHENTHEVALUEOFTHESTOCKGOESUPSAYFROM TOORWHENTHECOMPANYSHARESSOMEOFTHEMONEYITMAKESWITHALLOFTHE PEOPLEWHOOWNITSSTOCKSBYPAYINGAhDIVIDENDv3TOCKSARETHEMOSTRISKYOFTHE THREETYPESOFINVESTMENTSBECAUSETHEPRICEOFTHESTOCKCANGODOWNORACOMPANY CANEVENGOOUTOFBUSINESSANDYOUCOULDLOSEALLYOURINVESTMENT !LLDAYALLAROUNDTHEWORLDPEOPLEAREINVESTINGTHEIRMONEY4HEYREBUYINGANDSELLING PIECESOFBIGCOMPANIESANDSMALLCOMPANIESTRADINGBONDSSWAPPINGCURRENCIESSUCHAS THE53DOLLARAND*APANESEYENANDEVENBIDDINGONHOGSORANGEJUICEANDBEANS %VERYONEISBASICALLYHOPINGTODOTHESAMETHING#OMEAWAYWITHMORETHANTHEYSTART EDWITH7HENPEOPLEDECIDETOINVESTTHEIRMONEYTHEYHAVETHOUSANDSANDTHOUSANDSOF CHOICES7ECANTLISTTHEMALLHEREBUTWECANTELLYOUALITTLEBITABOUTTHETHREEMAINTYPESOF INVESTMENTS Take!Your!Pick ................. ................. ................. ................. ................. __ /__ __ /__ __ /__ __ /__ ................. __ /__ __ /__ ................. __ /__ ................. __ /__ ................. ................. __ /__ __ /__ Stock Name Date ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... Price Per ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... Quantity ACTIVITY: INVEST IN SOME STOCKS ACTIVITY: TRY THIS! 4HEMOSTWIDELYKNOWNGROUPOFSTOCKS ISTHE$OW*ONES)NDUSTRIAL!VERAGETHE $OWFORSHORTWHICHINCLUDESHUGE COMPANIESINDIFFERENTBUSINESSESSUCHAS -C$ONALDS$ISNEY%XXONAND7AL-ART 4HISISTHESTOCKPRICEAVERAGETHATIS MOSTOFTENQUOTEDASANINDICATIONOFHOW THEOVERALLMARKETISPERFORMING )NTHELASTYEARTHE$OW*ONES!VERAGE ANDTHEOVERALLSTOCKMARKETHASFALLEN AFTERRISINGHIGHERANDHIGHERINTHEYEARS BEFORETHAT 3HARESAREBOUGHTANDSOLDOR TRADEDASITSCALLEDINTHEFINANCIALWORLD INTWOWAYS/NTHEFLOOROFAPLACE KNOWNASANEXCHANGEOROVERAHUGE COMPUTERNETWORKTHATLINKSTHOUSANDSOF COMPUTERSALLOVERTHECOUNTRY The!Dow!JONES — — Comedian Jackie Mason “I have enough money to last me the rest of my life—unless I buy something.” Sunshine State Standards: LA.4.1.7.1, LA.4.5.2.5, LA.4.4.2.2, MA.4.A.6.5, MA.4.A.1.1, MA.4.A.1.2, MA.4.A.2.4, LA.5.1.7.1, LA.5.5.2.5, LA.5.5.2.2, MA.5.A.6.5, MA.5.A.2.2, LA.4.4.2.2, LA.4.4.2.3, LA.5.4.2.2, LA.5.4.2.3, LA.4.2.2.2, LA.4.6.2.1, LA.4.6.2.2, LA.4.6.2.3, LA.5.2.2.2, LA.5.6.2.1, LA.5.6.2.2, LA.5.6.2.3 Imagine you’re deciding whether to invest in the stock of a company. Make a list of qualities %VERYONEKNOWSTHATSAYING&ORINSTANCEIFYOUREEXERCISINGYOU %VERYONE KNOWS THAT SAYING &OR INSTANCE IF YOURE EXERCISING YOU that you’d like to see in such a company. Then HAVETOGETALITTLETIREDORYOUAREPROBABLYNOTTRYINGHARDENOUGH list some qualities that might scare you off 7ELLIFYOUREINVESTINGYOURMONEYYOUHAVETOUNDERSTANDTHATYOU from investing in a company. Write an essay CANONLYMAKEMOREMONEYIFYOUTAKEMORERISK)FYOUPUTABILL explaining why you came to your conclustions. UNDERYOURMATTRESSFORTWOYEARSYOULLSTILLHAVEYOURBUTNOTHING MOREWHENTHETWOYEARSAREUP)FYOUWANTTOTRYTOTURNTHATINTO MOREMONEYYOUHAVETOTAKESOMERISK)NOTHERWORDSYOUHAVETOBEWILLINGTOLOSESOMEORMAYBE ALLOFTHEMONEYWITHTHEHOPETHATYOULLMAKEMORE *USTBECAUSEYOUTAKERISKDOESNTMEANYOUREGUARANTEEDTOMAKEMONEY)TJUSTMEANSTHATYOUR CHANCESOFMAKINGMOREMONEYAREBETTERJUSTASYOURCHANCESOFLOSINGMONEYAREBETTER/NE EASYWAYTOREDUCEYOURRISKISTOSPREADYOURMONEYAROUNDINDIFFERENTINVESTMENTSSOTHATIF ONEINVESTMENTSSTINKSTHEOTHERSMAYDO/+ORATLEASTNOTSTINKASBADAS THEWORSTONE 7HATDETERMINESWHETHERTHEMARKETGOESUPORDOWN-OSTIMPOR TANTISTHELAWOFSUPPLYANDDEMAND)FALOTOFPEOPLEWANTTOBUY SOMETHINGANDTHERESONLYALIMITEDAMOUNTOFITAVAILABLETHENTHAT ITEMWILLCOSTMORE3TOCKSTHATMANYPEOPLETHINKWILLKEEPGOINGUPARE POPULARANDTHEREFOREHAVEHIGHERPRICES /THERFACTORSALSOMATTERINCLUDINGWHATSGOINGONINTHEWORLDAND EVENWHETHERPEOPLEFEELGOODABOUTTHEIRJOBSANDTHE53ECONOMY no!Pain-!no!gain/// 3O WHAT DID THE STOCK MARKET DO TODAY 9OU MAY BE 3OWHATDIDTHESTOCKMARKETDOTODAY9OUMAYBE SURPRISEDBYHOWMANYPEOPLECAREABOUTTHEANSWERTO THATQUESTION4HATSWHYYOUCANREADABOUTSTOCKSINTHE NEWSPAPERANDSEEREPORTSABOUTTHEMONTELEVISION %VERYDAYMILLIONSOFPEOPLEANDBUSINESSESBUY ANDSELLHUNDREDSOFMILLIONSOFSHARESOFSTOCK !BOUTCOMPANIESSELLSTOCKTOTHEPUBLIC SOMETHATCOSTJUSTAFEWCENTSASHARESOMEAT MAYBEORANDEVENONEFORABOUT PERSHARE 4HEREASONITSSUCHBIGNEWSWHENTHE STOCKMARKETSHOOTSUPORSLIDESDOWNIS THATITSNOTJUSTRICHPEOPLEANDBANK ERSWHOAREBUYINGANDSELLINGSTOCKS )NFACTMILLIONSOF!MERICANS OWNSTOCKS4HEYBUYSTOCKSWITHTHE HOPESTHATTHEMONEYTHEYINVESTWILLEVENTUALLYBE WORTHMOREMONEY4HEYMAYUSETHEMONEYFORANEWCARORA HOUSE You can practice investing before you try the real thing. Pick a few stocks you might be interested FORTHEIRCHILDREN SCOLLEGEEDUCATIONORFORTHEIRRETIREMENT in from the listings in today’s YOUR MONEY SECTION of the Sun Sentinel Digital Edition. Discuss 7ITHALLOFTHATMONEYATSTAKEIT SNOTSURPRISINGTHATTHEPERFORMANCE how the prices are written as a class. You have $5,000 to spend. In the spaces below, write what stock you are buying, the price you are paying today, and the number of shares. Check OFTHESTOCKMARKETCANMAKEABIGDIFFERENCETOPEOPLE&OR your stock online and record how the prices are doing. Figure out and record the difference in EXAMPLEWHENTHESTOCKMARKETWENTDOWNINTHEFALLOF price from week to week. Depending on how the stock does, you may feel really happy or really ITWASESTIMATEDTHAT!MERICANSLOSTMORETHANTRILLION4HATS bummed that you didn’t use real money! Put a thumb’s up if you made a profit or thumb’s down if you lost money next to the date to indicate your results. The!Big!Picture/// :! Not long ago, a man paid more than $3 million for a baseball. The ball wasnÒt made of gold and it didnÒt have any special powers. It was the ball that St. Louis CardinalsÒ first baseman Mark McGwire hit over the fence for his recordsetting 70th home run in 1998. The man wanted to add the record-setting ball to his collection of baseball items. In addition to the coins the U.S. Mint produces for general circulation, it mints coins for coin collectors. Some of the most popular ones produced are the gold and silver American Eagle Bullion coins. 21!!! From!Beanie!Babies!t1!Baseball! Cards///!Rules!for!collectors Most of us don’t have the kind of money the fan at left spent on his baseball collection. But that doesn’t stop us from collecting things anyway, whether they’re Beanie Babies, basketball cards, Barbies or bugs. Many people think of collecting as a way to invest their money. Buy a baseball card of a star today, and it may be worth 100 times its current value in the future. Or buy an antique, or a work of art, and you will be able to sell it for more in the future. It doesn’t always work that way. Whatever you’re collecting, here are some rules you can follow: sDON’T EXPECT TO GET RICH It’s exciting to think that someday your collection might be worth a lot of money. You may be able to sell one of your collectibles, but you’ll probably get a lot less than the amount you read about in a magazine or heard about on TV. sCOLLECT SOMETHING THAT INTERESTS YOU Don’t just start collecting something because everyone else is collecting it, or because you think it may be worth a lot some day. Stick with stuff you like in the first place. Remember, collecting is supposed to be fun. YOUR COLLECTIBLES Take the time to read about what makes your collectibles special. Your local library is a great place to start and the Internet should have some information, too. You’ll learn new things and there’s a better chance that you’ll be able to spot items that are rare or unique. sLEARN MORE ABOUT TULIPS!ANYONE@ Imagine thousands of people going crazy over a bunch of flowers, offering to give up their life savings to buy just one. Well, it happened, about 400 years ago. The story is a good example of how people can get caught up in a craze or a fad. It all started when a teacher brought his collection of tulip plants from Turkey to Holland. With beautiful, colorful flowers, tulips quickly became very popular. Many people decided they just had to have them no matter what they cost. Look in the Sun Sentinel Digital Edition As you might have guessed, people eventually began to classified ads to find out what people figure out that tulip bulbs weren’t worth the kind of money collect. The paper will list ads from people PEOPLEWEREPAYINGFORTHEM0RICESDROPPEDANDDROPPED who are offering to buy certain things. until tulips were worth almost nothing. Many people lost all Break up into groups of three or four the money they had. friends and talk about what you collect. ACTIVITY: COLLECTION SURVEY Write a list of the different things you collect and why. Sunshine State Standards: LA.4.1.7.1, LA.4.4.2.2, LA.4.5.2.5, LA.5.1.7.1, LA.5.5.2.2, LA.5.5.2.5 whoºs!interested@ KRT At one time or another, you have probably heard the news reports: Interest rates are up. Or interest rates are down. It seems like a big deal, the way the newscasters treat it. So what’s up with interest? Interest is a kind of service charge you pay when you borrow someone else’s money. The interest rate — the percentage of the loan that you pay in interest — is usually expressed as an annual rate. In other words, if you borrow $100 from the bank for a year, and the annual interest rate is 10%, you’ll owe $10 in interest charges at the end of the year, in addition to $100 that you borrowed. Generally speaking, lower interest rates are viewed as a good thing for the nation’s economy because they encourage consumers and business to do more borrowing and spending. Companies pay interest when they borrow money to build new factories or start up new BUSINESSES0EOPLEPAYINTERESTONMANYKINDS of debts, including mortgages (the loan you take out to buy a house), credit card debt, and car loans. Interest rates become news when the Federal Reserve System raises or lowers what is known as the primary credit rate. The Federal Reserve System, also called the Fed, is the central bank of the United States. It’s a kind of watchdog of the nation’s money supply. The primary credit rate, also known as the discount rate, is the interest rate that’s charged when banks borrow money overnight from the Fed. In December 2009, the primary credit rate was 0.50%. Another interest rate that’s often in the news is the prime rate, the interest rate that banks charge their “best” customers. Usually, that means big, established businesses. The Fed does not control the prime rate directly, but when there is a change in the primary credit rate, the prime rate also moves up or down. As of December 2009, the prime rate was 3.25%. Interest rate changes affect everyone. Many banks base the interest rates they pay customers for savings accounts to the prime rate. In addition, many car loans, credit cards and other consumer loans are adjustable rates that are “tied” to the prime. ACTIVITY: TRY IT! On every dollar dollar, there’s a seal to the left of George Washington’s picture that names the Federal Reserve Bank that issued the bill. Examine any dollar bills in your wallet or purse to see which cities are listed. Take a class survey and chart the results. Graph your collected data. THE!Power!Guy second most powerful person in Who’s the second-most 7ASHINGTONAFTERTHE0RESIDENT-ANYSAYITS"EN Bernanke, chairman of the Board of Governors of the Federal Reserve System. Bernanke (left) serves as Chairman of the Federal Open Market Committee, the primary policy-making body for our monetary system. The Open Market Committee’s decisions about interest rates affect all other parts of the economy. The financial world watches Bernanke closely for clues about whether interest rates are headed up or down and whether the economy is recovering or headed for trouble. Even rumors about the health of the Federal Reserve Chairman have been known to set off selling by nervous stock market investors. The Federal Reserve System was established by Congress in 1913 to stabilize the nation’s financial system. Before then, the finance system was very dis-organized, and hadn’t worked very well. The Fed is actually 12 separate banks governed by the seven-member Board of Governors. The Fed handles the day-to-day banking business of the U.S. government, but it also carries out many other duties as it... sTRIESTOBALANCETHEAMOUNTOFMONEYTHATSINCIRCULATIONBYBUYing and selling bonds and other government securities. If the Fed’s Open Markets Committee decides there is too much money in circulation, it can raise or lower the amount of money in circulation by changing the interest rate it charges banks to borrow money. sLENDSMONEYTOBANKSTHATNEEDTOBORROWMONEY sMONITORSTHENATIONSBANKS/NEREQUIREMENTISTHATBANKSKEEP a portion — usually 10% — of their deposits on hand to cover unexpected demands from customers for cash. sTAKESOLDORWORNMONEYOUTOFCIRCULATIONANDAUTHORIZES Treasury Department to print up new bills or mint new coins. sSERVESASTHENATIONALhCLEARINGHOUSEvFORCHECKSTAKINGCARE of the quick and accurate transfer of funds in more than 15 billion transactions a year. ACTIVITY: NEWS CENTS Look in YOUR MONEY of the Sun Sentinel Digital Edition for the current discount and prime interest rates. See if you can find listings for home mortgage rates or credit card rates. Explain how they compare. Sunshine State Standards:LA.4.4.2.2, LA.5.4.2.2, MA.5.S.7.1, LA.4.1.7.1, LA.4.4.2.3, LA.5.1.7.1, LA.5.5.2.3 22!! Cashless!Society!¶! Coming!Sooner!! Than!You!Think@ Are you ready to live in a world where you don’t have to carry cash around? A world where computers transfer money in and out of your accounts with the click of a mouse or a few keystrokes? In some ways, it’s already here. These transactions have become a familiar part of American life. sDirect deposit. Many Americans already enjoy the convenience of having their pay automatically deposited in their bank accounts instead of receiving a paper paycheck. In January 1999, federal agencies began paying Social Security, pensions and veterans’ benefits electronically instead of by check. sATMs and debit cards. Automatic teller machines allow you to get cash from your bank account almost wherever and whenever you like. A person can use a debit card to make a purchase in a store or restaurant. A debit card looks like a credit card, but it’s different in one important way. With a debit card, the money for the purchase is transferred immediately — or the next business day — from the cardholder’s bank account to the store’s account. Still!! to!come As the old saying goes, “You ain’t seen nothin’ yet!” Someday soon, we could all be using “smart cards.” A smart card looks like a credit card, but it has an embedded microprocessor chip that stores monetary value and also keeps a record of the user’s spending. As you use up the value that’s stored on the card, you may be able to download additional funds from bank accounts through a personal computer or a modified bank machine. Smart cards can be used for purchases from vending machines, stores or through computers. Imagine not having to go to the trouble of keying in a credit card number to make purchases on the Internet! Smart cards have been widely used in Europe and Asia for about a decade. Americans got their first look at smart cards when they were offered on a limited basis at the 1996 Summer Olympics in Atlanta and they have become popular on college campuses. By 2007 there were more than 35 million smart card users in the United States. ACTIVITY: SMART CARD DESIGN sInternet purchases. In the last few years, millions of Americans have learned how to shop from their personal computERS0ERHAPSYOURFAMILYHASBOUGHTBOOKS from online booksellers like Amazon.com or other goods and services that are available online. All you have to do is key in your credit-card number — and hope that there are adequate security measures to prevent “cyberthieves” from stealing your credit card number and going on a spending spree. 23!!! Sunshine State Standards:VA.A.1.2, VA.B.1.2, LA.4.4.2.1, VA.A.1.2, VA.B.1.2, LA.5.4.2.1 Design a smart card. You can call your smart card whatever you want. What kinds of symbols would you include? Include explanatory notes in the space around your smart card with arrows to important design elements. The government used to produce paper money in amounts as big as $500, $1,000, $5,000 and $10,000. But those denominations were eliminated in 1969. They were mostly used for large transfer payments between banks, and by then, banks had more secure transfer technologies. Online!Banking In recent years online banking and bill-paying have become increasingly popular. By the time you are earning a living and paying bills, you’ll probably be paying all your bills from your computer. Here’s how it works: Sitting down at your computer after work, you navigate to your bank’s website, and then type in your password. There, you may find bills waiting there for you from your electric company, your landlord and your credit card companies. With a few keystrokes, you authorize your bank to pay the bills. Then you’re all done with your bill-paying, and you can spend the rest of your evening relaxing. More than 60 million people are now using some form of online banking in the U.S. How!ATMs!Work When you were too little to understand, you may have thought that automatic teller machines were wonderful, magical inventions that spit out free cash on demand whenever your parents needed MONEY.OWTHATYOUREOLDERYOUUNDERSTAND that ATM cash is really coming out of their bank account. But do you know how they work? Hereºs!what!! happens! behind!! the!scenes ATMs, also called 24-hour Tellers, are electronic terminals that permit you to bank at almost any time of the day or night. When you slide an ATM card into an automated teller machine and enter your personal identification number on the keypad, the machine sends a message by modem to your bank’s central computer. The ATM machine transmits the identification number that’s encoded on the card’s magnetic strip to the bank. The computer then permits the ATM to issue cash, accept deposits or provide information about account balances. The first ATM was installed in 1969. Sunshine State Standards: LA.4.1.7.1, LA.4.4.2.1, LA.5.1.7.1, LA.5.4.2.1 ACTIVITY: NEWS CENTS Why!E.Commerce@ L k iin th Look the S Sun S Sentinel ti l Digital Edition for ads from banks and other financial services companies. See how many mentions of electronic commerce you can find. Make a chart to categorize the different types of electronic commerce you dis discover. Electronic commerce offers some major attractions. It’s faster. It’s also cheaper. And it’s safer and reliable. s&!34%2 Who wants to wait for a check to come in the mail, when they can have the money moved into their bank account electronically? s#(%!0%2 Banks, which process 60 billion paper checks a year, save 80 cents for EACHELECTRONICTRANSFERTHATELIMINATESAPAPERCHECKACCORDINGTOTHE.ATIONAL Automated Clearing House Association. The federal government estimates that it costs 44 cents to mail out a Social Security check, compared with the two cents that it costs to send out a Social Security monthly payment to the recipient’s bank. s3!&%2!.$2%,)!",% The federal government sends out millions of benefits checks every month to Social Security recipients, military veterans and others. Before the government decided to begin electronic payments, agencies were receiving more than a million telephone calls a year from people whose benefits checks were lost, damaged, or just delayed in the mailed. 24!!!! It sounds almost too good to be true. You walk into a store with no money in your pocket, just a piece of plastic with a long number stamped on it. You walk out with whatever you want. Well, it is too good to be true. When you or your parents use a credit card, the credit card company pays for your purchase, then you pay back the credit card company. But, of course, there’s a catch. The credit card company charges you interest because it is basically lending you money. For example, if you buy a $50 pair of sneakers using a credit card, you may actually pay back the credit card company $56.50. And the longer it takes you to repay the “loan,” the more interest adds up. In most cases, just paying cash would have been a lot cheaper. Credit cards can make shopping more convenient, but they can be dangerous if you use them too often or if you don’ t keep track of your bills. Keep that in mind the next time you or your parents decide to “flash some plastic” at the mall. ACTIVITY: TO THINK ABOUT Th llaw says you h The have to be b 18 to get your own credit card. But kids as young as 15 can get their own credit cards, as long as their parents agree to be responsible for paying the bills. Do you think you could handle a credit card? Write a few paragraphs explaining why or why not. The!hard!numbers As a nation, we love our credit cards. And that’s not such a good thing, experts say. Americans owe billions of dollars on credit cards. Some people use their credit cards to pay for routine expenses — gasoline for their cars, groceries, meals out in restaurants — and then find they owe huge amounts of money that they can’ t pay back. Among U.S. households that “carry a balance” on their credit cards, the average debt is $8,000. As a nation credit card debt has grown almost BILLIONSINCETOALMOST42),,)/. today. Running up big credit card bills may seem tempting to some people. Most cards don’t require you to pay off the full amount every month. You can pay a small portion of your debt and then pay interest on what remains unpaid. But those interest rates can be 18% and higher. Does it really make sense to take a year to pay off a dinner in a restaurant? /NE.EW9ORKWOMANRANUPIN debt with her credit cards. In an interview with a news magazine, she said the debt just “sneaked UPvONHER.OWSHE SGETTINGHELPFROMADEBT counseling firm to pay off what she owes. If you owe a credit card debt of $2,500 with an interest rate of 18%, and you pay just the minimum payment each month, it could take you 34 years to pay off the balance, according to the U.S. Public Interest Research Group. 25!!!! Sunshine State Standards: LA.4.4.3.1, LA.4.4.3.2, LA.5.4.3.1, LA.5.4.3.2 Now that youÒve learned something about saving, spending and investing money, here are some activities to put your new know-how to work. ACTIVITY: YOU HIT THE JACKPOT! Imagine you have just won $5 $5,000. 000 Write an essay about what you would do with the money. Whether you’re spending, saving or investing — or doing a bit of all three — be sure to describe: s7HYYOUREMAKINGTHOSECHOICES s7HATYOUHOPETOGAIN s(OWYOUWOULDGOABOUTMAKINGSUREYOUDONTWASTEYOURMONEY s7HOMYOUMIGHTCONSULTFORADVICE s7HEREINTHENEWSPAPERYOUMIGHTFINDUSEFULINFORMATIONFORYOUR decision-making. Just!For!Fun 1) If you cashed a $1 million check and asked for payment in $100 bills, how many $100s would you get back? ____________________________________ 2) If you spent just $10 a day, how long would $1 million last? (How many years is that?) ____________ days, which is _________ years 3) If you won $1 million dollars in the lottery and you had to pay 38% in federal taxes and 7% in state taxes, how much would you have left? $ _________ left for me to spend 4) If you earned $25,000 a year and put every dollar of it under your mattress, how long would it take for you to accumulate $1 million? (And how lumpy would your mattress be?) _________ years !.37%23 page 3; 1a, 2c, 3b, 4c, 5a, 6d, 7a, 8b, 9a page 15; 1. 10,000 2. 100,000 days, 274 years 3. 380,00 federal, 70,000 state, 550,000 4. 40 years Sunshine State Standards: LA.4.4.1.1, LA.5.4.1.1 ACTIVITY: YOU ARE IN THE NEWS P t d you’ve Pretend ’ just j t been b named d the th world’s ld’ richest i h t man or woman. Write a newspaper article about yourself. How did you make your fortune? What kinds of things do you do with your money to help other lessfortunate people? Do you spend any of your money on any unusual hobbies or interests that might be mentioned in the article? CREDITS The supplement ÏF ÏFocus on FinanceÐ was commissioned from Hollister Kids by the Connecting With the Classroom program for The Philadelphia Inquirer. § 1999. All rights reserved. The authors were financial writers Michael!Hernan and Marta!McCave. The editor was Peter!Landry. Kimberly! Rogers was the designer. The Hollister Kids website is www.hollisterkids.com 26!!! Making!Money!Make!Sense The h TD Bank k WOW!Zone O is i a financial fi i l education d i program from f TD Bank. k This FREE, one-of-a-kind program helps students in grades K–12 develop strong financial skills, in school and online. This website has something for everyone: s$OWNLOADABLELESSONPLANS and resource tools for educators s!NIMATEDSTORIESFORCHILDRENTHAT teach valuable financial lessons s)NTERACTIVEGAMESTHATINCREASE learning through fun activities s!VIRTUALSTOCKMARKETGAMEWHERE individuals test their investment strategies with $50,000 of fantasy money s0RACTICALWORKSHEETSFORPARENTS on topics like: – Earning Money Through Work – Creating a Budget – How to Save www.tdbank.com/wowzone TD Bank Programs: Our trained Bank Instructors will visit your classroom equipt with teacher-written lesson plans THAT WERE DEVELOPED IN ACCORDANCE WITH THE .ATIONAL #OUNCIL OF 4EACHERS OF -ATHEMATICS 3TANDARDS 7ELL TAKE students on an exciting journey through the world of banking and finance! Our lessons compliment Social Studies curricula or can be a fun introduction to Economics or a Life Skills in any class! Each course or class can conclude with a tour of a local TD Bank store where students meet the tellers, step inside the vault, and use 0ENNY!RCADEnOUR&2%%COINCOUNTINGMACHINE