Unit 2:
Saving, Investing &
Risk management
Saving, Investing &
Risk management
True or False
Investing is to commit money to gain a profit or earn interest.
True
A not-for-profit cooperative that offers bank services and is owned by its members.
A. Bank
B. Credit Union
C. Interest
Credit Union
Making a purchase based on an immediate want or due to the pressure of advertising.
B. Impulse Buying
Jason went to the grocery store to buy a gallon of milk for his mother. While waiting in the checkout line, he saw a display for a new chocolate caramel candy bar, so he bought it, too. The candy bar purchase is an example of:
Impulse Buying
An IOU is issued by a company, municipality, or the federal government in exchange for a loan from an investor that will be repaid with a set rate of return.
A. Bond
B. Mutual Fund
C. Opportunity Cost
Bond
A contract that outlines coverage plans and protects a person against financial loss or damage.
A. Premium
B. Insurance policy
C. Mutual Funds
Insurance policy
A wireless service that allows financial transactions by using an app or Web browser from a mobile device.
Mobile banking
Money that is available to spend on goods and services that are not essential.
Discretionary income
Grants' Net Monthly Income: $2864.34
Grants' Fixed Expenses:
- Car Insurance: $482.72
- Rent: $750.00 - Renters Insurance: $35
- Internet bill: $45.00 -Vehicle Fuel Cost: $180.00
- Phone bill: $275.00 - Apple Music: $10.99
Grants' Variable Expenses:
- Groceries: $250.00 - Student Loan: $150.00
How much is Grants' Discretionary Income? _________
$685.63
Billy works at a Texas roadhouse for $18.00 an hour as a chef. In a typical month, he works 60 hours
Calculate his monthly taxes below.
Gross Monthly Income: $1080.00
Monthly Federal Income Tax (15.2%) $136.80
Monthly Social Security (6.2%) $55.80
Monthly Medicare (1.45%) $13.05
Monthly State Tax (4%) $36.00
Monthly Local Tax (0.1%) $0.90
Total Monthly Deductions: $242.50
Total Monthly Deductions: $________________
$837.50
This represents a fractional ownership in a company. Traditionally, they pay higher average returns than most other investments. Stocks are sold in shares, and their prices can change daily. They are long-term investments because they are meant to gain value over a longer period of time (although they can be bought and sold anytime) based on the company’s performance. Some companies pay dividends to stockholders based on the company’s profits. What am I referring to?
Stocks
An electronic way to view account activity and pay bills via the Internet and an institution’s website.
Online Banking
The maximum a cardholder can borrow. It is recommended that cardholders keep a balance of no more than 25 percent of the credit limit.
A. Minimum Payment due
B. Credit Limit
C. Annual fee
B. Credit Limit
Caleb is a junior at JA Enterprise High School and plays rugby on the school team. He has a part-time job at a local fast-food restaurant and works 20 hours a week for $7.60 an hour. His gross monthly income is $608.00, and his take-home pay is $501.64. In his spare time, Caleb walks a dog belonging to an elderly neighbor. He earns an additional $40 per month for that chore. Caleb’s parents gave him a used car, and he pays his insurance, which is $110 a month. His gas and maintenance expenses usually run $65 a month. He also has a cell phone and pays his parents $30 each month for his share of the family plan. In three weeks, Caleb plans to take a day trip to Six Flags amusement park. His admission will cost $50, and he plans to have $35 for meals and another $50 for incidentals.
How much does Caleb have left over after he pays his regular monthly expenses? ________ This is his discretionary fund.
$336.64
Caleb needs to start saving for Christmas, which is in four months, and he usually spends around $200 on gifts for his family and friends. He also would like to buy a new $80 e-reader this month. Though Caleb’s parents will help pay for his college tuition, he knows that in two years, he will have to pay for his books and earn his own spending money. He is estimating that each semester, he will spend $300 on books and $600 on personal needs.
- What are Caleb’s short-term goals? ___________________
- What is his long-term (longer than one year) goal? ________________________
Short-term Goals: Buying a card e-reader, a trip to Six Flags, and saving for Christmas.
Long-term Goals: Saving for College
This carries low risk because most bank and credit union accounts are insured by the government (Federal Deposit Insurance Corporation, or FDIC, or the National Credit Union Administration, or NCUA) for up to $250,000 per savings account. This also pays a small interest rate, less than what stocks or mutual funds yield, but you can take your funds out at any time without penalty. What am I referring to?
Savings account
PayPal, Venmo, Cash app, Zelle, Western Union, Wire transfer, Google Pay, Apple Pay, Walmart to Walmart are all types of what?
Ways to transfer money electronically
A record of income and spending and a plan for managing money.
Budget
Caleb needs to start saving for Christmas, which is in four months, and he usually spends around $200 on gifts for his family and friends. He also would like to buy a new $80 e-reader this month. Though Caleb’s parents will help pay for his college tuition, he knows that in two years, he will have to pay for his books and earn his own spending money. He is estimating that each semester, he will spend $300 on books and $600 on personal needs.
How much money does Caleb need to save every month for the next four months if he wants to have enough money to do his Christmas shopping? ________________
$50.00
Billy works at a Texas roadhouse for $15.00 an hour as a chef. In a typical month, he works 60 hours
Calculate his monthly taxes below.
Monthly Fed Income Tax (15.2%) $______________
Monthly Social Security (6.2%) $______________
Monthly Medicare (1.45%) $______________
Monthly State Tax (4%) $______________
Monthly Local Tax (0.1%) $______________
Total Monthly Deductions: $______________
$242.55
Chris is off to college this fall, but he has discovered that under his parents’ health policy, he is only covered for emergency medical care while at school. Should Chris consider purchasing additional medical insurance just in case he needs it? Explain your answer. Answers may vary but you have to be within the confines to get the points.
Yes, because if he gets sick, he can go to a primary care doctor.
Yes, because if he gets sick, he can pay for medicine at a lower cost with insurance.
Chris can consider purchasing an individual health policy
Not necessarily, he can check with his parents' insurer to see if they offer a policy for students who attend school out of state.
A legal process in which a lender takes possession of mortgaged property from a mortgage holder who failed to make payments.
C. Foreclosure
The next best alternative given up when making a financial choice.
Opportunity Cost
Amanda, a college student, attends the University of Georgia and works part-time as a barista for an annual salary of 36,000 a year.
Amanda's Gross Monthly Income: $___________
$3000.00
Carl will be working as a dog groomer in the local community this summer. He will earn $725.00 each month (a total of $2175 for the whole summer). Carl does not plan to work any other jobs this year.
Answer the questions below:
- What is Carl’s Gross Annual Income (GAI)? $___________
- Total Deductions: $599.40
- What is Carl’s Gross Monthly income for each summer month (GMI)? $_________
- What is Carl’s net monthly income for the summer months (NMI)? $________
GAI- $2175.00
GMI- $750.00
NMI- $525.20