Building Decision-Making Skill for Personal Finance.ppt

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  • Income at any cost?
  • Building Decision-Making Skill for Personal Finance.ppt

    1. 1. 2009 OATFACS Conference <ul><li>Douglas Haskell </li></ul><ul><li>Associate Professor of Economics </li></ul><ul><li>Director of Professional Development </li></ul><ul><li>Economics Center Education & Research </li></ul><ul><li>University of Cincinnati </li></ul><ul><li>[email_address] </li></ul><ul><li>www.EconomicsCenter.org </li></ul><ul><li>513-556-2951 </li></ul>
    2. 2. 2009 OATFACS Conference <ul><li>Building </li></ul><ul><li>Decision-Making Skills </li></ul><ul><li>for </li></ul><ul><li>Personal Finance </li></ul>
    3. 3. 2009 OATFACS Conference <ul><li>If you would like the notes </li></ul><ul><li>from this presentation, with links, </li></ul><ul><li>email: </li></ul><ul><li>[email_address] </li></ul><ul><li>Subject Line: OATFACS Notes </li></ul>
    4. 4. 2009 OATFACS Conference <ul><li>A warm-up activity… </li></ul><ul><li>You are the Valedictorian of your senior class. A movie company offers you $1,500 to mention the name of their new movie in your graduation speech. </li></ul>
    5. 5. 2009 OATFACS Conference <ul><li>Will you take the money? </li></ul>
    6. 6. 2009 OATFACS Conference <ul><ul><li>How many times in your life as a producer or as a consumer do you </li></ul></ul><ul><ul><li>face ethical dilemmas about earning income or spending? </li></ul></ul>
    7. 7. 2009 OATFACS Conference <ul><ul><li>What role does ethics play in economic-consumer-financial </li></ul></ul><ul><ul><li>education? </li></ul></ul>
    8. 8. 2009 OATFACS Conference <ul><li>So … </li></ul><ul><li>Who needs economics, consumer </li></ul><ul><li>and financial education? </li></ul>
    9. 9. 2009 OATFACS Conference <ul><li>July 29, 2009… </li></ul><ul><ul><li>U.S. unemployment rate in June: - 9.5% </li></ul></ul><ul><ul><li>Real GDP growth (Q1 2009): -5.5% </li></ul></ul><ul><ul><li>Fed Funds Rate range: 0 to .25% </li></ul></ul><ul><ul><li>Continuing sclerotic credit markets </li></ul></ul><ul><ul><li>Continuing low housing and resource values </li></ul></ul><ul><ul><li>Consumer confidence near an all-time low. </li></ul></ul><ul><ul><li>CPI in June 2009: +0.7% - Personal income: -1.2% </li></ul></ul><ul><ul><li>Not to mention health care…so I won’t. </li></ul></ul>
    10. 10. 2009 OATFACS Conference <ul><li>Good news: stock prices are up! </li></ul><ul><li>Why? </li></ul><ul><li>Stock prices are based on future </li></ul><ul><li>expectations. </li></ul><ul><li>Things must not be that bad (?) </li></ul>
    11. 11. 2009 OATFACS Conference <ul><li>Understanding the U.S. economy and planning your financial future in 2009: </li></ul><ul><li>What is a TARP? ( temporary asset relief program) </li></ul><ul><li>What is a credit crunch? </li></ul><ul><li>What is a fiscal stimulus? </li></ul><ul><li>What is the fed funds rate? </li></ul><ul><li>What is inflation? Deflation? </li></ul><ul><li>What is a “toxic asset”? </li></ul>
    12. 12. 2009 OATFACS Conference <ul><li>Uncertainty about the future can have unintended negative consequences. </li></ul><ul><li>Even those with jobs, income and positive futures have stopped spending. Less spending results in fewer jobs and income. </li></ul><ul><li>Dependence on fragile credit markets results in more uncertainty </li></ul>
    13. 13. 2009 OATFACS Conference <ul><li>How do we help students (anyone) understand and cope with these </li></ul><ul><li>economic and financial conditions in </li></ul><ul><li>an ever-changing world economy? </li></ul><ul><li>Could more economic and financial education have prevented </li></ul><ul><li>these problems? </li></ul>
    14. 14. 2009 OATFACS Conference <ul><li>One of the most important concepts in economics for today’s students… </li></ul><ul><li>Derived demand </li></ul>
    15. 15. 2009 OATFACS Conference <ul><li>Derived demand </li></ul><ul><li>The demand for a productive resource, such as labor, is derived from the demand for the good or service the resource produces . </li></ul>
    16. 16. 2009 OATFACS Conference <ul><li>How did the Ohio legislature respond to the very early signs that there were problems in </li></ul><ul><li>financial markets and that Ohio households </li></ul><ul><li>had potential problems? </li></ul>
    17. 17. 2009 OATFACS Conference <ul><li>Ohio Senate Bill 311 </li></ul>
    18. 18. 2009 OATFACS Conference <ul><li>Ohio Senate Bill 311… </li></ul><ul><ul><li>required for HS graduates in grade 9 in 2010 </li></ul></ul><ul><ul><li>embed the instruction in a required course </li></ul></ul><ul><ul><li>standards in economics and personal finance </li></ul></ul><ul><ul><li>using available business and community resources </li></ul></ul><ul><ul><li>using resources from the Ohio Centers for Economic Education </li></ul></ul>
    19. 19. 2009 OATFACS Conference <ul><li>What does SB 311 really require? </li></ul><ul><li>What is the required content? </li></ul><ul><li>Who teaches it? </li></ul><ul><li>When is it taught? </li></ul><ul><li>How is it assessed? </li></ul><ul><li>Who is making sure it gets done? </li></ul>
    20. 20. 2009 OATFACS Conference <ul><li>What does it look like in a </li></ul><ul><li>high school or school district </li></ul><ul><li>implementation plan? </li></ul>
    21. 21. 2009 OATFACS Conference <ul><li>What a good question! </li></ul>
    22. 22. 2009 OATFACS Conference <ul><li>High School Implementation Options … </li></ul><ul><li>- Semester of economic principles </li></ul><ul><li>- Semester of personal finance </li></ul><ul><li>- Integrated economics and personal finance </li></ul><ul><li>- Integrated economics/personal finance/gov’t </li></ul><ul><li>- Family and consumer sciences </li></ul><ul><li>- Business and entrepreneurship </li></ul>
    23. 23. 2009 OATFACS Conference <ul><li>Personal Finance/Economics: </li></ul><ul><li>- Thinking and decision-making skills </li></ul><ul><li>- Basic economic principles </li></ul><ul><li>- Personal financial decisions </li></ul><ul><li>- Economic systems </li></ul><ul><li>- Business and careers </li></ul>
    24. 24. 2009 OATFACS Conference <ul><li>Integrated Economics and Personal Finance </li></ul><ul><li>Most of the basic economics content </li></ul><ul><li>can be taught within the context of personal financial decisions. </li></ul><ul><li>Why not teach about he supply and demand for labor instead of the supply an demand for widgets. </li></ul>
    25. 25. 2009 OATFACS Conference <ul><li>What is the best “tool” for teaching </li></ul><ul><li>economic thinking, decision-making </li></ul><ul><li>and problem solving? </li></ul>
    26. 26. 2009 OATFACS Conference <ul><li>The </li></ul><ul><li>“ Handy Dandy Guide” </li></ul><ul><li>to Economic Thinking </li></ul>
    27. 27. 2009 OATFACS Conference <ul><li>The “Handy Dandy” Guide to Economic Thinking </li></ul><ul><ul><li>People choose </li></ul></ul>
    28. 28. 2009 OATFACS Conference <ul><li>The “Handy Dandy” Guide to Economic Thinking </li></ul><ul><ul><li>People choose </li></ul></ul><ul><ul><li>All choices have costs </li></ul></ul>
    29. 29. 2009 OATFACS Conference <ul><li>The “Handy Dandy” Guide to Economic Thinking </li></ul><ul><ul><li>People choose </li></ul></ul><ul><ul><li>All choices have costs </li></ul></ul><ul><ul><li>People respond to incentives </li></ul></ul>
    30. 30. 2009 OATFACS Conference <ul><li>The “Handy Dandy” Guide to Economic Thinking </li></ul><ul><ul><li>People choose </li></ul></ul><ul><ul><li>All choices have costs </li></ul></ul><ul><ul><li>People respond to incentives </li></ul></ul><ul><ul><li>People create systems that allocate costs </li></ul></ul><ul><ul><li> and incentives (benefits) </li></ul></ul>
    31. 31. 2009 OATFACS Conference <ul><li>The “Handy Dandy” Guide to Economic Thinking </li></ul><ul><ul><li>People choose </li></ul></ul><ul><ul><li>All choices have costs (TANSTAAFL) </li></ul></ul><ul><ul><li>People respond to incentives </li></ul></ul><ul><ul><li>People create systems to allocate costs </li></ul></ul><ul><ul><li> and incentives (benefits) </li></ul></ul><ul><ul><li>Only future costs really matter </li></ul></ul>
    32. 32. 2009 OATFACS Conference <ul><li>The “Handy Dandy” Guide to Economic Thinking </li></ul><ul><ul><li>People choose </li></ul></ul><ul><ul><li>All choices have costs </li></ul></ul><ul><ul><li>People respond to incentives </li></ul></ul><ul><ul><li>People create systems to allocate costs </li></ul></ul><ul><ul><li> and incentives (benefits) </li></ul></ul><ul><ul><li>Only future costs matter </li></ul></ul><ul><ul><li>Free trade creates wealth </li></ul></ul>
    33. 33. <ul><li>http://www.youtube.com/watch?v=VVp8UGjECt4 </li></ul>
    34. 34. <ul><ul><ul><li>The key problems facing consumers… </li></ul></ul></ul><ul><ul><ul><li>Current income </li></ul></ul></ul><ul><ul><ul><li>Surplus income </li></ul></ul></ul><ul><ul><ul><li>Deficit income </li></ul></ul></ul>
    35. 35. 2009 OATFACS Conference <ul><li>Teaching financial topics with </li></ul><ul><li>economic reasoning… </li></ul><ul><li>“You are the Financial Advisor” </li></ul><ul><li>(CEE, Learning, Earning and Investing , Grades 9-12) </li></ul>
    36. 36. 2009 OATFACS Conference <ul><li>You are a financial advisor. Clients come to you to ask for your recommendation about what to do with their surplus income (savings). </li></ul><ul><li>You take time to clarify the criteria they can use to make their investment choices. </li></ul>
    37. 37. 2009 OATFACS Conference <ul><li>Liquidity (transaction demand) </li></ul><ul><li>Growth potential (principal/interest) </li></ul><ul><li>Tax liabilities </li></ul><ul><li>Potential for loss (risk tolerance) </li></ul><ul><li>Your personal temperament </li></ul>
    38. 38. <ul><li>What are your options? </li></ul><ul><li>Passbook savings account </li></ul><ul><li>Certificates of deposit </li></ul><ul><li>Growth stocks </li></ul><ul><li>Income stocks </li></ul><ul><li>Balanced mutual fund </li></ul><ul><li>Gold </li></ul><ul><li>Real estate </li></ul>
    39. 39. 2009 OATFACS Conference <ul><li>Around the room are posted signs of several investment options. </li></ul><ul><li>I will read a brief description of your client. </li></ul><ul><li>Stand by the sign of the investment option you would recommend. </li></ul>
    40. 40. 2009 OATFACS Conference <ul><li>Discussion topics: </li></ul><ul><li> Personal financial goals </li></ul><ul><li> Trade-offs </li></ul><ul><li> Personal temperament </li></ul><ul><li> Risk tolerance </li></ul><ul><li> The value of good information </li></ul><ul><li> Trust </li></ul><ul><li> </li></ul>
    41. 41. 2009 OATFACS Conference <ul><li>The best single resource for classroom instructional activities… </li></ul><ul><li>The Virtual Economics CD Rom </li></ul><ul><li>Council for Economic Education (NCEE) </li></ul><ul><li>80 publications </li></ul><ul><li>Over 1200 grade K-12 lessons </li></ul><ul><li>Links to hundreds of online lessons </li></ul><ul><li>Correlated to the Ohio Academic Content Standards </li></ul><ul><ul><ul><li>www.ncee.net </li></ul></ul></ul>
    42. 42. 2009 OATFACS Conference <ul><li>Raise your hand if you would </li></ul><ul><li>like a free copy of the </li></ul><ul><li>“ Virtual Economics” CD Rom </li></ul>
    43. 43. 2009 OATFACS Conference <ul><li>EconEdLink </li></ul><ul><li>www.econedlink.org </li></ul><ul><li>Produced by the Council for Economic Education </li></ul><ul><li>100s of lessons developed by educators </li></ul><ul><li>Includes “Focus on Economic Data” lessons </li></ul>
    44. 44. 2009 OATFACS Conference <ul><li>Federal Reserve Bank Resources </li></ul><ul><li>- data sources </li></ul><ul><li>- instructional activities </li></ul><ul><li>- research </li></ul><ul><li>- classroom materials </li></ul><ul><li>http://www.federalreserveeducation.org </li></ul>
    45. 45. 2009 OATFACS Conference <ul><li>Jump$tart Coalition for Personal </li></ul><ul><li> Financial Literacy </li></ul><ul><li>www.jumpstart.org </li></ul><ul><li>www.ohjumpstart.org </li></ul>
    46. 46. 2009 OATFACS Conference <ul><li>Teaching about risk and insurance? </li></ul><ul><li>Go directly to the Ohio Insurance </li></ul><ul><li>Institute. They have everything you need to teach about property-casualty insurance. </li></ul>
    47. 47. 2009 OATFACS Conference <ul><ul><li>What can your Economics Center </li></ul></ul><ul><ul><li>do for you? </li></ul></ul><ul><li>www.ocee.org </li></ul>
    48. 48. <ul><li>Defining a Problem or Opportunity </li></ul><ul><li>Describe a problem or opportunity. </li></ul>2009 OATFACS Conference
    49. 49. <ul><li>Restate the problem or opportunity in five different ways. </li></ul><ul><li>1. </li></ul><ul><li>2. </li></ul><ul><li>3. </li></ul><ul><li>4. </li></ul><ul><li>5. </li></ul>2009 OATFACS Conference
    50. 50. 2009 OATFACS Conference <ul><li>Restate the problem as a metaphor (a figure of speech in which two different universes of thought are linked by some point of similarity, ie. liquid assets, barking an order) or a simile ( a figure of speech in which the subject is compared to another subject. Frequently, similes are marked by use of the words like or as or so. </li></ul>
    51. 51. 2009 OATFACS Conference <ul><li>The Decision Making Process </li></ul><ul><ul><li>Alternatives </li></ul></ul><ul><ul><li>Criteria – benefits and costs </li></ul></ul><ul><ul><li>Basis for the assessment of alternatives </li></ul></ul><ul><ul><li>Measurement / Judgment </li></ul></ul><ul><ul><li>Analysis - comparison </li></ul></ul><ul><ul><li>Decision </li></ul></ul>
    52. 52. 2009 OATFACS Conference <ul><li>Clarify the alternatives </li></ul><ul><li>Eliminate any that are not possible </li></ul><ul><li>Clarify the criteria </li></ul><ul><li>Compare with similar criteria </li></ul><ul><li>Weight the criteria </li></ul>
    53. 53. 2009 OATFACS Conference
    54. 54. 2009 OATFACS Conference
    55. 55. 2009 OATFACS Conference <ul><ul><li>Questions? </li></ul></ul>
    56. 56. 2009 OATFACS Conference <ul><ul><li> Remember… </li></ul></ul><ul><ul><li> If you would like the notes </li></ul></ul><ul><ul><li>from this presentation, with links, </li></ul></ul><ul><li>email: </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>Subject Line: OATFACS Notes </li></ul></ul>
    57. 57. 2009 OATFACS Conference

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