Personal Financial Literacy : 1. FINANCIAL RESPONSIBILITY AND DECISION MAKING

literacy

an individual's knowledge of a certain area or field

reliable

trustworthy, information you can trust with certainty

You pick up a brochure at the grocery store. You cannot find any information about the people who created it. This information is _____.

unreliable

Grace would like to open a checking account. She needs to decide which bank is better for her. Grace should _____.

use the PACED decision-making process to help her decide

criteria

standards for evaluating something

goal

target or result which is desired

net worth

the amount you have minus the amount you owe

Which of the following is an example of financial irresponsibility?

spending your entire paycheck

assets

items owned that could be sold for cash

Select each of the PACED steps below.

- Evaluate the alternatives. - Make a decision. - List the alternatives. - Select the criteria. - Define the problem.

Read the following actions and decide if they are responsible or irresponsible.

- earning interest: responsible - living with your parents: irresponsible - avoiding fees and penalties: responsible - missing out on adventures because you don't have the money saved: irresponsible - asking your parents for money: irresponsible - having money saved: responsible - being accepted for a loan: responsible - being rejected for a credit card: irresponsible - not being able to pay for car repairs: irresponsible

Select the items from this list that are examples of good financial habits.

- keeping good records - asking advice from employees at a bank or financial advisers - creating a budget no matter what your age

You read a newspaper article in the business section of a newspaper. The author is a licensed financial advisor with a degree in finance. The article is about setting aside money for your kid's college tuition. This information is _____.

reliable but irrelevant

Select the items from the following list that are included in financial literacy.

- using a credit card to make a purchase - applying for a credit card - selecting a college - deciding to rent an apartment - paying taxes - opening a checking account

Erin is in high school. She decides that she will set aside money to put in her savings account each week from the money she makes babysitting. This is a bad habit.

False

PACED is a process for finding reliable information.

False

Thomas was thinking about the car he wants to buy in a few years. He does'nt know what he should do now so that he can buy the car. What should Thomas do?

He should become more knowledgeable about smart ways to save and about car loans.

Read the following two descriptions. Decide who has better financial habits and attitudes.

Hillary receives a few bills in the mail. She takes out a piece of paper and starts figuring out a plan to pay these bills.

Michael must pay his way through college. He is a sophomore in high school and currently babysits regularly on the weekends. He works 15 hours and makes $8.00 an hour. He will be eligible to work at his uncle's restaurant in three months, and he can work twenty hours a week at $8.50 an hour. Use the PACED decision-process to decide what Michael's best choice is. Show each step.

Problem: He has to pay his way through college. Alternatives: He can either babysit $8/15 hours only on the weekend or work at his uncles resturant for $8.50/20 hours a week Criteria: A job that pays more until college Evaluation:1. Baby Sitting Job - Will last another 2 1/2 years. That's 2.5 x 52 weekends= 130 weekends. 130 weekends x $8 / hour x 15 hours = 130 * 120 = $15,600 for college.2. Restaurant Job - Will earn nothing for 3 months and then pay $8.50 / hour, 20 hours / week for 2 1/4 years. 2 1/4 years = 117 week117 x $8.50 x 20 = 117 x $170 = $19,890 for college. Decision: Micheal will make more money working at his uncles restaurant

Alicia has been keeping money in her room that she has earned from babysitting. What should Alicia do with this money?

She should become more knowledgeable about her options for savings accounts.

A misconception is a misunderstanding.

True

Decisions and goals are connected.

True

Reliable information is information you can trust with certainty.

True

Sam will finish high school this year. He does not think he needs any further education. This is a misconception.

True

To become financially responsible, you need to accept that you are accountable for your financial future.

True

When you are accountable, reliable and dependable you are acting responsibly.

True

short-term goal

a desired result which may be attained in less than one year

long-term goal

a desired result which may be attained in more than one year

misconception

a misunderstanding; a mistaken thought or idea

warranty

a written guarantee given to the purchaser, usually specifying that the manufacturer will make any repairs or replace defective parts free of charge for a certain period of time

responsible

accountable, reliable, dependable

financial

anything that has to do with money and investments

relevant

appropriate, suitable, fitting

Your financial decisions will only affect yourself and nobody else.

false

Which of the following is an example of financial responsibility?

having medical insurance

A(n) _____ is a misunderstanding; a mistaken thought or idea.

misconception

Financial literacy is the knowledge about _____.

money

liabilities

money owed

You do an Internet search and the results list includes the Web site www.FDIC.gov. This information is _____.

reliable

You receive a college investing kit in the mail from a reputable investment company. This information is _____.

reliable