building decision-making skill for personal finance.ppt

2009 OATFACS Conference2009 OATFACS Conference

Douglas HaskellAssociate Professor of Economics

Director of Professional DevelopmentEconomics Center Education & Research

University of Cincinnati

douglas.haskell@uc.eduwww.EconomicsCenter.org

513-556-2951

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Building

Decision-Making Skills

for

Personal Finance

2009 OATFACS Conference2009 OATFACS Conference

If you would like the notes

from this presentation, with links,

email:

douglas.haskell@uc.edu

Subject Line: OATFACS Notes

2009 OATFACS Conference2009 OATFACS Conference

A warm-up activity…

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.

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Will you take the money?

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How many times in your life as a producer or as a consumer do you

face ethical dilemmas about earning income or spending?

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What role does ethics play in economic-consumer-financial

education?

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So …

Who needs economics, consumer

and financial education?

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July 29, 2009…

U.S. unemployment rate in June: - 9.5%

Real GDP growth (Q1 2009): -5.5%

Fed Funds Rate range: 0 to .25%

Continuing sclerotic credit markets

Continuing low housing and resource values

Consumer confidence near an all-time low.

CPI in June 2009: +0.7% - Personal income: -1.2%

Not to mention health care…so I won’t.

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Good news: stock prices are up!

Why?

Stock prices are based on future

expectations.

Things must not be that bad (?)

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Understanding the U.S. economy and planning your financial future in 2009:

What is a TARP? (temporary asset relief program)

What is a credit crunch?What is a fiscal stimulus?What is the fed funds rate?What is inflation? Deflation?What is a “toxic asset”?

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Uncertainty about the future can have unintended negative consequences.

Even those with jobs, income and positive futures have stopped spending. Less spending results in fewer jobs and income.

Dependence on fragile credit markets results in more uncertainty

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How do we help students (anyone) understand and cope with these

economic and financial conditions in

an ever-changing world economy?

Could more economic and financial education have prevented

these problems?

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One of the most important concepts in economics for today’s students…

Derived demand

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Derived demand

The demand for a productive resource, such as labor, is derived from the demand for the good or service the resource produces.

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How did the Ohio legislature respond to the very early signs that there were problems in

financial markets and that Ohio households

had potential problems?

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Ohio Senate Bill 311

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• Ohio Senate Bill 311…

– required for HS graduates in grade 9 in 2010– embed the instruction in a required course– standards in economics and personal finance– using available business and community

resources– using resources from the Ohio Centers for

Economic Education

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What does SB 311 really require?

What is the required content?

Who teaches it?

When is it taught?

How is it assessed?

Who is making sure it gets done?

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What does it look like in a

high school or school district

implementation plan?

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What a good question!

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High School Implementation Options …

- Semester of economic principles

- Semester of personal finance

- Integrated economics and personal finance

- Integrated economics/personal finance/gov’t

- Family and consumer sciences

- Business and entrepreneurship

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Personal Finance/Economics:

- Thinking and decision-making skills

- Basic economic principles

- Personal financial decisions

- Economic systems

- Business and careers

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Integrated Economics and Personal Finance

Most of the basic economics content can be taught within the context of personal financial decisions.

Why not teach about he supply and demand for labor instead of the supply an demand for widgets.

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What is the best “tool” for teaching

economic thinking, decision-making

and problem solving?

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The

“Handy Dandy Guide”

to Economic Thinking

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The “Handy Dandy” Guide to Economic Thinking

– People choose

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The “Handy Dandy” Guide to Economic Thinking

– People choose– All choices have costs

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The “Handy Dandy” Guide to Economic Thinking

– People choose– All choices have costs– People respond to incentives

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The “Handy Dandy” Guide to Economic Thinking

– People choose– All choices have costs– People respond to incentives– People create systems that allocate costs

and incentives (benefits)

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The “Handy Dandy” Guide to Economic Thinking

– People choose– All choices have costs (TANSTAAFL)– People respond to incentives– People create systems to allocate costs

and incentives (benefits)– Only future costs really matter

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The “Handy Dandy” Guide to Economic Thinking

– People choose– All choices have costs– People respond to incentives– People create systems to allocate costs

and incentives (benefits)– Only future costs matter– Free trade creates wealth

• http://www.youtube.com/watch?v=VVp8UGjECt4

The key problems facing consumers…

• Current income

• Surplus income

• Deficit income

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Teaching financial topics with

economic reasoning…

“You are the Financial Advisor”(CEE, Learning, Earning and Investing, Grades 9-12)

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You are a financial advisor. Clients come to you to ask for your recommendation about what to do with their surplus income (savings).

You take time to clarify the criteria they can use to make their investment choices.

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Liquidity (transaction demand)

Growth potential (principal/interest)

Tax liabilities

Potential for loss (risk tolerance)

Your personal temperament

What are your options?

Passbook savings accountCertificates of depositGrowth stocksIncome stocksBalanced mutual fundGoldReal estate

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Around the room are posted signs of several investment options.

I will read a brief description of your client.

Stand by the sign of the investment option you would recommend.

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Discussion topics:

Personal financial goals Trade-offs Personal temperament Risk tolerance The value of good information Trust

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The best single resource for classroom instructional activities…

The Virtual Economics CD RomCouncil for Economic Education (NCEE)80 publicationsOver 1200 grade K-12 lessonsLinks to hundreds of online lessonsCorrelated to the Ohio Academic Content

Standards• www.ncee.net

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Raise your hand if you would

like a free copy of the

“Virtual Economics” CD Rom

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EconEdLink

www.econedlink.orgProduced by the Council for Economic Education

100s of lessons developed by educators

Includes “Focus on Economic Data” lessons

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Federal Reserve Bank Resources

- data sources

- instructional activities

- research

- classroom materials

http://www.federalreserveeducation.org

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Jump$tart Coalition for Personal

Financial Literacy

www.jumpstart.org

www.ohjumpstart.org

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Teaching about risk and insurance?

Go directly to the Ohio Insurance

Institute. They have everything you need to teach about property-

casualty insurance.

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What can your Economics Center

do for you?

www.ocee.org

Defining a Problem or Opportunity

Describe a problem or opportunity.

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Restate the problem or opportunity in five different ways.

1.

2.

3.

4.

5.

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• 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.

•

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The Decision Making Process

– Alternatives– Criteria – benefits and costs– Basis for the assessment of alternatives– Measurement / Judgment– Analysis - comparison– Decision

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Clarify the alternatives

Eliminate any that are not possible

Clarify the criteria

Compare with similar criteria

Weight the criteria

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Questions?

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Remember…

If you would like the notes

from this presentation, with links,

email:

douglas.haskell@uc.edu

Subject Line: OATFACS Notes

2009 OATFACS Conference2009 OATFACS Conference