Grades 5, 6, 7, 8

Earning Income

Buying Goods and Services

Saving

Using Credit

Financial Investing

Protecting and Insuring

Careers are based on working at jobs in the same occupation or profession for many years. Different careers require different education and training.

People make many decisions over a lifetime about their education, jobs, and careers that affect their incomes and job opportunities.

Getting more education and learning new job skills can increase a person's human capital and productivity.

People with less education and fewer job skills tend to earn lower incomes than people with more education and greater job skills.

Investment in education and training generally has a positive rate of return in terms of the income that people earn over a lifetime.

Education, training, and development of job skills have opportunity costs in the form of time, effort, and money.

People often use a portion of their savings to help themselves or their family members build human capital through education or job training.

Entrepreneurs take the risk of starting a business because they expect to earn profits as their reward, despite the fact that many new businesses can and do fail. Some entrepreneurs gain satisfaction from working for themselves.

Interest, dividends, and capital appreciation (gains) are forms of income earned from financial investments.

Some people receive income support from government because they have low incomes or qualify in other ways for government assistance.

Social Security is a government program that taxes the income of current workers to provide retirement, disability, and survivor benefits for workers or their dependents.

When making choices about what to buy, consumers may choose to gather information from a variety of sources. The quality and usefulness of information provided by sources can vary greatly from source to source. While many sources provide valuable information, some sources provide information that is deliberately misleading.

By understanding a source's incentives in providing information about a good or service, a consumer can better assess the quality and usefulness of the information.

People choose from a variety of payment methods in order to buy goods and services.

Choosing a payment method entails weighing the costs and benefits of the different payment options.

A budget includes fixed and variable expenses, as well as income, savings, and taxes.

People may revise their budget based on unplanned expenses and changes in income.

Banks and other financial institutions loan funds received from depositors to borrowers. Part of the interest received from these loans is used to pay interest to depositors for the use of their money.

For the saver, an interest rate is the price a financial institution pays for using a saver's money and is normally expressed as an annual percentage of the amount saved.

Interest rates paid on savings and charged on loans, like all prices, are determined in a market.

When interest rates increase, people earn more on their savings and their savings grow more quickly.

Principal is the initial amount of money upon which interest is paid.

Compound interest is the interest that is earned not only on the principal but also on the interest already earned.

The value of a person's savings in the future is determined by the amount saved and the interest rate. The earlier people begin to save, the more savings they will be able to accumulate, all other things equal, as a result of the power of compound interest.

Different people save money for different reasons, including large purchases (such as higher education, autos, and homes), retirement, and unexpected events. People's choices about how much to save and for what to save are based on their tastes and preferences.

To assure savers that their deposits are safe from bank failures, federal agencies guarantee depositors' savings in most commercial banks, savings banks, and savings associations up to a set limit.

People who apply for loans are told what the interest rate on the loan will be. An interest rate is the price of using someone else's money expressed as an annual percentage of the loan principal.

The longer the repayment period on a loan and the higher the interest rate on the loan, the larger is the total amount of interest charged on a loan.

A credit card purchase is a loan from the financial institution that issued the card. Credit card interest rates tend to be higher than rates for other loans. In addition, financial institutions may charge significant fees related to a credit card and its use.

Borrowers who use credit cards for purchases and who do not pay the full balance when it is due pay much higher costs for their purchases because interest is charged monthly. A credit card user can avoid interest charges by paying the entire balance within the grace period specified by the financial institution.

Various financial institutions and businesses make consumer loans and may charge different rates of interest.

Interest rates on loans fluctuate based on changes in the market for loans.

Lenders charge different interest rates based on the risk of nonpayment by borrowers. The higher the risk of nonpayment, the higher the interest rate charged. The lower the risk of nonpayment, the lower the interest rate charged.

People can use credit to finance investments in education and housing. The benefits of using credit in this way are spread out over a period of time and may be large. The large costs of acquiring the education or housing are spread out over time as well. The benefits of using credit to make daily purchases of food or clothing are short-lived and do not accumulate over time.

Financial assets include a wide variety of financial instruments including bank deposits, stocks, bonds, and mutual funds. Real estate and commodities are also often viewed as financial assets.

Interest is received from money deposited in bank accounts. It is also received by owning a corporate or government bond or making a loan.

When people buy corporate stock, they are purchasing ownership shares in a business. If the business is profitable, they will expect to receive income in the form of dividends and/or from the increase in the stock's value. The increase in the value of an asset (like a stock) is called a capital gain. If the business is not profitable, investors could lose the money they have invested.

The price of a financial asset is determined by the interaction of buyers and sellers in a financial market.

The rate of return on financial investments consists of interest payments, dividends, and capital appreciation expressed as a percentage of the amount invested.

Financial risk means that a financial investment has a range of possible returns, including possibilities of actual losses. Higher-risk investments have a wider range of possible returns.

The rate of return earned from investments will vary according to the amount of risk. In general, a trade-off exists between the security of an investment and its expected rate of return.

Personal financial risk exists when unexpected events can damage health, income, property, wealth, or future opportunities.

Insurance is a product that allows people to pay a fee (called a premium) now to transfer the costs of a potential loss to a third party.

Insurance companies analyze the outcomes of individuals who face similar types of risks to create insurance contracts (policies). By collecting a relatively small amount of money, called a premium, from each policyholder on a regular basis, the company creates a pool of funds to compensate those individuals who experience a large loss.

Self-insurance is when an individual accepts a risk and saves money on a regular basis to cover a potential loss.

Insurance policies that guarantee higher levels of payment in the event of a loss (coverage) have higher prices.

Insurance companies charge higher premiums to cover higher-risk individuals and events because the risk of monetary loss is greater for these individuals and events.

Individuals can choose to accept some risk, to take steps to avoid or reduce risk, or to transfer risk to others through the purchase of insurance. Each option has different costs and benefits.

Social networking sites and other online activity can make individuals vulnerable to harm caused by identity theft or misuse of their personal information.