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Running head: ASSESSING THE IMPACT

Assessing the Impact of an Experiential and Small Group Centered Instructional Method on High School Students Understanding of Personal Financial Management Concepts

William Bear Lloyd wlloyd13@ehc.edu Emory and Henry College

Dr. Rebecca Buchanan Education 509 Action Research Practicum December 10, 2013

2 ASSESSING THE IMPACT Assessing the Impact of an Experiential and Small Group Centered Instructional Method on High School Students Understanding of Personal Financial Management Concepts

Segment A - Research Topic: This study was based upon the following research question: When teaching business and personal finance, what are the effects of a classroom structure where students are organized into various households and given the task of managing that households finances during the semester?

Segment B Introduction and Rationale The purpose of this study was to identify the effects of a hands-on approach to teaching business and personal finance. More specifically, the study was conducted to determine the effects of a business classroom structured in such a way that students were organized into various households and given the task of managing that households finances throughout the semester. When examining these effects, researchers were anxious to see if students were able to pass industry related assessments in personal finance, comprehend and ask complex questions relating to the subject matter, and able to gain a well-developed understanding of financial management. In addition, the study also sought to identify any unforeseen effects of this handson approach to teaching business and personal finance on the secondary level. The results of this study should be used to assist business educators in their search for the most effective methods to educate students in the secondary level on financial management. Considering the high degree of financial illiteracy prevalent in todays society, this study was of great importance since the ultimate aim of the research was to assist educators in

3 ASSESSING THE IMPACT identifying the best possible teaching methods to improve students financial literacy skills. In fact, Walstad, Rebeck, and MacDonald (2010) reported that there is an increasing amount of literature showing that a well-specified and properly implemented program in financial education can positively and significantly influence the financial knowledge of high school students (p.1). This comes as very encouraging news and displays the importance of developing effective teaching methods for this subject area. Furthermore, it was of great importance to the study to identify the effects of a business education classroom that utilizes the hands-on approach discussed earlier, so that one may determine if a cognitive understanding of personal financial management is the ultimate outcome of this approach to teaching. There is certainly no shortage of evidence highlighting the fact that there is such a great need to improve high school students and the general publics financial literacy skills. When writing for the Harvard Business School, Anna Secino (2013) highlighted that The average amount of debt borne by households is on the rise, with nearly 50% carrying outstanding credit card balances (the average amount for which is $7,300.) To make matters worse, households with low financial literacy tend not to plan for retirement, are more likely to borrow at high interest rates, and end up acquiring few, if any, assets (para.9). Surely, these alarming facts display the need for an increased understanding of financial management among members of society and the destruction financial illiteracy can cause. In addition, the Wall Street Journal reported that Genworth Financials research explains that 88 percent of Americans believe they dont have enough financial literacy (Are Americans Making the Grade, 2013, para.1). With all of this information in mind, there is most certainly a significant need to improve the methods used to teach financial literacy skills on the secondary level.

4 ASSESSING THE IMPACT Part C Literature Review The Importance of Financial Education As earlier highlighted, there are a multitude of studies, polls, and statistics that exemplify the growing need for an effective financial literacy curriculum to be taught in our schools. In fact, a quick look at the state of our nations economic affairs and the exacerbating amount of debt members of society are carrying underscores the fact that financial illiteracy is running rampant in our communities, and the effects of this crisis are now beginning to take hold. With this information in mind, an article from the Journal of Education for Business stated, the present recession is widely considered the worst this country has experienced since the Great Depression of the 1930s (Hite, Slocombe, Railsback, & Miller, 2011, p.253). After considering some of the causes of the recession, the article went on to explain that personal financial competency is an essential ingredient for successful living in the 21st century (Hite et al., 2011, p.253). It is clear that the recent economic recession, rising debt levels, and the personal economic struggles individuals are facing have brought the issue of personal financial education to the forefront of much debate and concern. In fact, when looking at school systems in Kansas, which is a state that shows many statistical similarities to the nation as a whole, the quoted study from the Journal of Education for Business found that there has been a small but noticeable increase in the amount of students enrolling in personal finance courses since the onset of the recession (Hite et al., 2011). Also, an article from the Association for Financial Counseling and Planning Education explained that many policy makers believe that the impact of poor decision making due to lack of financial knowledge can be overcome through mandated financial education (Mandell & Klein, 2009, p.16). It is apparent that policymakers are holding true to

5 ASSESSING THE IMPACT this conviction considering that 40 of the 50 states now have personal finance standards or guidelines (Mandell & Klein, 2009, p.16). There seems to be an overwhelming consensus that the well being of our economy is partially dependent upon the financial literacy of members of society, and many leaders are now searching for ways to improve that literacy. The Effects of Personal Finance Instruction in High School In light of this recent effort to improve our nations financial literacy by increasing the amount of instruction on this subject matter in the countrys high schools, there has been a great deal of interest in researching the effects of taking a personal finance course while in senior high. However, research in the field tends to present conflicting conclusions. One interesting study published in the Journal of Consumer Affairs sought to identify if there was a correlation between the completion of a personal finance related course and ones use of financial services several years after graduation (Grimes, Rogers, & Smith, 2010). This study sought to determine whether or not this correlation exists because successful participation in todays economy virtually necessitates the use of services provided by banks and other financial institutions (Grimes et al., 2010, p.318). Therefore, it is essential that individuals gain enough financial literacy in order to effectively manage their own bank accounts and enjoy the benefits of other financial services in order to become successful members of the nations economy (Grimes et al., 2010). The study found that students that took a business course in high school were 3.7 percent less likely to be without a bank account than those who did not take a business course (Grimes et al., 2010). Although this is not a massive percentage, the statistics do show that there is a direct correlation between the completion of a personal finance related course in high school and ones use of financial services that are required for healthy participation in the economy (Grimes et al., 2010).

6 ASSESSING THE IMPACT On the other hand, the study published in the Journal of Financial Counseling and Planning evaluated the impact of a personal finance course on 79 students that had graduated from high school one to four years earlier (Mandell & Klein, 2009). When conducting this study, researchers compared the financial knowledge and financial behaviors of students that had taken a personal finance course in high school to those that did not by asking these students to complete a financial knowledge test and survey of ones financial behavior (Mandell & Klein, 2009). Sadly, the results revealed that there were almost no differences between the financial literacy and behavior of students that had taken a personal finance course and those that had not (Mandell & Klein, 2009). With this in mind, the study explained that, while financial behavior seems to be positively affected by financial literacy, the effects of various forms of financial education on financial behavior are less certain (Mandell & Klein, 2009, p.17). However, researchers did admit this study used a small sample size in regards to population and geography (Mandell & Klein, 2009). This conflicting evidence on the effectiveness and benefits of personal finance education seems to highlight the need for effective and systematic instruction on financial literacy for high school students that has long-term effects. In fact, a 2010 study from the Journal of Consumer Affairs decided to take this issue to task by evaluating the effectiveness of one particular set of curriculum known as Financing Your Future (Walstad, Rebeck, & MacDonald, 2010). The journal article stated that, in response to the perceived need to improve financial literacy, a wide range of private businesses, nonprofit organizations and government agencies have developed financial education materials and programs (Walstad et al., 2010, p.337). Although some of the curriculums available today may be ineffective, this does not negate the need to identify effective instructional models to increase students financial literacy. If anything, it underscores this need

7 ASSESSING THE IMPACT and helped to inspire this research on the effectiveness of a given set of curriculum (Walstad et al., 2010). When assessing the Financing Your Future curriculum, the study utilized a series of pretests and posttests and found that the curriculum had a significant and positive impact on students understanding of personal financial management (Walstad et al., 2010). The article went on to state that the assessment contributes to the growing literature showing that a wellspecified and properly implemented program in financial education can positively and significantly influence the financial knowledge of high school students (Walstad et al., 2010, p.336). With this in mind, all of the data available today seems to point towards a need for effective instructional methods on financial literacy that have long-term effects. However, the real questions begin to arise when determining what types of instructional methods best prepare students to manage their finances as adults in todays complex economy. Small Group Centered Learning As previously discussed, there is a great need to identify and implement instructional methods that have a long-term impact on high school students understanding of personal finance as well as a positive influence on their personal financial behavior. With this in mind, educators should challenge their ways of thinking and current practices to ensure that students receive the best instruction possible. It is of great value to recognize that other academic areas and industries have also had to think outside of the box in order to discover practices that better prepare students for real-world scenarios, such as financial management. In consideration of this, an interesting study published in the American Journal of Pharmaceutical Education highlighted that a previous pharmaceutical class on self-care therapy at the University of North Carolina was experiencing unsatisfactory results in sufficiently preparing students with the skills needed to successfully educate a customer on self-care treatments and to determine if he or she was a good

8 ASSESSING THE IMPACT candidate for this type of treatment (Ferreri & OConnor, 2013). However, due to the unsatisfactory results this course was producing, university officials decided to redesign the instructional elements that it utilized by replacing its lecture-based format with a hands-on student-centered format. Under this new course format, students were placed into small groups that utilized prompted discussions, case studies, and other interactive means in order to learn the material along with textbook readings and a limited amount of lecturing. As a result, students grades, comprehension of the material, and course evaluations improved dramatically when compared to the results of the former lecture-based course. The study concluded that compared with student experiences in the previous large lecture-based class, students in the smaller-class format reported a preference for working in teams and achieved significantly better academic grades with the new course format (Ferreri & OConnor, 2013, p.8). The results of this study underline the substantial and positive effects that active, studentcentered learning can have through the use of small groups when educating students on technical matters, such as self-care treatment. When considering the success of the pharmacy schools small group centered course, it would be of great benefit for business educators to study the effects of structuring a personal finance class in such a way that utilizes small groups as was done in my research. This need for such a study on the effects of a course that utilizes small groups to educate students on personal finance inspired the research outlined in this study. It was of great interest to my research to determine if students could be organized into small groups that are designed as families and given the task of managing their familys finances throughout the course of the semester in order to determine if the same successes the pharmaceutical class experienced could be replicated in a personal finance course.

9 ASSESSING THE IMPACT Segment D - Research Site Description After a thorough consideration of the need for an effective personal finance instructional method that has long-term benefits and the success of the previously described restructuring of a once ineffective pharmaceutical course, it was concluded that it would be of great benefit to the field of business education if a similar study was conducted. This study was designed to evaluate the effects of an experiential, group-centered learning method implemented in a personal finance course. In light of this, I chose to conduct this study in the Southeastern part of the United States, an area of the country known for its family values and slower pace of living. In particular, I selected Southwest Virginia as the location to conduct my research. This region of the nation is known for its small towns, rural lifestyles, and family atmosphere. The economy of this area is driven by agriculture, light industry, and coal mining. Although certainly not an area that is destitute, rural poverty is an issue that many must face in this locale. In addition, the vast majority of the population in Southwest Virginia is Caucasian and experiences a wide range of incomes. A particular county, which for matters of privacy will be referred to as Lincoln County, was selected in this region of the state to conduct the research on my topic. This is a very charming and conservative county known for its family values and small town way of life. Church activities, high-school athletics, and other community functions often highlight the calendars of many local residents. Although still rural, Lincoln is one of the larger counties in the area and boasted a population of nearly 55,000 residents at the time of this study (County Profile, 2013). In addition, the county was roughly 96% white (County Profile, 2013). Lincoln has impressive agricultural, light manufacturing, and service industries within the county that drive its economic growth. The average household income slightly exceeded $40,000 per

10 ASSESSING THE IMPACT year (County Profile, 2013). However, poverty was still an issue in the region considering that approximately 11 percent of the countys residents lived below the poverty level (County Profile, 2013). In addition, over 45 percent of the county school divisions students received free or reduced lunch (School Profile, 2012). As one can see, the county had a wide array of socioeconomic statuses that tended to fall at or below the lower middle class. When looking at the county school division, it served approximately 7,400 students in seven elementary schools, four middle schools, and four high schools (School Profile, 2012). This rural county is proud to be known as a very friendly and welcoming county. Even more precisely, my research was focused on a particular high school in the eastern portion of Lincoln County, which again for matters of privacy will be referred to as Adams High School. This high school serves a more rural part of the county that includes one incorporated town and several smaller farming communities. At the time of this study, the total student body consisted of approximately 400 students, 97% of which were Caucasian (School Profile, 2012). When looking at the faculty, the school was blessed to have 35 licensed teachers serving its students (School Profile, 2012). In addition, Adams High School had a free and reduced lunch rate of roughly 41%, which was reflective of the socioeconomic status of the county as a whole (School Profile, 2012). The gender breakdown of the school was roughly 50/50 (School Profile, 2012). This rural high school certainly has a charming and family-like atmosphere, and the small student body takes value in knowing and supporting one another. The school boasts impressive academic and athletic achievements. Recently, the school was recognized as one of the top high schools in the nation by U.S. News and World Report. The research for this study took place in a personal finance course within the business education department at Adams High School. There were two teachers in this department that

11 ASSESSING THE IMPACT offered a required personal finance course, as well as several business electives. More specifically, my research was conducted in a personal finance course that contained a mixture of 19 sophomore and junior students. When looking at the demographic breakdown of the class, there were 11 males and 8 females, each of whom was Caucasian. In addition, there were two students in the class that had individualized education plans (IEPs) for a mild learning disability. Overall, the demographics of this class were reflective of the schools general demographics. The main aim of the personal finance course was to improve students financial literacy and to prepare them to become effective stewards of their personal finances. This class served as a great setting to conduct the study that evaluated the effects of an experiential, group centered learning method designed to teach personal finance because the students well represented the demographics of the countys residents.

Section E Research Design and Instruments Classroom Design As previously noted, the aim of this paper was to identify the effects of a classroom where personal finance is taught using a student-centered small group method. Under this arrangement, students were organized into small groups known as families, so that they could be given hands-on experience in managing their familys finances throughout the semester. The increasing need for an effective instructional method that has a positive and long-term impact on the students financial literacy skills assisted in sparking interest in this research topic. In addition, the success that the University of North Carolina experienced in restructuring an ineffective lecture-based pharmaceutical course into a student-centered course that focuses on the completion of hands-on projects and case studies through small groups further fueled the

12 ASSESSING THE IMPACT flames of interest for this research topic and provided a model for conducting similar research in the personal finance course (Ferreri & OConnor, 2013). In comparison to the research conducted by Ferreri and OConnor (2013) at the University of North Carolina and published in the American Journal of Pharmaceutical Education, my research focused on identifying the effects of a course format that focuses on learning through small groups. As the redesigned pharmaceutical course was structured into interactive groups, so too was the personal finance course at Adams High School in which my research is was conducted. As earlier described, this class consisted of 19 students, each of whom was Caucasian. There were 11 males and 8 females in the class, and two of these students had a mild learning disability. These students were broken down into four groups of four and one group of three. In order to provide for some randomness in the selection of groups, the students were lined up in alphabetical order and numbered off to determine which family they would be working with throughout the semester. Once students were organized into their families, day to day classroom activities consisted of numerous components. First, a limited amount of lecture was provided to students to orient them with the concepts being covered and to supply them with background information on a given subject. In addition, there were substantial amounts of interactive discussions that took place within each family and among the entire class, and these discussions were encouraged and facilitated by the instructor. The most notable activity of this classroom structure involved each familys task of creating an excel spreadsheet that contained their hypothetical familys budget for the semester. This budget highlighted the familys expenses, incomes, savings, and other information pertinent to its financial management. Students were given assignments on a routine

13 ASSESSING THE IMPACT basis that required them to take the information they had gathered from recent lectures and class discussions and apply it to the construction of their familys personal budget. Now that an overview of this instructional model for personal finance has been provided, it would be of great benefit to employ the use of an example to more clearly depict the components of the instructional method that was researched. For example, suppose the given topics being investigated in class related to mortgages and car payments. Instruction would begin by allowing students to discuss any background knowledge they may have on mortgages and car payments. Then, the teacher would provide an effective but limited amount of lecture on these issues to provide students with a more thorough understanding of these financial topics and a foundation of information that would enable them to complete their familys assignment. Next, additional discussions about the information provided in the lecture would take place among the entire class and each family so that students would begin to contemplate what they had learned. Finally, each family would be given an assignment that requires them to apply their knowledge of mortgages and car payments to their familys budget. A sample assignment relating to this topic is provided in Appendix A. In this sample assignment, each family would be required to determine the amount of income they will earn based off of their assigned occupations. Once students determine their familys level of income, they would be asked to determine the maximum amount they can spend on a home and vehicle(s), to select a home and vehicle(s) that are affordable and satisfying to them, and to calculate their monthly mortgage and car payments based on the purchases they chose to make. After completion of these steps, each family would be asked to record their monthly mortgage and car payment(s) in the excel budget they had been constructing. The goal of the budget each family is tasked with creating is to display the relationship each financial concept they are learning about has with other financial concepts and

14 ASSESSING THE IMPACT the impact it has on a familys budget. It was of great interest to the research to see if these family assignments and hands-on approach had a positive impact on each participants financial literacy. Research Instruments In order to identify and measure the effects the instructional design being researched has on students understanding of personal finance and their financial literacy skills, two specific tools were utilized. First, each participant was given a financial skills pretest (Appendix B) during the first week of the semester. The same financial skills test was given as a posttest at the conclusion of the semester to identify if there had been a noticeable change in each students scores. If the instructional methods being researched were having a positive impact on students financial knowledge, it was believed there would be a noticeable increase in overall scores between students first and second attempt at the test. The financial skills test utilized was Jump $tarts 2008 Financial Literacy Test for College Students and is depicted in Appendix B. Jump $tart is a well-respected organization that produces curriculum aimed at improving students financial literacy skills. The Jump $tart assessment was selected as an indicator of the effects of the instructional design being researched because of the various financial concepts the assessment covers and because of the respect Jump $tart has gained in the field of financial education. The assessments developed by this organization seem to provide a thorough measure of ones financial literacy skills, and, therefore, were used as a constructive measure for my research. In addition, any assessment used by this organization should be well-regarded by other members of the financial education field. In addition to the financial literacy skills test, another tool was employed to assist in measuring the impact of the instructional design being researched. To effectively understand

15 ASSESSING THE IMPACT personal finance, one must be able to understand the terminology commonly used in the field. For example, if one did not understand terms, such as interest rates, closing costs, and mortgage, they would have great difficulty in purchasing a home. Therefore, a students use and understanding of terms commonly used in personal finance was a great indicator of how well a student is prepared to manage his or her own finances. In order to measure each students understanding of the terminology, a short essay assignment was employed. In this short essay assignment, students were asked to construct six journals that reflected their knowledge of a given financial topic. This short essay assignment is depicted in Appendix C. In order to measure how well this essay assignment reflected students understanding of personal finance terminology, a word count was conducted that evaluated how many different personal finance vocabulary words each student used when responding to the writing prompts. In addition, to preserve the legitimacy of this tool of measurement, students were not told a vocabulary word count was being conducted on their writings, and each vocabulary word included in the assignment had to be used correctly in order to receive credit. The vocabulary words that were counted in each essay are depicted in Appendix D, along with their definitions. These terms reflect the personal finance vocabulary words identified by Finance in the Classroom (2013). In order to determine each students growth in knowledge and use of these vocabulary terms, the same short essay assignment was given to students during the first week of the semester and again at the conclusion of the semester. If the instructional methods being utilized were having a positive impact on students financial literacy skills, it was believed that there would be an increase in the usage of these financial terms between the first and second administering of the short essay assignment as depicted in the word counts being conducted.

16 ASSESSING THE IMPACT Segment F Graphic to Display Data Analysis and Findings The table below displays the change in students scores on their pre and post financial literacy tests, as well as the change in their usage of financial literacy terms between their first and second completions of the short essay assignment. The percentage change is also highlighted.

17 ASSESSING THE IMPACT Student Pretest Score Posttest Score Percent Short Change Essay 1 Vocabulary Word Count 72 50 9 89 73 78 92 97 86 79 85 80 83 87 65 96 87 83 91 98 96 85 44 97 86 59 23 28 84 77 105 63 38 132 55 112 41 94 75 35 68 21 6 10 11 15 9 8 9 4 11 14 3 15 7 16 5 8 18 10 Short Percent Essay 2 Change Vocabulary Word Count 22 144 36 19 21 23 28 18 17 21 16 28 31 12 27 19 24 16 20 27 22 71 217 110 109 87 100 113 133 300 155 121 300 80 171 50 220 150 50 141

Student 1 Student 2 Student 3 Student 4 Student 5 Student 6 Student 7 Student 8 Student 9 Student 10 Student 11 Student 12 Student 13 Student 14 Student 15 Student 16 Student 17 Student 18 Student 19 Class Average

48 62 37 42 58 79 67 43 48 39 51 63 28 62 41 59 47 56 71 53

20

40

60

80

100

120

140

0 Student 1 Student 2 Student 3 Student 4 Student 5

Student 6
Student 7 Student 8 Student 9 Student 10

18 ASSESSING THE IMPACT

Student 11
Student 12 Student 13 Student 14 Student 15

Student 16
Student 17 Student 18 Student 19 Class Average

Jump $tart Test Scores

Pretest Score

Posttest Score

Percent Change

50

19 ASSESSING THE IMPACT

100

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300

350

0 Student 1 Student 2 Student 3 Student 4 Student 5 Student 6 Student 7 Student 8 Student 9 Student 10 Student 11 Student 12 Student 13 Student 14 Student 15 Student 16 Student 17 Student 18 Student 19 Class Average

Vocabulary Essay Word Count

Percent Change

Short Essay 2 Vocabulary Word Count

Short Essay 1 Vocabulary Word Count

20 ASSESSING THE IMPACT Segment G Findings and Implications The inadequate financial literacy skills that have become more and more prevalent in todays society most certainly exemplified the need to develop a personal finance instructional method that produced solid and measureable results. Clearly, the measures produced by this study indicate that a student-centered classroom focused on experiential learning through group projects has the capability of significantly improving students comprehension of the topics related to personal finance, and, therefore, improving each students ability to handle his or her finances in a competent manner. As indicated earlier, two main tools were employed in the study to measure the effects of the instructional method under research in a quantifiable manner. These tools were developed to provide an objective analysis of the effectiveness of the instructional model under observation so that business educators may have substantiated results to take advantage of when developing instructional strategies that should be employed in their classroom. With this in mind, the outcome of this study certainly produced clear and distinguished results in regards to the effects being researched and students performance. First, the 2008 Jump $tart Financial Literacy pretest utilized throughout the study indicated that the majority of students did have some base of prior knowledge in regards to personal financial management. However, as expected, the financial literacy skills displayed by the students were in great need of expansion and improvement as indicated by a mean pretest score of 53 percent for the entire class. Students pretest scores ranged from a low of 28 to a high of 79. In consideration of these scores, it is plausible to believe the routine financial tasks of daily life and the possibility of parental coaching provided students with a varying base of background knowledge. However, the results of the instructional method under research had clear and positive results. The mean posttest score for the class was an impressive 85 percent,

21 ASSESSING THE IMPACT and each participant displayed a marked improvement in their test scores. The average percent increase in test scores ranged from a 23 percent improvement to a 132 percent improvement. In addition, the average improvement on students test scores from the pretest to the posttest was a remarkable 68 percent. It is clear that an instructional model that uses an experiential learning method in groups significantly improved each students understanding of financial literacy concepts. As earlier indicated, the tests produced by Jump $tart are well respected assessments in the industry and are known to provide a reliable analysis of an individuals financial management skills. In addition to the Jump $tart pre and post tests, the short essay assignment was also employed to measure students competency in recognizing and using common vocabulary essential to the field of personal financial management. As earlier mentioned, an understanding of the terminology used when engaging in various financial activities, such as purchasing a home or planning for retirement, is essential to ones ability to successfully manage their finances. With this in mind, the short essay assignment consisted of six journals that asked students to write about their knowledge of a particular financial topic. Afterwards, a word count was conducted to measure the amount of finance vocabulary words each participant utilized throughout their short essay assignment. The initial assignment showed that students utilized an average of 10 vocabulary words in their writings. As with the pretest assignment, individual performances varied depending on each students background knowledge. Word counts on the first short essay assignment ranged from a low of 3 to a high of 21 words incorporated into the students journals. However, the instructional method under evaluation produced even more significant and positive results than those that took place in the pre and post tests. The average word count in the final short essay assignment indicated that students utilized a mean of 22

22 ASSESSING THE IMPACT finance vocabulary words when composing their journals. This reflected an impressive 141 percent increase in the students usage of terms critical to ones ability to effectively manage their personal finances. In fact, some students enjoyed a 300 percent increase in the amount of vocabulary words incorporated into their writings between their first and second attempt at the short essay assignment. Although these particular cases may be slight outliers, it is clear that the small group and experiential teaching strategy employed in the research had a profound impact on each students understanding and usage of critical terminology, and, therefore, should also improve their ability to manage their personal finances. Although further research is needed before recommending widespread and systematic changes to the traditional lecturing format utilized in many personal finance courses, it is obvious that the results produced in this study are clear and distinct indicators of the positive effects that can be obtained through an experiential learning model that organizes students into small groups, which were labeled as families, in order to conduct learning. In fact, these findings should greatly encourage other practitioners in the field of business education to conduct similar research on the instructional design implemented in the personal finance course studied at Adams High School. Although it is true a lecture based course would have some positive impact on students knowledge of financial management concepts and use of terms critical to their financial skills, it seems as though the 68 percent increase in financial literacy test scores and 141 percent increase in students use of financial vocabulary terms that were produced in this study are particularly impressive results. It is believed that this study resulted in such positive outcomes because the instructional strategy under evaluation required students to think about the material presented to them in order to manage their familys finances, rather than simply asking students to memorize facts. All too

23 ASSESSING THE IMPACT often, a traditional classroom format simply provides students with information they must temporarily memorize in order to successfully complete a test. However, it is of my belief that the results produced in this study were of such positive significance because students were given responsibility for their learning. If a small group desired to successfully manage their familys finances, which they most certainly did, then they were required to apply themselves and truly learn the financial concepts relevant to each lesson. This instructional approach produced such positive results because it focused on actual learning, rather than the memorization of facts for test preparation. In addition, this study is not the first indicator of the substantial improvements that can be achieved through a hands-on learning approach that organizes students into small groups. As earlier highlighted, the research conducted by Ferreri and OConnor (2013) in the pharmaceutical course at the University of North Carolina also found that this instructional approach has substantial and positive effects on students comprehension of material presented to them. It is clear that high school business education departments should, at the very least, begin contemplating venues in which more hands-on and small group activities can be incorporated into their instructional designs in order to improve students financial literacy skills. In addition, some educators should also be encouraged to replicate studies similar to the one conducted in this research, which grouped students into families and assigned them the task of managing their familys finances throughout the semester, in order to identify if such notable positive outcomes can be reproduced. One must keep in mind that there are endless indicators of the need to improve students financial literacy skills. In fact, the current state of our nations economy and rising personal debt levels are some of the most substantial reflections of individuals inability to manage their finances. With this in mind, business educators should be willing to employ new

24 ASSESSING THE IMPACT instructional strategies that assist in stemming the prevailing tide of financial illiteracy for the benefit of each student in the classroom and for the sake of the nations economic well-being as a whole.

Segment H Limitations of Study Although this study provides a great deal of encouragement to business educators striving to improve students financial literacy skills, one should be careful to recognize that this was a singular study conducted to identify the effects of a particular instructional method on students understanding of personal finance concepts. With this in mind, sweeping generalizations should not be made without conducting multiple studies and identifying the variables and effects present in each of these studies. In addition, the analysis conducted in this research contained certain limitations that must be taken into consideration. First, it was only conducted in one classroom. To gain a more thorough knowledge of the effects of this instructional method, the research must be conducted in multiple classrooms to better ascertain its impact on student learning and to increase the validity of the research. As I mentioned, educators should never allow themselves to make sweeping generalizations based upon one sole body of research. Second, the study conducted at Adams High School evaluated a somewhat homogeneous group of students. Although there were differences in the students socioeconomic statuses and academic success, each participant was from a relatively rural area, Caucasian, of a similar age, and had a lifestyle somewhat reflective of the local culture. It is probable to believe that students in a rural, blue collar culture may benefit more from a hands-on learning style than students from a more urban culture. Thirdly, this research did not simultaneously evaluate the results of a lecture-based classroom on students understanding of financial concepts in order to provide a more definitive

25 ASSESSING THE IMPACT comparison. To concretely state that the experiential and group centered course produced better results, multiple studies would be needed to validate this conclusion while still utilizing the same tools of measurement. Although the results of my research provide a legitimate basis for excitement and interest in a hands-on, group centered course, we must also recognize that this study did have justifiable limitations as well.

Segment I Suggestions for Future Study and Abstract Suggestions for Future Study With the limitations of the study in mind, the best method for remedying concerns resulting from these limitations is to conduct further research. As discussed earlier, additional exploration of this topic is needed to validate the conclusions found in my original study before one could justifiably recommend that personal finance teachers employ the same interactional instructional method on a widespread basis. Further bodies of research should be conducted in similar settings as the one in which this study was conducted as well as numerous other settings in order to continue to evaluate the effects of a hands-on, small group centered teaching method. First, it would be of great benefit to replicate this same study in a more urban and culturally diversified area in order to see if students from this type of background receive such positive benefits from the instructional design in regards to their financial literacy skills. In addition, future studies should take a more in depth look at the impact of this design on specific genders. It would be of great interest to identify whether or not a particular gender responds more favorably to a hands-on approach for teaching basic financial skills. Also, a more complex study should also be conducted to evaluate the effects of the instructional method utilized throughout my research on students with various learning disabilities. For example, do students with Attention

26 ASSESSING THE IMPACT Deficit Disorder benefit more from the teaching method than students without a learning disability? The possibilities for future research on this topic are quite endless. However, it is important that future research is conducted in order to validate or contradict the findings reached in my study before recommending on a widespread basis that personal finance teachers design their classrooms in a manner similar to the design evaluated at Adams High School. Abstract The aim of this study was to identify the effects of an instructional method that utilized small groups structured as hypothetical families and hands-on learning activities on students personal financial management skills. Throughout the course of a semester, students were given the task of developing and maintaining a family budget, along with the other members of their group, in order to teach the class basic financial literacy skills. Each portion of the family budget was constructed after class lecture and discussion took place on the financial concept being covered during a particular lesson. The results of this study found that students were greatly benefited by this instructional method as evidenced through the improvement of scores on a financial literacy test and through the students increased usage of financial vocabulary measured in a short essay assignment. This study was inspired by an apparent need to improve societys financial literacy skills.

27 ASSESSING THE IMPACT References Are Americans making the grade when it comes to financial literacy? According to Genworth survey, it depends on who you ask. (2013, September 10). The Wall Street Journal. Retrieved from http://online.wsj.com/article/PR-CO-20130910-905908.html Bzinak, S. A. (2013). Personal budget webquest. Madrid-Waddington Central School District. Retrieved from http://www.mwcsk12.org/faculty/twilson/intro2occ/personalfinance/personalbudgetques t/indexpersonalbudgetwebquest.htm Ferreri, S. P., & OConnor, S. K. (2013). Redesign of a large lecture course into a small-group learning course. American Journal Of Pharmaceutical Education, 77(1), 1-9. Retrieved from http://ehis.ebscohost.com/ehost/detail?sid=e3b6a1cf-b539-45c5-b095a0bf9ef4d8c0%40sessionmgr112&vid=5&hid=102&bdata=JnNpdGU9ZWhvc3QtbGl2 ZQ%3d%3d#db=a9h&AN=87614103 Grimes, P. W., Rogers, K. E., & Smith, R. (2010). High school economic education and access to financial services. Journal Of Consumer Affairs, 44(2), 317-335. Retrieved from http://ehis.ebscohost.com/ehost/detail?sid=ed8805f6-0e5c-462f-ada3990022f74e3d%40sessionmgr111&vid=5&hid=102&bdata=JnNpdGU9ZWhvc3QtbGl2 ZQ%3d%3d#db=a9h&AN=51126884 Hite, N., Slocombe, T., Railsback, B., & Miller, D. (2011). Personal finance education in recessionary times. Journal Of Education For Business, 86(5), 253-257. Retrieved from http://ehis.ebscohost.com/ehost/detail?sid=3b6ecdd2-d867-4815-84e3c6ca52d6bb1b%40sessionmgr113&vid=5&hid=102&bdata=JnNpdGU9ZWhvc3QtbGl2 ZQ%3d%3d#db=a9h&AN=61460057 Mandell, L., & Klein, L. (2009). The impact of financial literacy education on subsequent financial behavior. Journal Of Financial Counseling & Planning, 20(1), 15-24. Retrieved from http://ehis.ebscohost.com/ehost/detail?sid=357ac4d7-7b6c-435d-af1743a8f920ff15%40sessionmgr110&vid=5&hid=102&bdata=JnNpdGU9ZWhvc3QtbGl2 ZQ%3d%3d#db=a9h&AN=43915999 Secino, A. (2013, May 30). Can good financial behavior be taught in high school? Forbes. Retrieved from http://www.forbes.com/sites/hbsworkingknowledge/2013/05/30/cangood-financial-behavior-be-taught-in-high-school/ School profile. (2012). Washington County Public Schools. Retrieved from http://wcs.k12.va.us/profile Test your financial literacy Jump$tart Coalition 2008 test for college students. (2008). Student Lending Analytics Blog. Retrieved from http://studentlendinganalytics.typepad.com/student_lending_analytics/2008/09/test-yourfinancial-literacy---jumpstart-coalition-2008-test-for-college-students.html

28 ASSESSING THE IMPACT

Vocabulary. (2013). Finance in the Classroom. Retrieved from http://financeintheclassroom.org/student/vocabulary.shtml Walstad, W. B., Rebeck, K., & MacDonald, R. A. (2010). The effects of financial education on the financial knowledge of high school students. Journal of Consumer Affairs, 44(2), 336-357. Retrieved from http://ehis.ebscohost.com/ehost/detail?sid=24950ae5-035b49fb-b498e3431b8e3cd8%40sessionmgr15&vid=6&hid=6&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ %3d%3d#db=a9h&AN=51126883 Washington County, Virginia profile. (2013). City-Data. Retrieved from http://www.citydata.com/county/Washington_County-VA.html

29 ASSESSING THE IMPACT

-Appendices-

30 ASSESSING THE IMPACT Appendix A Class Assignment Name _______________________________

Personal Budget Worksheet


Part A Your Career
1. Which occupation were you assigned?

2. What is the average yearly income for individuals with this career? What is this income on a monthly basis (annual salary/12)? Note: Use online career resources to find this info.

3. How much education will you need for this career?

4. If you have a spouse, what is their assigned occupation? What is the average annual salary for this occupation? What is this income on a monthly basis (annual salary/12)? 5. What is your familys total yearly income (your income + spouses income)? What is this on a monthly basis?

Part B Calculating Your Budget


Multiply your total monthly income by each of the percentages below (ex: income x .28) to determine how much you can spend in each category per month. Salary (Part A #5) x percent. Housing 28% Automobile 12% Utilities 5% Taxes 16%

31 ASSESSING THE IMPACT Food 18% Savings 5% Entertainment 5% Misc./Other 11%

Part C Finding a House


1. Based on the monthly income in part B, what is the maximum amount you can spend on monthly house payments?

2. Use an online mortgage calculator to determine the maximum amount you can spend on a house (the total cost of the house) that will give you a monthly payment you can afford. What is the maximum amount you can spend on a house? (When using the online calculator, use a 20 year mortgage, with a 6% fixed interest rate, and a $5,000 down payment).

Now, search for a house that you would like to purchase for your family that is in your price range. (Use a local realtors website ex: Highlands Realty, Callebs Realty, Meade Realty etc.). Answer the questions below.

3. How much does it cost?

4. Where is your house located?

5. How many bedrooms are in house? Bathrooms?

6. Which web site did you use?

7. What will your monthly payments be on this house? Use mortgage calculator. (When using the online calculator, use a 20 year mortgage, with a 6% fixed interest rate, and a $5,000 down payment).

32 ASSESSING THE IMPACT

Part D Finding a Car


1. Based on the monthly income in part B, what is the maximum amount you can spend on monthly car payments?

2. Use an online car payment calculator to determine the maximum amount you can spend on a car (the total cost of the car) that will give you a monthly payment you can afford. What is the maximum amount you can spend on a car? (When using the online calculator, use a 5% tax rate, with a 3% interest rate, and a $2,000 down payment on a 36 month loan).

Now, search for a car that you would like to purchase for your family that is in your price range. (Use a local dealers website) Answer the questions below.

3. What kind of vehicle did you decide to purchase?

4. Is your vehicle new or used?

5. Where did you purchase it?

6. What will your monthly payments be on this car? Use payment calculator. (When using the online calculator, use a 5% tax rate, with a 3% interest rate, and a $2,000 down payment on a 36 month loan).

Part E
1. Record your monthly mortgage payment and car payment in your record of monthly expenses.

*Although the worksheet was redesigned, its format was derived from the personal budget worksheet created by Bzinak (2013), the project facilitator for Virtual High School.

33 ASSESSING THE IMPACT Appendix B Pre and Post Test Name:_______________ Course:_________ Instructions: Please circle the response below that best answers each question. Date:_______

Financial Literacy Assessment


1. Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that last several years? a.) b.) c.) d.) 2. Older, working couples saving for retirement. Older people living on fixed retirement income.* Young couples with no children who both work. Young working couples with children.

Which of the following is true about sales taxes? a.) b.) c.) d.) The national sales tax percentage rate is 6%. The federal government will deduct it from your paycheck. You dont have to pay the tax if your income is very low. It makes things more expensive for you to buy. *

3.

Rebecca has saved $12,000 for her college expenses by working part-time. Her plan is to start college next year and she needs all of the money she saved. Which of the following is the safest place for her college money? a.) b.) c.) d.) Locked in her closet at home. Stocks. Corporate bonds. A bank savings account.*

4.

Which of the following types of investment would best protect the purchasing power of a familys savings in the event of a sudden increase in inflation? a.) b.) c.) d.) A 10-year bond issued by a corporation. A certificate of deposit at a bank. A twenty-five year corporate bond. A house financed with a fixed-rate mortgage.*

34 ASSESSING THE IMPACT

5.

Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income? a.) b.) c.) d.) When you need to buy a car to get a much better paying job.* When you really need a week vacation. When some clothes you like go on sale. When the interest on the loan is greater than the interest you get on your savings.

6.

Which of the following statements best describes your right to check your credit history for accuracy? a.) Your credit record can be checked once a year for free.* b.) You cannot see your credit record. c.) All credit records are the property of the U.S. Government and access is only available to the FBI and Lenders. d.) You can only check your record for free if you are turned down for credit based on a credit report.

7.

Your take home pay from your job is less than the total amount you earn. Which of the following best describes what is taken out of your total pay? a.) b.) c.) d.) Social security and Medicare contributions. Federal income tax, property tax, and Medicare and Social Security contributions. Federal income tax, social security and Medicare contributions.* Federal income tax, sales tax, and social security contribution.

8.

Retirement income paid by a company is called: a.) b.) c.) d.) 401 (k). Pension.* Rents and profits. Social Security.

9.

Many people put aside money to take care of unexpected expenses. If Juan and Elva have money put aside for emergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away? a.) Invested in a down payment on the house.* b.) Checking account. c.) Stocks. d.) Savings account.

35 ASSESSING THE IMPACT 10. David just found a job with a take-home pay of $2,000 per month. He must pay $900 for rent and $150 for groceries each month. He also spends $250 per month on transportation. If he budgets $100 each month for clothing, $200 for restaurants and $250 for everything else, how long will it take him to accumulate savings of $600. a.) b.) c.) d.) 11. 3 months. 4 months.* 1 month. 2 months.

Sara and Joshua just had a baby. They received money as baby gifts and want to put it away for the babys education. Which of the following tends to have the highest growth over periods of time as long as 18 years? a.) b.) c.) d.) A checking account. Stocks.* A U.S. Govt. savings bond. A savings account.

12.

Barbara has just applied for a credit card. She is an 18-year-old high school graduate with few valuable possessions and no credit history. If Barbara is granted a credit card, which of the following is the most likely way that the credit card company will reduce ITS risk? a.) b.) c.) d.) It will make Barbaras parents pledge their home to repay Karens credit card debt. It will require Barbara to have both parents co-sign for the card. It will charge Barbara twice the finance charge rate it charges older cardholders. It will start Barbara out with a small line of credit to see how she handles the account.*

13.

Chelsea worked her way through college earning $15,000 per year. After graduation, her first job pays $30,000. The total dollar amount Chelsea will have to pay in Federal Income taxes in her new job will: a.) Double, at least, from when she was in college.* b.) Go up a little from when she was in college. c.) Stay the same as when she was in college. d.) Be lower than when she was in college.

14.

Which of the following best describes the primary sources of income for most people age 20-35? a.) b.) c.) d.) Dividends and interest. Salaries, wages, tips.* Profits from business. Rents.

36 ASSESSING THE IMPACT 15. If you are behind on your debt payments and go to a responsible credit counseling service such as the Consumer Credit Counseling Services, what help can they give you? a.) They can cancel and cut up all of your credit cards without your permission. b.) They can get the federal government to apply your income taxes to pay off your debts. c.) They can work with those who loaned you money to set up a payment schedule that you can meet.* d.) They can force those who loaned you money to forgive all your debts. 16. Rob and Mary are the same age. At age 25 Mary began saving $2,000 a year while Rob saved nothing. At age 50, Rob realized that he needed money for retirement and started saving $4,000 per year while Mary kept saving her $2,000. Now they are both 75 years old. Who has the most money in his or her retirement account? a.) b.) c.) d.) 17. They would each have the same amount because they put away exactly the same Rob, because he saved more each year Mary, because she has put away more money Mary, because her money has grown for a longer time at compound interest*

Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage? a.) You are covered by your parents insurance until you marry, regardless of your age. b.) If your parents become unemployed, your insurance coverage may stop, regardless of your age. * c.) Young people dont need health insurance because they are so healthy. d.) You continue to be covered by your parents insurance as long as you live at home, regardless of your age.

18.

Don and Bill work together in the finance department of the same company and earn the same pay. Bill spends his free time taking work-related classes to improve his computer skills; while Don spends his free time socializing with friends and working out at a fitness center. After five years, what is likely to be true? a.) b.) c.) d.) Don will make more because he is more social. Don will make more because Bill is likely to be laid off. Bill will make more money because he is more valuable to his company.* Don and Bill will continue to make the same money.

37 ASSESSING THE IMPACT 19. If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to Federal law? a.) b.) c.) d.) 20. $500 $1000 Nothing. $50*

Which of the following statements is NOT correct about most ATM (Automated Teller Machine) cards? a.) You can generally get cash 24 hours-a-day. b.) You can generally obtain information concerning your bank balance at an ATM machine. c.) You can get cash anywhere in the world with no fee.* d.) You must have a bank account to have an ATM Card.

21.

Matt has a good job on the production line of a factory in his home town. During the past year or two, the state in which Matt lives has been raising taxes on its businesses to the point where they are much higher than in neighboring states. What effect is this likely to have on Matts job? a.) Higher business taxes will cause more businesses to move into Matts state, raising wages. b.) Higher business taxes cant have any effect on Matts job. c.) Marks company may consider moving to a lower-tax state, threatening Matts job.* d.) He is likely to get a large raise to offset the effect of higher taxes.

22.

If you have caused an accident, which type of automobile insurance would cover damage to your own car? a.) b.) c.) d.) Comprehensive. Liability. Term. Collision.*

38 ASSESSING THE IMPACT 23. Scott and Eric are young men. Each has a good credit history. They work at the same company and make approximately the same salary. Scott has borrowed $6,000 to take a foreign vacation. Eric has borrowed $6,000 to buy a car. Who is likely to pay the lowest finance charge? a.) b.) c.) d.) Eric will pay less because the car is collateral for the loan. * They will both pay the same because the rate is set by law. Scott will pay less because people who travel overseas are better risks. They will both pay the same because they have almost identical financial backgrounds.

24.

If you went to college and earned a four-year degree, how much more money could you expect to earn than if you only had a high school diploma? a.) b.) c.) d.) About 10 times as much. No more; I would make about the same either way. A little more; about 20% more. A lot more; about 70% more. *

25.

Many savings programs are protected by the Federal government against loss. Which of the following is not? a.) b.) c.) d.) A U. S. Savings Bond. A certificate of deposit at the bank. A bond issued by one of the 50 States.* A U. S. Treasury Bond.

26.

If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance? a.) b.) c.) d.) An elderly retired man, with a wife who is also retired. A young married man without children. A young single woman with two young children.* A young single woman without children.

27. Which of the following instruments is NOT typically associated with spending? a.) b.) c.) d.) Debit card. Certificate of deposit.* Cash. Credit card.

39 ASSESSING THE IMPACT 28. Which of the following credit card users is likely to pay the GREATEST dollar amount in finance charges per year, if they all charge the same amount per year on their cards? a.) Jessica, who pays at least the minimum amount each month and more, when she has the money. b.) Vera, who generally pays off her credit card in full but, occasionally, will pay the minimum when she is short of cash c.) Megan, who always pays off her credit card bill in full shortly after she receives it. d.) Erin, who only pays the minimum amount each month.* 29. Which of the following statements is true? a.) Banks and other lenders share the credit history of their borrowers with each other and are likely to know of any loan payments that you have missed.* b.) People have so many loans it is very unlikely that one bank will know your history with another bank c.) Your bad loan payment record with one bank will not be considered if you apply to another bank for a loan. d.) If you missed a payment more than 2 years ago, it cannot be considered in a loan decision. 30. Dan must borrow $12,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate? a.) b.) c.) d.) 31. If he went to a state college rather than a private college. * If his parents cosigned the loan. If his parents took out an additional mortgage on their house for the loan. If the loan was insured by the Federal Government.

If you had a savings account at a bank, which of the following would be correct concerning the interest that you would earn on this account? a.) b.) c.) d.) Earnings from savings account interest may not be taxed. Income tax may be charged on the interest if your income is high enough.* Sales tax may be charged on the interest that you earn. You cannot earn interest until you pass your 18th birthday.

* Denotes correct answer (Questions taken from 2008 Jump $tart Financial Literacy Test for College Students)

40 ASSESSING THE IMPACT Appendix C Short Essay Assignment Financial Literacy Short Essay Assignment Name:_______________ Class Period:______ Instructions: For each of the following questions, please construct a short essay that reflects your current knowledge of the given prompt. When constructing these essays, please be sure to write in a business language that reflects your knowledge of relevant terms and concepts. Each essay must be a minimum of 300 words, typed, and stapled to this sheet. Date:__________

Short Essay Prompts: 1) Please journal about your knowledge of constructing a budget, managing a households finances, paying bills, and living on a particular level of income.

2) Please journal on your knowledge of personal financial planning in regards to savings, retirement, health benefits, wills, etc.

3) Please journal on your knowledge of various financial services in regards to bank accounts, loans, mortgages, saving accounts, and insurance.

4) Please journal on your knowledge of taxes and the various types of taxes individuals and families must pay.

5) Please journal on your knowledge of the steps involved in purchasing a home.

6) Please journal on your knowledge of making major purchases other than a home, such as an automobile, boat, four wheeler, etc.

41 ASSESSING THE IMPACT Appendix D Personal Finance Vocabulary Terms

Personal Finance Vocabulary


AAdvertising - To make something known generally or in public, especially in order to sell it. Affinity Fraud - A scam that targets members of a certain demographic. Amortization - Payment of a portion of the principle of a mortgage loan, reducing or amortizing the mortgage amount. Annual Percentage Rate (APR) - The total annual percentage amount it will cost a person to use credit. Annual Report - Audited document required by the SEC and sent to a public companys or mutual fund's shareholders at the end of each fiscal year, reporting the financial results for the year (including the balance sheet, income statement, cash flow statement and description of company operations) and commenting on the outlook for the future. ARM - A mortgage on which the interest rate can move up and down on a periodic basis. Asset - Any items of value that people own, including cash, property, personal possessions, and investments. Automobile Insurance - Insurance purchased for cars, trucks, and other road vehicles. Its primary use is to provide protection against physical damage and/or bodily injury resulting from traffic collisions and against liability that could also arise there from.

-BBait and Switch - Baiting consumers with an advertised but nonexistent bargains and then switching them to a more expensive product. Bank - An institution that handles savings and checking accounts, issues loans and credit, and deals in government and corporate issued securities. Bankruptcy - A legal process to get out of debt when you can no longer make all your required payment. Beneficiary - The person designated to receive the benefits of the policy upon the death of another individual.

42 ASSESSING THE IMPACT Benefit - Something the company offers besides a paycheck. Better Business Bureau (BBB) - A nonprofit, business-sponsored agency with local offices dedicated to educating consumers, helping to resolve disputes, and promoting honest business practices. (www.bbb.org) Bond - A certificate of debt that is issued by a government or corporation in order to raise money with a promise to pay a specified sum of money at a fixed time in the future and carrying interest at a fixed rate. Borrowing - Obtaining funds from a lender. Bounced Checks - A check that a bank returns because it is not payable due to insufficient funds - also called rubber check. Broker - An individual or firm who acts as an intermediary between a buyer and seller, usually charging a commission. For securities and most other products, a license is required. Budget - A plan for spending and saving money based on a persons goals during a given time period. (See Spending Plan) Bureau of Consumer Protection - A federal agency (a division of the FTC) that provides state and local consumer protection to help answer consumer problems and enforce consumer protection and fraud laws. Business Plan - A written document that outlines measures and actions to define where you want to go and how you will get there. Buy and Hold - An investment strategy in which stocks are bought and then held for a long period, regardless of the market's fluctuations. Buying on Margin - A risky technique involving the purchase of securities with borrowed money, using the shares themselves as collateral.

-CCafeteria-Style Benefits - Allows workers to choose the benefits that best meet their personal needs. Career - A life-work chosen by a person to use personal talent, provide some service or goods, earn money, and contribute to society. Career Plan - Outlines the steps you need to take to reach your career goal.

43 ASSESSING THE IMPACT Catastrophic Health Insurance - Often included in major medical insurance policies. It covers the costs of intensive care, heart surgery, or long illness. Certificate of Deposit (CD) - A savings alternative in which money is left on a stated time period (ranging from a month to five or more years) to earn a specific rate of return. Charitable Giving - A gift made by an individual or an organization to a nonprofit organization, charity or private foundation. Charitable donations are commonly in the form of cash, but can also take the form of real estate, motor vehicles, clothing and other assets or services. Checking account - A transaction deposit account at a financial institution that that allows consumers to make deposit and withdrawals. Money that is in a checking account is very liquid, meaning it can be easily accessed. It can be withdrawn using checks, automated cash machines and electronic debits. Claim - A formal request made to an insurance company for payment for a loss. Closing Costs - Fees and charges for which a seller and buyer are responsible when a real estate transaction is completed; also known as settlement costs. Collateral - A form of security to help guarantee that a creditor will be repaid. Collectibles - An item which has value due to its rarity and desirability, such as coins. Collision Insurance - Will cover the cost of repairing your car if it is damaged in an accident with another vehicle. Compound Interest - Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. Comprehensive Insurance - Covers your car if it is damaged by fire, flood, earthquake, hurricane, hail or collision with an animal. It also covers losses if your car is stolen. Consequence - An often bad or inconvenient result of a particular action or situation. Consumer - A person who purchases and uses goods or services. Consumer Bill of Rights - State of the Union Address of 1962-President John F. Kennedy The right to safety - protection against the sale of products that are dangerous to life or health. The right to choose - protection against practices that result in noncompetitive prices for goods and services available. The right to be informed - protection against false and misleading advertising.

44 ASSESSING THE IMPACT The right to be heard - guarantee of consumer representation in the deciding of government policy and enforcement of consumer protection laws. Consumer Product Safety Commission (CPSC) - A federal agency that which sets and enforces safety standards household appliances, toys, and tools. (www.cpsc.gov) Consumer Protection Laws - Laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional protection for the weak and those unable to take care of themselves. Contract - An agreement between two or more people that can be enforced by law. Co-signer - Agreeing to be responsible for loan payments if the borrower fails to make them. Cost of Living - Cost of food, transportation, housing, and other expenses. Credit - An arrangement to receive cash, goods, or services now and pay for them in the future. Credit Bureau - Company that collects information about your credit history and sells it to lenders. (Equifax (www.equifax.com), Trans Union (www.transunion.com), Experian (www.experian.com) Credit Card - A plastic card that can be used by the holder to make purchases or obtain cash advances using a line of credit made available by the card-issuing financial institution. Credit Rating - A measure of a persons ability and willingness to make credit payments on time. Credit Report - A record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history. Credit Score - A number, generally between 300 and 800, that reflects the credit history shown in a borrower's credit report. This score is considered predictive of the borrower's future credit performance. Credit Union - A cooperative financial institution, chartered by a state or federal government, which is member-owned. Credit Unions serve groups that share something in common, such as where they work, live, or go to church. Credit Worthiness - This is determined before you are given the option to buy or get credit. The guidelines used to determine your credit worthiness are character, capacity, and capital. Character - is established by your conduct and living habits. Capacity - is your ability to earn enough income to repay.

45 ASSESSING THE IMPACT Capital - is what you own. It includes savings, investments, and property. Creditor - An entity (bank, finance company credit union, business, or individual) to which money is owed. Culture - The way of life, especially the general customs and beliefs, of a particular group of people at a particular time.

-DDebt - The entire amount of money a person owes to lenders. Debt Collectors - Businesses that collect debts for creditors. Decision-Making - The process of considering and analyzing information in order to make a choice. Deductable - Regarding insurance policies: A set amount an insured person must pay per loss before the insurance company will pay a claim. Default - Failure to repay a loan in accordance with the terms of the promissory note. Deficiency Clause - A creditor can repossess, or take back, and resell goods. Delayed Payment - To make a payment at a later time than originally planned or expected. Demand - The amount of goods and services people are willing to buy. Depository Institution - A business that offers financial services to people. Disability Income Health Insurance - Protects a person or family from loss of income due to illness or disabling injury. It Guarantees the continuation or a portion of the wage earners salary during the time he/she is unable to work. Discount Broker - Full-service broker who charges less than the prevailing commission rates in his or her community. Diversification - The process of spreading ones assets among several different types of investments in order to reduce risk. Dollar Cost Averaging - An investment strategy in which securities (typically mutual funds) are purchased in fixed dollar amounts at regular intervals -- regardless of how the market is performing.

46 ASSESSING THE IMPACT

-EEconomic Conditions - Consumer prices (inflation), consumer spending, and interest rates. Economic Reasoning - Making decisions by comparing costs and benefits. Economy - Consists of the ways in which people make, distribute, and use their goods and services. Entrepreneur - One who organizes, manages, and assumes the risks of a business or enterprise. Escrow Account - An account usually set up by a mortgagee for a purpose of collecting and paying property taxes and insurance on the property. Estate - All that a person owns, less debts owed, at the time of death. Estate Planning - Preparing a plan for transferring property during ones lifetime and at ones death. Exemption - A tax break received because of particular circumstances. Expenses - Any money a person spends or gives away.

-FFDIC - Federal Deposit Insurance Corporation A federal agency that insures deposits in member banks up to $250,000 Federal Citizen Information Center (FCIA) - Assists federal agencies in the development, promotion, and distribution of practical consumer publications. (www.pueblo.gsa.gov/) Federal Trade Commission (FTC) - A federal agency that protects consumers against false advertising, illegal sales schemes, and unfair trade practices. (www.ftc.gov) Finance Charge - The total dollar amount a person pays to use credit. Financial Goals - A statement of something a person wants or needs to do that pertains to finances and/or money. Common reasons for setting financial goals are: saving for a comfortable retirement, saving for college, and managing finances to enable a home purchase. Financial goals should be Specific, Measurable, Attainable, Realistic, and Time-bound (SMART). Financial Planner - A specialist who is trained to offer specific financial help and advice.

47 ASSESSING THE IMPACT Financial Planning - A blueprint or plan for managing all aspects of a persons money. Financial Services - Programs that offer aid with money management. Fiscal Policy - Changes in the expenditures or tax revenues of the federal government, undertaken to promote full employment, price stability and reasonable rates of economic growth. Fixed Expense - Expenses that are the exact amount every time. Food and Drug Administration (FDA) - A federal agency that sets and enforces safety standards for food, drugs, and cosmetics. (www.fda.gov) Fraud - A deliberate deception, designed to secure unfair or unlawful gain. Full-service Broker - A brokerage which, in addition to executing trades for its clients, also provides them with research and advice.

-GGambling - Any behavior that involves the risking of money or valuables on the outcome of a game, contest, or other event. This event or game may be in part or totally dependent upon chance. Garnishment - A court order to an employer to withhold some of an employees wages; that money must be sent to the court to pay someone who has won a lawsuit against the employee. Goals - A statement of something a person wants or needs to do. Good - A physical object that is produced and can be weighed or measured. Grace Period - The time between the billing date and the payment due date when no interest is charged. Gross Earnings - An individual's taxable income before any appropriate adjustments are made. Gross Income - Total income amount of income from wages or salary before payroll deductions. Group Health Insurance - This is usually less expensive than individual policies. The employer pays a share of the cost and sometimes all of it.

48 ASSESSING THE IMPACT -HHard Assets - Hard assets often refer to items such as buildings, cash or other fungible assets. Hard assets are considered particularly valuable because they can be used to produce or purchase other goods or services. Health Insurance - Insurance against loss due to ill health. Homeowner's Insurance - A form of insurance that protects the insured property against loss from theft, liability and most common disasters. Human Capital - The set of skills which an employee acquires on the job, through training and experience, and which increase that employee's value in the marketplace.

-IIdentity Theft - Someone wrongfully acquires and uses a consumers personal identification, credit, or account information. Impulse Buying - Purchasing items on the spur of the moment. Income - Money that a person receives; such as a paycheck from a job, an allowance from parents (inheritance), or interest earned on a savings account. Income Tax - The governments leading source of revenue (money). Inflation - The general rise in the level of prices for goods and services over time. Installment Loans - A loan in which the amount of payment and the number of payments are predetermined, such as an automobile loan. Insurance - A method for spreading individual risk among a large group of people to make losses more affordable for all. Insurance Policy - Insurance contract. Insurance Rates - Rates are based on risk. Risk is the chance of losing something. An insurance company has greater risk when there is a greater chance of an accident. The greater the risk to an insurance company, the higher the rated it charges. Rating Territories - Higher in cities, lower in rural areas. Driver classification - Age, sex, marital status, how much you drive, and your driving record are considered in setting rates.

49 ASSESSING THE IMPACT Age and type of car - Higher for cars that are more expensive to repair. Rates are higher for sports cars than for sedans. Coverage - The greater the coverage the higher the rate. Interest - The amount paid for the use of borrowed money. Interest Rate - The cost of borrowing money, expressed as a percentage, usually over a period of one year. Investing - An item of value purchased for income or capital appreciation. Investment - The use of savings to earn a financial return. Investment Advisor - Someone who advises others how to invest their money. Investment Broker - Investment brokers are individuals who bring together buyers and sellers of investments. They need a license to operate. They act on behalf of buyers and sellers of stock. They charge a commission on trades. Investment Vehicles Types of investments such as stocks, bonds, real estate, and hard assets. IRA - Individual Retirement Account A tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 or later (or earlier, with a 10% penalty).

-LLate Fees - The fees that credit-card companies charge when you pay your bill past the due date. Leave - A period of time away from your job, sometimes paid for. Lender - An organization or person that lends money to borrowers. Liability Insurance - Protects you whether you are driving or someone else is driving your car with your permission. Life Insurance - A form of insurance on the life of a person. If the person dies then the insurance policy pays out a sum of money to the policyholder (such as a person's family). Life Style - The way a person chooses to spend his or her time and money. Liquidity - The ability to easily convert financial resources into cash without a loss of value.

50 ASSESSING THE IMPACT Living Trust - Transfer some property to a trustee, giving him/her instructions regarding it management and disposition while you are alive and after your death. Loan - A sum of money given to an individual with the intent that it is to be repaid at some future date along with any agreed upon interest. Loan Agency - An agency that offers loans. Long Term Disability Insurance - A disability insurance designed to offer income payments for long-term injuries, illnesses or disabilities. Long- term if often considered over 90 days.

-MMajor Medical Insurance - This covers many out-of-hospital costs. It may also extend your basic policy and any additional days of hospital care. Marketing - To make goods available to buyers in a planned way which encourages people to buy more of them. Monetary Policy - Changes in the supply of money and the availability of credit initiated by a nation's central bank to promote price stability, full employment and reasonable rates of economic growth. Money Management - How a person manages money coming in and going out. Money Market - A savings account in which the interest rate varies as market rates change. Monopoly - A company that has an unfair advantage over competitors in an area of business. Mortgage - An agreement that a borrower gives a lender in return for the lender giving a loan for the purpose of buying property. Mutual Fund - An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Need The essentials or basics of life.

-NNeeds - The essentials or basics of life. Net Income - The amount of a paycheck that a person can actually spend; gross income less any payroll deductions.

51 ASSESSING THE IMPACT No-Fault Insurance - The driver's own insurance company pays for accident costs no matter who caused the accident.

-OOnline Broker - Many broking firms offer an online trading platform that allows customers to control their orders with the click of a mouse. The fees are usually a fraction of the full service brokers. Online Commerce - Involves multiple transactions or the transfer of payment information across a secure Internet connection in exchange for goods and services. Opportunity Cost - The value of what is given up when a person chooses one option over another. Outstanding Check - A check that has been written but that has not cleared the bank.

-PPayday Loans - A loan or advance that is put into your bank account or provided as cash in a short time period, usually within a day. At the end of the loan term, the cash borrowed as a payday loan will be withdrawn from the borrower's bank account. Payment Methods - A means for accepting payment. The most common are credit card, electronic check, phone charge, corporate account, and invoice. Payment Penalty - A penalty assessed because of paying off a loan or a payment too late. Believe it or not, sometimes there are PRE-payment penalties assessed for paying off a loan TOO EARLY!! Payroll Deductions - Amounts subtracted from gross income that is withheld by an employer for items like taxes and employee benefits. Peer Pressure - The strong influence of a group on members of that group to behave as everyone else does. Pension Plan - Retirement plan that is funded at least in part by an employer. Permanent Life Insurance - Life insurance that provides a death benefit plus a savings plan and lasts for the policy holders lifetime.

52 ASSESSING THE IMPACT Personal Financial Planning - Spending, saving, and investing money so a person can have the kind of life desired as well as financial security. Phishing - An e-mail scam that attempts to trick consumers into revealing personal information or use e-mail to "fish" the Internet hoping to hook people into giving their passwords and/or credit card information. Points - A mortgage term that refers to the fee a lender charges the borrower for lending money. Ponzi Scheme - Is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. The scheme is named after Charles Ponzi who became notorious for using the technique in early 1920. Predatory Lending - A type of lending that falls between appropriate risk-based pricing and blatant fraud. An example would be a broker who writes loans for people who they know cannot afford the repayments, expecting them to default but going through the transaction for the sake of their commission. Premium - The amount of money you pay for your insurance. Pretexting - The practice of getting your personal information under false pretenses and selling your information to people who may use it to get credit in your name, steal your assets, or to investigate or sue you. Probate - A court supervised process of paying your debts and distributing your property to your heirs upon your death. Productivity - The ratio of the quantity and quality of units produced to the labor per unit of time. Promissory Note - The legal and binding contract signed between the lender and the borrower who states that the borrower will repay the loan as agreed upon in the terms of the contract. Prospectus - A document that discloses information about a companys earnings, its assets and liabilities, its products or services, and the qualifications of its management. A report that provides potential investors with detailed information about a particular mutual fund. PYF (Pay Yourself First) - A popular phrase used to describe what people should do to stay on track with saving money. Basically meaning that the first deposit out of a person's paycheck should be into a savings account or retirement account. Pyramid Schemes - A type of financial fraud in which people pay to join an organization in exchange for the right to sell memberships to others.

53 ASSESSING THE IMPACT

-RReal Estate - A piece of land, including the air above it and the ground below it, and any buildings or structures on it. Reconcile - To check a financial account against another for accuracy. Regulatory Pyramid - The U.S. securities regulates itself in a careful and through manner. The market protects and maintains its integrity through the combined efforts of four basic groups. Together these groups form what the industry refers to as the Regulatory Pyramid. Renter's Insurance - A form of insurance that protects the insured renter to protect personal items against theft or damage. Although a landlord will likely have insurance, that insurance will only cover the building of the apartment and not the personal items in the apartment. Repossess - Forced or voluntary surrender of merchandise as a result of a consumer's failure to repay a loan as promised. Retirement - The age at which you stop working full time. Retirement Planning - Act of creating a financial plan for life after retirement from compensated work. Return - The annual return on an investment, expressed as a percentage of the total amount invested. Revolving Credit - A type of credit that does NOT have a fixed number of payments, such as a credit card. Risk - A situation in which some kind of loss is possible. Risk Management - Procedures to minimize the adverse effect of a possible financial loss by: 1) identifying potential sources of loss; 2) measuring the financial consequences of a loss occurring; and 3) using controls to minimize actual losses or their financial consequences. Risk-return - The relation between risk and return in which one must be willing to accept greater risk if one wants to pursue greater returns. Roth IRA - A type of IRA, established in the Taxpayer Relief Act of 1997, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Rule of 72 - Formula used to determine how long it takes for money to double in value.

54 ASSESSING THE IMPACT

-SSales Strategies - A way of talking that is intended to persuade people to buy something. Savings - The part of a person's income that is not spent. Savings Account - A deposit at a bank or savings and loan that pays interest, but cannot be withdrawn in check writing. Scam - Fraudulent or deceptive schemes. Scarcity - When something is not easy to find or obtain. Security Exchange Commission (SEC) - Securities and Exchange Commission. The primary federal regulatory agency for the securities industry, whose responsibility is to promote full disclosure and to protect investors against fraudulent and manipulative practices in the securities markets. Service - A task that a person or machine performs. Service Credit - A member's earned service, prior service, and purchased service. Short Selling - Borrowing a security from a broker and selling it with the understanding that it must later be bought back, hopefully at a lower price, and returned to the broker. Simple Interest - The interest calculated on a principal sum, not compounded on earned interest. Skimming - The theft of credit card information used in an otherwise legitimate transaction. Small Claims Court - A simple, inexpensive way to settle minor differences involving small amount of money. Social Security - The comprehensive federal program of benefits providing workers and their dependents with retirement income, disability income, and other payments. The Social security tax is used to pay for the program. Spending Plan - A tool used to record and track projected and actual income and expenses over a period of time. (See Budget) Standard of Living - A measure of quality of life based on the amounts and kinds of goods and services a person can buy. Stock - An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's assets and profits.

55 ASSESSING THE IMPACT Student Loans - Student loans are loans offered to students to assist in payment of the costs of professional education. These loans usually charger lower interest than other loans, and are also usually issued by the government. A student loan allows a person to finance their education and defer payments until after graduation. Supply - The amount of goods and services available for sale.

-TTax Sheltered Annuity (TSA) - A contract sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement. Taxes - A contribution made by people to fund the services provided by the government, such as transport, education or health services. The most common tax is income tax, which is a contribution made from income. The amount is usually a percentage of income that is determined by the amount of income earned. Term Life Insurance - Life insurance that pays a death benefit if the policyholder dies within a specific time period but has no remaining value at the end of this time. Time Value of Money - The increase in an amount of money as a result of dividends or interest earned. The idea that a dollar now is worth more than dollar in the future, even after adjusting for inflation, because a dollar now can earn interest or other appreciation until the time the dollar in the future would be received. Tradeoffs - A choice that involves giving up some of one thing to have more of another. Ex: In the morning my cousin spends a lot of time putting on make-up, she doesn't have enough time to eat breakfast because she has to go to school. The time she could spend on her nutrition is being given up. Treasury Bill (T-Bill) - A negotiable debt obligation issued by the U.S. government and backed by its full faith and credit, having a maturity of one year or less. Exempt from state and local taxes. Trust - A legal document in which an individual (trustor) gives someone else control of someone else (trustee) control of property, for ultimate distribution to another person (beneficiary). Types of Taxes - Two main types are Social Security and income taxes.

-UUnderinsured - A person who carries insufficient insurance to pay for losses he/she is liable for.

56 ASSESSING THE IMPACT Uninsured Motorist Insurance - Will cover you and your immediate family against injury by a hit-and-run driver or a driver who has no insurance. Uses of Taxation - To pay for the growing demand for services and needs of the government (military, police, roads, public servants, schools, social services).

-VValues - The beliefs and principles a person considers important, correct, and desirable. Variable Expense - Expenses that fluctuate.

-WWage - A fixed amount of money paid to an employee for each pay period. Wants - Items, activities, or services that increase the quality of life. Warranty - A company's promise that its product will meet specific standards over a given time period or replace or refund. Full Warranty: A written promise that the company will repair or replace a defective or dissatisfied product at no charge. Limited Warranty: May require the consumer to pay labor or handling charges. Implied Warranty of Merchantability: The product is what it is called and does what its name implies. Implied Warranty of Fitness: The product is fit for any performance or purpose promised by the seller. Whole Life Insurance - Insurance on the life of the insured for a fixed amount at a definite premium that is paid each year in the same amount during the entire lifetime of the insured. Will - A legal document that tells how the decedent wishes his/her property to be distributed upon death. (Vocabulary, Finance in the Classroom, 2013)