ECONOMIC AND FINANCIAL LITERACY LEARNING FRAMEWORK TO SUPPORT THOSE DEVELOPING CURRICULUM RE FINANCIAL CAPABILITY AND RESPONSIBILITY

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1 ECONOMIC AND FINANCIAL LITERACY LEARNING FRAMEWORK TO SUPPORT THOSE DEVELOPING CURRICULUM RE FINANCIAL CAPABILITY AND RESPONSIBILITY Developed by: Gary Rabbior, President, Canadian Foundation for Economic Education (CFEE) 110 Eglinton Avenue West, Suite 201, Toronto, Ontario, Canada, M4R 1A3 Phone: Direct - (905) General Office - (416) Cell (416) Fax: (905) gary.rabbior@rogers.com Alternate: gr@rogers.blackberry.net Web site:

2 1. MONEY AND DECISION-MAKING EARLY EXPERIENCES WITH MONEY DECISION-MAKING MONEY IN THE ECONOMY How bartering becomes difficult as the number of people and products and services increases How money makes exchange in the economy easier Reasons why we have money spending, saving, pricing What is used as money to pay for things What we can do with money Why money has value Resources, including money and peoples incomes, are limited and so we cannot have everything we want Every money decision we make involves a trade-off giving up something else Experience the problems that arise with bartering and how money makes it easier to exchange things Recognize money and the value of different denominations Have a sense of the value of money and how goods and services differ in value and cost Use money to spend and save Calculate correct change Think about options and the trade-offs when they make a money decision what they are giving up Consider the impact their money decisions may have on others Make decisions knowing they can t have everything they want The importance of clearly defining the problem, opportunity, or challenge before trying to make a decision Steps to take in making a good decision when using money The kinds of money decisions people face How money can be used to help others Countries use different kinds of money Ways the value of money can be increased Using credit is using someone else s money that will need to be repaid Identify the opportunity cost (best alternative) when making money decisions Use a decision-making process to make key decisions about money Change money of one country into the money of another country Apply decision-making skills when making key money decisions Identify the opportunity cost of key money decisions before they make any decision Consider the possible impact of their decisions on others Think about the future consequences of decisions made today Topic: Activity: What determines the amount of money in the economy How the amount of money in our economy is controlled Why people wouldn t be better off if we printed more money and gave it to all The effect inflation can have on the value (purchasing power) of money Money will help in achieving some life goals but not all Possible life goals they can consider Ways money can be used to increase the value of, and improve, things including skills and abilities Incentives that can affect money decisions and actions Set personal and financial goals Describe the role of the central bank Describe how the central bank can influence interest rates and the amount of money in the economy Recognize ways money can cause stress and tension Consider possible life goals short, medium, and long term Consider the impact of inflation on money decisions Have a sense of personal responsibility when making decisions and how their decisions may impact others Verify sources and quality of information that can affect their financial decisions and actions

3 2. SPENDING AND SAVING MONEY EARLY SPENDING AND SAVING DECISIONS The difference between needs and wants Spending and saving are two choices in how to use money Others can try and influence money decisions Spending uses money today, saving stores it for future use Why saving is important and the possible benefits from saving Where money can be saved and the role of banks Why we can t have everything we want Transfer money and purchase things needed and wanted Save money Open a bank account Assess how advertising can try to affect money decisions Consider the benefits that can come from saving for the future Consider whether something is needed or wanted before making a purchase As possible, save some of their money for the future Recognize and consider the influence and goal of advertising before making a spending decision 1. ADVERTISING 2. SAVING TO MAKE A DIFFERENCE Different ways to pay for things The advantages of comparing costs and benefits when making a consumer decision Some things we need and want may require saving sometimes over a long period of time (examples) Why people have different amounts of money to spend and save People make different money decisions for different reasons Why things they need and want differ in cost Others often try and influence how you use your money Production of products and services has to abide by regulations and laws protecting consumers Both consumers and producers have rights and responsibilities Set priorities for their needs and wants Find ways to save money Make good spending and saving decisions Use an ATM appropriately and safely Deal with the influences of others effectively when making money decisions Complain effectively about a product or service if justified As possible, save some of their money for future use Consider the trade-offs and opportunity cost today and in the future when making money decisions Avoid impulsive buying Consider the possible impact on others and the environment when making money decisions TOPICS: Needs and wants are sometimes difficult to tell apart Some spending decisions have greater consequences than others Spending and saving decisions can be helped with a budget Various factors can affect the prices of what we need and want A goal of saving is to increase future purchasing power Factors that can impact future purchasing power of saving (e.g., inflation, fees) Impact of compound interest Different factors and forces can influence saving and spending decisions at different times of one s life the life cycle Legal documents and contracts should be reviewed carefully 1. CELL PHONE DECISIONS 2. SAVING FOR POST-SECONDARY EDUCATION AND TRAINING Consider whether they need or want a product or service Compare advantages and disadvantages costs and benefits in making consumer decisions Track expenses and estimate their spending capacity Save for a specific purchase or goal Try and increase the value of money saved Calculate how much will be needed, and how to save, for their future education or training Compare the potential benefits of a purchase with the price being paid Make saving and spending decisions to live within their means Make thoughtful, informed, consumer decisions

4 3. PRODUCTION OF GOODS AND SERVICES Examples of natural, labour, capital, and technology resources that are available for production All resources are limited Some resources are renewable and some are not Resources are combined to make goods and services that people need and want and are willing to buy By specializing it is possible to produce more, and better, goods and services Specializing leads to the need for exchange and interdependence Opportunities for business and production are the needs, wants, challenges, and problems consumers face SURVIVAL SIMULATION Combine resources to see how a product is produced or a service is provided Provide examples of businesses in their community and the goods or services that they provide Provide examples of goods or services that are provided by governments in their community Identify an opportunity in their school or community something that people need, want, or see as a problem Consider new and better ways of combining and using resources they have Consider the possible effect of their decisions on others and the environment Act on an opportunity of any size when they see it in their class, school, home, community Work well with others to try and address an opportunity Countries have different types, quantities, and quality of resources The role and contributions of businesses and entrepreneurs Different kinds of businesses that exist Reasons a business may succeed or fail How consumers influence what is produced and the concept of consumer sovereignty Why some goods and service are produced by governments Examples of inventions and innovations that have affected production Key skills for entrepreneurship success BASICS OF BUSINESS Consider their own interest in entrepreneurship Describe contributions of business and entrepreneurs to the economy and to their community Develop enterprising skills to apply to any kind of endeavour Discuss and debate decisions as to what goods and services should be provided by business and/or governments Apply enterprising skills to a wide range of endeavours Support business activity that helps to improve and sustain the environment Identify and explore opportunities as they perceive them in school, at home, in their community Characteristics and skills common to many entrepreneurs Enterprising skills and abilities can be applied to all endeavours How to explore and identify opportunities How to compare and evaluate business opportunities Key steps in setting up an enterprise Key components of a plan to set up a business Roles of cooperatives, unions, NGOs., and volunteers in producing and providing goods and services COMMUNITY ENTERPRISE Assess their personal entrepreneurial interest and potential Identify and assess opportunities for enterprising initiative in their community Create and assess some ideas generated for an opportunity Develop a plan for an enterprising initiative to address an opportunity in their school or community Make informed decisions about their participation in the economy Follow news and events that might lead to opportunities and affect their actions and decisions Develop an effective plan to setup a business if they make the decision to become an entrepreneur Consider opportunities for social enterprise to start initiatives that could help others or sustain the environment

5 COMMUNITIES AT WORK GETTING A JOB AND EXPLORING PLANNING FOR LIFE CAREERS 4. GETTING AND EARNING MONEY Ways by which people can get money Why people get different amounts of money from different kinds of work Things that affect how much money a person can make How people with more money can help those with less Develop a good work ethic that helps them to earn income Identify and consider a wide variety of occupations that provide an opportunity to earn money Consider how their effort and quality of work can affect their ability to earn money Consider situations and make judgments with an understanding that people and households have different amounts of money available for many different reasons Appreciate things in life that do not require money Consider opportunities there may be to assist others Value all forms of work How people get paid for work e.g. wages, salaries, contracts, gross vs. net pay, types of deductions, etc. Benefits that may be possible to earn from work Factors affecting how much money they can get from employment Ways they can increase their ability to earn money The difference between employment income and earning money as an entrepreneur (profit) How it is possible to get money from investing in themselves and other investments Governments have programs to help people improve their ability to earn money Governments have programs to help those with low incomes How jobs change, and are changing, over time Role of unions in influencing income and benefits Identify sources of information regarding possible careers How to explore interest in different career options How to look for a job How to prepare a resume How to handle a job interview Estimate potential future income and possible income needs The risks in gambling to try and get more money Explore areas of personal interest or passion that may affect their future career choice Begin to plan for investments in skills and abilities to prepare for the future Effectively look for a job if they wish to do so Monitor payment for work done to ensure accuracy Avoid gambling problems and addiction The components of a career plan Occupations that are of personal interest Education and training needed for occupations of interest Estimate costs of post secondary education and training Sources of funding assistance for post-secondary education Factors affecting standard of living and quality of life Compare life goals requiring money with others that do not A balanced life means considering things other than money that are important Set career goals and develop a career plan Develop a sense of passion for what they like to do and would like to do Select post secondary education and training programs that align with their interests Identify sources of funding to help with post secondary education and training Align education, career, and work with their personal passion Find ways to invest in themselves to improve their ability to achieve their goals Live a balanced life considering both monetary and nonmonetary goals and priorities Consider careers that can contribute toward sustainability

6 5. BORROWING MONEY AND USING CREDIT RETURNING/REPAYING Why people borrow money What it means to borrow money Ways in which money can be borrowed Why there are costs to borrow money Where you can borrow money Borrow something and return it within a given time BORROWING AND Recognize there are limits to borrowing Accept responsibility for how much is borrowed since others may be willing to lend more than can reasonably be afforded Accept responsibility for returning something borrowed and return it Ways to pay for things over time Where you can borrow money The costs associated with borrowing money What a credit card is How a credit card works Different kinds of credit cards Factors affecting the costs of using a credit card What living within your means means Use a credit card wisely Estimate credit card debt that can be reasonably afforded Compare credit card types, services, and costs Use the services of a bank effectively CREDIT CARDS MANAGING DEBT AND CREDIT Use a credit card wisely Pick a credit card most suited to their needs Consider the risks and obligations that come with borrowing decisions Factors affecting how much you can borrow Factors affecting the cost of borrowing Advantages and disadvantages of credit cards Credit rating what it is Factors that will affect one s credit rating How a mortgage works and factors affecting the cost Signs a person may be heading for debt trouble What payday loans are, and the costs they entail Set reasonable, affordable limits on debt Make informed decisions regarding use of debt Check and maintain a good credit rating Estimate the mortgage a person can afford Take appropriate action if debt trouble should arise Apply for a loan and/or credit card Keep the costs of credit as low as possible Avoid paying higher costs to borrow than is reasonable/warranted Review contracts and legal documents carefully before making borrowing decisions Assume debts that are affordable Maintain a good credit rating Avoid debt problems Take advantage of the benefits that credit cards, and wise use of debt, can provide

7 IMPORTANCE OF PLANNING BUDGETING GOAL-SETTING AND PLANNING 6. BUDGETING, PLANNING, AND GOAL-SETTING Common costs to operate a household How a plan can help to achieve goals Benefits of having a plan to follow How and why plans can change Why planning to save money is important Why it is important to know how money is being Estimate how much is spent on different things Develop a plan to accomplish a task Adjust a plan if necessary to achieve a task Work with others to develop a plan and achieve a task Build a simple budget Know how money is being used and consider if the best use is being made of money Achieve goals or accomplish tasks by using a plan Review and change plans as needed What a budget is Benefits of working with a budget Different types of budgets How to estimate the costs of running a household Difference between a budget and plan Budgets and plans are used to achieve goals How to adjust a budget to achieve goals Develop a simple household budget Make changes to see how to reduce expenses Use a budget to help save money Use different strategies to save money Develop a plan to save to reach a goal Check and verify bank statements Keep track of expenses Spend what they can afford Find ways, as possible, to save Develop a plan to achieve tasks and goals How to set goals over different time periods short, medium, long term How goals can change over the life cycle Goals become more challenging when two or more people set shared goals Components of a good financial plan Importance of keeping receipts and records How to use a budget and plan to try to achieve goals Set some life goals Work with others to set shared goals Develop a detailed budget Develop a financial plan to achieve goals Modify a budget or plan if needed Track expenses Willing and able to work with a budget Willing and able to plan for the future Prepare for the unexpected Set some initial life goals and review goals over time Keep good records and receipts Begin to consider a plan for achieving financial independence (i.e. not required to work for income)

8 GRADE: Various 9-12 INVESTING TO MAKE A DIFFERENCE BASICS OF INVESTING MAKING SIMULATED INVESTMENTS 7. INVESTING MONEY The concept of investing that is, to make something change, grow, improve, etc. Different ways to invest time, effort, creativity, money Why a person might want to invest in something The concept of investing in yourself How resources can be invested to help others Identify ways they can invest in themselves Identify ways in which people, groups, organizations have invested in their community Make an investment of time, effort, ideas, money etc. to improve something in their class, school, or community Look for opportunities to improve things by investing time, ideas, innovative thinking, and money Recognize and appreciate investments made by others Make investments as they can to improve themselves, the circumstances of others, or the environment Investment is key to making improvements in our economy Investments in people, equipment, capital, and other resources contribute to growth, innovation, and employment Different kinds of basic investments (GICs, stocks, bonds, mutual funds) How the stock market works Investing can result in losses as well as gains Different kinds of investment income (interest, dividends, capital gains) Roles of banks and other financial institutions in investment The Rule of 72 to help predict the growth in value of an investment The impact compound interest can have on investments Identify investments that have led to improvements in the economy and their community Explain how investments in stocks can earn money and lose money Calculate interest that will be earned on a savings account or GIC investment Compare the risks of different kinds of investments Begin to invest resources they have time, ideas, effort, etc. to make improvements in their life If possible, start saving and investing early to provide longer time for growth Different kinds of investments (stocks, bond, GIC, etc.) Factors that can affect the return on different investments The different kinds of risks associated with various investments The trade-off between risk and reward Importance of knowing your investment goals, preferences, and risk tolerance How investors can differ in terms of goals, preferences, and comfort with risk Concept of an investment portfolio The concept and advantages of diversifying investments Various frauds and scams that exist Where to find good information and advice Participate in an investment simulation Make basic investments, and build a portfolio to fit their goals, preferences, and comfort with risk Find advice and assistance if needed Set investment goals when they are ready to do so Diversify choices when making investments Avoid frauds and scams Make investments they understand Ask questions, seek advice, and help when needed Use reliable, licensed, registered advisers as needed Take on risk suited to fit goals, life stage, and comfort level Diversify when investing Avoids frauds and scams Review contracts and legal documents carefully before making investment decisions.

9 8. PROTECTING MONEY AND ASSETS GRADE: 4-6 IMPORTANCE OF PROTECTING MONEY T Y O Savings can be protected in different ways Ways to protect cash when carried How banks help protect savings Why banks pay interest on savings Why banks charge fees for their services Ways to protect things they own i-pod, bike, etc. Deposit money in the bank Protect cash they carry with them Protect their possessions Take steps to keep their money and possessions safe Use the services of a bank when needed and as appropriate RISK The concept of risk as it relates to the value of money, things you own, health and well-being, etc. Types of risk that exist Things people may own that they will need to protect Risks when using a debit card Risks when using a credit card Risks when writing a cheque Risks when using an ATM Risks that exist for possessions Recognize risks when they exist Use a debit card safely Use a credit card safely Write a cheque properly and safely Use an ATM safely Look to identify risks that might exist Take steps to avoid or reduce risk Use financial products and services safely Reduce or eliminate risks, as possible, when they exist Protecting, You, Your Family, And Your Possessions The risks of losing the ability to earn an income e.g. because of injury, disability, illness, death The risks property and other assets face loss, theft, damage, destruction How insurance can be used to reduce and manage risk Types of insurance Who sells insurance The different types of life insurance Sample costs for insurance for a car, house, etc. Factors that can affect the cost of insurance The concept of identity theft Estimate one s own lifetime earning potential Seek out and buy insurance when needed Link levels of risk with different costs for insurance Estimate the cost of auto insurance Compare costs of insurance for different young drivers Acquire sufficient insurance as they acquire assets over time Acquire adequate insurance, as and when needed, to protect family members if death, disability, or disease should affect ability to earn income Assign an appropriate amount of a budget to acquire adequate insurance protection when it is needed Protect their identity and control what happens to personal information and material

10 9. THE ECONOMY: THE BASICS AND KEY ISSUES GRADE: 4-6 An economy s role is to use available resources to produce and distribute products and services needed and wanted by consumers Countries have different types, and quantities, of resources In very early economies, people could take care of their own needs basic food, clothing, and shelter (necessities) Features of Canada s early economy Difference between needs and wants Specialization helps societies produce more and better things Specialization leads to the need for exchange and interdependence among people, communities, and countries Businesses are set up to combine resources to produce products and services consumers will buy Businesses that produce well, and what consumers will buy, can make a profit and succeed TRADE Experience how specialization can increase and improve production Identify key resources used in Canada and their community Describe how resources in their community are used to produce products and services The basic economic questions every society must answer what to produce, how to produce, and how to distribute How Canada s economy answers the basic questions The role of key sectors of Canada s economy households, business, government, financial, international Factors affecting the level of production and employment in an economy Needs and wants change over time leading to new products and services being produced The exchange of products and services take place in markets and at prices set by the decisions of the buyers and sellers Factors that can affect prices in the economy Why interest rates may change Why countries engage in trade and how both countries can be better off after trade Examples of Canadian imports and exports The concept of globalization and how it can affect countries differently The concepts of trade protection and freer trade Examples of trade issues and challenges TRADE Debate the pros and cons of freer trade Debate the pros and cons of globalization Consider, assess, and discuss the advantages and disadvantages of globalization as events and changes occur over time THE BIG PICTURE HOW THE E W How, in general, an economy works to produce and distribute products and services Different types of economic systems Key features of Canada s mixed economy The business cycle why it occurs and conditions at various points in the cycle Statistics used to assess how an economy is performing including trade performance and success Factors that affect growth, inflation, employment, productivity, and trade success in the economy Various ways in which economies are linked together Issues that can arise from globalization Current issues in Canada s economy Form opinions on the direction an economy may be headed, whether interest rates may be more likely to rise or fall in the near future, and when inflation may pose more of a risk Generate ideas for improving productivity Debate, discuss, and evaluate economic policies and actions proposed by the government and different political parties Make informed consumer decisions based on an understanding of inflation and interest rates Assess the policies of different political parties that could affect the economy and production of goods and services Make informed political decisions when presented with economic policy options

11 GRADE: 9-12 VOTING THE ECONOMY AND THE ENVIRONMENT BUILDING THE FUTURE 10. ECONOMIC CITIZENSHIP How people determine those who govern them by voting in a democracy Citizens are responsible for making informed decisions and voting Examples of goods and services provided by governments Why governments might produce a good or service How governments pay for goods and services provided Examples of taxes that people pay How people can help others in need both through government activity and other ways Identify goods and services provided by governments Discuss the possible roles of government in the economy Recognize how people can affect the decisions and actions of government by voting Take an interest in government and how policies of different political parties could affect their lives When of age, be a responsible voter Concept of economic sustainability Concept of renewable and non-renewable resources How business, household, and consumer actions can affect the environment positively and negatively How governments policies and actions can affect the environment positively and negatively Concept of economic, citizenship and what it means e.g. help sustain and improve the environment, be an informed voter, consider impact of decisions on others, consider the circumstances and needs of others, obey laws and abide by regulation Provide examples of how changes in business and consumer actions can lead to improvements in the environment Make personal decisions that can help sustain and improve the environment Generate ideas to help sustain and improve the environment Discuss and assess various actions of business and governments in terms of the impact on the environment Possible goals for the economy How various factors can affect growth, employment, incomes, and quality of life in the economy How the decisions and actions of individuals, organizations, business, and governments can affect productivity, innovation, employment, inflation, incomes, and growth in the economy as well as the environment Factors that can affect the distribution of income How government policies and actions can affect the distribution of income Compare environmental conditions, and efforts to improve the environment, in various countries Different views on the role of government in the economy Discuss factors that can affect the nation s ability to achieve its economic goals Compare and assess different economic policies and priorities implemented or proposed by government and other political parties Consider and assess economic activity as potentially helpful or harmful to the environment Identify taxes paid to different levels of government Live, work, and play in ways that help sustain and possibly improve the environment Support reasonable activities that have a positive impact on the environment Consider careers that involve helping to sustain and improve the environment Make informed assessments and judgements, of government actions and political alternatives Act in a manner respectful, and helpful, to the environment Have a sense of compassion for the needs and circumstances of others Complete a tax return and pay their fair share of taxes