SEATING CHART (Back)

1
SEATING CHART(Back)

• Stage Podium (Front)
• Welcome to Day 2! Please find your Group Leader
  and begin passing off the requirements that you
  have finished with them. We will begin shortly.

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Personal ManagementMerit Badge Day 2

• Objective of this presentation
• To help you pass of as many requirementsas you
  can by the end of today!

BSA Advancement ID 11Source Boy Scout
Requirements, 33215 Revised Oct. 25,
2007 Instructor(s)
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Review of your timeline

• Where are we? Where will we be after today?
• From last time (pass off everything but Req. 2)
  
• Req. 1 Shopping Strategy Pass off today!
• Req. 2 Budget Continue, pass off in 11
  weeks!
• Req. 5 5 Stocks Pass off today!
• Req. 8 To Do List Schedule Pass off today!
• Req. 9 Written Project Pass off today!
• Req. 10 Career Research Pass off today!
• New material for today, Day 2 (pass off
  everything else)
• Req. 3 Discuss Feelings on Begin pass
  off today!
• Req. 4 Discuss Investing Begin pass off
  today!
• Req. 6 Discuss 1,000 Begin pass off
  today!
• Req. 7 Discuss Debt Begin pass off today!

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Requirement 3Discuss Topics

• 3. Discuss with your merit badge counselor FIVE
  of the following concepts
• a. The emotions you feel when you receive money.
• b. Your understanding of how the amount of money
  you have with you affects your spending habits.
• c. Your thoughts when you buy something new and
  your thoughts about the same item three months
  later. Explain the concept of buyer's remorse.

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Requirement 3Discuss Topics Contd

• d. How hunger affects you when shopping for food
  items (snacks, groceries).
• e. Your experience of an item you have purchased
  after seeing or hearing advertisements for it.
  Did the item work as well as advertised?
• f. Your understanding of what happens when you
  put money into a savings account.
• g. Charitable giving. Explain its purpose and
  your thoughts about it.
• h. What you can do to better manage your money.

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Requirement 4Discuss Investing

• 4. Explain the following to your merit badge
  counselor
• A. The differences between saving and investing,
  including reasons for using one over the other.
• Saving to put money aside, usually in a bank
  account for future use.
• The return you earn is generally very low but
  certain
• Investing to invest money to make even more
  money in the future.
• The return is generally higher but uncertain
• Generally you save for short-term goals, and
  invest for long-term goals.

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Requirement 4Discuss Investing

• B. What is return on investment?
• Return on investment is the money received from
  investing divided by the amount of money
  invested. In other words, it is a increase in
  the money you invest.
• What is risk?
• Risk can be many things, but generally relates to
  uncertainty. The less certain a return,
  generally the higher the risk.
• C. What is the difference between simple
  interest and compound interest? How do these
  affected the results of your investment exercise?
• Simple interest is interest on principle only.
• Example 1,000 invested for 1 year at 10 simple
  interest
• 1,000 x 10 100 in interest
• So 1,000 in principle 100 in interest
  1,100 total

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Requirement 4Discuss Investing

• Compound Interest is interest on interest
• Example 1,000 invested for 5 years at 10
  compounding
• 1,000 x 10 100 in interest (same as simple
  interest for year 1)
• So, 1,000 100 1,100 total (same as simple
  interest for year 1)
• Then, for year 2 (the first year of compounding),
  we do
• 1,100 x 10 110 in interest
• So, 1,100 in principle 110 in interest
  1,210 total

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Simple vs. Compound InterestInterest can harm or
help you - EARN it, dont PAY it!
1000 at a 10 rate
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Simple vs. Compound InterestInterest can harm or
help you - EARN it, dont PAY it!
1000 at a 10 rate
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Requirement 6Discuss Invest 1,000

• 6. Pretend you have 1,000 to save, invest, and
  help prepare yourself for the future. Explain to
  your merit badge counselor the advantages or
  disadvantages of saving or investing in each of
  the following
• a. Common stocks
• b. Mutual funds
• c. Life insurance
• d. A certificate of deposit (CD)
• e. A savings account or U.S. savings bond

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Requirement 6Discuss Invest 1,000 contd

• What are common stocks?
• Stocks are pieces of ownership in a listed
  company
• Advantages
• Higher returns over the long-term
• Disadvantages
• Higher risk

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Requirement 6Discuss Invest 1,000 contd

• What are mutual funds?
• Mutual funds are portfolios of securities
  (stocks, bonds, or cash) managed by an investment
  company
• Advantages
• Professionally run
• Immediate diversification
• Disadvantages
• No control over taxes
• May not outperform benchmarks

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Requirement 6Discuss Invest 1,000 contd

• What is life insurance?
• Life insurance is a contract that will pay money
  to your beneficiaries should you die
• Advantages
• Life insurance payments are tax-free
• Cash value life insurance grows tax-free
• Disadvantages
• Cash value life insurance is very expensive
• You have to die to get paid

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Requirement 6Discuss Invest 1,000 contd

• What are Certificates of Deposit (CDs)?
• CDs are savings accounts held with a financial
  institution for a specific time
• Advantages
• Returns are higher than savings accounts
• Returns are guaranteed
• Disadvantages
• Returns are lower than other instruments

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Requirement 6Discuss Invest 1,000 contd

• What are U.S. Savings bonds?
• U.S. Savings Bonds are bonds issued by the US
  government
• Advantages
• Returns are higher than general savings accounts
• Returns are tax-free if used for education
• Disadvantages
• Returns are lower than other instruments

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Investing The Hourglass Bottom
Investment Strategy
Taxable Assets(Non-Retirement Investments)
Retirement Assets(Investments like IRAs, 401Ks,
etc)
4. OpportunisticIndividual Stocksand Sector
Funds
3. Diversify Broaden andDeepen your Asset
Classes(International emerging markets,
mid-cap, small-cap)
2. Core Broad Market Index or Mutual
Funds(Large Cap U.S. funds in core industries)
1. Basics Emergency Fund and Food
Storage(Liquid funds, US treasuries, savings
accounts, MMMFs, CDs)
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Requirement 7Discuss Debt

• 7. Explain the following
• A1. What is a loan?
• A loan is an agreement to borrow money and to
  repay a specific amount of money (principle and
  interest) each period. It is also called credit.
• A2. What is interest?
• Interest is money you pay to borrow money. The
  Key to Interest is Earn it, Dont pay it!!

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Requirement 7Discuss Debt Contd

• A3. How does the annual percentage rate (APR)
  measure the true cost of a loan?
• The APR reflects the true percentage rate of a
  loan. It takes into account various fees and
  other costs over a year. The APR is always higher
  than the simple interest rate on a loan.
• Before you borrow
• Ask what the total cost of the loan will be in
  dollars and cents.
• Find out the amount of all fees they add up
  quickly.
• Dont always choose the loan with the lowest
  payment. A lower payment may mean a longer
  repayment period and you will pay more in total
  interest charges.

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Requirement 7Discuss Debt Contd

• B. What are the different ways to borrow money?
• Money can be borrowed many different ways. From
  cheapest to more expensive, it is
• Loans from family and parents
• Loans from Credit Unions and SLs
• Loans from banks
• Credit cards
• In-store financing
• Payday lenders
• Generally, the worse your credit the more you
  will pay to get a loan

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Requirement 7Discuss Debt Contd

• C. Explain the differences between a charge card,
  debit card, and credit card.
• What is a Charge card?
• A charge card is a credit card but typically is
  restricted to purchases from a particular
  company, like a department store or a gasoline
  company.
• Most charge cards are like a credit card in that
  you dont have to pay off all of your charges, or
  your entire balance, at one time.
• What is a Debit card?
• A debit card is a credit card that works like a
  check. The amount is electronically deducted
  (debited) from your checking account and paid
  into the stores bank account.
• What is a Credit card?
• A credit card is a card issued by a bank and can
  be used to pay for any product as long as the
  seller accepts the card.

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Requirement 7Discuss Debt Contd

• What are the costs and pitfalls of using these
  financial tools (cards)?
• They are expensive and charge very high interest
  rates (gt20)
• They obligate future earnings to payments
• They encourage consumption, not saving
• Why it is unwise to make only the minimum payment
  on your credit card?
• Companies want you to pay only the minimum
  balance as it will take you years to pay off the
  card and they will charge thousands in interest
  costs

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Requirement 7Discuss Debt Contd

• D. What are credit reports and how does personal
  responsibility affect your credit report?
• Credit reports are reports of information
  collected by credit bureaus from subscribers,
  creditors, public court records, and the consumer
• Why are credit reports important?
• Credit reports help financial institutions
  determine if you will likely pay back a loan. If
  your credit report is good, there is a much
  higher likelihood that you will pay back a loan
  and hence, more likely a financial institution
  will lend you money

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Requirement 7Discuss Debt Contd

• E. What are some ways to eliminate debt?
• The best is dont go into debt in the first place
• Pay off your highest cost debt first
• Pay more than the minimum amountas much as you
  can
• Consider plastic surgery (cutting up your credit
  cards) if you cant stop using your cards

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Requirement 4Discuss Investing

• Interest can help or harm you. Earn it, dont pay
  it!
• It is a rule of our financial and economic life
  in all the world that interest is to be paid on
  borrowed money. . . Interest never sleeps nor
  sickens nor dies it never goes to the hospital
  . . it never visits nor travels it is never laid
  off work it never works on reduced hours it
  never pays taxes it buys no food, it wears no
  clothes. . . Once in debt, interest is your
  constant companion every minute of the day and
  night you cannot shun it or slip away from it
  you cannot dismiss it. . .and whenever you get
  in its way or cross its course or fail to meet
  its demands it crushes you. So much for the
  interest we pay. Whoever borrows should
  understand what interest is, it is with them
  every minute of the day and night. (J. Reuben
  Clark, conference address, April 6, 1938)

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Finish Line

• CONGRATULATIONS!!
• By now you should have successfully passed off
  all the requirements except for your personal
  budget. Finish your budget over the next 11 weeks
  and pass it off to your local merit badge
  counselor.
• Have a fun Saturday!

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Requirement 4Discuss Investing

• Compound Interest is interest on interest
• Example
• 1000 investment, 12 interest rate, compounded
  monthly
• So, monthly interest 12 / 12 months 1 per
  month

Month Initial Balance Interest New Balance
Jan 1,000.00 10.00 1,010.00
Feb 1,010.00 10.10 1,020.10
Mar 1,020.10 10.20 1,030.30
Apr 1,030.30 10.30 1,040.60
May 1,040.60 10.41 1,051.01
Jun 1,051.01 10.51 1,061.52
Jul 1,061.52 10.62 1,072.14
Aug 1,072.14 10.72 1,082.86
Sep 1,082.86 10.83 1,093.69
Oct 1,093.69 10.94 1,104.62
Nov 1,104.62 11.05 1,115.67
Dec 1,115.67 11.16 1,126.83

Total Interest Earned Total Interest Earned 1,126.83