Does Money Really Grow
Does Money Really Grow on Trees?
Additional ActivitiesAdditional Resources
Answers to Activities in the Newspaper Insert
Download a lesson plan that includes the standards of learning for Virginia and New Jersey - PDF
Jane and Tommy been saving their allowance money and money earned from mowing lawns and baby-sitting and will only need to take out a loan for part of the automobile price. While Tommy and Jane both have part time jobs, one of their parents must be a co-signer on the loan. Their parents have agreed to pay the insurance for Tommy and Jane as long as they are not involved in a car accident or get a speeding ticket. If the insurance is raised for any reason, Jane and Tommy must pay the difference. The second time an accident or ticket occurs they must pay the entire amount to insure them and their car.
- What are some extra payments that Jane and Tommy need to consider on a monthly basis (or even more frequently) when they are calculating how much money they need to cover the expense of owning a car?
The amount for Jane and Tommy's loans is $10,000; they each have $4,000 saved. The interest rate is 5.58% for a 60 month loan and the sales tax is 4%. How much is their payment?
- How much would Jane and Tommy's monthly payments be if they had each made a down payment of $5,000? Would their monthly payments be higher or lower? Using USA Today's financial calculator (http://www.usatoday.com/money/perfi/calculators/calculator.htm), calculate how much their payments would be.
- How much would Jane and Tommy's monthly payments be if the interest were 4% instead of 5.58%?
- Should Tommy and Jane consider saving more money before they decide to buy their car? What are some advantages to waiting longer before they commit to this purchase?
Additional Activities
- When looking at the cost of car loans, visit the American Banker's Association's online calculator. Look at various advertisements in the newspaper and type in the different purchase prices you find for the same model and make of car. Now type in different amounts of down payment to see how it affects your monthly payments.
- How much would your payments be with a 6-year loan rather than a 5 year loan?
- Compare purchase prices of similar used cars in different newspaper advertisements.
- Using the Kelly Blue Book Web site, find out the retail value of the car(s) you have found. This is the amount of money you may expect to pay a dealer when you visit the dealership. What is the difference in prices between dealers listed in the newspaper?
Additional Resources
- Department of Financial Institutions, http://www.dfi.ca.gov/kidspage/kidspage.htm has information, activities, and lots of helpful, additional links on topics related to teens and money management, and debt issues.
- Mortgage Banker's Association of America http://www.econedlink.org/lessons/index.cfm?lesson=EM37 has as student lesson on time value of money with relevant activities.
- To Be a Have or Have Not, http://www.ahrm.vt.edu/Extension/www/index.shtml has information for young adults on saving, spending, credit, insurance, and other money management-related topics. A video and CD are available at no cost (you pay shipping, however) for presentations and programming. This program also uses time value of money to show how savings grow and how much credit costs.
Online Calculators
- American Banking Association, http://www.aba.com/aba/cgi-bin/autoNT.pl has calculators available online to assist you in figuring costs of loans. This particular calculator is used for car loans.
- Department of Financial Institutions, http://www.dfi.ca.gov/kidspage/kidspage.htm has information, activities, and additional links on topics related to teens and money management, and debt issues.
- Direct Consolidation Loan Calculator, http://www.ed.gov/DirectLoan/ConsolCalc/form3.htm can assist students to calculate their payment for all their school loans, if they wish to consolidate.
- Federal Credit Union of Iowa, http://www.fecuiowa.org/calculators/savecalc.shtm has several types of online calculators for estimating savings, debt ratios, and loans.
- Federal Reserve Bank of New York, http://app.ny.frb.org/sbr/ has a savings bond calculator that will compute the value of bonds over time given certain conditions. It will do this for most types of bonds (and lists many types).
Time Value of Money Books
- Kids' Allowances: How Much, How Often, and How Come, by David McCurrach, (2000), Kids' Money Press. (This book is a parents' guide).
- Making Allowances: A Dollars and Sense Guide to Teaching Kids About Money, by Paul W. Lermitte and Jennifer Merritt, (2002), McGraw-Hill Trade.
- Money Matters for Teens Workbook, aged 15-18 edition, by Larry Burkett with Todd Temple, (1998), Moody Press.
- The Complete Idiot's Guide to Money for Teens, by Susan Shelly, (2001), Pearson Education.
- The Motley Fool Investment Guide for Teens, by David and Tom Gardner, (2002), Fireside Publishers.
Answers to Activities in the Newspaper Insert
Jason invests $3,000 a year for ten years, beginning at age 21. Sarah waits 10 years, then invests $3,000 a year for 35 years. They both earn 8% on their investment. Compare the total contributions and the total value of retirement for Jason and Sarah.
| Jason | |||
|---|---|---|---|
| Age | Years | Contributions | Year-End Value |
| 21 | 1 | $3,000 | $3,240 |
| 22 | 2 | 3,000 | 6,739 |
| 23 | 3 | 3,000 | 10,518 |
| 24 | 4 | 3,000 | 14,600 |
| 25 | 5 | 3,000 | 19,008 |
| 26 | 6 | 3,000 | 23,768 |
| 27 | 7 | 3,000 | 28,910 |
| 28 | 8 | 3,000 | 34,463 |
| 29 | 9 | 3,000 | 40,460 |
| 30 | 10 | 3,000 | 46,936 |
| 35 | 15 | 0 | 68,965 |
| 40 | 20 | 0 | 101,332 |
| 45 | 25 | 0 | 148,890 |
| 50 | 30 | 0 | 218,769 |
| 55 | 35 | 0 | 321,443 |
| 60 | 40 | 0 | 472,306 |
| 65 | 45 | 0 | 693,972 |
Value at Retirement _____________
Less Total Contributions ___________
Net Earnings _____________
| Sarah | |||
|---|---|---|---|
| Age | Years | Contributions | Year-End Value |
| 21-30 | 10 | 0 | 0 |
| 31 | 11 | $3,000 | $3,240 |
| 32 | 12 | 3,000 | 6,739 |
| 33 | 13 | 3,000 | 10,518 |
| 34 | 14 | 3,000 | 14,600 |
| 35 | 15 | 3,000 | 19,008 |
| 36 | 16 | 3,000 | 23,768 |
| 37 | 17 | 3,000 | 28,910 |
| 38 | 18 | 3,000 | 34,463 |
| 39 | 19 | 3,000 | 40,460 |
| 40 | 20 | 3,000 | 46,936 |
| 45 | 25 | 15,000 | 87,973 |
| 50 | 30 | 15,000 | 148,269 |
| 55 | 35 | 15,000 | 236,863 |
| 60 | 40 | 15,000 | 367,038 |
| 65 | 45 | 15,000 | 558,306 |
Less Total Contributions ___________
Net Earnings _____________
Answer Key (A: 693,972; 30,000; 663,972. B: 558,306; 105,000; 453,306)
