Back 10 Rows
Back 10 Rows
Back 10 Rows
(Please don’t sit here)
(Please don’t sit here)
(Please don’t sit here)
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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.
Objective of this presentation:
To help you pass of as many requirements
as you can by the end of today!
BSA Advancement ID#: 11
Source: Boy Scout Requirements, #33215
Revised Oct. 25, 2007
Instructor(s):
Where are we? Where will we be after today?
From last time (pass off everything but Req. 2):
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




Req. 1:
Req. 2:
Req. 5:
Req. 8:
Req. 9:
Req. 10:
Shopping Strategy
Budget
5 Stocks
To Do List & Schedule
Written Project
Career Research
– Pass off today!
– Continue, pass off in 11 weeks!
– Pass off today!
– Pass off today!
– Pass off today!
– Pass off today!
New material for today, Day 2 (pass off everything else):



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Req. 3:
Req. 4:
Req. 6:
Req. 7:
Discuss “Feelings on $$”
Discuss “Investing”
Discuss “$1,000”
Discuss “Debt”
– Begin & pass off today!
– Begin & pass off today!
– Begin & pass off today!
– Begin & pass off today!

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.
 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.

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 longterm goals.
 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

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
Time
Year 1
Year 2
Year 3
Year 4
Year 5
Initial Balance Interest
$
1,000 $
100
1,100 $
110
1,210 $
121
1,331 $
133
$
1,464 $
146
New Balance
$
1,100
1,210
1,331
1,464
$
1,611
$1000 at a
10% rate
Compound vs. Simple Interest Over 10 Years
$3,000
Compound Interest
$2,594
Simple Interest
$2,500
$2,000
$2,000
$1,611
$1,500
$1,500
$1,100
$1,000
$1,100
$1,000
$1,000
$500
$-
Today
Year 1
Year 5
Year 10
$1000 at a
10% rate
Compound vs. Simple Interest Over 45 Years
$80,000
$72,890
Compound Interest
$70,000
Simple Interest
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$5,500
$-
Year 15
Year 20
Year 25
Year 30
Year 35
Year 40
Year 45

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
 What are common stocks?
▪ Stocks are pieces of ownership in a listed company
 Advantages
▪ Higher returns over the long-term
 Disadvantages
▪ Higher risk
 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
 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
 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
 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
Investment Strategy
Taxable Assets
Retirement Assets
(Non-Retirement Investments)
(Investments like IRAs, 401Ks, etc)
4. Opportunistic:
Individual Stocks
and Sector Funds
3. Diversify: Broaden and
Deepen 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)
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, Don’t pay it!!
 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.
▪ Don’t 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.
 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 S&Ls
Loans from banks
Credit cards
In-store financing
Payday lenders
▪ Generally, the worse your credit the more you will
pay to get a loan
 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 don’t 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 store’s 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.
▪ What are the costs and pitfalls of using these
financial tools (cards)?
▪ They are expensive and charge very high interest rates
(>20%)
▪ 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
 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
 E. What are some ways to eliminate debt?
▪
▪
▪
▪
The best is don’t go into debt in the first place
Pay off your highest cost debt first
Pay more than the minimum amount—as much as you can
Consider plastic surgery (cutting up your credit cards) if you
can’t stop using your cards
 Interest can help or harm you. Earn it, don’t 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)

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!
▪ Compound Interest is “interest on interest”
▪ Example:
▪ $1000 investment, 12% interest rate, compounded monthly
▪ So, monthly interest = 12% / 12 months = 1% per month
Month
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Initial Balance
$
1,000.00
1,010.00
1,020.10
1,030.30
1,040.60
1,051.01
1,061.52
1,072.14
1,082.86
1,093.69
1,104.62
$
1,115.67
Interest
$ 10.00
10.10
10.20
10.30
10.41
10.51
10.62
10.72
10.83
10.94
11.05
$ 11.16
Total Interest Earned
New Balance
$
1,010.00
1,020.10
1,030.30
1,040.60
1,051.01
1,061.52
1,072.14
1,082.86
1,093.69
1,104.62
1,115.67
$
1,126.83
$
1,126.83