What Interest Rate Increases Mean for You

What to expect as the Federal Reserve (the central bank of the United States) increases interest rates. How it impacts your budget, and your money. Understand why the Federal Reserve is increasing rates, so we all will see our borrowing costs potentially rise. Here are some ways that rate hikes could affect you, your money, and your monthly expenses. Learn how the rate increases will impact different types of borrowing including credit cards, student loans, auto loans, mortgages, and bank savings accounts. Here are the implications of the Fed’s rate increase for students, homeowners, savers, and borrowers.

CONCEPTS

Use this video lesson on the topic to discuss the terminology and basic economic and related concepts of

  • Interest Rates
  • Federal Reserve
  • Debt and Credit
  • Budgeting and Monthly Expenses

PROCEDURE

Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have and have them complete the worksheet.  Then have a discussion about interest rates and how they are currently increasing. Discuss how rising interest rates will impact them and their family’s finances. Review the questions on the worksheet.

 

Watch What Interest Rate Increases Mean for You on YouTube

GRADE LEVEL

7-12th grades

TIME REQUIRED

60 minutes

 

What does the interest rate increase mean for you?

Interest rates are increasing. The Federal Reserve, the central bank, is increasing rates, so we all will see our borrowing costs potentially rise. Here are some ways that this could affect you and your monthly expenses.

So what exactly is happening?

The federal funds interest rate is the rate at which banks lend and borrow to each other overnight. It is set by central bank. The Fed’s actions have an impact on the savings and borrowing rates consumers see every day, even though it isn’t the rate they pay. When the Fed raises its benchmark rate, rates on savings accounts, credit cards and other types of loans change. Changes in the benchmark rate of Federal Reserve have ripple effects on all aspects of credit, from student loans to home mortgages, to credit cards.

Why are interest rates rising?

The Federal Reserve is raising rates to try and control inflation, which has reached a multi-year high. As the Fed raises its federal funds rate, borrowing costs rise, whether directly or in indirect ways. This should slow down the demand for goods and services and reduce inflation. Here is how the rate increases will impact different types of borrowing, debt and credit.

Credit Cards

The rates of short-term borrowing, especially on credit cards, will rise quickly. Most credit cards have variable rates, which means that your APR, or interest charge, will rise in a billing cycle. Rate increases, no matter how small, are not good news for people with lots of credit card debt, so try to reduce any credit card debt you may have.  If that is not something you can do, try to lower your rate or find a credit card that has a lower rate than the one you currently have.

Student Loans

The federal student loan rates are fixed so that most current borrowers won’t be affected by an increase in interest rates. Private loans, however, may have fixed rates or a variable rate . This means that borrowers who borrow more money will pay more interest.   New federal student loan borrowers, however, will be impacted when they get new loans, and those new loans are priced to the new higher rates.

Auto Loans

Auto loans are usually fixed, so your current rate won’t generally increase.  While the Fed’s interest rate moves can affect car loans, other factors have a greater impact on the rate that borrowers pay. The prices of new and used cars have risen so dramatically in the last year that interest rates might seem an afterthought. These rates are expected to increase.

Mortgages

The economy and inflation have already caused long-term fixed mortgage rates to edge higher. Homeowners with adjustable-rate mortgages and home equity lines will be affected more than those without. Most ARMs are adjusted once per year while a home equity line or HELOC adjusts immediately.

The federal funds rate doesn’t directly affect mortgage rates. Instead, they typically track the yield of 10-year Treasury bonds. This is affected by many factors, including investors’ expectations about how the Fed will react to inflation. Inflation had already caused mortgage rates to rise, even though historically low.

Bank Savings accounts

You may have money in bank accounts. However, whether rates rise translate into higher yields depends on which type of account you have. A Fed benchmark increase often means that banks will pay higher interest on deposits, but not always immediately.  Even so, rates remain quite low.  However, the inflation rate is likely higher than any of these rates so money in bank savings accounts loses its purchasing power over time.

So be aware that interest rates are increasing, and be prepared to property manage your finances with the higher cost of borrowing.

 

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Categories Banking, Basic Money, Borrowing Money, Credit, Credit Cards, Economics, Saving & Investing, Tags , , , , , ,
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Types of Money | Commodity, Representative, Fiat, and Bank Money

What is money? Economists differentiate among several different types.  Learn about the four main types of money including commodity money, representative money, fiat money, and bank money. Also learn why intrinsic value is important for understanding the types of money.

CONCEPTS

Use this video lesson on the topic to discuss the basic economic concepts of

  • Types of Money
  • Intrinsic Value
  • Printing Money and Inflation

PROCEDURE

Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have and have them complete the worksheet.  Then have a discussion about the various types of money. Discuss why we categorize money by intrinsic value. Review the questions on the worksheet.

 

Watch Types of Money on YouTube

GRADE LEVEL

7-12th grades

TIME REQUIRED

60 minutes

Types of Money

Money is any good that is used widely, and accepted in transactions involving the transfer of goods or services. Money can come in many forms but there are two main categories of money: money with intrinsic value, or money without intrinsic value.

Commodity Money
Money with intrinsic value is called commodity money.  Commodity money has the same value as the money it represents. Examples are precious metals like gold, silver, or other valuable commodities.  The value is what the commodity is worth, even if it is not used as money. Because of its intrinsic worth, it is not only a medium for exchange, but also a storehouse of purchasing power. Greece had some of the first gold and silver coins in use. 

Commodity money has one drawback: its value can fluctuate in an unpredictable way. In the United States, gold was an early form of money. The quantity of money went up after gold discoveries in California and elsewhere which led to some of the nation’s most severe bouts of inflation. 

However, the quality of commodity money can be a problem. Because of this variability, lower-quality commodities can drive higher-quality commodities from circulation. For example, horses were once used as money. Loan obligations were often stated in terms of the number of horses that had to be repaid. Due to such obligations, it was common for loans to be paid back with lower-quality horses.

Representative Money
Representative money can be described as a token or certificate that can be exchanged for the underlying commodity. Instead of carrying the gold currency money, you might keep a paper certificate or certificate that was backed by the vaulted gold. The certificate could be exchanged for gold at any moment. It was also easier to carry than actual gold and people grew to trust paper certificates as much or more than gold over time. 

Fiat Money
Representative money was replaced by fiat money, which is the type that is used today in modern economies. Money does not necessarily have to have  intrinsic value. Fiat money refers to money that an authority, usually a government, has authorized to be used as a means of exchange. Fiat money refers to a good whose value is lower than its money value and It has no other value than its use as money. For example, dollar bills are a type of Fiat money whose value as slips made of printed paper are worth less than their money value.

The phrase “This note is legal tender for all debts, public and private.” is printed on each bill.  We accept the value of the currency because it is accepted by the government and others who value it enough to pay it. 

Bank Money
Bank money is the amount of book credit banks offer to depositors. Bank money is used to make transactions using forms of money with no intrinsic value such as checkable deposits and traveler’s checks. You can pay for something by using a check or a debit card.  Although they can be converted into currency, they mainly serve only as a means of exchanging money.

Altogether, acceptance is the main thing that makes something money. Even Fiat money, issued by the government, is accepted as long as it isn’t printed too fast. People will search for alternative money if too much money is printed.

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Main Functions of Money

Learn what is money and what are its four main functions. Money serves all these functions: it is a medium for exchange, store of value, unit of account, and standard for deferred payments.

CONCEPTS

Use this video lesson on the topic to discuss the basic economic concepts of

  • Money
  • Barter
  • Inflation

PROCEDURE

Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have and have them complete the worksheet.  Then have a discussion about the functions of money. Discuss money’s functions, including it as a store of value and the impact of inflation on it. Review the questions on the worksheet.

 

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GRADE LEVEL

7-12th grades

TIME REQUIRED

60 minutes


Main Functions of Money

Money is something people use every day. We earn it, and spend it, and hopefully, save it. Money is defined by economists as a medium of economic exchange, any item that is accepted widely as the final payment for goods or services, or the repayment of debt. Money has had many forms over time. Though, the ultimate purpose of money is to  purchase and sell goods and services. 

What would happen if people didn’t have money to use? Barter is a common way for economies without money to trade goods and services. However, Barter, which is the act of trading one good or service in exchange for another, is inefficient in modern economies. A cook might want to exchange food they prepare for repair services provided by a mechanic. While making a trade using food might not be difficult, it might not be always easy to arrange such a trade. Consider the difficulty of such trades in modern economies, which have a large division of labor and thousands upon thousands of jobs.  A much easier way is to instead use money,  which allows you to purchase a wide range of goods and services.

The problems caused by barter systems are solved by money and it has several functions.

Store of Value

First, money is a store of value. It is possible to save 50 dollars if I earn it working today. The money will still be valuable tomorrow, or next week. Actually, keeping money is more efficient than keeping food or other similar items, as they can more quickly go bad, or lose value. It is an efficient way to store worth, but it’s not necessarily the best. Over time, inflation slowly reduces the purchasing power of money.

Unit of Account

Second, money can be thought of as a unit of account. This means it is the standard by which all other values are measured.  Money can be thought of as a measuring device. The price of a new shirt, for example, could be priced in terms of apples. Then maybe a shirt would be worth 50 apples. However, it would be more useful if the price was set in dollars, as it is an common economic  measure of value.

Medium of Exchange

Third, money can be used as a medium of exchange. This means that money can be used to pay for goods and services. I feel confident that the cashier at the grocery store will accept money for payment. Money must be widely accepted in order to serve as a means of exchange in the economy.

Standard for Deferred Payments

Another function of money is its ability to serve as a standard for deferred payments. This means that money must be able today to purchase goods and services in the future. Future agreements and loans are described in monetary terms. The standard of deferred payments is what allows us buy goods and services now and then pay later. 

Money serves all these functions: it is a medium for exchange, store of value, unit of account and standard for deferred payments. Money makes it easy, to buy goods and services, in a modern economy. 

 

 

 

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Mittens Shops at Costco | Spending and Budgeting

A dog goes shopping for dog food at Costco. A fun class or lesson starter for the YouTube and TikTok generation on the importance of spending money wisely.

When shopping for groceries, we often spend more than necessary and buy more groceries than we can eat, and lose track of what we actually bought. A grocery list, just like a to-do list, keeps us focused on essentials to help us stay on track with what to buy. Discuss with students the importance of budgeting, and planning on what, and how much you are going to purchase BEFORE shopping.

CONCEPTS

Use this video on the topic to discuss the money concepts of

  • Needs and wants
  • Budgeting
  • Making good spending decisions
  • Spending Money

 

PROCEDURE

Show students the video and have and then have a discussion about the importance of budgeting, making a list, and making spending decisions BEFORE shopping. What are the ramifications of not sticking to a budget? Why should we plan what we are going to purchase ahead of time?

 

 

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GRADE LEVEL

6-12, Young adults

TIME REQUIRED

20 minutes

 

BACKGROUND INFORMATION


GROCERY SHOPPING ON A BUDGET

There are many things you can do before grocery shopping to make sure you reduce costs and keep to your budget.

Make a Shopping List
Make a list of all the ingredients you need for the meals you are going to make. Make sure you list the items in the same order that you’ll find them at the grocery. If the produce section is your first department, you should list the fresh fruits or vegetables that you will use first. You can go section by section until everything is covered. While this may require some extra time while you prepare, it will save you the hassle of going back and forth from each section.

Plan your Meals
Planning your meals is an important part of grocery shopping within a budget. Planning your meals is key to both saving money and saving time. Start small and plan your meals for the whole day. Once you have mastered this, plan your weekly meals and then move on to creating a monthly menu planner. It’s easy to meal prep and everyone can do it. You can prepare your meals ahead of time and keep them in the freezer for later use.

This not only saves money because you can evenly distribute your ingredients across several meals, but also allows you to quickly heat your food up and then eat it right away. There are many creative and inexpensive meals that you can make.

Reduce your Meat Consumption
The price of meat, poultry, and eggs continues to increase. There’s an easy way to cut your grocery bill if you spend less on meat than other food categories. Meat is often the most costly component of a meal. It is easy to reduce your meat intake by implementing a few meatless weeks or using less meat in your dishes. You can reduce the amount of meat in a recipe or use cheaper ingredients. Substitute beans, lentils, and/or mushrooms for ground beef. Sub in white beans and other vegetables for chicken. If you don’t want to reduce your meat consumption, but still want savings, you can find meat sales at your local grocery store and plan your meals around the items on sale.

Make a Grocery List that is within your Budget
When shopping for groceries, we often spend more than necessary. We often buy more groceries than we can eat and lose track of what we actually bought. A budget grocery list, just like a to-do list, keeps us on task with our tasks, is essential to help us stay on track with what to buy. This may seem obvious, but it is important. Have you ever made a quick stop at the shops to purchase one item, only to end up purchasing many other items that you don’t need? You can prevent yourself from purchasing unnecessary items by creating a quick grocery list on your phone or pen and paper before you go to the store.

Eat Before you Shop
Shopping when you’re hungry can lead to you spending more money than you planned, and you may end up buying items that are not on your shopping list but which are more likely to be harmful for you.

Prioritize your Needs
This isn’t only for the items you purchase. This same method can also be used to create your grocery budget. It is easy to purchase random food just because it looks good. Do you really need to buy steak every week? Or could you save money by buying a lower-priced option for dinner? Saving money by knowing what you really need can help you save big every month.

Learning to plan and budget before grocery shopping will help you save more, and spend less.

@moneymittens Mittens shops at Costco #costco #costcotiktok #stuffedanimals #dog #money #foryoupage #funny ♬ Sunny Day – Ted Fresco

 
 
 
 
 
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How to Prepare your Finances for an Emergency or Disaster

With all the uncertainty in the world, including pandemics, invasions, wars, and natural disasters, it reminds us we all need to plan so we are financially prepared. There are many situations in which you need to be financially prepared, including hurricanes, house fires, floods, pandemics, and more. Proper planning, including saving emergency money with a emergency savings fund, is key to avoid a personal financial crisis. Here we review some important steps to make sure your finances are ready for emergencies, natural disasters, and other related events.

CONCEPTS

Use this video lesson on the topic to discuss the personal financial concepts of

  • Financial Planning
  • Saving Money
  • Insurance

PROCEDURE

Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have and have them complete the worksheet.  Then have a discussion about the importance of preparing your finances for an emergency. Review the questions on the worksheet.

 

Watch on YouTube

GRADE LEVEL

9-12, Young adults, Adults

TIME REQUIRED

60 minutes

Preparing your Finances

There are many situations in which you need to be financially prepared, from natural disasters such as floods and hurricanes, to public health crises. Proper planning is key.  It is important to assess your income and budget, in order to be prepared for the unexpected. Anyone can experience financial emergencies. Without a plan, it may be difficult to recover from the damage. 

Americans are severely under-prepared for natural disasters and sudden expenses. Although we hope that disaster will never strike, in today’s environment we know nothing is certain. It’s worth doing some research to make sure you are financially sound no matter what. Here, we will show you some ways to help protect your finances.

Make an emergency savings fund

The first thing you should do is set up an emergency savings fund.  In case you lose your job, try to save six months of your income to ensure you have enough money to pay for essential expenses. Even if you have only three months of income to save, it’s still a good start, and twelve months is even better.  If you don’t find yourself in a dire situation, having an emergency fund can still be a great way to help cover unexpected expenses.

Also, companies are always looking for ways to reduce costs and remain afloat during natural disasters, which can lead to furloughs or layoffs. In the worst case scenario, it’s essential to have a cushion to supplement or replace your income.

It is important to remember that emergency funds must be readily available.   So consider a bank savings account, for your emergency funds. In an emergency, you also need cash at home, so make sure you have it.  You should have enough cash in your emergency kit to cover food and other essentials for at least three days. This will come in handy if you are unable to withdraw cash from an ATM or bank, or if electricity is out, or you have to travel.

Electronic Payments

Set up Direct deposit and electronic payments. You may not be able to leave your home or travel far if there is a natural disaster. Direct deposit can be set up by your employer if you are employed. It will guarantee that you are paid even if your bank is closed. This will reduce your chances of losing your checks. It also gives you instant access to your money which can be very important in times of financial stress.

You might also consider setting up auto payments to pay your bills.  Protecting your credit is an important part of financial security. You should establish auto-payments for major debts and bills.

Insurance

Take into consideration having appropriate insurance coverage.  Insurance is designed to protect you against any unfortunate events and is an essential part of financial emergency preparedness. You’ll be grateful if you have it, should anything happen. There are several types of insurance you should consider.  This includes Homeowners insurance.

Homeowner Insurance

Homeowners should also be aware that although standard homeowners insurance covers most extreme weather conditions, there are some natural disasters that aren’t covered by the policy and will require additional coverage. For example, many standard homeowners insurance policies do not include flood coverage or earthquake damage. Consider additional insurance if your area is susceptible to either.

Renters Insurance

You may believe that you are covered by your landlord’s homeowners policy even if you’re not a homeowner. This is true for your home’s structure, but it doesn’t cover your personal belongings. Renters insurance is the solution.

Auto insurance

Comprehensive auto insurance will protect your vehicle against the most common natural disasters such as floods, fires, hurricanes and earthquakes. You will also be covered for smaller-scale damage that is not your fault, such as a tree falling on your vehicle.

Life Insurance

Life insurance protects against the unthinkable. It will help your family pay off any outstanding debts, and provide housing and living expenses for your loved ones in the event you are unable to work. It is an essential part of your financial emergency preparedness.

Although it may seem tempting to cut corners in insurance in order to save some money, investing in the right coverage in the future will help you save even more if you have to file a claim.

Make a Home Inventory

Make a complete inventory of your home. This includes all your personal possessions, including electr  onics, furniture, kitchen appliances, clothing, and other household items. Even if you don’t own any expensive items, the value of your belongings can quickly add up. 

Home insurance is for covering your home and belonging, and you will need this inventory if you need to file a claim. Documentation of your belongings, using photos, descriptions, and estimates, will help you file a claim more quickly. You should photograph the exterior and interior of your house, including the landscaping. Take special note of any improvements. These may help to increase property value and assist with insurance claims.

Collect physical copies of important documents. This includes Birth certificates, Marriage certificates, wills, deeds, tax returns, and insurance policies. It’s easy to store important financial documents online in today’s digital age. You can use a flash drive to save your documents.  Cloud storage allows you to back up your tax returns, insurance information, receipts, and other important documents from anywhere. However, you should also have physical copies.  Make copies of such documents as birth and marriage certificates and store them digitally.

You will need to keep paper copies of all documents safe in a fireproof and water-proof container in the event of a natural catastrophe that results in power loss or interruptions to internet access. These papers should be kept handy so that you can easily find them in case you need to evacuate your house.

This has been a summary of some of the things you should consider for your financial plan.  Your own situation may be different, so be sure to consider other things you need to include in your own personal plan.

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What is causing Inflation? When will it end?

Why are prices going up for food, gas, and housing? Why are prices rising and who is it hurting? Why is everything so expensive? What is causing inflation, and when will inflation end?

CONCEPTS

Use this video on the topic to discuss the financial economic concepts of

  • Inflation
  • Supply and Demand
  • Consumer Price Index
  • Federal Reserve Bank

 

PROCEDURE

Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have and have them complete the worksheet.  Then have a discussion about inflation, it impact on the economy, businesses, and individuals.  Discuss each of the questions mentioned in the video.  Review the questions on the worksheet.

 

Watch on YouTube

GRADE LEVEL

7-12, Young adults

TIME REQUIRED

50 minutes

What is causing Inflation?

Wherever you look these days, there are headlines about Inflation, and most Americans are worried. It is a difficult task to grasp inflation, even though we keep hearing about it in the news. Even those who have been studying the economy and markets for many years don’t completely understand how inflation works. Its effects on society, from who wins to who loses to whether it’s good news or bad news, are complex.

What is inflation?

Inflation refers to a decrease in purchasing power over time. Basically, it means that your money won’t let you buy as much later as it does today. The annual price change for  goods and services is called inflation. One main measurement of inflation  in the United States is the  Consumer Price Index, or C.P.I.   It measures the price of  consumers out-of-pocket purchases. 

Some consumer price inflation can be considered desirable. This is because it allows companies to adapt to changing economies, where labor and commodities may cost more. But inflation that is too high, like we are having, can cause problems.

What is the cause of high inflation?

High inflation in the short-term can be caused by a hot economy. This is one where people have access to a lot of credit and are willing to spend. Businesses may have to increase prices if consumers are purchasing goods and services quickly enough. Companies may decide to raise prices because they know they can increase profits and keep customers.

However, inflation can rise or fall depending on economic developments.  Problems in the supply chain can cause goods to be out of stock, which can lead to higher prices.

The coronavirus, which has caused factories to close down and clogged shipping routes, has also contributed to a decrease in the supply of things like cars and , and have pushed prices higher. 

It is also true that consumers who have collectively saved a lot of money through months of lock-down and repeated government stimulus checks are spending strongly, which is contributing to some inflation.

Meanwhile, officials claim they don’t yet see any evidence that rapid inflation has become a permanent feature in the economy’s economic landscape. This is despite prices rising very rapidly. 

Now, there are many reasons to believe the price surge will recede. The increase in prices this year is largely due to a shortage of goods, including food, cars, and electronics. These will likely decrease as companies find ways to produce and transport the goods people want to purchase in an economy that has been affected by a pandemic. Many households have also built up savings due to repeated stimulus payments. However, they could eventually exhaust these.

Also, There are worrying signs that inflation might be becoming more persistent, which could mean that it will continue to rise rather than diminishing over time. As home prices have increased, rents have gone up and potential buyers have been locked out of purchasing homes. Although consumers are gradually anticipating higher prices, long-term inflation expectations have not yet risen significantly.

Long-term,  high inflation can become entrenched when workers start to expect it and are able to negotiate wage increases to offset rising costs. If companies are facing rising labor costs, they may be able to pass these costs on to consumers, and you end up with a situation in which prices and pay go up.

What does inflation mean for the poor?

This becomes especially difficult for people who are poor. Poorer people can have a hard time coping with high or unpredictable inflation that’s not outmatched by wage increases. This is simply because they have less flexibility. The poor spend  more on their necessities, such as food, housing, and gas.  An impoverished family might be forced to reduce essentials like food.

Inflation can also be a problem for many businesses. Businesses without pricing power, which means they can’t pass costs on to customers easily, suffer the most because they have to absorb increases in input cost by taking a hit with their profits.

To help fight inflation, the central bank, the federal reserve, typically will raise interest rates. Inflation can cause the Federal Reserve to raise interest rates to try to cool down the economy and slow down demand. The problem is that the central bank could also raise interest rates too much, which could lead to a recession which would make things difficult for everyone.

The hope is that the fed can increase interest rates, to slow the economy, while at the same time not slowing it too much causing a recession, while the rate of inflation returns to a more normal level.

 

 

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Getting Ready for Taxes: Documents you Need

The first step towards filing your tax return is to gather all the documents that you will need.  Here, students learn what documents, paperwork, and receipts are needed to file your income tax return.  It is a checklist of documents for completing IRS form 1040 Income tax.  Learn to prepare and organize your tax documents, including the W-2 and 1099. Income tax 101.

Examples of important documents. To get started, you will need to gather all the documents you will need for filling out your tax forms. Whether you are doing your taxes yourself, or you are meeting with your tax advisor, this is an overview of some of the more typical documents you will need to gather.

CONCEPTS

Use this video on the topic to discuss the financial concepts of

  • Taxes
  • Getting ready for taxes.
  • Important financial documents, paperwork, and receipts.

 

PROCEDURE

Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have and have them complete the worksheet.  Then have a discussion about the documents needed for filing taxes.  Discuss each of the categories mentioned in the video and highlight the important documents for each.  Review the questions on the worksheet.

 

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GRADE LEVEL

9-12, Young adults

TIME REQUIRED

30 minutes

Getting Ready to File Taxes – Documents you need

Getting ready for filing taxes can seem overwhelming.  To get started, you will need to gather all the documents you will need for filling out your tax forms.  Whether you are doing your taxes yourself, or you are meeting with your tax advisor, here is an overview of some of the more typical documents you will need to gather. 

These are the main categories of items that you will need.  We will step through each one in more detail. The challenge of gathering all the information you need to file your tax return for the year can be simple or more time consuming, depending on your financial situation. For example, if you are single and rent, it likely will be easier, but if you are married, self-employed, own a home, and have children, will need to spend more time on the tax filing process.

Personal Information

You will need personal information, including  the social security numbers for you, your spouse, and any dependents.

Bank account information including bank account number and routing information.

Your federal and state taxes from last year. These documents are helpful to remember the information you filed last year and the documents that you used.

If you are meeting with a tax preparer, and it is the first time, then you will also likely need a photo ID, and other personal information for everyone on your tax return. 

Income

You will need all documents that verify the money you received in the past year.

This includes W-2 forms, which employers must send by January 31st.  If you held a regular job, your employer will send you this form. You’ll get one form from each employer if you worked for multiple ones in the same year. This form details your earnings, and the amount of income tax that was withheld from your pay.

1099 forms.  There are many different types of 1099 forms that you may receive, depending on the type of payment.  Typical ones include 1099-INT for interest, and 1099-MISC for contract work.

While the Internal Revenue Service already knows the amount of income you have earned last year, it still just needs you to verify it on your tax return. Anybody who paid you more that $600 in the previous year must let the IRS know.

If you have received income but did not receive a return with supporting information, you should contact the entity that paid you or your employer.

Deductions

You can reduce your taxable income by taking deductions. This generally results in a lower tax bill. Documentation is the key to claiming deductions. It can help you avoid being audited and can reduce your tax bill by reminding you what you should claim. It may be time-consuming, but it is likely worth the time.

Here are some of the most popular tax deductions. Before you file, make sure you have the supporting documentation.

Mortgage interest and property taxes for your home.

Classroom expenses. You can deduct  for classroom supplies if you are a teacher or another eligible educator.

Charitable donations. Have your receipts for charitable donations.

Medical bills. Tax savings may be possible for medical costs if they exceed a certain amount of your adjusted gross income.

Contributions to retirement accounts. Contributions to a traditional IRA and self-employed retirement account can be deducted if they are within the allowed contribution limits.

Taxes that are local and state taxes. Other taxes can be deducted, including state and local income taxes or sales taxes. Keep your receipts to prove that you paid the tax on major purchases.

Credits

Next are tax credits. They offer dollar-for-dollar reductions in any tax you owe. You will need to provide documentation in order to claim credits, just like deductions. These are some of the most popular tax credits.

To claim some tax credits, you will need to have received a Form 1098 detailing the expenses paid. This is especially important for those available for education. You will need to keep accurate records of your spending so that you can claim other credits.

Payments

If you were employed, you likely have inc ome taxes withheld from your paychecks to pay our tax liabilities. This amount can be found on your W-2 forms.

If your made estimated tax payments throughout the year, you should also have that information.

Letters from the IRS

Have any letters you may have received from the past year from the IRS.   This includes letters related to any tax credits, or any other letters you may have received.

Self-Employment Income

It is especially important to keep receipts if you earn income as an independent contractor. If you have income as an independent contractor, you can claim a number of business expenses on Schedule C that are ordinary and necessary for doing business.

Summary

This is just a summary of the documents that many will need. There may be others that you may require depending on your financial situation. We suggest you visit the IRS website or consult with your own tax advisor if you need help. It’s a good idea to organize all your tax documents as soon as possible to make it easier once you begin working on filing your taxes.

Learn what documents you need to file your 2021 income tax returns for 2022 tax season.

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Spending Money Wisely: Dog goes to Super Bowl

A dog goes to the Super Bowl. A fun class or lesson starter for the YouTube and TikTok generation. Discuss with students if price discounts are really a good deal, or just a pricing trick?

CONCEPTS

Use this video on the topic to discuss the money concepts of

  • Needs and wants
  • Understanding discounts
  • Making impulsive purchases
  • Spending Money

 

PROCEDURE

Show students the video and have and then have a discussion about impulse buying and needs and wants.

 

Watch on YouTube

Watch on YouTube Shorts

Watch on TicTok

Watch on Instagram

GRADE LEVEL

7-12, Young adults

TIME REQUIRED

20 minutes

Impulse Purchasing Background

Is it possible to buy an item without even thinking about it? You buy an item without thinking about the consequences. Most people impulse buy, whether it’s a big purchase like Super Bowl tickets in this case, a like a car or a small one like new clothes. Retailers market themselves online  with impulse buying in mind.

A small impulse purchase, such as shirt, can be harmless. However, impulse spending on an even larger scale can cause ineffective budgeting, loss savings and poor financial planning. This is money that you can instead use to  pay your apartment or home utility bills or use to save for college.

Emotional state is a key factor in an impulse purchase. Emotions can be intense feelings towards someone or something. They are often expressed through facial expressions, such as anger, fear, delight and enthusiasm.

Consumers’ buying habits can be affected by both negative and positive emotions. It was originally believed that happiness preceded impulsive purchases, causing joy and pleasure. Impulse buying can be used to relieve stress, fatigue and other negative emotions in certain situations. Impulse purchases can be made when you are able to gain face or prestige in a social setting. People who feel embarrassed, anxious, rejected or ashamed may also buy on impulse if they lose their face.

People resist the urge to eat snacks, go to bed, or impulse buy. Self-control refers to the ability not only to ignore one’s thoughts and emotions but also to control your actions. A standard is a way to set a shopping goal. A shopper might go to a shop to purchase a suit for a wedding or to make a list of things to buy at the grocery store. Uncertain goals make shoppers more likely to lose self-control. Monitoring the process or tracking spending and behavior. Monitors are less likely for shoppers to buy impulse items.

What motivates impulse shoppers? You feel like you are getting a deal. Impulse buying does not always require spending a large sum of money on expensive products. Many people buy products to save money over the long-term. People mostly would prefer to take advantage of a deal rather than paying full price. Because consumers are price-conscious, sales promotions can have an impact on sales. They are more likely to purchase products with higher savings.

Physical stimuli are also key to driving impulse purchases and can influence consumers’ behavior. A happy environment can encourage customers to shop around and make spontaneous purchases. Positive feelings are associated with higher impulse buying. A store’s music can have a significant impact on customer impulse buying and emotions. Customers spend more time in stores with soft background music, which results in more product purchases and a slower pace of shopping. Salespeople who provide customer service and guidance can increase consumer spending. One common tactic retailers employ is to tell customers how satisfied their customers are with their purchases. To encourage impulse buying, they can inform customers about product scarcity, give free samples and trials, or offer money-back guarantee. Sales promotions encourage customers to purchase larger quantities of products. Impulse buying is also influenced by free vouchers and refunds.

It’s difficult to make rational purchasing decisions when we are overwhelmed by emotion such as anxiety, stress, or excitement. Your brain struggles between short-term rewards or long-term goals. The logical side of a person’s brain attempts to reason with them when they see something they need.  However, the emotional side is more focused on the immediate and considers the ultimate reward as instant gratification. Shopping offers consumers instant pleasure and a dose of dopamine. This is the feeling that retailers offer that makes people want to shop.

@moneymittens Dog goes to Super Bowl 2022 Los Angeles Rams Bengals #superbowl #stuffedanimals #dog #funny #fyp #penguin #sofistadium ♬ original sound – money mittens





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Impulse Buying? Dog Orders Chocolate Bar

A dog orders a MrBeast chocolate bar.  Did he win the golden ticket? Here is a fun class or lesson starter for the TikTok or YouTube generation of students on the topics of impulse buying, money and spending.

BACKGROUND

MrBeast is a popular YouTube celebrity your students are likely familiar with.  He recently has started working with a food company, feastables, to market his new chocolate bars and contest he promotes on his YouTube channel.

CONCEPTS

Use this video on the topic to discuss the money concepts of

  • Needs and wants
  • Making impulsive purchases

PROCEDURE

Hand out the worksheet below (see lesson button below).

Show students the video and have them answer the questions on the worksheet.  Then have a discussion about impulse buying and needs and wants.

GRADE LEVEL

7-12, Young adults

TIME REQUIRED

20 minutes

Impulse Buying

Is it possible to buy an item without even thinking about it? You buy an item without thinking about the consequences.

Most people impulse buy, whether it’s a big purchase like a car or a small one like a box of chocolate. Retailers market themselves online and design their stores with impulse buying in mind and strategically place common impulse-purchased products.

A small impulse purchase, such as a candy bar, can be harmless. However, impulse spending on an even larger scale can cause ineffective budgeting, loss savings and poor financial planning. This is money that you can instead use to  pay your utility bills or save for college.

More Information on MrBeast and Feastables

Jimmy Donaldson, also known as MrBeast, is a well known YouTuber, a digital creator and philanthropist who has launched Feastables, a healthier snacking brand.  Feastables launched the MrBeast Bar, a chocolate bar made without gluten and containing simple ingredients like organic cocoa.  Donaldson was diagnosed with Crohn’s Disease as a child and realized the importance of making high-quality snacks more easily accessible.

The current product portfolio is only the beginning of a larger vision. Donaldson will be Feastables creative visionary. Feastables will host sweepstakes worth over $1,000,000 in prizes and offers. Ten grand prize winners will be chosen to participate in a MrBeast video for a chance to win MrBeast’s Chocolate Factory.  Prices starting from $2.98 for individual bars to $49.99 for bundles.

@moneymittens Dog order MrBeast chocolate bar. Golden ticket win? #dogs #mrbeast #mrbeastchocolate #beastbar #dogslife #chocolate ♬ original sound – money mittens

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Financial Management Skills Assessment


LESSON DESCRIPTION

Students assess their own financial management skills by taking the money management self-assessment.  This assessment will help students identify their current knowledge or money management as well as areas that need instruction regarding money and finances.

Money management is how you manage all aspects of your finances. This includes setting goals for the long-term, making a budget and choosing investments that will help you reach them. Money management does not mean saying no to every purchase. It is about creating a plan that will allow you to say yes to the most important things in your life. If you lack the ability to manage money effectively, any amount of money could prove to be insufficient.

Although it isn’t as difficult as you might think, managing your money well can be tedious. A healthy financial life is just as important as being physically fit. You will not stop trying to live a healthy lifestyle just because you have reached your ideal weight. It’s a constant effort that never ends. Once you reach your goal, it won’t be as hard to maintain it as the previous effort. However, effort is still necessary.

 

PROCEDURE

Print out the money management self assessment worksheet.

Encourage students to be truthful when filling out the assessment, and that their skills may be better than many adults.

After completing the assessment, students should choose one topic from their self-assessment that they would like to improve over the next month. 

Every month, have the students re-take the assessment and evaluate areas they have either improved or areas they still need to improve.

GRADE LEVEL

7-12, Young adults

CONCEPTS

  • Understanding spending plans
  • Assessment of spending plans
  • Adjusting spending decisions
  • Personal finance
  • Spending vs. saving

OBJECTIVES

Students will:

  • Be able to evaluate their spending plans.
  • Understand what influences spending decisions.
  • Identify ways to improve their spending decisions and behavior.
  • Prioritize their spending decisions

TIME REQUIRED

20 minutes.

Click on the button below to get the worksheet to use with the above lesson. This is a random worksheet. Every time you click, a new worksheet will be created. You may create multiple worksheets using this button.

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