How to do Taxes – Tax Filing Guide for Beginners Lesson

A lesson on the basics of how to file taxes if you are new to the process or unsure of what to do. Topics include tax preparation, necessary documents, tax deductions, tax credits, and tax return filing status.

CONCEPTS

Use this video lesson on the topic of taxes. Learn basic tax and related concepts of

  • Taxes
  • IRS
  • Tax filing methods
  • Tax preparation
  • Filing status
  • Deductions and credits
  • 1040 form

GRADE LEVEL

9-12th grades. High School. Adult Education.

TIME REQUIRED

45-60 Minutes. It may be necessary to adjust the lesson plan and allocate more or less time to certain topics, depending on the needs and interests of the students.

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.  Review the questions on the worksheet.  A more comprehensive and detailed lesson plan can be accessed below for further instruction and study.

How to do Taxes – Tax Filing Guide

Lesson Plan: How to File Taxes (Video Lesson)

Objective: Students will understand the process and importance of filing taxes by watching a video lesson, and will learn how to gather necessary documents and determine their filing status by completing a worksheet and participating in a class discussion.

Materials:

  • Video lesson on “How to File Taxes” (see above).
  • Handouts on types of income forms (W-2, 1099-MISC, 1099-INT, 1099-DIV, 1098E)
  • Tax preparation software or online resources
  • Worksheet on filing taxes (see below).

Introduction (10 minutes):

Begin the lesson by discussing the importance of taxes and why they are filed.

Ask students if they have any experience with filing taxes or if they have any questions or concerns.

Direct Instruction (10 minutes):

Show the video lesson on “How to File Taxes”

Guided Practice (20 minutes):

Have students complete the worksheet on filing taxes, which will include questions about the types of income forms, how to gather necessary documents, and determining their filing status.

Have students work in pairs or small groups to discuss their answers and provide feedback.

Independent Practice (20 minutes):

Assign students to use tax preparation software or online resources to complete a mock tax return.

Closure (10 minutes):

  • Have a class discussion on the key concepts and main takeaways from the lesson and the video.
  • Encourage students to ask any remaining questions and address any concerns they may have.
  • Remind students of the importance of filing taxes and the consequences of not doing so.

Assessment:

  • Review completed worksheets for accuracy.
  • Observe students during independent practice to ensure they understand the process of gathering necessary documents and determining their filing status.
  • Use formative assessment techniques like oral questions, self-reflection and exit slip to evaluate students’ understanding.

Note: The video length and the duration of the other activities might vary depending on the type of class and students, so adjust the time accordingly.

How to do Taxes

Taxes are something we all have to deal with, whether we like it or not. They’re the money we pay to keep our government running. To get ready for tax season, you’ll need to gather all the necessary paperwork, like your W-2, 1099 forms, and any other documents that show your income and how much taxes have already been taken out. Once you have everything together, you’ll need to figure out your filing status. This will help you figure out what tax rate you’ll be paying and what deductions or credits you’re eligible for. After that, you’ll have to decide how you want to file your taxes. You can use tax software, file a paper return, or hire a professional to do it for you. Once you’ve chosen your method, you’ll fill out the forms, like the IRS 1040 tax form. Before you file, make sure you double-check everything to make sure it’s all accurate and complete. And finally, you can file your taxes electronically or mail it to the IRS.

Money Instructor does not provide tax, legal or accounting advice. This material has been prepared for educational and informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors regarding your own situation. Although the information has been researched and vetted beforehand, it may not be current at the time of viewing.

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Introduction to Stocks | Basics for Beginners

A playful and engaging animated video that makes learning about stocks easy and fun for beginners. Learn the fundamentals of stocks and take the first steps towards understanding the stock market with this entertaining and informative video lesson.

This video is designed to make the concept of stocks easy for anyone to understand. Covering the basics of stocks, this video is a comprehensive introduction to the world of stocks, also known as Stocks 101. It breaks down the complex concepts of stocks and finance into simple and easy-to-digest explanations, in a fun, kid-friendly way. Get a grasp on the basics of stocks with this fun and informative guide.

CONCEPTS

Use this video lesson on the topic of basics of stock investing. Learn basic economic and related concepts of

  • Stocks
  • Investing
  • Stock Market
  • Economy

GRADE LEVEL

6-12th grades. Middle School. High School. Adult Education.

TIME REQUIRED

45-60 Minutes. It may be necessary to adjust the lesson plan and allocate more or less time to certain topics, depending on the needs and interests of the students.

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.  Review the questions on the worksheet.  A comprehensive and detailed lesson plan can be accessed below for further instruction and study.

Introduction to Stocks

After watching the video, have students tell what the most important things they learned from the video.

Additional Resources

See our additional resources on investing, stocks, and the stock market.

 

Lesson Plan: Introduction to Investing in Stocks


Objective:

Students will understand the basics of investing in stocks, including the concept of buying and selling ownership in a company, the potential risks and rewards, and the factors to consider when choosing which stocks to buy.

Materials:

  • Whiteboard and markers
  • Video:  Introduction to Stocks (see above)
  • Computers or devices with internet access for research


Introduction (10 minutes):

  • Begin the class by asking students if they have heard of stocks before and what they know about them. Write their responses on the whiteboard.
  • Introduce the video about some friends discussing stocks and ask students to pay attention for key concepts and terms.


Direct Instruction (20 minutes):

  • Review the video as a class and pause to discuss key concepts and terms such as stock ownership, buying and selling stocks, the value of stocks, and the risks and rewards of investing in stocks.
  • Write key concepts and terms on the whiteboard for reference.
  • Provide handouts with additional information on stocks and the stock market for students to read and reference.


Guided Practice (20 minutes):

Have students work in small groups to research a specific company and its stock performance. Each group should present their findings to the class, including information on the company’s financial statements, management team, products or services, and competitive advantage in the market.


Independent Practice (20 minutes):

  • Provide students with a hypothetical investment scenario and have them choose which stocks they would buy and why.
    Have students present their choices to the class and justify their decisions based on the factors discussed in the lesson.


Closure (10 minutes):

  • Review key concepts and terms from the lesson and ask students to share what they learned.
    Remind students that investing in stocks can be risky, but with proper research and understanding, it can also potentially be a good way to build wealth over the long term.
  • Encourage students to continue learning about personal finance and investing in the future.


Assessment:

  • Observe student participation and engagement during group research and presentations.
  • Review student choices and justifications for hypothetical investment scenario.
  • Collect and grade written responses to a reflection question on the key takeaways from the lesson.


Introduction to Stocks

Stocks represent ownership in a company. Buying stocks means buying a small piece of the company, whose value can increase if the company does well, allowing the investor to sell for a profit. However, if the company performs poorly, the stock value may decrease. Investing in stocks can be risky but can also build wealth over time. It’s important to research and consider risks before investing and to work with a financial advisor or broker for informed investment decisions.

Information is for educational and informational purposes only and is not be interpreted as financial advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.

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How to Fill out Form 1040 for 2022 Taxes Lesson

In this lesson, students will learn how to properly complete the 2022 IRS Form 1040 for the 2023 tax season. The lesson includes a video tutorial with step-by-step instructions and a comprehensive lesson plan to provide a thorough understanding of the process.

CONCEPTS

Use this video lesson on the topic of filling out the 1040 tax form. Learn basic tax and related concepts of

  • Taxes
  • Tax Filing
  • IRS
  • Income
  • Dependents

GRADE LEVEL

9-12th grades. High School. Adult Education.

TIME REQUIRED

30-45 Minutes. It may be necessary to adjust the lesson plan and allocate more or less time to certain topics, depending on the needs and interests of the students. More in-depth lesson plan below will be longer.

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.  Review the questions on the worksheet.  For a more in-depth lesson, complete the lesson plan below.

How to Fill Out Form 1040 for 2022

After watching the video, ask students to summarize the main points made in the video.

 

Lesson Plan: Filling out the 1040 Tax Form


Objective:

Students will be able to accurately and efficiently fill out a 1040 tax form and understand the different deductions and credits that can be claimed.

Materials:

  • 1040 tax forms and instructions (see forms and documents section).
  • How to Fill out the 1040 Video (see above).
  • Computers with internet access (optional)
  • Calculators
  • Examples of tax-related documents such as W-2 forms, 1099 forms, and receipts for charitable donations or business expenses

Sample data for practice:

A W-2 form showing $40,000 of wages and $500 of state tax withheld

A 1099-INT form showing $500 of interest income

A 1099-DIV form showing $1,000 of dividend income

Receipts for $500 of charitable donations, $2,500 of state and local taxes, and $3,000 of mortgage interest

Example Information:

Student’s name: John Doe

Social Security number: 123-45-6789

Filing status: Single

Wages, salaries, tips: $22,000

Interest Income: $1,000

Dividend Income: $500

Federal income tax withheld: $2,500

Bank account information for direct deposit:

Account number: 1234567890

Routing number: 111000025

Example 2:

Student’s name: Jane Smith

Social Security number: 123-45-6789

Filing status: Head of Household

ages, salaries, tips: $45,000

Rental Income: $5,000

Adjustments to Income: $3,000 (Alimony paid)

Federal income tax withheld: $6,300

Bank account information for direct deposit:

Account number: 9876543210

Routing number: 111000025

 

Introduction (15 minutes):

Begin by reviewing the importance of paying taxes and the role they play in funding government programs and services.

Introduce the 1040 tax form and its purpose. Explain that the form is used to report an individual’s income, deductions, and credits to the IRS.

Have the students watch the video and answer the worksheet questions.  Provide students with a brief overview of the different sections of the form and what information they will need to gather in order to complete it.

Highlight the importance of accuracy and completeness when filling out the form to avoid errors and potential penalties.

Direct Instruction (45 minutes):

Review the different sections of the 1040 tax form, including personal information, income, deductions, and credits.

Discuss the types of income that must be reported, such as wages, salaries, tips, interest, and dividends.

Explain the difference between itemized and standard deductions and provide examples of each. For example, itemized deductions include expenses such as mortgage interest, state and local taxes, and charitable donations, while the standard deduction is a set amount that can be claimed by taxpayers who do not itemize their deductions.

Discuss common tax credits, such as the Earned Income Credit and Child Tax Credit. Explain how these credits can lower the amount of taxes owed.

Guided Practice (45 minutes):

Provide students with a sample 1040 tax form and instructions.

Provide them with the sample data and relevant tax-related documents such as W-2 forms, 1099 forms, and receipts for charitable donations or business expenses.

Have students work in pairs or small groups to fill out the form using the provided examples.

Provide assistance as needed and allow students to ask questions.

Point out key information to look for on the different documents, such as the taxpayer’s name, social security number, and income amount.

Independent Practice (30 minutes):

Provide students with their own 1040 tax form and instructions.

Have students complete the form independently, using their own tax-related documents if they have them.

Provide a deadline for submitting the completed form for review.

Closure (10 minutes):

Review the key concepts covered in the lesson, such as the purpose of the 1040 tax form, types of income that must be reported, and deductions and credits that can be claimed.

Answer any remaining questions and provide feedback on the completed forms.

Remind students of the importance of accuracy and completeness when filling out the form, and encourage them to seek assistance if they have any questions or concerns.

Assessment:

Observe students during independent practice to ensure they are accurately and efficiently filling out the 1040 tax form. Review completed forms for accuracy and provide feedback.

 

Money Instructor does not provide tax, legal or accounting advice. This material has been prepared for educational and informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors regarding your own situation. Although the information has been researched and vetted beforehand, it may not be current at the time of viewing.

 

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What is a Slowcession – Slow Recession Lesson

The lesson is about understanding what is a slowcession. With a slowcession, or slow recession, economic growth slows down, but an economic downturn is avoided.

CONCEPTS

Use this video lesson on the topic of slowcession. With a slowsession, or slow recession, the Federal Reserve’s plan to raise interest rates hopefully helps lower inflation without causing a recession. Cheap oil prices, less inflation, and a strong housing market, are possible reasons for a slowsession. Learn basic economic and related concepts of

  • Recession
  • Slowcession
  • Inflation
  • Unemployment
  • Economic growth

GRADE LEVEL

7-12th grades. Middle School. High School. Adult Education.

TIME REQUIRED

45-60 Minutes. It may be necessary to adjust the lesson plan and allocate more or less time to certain topics, depending on the needs and interests of the students.

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.  Review the questions on the worksheet.  Complete the lesson plan below.

What is a Slowcession?

After watching the video, ask students to summarize the main points made in the video.

Lesson Plan:

Objective:

  • Students will understand what a slowcession is and how it differs from a recession.

Materials:

  • Lesson Video (see above)
  • Whiteboard or chalkboard
  • Markers or chalk
  • Handouts with examples of ways the government can help prevent a recession or slowcession

Warm-Up:

Ask students if they have heard of the term “recession” before.

Ask them to share what they know about a recession and write their responses on the board.

Direct Instruction:

Show students the video and worksheet.  Have students answer the questions on the worksheet.

Define a recession as a time when the economy is not doing well and many people lose their jobs and businesses struggle to make money.

Explain that a slowcession is similar to a recession, but the economy doesn’t get as bad.

Share examples of things that could help prevent a full-blown recession, such as lowering inflation and the government investing in infrastructure.

Guided Practice:

Have students work in pairs to come up with their own examples of ways the government can help prevent a recession or slowcession.

Have each pair share their ideas with the class and add them to the list on the board.

Independent Practice:

Hand out the handouts with additional examples of ways the government can help prevent a recession or slowcession.

Have students read the handout and identify which examples they think would be most effective.

Have them write a short paragraph explaining why they think their chosen examples would be most effective.

Closure:

Review the list of ways the government can help prevent a recession or slowcession.

Ask students to share their thoughts on which methods they think would be most effective in preventing a recession or slowcession.

Summarize the main points of the lesson and review the definition of a slowcession.

Assessment:

Observe student participation during discussion and group work.

Review the paragraphs written by students explaining which examples they think would be most effective in preventing a recession or slowcession.

What is a slowsession?

First let’s make sure we understand what is a recession?

A recession is a time when the economy is not doing well and lots of people lose their jobs and businesses have trouble making money. A slowcession is similar, but the economy doesn’t get as bad as it does during a recession.

Some think a slowcession is more likely to happen in the U.S. this year than a full-blown recession. Even though the economy will face some challenges, like more unemployment and less growth, there are things that could help us avoid a full-blown recession.

For example, if inflation, which is when prices for things like food and gas go up, so it costs more money to buy things,   is high, it can be hard for people to afford the things they need.

However, if inflation  goes down and people keep spending money, it could help the economy not get as bad as a recession.

Many people are worried that a recession might happen this year, but some think it’s not a sure thing. They believe that if we’re lucky and the government makes smart decisions about how to handle the economy, we might be able to avoid a full-blown recession and just have a slowcession instead.

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What is a Bank Statement? How to Read.

The lesson is about understanding and interpreting bank statements, which are documents that show financial transactions made to an account over a specified period of time.

CONCEPTS

Use this video lesson on the topic of bank statements, including the various components of a bank statement, such as the bank information, statement period, account number, type of account, summary section, and transaction details, as well as how to check for fees and calculate the ending balance to ensure accuracy. Learn basic economic and related concepts of

  • Banking
  • Fees
  • Account balance
  • Deposits and withdrawals

GRADE LEVEL

7-12th grades. Middle School. High School. Adult Education.

TIME REQUIRED

45-60 Minutes. It may be necessary to adjust the lesson plan and allocate more or less time to certain topics, depending on the needs and interests of the students.

LESSON OBJECTIVES

  • Understand what a bank statement is and why it is important
  • Know how to receive a bank statement
  • Identify the different components of a bank statement
  • Learn how to review and interpret the information on a bank statement
  • Know how to check for fees on a bank statement
  • Learn how to calculate the ending balance on a bank statement
  • Understand how to manage your money and keep your account in good standing by understanding and interpreting your bank statement

MATERIALS NEEDED

  • Video and Worksheet
  • Bank statements (real or sample)
  • Calculator

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.  Review the questions on the worksheet.  Complete the lesson plan below.

What is a Bank Statement?

After watching the video, ask students to summarize the main points made in the video.

Lesson Outline:

Introduction

  • Show students the video and have them complete the worksheet to introduce the topic of bank statements and their importance in keeping track of financial activity and ensuring that an account is in good order
  • Explain that a bank statement is a record of all transactions made to an account during a specified time period, usually covering monthly activity, and containing information like account balances, withdrawals, and contact information

Receiving a Bank Statement

  • Discuss the different ways to receive a bank statement, such as online or by mail
  • Emphasize the importance of keeping bank statements for up to seven years for tax preparation.

Components of a Bank Statement

  • Review the various components of a bank statement, including the bank information, statement period, account number, type of account, summary section, and transaction details
  • Point out that the summary section includes the beginning and closing balances of the account, and the transaction details list all the transactions made during the statement period.

Reviewing and Interpreting Information

  • Discuss the importance of carefully reviewing the transaction details on a bank statement to ensure that all transactions are accurate and authorized
  • Emphasize the importance of tracking spending habits and identifying fraudulent activity by regularly reviewing bank statements

Checking for Fees

  • Explain that bank statements may include fees such as overdraft fees and monthly maintenance fees, and that it is important to check for these fees in the transaction section and summary section of the statement
  • Discuss the importance of paying any fees on time to avoid additional fees

Calculating Ending Balance

  • Demonstrate how to calculate the ending balance on a bank statement by adding all deposits and subtracting withdrawals and fees
  • Emphasize the importance of checking the ending balance to ensure that it is accurate

Managing Money and Keeping Account in Good Standing

  • Discuss the importance of understanding and interpreting bank statements in order to properly manage money and keep an account in good standing
  • Encourage students to regularly review their bank statements and pay any fees on time to avoid additional fees

Conclusion

  • Review the main points of the lesson and emphasize the importance of understanding and interpreting bank statements in order to properly manage money and keep an account in good standing
  • Encourage students to ask any questions or clarify any points before ending the lesson.


What is a bank statement?

A bank statement is a valuable tool to keep track of your financial activity, and ensure that your account is in good order. It is a record that shows all transactions made to your account during a specified time period, and it usually covers monthly activity. It contains information like account balances and withdrawals as well as contact information.

Regularly reviewing your bank statements is essential to keep track of your spending habits, spot fraudulent activity, and to create a budget. Bank statements can be received online or by mail. It is recommended that you keep them for at most seven years for tax preparation.

Let’s begin by identifying the most important information on your bank statement. The following information should be on your bank statement:

  • Bank Information.  This includes the bank’s name, address, and contact information.
  • Statement period: This describes the time span that the statement covers.
  • Account number: This number is unique to your bank account.
  • Type of account: This refers to the type account you have such as a savings or checking account.
  • Summary section.  This is a summary of the transactions done in your account. It includes the Beginning balance, which is the amount in your account at the beginning of the statement period, and Closing balance,  the amount in your account at end of the statement period.

Let’s now look at your transactions. You will find a list listing all transactions that were made during the statement period. This list should include the date, description and amount. You should carefully review this list to ensure that the transactions have been authorized and accurate.

Be sure to check for fees. Check for fees such as overdraft fees and monthly maintenance fees.  You may find this in the transaction section and also in the summary section.

Let’s now calculate your ending balance to make sure it is correct. To calculate your balance, add all deposits to the account and subtract withdrawals and fees. This will allow you to see how much money is in your account, and make sure it is correct.

You can avoid any additional fees by understanding your bank statement and paying all fees on time. To avoid any additional fees, pay any fees that are on your bank statement. You can pay fees online, or by mail.

This will help you keep your account in good standing. You should keep track of all activity in your bank account and ensure that you manage your money properly.

Be sure to be able to read and understand your bank statement.  It is important to regularly review to ensure accuracy, track spending habits, and identify fraudulent activity.

Sample Bank Statement
Sample bank statement

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What is Currency? Exchange Rates

This lesson covers the concept of currency, including its role in an economy as a medium of exchange and store of value, and different types of currency such as traditional currencies and digital currencies like Bitcoin. It also covers the foreign exchange market and how it determines the exchange rate between different currencies, as well as the factors that can affect the exchange rate, such as economic conditions, interest rates, and political events.

CONCEPTS

Use this video lesson on the topic of currency, including its role in an economy, different types of currency, and the factors that can affect the exchange rate of a currency and other basic economic and related concepts of

  • Currency
  • Money
  • Exchange Rates
  • Interest Rates

PROCEDURE

Warm-Up: Have students brainstorm a list of different types of money they are familiar with (e.g. cash, credit cards, checks). Ask students to share their list with the class and discuss the purpose of each type of money.

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.  Review the questions on the worksheet.

What is Currency?


After watching the video, ask students to summarize the main points made in the video.

Lead a discussion on the role of currency in an economy and how it serves as a medium of exchange and store of value. Discuss the different types of currency mentioned in the video, including traditional currencies and digital currencies such as Bitcoin. Ask students to share any additional questions or points they have about currency.

Conclusion:

Review the main points covered in the lesson, including the role of currency in an economy and the different types of currency. Encourage students to continue learning about currency and its importance in the global economy.


GRADE LEVEL

6-12th grades. Adult Education.

TIME REQUIRED

45 minutes

 

What is Currency?

The official money of a country is called currency. It is made up of coins and paper money. A currency is any money that is generally accepted, such as coins or paper notes. It is issued by a government, and circulated within an economic system.  Each country has its currency and it is usually managed by the country’s central bank.

Sometimes, currencies are named the same as those of other countries and more than one country may use the same currency. The Euro, for example, is the official currency in many of the EU member countries. This facilitates trade and transactions among countries that use the Euro.

Other times, the currency name for one country is different from another. Examples of different currencies include the US dollar, Euro, and Japanese Yen.

The US dollar is the most widely used currency in international transactions. Because the US dollar is widely recognized and traded on the international market, this is why it is so popular. It is also considered a stable and reliable currency.

So what is an Exchange Rate?

An exchange rate refers to the rate at which one currency is exchangeable for another. For example, the exchange rate between the US Dollar and Euro can be expressed in the following way: “1 USD = 1.05 EUR” This means that you can get 1.05 euros for every $1 US Dollar.

The forex or foreign exchange market determines the exchange rate between currencies. The value of a currency will rise relative to other currencies if it is in high demand. Conversely, if a currency is in low demand, its value will drop relative to other currencies.

Many factors can affect the foreign exchange rate. These include economic conditions, interest rates and political events. A strong economy can increase demand for its currency, which could cause it to appreciate relative to other currencies.

The exchange rate is subject to change often, sometimes multiple times per day. The market’s underlying factors and currencies can have an impact on how the rate of change changes. In general, currencies that are more volatile, such as those from developing countries, experience greater frequency and more significant changes in   exchange rates.

What is Digital Currency?

Bitcoin is one example of a digital cryptocurrency. It is a digital currency decentralized on blockchain technology. Bitcoin, unlike traditional currencies that are issued by governments is created and managed electronically by a network of computers.  These computers use complex algorithms to verify transactions to maintain the integrity of its system.

Bitcoin’s value is determined only by market demand. It is not supported by any tangible assets or government. It is therefore a high-risk investment that can see its value fluctuate widely.

Currency plays an important role in the economy as it serves as both a medium for exchange and a store value. 

 

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What is Yield? How to Calculate

Learn the basics of investment yield, definition of yield, and how to calculate the percentage yield formula for bonds and stock dividends.

CONCEPTS

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

  • Yield
  • Investment Return
  • Bonds
  • Stocks

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 what things they and their family may do to prepare for a recession. Review the questions on the worksheet.

What is Yield?

GRADE LEVEL

9-12th grades. Adult Education.

TIME REQUIRED

45 minutes

 

What is Yield?

Yield refers to the amount of income that an investment generates over time. It is calculated by adding interest or dividends to the investment and then dividing it by the investment’s value. It is usually expressed in an annual percentage and does not include capital gains.

However, it is important not to confuse yield and return. The return on investment, or ROI, is usually referred to as profit and loss, and that is not the same as yield. There are a few different contexts where yield can be used. It is possible to define yield in a more precise way if a qualifier is added to it, such as current yield, dividend yield, or yield until maturity. Common investments used for calculating yield are stocks, bonds, and real estate.

So how do we calculate Yield? Simply put, the percent yield formula calculates the annual income-only return of an investment by putting income in the numerator, and cost (or market price) in the denominator.

Yield = Annual Income/Investment Value

We then use this formula doing the following steps to calculate yield:

  • Calculate the initial investment or market value of the stock or bond.
  • Calculate the amount of income from the investment.
  • Divide the market value by your income.
  • Multiply this number by 100.


Bonds have an interest yield

Bond investors receive income in the form coupon payments. These can vary in frequency, but are usually semi-annual. Bonds may make things more difficult because there are many ways to calculate bond yield. This depends on factors like how long the bond is held, the coupon or interest rate and whether it is fixed or variable.

Example:

Let’s say you want to save your money and decide you wish to buy bonds.  You want to buy a government bond with a coupon of 5% and it currently costs $900.  What is the yield of the bond?

Answer:

5.00% x 1000 = $50.00 per year for each bond.

$50.00 / 900 = .056 x 100 = 5.56%

Dividend Yield (Stocks)

Dividends are the source of income for stockholders. Although the frequency of dividends varies, it is often quarterly. Stockholders get yields from stocks. Dividends are a form of income that is paid over a regular period. Dividends can be used to calculate yield.

Let’s take a look at the percent yield formula for dividend-paying stocks by using an  example.

Example: 

You want to buy a stock that is priced at $100.  The quarterly dividend is $1.00 per share.  What is the current dividend yield?

Answer:

$1.00 x 4 = $4.00 annual dividend

$4.00 / $100 = 0.04

.04 x 100 = 4.0 %

The current dividend yield is 4%.

 

It’s not difficult to calculate the yield of an investment’s value with some basic math.  Learn to calculate yield so you can understand the income you get from your investments.

 

 

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How to Prepare for a Recession

Learn the basics of how to prepare yourself for a recession, economic loss, or potential job loss. Learn important steps and tips to help prepare and protect yourself for a decline in the economy, a layoff, job loss, unemployment, or other related event.

CONCEPTS

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

  • Recession
  • Saving
  • Spending
  • GDP
  • Debt
  • Budgeting

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 what things they and their family may do to prepare for a recession. Review the questions on the worksheet.

How to Prepare for a Recession

GRADE LEVEL

9-12th grades. Adult Education.

TIME REQUIRED

45 minutes

What is a Recession?

A recession can be described as a contraction of economic activity or when an economy shrinks. It is a significant decline in the economy and lasts longer than a few months.  In a recession , you often have weakness in consumer spending, employment, and industrial production.

When a region’s economy falls over several months or years, it is called a recession. These  periods are marked by a drop in the region’s GDP, or gross domestic product GDP, which is the total value of its goods and services.  Industries that were once profitable may suddenly lose their value. Consumers might see higher inflation or higher than normal levels of unemployment. Consumer confidence may also decline, which could lead to people being less likely to spend their money.

Recessions can have many different effects on families and individuals. Companies make fewer sales during periods of recession and the economy slows down or stops growing. Organizations may have to reduce costs by laying off large numbers of employees. This can lead to widespread unemployment. The hiring process slows down, which makes it more difficult for people to find work. There is also financial uncertainty, and in response, lenders may increase their lending requirements to make it more difficult to get credit.

However, there may also be opportunities. Recessions can affect different people in different ways. Some businesses, for example, don’t suffer as much from a downturn. These include basic food, repair and freelance businesses. You can weather most any storm by anticipating problems early and planning for the future. Here are some steps that will help you prepare for the unexpected.

How to prepare for a recession

Sometimes the discussion leading up to them is scarier than what the actual economic situation warrants. Although recessions can be very difficult financially, it is important to remain calm, be aware of your financial situation, and be ready to be flexible and resilient in times of need. Recessions will eventually end, just as they begin.

Prioritize purchases

Consider what you actually need and what you really want. Do you really need to go on a vacation, buy a car or eat out at restaurants? Reassess your spending and determine which items can be cut or kept. This could help you save thousands of dollars each year. Recession-proof living is possible by learning to live with less.

Make a list of your financial priorities

Uncertainty about the future and how things will turn around is one of the most difficult aspects of a recession. It’s crucial to know what your financial position is. These are the key questions to ask yourself when you assess your financial situation:

What amount of cash do you have?

What amount of debt (credit cards, student loans etc.) do you have currently?

What are your monthly expenses for basic living, including food and shelter, as well as transportation?

Are there any significant life events that will require you to spend a lot of money?

Next, it’s time to assess your current spending and plan for the future. You’ll be prepared for any financial emergency, such as a job loss, recession or other financial situation.

Make a thorough review of your finances and develop a monthly budget

Recessions can often cause people to lose their confidence in the economy. This can lead to lower job security, or worse, job losses. Preparing for any recession-induced emergency is important long before it actually happens.

To ensure that you are living within your means, it is important to create a monthly budget. This could be a great way to ensure you are successful in times of economic turmoil. You want your income to last as long possible and knowing how much money you have and where it is going can help you plan how to handle unemployment or other emergencies.

Write down everyone who you pay monthly bills. Check out how much cash you have in your savings or checking accounts. Find out which categories are your most frequently spending money. It is a good idea for you to look at your monthly expenses. This will help you identify what items are discretionary, and services that you don’t need and which are essential.

Reduce your spending, especially on big-ticket items

Once you have a rough idea of your spending habits, you can identify areas that you can reduce. These are usually not necessary purchases.  You should prioritize your essential expenses. Make sure to identify your monthly budget in order to survive in the event of a job loss. Reduce non-essential expenses like entertainment. It’s impossible to eliminate discretionary spending completely, but it is important to distinguish between your wants and needs. Find areas in which you might have spent too much and reduce that spending.

You have to pay rent, you need car insurance if you have a car, and you need food to eat. Groceries and utilities are essential expenses, but dining out and vacations, is discretionary spending.

Increase your savings

You can increase your savings by building your savings. Start saving now if you don’t have enough money to cover at least six months of your expenses. Make sure to build up your emergency fund before you need it. Keep as much money in your emergency fund even if there are job cuts or layoffs. When income stops coming in, you’ll need every penny.

Although tapping into your emergency fund should not be taken lightly, losing your job or having to live on less money is a reason to tap into some of the funds you have saved. It’s crucial to build your emergency fund once your financial situation stabilizes. Six months to one year of income is the minimum amount you should save.

Reduce your debt

You can reduce your monthly interest cost and have more income to pay for other things by paying off your debt. This doesn’t mean that you should eliminate all debt, but that you should concentrate on the debt that will improve your financial situation. You shouldn’t borrow more money than you can repay with a lower income in times of uncertainty.

If you are able to, focus on debt repayment.  It is possible that you are worried about the future payment of outstanding debts, such as student loans, utility bills, credit card bills, and utilities. You might lose your income and have to stop paying some or all of these bills. It’s important that you understand what bills you must pay.

You might not be able pay all your bills on time if you have lost income.  However, it may not be possible during a recession. You should prioritize how and when you pay your bills so that your cash is available to cover as many of your debts as possible. The more money you can save and the less debt that you have, the more it will be available in an emergency.

Take into consideration your career options, both now as well as in the future

You might also want to review your resume and other tools for job hunting ahead of time. Look for gaps in your work history as you go through your resume. Is there a place where you could get additional training or continuing education? It is a great way to invest in yourself by expanding your skills. Even if your job isn’t in danger, this strategy  applies.

High levels of unemployment are often a result of recessions. It’s important that you consider how difficult economic times can affect your career, and to have a plan in place for if you are laid off.

Some workers may find it beneficial to take on a side job such as freelance work. An extra income stream can help you build emergency savings and can be a great way to save money in the event that you are laid off.

Do not react in a hurry to change your investments

A falling stock market is often associated with a downturn. When times are difficult, companies often have difficulty hiring, expanding and investing. Worse, some companies might even decide to lay off workers.

Changing your investment strategy in a recession may be the worst thing you can do. This applies to all people, no matter how old they are or how close they are to retirement. Regular contributions and reinvesting all distributions will make those market fluctuations work in your favor. A recession may actually be a great buying opportunity.

You generally should avoid making changes that could jeopardize long-term financial security because of short-term economic events.  Be aware that markets are forward-looking. Investors can look ahead months or even a year to when the environment will be better.

Although a recession can be a difficult time, it is best to take proactive steps now in order to prepare. Keep yourself educated, to help you feel confident about your finances, no matter what the future may bring.

This material has been prepared for educational and general informational purposes only, and is not intended to provide, and should not be relied on for financial, tax, or accounting advice. You should consult your own tax, legal and financial advisors regarding your own situation.

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Categories Borrowing Money, Budgeting, Credit, Debt, Earning Money, Economics, Saving & Investing, Spending Money, Tags , , ,
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What is Simple Interest? How to Calculate

Learn the basics of simple interest, and how it is calculated using the simple interest formula.

CONCEPTS

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

  • Interest
  • Saving
  • Money
  • Principal

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 simple interest, how it is used, and how it is calculated. Review the questions on the worksheet.

 

What is Simple Interest

GRADE LEVEL

6-12th grades

TIME REQUIRED

30 minutes

What is Simple Interest

It is important to understand simple interest and how it affects your borrowing or investments.

It can be used to calculate the interest rate on a sum at a certain rate for a specific period of time. Simple interest is simply the benefit of investing money or the cost of borrowing money, without taking into account compounding effects.

Here we will introduce you to simple interest and how it relates to investing or borrowing money. Additionally, you will learn terms like principal, interest rate, time period. These terms allow you to calculate simple interest by using the simple-interest formula.

Simple interest is an easy way to calculate interest on money. In simple interest, interest applies only to the original principal amount and the same rate for each time cycle. For example, if you are saving your money in a bank, the bank will pay interest for your money placed in the bank. One type of interest that banks pay is simple interest.

Simple interest is also important for understanding loans.  A loan is a amount that someone borrows from a bank to meet their financial needs. Examples of loans include personal loans, car loans and education loans. The borrower must return the amount of the loan to the lender by  the due date. Usually, this includes the interest that you have paid on the loan.

 

The Simple Interest Formula

Simple interest is calculated using an investment or loan’s principal balance. This is the amount that you invested or borrowed initially.

The following formula can be used to calculate simple interest: S.I. = P x R x T. where P = Principal,  R = Rate of interest in % per year, and T = Time. The interest rate is expressed in percentage r%. It should be written as r/100 or as a decimal.

Principal: This is the principal amount initially borrowed or invested. P denotes the principal.

Rate: The rate at which the principal amount of an investment is paid to someone is called the rate. It can amounts such as 5%, 10% or 15%. The symbol R denotes the rate of interest.

Time: The duration that the principal amount is placed with someone is called time. T denotes time.

Amount: A person who takes out a loan from the bank must repay the principal and the interest. This is known as Amount.

 

Simple Interest Example

You get a loan of $10,000 from the bank at a rate of 6%. How much would the simple interest be for a loan amount of $10,000? Calculate the simple interest for the amounts borrowed over 1 year.

Solution:

Principal Amount = $10,000, Interest Rate = 6% = 6/100 or .06

Simple Interest

1 Year S.I = 10,000 x 6/100 x1= 600

Simple interest has its limitations

This simple interest calculation is a basic way to look at interest. This is a simple  way to calculate interest. Your interest, whether you are paying it or earning may be calculated using more complicated methods.  For example, other costs may be added to a loan beyond interest. They may be included in your lender’s interest rate.

You can be affected by interest in many areas of your financial life.  So be sure to understand simple interest and all the ways that interest may be calculated.

 

 

LESSON WORKSHEET

 

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How to Make a Budget – 5 Steps

Learn the basics of how to create a personal budget, including 5 simple steps.

CONCEPTS

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

  • Income
  • Spending
  • Saving
  • Budgeting

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 budgeting and the steps required. Review the questions on the worksheet.

 

How to Make a Budget

GRADE LEVEL

7-12th grades

TIME REQUIRED

30 minutes

How to Make a Budget.

A budget is a plan that outlines how you intend to spend your money.  It is important to find a way that you can track your finances.  A budget is essential for most people, to see where their money goes each week, month, and year. It helps you take control of your finances, so you can save more money for your goals. Here we will set up a hypothetical weekly budget and show you five steps that you may use to help you create your own personal budget.

STEP 1: Calculate Income

Income is money you may get from your wages or other sources. It includes full-time jobs, second jobs, freelance pay, and any other ongoing source of income, such as income from interest and investments.

Your income is your total wages or salary less deductions for taxes, employer-provided health insurance and retirement plans. You can calculate an average amount if you don’t have a regular source of income.

STEP 2 – List Expenses

The next step after you’ve determined how much money is coming in, is to determine where it’s going. You can track and categorize your expenses to determine where you’re spending most of your money and where you might save the most.

List all expenses including your regular bills such as rent,  utilities, and so on. Also include your irregular bills, such as quarterly payments such as insurance. Add up all your other expenses, such as groceries, gas and other bills. You should account for every dollar you spend.

Its easier to start by listing all fixed expenses. These are your monthly expenses such as rent, mortgage, utilities, and car payments. Next, list variable expenses. These are those that can change month to month like groceries, gas, and entertainment.  Check your bank statements or bills to ensure you have recorded all your expenses.

STEP 3. Compare and Set Savings

After calculating your required expenses, the money left may be used either for additional spending or for savings. Spending money might be used for entertainment, dining out, and hobbies. Besides spending money, you should set an amount for savings. You can set a savings goal and use your budget to help you reach it. Savings is important because it can be a safety net in case you have unexpected expenses. A small amount saved every day can make a big difference.

For your budget, your income should equal all your expenses plus savings. This will ensure that every dollar you spend has a place within your budget. You can check your math if you aren’t sure.  If the numbers don’t match, make adjustments where necessary.  Try first to reduce some of your variable expenses if possible. Be sure to set spending limits that are specific and realistic for each expense category.

STEP 4:  Track Spending

Track your spending once you have created your budget. This is the only way to see if your spending matches what you set in your budget.   Use a notebook, app, or spreadsheet to keep track of all your expenses and the related spending categories.

STEP 5. Review and Adjust

So how did you do as compared to your budget?  Were you able to match your budget?  Do you need to make adjustments?

Once you have a detailed record of your income and expenditures, you can make adjustments to ensure you don’t spend too much and still have enough money for your goals. Your wants are the first place to cut. Do you have the option to skip going out for dinner and instead cook dinner at home? You may have already adjusted your spending to meet your wants.

Your budget should be able to accommodate you and your life. It’s important that you adjust your budget as your circumstances change. For example, if your expenses are increasing, you might need to find other ways to earn more money, or else you may need to cut back or adjust your savings goals. You might also be able save more if your salary increases or you repay some debts.

It is important to regularly review your budget and your spending once you have established it. This will ensure that you stay on track.  No matter what reason, you should get into the habit to regularly reviewing your budget. Good luck with making and tracking your own budget.  It’s a great tool to help you understand where your money is going to help you reach your financial goals.

LESSON WORKSHEET

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