Browser: Netscape Navigator 4.0 or above or Internet Explorer 4.0
or above.

Personal computer (Pentium II 350 MHz or Celeron 600 MHz) running
Windows® 95 or higher and at least 32 MB of RAM. Macintosh computer: System 8.1 or above and at least 32 MB of RAM.

Software: Any presentation software such as Power Point or HyperStudio (optional).

Specific Software Needed:

Microsoft Excel or some other spreadsheet program (optional).

Web Resources:

TIP: Prior to teaching, bookmark all of the Web sites used in the lesson and create a word processing document listing all of the links. Preview all sites and videos before presenting them to the class.

Citigroup Financial Education Curriculum http://www.citigroup.com/citigroup/financialeducation/curriculum/
This site provides basic information about personal finances that everyone needs to build wealth. The curriculum provides authoritative and flexible content from which you can choose subjects and activities, including budgeting, credit, and saving and investing, that best meet your needs.

Each of the above sites has a cell phone plan calculator; that is, by entering some information about how much you plan to use your cell phone, it will offer cell phone plans that you might want to consider.

Materials:

Teachers will need the following supplies:

Board and/or chart paper

Ideally a screen on which to project the Web-based video clips

Handouts of Web resources if computers are not available in the classroom

Video of TV411, Episode #122 (tape should be cued to the vignette with the Calculating Women, approximately 15 minutes into the episode)

Students will need the following supplies:

Computers with the capacities indicated above

Notebook or journal

Graph paper

Pens/pencils

Steps Introductory Activity:

Explain to students that they will spend the next several days learning about personal finances. Explain that they will begin with a budgeting exercise where they will track their income, savings, and expenses.

Have students work in pairs as you take them through the activity Where Does Your Money Go? from the Citigroup Financial Education Curriculum for grades 6-8. When conducting this activity, be sure that students include the price of a cell phone plan in their budgets. This activity will help students set financial goals and understand that their financial resources affect their spending choices.

Learning Activities:

Activity 1:
(Half of one class period)

Explain to students that they will be investigating rate plans for cell phones; that is, they will find out what fees are associated with using a cell phone. As an introduction, explain that they will need to find at least one cell phone rate plan. You may want to have students search for cell phone plans on their own (using the Internet or looking for advertisements), or they can use the cell phone plan calculators available at the following Web sites:

Alternatively, they can use their own cell phone plan if they have one.

Have each student (or pair of students) find and record the details of at least one cell phone plan. Have students use the graphic organizer Cell Phone Plan Background Information to keep track of their findings.

As a class, discuss the different plans that were found. Specifically, have students compare the number of minutes allowed, the cost for extra minutes, and any fees.

Tell students that today's lesson will focus on comparing cell phone plans to determine which is most appropriate for different needs. Explain that scarcity of resources (such as money) makes it necessary to choose between various items (such as different cell phone plans) and that the decision should be based on a sound financial comparison.

Activity 2: Cell Phone Comparison
(One class period)

Tell students that they will watch a video about the Calculating Women from TV 411. Before showing the clip, explain that the women will be deciding between two cell phone plans to determine which one makes the most sense for them.

Show the video clip from TV 411, Episode #122. The clip of the Calculating Women begins approximately 15 minutes into the episode.

Discuss with students the different methods that the Calculating Women used to determine which cell phone plan was most appropriate. (The women determined the average number of minutes they used each month. Realizing that they only occasionally went over the limit of 500 minutes, they decided that the plan allowing 500 minutes per month would be sufficient. The women took slightly different approaches: the first woman calculated the numbers exactly, whereas the second woman estimated. Both of them, however, reached the same conclusion.)

Ask students, "In general, if you had several different phone plans to choose from, how could you decide which one to use?" Through a classroom discussion, construct a general process for determining which cell phone plan would be most appropriate. Students may suggest the following process:

Determine what you can afford to spend.

Estimate how many minutes per month you will use your cell phone.

Consider various cell phone plans, and determine the cost per month of each based on your estimated number of minutes.

Choose the plan that is most appropriate.

Ask students, "Which plan - Plan A or Plan B - would be better for you?" Have students use the process above to determine which cell phone plan would be most appropriate. Review the information for both plans from the video:

Plan A: 500 minutes, $39.95 per month, 50¢ per minute for additional minutes

Plan B: 800 minutes, $59.95 per month, 50¢ per minute for additional minutes

Have students estimate the number of minutes that they talk on the phone each month. (Students could figure out the number of minutes they talk each night and multiply by 30; or, they could get a better estimate by determining the number of minutes they talk in a week and multiply by 4.5.)

Require students to calculate the cost of each plan, based on their estimated number of minutes. As students perform these calculations, circulate around the room, noting interesting occurrences. For instance, find a student whose estimated number of minutes is between 500 and 800, as this will yield interesting results. (Note that if a student estimated using the phone fewer than 500 minutes a month, no calculation is necessary; Plan A will cost $39.95, and Plan B will cost $59.95.)

Ask the class, "Which cell phone plan is best for you?" Have several students share their results with the class and require them to explain how they arrived at their decision.

After several students have shared their results, explain to the class that there are two other ways to determine which plan might be appropriate: using a table and using a graph. Explain to students that they will first create a table of costs based on the number of minutes used; then, they will use the values in the table to create a graph.

Using an overhead projector, a chalkboard, or flip chart paper, display a table like the one shown below:

Number of Minutes Used

Cost of Plan A

Cost of Plan B

100

$39.95

$59.95

200

$39.95

$59.95

300

$39.95

$59.95

400

$59.95

500

$59.95

600

700

800

900

1000

Note that you will display this table, as well as the line graph below, again during the next day's lesson. If you create the table and graph on a transparency sheet or on flip chart paper, you may wish to save these items for the following day.

With the class, complete the table. (Note that once the allowance is reached for each plan, the total cost increases by $50 for each increase of 100 minutes. You may wish to point this out to students.)

When the table has been completed, distribute the Cell Phone Plans - Tables and Graphs to students. Allow students to work with a partner to complete the line graph for each cell phone plan.

As a class, discuss the graphs. Correct line graphs will be drawn as follows:

Using either the table of values or their graphs, have students answer the following questions:

If a person uses less than 500 minutes a month, which plan is the better choice?
(Plan A is the better choice. The table shows that the cost is less for all values of Plan A less than 500 minutes; the graph shows that the line for Plan A is lower than the line for Plan B until after 500 minutes, likewise indicating that it costs less.)

If a person uses more than 800 minutes a month, which plan is the better choice?
(Plan B is the better choice. The table shows that the cost is less for all values of Plan B greater than 800 minutes; the graph shows that the line for Plan B is lower than the line for Plan A after 800 minutes, likewise indicating that it costs less.)

For what number of minutes are the costs equal for both plans? How do you know?
(Although the answer to this question cannot be determined from the table, the point of intersection of the two lines gives the point at which the costs are equal. This point occurs at 540 minutes, and the cost for both plans at that point is $59.95.)

Based on your work today, what advice would you give a person who is trying to decide between these two plans?
(That if they think they will use less than 540 minutes per month, they should go with Plan A; otherwise, they should choose Plan B.)

Note: Depending on the ability and experience of your students, you may want to represent each cell phone plan in functional notation. The following functions - in which c represents cost and m represents minutes - may be discussed with students or you may wish to have them generate these functions on their own:

Discuss with your class a scenario where a student estimates that she or he talks on the phone over 500 minutes per month, but they cannot afford to spend more than $39.95 on a phone. The student has to analyze whether to 1) opt to spend additional money on a phone, and not on another item in her/his budget (including saving the money); or 2) acknowledge his/her limited financial resources and buy the cheaper plan (which will involve self-regulating call times so as not to exceed 500 minutes per month). Also talk with the students about a scenario where someone buys the cheaper plan but does not self-regulate and exceeds the free minutes capacity. What happens to their budget?

Have the students make a chart showing how much they would save over one month, one year, and two years by using the cheaper plan. Ask them to think about what they could do with the extra money they save.

Conclude the lesson by telling students that they will be using the same skills to compare checking account options.

Activity 3: Checking Account Comparison
(One and a half class periods)

Before students arrive to class, display the table of values and line graph used to compare Plan A and Plan B from the previous day's lesson. (If possible, you may want to use the same transparency sheet.)

Have students recall yesterday's lesson, in which they compared cell phone plans. Remind them of the three ways that plans were compared: calculating directly (which was the method used by the Calculating Women), as well as by creating a table of values and using a line graph (which was done by students in class). For each of these methods, have a student briefly explain the process.

Tell them that today, on their own, they are going to do a similar comparison. They are going to compare four checking accounts to decide which one would be most appropriate for their use. But first, they are going to learn the basics of a checking account.

Explain the basics of a checking account to students. Describe how a checking account works - that they put their money in a bank which prevents them from having to carry a lot of money around (or from having to hide it in a safe place). When they need to pay for something, they can either go to the bank and make a withdrawal or they can write a check for the amount they owe.

Explain to students that a checking account must always have enough money in it to pay for checks -- that's how the checks "clear." Introduce the concept of a check register. Discuss with the class the need to maintain a "healthy checking account" through proper accounting in the check register. Discuss how students could use a check register to help them follow their budget/spending plan.

Check A written order telling the bank to pay a certain amount to another person or business.

Fee Charges for the use of certain bank services. These services vary but could include returning cancelled checks, writing more than a certain number of checks monthly, use of various bank cards, etc.

Interest Some checking accounts earn money on deposited amounts.

Minimum Balance Requirement to keep a certain amount of money in the account; otherwise, monthly service charges may result.

Overdraft Lack of sufficient funds to cover the full amount of a check.

Payee The person or organization to whom a check is written.

Transaction Limits Some accounts have a limit on the number of transactions performed during a certain time period. These may include the number of withdrawals, number of teller assisted activities, number of checks written, etc.

Once the basics of a checking account are understood, tell students that a local bank offers four different checking accounts:

Trouble-Free Checking: This account has a flat fee of $32 per month. You can write as many checks as you want.

Quick and Easy Checking: Like Trouble Free Checking, this account has a flat fee, but it's only $12 per month. However, you are only allowed to write 20 checks a month; if you use more, there is a charge of $1.25 for each additional check.

Minimum Balance Checking: This account has no fees, but there is a penalty of $50 if the account balance ever falls below $2500.

No-Hassle Checking: This account has a $6 monthly fee as well as a charge of 50¢ per check.

Tell students that they will compare these accounts using a table as well as a graph. Distribute the "Checking Account Comparison" organizer. Working in pairs, students should complete the table and draw the graph. Allow time for students to complete these activities. (If your students have the experience, you may wish to have them complete the table using a spreadsheet program. Or, you may take this opportunity to teach students about the functionality of a spreadsheet.)

Teacher Note: It is important that you explain the terms sufficient funds and insufficient funds before they attempt to do this comparison. In this context, sufficient funds indicates that a minimum balance account always has more than the minimum balance required and no penalty is incurred. Insufficient funds indicates a balance below the minimum, in which case a $50 penalty is incurred.

When students have completed their work on the table and graph, review the results with the class. Display a table on the board, overhead, or flip chart. Call on a different student to provide the values for each column. The completed table is shown below.

Number of Checks Written

Trouble - Free

Quick - and - Easy

Minimum - Balance (Sufficient Funds)

Minimum - Balance (Insufficient Funds)

Hassle - Free

0

$32.00

$12.00

$0.00

$50.00

$6.00

2

$32.00

$12.00

$0.00

$50.00

$7.00

4

$32.00

$12.00

$0.00

$50.00

$8.00

6

$32.00

$12.00

$0.00

$50.00

$9.00

8

$32.00

$12.00

$0.00

$50.00

$10.00

10

$32.00

$12.00

$0.00

$50.00

$11.00

12

$32.00

$12.00

$0.00

$50.00

$12.00

14

$32.00

$12.00

$0.00

$50.00

$13.00

16

$32.00

$12.00

$0.00

$50.00

$14.00

18

$32.00

$12.00

$0.00

$50.00

$15.00

20

$32.00

$12.00

$0.00

$50.00

$16.00

22

$32.00

$14.50

$0.00

$50.00

$17.00

24

$32.00

$17.00

$0.00

$50.00

$18.00

26

$32.00

$19.50

$0.00

$50.00

$19.00

28

$32.00

$22.00

$0.00

$50.00

$20.00

30

$32.00

$24.50

$0.00

$50.00

$21.00

32

$32.00

$27.00

$0.00

$50.00

$22.00

34

$32.00

$29.50

$0.00

$50.00

$23.00

36

$32.00

$32.00

$0.00

$50.00

$24.00

38

$32.00

$34.50

$0.00

$50.00

$25.00

40

$32.00

$37.00

$0.00

$50.00

$26.00

42

$32.00

$39.50

$0.00

$50.00

$27.00

44

$32.00

$42.00

$0.00

$50.00

$28.00

46

$32.00

$44.50

$0.00

$50.00

$29.00

48

$32.00

$47.00

$0.00

$50.00

$30.00

50

$32.00

$49.50

$0.00

$50.00

$31.00

Then, choose a different student to draw the graph for each plan on the board, overhead, or flip chart. The final graph should look something like what is shown below.

Using either the table of values or their graphs, have students answer the following questions:

If a person writes fewer than 10 checks a month, which account is the best choice?
(If it is possible for the account holder to maintain a balance of $2500, the Minimum Balance account is the best option. Otherwise, the Hassle Free account is best. As shown by the graph, the line for Hassle Free is the lowest until the number of checks written reaches 12.)

If a person writes 20 checks a month, which plan is the best choice?
(If it is possible for the account holder to maintain a balance of $2500, the Minimum Balance account is the best option. Otherwise, Quick and Easy is the best choice. In the graph, the line for Quick and Easy is lowest at 30 checks.)

Based on the table and graphs, what advice would you give a person who is trying to decide between these accounts?
(If it is possible for the account holder to maintain a balance of $2500, the Minimum Balance account is always the best option. Otherwise, people who write fewer than 12 or between 26 and 38 checks a month should choose Hassle Free. For 12 26 checks, they should choose Quick and Easy. For 26 52 checks, they should choose Hassle Free. And for 52 or more checks, they should choose Trouble Free.)

To reinforce the importance of choosing the right type of account and not overpaying in the long term, ask the students to determine the cost of different scenarios over a one-year period. For example, Person A chooses the Quick and Easy Account and writes 36 checks per month. If they had chosen the Hassle-Free account, how much money would they have saved? ($96)

Discuss the pros and cons of a Minimum Balance Account. Ask the students: Do you think it is easy or hard to maintain a consistent balance of $2500 every month? What would make it easy? What would make it hard? Compared to the other accounts, is a minimum balance account worth it if you had insufficient funds for one month? Two months? Four months? Why or why not?

Ask students how checking account fees figure into their overall budget/spending plan. Ask the students if paying higher checking-account fees can save money in some circumstances.

Using the tables and graphs from the cell phone plan comparison and the checking account comparison, have students answer the following question:

You have $100 income per month (from allowance, lemonade stand sales, cutting grass, and shoveling snow). During the course of a month, you typically only write one check - to pay for your cell phone service. Determine which cell phone plan and which checking account you will use, and then figure out how much money you'd have left after paying for those services.

Give students 3 to 5 minutes to determine the answer to the question. Allow several students to share their results. Then say, "To maximize your money, the amount left over will be deposited in a savings account that earns 3% interest."

Choose one student from the class, and use the amount of money that he or she has left to complete a table showing how the money would grow if placed in a savings account. Emphasize that the student will have more money if the leftover is placed in an interest bearing savings account rather than if it is kept in a checking account (which usually doesn't earn interest). For example, if the student has $40 left over each month, the table might look like this:

Months from Today

Amount in Savings Account

Amount in Checking Account

1

$40.00

$40.00

2

$80.10

$80.00

3

$120.30

$120.00

4

$160.60

$160.00

5

$201.00

$200.00

6

$241.51

$240.00

7

$282.11

$280.00

8

$322.81

$320.00

9

$363.62

$360.00

10

$404.53

$400.00

11

$445.54

$440.00

12

$486.66

$480.00

:

:

:

24

$988.11

$960.00

36

$1,504.82

$1,440.00

48

$2,037.25

$1,920.00

60

$2,585.87

$2,400.00

Point out to students that, in five years, the student will have $185 more by using a savings account.

Conclude the lesson by pointing out that making wise decisions about cell phone plans, checking accounts, and other services that students may choose will allow them to maximize the amount of money they have left for other things they may need and want.

Culminating Activity/Assessment:
(Half a class period)

Say to students, "Over the past few days, you learned how to compare different pricing plans for cell phones and checking accounts. In fact, you learned several different ways to make these comparisons. In your journal, describe as many methods as possible for deciding how to choose between several different payment plans." Ask them to write in their journals about what they expect to face in the future about comparisons. For example: Will they purchase computers with money up front or through a payment plan? Will they buy or lease a car? How can they compare their options?

In their journals ask the students to create a two-week or a one-month budget and ask them to track their income and expenses every day. Have them identify each expense as either a want or a need.

Have students investigate various investment vehicles, such as certificates of deposit, stock markets, savings bonds, money market accounts, and so forth. Students should keep a record of the amount of interest earned by each type of investment. Using the data they find, show students how the money will grow in each type of investment. This may provide an opportunity to teach students "The Rule of 72," which says that an investment will double in approximately "The Rule of 72," which says that an investment will double in approximately 72/r years when invested at an interest rate of r%. For instance, if $1000 is invested at 6% interest, it will double to $2000 in approximately 72/6=12 years.

Further comparisons can be done on different income-producing investment vehicles, comparing how different products pay different interest rates. It is important to take into account the time horizon involved with different investment products, and the opportunity costs of not having the money to withdraw if it is locked into an investment. Further analysis can be done on how the early-withdrawal penalty, and any other fees, can detract from the potential profit of the investment. From a banking services perspective, it is worth emphasizing that many of these investment vehicles are available at the same bank a student has used to open a checking account, and that by opening a checking account, they have initiated a relationship with a bank that can include many other services throughout their lives.

Ask the students to pick a goal they want to save money for. After investigating the above savings options, what would be the best investment vehicle for them to use to reach their purchase goal - especially considering penalties on certain options for early withdrawal.

Introduce the topic of retirement savings accounts. Why would students want to have long-term savings?

Tips
For the final activity, you are expected to show students how the amount increases when money is invested in an interest bearing savings account. The table used in the lesson shows the results when $40 is invested in an account that earns 3% interest. The following formula shows how the amounts were obtained:

Amount in Account = (Amount from Previous Month × 1.0025) + 40

Understanding this formula is fairly easy. The value 1.0025 represents the increase due to interest - because the account earns 3% interest annually, it earns each month; consequently, it is necessary to multiply by 1.0025 to find the increase due to interest. Further, because the student deposits $40 to the account each month, an amount of 40 is added at the end.

Because a new amount is calculated each month, this formula assumes that interest is compounded monthly. However, it is also possible for interest to be compounded daily or annually, and this depends on the policy of the bank.