Restricted Use License forFoundations in Personal Finance5/3rd Bank Sponsored SchoolsElectronic PDF of Student WorkbookThe License: This 5/3rd Bank sponsored school is granted a license to use, distribute andpresent the curriculum Foundations in Personal Finance ( 2008 The Lampo Group, Inc.)delivered as an electronic PDF file .The Restrictions: The electronic PDF of the student workbook may be presented and used onlyby authorized full-time students and faculty at the sponsored school. It may be transferred to,and used on, the school’s computers, mobile devices , and/or the school’s intranet. Neither thewhole curriculum nor any part may be altered, deleted, reproduced, duplicated, sold, loaned,transferred or given away without specific written permission from The Lampo Group, Inc.; andno student or faculty member shall give, lend, sell, rent or otherwise transmit all or any part toany person or entity not a full-time student or faculty member at the sponsored school. Alladditional rights and remedies protected by United States Copyright Laws and Treaties arereserved.Procedures and Limitations: A unique user name and password will be assigned to all teachersselected by the sponsored school to teach the 5/3rd sponsored Foundations in Personal Financecurriculum, enabling those selected teachers to access the online delivery of the PDF workbook.These unique user names are for the use of the designated recipients only. They shall not begiven to, shared with, or used by, other students, faculty, administrators or other individuals.Acceptance: By accepting 5/3rd’s sponsorship and gaining access to the Foundations in PersonalFinance electronic PDF, this school accepts this Restricted Use License and agrees to be boundby its terms. This license may be immediately revoked by The Lampo Group, Inc. at any timeupon the discovery that any of the restrictions and limitations in this document have beenbreached. All breaches of whatever nature, extent or time shall be considered material.

Foundationsin personalfinance Sponsored By:Dave RamseyDave Ramsey

Notice of Copyright protectionIt is unlawful to copy or reproduce any part of the studentworkbook without the written consent of the publisher.Copyright 2008 by Lampo Licensing LLCLLC.Notice of RightsAll rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical,including photocopy, recording, or any information storage and retrieval system, without written permission from the publisher.PermissionsRequests for permission to make copies of any part of the work should be mailed to:Permissions—Curriculum DepartmentThe Lampo Group, Inc.1749 Mallory Lane, Suite 100Brentwood, TN 37027Note to the ReaderThis publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is soldwith the understanding that the publisher is not engaged in rendering financial, accounting, or other professional advice. If financialadvice or other expert professional assistance is required, the services of a competent professional person should be sought.48 91310 1616 1515 1414 1313 12129 510 6117 12Printed and bound in the United States of AmericaISBN 978-0-9816839-6-6978-0-9816839-1-1

AcknowledgementsThe Lampo Group, Inc. would like to give special thanks to the following educators fortheir assistance with this project. Their input was essential for creating a financial literacycurriculum that meets the needs of the students and empowers them in the area ofpersonal finance.Jean AmbroseFamily and Consumer Science TeacherHall-Dale High SchoolFarmingdale, MaineKathy L. JarmanBusiness and English TeacherHelias High SchoolJefferson City, MissouriMajor Richard BensemonSenior Aerospace Science InstructorNorthridge AFJROTC UT-931Layton, UtahPenny KuglerAssistant Professor of EconomicsDirector, Center for Economic EducationUniversity of Central MissouriWarrensburg, MissouriJan ChristmasSpanish, Government, Economics andArt History TeacherHenry T. Waskow High SchoolBelton, TexasSherri McAfeeBusiness TeacherElida High SchoolElida, New MexicoLindsey ChunnResource Management TeacherOlive Branch High SchoolOlive Branch, MississippiLen McKnattEconomics TeacherBattle Ground AcademyFranklin, TennesseeMatthew DanielEconomics TeacherCannon County High SchoolWoodbury, TennesseeKregg ParentiComputer and Personal Finance TeacherBerean Christian SchoolWest Palm Beach, FloridaJerry L. DentLEAP Alternative Education InstructorLakeview High SchoolLakeview, MichiganJeff RogersWork-Based Learning CoordinatorHeritage High SchoolConyers, GeorgiaKent EberspacherBusiness TeacherStar Valley High SchoolAfton, WyomingCathy M. TaylorMath TeacherSatsuma High SchoolSatsuma, AlabamaAllen HarrisDirector of Content DevelopmentDave Ramsey’s Financial Peace UniversityNashville, TennesseeTerri WinkleBusiness TeacherWestern Heights High SchoolOklahoma City, OklahomaCurriculum DevelopmentBrenda ThompsonEditingMark BallingerDaniel ChunnGrace ClausingRachel DeMassJoe FinlayLindsey FosterAllen HarrisChris HuovinenMarcie KindredJim KingKim LittleJason LowreyJason MayesChris RussellRichard SpeightJane StorieBeth TallentDavid TaylorMatt WoodburnCreative DirectionPaul FarmerBrian WilliamsDesign and AnimationJosh HancockJeff HunterKen PruiksmaVideo ProductionCarl Diebold, Sincera VideoFoundations in Personal Finance 3Sponsored by:

Dave Ramsey, a personal money managementexpert, is an extremely popular national radiopersonality, and author of the New York Timesbest-sellers The Total Money Makeover, FinancialPeace and More Than Enough. Ramsey addedtelevision host to his title in 2007 when “TheDave Ramsey Show on the Fox BusinessNetwork” debuted nationally. Ramsey knowsfirst-hand what financial peace means in hisown life—living a true rags-to-riches-torags-to-riches story. By age twenty-six he hadestablished a four-million-dollar real estate portfolio, only to lose itby age thirty. He has since rebuilt his financial life and now devoteshimself full-time to helping ordinary people understand the forcesbehind their financial distress and how to set things right. He resideswith his wife Sharon and their three children in Nashville, Tennessee.As Dave Ramsey’s kid, Rachel Cruze knows athing or two about money. From an early age,Rachel’s parents instilled in her a healthy senseof financial responsibility. She learned the valueof earning, saving and giving—and how debt isthe enemy of wealth. Armed with this valuableknowledge, Rachel desires to help others—especially teens and college students—understandthe importance of money management. Anexperienced public speaker, Rachel often joinsher father on stage in capacity-crowd arenas toteach basic financial literacy skills. Now in college, Rachel successfullymanages her own finances while majoring in Communication Studies.4 Foundations in Personal FinanceSponsored by:

table of contentsUNIT 1 SAVING and INVESTINGChapter 1 Savings . 9Chapter 2 Investment Options . 21Chapter 3 Wealth Building and College Savings . 31UNIT 2 CREDIT and DEBTChapter 4 Dangers of Debt . 47Chapter 5 Consumer Awareness . 65Chapter 6 Credit Bureaus and Collection Practices . 73UNIT 3 FINANCIAL RESPONSIBILITY and MONEY MANAGEMENTChapter 7 Budgeting 101 . 93Chapter 8 Bargain Shopping . 119Chapter 9 Relating with Money .129UNIT 4 INSURANCE/RISK MANAGEMENT and INCOME/CAREERSChapter 10 Career Choices and Taxes . 141Chapter 11 Ins and Outs of Insurance . 155Chapter 12 Real Estate and Mortgages . 169STUDENT RESOURCESForms . 185Glossary . 207Foundations in Personal Finance 5Sponsored by:

A LETTER FROM DAVEDear Student,Welcome to Foundations in Personal Finance! The information you are about to learn will change yourfinancial future—if you apply what we teach.I talk to people every day who tell me, “I wish I had learned this stuff in high school! I could have avoided somany problems!” I know how they feel. I built a multi-million-dollar business in my twenties, only to have itwiped out because I didn’t know how to manage my money—and I even had a college finance degree!You don’t want to learn about money the hard way like I did. Thanks in part to our friends at Fifth Third Bankyou will not have to. If you take what you learn from this class and apply it to your life, you’ll never have toexperience the pain and stress money problems can bring.Enjoy the class! Use what you learn! Change your life!Sincerely,A LETTER FROM OUR SPONSORDear Student,It is a privilege for Fifth Third Bank to sponsor Foundations in Personal Finance in your school. We arebig fans of Dave Ramsey and what he teaches young people about money. We made this investment inyou so that you’d gain the knowledge that will pay you healthy dividends in the future.We care about your financial literacy—how much you know about how money works and how to use itproperly—because, as a bank, we have a front-row seat to what can happen when you don’t understand it.We want to be your partner on your journey to financial independence.All of us at Fifth Third Bank wish you the very best as you move ahead toward graduation and into youradult life. Thanks for the opportunity to be a part of your education.Good luck!Kevin Kabatpresident & ceofifth third bancorp


SavingsWhat do other high school students know about saving?LearningOutcomesWe asked high school students to describe something they really wanted andthought they had to buy, only to realize later that they wasted their money.List the Baby Steps.Identify the benefitsof having anemergency fund.I worked and saved 250 for a guitarthat I never learned how to play.Junior, Michigan“ I bought some fish that Ithought I really wanted. Inever fed them, totally lostinterest in them, and they alldied. What a waste of money.”Junior, Alabama“ I bought a computer gamethat didn’t work because Ididn’t read the requiredhardware notice on the box.”Explain the threebasic reasons forsaving money.“ I really wanted this expensiveskateboard that cost 130. I hadto have it. Turned out it skatedno better than the other onesthat were a lot less expensive.”Sophomore, AlabamaDemonstratehow compoundinterest works andunderstand theimpact of annualinterest rate.Key termsBaby StepsCompound InterestEmergency FundInterest RateMoney MarketSinking Fund“ I got a pink Coach purse thatI paid over 200 for and havemaybe used twice.”Junior, FloridaSenior, Missouri9Sponsored by:

before you beginWhat do you know about saving?Before watching the lesson, read each statement below and mark whether you agree or disagree in the“before” column. Then, after watching the lesson, do it again using the “after” column to see if youchanged your mind on any question.BeforeAgreeAfterAgreeDisagreeDisagree1. The amount of money you save depends onhow much money you earn. Simply put, youwill save more when you earn more.2. A savings account at your bank is the bestplace to put your emergency fund.3. The two biggest factors in compound interestand building wealth are time and the initialamount of the investment.4. It is okay to use your emergency fund to pay cashfor big purchases such as a TV or a cell phone.5. You should pay yourself first before you pay bills.What are your initial thoughts about saving?What do you want to learn about saving?10 Foundations in Personal FinanceSponsored by:

SavingsThe Seven Baby StepsStep 1 1,000 in an emergency fund (or 500 if you make lessthan 20,000 a year)Step 2Pay off all debt except the house utilizing thedebt snowballStep 3Three to six months expenses in savingsStep 4Invest 15% of your household income into Roth IRAsand pre-tax retirement plansThe Seven BabySteps are the stepsyou should take toreach financial peace.If you are not in debt,these steps will serveas your compass orframework forfinancial success.You will find the SevenBaby Steps explainedin detail throughoutthis course. When youbegin implementingthem for yourself,be sure to followthem in order andcomplete each onebefore moving on tothe next.Step 5College fundingStep 6Pay off your home earlyStep 7Build wealth and give!Chapter 1: Savings 11Sponsored by:

Take the First Step70% of consumersBaby Step 1 is in an emergency paycheck topaycheck.The Wall Street JournalThe United States hasa -.6% savings rate.If you make under 20,000 a year, put in anemergency fund.Department of CommerceOnly 41%of Americanssave regularly.Federal Reserve SystemHalf of Americanhouseholds live onless than 46,326a year.U.S. Census Bureaumust become a priority. Always payfirst.The United States has a savings rate.Saving money is about and .Money is .END OF VIDEO PART 1You should save money for three basic reasons:1.2.3.Do you thinkpeople who makemore actually savemore? Think again.Harris Interactiveconducted a surveyfor (November/December 2006)of 6,169 full timeadult workers. Thesurvey, accordingto a Reuters newsrelease, found that19% of workerswho make over 100,000 live paycheck to paycheck.Emergency Fundare going to happen. Count on it.Baby Step 1, a beginner emergency fund, isin the bank (or 500 if your household income is below 20,000 per year).12 Foundations in Personal FinanceSponsored by:

Baby Step 3 is a fully funded emergency fundof 3-6 months of expenses.A great place to keep your emergency fund is in aaccount from a mutual fund company.“If you do the thingsyou need to do whenyou need to do them,then someday youcan do the things youwant to do when youwant to do them.”Zig Ziglar“I’m 14 and want to buy a car in a couple of years.How much money will it take to get a good one?”DAVE’S ANSWER: You can buy a good used car for around 3,000. Thismay seem like a lot right now, but let me show you how easy it can be.Let’s say you work part-time after school and on weekends. If you make 100 a week and save it all, you’ll have enough for a car in only eightmonths. Pretty cool, huh?Can’t do 100 a week? Saving a little bit at a time adds up and you willeventually reach your goal. Take a look at the graph below for a few ways itcan be done.Chapter 1: Savings 13Sponsored by:

“How should I prepare to manage my money when I go off tocollege and what should I do when I’m there?”Dave’s Answer: One thing you want to be sure to do in college is avoidcredit cards. They’re going to be tempting you on every corner. And ofcourse, you need to learn how to operate, balance and reconcilea checkbook.You also need to learn how to do a zero-based budget where you look atwhat you’re going to spend every month. A friend of mine gives his college-age daughter 200 a month for expenses and she has to do a writtenplan showing exactly what she’s going to do with that money before eachmonth begins.Your emergency fund is not an ,it is insurance.For example.Say you borrow 4,000to purchase a diningroom set.Most furniture storeswill sell their financingcontracts to financecompanies.This means you willhave borrowed at24% with payments of 211 per month for 24months. So, you will paya total of 5,064, plusinsurance, for that set.But if you save thesame 211 per monthfor only 18 months, youwill be able to pay cash.When you pay cash,you can almost alwaysnegotiate a discount, soyou will be able to buy iteven earlier.Do not this fund for purchases.The emergency fund is your savingspriority. Do it quickly!The second thing you save money foris .PurchasesInstead of to purchase, paycash by using aapproach.END OF VIDEO PART 214 Foundations in Personal FinanceSponsored by:

Wealth BuildingThe third thing you save money for a key ingredient when it comes towealth building.Building wealth is a , not a sprint.Pre- (PACs)withdrawals are a good way to build in a mathematicalexplosion. You must start .You should have anemergency fundbecause unexpectedthings are goingto happen. Smartpeople have knownthis for centuries andused to say, “In thehouse of the wiseare stores of choicefood and oil, but afoolish man devoursall he has.” (Proverbs21:20) In otherwords, having somemoney saved backcan turn a crisis intoan inconvenience.Compound Interest Is PowerfulTake a one-time investment of 1,000 and earn 10% on it. Your interest at the end ofthe year is 100. Add that to your original 1,000 and you have 1,100. At the end ofthe next year, your 1,100 is compounded at 10% interest, so your return on investment is 110. Add that to the 1,100 and you now have 1,210. Your interest on 1,210is 121. So as time passes, the amount you earn from interest grows. That is why itis so important that you start now. You have more time for your interest to snowballand pick up more and more snow!How to Calculate Compound InterestUse this simple formula to figure out the future value of a deposit once compoundinterest has worked its magic.FV  PV (1 r/m)mtWhen calculating this formula, rememberto use the mathematical order ofoperations.Compoundinterest is interestpaid on interestpreviouslyearned; crediteddaily, monthly,quarterly, semiannually, orannually on bothprincipaland previouslycredited interest.FV is the future valuePV is the present valuer is the annual rate of interest as a decimal (5% is expressed as the decimal .05)m is the number of times per year the interest is compounded (monthly, annually, etc.)t is the number of years you leave it investedChapter 1: Savings 15Sponsored by:

The Story of Ben and Arthur“I played this internetgame site whereyou could buy extra‘pixel’ clothing andhairstyles.I ended up spendingover 100 on pixelsfor the game.”Both save 2,000 per year at 12%. Ben starts at age 19and stops at age 26, while Arthur starts at age 27 andstops at age 65.END OF VIDEO PART 3Freshman, AlabamaAge Ben Invests:“I blew all my moneytrying to get a stuffedanimal out of one ofthose machines withthe claws.”Junior, Florida“I’ve read some ofDave Ramsey’s stuffand learned a ton.As soon as I turned16, I started workingand have been savingmoney ever since.After just over ayear of working, Ihave saved between 5,000– 6,000 to buya car. What he saysreally 00000000000000000000000000000000Arthur gonly 167a month!Arthurinvested 78,000andNEVERcaughtup!1,532,166Ben invested only 16,000!Senior, Alabama16 Foundations in Personal FinanceSponsored by:

Rate of Return, or rate,is important.END OF VIDEO PART 4 1,000 One-Time Investment, No WithdrawalAge 25 to Age 65 (40 years) 800,000 750,378 700,000 600,000Whereyou putyourmoneydoesmatter! 500,000 400,000 300,000 200,000 100,0000 10,2856% 93,05081% of teens agree“it’s important to meto have a lot of moneyin my life.”Charles Schwab surveyOnly 22% of teenssay they know how toinvest money to makeit grow.Charles Schwab survey84% of teens havesome money saved,with an averageof 1,044.Charles Schwab survey1 in 4 (24%) teens12%18%Annual Interest Rateagree that since theyare young, savingmoney isn’tthat important.Charles Schwab surveyRecap and ReviewMake savings a priority. START NOW!Compound interest works over time and the rate of returnwill make a difference in how large your investment grows.Remember Ben and Arthur.An emergency fund is your backup strategy whenunexpected financial events happen. Baby Step 1 is 1,000 inyour emergency fund ( 500 if you earn less than 20,000).Discipline and focused emotion is the key to saving.Use the 80/20 rule. Handling money is 80% behavior andonly 20% head knowledge. Anyone can learn to save!Chapter 1: Savings 17Sponsored by:

Chapter 1: Money in ReviewVocabularyAmoralBaby StepsCompound InterestEmergency FundInterest RateMoney MarketMurphy’s LawPre-Authorized CheckingPrioritySinking FundMatchinga. money marketb. 500/ 1,000 in an emergency fundc. 3-6 months of expensesd. pay off debte. amoralf. disciplineg. compound interesth. Murphy’s Lawi. sinking fundj. savings account1. Saving money for a purchase andletting the interest work for you ratherthan against you2. Money is neither good nor bad3. Emergency Fund goes here4. Interest on interest5. If it can go wrong, it will;unexpected events6. Baby Step 1Multiple Choice9. For most people, a fully-funded emergencyfund will be about:a. 1,000b. 3,000-5,000c. 5,000-10,000d. 10,000-15,00010. Ben and Arthur illustrate which principleof saving?a. rule of 72b. compound interestc. simple interestd. none of the above11. Baby Steps 1 and 3 have to do with:a. savingb. emergency fundc. getting out of debtd. both a and b12. You should save for the following:a. emergency fundb. purchasesc. wealth buildingd. all of the above13. How many Baby Steps are there?a. 4b. 5c. 6d. 714. Saving is about contentment and:a. emotionb. greedc. having moneyd. pride7. Baby Step 38. Key to wealth building18 Foundations in Personal FinanceSponsored by:

15. The following is true about PACs:a. stands for Personal Account Coordinatorb. stands for Pre-Authorized Checkingc. helps build discipline when savingd. both b and c24. Calculate the compound interest for eachproblem below: 1,000 at 6% interest for three years 500 at 18% interest for four years 1,500 at 12% interest for two years16. The saving habits of Ben and Arthur helpto illustrate the principal of compoundinterest.a. trueb. false25. What are the three primary savings goals?17. Dave’s 80/20 rule says when it comes tomoney, 80% is head knowledge and 20%is behavior.a. trueb. false27. Why do you need an emergency fund atyour age?18. Your income level greatly affects yoursavings habits.a. trueb. false29. How does compound interest differ fromsimple interest?19. Interest is money paid to a saver by afinancial institution.a. trueb. false20. The correct order for using your money is:pay bills, save, then give.a. trueb. falseShort Answer21. Why do you think the United States has anegative savings rate? How does this relateto your personal savings habits?22. List the Baby Steps. Why do you thinkDave skips Baby Step 2 in this lesson?23. Explain the relationship between havingan emergency fund and Murphy’s Law.26. What changes can you make now in yourown life based on what you saw in thevideo? How will these changes help?28. Why do you need to have 1,000 in thebank before paying off debt?Case Studies30. What was the most important piece ofinformation or concept you learned from thislesson? How will you apply it to your life?31. Jeremy has been out of school for two years,has a good job, and recently got a raise. He isexcited about investing and always puts partof his check into savings. Although he has 6,500 in debt left to pay, he is making morethan the minimum payments and should bedebt free in 15 months. Should he continue tosave or pay off his debts? Justify your answer.32. Melissa is about to get a 200 per monthraise. She wants a new television and somefurniture. She has 500 in her savings accountand figures with her raise she will have thecash to make her purchases easily within a fewmonths. She also has 1,000 in available creditremaining on her credit card and is thinkingabout using it to buy everything now ratherthan waiting until she has the money. Whatwould you tell Melissa? Justify your answer.Chapter 1: Savings 19Sponsored by:

20 Foundations in Personal FinanceSponsored by:

Restricted Use License for Foundations in Personal Finance 5/3rd Bank Sponsored Schools Electronic PDF of Student Workbook The License: This 5/3rd Bank sponsored school is granted a license to use, distribute and present the curriculum Foundations in Personal Finance ( 2008 The