Page 2.2.3 STATEMENT OF FINANCIAL POSITION · PDF fileStatement of Financial Position Answer Key 2.2.3.C1 ... Income and Expense Statement Lesson Plan 2.2.4
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1 Statement of Financial Position Word Grid 2.2.3.A1 per participant Before instruction: 1. Provide each participant with one copy of the Statement of Financial Position
Word Grid 2.2.3.A1. 2. Complete the directions for “Before the lesson.” An example is provided.
After instruction: 3. After the lesson is complete, reinforce learning gained by completing the
directions for “After the lesson.”
ANTICIPATORY SET
Who is wealthier? Approximate time: 2 minutes Materials to prepare: Statement of Financial Position PowerPoint Presentation 2.2.3.G1 Technology Integration Options Active Learning Tool 3.0.50 for reference 1. Present the Statement of Financial Position PowerPoint Presentation 2.2.3.G1. 2. On slide 2, ask participants to vote on who they think is wealthier, Ian or
Mitchell. 3. If desired, add up the votes to compare the results at the end of instruction.
This could be completed in a variety of ways: a. Have participants raise their hands to cast their vote. b. Use software on an interactive whiteboard or a classroom response
system. c. Use a polling or brainstorming/discussion website. Refer to the
Technology Integration Options Active Learning Tool 3.0.50 guide for specific websites.
4. Tell participants that they will learn more about wealth, net worth, and income throughout the lesson.
RECOMMENDED FACILITATION
Approximate time: 70 minutes Materials to prepare: 1 Statement of Financial Position Note Taking Guide 2.2.3.L1 per participant 1 Tori’s Statement of Financial Position 2.2.3.A2 per participant 1. Pass out one Statement of Financial Position Note Taking Guide 2.2.3.L1 to each
participant. a. If the note taking guide is not used, consider providing each participant
with a copy of Tori’s Statement of Financial Position 2.2.3.A2 to reference throughout the presentation.
Part 1: What is Net Worth? 2. Slide 3: Net Worth = Wealth
a. Net worth is the objective measure of financial wealth.
Discussion questions are indicated by a question mark icon throughout the PowerPoint.
Have participants highlight each section of the Statement of Financial Position as it is discussed.
Use the quiz me cards activity from the Vocabulary Reinforcement Activities Active Learning Tool 3.0.36 for the three spending lessons: Statement of Financial Position 2.2.3, Income and Expense Statement 2.2.4 and Spending Plans 2.2.5.
b. Give the examples provided and then ask participants to brainstorm other examples of investment assets. Other examples include bonds, mutual funds, and the value of investment real estate.
Part 4: Liabilities 11. Slide 12: What are liabilities?
a. Ask participants what they think liabilities are and discuss the definition. b. Give the examples provided and then ask participants to brainstorm
other examples of liabilities. Other examples include a personal loan, a loan for other items such as a camper or boat, and money owed to others such as a family member.
12. Slide 13: What is recorded in the liabilities section? a. When recording the amount for each liability, you should record what
you would pay if you were to pay the loan off in full today. b. For example, let’s say you have an automobile loan that if you were to
pay today in full you would owe $5,490. If you were to continue making payments of $180 which include interest you will pay $6,300 total. Because a Statement of Financial Position is based on a specific date, you would record what you owe today which is $5,490.
13. Slide 14: Liabilities vs. Expenses a. Bills needing to be paid are not liabilities. You are paying for the use of
an item, not paying back money owed. b. Refer back to the example on slide 13 to explain that the $5,490 owed
on the automobile loan is the liability and the $180 monthly payment is the expense.
Part 5: Net Worth 14. Slide 15: Calculating Net Worth
a. Refer to the bottom line of the Statement of Financial Position that indicates: net worth = total assets – total liabilities.
15. Slide 16: Net Worth – Your Personal Financial Thermometer a. Net worth is like your personal financial thermometer, because it
provides a number that can measure your “financial temperature.” 16. Slide 17: How can you increase net worth?
a. If you want to increase your net worth you can increase your assets, decrease your liabilities, or complete a combination of both.
b. In order to increase assets or decrease liabilities you will want to make changes regarding how you manage your money.
17. Slide 18: Money Management Tools a. In addition to the Statement of Financial Position, there are two other
money management tools that will help you manage your money: the Income and Expense Statement and the Spending Plan.
b. These three money management tools work together to help you objectively evaluate your past, present, and future financial decisions to work towards reaching the net worth level desired.
18. Slide 19: Your present self impacts your future self a. Remind participants to keep their future in mind when making financial
decisions. Think about how financial decisions will affect future net worth.
19. Slide 20: So who is wealthier? a. Refer back to the anticipatory set. Show participants Ian and Mitchell’s
Statements of Financial Position and ask them to determine if they agree with their initial vote of who is wealthier.
b. If desired, complete the vote again. c. Discuss how even though Ian has a lower income, his net worth is
higher because he has more assets than liabilities and therefore is wealthier.
20. Slide 21: Discussion a. Use the questions provided to discuss Ian and Mitchell’s scenario. You
may need to refer back to Ian and Mitchell’s Statements of Financial Position on slide 20 after introducing a question. Possible discussion points include:
i. Do you think Ian is making any trade‐offs to have higher net worth than Mitchell even though he has a lower income?
1. Ian’s car and home are worth less than Mitchell’s so he may be making a trade‐off to have lower valued assets in order to have less debt.
2. Discuss how Mitchell may appear wealthier than Ethan because his automobile and house have a higher value, but on paper Ian is really wealthier than Mitchell.
ii. How could both Ian and Mitchell increase their net worth? 1. Ian could work to pay off his mortgage or college loan
faster. He could invest more in his retirement account. 2. Mitchell needs to pay off some of his liabilities,
especially his credit card debt and automobile loan. 3. Both can use other tools such as the Income and
Expense Statement and Spending Plan to help them plan how to pay off their liabilities.
iii. If Ian and Mitchell were thinking about going on vacation, how would their Statement of Financial Position guide their decision?
1. They should evaluate if they have enough liquid (monetary) assets.
2. They should consider if they feel comfortable with their current net worth and if making the decision to go on vacation today is worth reducing their net worth.
21. Slide 22: When would a person need or want to create a Statement of Financial Position?
a. When creating a Statement of Financial Position, put it in writing, because it will result in a more accurate measurement of net worth. Research has shown that individuals have a tendency to believe they owe less than they actually do or own more than they actually do. Having a written Statement of Financial Position provides a tangible record to refer to and help set financial goals.
b. It is recommended to create a Statement of Financial Position approximately once per year. If you are making decisions regarding assets and liabilities (such as making a large purchase like a house or automobile) you may want to create a statement more often. A
If more background regarding trade‐offs and goals is needed, teach the Setting Financial Goals Lesson Plan 2.1.4.
financial professional such as a financial advisor, loan officer, or accountant may ask you to create a Statement of Financial Position at some point in your life.
Part 6: Tori Scenario 22. Slide 23: Meet Tori
a. Introduce Tori and explain to participants that they will be asked to create her Statement of Financial Position to help her make a decision regarding whether or not to buy a new car.
b. Provide each participant with Tori’s Statement of Financial Position 2.2.3.A2.
23. Slides 24‐26: About Tori a. Learn more about Tori and have participants record the applicable
information in the “current” column of Tori’s Statement of Financial Position 2.2.3.A2.
b. The information is also included on Tori’s Statement of Financial Position 2.2.3.A2.
24. Slide 27: Tori’s Current Statement of Financial Position a. Have participants complete their Statement of Financial Position. If
desired, have participants compare their statements with a partner or group to find any errors.
b. Show Tori’s Statement of Financial Position on slide 27. Ask participants if their statement was correct. If not, discuss any errors that were made and correct the statement.
25. Slide 28: Tori’s Statement of Financial Position if she purchases a car a. Explain that Tori would like to trade in her car for a new car priced at
$12,000. She would receive $2000 for the trade‐in value of her car. If she purchases the new car she plans to use $1,000 from her emergency savings and apply for a loan for the remaining $9,000. This means she will have to pay that $9,000 back to the loan provider.
b. Ask participants to complete the second “if she purchased a new car” column of the Statement of Financial Position based upon whether she purchased the car today.
c. Discuss how purchasing the car would affect her Statement of Financial Position.
i. The value of her savings account would decrease to $1,000, the value of her automobile would increase to $12,000, and she would add a $9,000 automobile loan.
26. Slide 29: Discussion a. Discuss the questions provided. Possible discussion points include:
i. What is Tori’s current net worth? 1. $4,220
ii. What would her net worth be if she purchased the new car today?
1. $3,220 iii. Based upon Tori’s Statement of Financial Position, would you
recommend that she purchase the new car? Why or why not? 1. Answers will vary but may include: No, I would not
recommend that Tori buy the new car because it will
An answer key for Tori’s Statement of Financial Position 2.2.3.A2 is available in the Statement of Financial Position Answer Key 2.2.3.C1.
The Statement of Financial Position Excel Template 2.2.3.E3 is also available to complete the statement electronically.
Use Tori’s Statement of Financial Position 2.2.3.A2 to facilitate the Tori scenario without the PowerPoint. This may also be completed individually or in small groups.
decrease her net worth. Her liabilities will increase and she will have to make a monthly payment to pay the automobile loan back. She should also consider that once she is done with her schooling she will have to start paying her student loans back as well. She would be better off continuing to drive her current car since it runs fine. She could use the money saved to pay back her student loans or save more money.
iv. Consider what trade‐offs she will have to make with both options
1. If she doesn’t purchase the new car, her trade‐off will be to own an older car. If she purchases the new car, her trade‐off will be to have lower net worth, more liabilities, and she won’t be as financially secure.
27. Slide 30: Discussion a. How could Tori increase her current net worth?
i. She could save more money or begin to pay off her student loans. She could also invest more into her retirement account.
b. To bring a life cycle focus, discuss how sometimes students investing in their higher education have low or negative net worth, because they are taking out loans to pay for the higher education or aren’t making much money while attending school. These people are willing to make this sacrifice, because by investing in higher education, they are increasing their future earning ability. Sacrifices are made in order to potentially be able to increase their future net worth. This is what Tori is doing. If she doesn’t purchase the new car she will be one step closer to increasing her future net worth.
28. Slide 31: Summary a. Summarize the main points of the lesson.
CONCLUSION OPTIONS There are two conclusion options provided for this lesson. 1. Option 1: Card Sort 2. Option 2: Reinforcement Worksheet
Option 1: Card Sort Approximate time: 10 minutes Materials to prepare: Refer to the Card Sort Active Learning Tool 3.0.9 for materials
o Card Sort Questions for Statement of Financial Position 3.0.9.H1 1. Conduct the Card Sort activity. Refer to the Card Sort Active Learning Tool 3.0.9
for directions and materials. a. Card Sort involves participants collaborating with others to categorize
similar information.
Option 2: Reinforcement Worksheet Approximate time: 30 minutes Materials to prepare: 1 Net Worth Knowledge 2.2.3.A3 per participant
1. Complete the Net Worth Knowledge 2.2.3.A3 as directed.
ASSESSMENT OPTIONS There are two assessment options provided for this lesson. 1. Option 1: Financial Position Throughout the Life Cycle 2. Option 2: My Statement of Financial Position
Option1: Financial Position Throughout the Life Cycle Approximate time: 30‐60 minutes Materials to prepare: Scenarios (quantity needed depends on facilitation option selected)
o Cody’s Statement of Financial Position 2.2.3.A4 o Chuck and Wendy’s Statement of Financial Position 2.2.3.A5 o Ed and Mary’s Statement of Financial Position 2.2.3.A6.
1 Statement of Financial Position Template per participant o 2 options are available o Statement of Financial Position Template 2.2.3.E2 (complete by hand) o Statement of Financial Position Excel Template 2.2.3.E3 (complete
electronically) 1 Financial Position Throughout the Life Cycle 2.2.3.A7 per participant There are two facilitation options for this assessment. Option 1: Create a Statement of Financial Position for one of the scenarios and
answer discussion questions. Option 2: Complete a Statement of Financial Position in addition to
collaborating with others to analyze all three scenarios and discuss life cycle changes.
Option 1: Create a statement for one scenario 1. Provide each individual or group a scenario and one of the Statement of
Financial Position templates. 2. Allow time for each individual or group to complete the statement for their
scenario and answer the questions. Option 2: Add a life cycle focus 1. Divide the three scenarios (Cody’s Statement of Financial Position 2.2.3.A4,
Chuck and Wendy’s Statement of Financial Position 2.2.3.A5, and Ed and Mary’s Statement of Financial Position 2.2.3.A6) evenly among participants.
2. Allow time for each participant to complete the statement for their scenario and answer the questions.
3. After all statements are complete, provide each participant with a Financial Position Throughout the Life Cycle 2.2.3.A7.
4. Create groups that include at least one person that completed each scenario (each group should have at least one of the three scenarios).
5. Have participants share the information from the scenario they completed with the other members of their group.
6. The group should work together to use the completed Statements of Financial Position for each scenario to complete the Financial Position Throughout the Life Cycle 2.2.3.A7.
Instead, complete option 2 by splitting participants into groups to summarize their information and present to the class. The shared information may be used to complete Financial Position Throughout the Life Cycle 2.2.3.A7.
Have participants underline assets and circle liabilities as they are reading the scenarios.
Have participants create pie charts to visually show the difference between the three scenarios.
Option 2: My Statement of Financial Position Approximate time: 30 minutes and possible time outside of class to conduct research Materials to prepare: 1 My Statement of Financial Position 2.2.3.A8 per participant Statement of Financial Position Template 2.2.3.E2 or the Statement of Financial
Position Excel Template 2.2.3.E3 to complete electronically 1. Participants complete a Statement of Financial Position for themselves. The My
Statement of Financial Position 2.2.3.A8 includes questions for participants to complete after the statement has been created.
a. Use the Statement of Financial Position Template 2.2.3.E2 to complete by hand or the Statement of Financial Position Excel Template 2.2.3.E3 to complete electronically.
b. It may be beneficial to introduce this assessment the day before completing to allow time outside class to research specific numbers.
Have participants also create a Statement of Financial Position for what they want their life to look like in five or ten years. Have them set goals to reach financial standing outlined in that statement.
1 Asset Items of monetary value a person or household owns
2 Expense Money spent
3 Income Money received
4 Investment asset Financial assets purchased with the hope that they will generate income and appreciate in value to make it possible to sell at a higher price in the future
5 Liability A debt or obligation owed to others
6 Market value The amount you could realistically sell an asset for today
7 Monetary asset Assets that can be quickly and easily converted into cash
8 Net worth A measure of financial wealth and indicates the monetary value of all possessions that a person or household owns, minus the total amounts owed to others
9 Statement of Financial Position
A financial statement that describes an individual or family’s financial condition on a specified date by showing assets, liabilities, and net worth
10 Tangible asset Personal property that was purchased to create a lifestyle or improve your life
11 Wealth A measurement of how much a person or household owns once all debts have been paid
a. Write a definition in your own words (in the shaded area) for each bolded term. (5 points) 2. After the lesson:
a. Review the definitions and make any edits to ensure the definitions are correct. b. Complete the word grid again by placing a “” in each box that correctly matches a section of the Statement of Financial Position with an
item. (9 points)
Monetary Asset Tangible Asset Investment Asset Liability Net Worth
Tori’s Statement of Financial Position Total Points Earned
Name
26 Total Points Possible
Date
Percentage
Class
Step One:
Tori is considering purchasing a new pre‐owned car. In order to help make a decision she would like to know her net worth. Use the information provided in the table below to create a Statement of Financial Position for Tori. (10 points for completion)
Tori is 21 years old Completing training to be a radiology technician and has one semester left
Works part‐time to earn $13,000 per year Owes $5,000 in student loans that helped pay for her training
Owns a car that runs fine but would like an upgrade
Used a website to determine the market value of her current car is $3000
Has $1,000 in her checking account Keeps $20 in cash in her wallet at all times
Keeps $2,000 in her savings account for emergencies
Rents a one bedroom apartment and owns $1,000 worth of furniture and other household supplies
Bought a laptop computer when she started school but estimates that it is only worth $200
Loves to shop and estimates that she owns $1,500 worth of clothes and shoes
Invests $20 per month into a retirement account that is currently worth $500
Step Two:
Tori would like to trade in her car for a new pre‐owned car priced at $12,000. She would receive $2,000 trade‐in value on her car making the purchase price of the new car $10,000. She will use $1,000 from her emergency savings and apply for a loan for the remaining $9,000. Create a new Statement of Financial Position for Tori if she were to purchase the new car. (10 points for completion)
Step Three:
Use Tori’s Statements of Financial Position to answer the questions below. 1. What is Tori’s current net worth? (1 point)
2. What would her net worth be if she purchased the new car today? (1 point) 3. Based upon Tori’s Statements of Financial Position, would you recommend that she purchase the new
car? Why or why not? Make sure to consider what trade‐offs she will have to make with both options. (2 points)
4. How could Tori increase her current net worth? (1 point) 5. Tori has chosen to use student loans to help her pay for training to become a radiology technician. This
has lowered her current net worth, but what impact may it have on her future net worth? (1 point)
2. What life events are impacting the financial choices each individual/family is making? (3 points) Cody: Chuck and Wendy: Ed and Mary:
3. How do the differences in net worth reflect changes in financial position throughout the life cycle? (1 point)
4. Cody is in college. How do you think his Statement of Financial Position will change after he graduates from college? Identify at least two specific changes. (2 points)
5. Chuck and Wendy are newly married. Do you think Ed and Mary had a similar Statement of Financial Position when they were first married? Why or why not? (2 points)
6. Based on their Statement of Financial Position, would you recommend that Ed and Mary retire next year? If so, explain why. If not, explain what you would recommend they do financially before they retire. (2 points)
7. Why is it ideal for net worth to increase as people get older? (1 point)
4. What are two things you could do in the next year to increase your net worth? What trade‐offs will be involved with each item? List at least one trade‐off per item. (4 points)
How I will increase my net worth in the next year Trade‐off
1
2
5. What are two things you could do in the next five years to increase your net worth? What trade‐offs will be involved with each item? List at least one trade‐off per item. (4 points)
How I will increase my net worth in the next five years Trade‐off