Financial Literacy Skills Unit 5: Understanding Investing and Home Ownership Objective 1: Define terms related to investing. • • • • • • • • asset bond compound interest diversify dividend inflation Interest liquid • • • • • • • mutual fund opportunity cost return risk principal stock tax rate.

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Financial Literacy Skills
Unit 5: Understanding Investing and Home
Ownership
Objective 1: Define terms related to
investing.
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asset
bond
compound interest
diversify
dividend
inflation
Interest
liquid
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mutual fund
opportunity cost
return
risk
principal
stock
tax rate
Objective 2: Discuss the risks and
benefits of various investment
options.
• Every type of investment carries some risk.
• In general, the higher the risk, the higher the
potential rate of return. The lower the risk, the
lower the potential rate of return.
• The asset class with the least risk is cash
equivalents.
• Bonds are riskier than cash equivalents, and have
a higher potential rate of return.
• Stocks are the riskiest asset class and have the
highest potential rate of return.
Objective 2: Discuss the risks and
benefits of various investment
options.
• Another way to invest is to buy assets such as real
estate, gold, art, or other items that are expected
to increase in value.
• With any type of investment, but especially with
lower-risk investments, you have a risk of your
investment earning less than the inflation rate,
which means your money is worth less than it
was when you put it into the investment.
Objective 2: Discuss the risks and
benefits of various investment
options.
• Experts recommend that you diversify your
investments by investing in several different
areas.
• Some investments are tax-deferred.
Objective 3: Discuss sources of
retirement income.
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Social Security
Employer pension
Employer-sponsored retirement plan
Personal investments
Objective 4: Compare the
advantages and disadvantages of
renting and owning a home.
• Home repairs and
maintenance
• Taxes
• Start-up costs
• Insurance
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Investment value
Risk
Restrictions
Cost stability
Objective 5: List common
responsibilities of a renter and
homeowner.
Renter:
• Monthly rent payment
• Utility installation fees, deposits, and monthly
bills (telephone, cable, electricity, etc.)
• Renter’s insurance
• Security deposit
• Upkeep of the interior of the apartment or house
• Repairs beyond normal “wear and tear”
Objective 5: List common
responsibilities of a renter and
homeowner.
Homeowner:
• Homeowner's insurance
• Maintenance and upkeep of interior and exterior
• Mortgage payment
• Property taxes
• Repairs
• Utility installation fees, deposits, and monthly
bills
• Homeowner’s association fees, if any
Objective 6: Discuss tenant’s rights.
• Security deposits must be returned with 30
days after the landlord receives a written
request.
• All electrical, plumbing, heating, air
conditioning, and other facilities and
appliances must be kept in good working
order unless you agree otherwise in writing.
Objective 6: Discuss tenant’s rights.
• If your landlord does not make needed
repairs, you can provide written notice that
you will do one of the following if the repair is
not made within 14 days:
– Move out 30 days after the date of your written
notice, ending your lease.
– Make the repair yourself, if it costs less than $100,
and subtract it from your next rent payment.
Objective 6: Discuss tenant’s rights.
• If an essential service fails due to something the
landlord did, renters have the following options:
– End your lease and move immediately.
– Temporarily suspend your lease and move out (paying
no rent) until the matter is taken care of.
– Sue the landlord for the difference between the value
of the home with the service and the value of the
home without the service.
– Make your own arrangements for the service and
deduct the cost from your rent.
Objective 6: Discuss tenant’s rights.
• Landlords must keep common areas (such as
the lobby of an apartment building) safe and
clean.
• Tenants can recover actual damages when a
landlord fails to honor an agreement.
• A landlord cannot raise the rent, decrease
services, or evict a tenant for filing a lawsuit or
grievance with a government agency or for
participating in a tenant's group.
Objective 6: Discuss tenant’s rights.
• A landlord cannot enter the home without
notice unless there is an emergency.
• Tenants have a basic right to be free of
discriminatory acts based on race, religion,
age, gender, etc.
Objective 7: List tenants’
responsibilities.
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Pay the rent on time.
Stick to the lease agreement.
Report problems.
Take care of the property.
Accept responsibility for the entre lease.
Objective 8: State the information
frequently included in a lease.
• Address
• Amount of security deposit required, the conditions
which must be met before the deposit is returned,
and when it will be returned
• Amount of rent to be paid; where and when it should
be paid, and applicable grace period and late fees
• Clause stating that final inspection of the premises
will be made in the tenant's presence
• Date of occupation and period of time for which
lease is effective
Objective 8: State the information
frequently included in a lease.
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Description of premises
Details concerning subletting
House rules for tenants
Provision for changing the lease
Responsibility for utility costs
Responsibility for maintenance and decorating
Right of the landlord to inspect premises
Rules for keeping pets
Signatures of tenant and landlord
Objective 9: Arrange in order the
steps in leasing a house or
apartment.
• Determine where you want to live, what type of
dwelling you want, and how much you can afford to
pay.
• Check various sources to determine what is available.
• Inspect the house or apartment you are considering.
• Check available services and facilities.
• Read the lease or written agreement carefully.
• Find out which bills are paid with the rent and which
bills are the tenant’s responsibilities.
• Sign the lease.
• Keep a copy of the lease for your personal records.
Objective 10: Investigate utility fees
and deposits.
Objective 11: Interpret a lease.
Objective 12: Define terms related to
mortgages.
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amortize
down payment
equity
principal
private mortgage insurance (PMI)
term
Objective 13: Distinguish among
types of mortgages.
• “80/20” mortgage
• Adjustable rate
mortgage (ARM)
• Conventional
• Interest-only
• Rural Housing Service
• Federal Housing
Administration (FHA)
insured
• Graduated payment
• Veterans
Administration (VA)
guaranteed
Objective 14: Arrange in order the
steps in buying a home.
• Determine your budget and begin to arrange for
financing.
• Contact a trusted real estate agent and begin looking at
potential houses in your price range.
• Inspect potential houses for defects, neighborhood
issues, etc.
• Have the house inspected by a professional home
inspector.
• Make an offer on the house and enter into a sales
agreement with the seller.
• Close the purchase.
Objective 15: State guidelines for
estimating a budget for housing.
• For most people, your total housing expense
(including mortgage and/or rent, taxes,
insurance, and utilities) should be no more than
one third of your take-home income
• Another guideline is that your total monthly
payments for debt should be no more than 36%
of your pre-tax income.
• One more guideline is that your mortgage should
be no more than 2.5 times your annual pre-tax
income.
Objective 16: Calculate monthly and
yearly mortgage budgets according
to housing budget guidelines.
End of Unit 5

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