BC Math 9 Financial Literacy - Hun Kim Tutorials

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Banking, simple interest, savings, planned purchases
Creating a budget/plan to host an event
Simple budgets and transactions

Determine where you want to live as a young adult. Research project: Estimate the cost of living as a young adult if:
1. You live on your own in a single bedroom apartment or a basement suite. Estimate the monthly cost for:
  1. Rent
    Solution
    At least $1500 per month depending on your neighborhood
  2. Utilities
    Solution
    ~$100 per month
  3. Internet / TV
    Solution
    ~$100 per month
  4. Food
    Solution
    ~$400 per month
  5. Clothes / entertainment
    Solution
    ~$100 per month
  6. Insurance
    Solution
    ~$200 per month
2. How much would you earn after taxes if you work a full-time job at a minimum wage?
  Solution
  Assuming $2400 (monthly gross), $2010 (monthly net)
3. How much would you be able to save each month
  1. Living by yourself?
    Solution
    $2010 – $2400 = negative $390 (budget not met)
  2. Splitting rent with a roommate?
    Solution
    $2010 – ($2400 – $750) = $360 (budget met)
4. As a rule of thumb, up to what percent of your income should be spent on rent?
  Solution
  Up to 30% is considered to be affordable
You manage to save $400,000 by the time you retire. If your investments make 10% annual interest, how much do you earn in interest each year?
Solution
$40 000
If you manage to save $1 million by the time you retire. Why it is overly optimistic to be able to spend $100,000 each year indefinitely?
Solution
The stock market does not always go up by 10% each year. There is a sequence of returns risk. If for example the stock market plunges by half, 10% of $500,000 will only produce $50,000 in that year.
You become an oncologist and make a $400,000 annual salary. If you are taxed at rate of 40%, estimate your daily budget.
Solution
~$657.53
You negotiate with your bank to waive your $30 per month banking fees because of your high account balance. How much do you save in monthly fees over the course of a decade?
Solution
$3600 and much more if you invest this amount
Can Dave Ramsey’s “baby steps” help you make responsible planned purchases?
Solution
Yes
Suppose the regular price of a Playstation 5 is $630. You have a coupon for 20% off. How much does the PS5 on sale cost now?
Solution
$504
Net worth
1. You pay off half your mortgage on a $1,000,000 home and own a car worth $30,000. But you owe $20,000 on your credit line. What is your net worth?
  Solution
  $500 000 + $30 000 – $20 000 = $510 000
2. Is Elon Musk worth more than your family?
  Solution
  Net worth yes. As a human being, not necessarily.
Restaurant
1. Your family restaurant bill comes out to be $100. Taxes is 12%. You decide to tip 15%. How much do you end up paying in total?
  Solution
  Either $128.80 or $127 depending on how the bill is calculated.
2. You bring a dozen of your friends to a restaurant. The bill ends up being $300. Taxes and 18% gratuity is included in the bill. How much extra should you tip?
  Solution
  $0. You already paid tip!
Planning a “best buy”
1. At the supermarket milk is sold:
  Deal A: 4L of milk for $4.99
  Deal B: 1L for $1.25
  Deal C: 250 mL for 20 cents
2. Calculate the unit cost of milk for each of these deals.
  Solution
  Deal A: 0.124 cents per mL
  Deal B: 0.125 cents per mL
  Deal C: 0.08 cents per mL
3. Which is the best deal?
  Solution
  Deal C
4. Describe how price matching can save you money.
  Solution
  Some stores (ex. Walmart) will take coupons and match prices from their competitor. For example, walk into Best Buy, then look up the same item on Amazon.ca and Walmart.ca.
What is the growth shape of unpaid debt over time?
Solution
Exponential
What is the growth shape of money invested over time?
Solution
Exponential
Suppose you have $50,000 in student loans. The annual interest rate is 10%.
1. How much does your debt grow by in 1 year?
  Solution
  $5000
2. If you pay this “debt growth” amount each year, how many years will it take to pay off your $50,000 student loan?
  Solution
  $\infty$
What are two keys to building financial wealth?
Solution
Make more money and spend less (i.e. invest more)
Enrichment: If you invest two Starbucks drinks a day (each drink $7) how much does your investment grow to be in 50 years (8% interest rate) according to the “get smarter about money compound interest calculator”?
Solution
More than 3 million dollars!
You borrow $1000 for 3 years at 10% interest.
1. Use the simple interest formula $I=P\times r\times t$ to roughly estimate how much you owe in 3 years.
  Solution
  $1300
2. Now recalculate the new interest at the end of each year. How much do you need to pay at the end of 3 years?
  Solution
  $1331
You owe $5000 on your credit card. The interest rate is 29.99%.
1. How much do you owe at the end of year 1?
  Solution
  $\$5000\times 1.299=\$6499.50$
2. How much do you owe at the end of year 2?
  Solution
  $\$6499.50\times1.299\approx\$8442.85$
3. Use the simple interest formula $I=P\times r\times t$ to calculate how much you owe after 10 years without paying off the $5000 initial balance
4. Challenge: In reality, how much will you owe after 10 years?
  Solution
  $\approx \$100,293.99$ which is much more!
Despite the “free” perks of using credit cards, how can some financial experts justify “cutting up” the credit cards?
Warren Buffet, a famous billionaire investor, believes that most people should invest in low MER index funds. What percentage of professional investors can “beat” the market?
Solution
The vast minority (perhaps 9 out of 10 fund managers fail to beat the market)
Suppose you have $100,000 in investments. Your investments grow at a rate of 8% but you are charged a Management Expense Ratio (MER) fee of 2.5%.
1. How much do you make this year on interest?
  Solution
  $5500
2. Enrichment: Over 30 years how much of a difference does this MER fee make (annual interest rate of 8%)? Use the “Get Smarter About Money” calculator.
  Solution
  $574,836.19 (banks may be taking about half of all your money!)

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