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ANSWER KEY
The Saga of Eloise and Franklin
20. Wealth is the value of the things you own (ie. home, car, and investments) minus your debt. Income is what you are paid for doing your job. If the job ends so does your income. Wealth is built from income. Wealth provides financial security.
or trade certification; moderate job security; worker class. LOW INCOME: Subdivision of the Lower Income class; clerical, agriculture and service workers; minimal job security; high school education;$16,000 to $35,000. Shorter life span than Upper Class and Middle Class. POVERTY: Subdivision of Lower Income class; Federal Poverty Level (“FPL”); 46.7 million people live at FPL in U.S.; often unemployed; difficulty finding even part time work; poorly educated, may be high school drop outs; income at or below $11,770 for individuals and $15,930 for a family of 2; benefit programs.
1. They graduated from college about the same time and they each have a college degree and have/had good job. Building wealth means transforming income into the ownership of things that hold or increase their value over time. Earned a college degree, took a paying job, started a blog that developed into a successful business, grew her business, saved and bought stocks and bonds, bought a house, rented the basement for extra income, married a financially responsible person. He got educated and got a paying job. Both essential for building wealth. Later he started saving. Stocks and bonds, savings, her small business, cars, house, retirement fund. $100,000 in stocks, bonds, retirement fund, and savings + $200,000 value of business + $250,000 home = Total assets $550,000. Debt = $220,000 of home and car loans. $550, 000 - 220,000 = $330,000 He has $10,000 in savings and $30,000 in credit card debt. He has a negative net worth $10,000 - $30,000 = (-$20,000) No. He's not building enough wealth. He'll remain dependent on salary for income. 10. The combined income is $60,000 + $60,000 (salary) + rental income ($4800) = $124,800 11. Middle. Upper Middle. 12. Yes 13. $125,000 14. Upper Middle 15. $16,000 + whatever he manages to earn if he gets a job. 16. Low income/borderline poverty level. 17. Federal Poverty Level; They are basically living at the poverty level at $16,000 for 2 people. 18. The Supplemental Nutrition Assistance Program (SNAP), assistance with the cost of food; The Low-Income Home Energy Assistance Program (LiHEAP) assistance with home heating and cooling costs; and Medicaid which is assistance with medical care for low income families. 19. Earning Income — Building Wealth — Protecting Wealth 9. 2. 3. 4. Franklin 5. 6. 7. 8. His savings. $10,000
Income, Earnings, and Class in America
1. Student's discretion. Answer should indicate that these are key to building wealth, which creates financial security, social mobility, and improves quality of life. Earning an income is based on the job you do to make a living. It is the foundation for building wealth. If you lose your job, you have no money. Wealth is net worth and is represented by the things you acquire of value, like money in a savings account, a home, a retirement fund and investments. They are similar in that they both require education, knowledge, a specific set of skills, a strategy and lots of discipline. 50% and 50%; Median income is the dollar amount that divides income distribution. PRODUCT PREVIEW 2. 3. 4. 5. 6. 7. 8. 9. Answer varies 11% It includes the Rich and the Super Rich B T 1. 2. C 3. 4. 5. T F 6.
Are You Financially Literate? Chapter 1 Quiz
Expected Response: Income is money that is earned in exchange for working at a job or other activity and is in the form of salary and hourly wages. It is the pay received for work. Wealth is a sum of the value of the things that one owns. It is built from income.
Wealth provides more permanent financial security and stability. Disruptions to income, such as a job loss or illness, can be a disaster. Wealth provides access to better education, medical care, housing and other things that affect a person’s quality of life. B 7a. Income, because it is a wage. 7b. Wealth, because saved cash is a form of wealth. 7c. Income, because income includes tips and commission. 7d. Income and wealth; gift is income and stocks are a form of wealth. He transformed income into wealth. 8. C 9. People have a natural urge to spend their money sooner rather than later, to gratify themselves now rather than save. Unplanned or increased expenses, and low wages impact the ability to save. Many people don’t participate in retirement or savings programs; many people don’t pursue an education. Wealth building requires a
Education increases the ability to earn a higher income and increases job security. Income is the basis for building wealth. While a high income doesn’t mean you will be wealthy, a higher income makes it easier to build wealth. annually; smallest & wealthiest class; The Rich make up the top 1 percent and earn $500,000+; Super Rich is top .01% of the 1%; Super Rich make $77+ million per year; Upper Class are very well-educated. Longer lifespan than poor. UPPER MIDDLE: Sub-division of middle class; well-educated, often have post- graduate degrees; earn high salaries; prestigious occupations; good job security; incomes range between $100,000–200,000. May live longer than poor. LOWER MIDDLE: Subdivision of middle class; includes households with incomes of $35,000 – 100,000; have bachelor’s degree
10. UPPER CLASS: Referred to as the “5 percent”; make more than $200,000
369 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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