relationships, health, education, and leisure. Goal
setting for these life circumstances is also necessary
for a person’s overall well-being.
• Concept Check 1-1
1- 5
Copyright © 2018 McGraw-Hill Education Ltd. All Rights Reserved.
Instructor’s Manual for Kapoor et al. Personal Finance 7CE.
CHAPTER 1 LECTURE OUTLINE Instructional Suggestions
Life Situation
• The personal factors include your age, income,
size of household, and your attitudes and beliefs. Your
life situation is affected by various personal events.
• Values are personal beliefs and ideas that a person
considers correct, desirable, and important.
Goal-Setting Guidelines
• Goal setting is at the center of financial decision
making. Financial goals should:
1. be realistic
2. be stated in specific, measurable terms
3. have a time frame
4. indicate the type of action to be taken
Economic Factors
• Economic conditions (supply and demand, prices,
and interest rates) and economic institutions (business,
labor, and government) also affect personal finance.
• Economics is the study of how wealth is created
and distributed.
• The price of a specific good or service is
determined by supply and demand. Just as high
demand for a consumer product forces its price up, a
high demand for money forces interest rates up. This
price of money reflects both the limited supply of
money and the demand for it.
• Banks, trust companies, credit unions, insurance
companies, and investment companies facilitate
financial activities in our society.
• The Bank of Canada is our central banking
system. It influences the money supply by borrowing
funds, changing interest rates, and buying or selling
government securities.
• The level of exports and imports, and the
investment in our country by foreign companies affect
the interest rates and prices in our society.
• Consumer prices, consumer spending, and interest
rates affect the financial planning environment.
• Inflation is a rise in the general level of prices. In
times of inflation, the buying power of the dollar
decreases.
• The main cause of inflation is an increase in
demand without a comparable increase in supply.
Inflation is most harmful to people who live on fixed
incomes.
• Text Highlight: Exhibit 1-
4 provides an overview of
common financial goals and
activities for different life
situations.
• Concept Check 1-2
• • Discussion Question:
How would various personal
events affect personal financial
decisions?
• Text Highlight: Use
Exhibit
1-6 to point out how various
economic factors affect financial
decisions.
• Assignment: Have
students use old newspapers and
information from friends and
relatives to compare current
prices with those of five or ten
years ago.
• Discussion Question:
What types of attitudes in our
society contribute to higher
inflation?
1- 6
Copyright © 2018 McGraw-Hill Education Ltd. All Rights Reserved.
Instructor’s Manual for Kapoor et al. Personal Finance 7CE.
• Consumer spending is the total demand for goods
and services in the economy; this influences
employment opportunities and potential for income.
• Interest rates represent the cost of money. Like
everything else, money has a price. The forces of
supply and demand influence interest rates. As the
amount saved and invested by consumers increases
the supply of money, interests rates tend to decrease.
• Discussion Question:
Interest rates influence most
aspects of our economic
existence. Why are changing
interest rates a significant
component of personal financial
planning?
But as consumer, business, government, and foreign
borrowing increases the demand for money, interest
rates also tend to increase.
• Concept Check 1-3
OPPORTUNITY COSTS & THE TIME VALUE OF
MONEY
• Distinguish between personal and financial
opportunity costs.
• Personal opportunity cost involves time that,
when used for one activity, cannot be used for other
activities. Other personal opportunity costs relate to
health.
• The time value of money refers to the increase of
an amount of money as a result of interest earned.
• Computation of interest is based on:
the amount of the savings
the annual interest rate