Standard
Standard: 4
- Students will understand that: People can choose to invest some of their money in financial assets to achieve long-term financial goals, such as buying a house, funding future education, or securing retirement income. Investors receive a return on their investment in the form of income and/or growth in value of their investment over time. People can more easily achieve their financial goals by investing steadily over many years, reinvesting dividends, and capital gains to compound their returns. Investors have many choices of investments that differ in expected rates of return and risk. Riskier investments tend to earn higher long-run rates of return than lower-risk investments. Investors select investments that are consistent with their risk tolerance, and they diversify across a number of different investment choices to reduce investment risk.
Standard: 2
- Students will understand that: A budget is a plan for allocating a person’s spendable income to necessary and desired goods and services. When there is sufficient money in their budget, people may decide to give money to others, save, or invest to achieve future goals. People can often improve their financial wellbeing by making well-informed spending decisions, which includes critical evaluation of price, quality, product information, and method of payment. Individual spending decisions may be influenced by financial constraints, personal preferences, unique needs, peers, and advertising.
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This lesson uses a Better Money Habits video to help students compare the costs of renting or buying a place to live.
Introduction
This lesson uses the Better Money Habits video Is Buying a Home Right for You? to help students compare the costs of renting or buying a place to live. While the lesson examines the personal as well as the financial reasons for making that choice, the video focuses primarily on the financial costs of buying a home, the costs of a mortgage, and the affordability of buying vs renting. The video is about 7 minutes, and the time needed to complete this activity is one 45 minute class period.
Learning Objectives
- Identify the costs and benefits of renting.
- Identity the costs and benefits of home ownership.
- Explain the guidelines for purchasing a home.
- Define down payment, closing costs, and PMI.
Resource List
Process
- Ask students if they should buy a place to live or rent a place to live. Encourage them to discuss the reasons for their answers to that question. Tell students that the best answer to that question is “It Depends!” because sometimes buying a place is the best choice and sometimes renting a place is the best choice. Remind students that every choice has costs (disadvantages) and benefits (advantages), and those costs and benefits will vary depending upon the situation and the people involved.
- Distribute copies of Handout 8.1 Renting vs Buying. Explain that this handout and the video will help them identify the costs and benefits associated with buying and renting. Have them complete the table provided in Part A of Handout 8.1 Renting vs Buying based on their discussion of the information provided in the video. Tell them you will be stopping the video about halfway to allow for that discussion.
- Show the video. Pause at the 2:50 mark. Have students add the costs (cons) and benefits (pros) presented in the video to the table in the appropriate spaces. Discuss their answers before continuing the video.
- Restart the video. After finishing the second part of the video, have students complete Part B of Handout 8.1 Renting vs Buying. Discuss their answers once they have completed writing.
Conclusion
To summarize this lesson, review the information included in the video and discuss any additional questions they have about buying versus renting a place to live.
Extension Activity
View additional videos from Better Money Habits, including https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/set-budget-stick-to-it ; Building Credit and Keeping Yours Healthy ; Easy Ways to Save on Everyday Expenses , and Create a Safety Net for Life’s Unexpected Events .
Assessment
Ask students to identify what they plan to do after graduating from high school (get a job, go to college, etc.). Have them create a list of reasons to buy or rent a home that best meets their needs based on their plans. Have students share their ideas with the class.