CONSUMER AWARENESS:
PROTECTING YOURSELF AND MAKING WISE DECISIONS
Personal Finance
Objectives
Jump$tart Coalition Standards Addressed:
Spending and Saving
Standard 4. Apply consumer skills to spending and saving decisions.
Financial Decision Making
Standard 1. Recognize the responsibilities associated with personal financial decisions.
Standard 2. Use reliable resources when making financial decisions.
Standard 3. Summarize major consumer protection laws.
Standard 4. Make criterion-based financial decisions by systematically considering alternatives and consequences.
Standard 6. Analyze the requirements of contractual obligations.
Our Economic System, Companies, and
Consumers
Our economic system:
Foundations
Economic system: the way a nation uses
resources to produce goods and
services.
“Mixed Economy” in US
(market/capitalist economy)
people own resources and run businesses. our system encourages and protects
innovators.
Business serve needs and wants of
consumers, businesses and the government.
The purpose of running a business is to
earn a profit.
Our economic system:
Competition
Competition is what makes a
market economy work.
Forces businesses to serve
consumers
: produce better
products, provide lower prices,
satisfy demands, adapt to
change.
Gov’t. requires it
. The
Sherman Anti-Trust Act limits
monopolies and price fixing.
Ex:
Our economic system:
Individuals
We are individual consumers: people who
buy the products and services businesses
sell.
Exchange between the buyer and seller is
generally mutually beneficial. We get a good
or service we need or want, businesses
generate wealth. Ex: I like REI.
Collectively we are powerful. If we demand
certain products/services, the marketplace
should respond to us.
Ex: more demand for organic foods, safer
products,
Our Economic System:
Businesses
The goal of business is to
maximize profit.
Every move is calculated to
increase sales, improve the
bottom line.
Businesses will limit
information flow to serve
their interests, they can
Our economic system: Businesses cont’d.
Businesses get our
attention and persuade
through marketing and
advertising.
Businesses spend about
$300 billion in advertising
each year.
Culture of Consumerism
How does advertising/marketing
affect us?
Marketing is very targeted, “surgical.”
Ex: ads based on browsing history, credit card
solicitations at 18, Facebook’s information
gathering, toy commercials during kid shows.
All of it is designed to make an impression and
generate sales.
Appeals to our emotions, desires. Angles:
this will make you cool
(Matthew McConaughey andJim Carrey)
It’s that easy (freecreditreport.com)
you deserve this ($150 and a job car ads)
this makes you more masculine/feminine/attractive
(Axe, Ford, A&F)
we’re funny (Mio, Old Spice, Skittles)
it will make life easier (Public Storage)
we’re on your side, we’re good people/we care
(Nationwide)
there’s no downside/consequences (5 Hour Energy,
Advertising is Everywhere
Many forms of advertising:
product placement (
wayne’s
world)
sponsorships (AT&T at the Half, Allstate “Good
Hands” play of the Day, etc.)
TV, radio, internet commercials (how many can
we quote?)
naming rights (Moda Center, Providence Park)
print ads/internet ads
celebrity endorsements Phil Mickelson ($60 mil.
How much in winnings vs. endorsements?)
Social media, Twitter (Oreo’s Superbowl tweet)
Playland gets kids into McDonalds so they grow
up on it, eat there as adults. It is very
calculated. Ex:
nag factor
.
How can we be responsible/conscious consumers?
We make purchases for our own benefit.
Our decisions also impact others and our planet.
How can we be mindful consumers?
Responsible consumerism: buying with purpose of minimizing impact to people, animals, and the environment.
1. Environmental impact:
You can support businesses/products that limit
environmental impact.
How can you limit your waste and dispose of it
responsibly? Don’t pour hazardous materials down the sink. Know what can be recycled and how.
Sandwich bags vs. food storage containers,
How can we be responsible consumers?
2. Consider the human impact of your choices
Respect the rights of others.
Consider: labor conditions, environmental
degradation, community impact, future
generations, water usage, etc.
Vote with your dollar. You can support
companies who use ethical business
practices, philosophies you support.
Corporate social responsibility: the idea that
companies have an obligation beyond just making a profit. They should act to benefit all stakeholders (environment, consumers, employees, community, etc.)
Are the products you buy sustainable?
In general, use information to make decisions.
There are many resources. Read, learn, act.
How do you shop wisely?
Decision-making process continued:
4. Make a decision
Try to choose the best product/service at the
right value.
Compare prices at different retailers.
5. Take action
Purchase
6. Re-evaluate
Would you do anything differently? Are you
Use smart buying strategies
Comparison shop.
Compare prices,products, guarantees, look for value. Value is where you get the best quality for a good price. Have patience. Don’t buy the first thing you see.
Don’t give into aggressive, high
pressure sales tactics
.
“I can only offer this today.” You can always walk away. You are in control.
Avoid impulse purchases
.
Use a list whenfood shopping. Ask, do I need this? Should I think about this? Give it a day. Use the 10 second rule.
Shop around for services
.
Not everyoneis honest or does a job well. Ask for references. Check to make sure the company is licensed and bonded. Use Yelp, Angie’s List, Google reviews.
pric e
Use smart buying strategies
Don’t be an early adopter when it
comes to technology
.
You’ll pay much less by waiting a bit.
Determine total cost for purchases
.
Ex:MS Office not on most computers. Consider taxes, shipping costs, accessories.
Compare unit prices for different sized
goods
.
How much $ per ounce?
Read labels
.
Ingredients, materials, careinstructions, etc. Nutrition labels give important information.
Read contracts before signing
.
Don’t pay infull before a service has been performed.
Buy seasonally
.
Snowboards in the Spring,Smart buying strategies
continued
Plan ahead for large purchases and save for them.
If it sounds too good to be true, it probably is. Be skeptical, check other sources.
Hold onto receipts for about 6 months. Think about buying used or refurbished
items. Considerable savings. Craigslist and consignment shops offer real deals.
Check for rebates, coupons, and read warranties. Use money saving apps (ex: retailmenot), check company websites.
Service contracts/”extended” warranties are rarely worth the cost.
Use information to make informed
What dangers exist in the marketplace?
Be aware of fraudulent and
deceptive business practices
Note: Opinion is protected
Sales tactics
Bait and switch (fraud) and upselling
(legal)
Loss leader – items priced at a loss to get
you in the door
“Sales” - sales that aren’t.
Low-balling and then persuading
additional repairs/services/costs
Add-on costs (ex: shipping, fees, service
plans)
High pressure sales. “limited time offer”
What dangers exist in the marketplace?
Misleading Products
Infomercials (sham-wow, Ronco
rotisserie “set it and forget it”)
Health/Medical products fraud (miracle
pills/creams ex:
foot pad
)
Payday/title/tax refund loans
Business or Gift “Opportunities”
Pyramid schemes/
multi-level marketing
companies (Amway, Shaklee, Advocare,
Scentsy, Herbalife, Cutco)
Work from home schemes (buy-in)
“Free” iphone/trip/etc. offers (what’s the
catch?)
Modeling “schools”
Dangers continued
Fraud
Fraudulent representation (ex: saying a car
hasn’t been in accident)
Phishing/internet fraud Craigslist scams
Fake prizes/ – send in a check for taxes, we’ll
send you your prize
“Credit repair”
Scholarship/Writing Contests/Diploma Mills
Investment fraud - “risk-free” or “guaranteed”
doesn’t exist
Ponzi Schemes
Bad Contracts
Unlicensed service providers/poor
performance (home improvement, auto repair)
Know your consumer rights and laws and
where to get consumer information
Laws – federal laws enforced by Federal Trade
Commission and Dept. of Justice:
Food, Drug and Cosmetic Act of 1938
Required all new drugs to be reviewed before placing on market.
National Traffic and Motor Vehicle Safety Act of 1966
Allowed federal gov’t. to require new safety standards (headrests, safety
belts, etc.) https://www.youtube.com/watch?v=joMK1WZjP7g
Fair Credit Billing Act of 1975 – limits responsibility for unauth. charges Fair Debt Collection Practices Act of 1978
Restricts collectors from abusing debtors and when/where they can contact
you. Also requires callers to state who they are calling on behalf of.
Hazardous Substances Labeling Act of 1960 – for household products CARD act of 2009
Stopped universal default, restricted marketing to students, required
information on how long it will take to pay off balance, and more.
More Consumer Protection and Resources
Federal Agencies:
Food and Drug Administration (FDA) 1906
Food Inspection, pharmaceuticals approval, cosmetics standards. Regulates
$1 trillion/yr.
Consumer Product Safety Commission (CPSC) 1972
Safety recalls
Consumer Financial Protection Bureau (CFPB) 2011
Regulates loans, prosecutes bad lenders, educates public on loans
Federal Trade Commission (FTC) 1914
Ensures fair business practices, prosecutes business criminals, creates rules
Securities and Exchange Commission (SEC) 1934
Regulates investments and ensures fair trading and accurate info to investors
Environmental Protection Agency (EPA) 1970
Regulates pesticides, energy efficiency, drinking water, factory pollutants, etc. State Organizations: Oregon Division of Finance and Corporate
Consumer Protection and Information
Cont’d.
Private Organizations:
Better Business Bureau
Accreditation requires businesses to meet certain standards. Tracks
consumer complaints.
Consumer Union-Consumer Reports
Independent product reviews (access it free through Clack. County
National Consumer League
Provides information to protect consumers
Electronic Privacy Information Center
For-Profit Resources:
Angie’s List, Edmunds.com, cnet.com, Charity Navigator, Yelp!
Helpful websites: Consumeraction.gov,
