Business and Personal Finance © 2007

Chapter 1: Personal Financial Planning

NAF Case Studies

Plan Your Financial Life (National Academy Foundation)

Everyone in the class envied Erik when he bought his new red convertible. What his classmates didn’t know was that the $22,000 he spent on the car came out of a $35,000 savings account that Erik’s parents had saved for his college education. Erik convinced his parents to let him spend the money on the car because he wanted to enjoy his life now. He thought the car would bring him attention and make him more popular.

Erik is sure he made the right decision. He heard that a college education would give him a better salary in the future, but he’s more interested in immediate gratification. Erik decided that he would get a job after high school and save some of his earnings. He also plans to invest the remaining $13,000 that his parents had saved for his college education.

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What are the three major decisions Erik made? What are the opportunity costs for each of his choices?