Phase 1 – Day 3

Today we talked about the components of a budget, how to create one, the importance of saving, different ways to save, how to create a savings plan, how a loan works and the concept of interest. For our budget, they first determined how many events they would have each week and how many chairs/canopies they would rent for each event. We determined our price brackets yesterday, so we were able to create a budget for our high season months and our low season months. Once we had our budget, we began creating our savings plan. We talked about the importance of saving and I asked what would happen to our business if we were not saving and someone broke into our store and stole our entire inventory. They quickly realized that without a savings plan, their business could collapse overnight and everything that they worked so hard to start and build up would have no way of continuing without money to reinvest in inventory. Our savings plan had different categories including: tithing, giving back to the community, personal salary, reinvestment into the business, and an emergency fund. Once we had determined our budget and savings plan, we dove into how a loan works. The hardest concept for them to understand was interest because they have not heard about it before and they don’t use percentages in their daily lives. I showed them an example of two people in our group receiving loans, one for $1,000 and one for $2,000 and asked them if it would be fair if the investor charged them each $200, although one was receiving a smaller amount. They decided that it would not be fair. Then I showed them an example where instead of being charged a flat rate, they were charged a variable rate. I showed them that although they would both be charged 15%, the final amount to repay would depend on the size of their loan. I showed them that when the investor charges both participants 15% instead of $200, they would repay $1,150 and $2,300 instead of $1,200 and $2,200, respectively. I asked them if this would be fair, and they agreed that it was. It took a good 30-40 minutes before everyone in the group understood how interest worked, but they finally got it and boy, was that a sweet moment! We then determined how quickly we could repay our loan and what our monthly loan repayments would be, including interest. We were finally able to put everything together and used actual numbers to show income, expenses, profit, and savings both in our high-season months and low-season months, both in the months we were repaying our loan and the months after we finished repaying the loan. They were pretty amazed to see how profitable their business was and how much they would be able to give away and save. We finalized our business plan, which includes everything we have learned over the past three days, and the group chose two members to make the business pitch to the panel of judges tomorrow morning. Dela and Adam decided they would present for the team. They don’t know what the business ideas for the other groups are, but they are still confident that they will place 1st in the competition!



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