Financial Fitness2

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					Financial Fitness



        A Lifetime Pursuit
Financial Health and Wellness


   Financial health and wellness are almost as

    important as physical, mental, and emotional health.
Financial Health and Wellness

   In fact, they are related: People with financial worries
    are frequently stressed out and this can cause:

           High blood pressure

           Anxiety

           Depression

           Substance abuse

           Other health and/or relationship problems
Financial Health and Wellness

   Debt can destroy marriages and even lead to
    suicide.

   As teachers it is important:
    –   that we integrate financial fitness into the

        curriculum often and in creative and

        compelling ways.
Personal Finance

   Personal finance should not begin with
    making a budget and itemizing spending.
   It should begin with information about
    careers, education, and maximizing a young
    adult’s potential for earning a respectable
    income during their lifetime.
Education

   Education pays off.

   More education = higher earnings and
                     more job security.
Adult Average Earnings
                       Source: U.S. Census Bureau Facts, 2004




   High School Dropout
    – $9.05/hr = $18,826/year


   High School Graduate
    – $13.12/hr = $27,280/year


   Associate Degree
    – $14.93/hr = $31,046/year
Adult Average Earnings
                       Source: U.S. Census Bureau Facts, 2004



   Bachelor’s Degree
    – $24.61/hr = $51,594/year


   Advanced Degree
    – $35.01/hr = $72,824/year
Adult Average Earnings
                                                  Source: U.S. Census Bureau Facts, 2004



   Charting Adult Average Earnings
                                  Average Adult Earnings

        $80,000                                                                     $35.01/hr

        $70,000

                                                                   $24.61/hr
        $60,000

                                                    $14.93/hr
        $50,000
                                    $13.12/hr
        $40,000
                     $9.05/hr
        $30,000


        $20,000

        $10,000

           $-
                  H.S. Dropout   H.S. Graduate   A.S. De gre e   B.S. De gre e   Adv. De gre e
Adult Average Earnings

   Once they earn it:

    –   Young adults need reliable information
        on how to manage their money to
        ensure they will have financial security
        and adequate funds to meet short and
        long term goals.
Strategies

   Financial fitness strategies can be
    entertaining as well as educational.
Strategies

   Challenge young adults to begin to
    think and act now in ways which will
    enhance their chances of becoming
    a millionaire over time.
Strategies

   The Millionaire Game

    –   This game provides opportunities for
        discussion about a variety of myths
        and misconceptions about realistic
        strategies for them to become a
        millionaire.
The Millionaire Game

1.   Most Millionaires are College Graduates.   T F

2.   Most millionaires work fewer than 40
     hours a week.                              T F

3.   More than half of all millionaires never
     received any sizeable amount of money      T F
     from a trust fund or estate.

4.   More millionaires have American Express
     Gold Cards than Sears cards.               T F
The Millionaire Game

5.   More millionaires drive Fords than         T F
     Cadillacs.

6.   Most millionaires work in glamorous jobs   T F
     such as sports, entertainment or high
     tech.

7. Most millionaires work for big Fortune       T F
     500 companies.

8. Many poor people become millionaires by      T F
     winning the lottery.
The Millionaire Game

9.    College graduates earn about 65% more      T F

      than high school graduates.

                                                 T F
10.   If an 18 year old high school graduate
      spends the same amount as a high school
      dropout but the high school graduate
      invests the difference in his or her
      earnings at 8% interest, the high school
      graduate would have over $5 million
      saved when he/she retires at the age of
      67.
The Millionaire Game

11.   Day traders usually outperform the           T   F
      stock market and many of them become
      millionaires.

12.   If you want to be a millionaire, avoid the   T   F
      stock market. It is too risky.

13.   At age 18 you decided not to eat snacks      T   F
      and save $1.50 a day. Invest this at 8%
      until you are 67. At age 67 your savings
      from not snacking are almost $300,000.
The Millionaire Game

14.   If you save $2000 a year from age 22 to     T   F
      age 65 at 8% annual interest, your
      savings will be over $700,000 at age 65.

15.   Single people are more often millionaires   T   F
      than married people.
Tips for Becoming a Millionaire

   Tips for becoming a millionaire over
    time:

    1.   Get a good education.
    2.   Work long, hard, and smart.
    3.   Learn money management skills.
    4.   Live below your means.
Tips for Becoming a Millionaire

  5.   Buy a home.
  6.   Save early and often.
  7.   Invest in common stocks for the long
       term.
  8.   Gather information before making
       decisions.
  9.   Get married and stay married to the
       same person.
Financial Reality

   The reality is that Americans of all ages are
    not doing a very good job of financial
    planning.

    –   Financial fitness is not taught often or well in the
        public schools.

    –   Young people and families of all ages spend
        more than they earn.

    –   Credit card debt is rampant.
Financial Reality

    –   People are not saving for the future or for
        retirement.

   More specifically:
    –   Americans bought over $2 trillion worth of “stuff”
        on credit last year.

    –   Current outstanding debt on credit cards – that’s
        the “revolving” part that we don’t pay off every
        month – totals nearly $700 billion, up from just
        $50 billion in 1980.
Financial Reality

  –   Three of five American families can’t pay off
      their credit cards each month. Their running
      balance averages about $12,000 which is one-
      fourth of the median household income.

  –   By the mid-1990s, credit card debt held by
      Americans living below the poverty level more
      than doubled.
Financial Reality

  –   Senior citizens, once noted for their frugality,
      are sinking deeper in debt: Their average
      credit card balance increased by 89% between
      1992 and 2001.

  –   Total consumer debt in the U.S. comes to over
      $7,100 per person – and that doesn’t include
      mortgages.
Measure Success

   Measure success by net worth – not
    possessions.

   The appearance of wealth or prosperity can
    be false. Many people buy expensive
    houses, cars, clothes, vacations, boats,
    etc. on credit. The equity they have is
    minimal. Their net worth is not much and
    they are in serious debt.
Measure Success

   The difference between what you own
    and what you owe is equity or overall
    net worth.

    –   Financial Planning can help an
        individual or family increase their net
        worth and financial security.
Realistic Guidelines

   Five Realistic Guidelines for Financial Fitness
    –   Live below your means and save the difference.
    –   Start saving now and save as much as you can on a
        regular basis.
    –   Save for the long term – compound interest is free
        money.
    –   Manage the risk. Be prudent, but the stock market
        and a balanced portfolio has provided a better return
        than most other investments over the long term.
Important Wisdom

   Improving basic financial education at the
    elementary and secondary school level is
    essential to providing a foundation for
    financial literacy that can help prevent young
    people from making poor financial decisions
    that can take years to overcome.

    –   Alan Greenspan, Federal Reserve Chairman,
        April 6, 2001.
Economic Way of Thinking

   Develop and Practice an Economic Way of Thinking

    –   The Economic way of Thinking is a powerful method
        for making decisions. It uses Opportunity Cost,
        Choice, Incentives, and Consequences as information
        tools in decision making.

          Using  the Economic Way of Thinking can prevent
           hurried, poorly made choices.
          A cost-benefit analysis is a look at the pluses and
           minuses of alternatives.
Economic Way of Thinking

   Talk to kids about the importance of their
    investment in themselves and how that will help
    them in the future.
    –   People with more education earn more money.
        Education can increase lifelong income dramatically.
        This improves one’s standard of living and options.
    –   Go to school, attend class every day. Be on time, pay
        attention, stay focused, do the assignments, read the
        book, do the homework, and practice retaining and
        applying what you have learned.
Economic Way of Thinking

   Talk about careers which match kids
    interests, aptitudes, and abilities.

    –   Share with them what you like or do not like about
        your job or career.
    –   If you had to do it all over again would you make
        the same or similar choices? Tell them why or
        why not?
Economic Way of Thinking

 –   Explore the major Career Clusters
       Arts   and Communication
       Business   and Technology
       Engineering   and Industrial
       Environmental

       Health,   Education, Human Services
Economic Way of Thinking

   Talk About Saving to Reach Long-Term Goals
    – Include:
    –   Inflation
    –   Function of Banks
    –   Compound Interest
    –   The Rule of 72 (a formula used to find out how long
        it will take money to double).
    –   Stocks and Bonds
    –   Risk
    –   Liquidity
Economic Way of Thinking

   Talk About Credit
    –   Advantages & disadvantages
    –   Finance Charges and Interest
    –   Credit Record – Tell them that a bad credit rating
        can hurt their chances of getting a good job.
    –   Many employers check the credit rating of
        potential employees. They figure if a person is
        not responsible financially they may not be a
        responsible employee.
Economic Way of Thinking

 –   Collateral, Character, Capacity to Repay
         The average American household has 10 credit cards.
         The average balance is $7,000 per family.
         The average interest rate is 18.9%.
         Americans pay $64 million in credit card interest each
          year. That is $256 for every man, woman, and child in
          the US..
         Typical payments are 90% interest and 10% principal
          (1999).
Economic Way of Thinking

   Get Informed – Stay Informed
    –   Sound money management includes an examination
        of earnings, a plan for saving, and a thoughtful
        spending strategy.

            Pay yourself first: Direct deposit savings.
            Make a Budget
            Use a debit card instead of a credit card.
            Do not bounce checks or make late payments.
Economic Way of Thinking

      Know and understand deductions and taxes

        –   Income Taxes
        –   Social Security Taxes
        –   Sales Taxes
        –   Property Taxes
Money Smart

   How can you help kids become Money Smart?

   WE CAN HELP!
    –   The Idaho Council on Economic Education & the
        UI, BSU, ISU center’s can help you do this.
Financial Fitness For Life

   A Personal Finance Curriculum developed by:
    –   The National Council on Economic Education

   Funded by:
    –   The Bank of America Foundation.


   Distributed by:
    –   Idaho Centers on Economic Education.
Financial Fitness For Life

   A recent National Council on Economic
    Education survey found that two-thirds of
    high school students are financially illiterate.

    –   They don’t know much about the American
        economy or about personal finances because
        they have not been taught much, if anything,
        about it in school.
    –   The Financial Fitness for Life Curriculum can
        help but it must be used.
The FFFL Curriculum is Designed to
Reverse Financial Illiteracy

   The comprehensive curriculum:
    –   Written by experts and field tested in classrooms;
    –   Includes interactive computer resources.
    –   Geared to student interest and sound learning
        theory.
    –   Includes parents as educational partners.
    –   Includes teacher training by NCEE Network.
The FFFL Curriculum is Designed to
Reverse Financial Illiteracy

   The following themes are addressed throughout
    the Financial Fitness for Life Series.
    –   Theme 1 – There is no such thing as a free lunch.
    –   Theme 2 – Education pays off: Stay in school and
        learn as much as you can.
    –   Theme 3 – Tomorrow’s money: Getting to the end of
        the rainbow (saving).
    –   Theme 4 – Spending & using credit are serious
        business.
    –   Theme 5 – Plan, budget, save, conserve.
                  (Money Management)
Parental Involvement

   FFFL incorporates a powerful learning tool –
    parental involvement and reinforcement at
    home using real information and situations.

    –   The Activity-Based Guide for Parents can help.
    –   A good place to start is talking about Net Worth.
    –   The appearance of wealth may be false.
Workshop Information

   For more information about the Financial Fitness for
    Life Teacher Workshops in your area contact?

    –   Marty Yopp
        University of Idaho
        322 E. Front Street, Suite 440
        Boise, ID 83702

    We can get you the training and materials you need
     to help your students and yourself become
               FINANCIALLY FIT FOR LIFE
Fun Discussion

   Would YOU Loan Them the Money?
    – Client One
       17years old
       Good grades in high school
       Admitted to a good state university
       Wants to attend school full-time for 4 years
       Major in chemical engineering
       Parents cannot help
       Wants to borrow $25,000 for college
Fun Discussion

   –   Client Two
         18 Years Old
         Attending local vocational technical school.
         Tuition is low and the program is 9 months.
         Plans to get an apartment after school is
          completed.
         Avid sports fan.
         Wants to borrow to buy a 38-inch TV for $3,000.
Fun Discussion

 –   Client Three
       21,senior in college, English Major
       Never had a vacation except with parents
       Wants to borrow $1,500 to bust out for Spring
        Break in Florida.


 –   Client Four
       22years old
       Completed a dental hygienist program
Fun Discussion

    Has first job which pays $25,000 per year
    The job is 20 miles from home
    Has $2,000 for down payment
    Wants to borrow $12,500 for a new car.


   Is the loan being used to obtain a valuable asset?
   Will the client be able to repay the loan?
   - Yes
   - No
   - Maybe

				
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