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

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 Most Millionaires are College Graduates. T F Most millionaires work fewer than 40 hours a week. More than half of all millionaires never received any sizeable amount of money from a trust fund or estate. More millionaires have American Express Gold Cards than Sears cards. T F

The Millionaire Game More millionaires drive Fords than Cadillacs. Most millionaires work in glamorous jobs such as sports, entertainment or high tech. 7. Most millionaires work for big Fortune 500 companies. 8. Many poor people become millionaires by winning the lottery. T F

The Millionaire Game 9. College graduates earn about 65% more than high school graduates. 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. T F

The Millionaire Game 11. Day traders usually outperform the stock market and many of them become millionaires. 12. If you want to be a millionaire, avoid the stock market. It is too risky. At age 18 you decided not to eat snacks 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. T F

The Millionaire Game 14. If you save $2000 a year from age 22 to age 65 at 8% annual interest, your savings will be over $700,000 at age 65. 15. Single people are more often millionaires than married people. T F

Tips for Becoming a Millionaire Tips for becoming a millionaire over time: Get a good education. Work long, hard, and smart. Learn money management skills. Live below your means.

Tips for Becoming a Millionaire Buy a home. Save early and often. Invest in common stocks for the long term. Gather information before making decisions. 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 More specifically: 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.

FINANCIALLY FIT FOR LIFE 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 17 years 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 Client Four 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 22 years 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