Personal Finance for Life On the Road to Financial Success Personal Finance for Life We’re going to focus on a number of the fundamentals of personal finance that will help you successfully manage your money during your teen years and throughout your life. What we hope to achieve – is to provide some rules and tools to make you a wise money manager. HANDOUT – Hand out “A Quiz on Credit.” Have the audience take the quiz. Then handout the “Answers.” Review the quiz with the focus on the percentage of students who got the questions correct indicated by the score on the answer sheet. Use this discussion as the basis of the need to be a smart consumer of personal finance and compliment them for taking the first step by attending the workshop.

Setting Goals Characteristics of goals Time-frame Specific, measurable, reasonable and realistic Time-frame Short-, medium-, long-term Examples for your life stage Save “x” dollars for a car Get a summer job Design a budget QUESTION - Why set goals? ANSWER - To take action toward a dream (buying a car, saving for college) To alleviate a concern (repaying debt) Characteristics of goals Specific (How much? How long?) Measurable (How will I know when I get there?) Reasonable and realistic (It fits within my budget) EXERCISE – Review the “Setting Goals” worksheet in Appendix A of the booklet. Ask the group to write a short, medium, or long term goal using the characteristics of goals. Then ask someone to share his/her goal. Write it on the white board/flipchart and ask the group to critique it. Does it have all of the characteristics of a goal?

Create a Budget - Income Scholarships Gifts Loans Allowance My job or business Odd jobs Once your goals are set, your budget will be the plan to help you achieve those goals. DISCUSSION – Asses the knowledge base of the audience by asking what they know about budgets. Do their parents have a budget? REVIEW the parts of the budget: Income is money in or inflow Expenses are money out or outflow EXERCISE – Go to “My Budget” in Appendix B of the Booklet and create a budget. This may be the first time the attendee creates a budget. Some attendees might not have any income (allowance, odd jobs, gifts). The attendees income might just be money that their parents have given them when they wanted to buy something. So, focus on what they spend money on and have them log those types of expenses in the expense area. HANDOUT – For the older students in the group, you can hand out the “Your Spending Profile,” which is a useful tool for the student to begin understanding their money personality.

Create a Budget - Expenses Money I owe Savings College savings Giving Gifts Transportation Food Clothing Personal care School supplies Telephone Recreation Vacations

Checking Accounts & Electronic Money Safety Proof of payment Convenience Establish credit ATM cards Debit cards EXERCISE – Bring a sample check, ATM card and Debit card from your financial institution and pass them around the room. Review the sections of a check and how a check is filled out. Explain the features of ATM and Debit cards.

Saving & Investing Emergency savings Start early Bonds Stocks Mutual funds Strategies Make savings a part of your budget. Get the attendees excited about saving money and show them the beauty of interest – that is, free money that is given to them for keeping their savings at the financial institution. Explain the steps of savings – start with cash savings, then move onto bonds and eventually stocks and mutual funds. Most attendees will understand savings accounts and some will have an idea about bonds because they may have seen a EE Bond before. Kids use products every day that are made by companies that they know – Nike, Microsoft, Coca-Cola. You can introduce stocks as simply as owning a piece of a company and use companies they are familiar with to support your example.

Recipe to be a Millionaire Work four summers, start at age 16 Save income in a Roth IRA account Invest in a simple, low-cost stock portfolio Simmer slowly for 47 years Serve un-garnished (and untaxed) at age 67 QUESTION – How many of you want to be a millionaire? ANSWER – Everyone will raise their hand. Get the students excited about saving by sharing with them the recipe to be a millionaire. You can share the details of the recipe as needed. Here are the details: Save $2,000 each summer during your high school years and save no more thereafter Invest the money in a common stock Roth IRA that earns 10.7% average compound rate By age 30, that $8,000, is worth $25,917 By age 40, $71,625 By age 50, $197,943 By age 60, $547,037 By age 67, $1,114,423

The World of Credit Benefits of credit So many choices Shopping for credit Applying for credit The C’s of credit Establishing credit The cost of credit Using credit wisely Protecting your credit history Your credit report Your credit score Define what credit is – buying now and paying later EXERCISE – Bring a sample loan application and pass it around the room. DISCUSSION – Discuss the types of questions included and not included in the application. Why does the application ask you to list your current employer and if you’re in a job for a short time? Why do loan applications not ask for information such as your religion? REVIEW – All of the credit topics in the booklet. EXERCISE – Bring a credit card statement and pass it around. As an option, show the attendees how finance charges are calculated. EXERCISE – Bring a sample credit report and pass it around. Introduction of these “show and tell” items will probably be the first time attendees see them.

Cost of Making the Minimum Payment Item Price APR Interest Paid How Much You Really Pay for the Item Total Years to Pay Off TV $500 18% $439 $939 8 Computer $1,000 $1,899 $2,899 19 Furniture $2,500 $6,281 $8,781 34 This chart is a real eye opener to students. It hits home the concept of paying interest on buying items now and paying for them later. This is a good opportunity to contrast earning interest on a savings account to paying interest on a credit card. QUESTION – Would you rather have your financial institution pay you interest on your savings or would you rather pay interest on a credit card? ANSWER – The answer is obvious, but it reinforces an important concept that saving money is a great deal.

Benefit of Making More Than the Minimum Payment Original Balance APR Monthly Payments Total Number of Monthly Payments Total Years to Pay Off Total of Pmts $2,500 18% Min Pmt 404 34 $8,781 +$50 94 8 $4,698 +$100 32 3 $3,163 Even if you can’t pay cash for everything, making more than the minimum payment on credit purchases will save you a lot of interest payments in the long run.

Be Credit Wise Over 75% of college students have credit cards Over 30% of college students have 4 or more credit cards 3 out of 5 students with credit cards maxed them out in their freshman year Over 60% of college students don’t have a budget Share these statistics with students to show that many kids who get credit cards for the first time don’t know how to use them wisely. Encourage the attendees to learn, learn and learn some more so they use their credit wisely.

Me and My Car New or used? Buy or lease? The other costs Registration License plates Insurance Maintaining the car REVIEW – the pros and cons of buying new vs. used and buying vs. leasing. Some of the attendees might already have some experience in this area and can add some valuable input.

It’s Off to Work You Go How much will you make? Taxes Gross vs. net income Entrepreneurial spirit Teens can use research activities such as Salary Comparisons, Take Home Pay Estimates, calling apartment complexes or comparing rents in an apartment guide to learn what they are likely to be able to afford. Teens often overestimate income and underestimate expenses, so this is a good way to show them the reality of the numbers. EXERCISE – Hand out the “How Much Charts” worksheet. Ask the student to fill out each chart. Take one at a time. On the “How Much Will You Earn?” chart, the student fills out the $ Per Year – Your Estimate column. Prior to the workshop, find out what the starting salary for a Lawyer, Teacher, and Architect are in your area. After the student completes their part, you share what the starting salary’s are and what the income would be after 10 years for each job. DISCUSSION – Discuss their expectation with reality On the “How Much Will You Take Home?” chart, ask the student to fill out the first column – Estimated Take-Home. Then discuss taxes that are deducted to identify what the Actual Take-Home would be for each of those jobs. On the “How Much Does It Cost?” chart, ask the student to complete the Estimated Cost for the listed expenses. Prior to the workshop, find out what the going rates are for these expenses in your area. Then share those costs with the students during the workshop.

Leaving the Nest Pay bills Open checking acct Balance checkbook Stop payment on a check Re-order checks Read a lease Buy insurance Order electric service Register to vote Get a passport Apply for student aid Get a credit report Invest Do a tax return There are some important life skills that every kid needs to know before leaving home. EXERCISE – Have the attendees go to “Appendix C – Life Skills 101” in the booklet and complete the list. DISCUSSION – Ask the attendees if there are any other items that need to be added to the list. Take a survey to see how many of the items the attendees already know how to do.

On the Road to Financial Success