MoneyCounts: A Financial Literacy Series Financial Literacy Overview (FLO) Penn State Financial Literacy & Wellness Center 011A Grange Building University Park PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214

Description The Pennsylvania State University is committed to provide students with the resources needed to make informed decisions regarding their money management. But what is Financial Literacy? What are the main principles that a student should explore? And what is the purpose of becoming financially literate? Financial Literacy is not just about managing your money, it dives deep to help you question your attitudes and values toward money and guides you to reach a life full of financial security and freedom.

Learning Outcomes Identify the core competencies for financial literacy Explore the knowledge using the KAB concept Knowledge, Action, Behavior List practical strategies to becoming financially literate Discuss financial security and freedom goals

Why we need financial literacy?

KAB Principle

Core Competencies

Core Concept #1 - Earning Gross versus net paycheck Benefits and taxes Education is important Understand your paycheck Verify and adjust your exemptions and deductions on your W4 (withholding) Learn about potential benefits and taxes Invest in your future, plan for your career through education – search the market Knowledge Action/Behavior

Core Concept #2 – Saving& Investing Saved money grows Banking – saving and checking accounts Long-term financial planning Eliminate or reduce waste Start saving early, pay yourself first Comparison shopping for a financial institution – reconcile your accounts Plan for retirement, child education, renting versus owning a home Replace waste with saving Knowledge Action/Behavior

Core Concept #3 - Spending Difference between needs and wants Develop a quantitative awareness of your spending habits Get the most/best value for your money Develop a spending plan Track spending habits Live within your means Understand the social and environment impact of your spending decisions Knowledge Action/Behavior

Core Concept #4 - Borrowing Distinguish net income from loans Cost of borrowing – Penalty, Interest, late fee, surcharge (PILS) Amortization schedules Credit Score - FICO (Fair Isaac &Company) Equifax, Experian, TransUnion Credit cards Borrow only what you need not want Avoid high cost loans, avoid penalties, late fees, and surcharge Minimize interest payments Get your free annual credit report, check your financial grade, review and correct if necessary Shop for low interest cards, use only in emergencies, avoid paying (PILs) Knowledge Action/Behavior

Core Concept #5 – Protecting Risk management and insurance coverage Identity theft Fraud and scam Shop for insurance, review and update insurance, build up an emergency fund Watch for your social security number and card, your date of birth and your banking information If it is too good to be true, it most certainly is Knowledge Action/Behavior

Elements of financial well-being

Fundamental Steps

Security versus Freedom

Strategies to pay debt

Rule 20/10 Rule of 20/10 – Your total outstanding debt should not exceed 20% of your total net yearly income.  Your monthly debt payment (not including mortgage) should not exceed 10% of your monthly net income.

Rule of 72 Rule of 72 – To find out how long it takes for your invested money to double in value, Divide 72 by the expected interest rate you hope to earn.  The result gives you the approximate number of years it will take for your investment to double. Years to double = 72 / Interest Rate

Budgeting

Increase income

Decrease Spending

Budget at a glance

MoneyCounts: A Financial Literacy Series Thank you! Comments and Questions Penn State Financial Literacy & Wellness Center 011A Grange Building University Park PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214