West Virginia State Auditor Civics Education Seen Through a 21st Century Lens July 27, 2006 Presented by: Justin Southern, Communications Director James Rutledge, Investor Education Specialist

Securities Regulation 1844 – Joint Stock Companies Act (UK) – First law to require companies to offer a prospectus 1911 – Kansas passed “Blue Sky” law 1929 – Individual states adopt “Uniform Securities Act” 1931 – WV Legislature passes the act –Chapter 32 of W.V.S.C. –West Virginia State Auditor as Commissioner of Securities, ex-officio –Predates creation of SEC (1934)

Why teach investor education? According to a June 2006 survey by the Center for Retirement Studies at Boston College: –Only 20% of Americans are eligible for a pension (80% must fend for themselves) –43% of Americans will not have enough saved to maintain their standard of living in retirement –25% have never enrolled in their company offered 401(k) –45% cash out of their 401(k) when they change jobs

West Virginia Securities Commission presents a first hand look at: The Basics of Saving and Investing: Investor Education 2020 A product of the Investor Protection Trust

About IPT Created in 1993 Provides “independent and objective investor education” More than 40,000 high school teachers use IPT publications Over 350 teacher trainings completed 3 rd teaching tool offered –#2 “FL2010” is 2 nd most accessed publication from the Jump$tart Coalition’s clearinghouse website –Focuses solely on Investor Education Funded by securities enforcement actions All trustees are state securities regulators

Unit 1 – Getting Started Defining “Investor Education” Why people save and invest How to think about making financial decisions Key concepts of saving and investing Unit 1 test / answer key

Let’s tour Unit 1

Teaching Standards / Key Terms Compound Interest Goals Interest Rate Opportunity Cost Risk

Unit Objectives Discuss why people save and invest Learn how to think about financial decisions Understand the key concepts of saving and investing (including the “time value of money”)

Each unit contains multiple handouts…

Each lesson within the unit contains an outline

Unit 1 – Lesson 1 Why people save and invest –Preparing for a career, often by going to college –Saving for a major purchase or expense –Building up a “rainy day” fund –Developing a personal finance/investment plan –Starting a saving and investing program

Unit 1 – Lesson 2 How to think about making financial decisions –1. Problem (Kathy wants to buy a car) –2. Gather information (Internet, etc.) –3. Consider Alternatives (bus, lease) –4. Make a decision (buys used but reliable two year old car) –5. Modify plans if needed (moves to city – sells car)

Lesson covers macro/ micro economic terms Needs Wants Choices Costs Benefits Trade-Offs Opportunity Costs

Unit 1 – Lesson 3 Key Concepts of Saving and Investing –1. Pay yourself first –2. Set goals that inspire success (short, medium and long term) –3. Don’t take unnecessary risks –4. Put time to work for you –5. Diversify!

Pyramid of Risk Chart

Paying Attention? Can you place the following? Futures Real Estate High Quality Stocks Aggressive Growth Bonds High Quality Corporate Bonds Government Bonds

Paying Attention? Can you place the following? Futures Real Estate High Quality Stocks Aggressive Growth Bonds High Quality Corporate Bonds Government Bonds

Quiz / Answer Key

Time Value of Money Investor A starts investing $40 a week at 25, quits investing at 35 years old. Investor B starts investing $40 a week at 35, quits investing at 65 years old. Investor A total investment $20,000 Investor B total investment $62,000 Who ends up with the most money?

Answer… Investor A: Investor B:

Time Value of Money Quiz

Magic of Compounding!

Unit 2 – Introduction to Financial Markets Understanding risk and reward How financial markets work Savings, stocks, bonds, mutual funds and other investments Regulation of financial markets Unit 2 test / answer key

Unit 3 – Making a Financial / Investment Plan Introduction to financial planning / investing concepts Framing a plan to meet students’ financial goals Selecting financial professionals Unit 3 test / answer key

Unit 4 – Investment Fraud Introduction to investment scams How telemarketing fraud works: Inside a “Boiler Room” Teach your students to become “Victim Proof”: Self-defense tips against fraud How regulators protect investors Unit 4 test / answer key

Appendix Resources Materials Organizations Agencies Glossary of terms

Contact us – and Thanks! Justin Southern or James Rutledge West Virginia State Auditor’s Office State Capitol Building 1, Room W100 Charleston, WV or