Personal Financial Literacy An Introduction to Financial Planning

Teens get most of their money from part-time jobs. True False 0 of 30

Most teens who are 18 or 19 years old have a checking account. 3 of 30 True False

Ninety percent of high school students rely on their parents for information about money. True False 20 of 30

On average, American teens spend more than $10 billion a year. 20 30 True False

Timed Rally Robin What is an item you would like to have, but cannot currently afford? Assuming you are starting with no money and you cannot count on anyone else to simply give it to you, how will you go about saving enough for the item? How long do you think it will take you to save enough money to buy the item? What are some other expenses you need to consider while saving up? Will you make sacrifices?

Financial Planning Process of setting goals Developing a plan to achieve them Putting the plan into action

Step 1: Set Goals “If one does not know to which port one is sailing, no wind is favorable.” (Seneca) Think about what “things” one needs and wants in the short-, intermediate-, and long-term IMPORTANT Easier to find money if you plan and save than searching frantically at the last minute

Step 1: Set Goals Distinguish between needs and wants Needs should come first Three types of goals: Short-term (less than 3 months) Intermediate (3 months- 1 year) Long-term (more than one year)

Birthday present for a friend whose birthday is next month. Short-term Intermediate Long-term

Next week’s date. Short-term Intermediate Long-term

Trip after you graduate. Short-term Intermediate Long-term

New pair of shoes. Short-term Intermediate Long-term

Wedding Short-term Intermediate Long-term

Yearbook at the end of the school year. Short-term Intermediate Long-term

Long-term Goals Instant gratification vs. delayed gratification Many opt for instant gratification credit cards

Step 2: Analyze Information Where are your finances now? Receiving, spending and saving Cash flow Keep track of amount received and spent

Step 3: Make Decisions Make many decisions Challenging Options opportunity costs

Stages of Decision Making Identify goal/problem List alternatives Establish criteria (expectations) Evaluate alternatives using criteria Make the decision Evaluate results

Making Decisions Choose between 2 things Trade-off also knows as opportunity cost

Step 4: Create and Implement a Plan On the output page, complete the writing assignment: “You have been asked by a friend to provide advice about how a financial plan will help the person meet his or her financial goal. List specific steps they should take and things they need to consider when creating their plan. Be sure to mention factors that will affect the plan and strategies to help them stick to it.”

Step 5: Monitor and Modify the Plan Once it’s developed: you have to reflect periodically (regular intervals) make sure you are staying on track Not set in stone Change as changes occur in priorities, criteria and unexpected events

Family Scenarios Write down your scenario Brainstorm with your team: 3 Financial decisions that may need to be made 2 unexpected events that might impact financial planning