Georgia Council on Economic Education w w w. g c e e. o r g Glen Blankenship Associate Director & Chief Program Officer I nvestor E ducation Financial Fitness for Life and

Georgia Council on Economic Education w w w. g e e e. o r g Why is K-12 financial education so important? More than ever there is a need for our citizens to have at least a basic knowledge of economics and financial management. It’s at the basis of everything we do. If people cannot make well-informed and sound personal finance decisions, how are they to make well-informed and sound public policy decisions?

But, It’s Scary Out There

Why Invest? Time is on your side. –Stock prices rise over time. Beat inflation. –Overtime, investments in stock have good returns.

Why Invest? Own corporate America- it’s not greed. –Investing helps companies to grow and provide more jobs and income. –Investing helps create new goods and services for consumers.

Economic and Financial Literacy is Important Citizens must understand basic economics to: –Fully participate in our nation’s market economy. –Understand policy issues and cast informed votes in federal and state elections. Citizens must understand personal finance to: –Plan for retirement. –Make saving and investing choices. –Purchase insurance. –Buy a home.

Georgia Council on Economic Education w w w. g c e e. o r g The Problem of Economic and Financial Literacy…

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Georgia Council on Economic Education w w w. g c e e. o r g Saving is a very fine thing. Especially when your parents do it for you. --Sir Winston Churchill

Georgia Council on Economic Education w w w. g c e e. o r g About 8 of 10 Americans are comfortable with the level of financial planning they are currently doing. Source: Federal Reserve Bank, St. Louis

Georgia Council on Economic Education w w w. g c e e. o r g 34% have not begun to prepare for retirement. 23% save nothing for long term goals. 25% do not know how much they are saving.

Georgia Council on Economic Education w w w. g c e e. o r g On average, Americans expect to retire at age 61 and live to 83.

Georgia Council on Economic Education w w w. g c e e. o r g Overall levels of economic understanding are low. (Average score of out of 40 in recent national test.) -Jump$tart Coalition

Georgia Council on Economic Education w w w. g c e e. o r g Source: Federal Reserve Bank, St. Louis Personal Bankruptcies

Georgia Council on Economic Education w w w. g c e e. o r g Bankruptcy Rates, 2005

Georgia Council on Economic Education w w w. g c e e. o r g Bankruptcy Rates by County

Bankruptcy Rates, 2008

Personal Bankruptcy Filings, 2009 StateRate (# of households in state per bankruptcy) % Change (over 2008) 1 – Nevada35.261% 2 – Tennessee48.515% 3 – Georgia50.322% 4 – Alabama56.720% 5 – Indiana57.222% 6 – Utah62.057% 7 – Michigan62.526% 8 – California66.059% 9 – Ohio70.522% 10 – Illinois71.932% Georgia Council on Economic Education w w w. g c e e. o r g

Georgia Council on Economic Education w w w. g c e e. o r g Foreclosure Rates are Way Up Georgia is 6 th in the Nation

Foreclosure Rates Still High

Georgia Council on Economic Education w w w. g c e e. o r g Source: Federal Reserve Bank, St. Louis Consumer Debt

Georgia Council on Economic Education w w w. g c e e. o r g Source: Federal Reserve Bank, St. Louis Credit Card Usage and Balance by Family Income Income Level LowestMiddleHighest Percentage of families with a credit card

Georgia Council on Economic Education w w w. g c e e. o r g Source: Federal Reserve Bank, St. Louis Credit Card Usage and Balance by Family Income Income Level LowestMiddleHighest Mean credit card balance 1970$1,038$950$ ,5023, ,5964,7856, ,9386,07714,713

Georgia Council on Economic Education w w w. g c e e. o r g Source: Federal Reserve Bank, St. Louis Credit Card Use in Atlanta Average Atlanta – 3 open credit cards (down from 4 in 2007), but total balance on cards is higher Across 20 metro areas – –Atlanta is #1 with avg balance at $6,753 –In 2007 it was $7,114 –Credit Scores in Georgia below the national average

Credit card companies have been marketing aggressively to young people % of teens have a credit card. (JA, 2005) High School Students and Credit Cards

College students report having an average of 4.6 credit cards. Half have four or more. Seniors graduate with more than $4,100 in credit card debt, up from $2,900 in Only 17% said they regularly paid off all the cards each month. The remaining 82% carried balances and incurred finance charges each month. 84% said they need more education on financial management topics. College Students and Credit Cards (Sallie Mae, 2009)

Unbanked Households (Federal Reserve Bank of Chicago) About 10 million households are unbanked. Over 57% of unbanked households are minority households.

What Does It Mean to be “Unbanked?”

Georgia Council on Economic Education w w w. g c e e. o r g Where Do the Unbanked Go For Financial Services?

So What Can We Do About All of This? Option #1

Option #2

WHAT ARE YOUR QUESTIONS ? Georgia Council on Economic Education w w w. g c e e. o r g

Georgia Council on Economic Education w w w. g c e e. o r g How to Really Be a Millionaire Lesson 1

Georgia Council on Economic Education w w w. g c e e. o r g The Millionaire Game 1.Most millionaires are college graduates. True: 4 of 5 millionaires are college graduates. 2. A majority of millionaires work fewer than 40 hours a week. False: About 2/3 of millionaires work 45 to 55 hours a week. 3. More than half of all millionaires never received money from a trust fund or estate. True: Only 19 % of millionaires received any income or wealth of any kind from a trust fund or an estate.

Georgia Council on Economic Education w w w. g c e e. o r g 4.More millionaires have American Express Gold Cards than Sears Cards. False: Only 28.6 % on millionaires have Amex Gold Cards while 43% have Sears credit cards. 5.More millionaires drives Fords than Cadillacs. True: Ford is preferred by 9.4% and Cadillac by 8.8 %. The Millionaire Game

Georgia Council on Economic Education w w w. g c e e. o r g The Millionaire Game 6. Most millionaires work in glamorous jobs such as sports, entertainment, or high tech. False: A majority of millionaires are in ordinary industries and jobs. 7. Most millionaires work for big Fortune 500 companies. False: About 3 out of 4 millionaires are self employed and consider themselves to be entrepreneurs. Most of the others are professionals, such as doctors, accountants and lawyers.

Georgia Council on Economic Education w w w. g c e e. o r g The Millionaire Game 8. Many poor people become millionaires by winning the lottery. False: Very few people get rich the easy way. If you play the lottery, the chances of winning are about 1 in 12 million. The average person who plays the lottery every day would have to live about 33,000 years to win once. You have a 1 in 1.9 million chance of being struck by lightning. A pregnant woman has a 1 in 705, 000 chance of have quadruplets

THE MILLIONAIRE GAME 9. College graduates earn about 65% more than high school graduates. True: recently the average college grad earned 66% more than the average high school grad. Folks with professional degrees earned 150% more than the HS grad. 10. If an average 18-year-old high school graduate spends as much …his or her earnings at 8% annual interest, the high school graduate would have $5,500,000. True: This is a dramatic illustration of how valuable a high school education and investing early and often can be. The difference in earnings is $8k a year at age 18 and assumes a 1.5% increase in income per year. Georgia Council on Economic Education w w w. g c e e. o r g

Georgia Council on Economic Education w w w. g c e e. o r g The Millionaire Game 11. Day traders usually beat the stock market and many become millionaires. False: Recent studies show that about 80% of day traders lose money. 12. If you want to be a millionaire avoid the risky stock market. False: Long term, the S&P 500 index has increased at about 11 % which exceeds any other investment.

Georgia Council on Economic Education w w w. g c e e. o r g The Millionaire Game 13. At age 18, you decide not to smoke and save $1.50 a day……..At age 67, your savings are worth almost $300,000. True: the power of compound interest. Small and steady investments make a big difference over time. 14. If you save $2000 per year from age 22 to age 65 at 8% annual interest, your savings will be over $700,000 at age 65. True: Because of compound interest, the earlier you begin saving the better. Regular saving will make you a millionaire even if your salary is modest.

Georgia Council on Economic Education w w w. g c e e. o r g The Millionaire Game 15. Single people are more often millionaires than married people. False: Most millionaires are married and stay married. Financially speaking, divorce is something you want to avoid.

Georgia Council on Economic Education w w w. g c e e. o r g Rules for Improving Your Financial Life Get a good education Work long, hard, and smart Learn money- management skills Live below your means Buy a home (you can afford) Save early and oftenSave early and often Invest in commonInvest in common stocks for the stocks for the long term (diversify) long term (diversify) Gather informationGather information before making before making decisions decisions Get married and stayGet married and stay married married

WHAT ARE YOUR QUESTIONS ? Georgia Council on Economic Education w w w. g c e e. o r g

Georgia Council on Economic Education w w w. g c e e. o r g Download the FREE App: “SIFMA Foundation” (The Stock Market Game)

Georgia Council on Economic Education w w w. g c e e. o r g The Basics Stock- An ownership share, or shares of ownership, in a corporation.

Georgia Council on Economic Education w w w. g c e e. o r g Can You Buy Stock in or

Georgia Council on Economic Education w w w. g c e e. o r g The Different Markets New York Stock Exchange The oldest stock exchange in the United States, founded in 1792 and stocks are still traded on the floor. Traditionally for large corporations with large volumes of shares.

Georgia Council on Economic Education w w w. g c e e. o r g NASDAQ An electronic marketplace enabling buyers and sellers to get together via computer to trade stocks. Traditionally high-tech firms that are very active. Created in 1971.

Georgia Council on Economic Education w w w. g c e e. o r g American Stock Exchange (AMEX) Located in New York, handles about 10% of all securities exchange. Has mostly small-cap stocks, exchange-traded funds and derivatives.

Georgia Council on Economic Education w w w. g c e e. o r g National Rules $100,000 to Invest for 10 Weeks –NYSE –AMEX –NASDAQ Must Purchase Minimum of 10 Shares Minimum Share Price of $3 4 pm Closing Price (not real-time)

Georgia Council on Economic Education w w w. g c e e. o r g Georgia 3x3x3 Rules Purchase a stock before end of third week Must purchase at least three stocks Must hold three stocks for 3 weeks

Georgia Council on Economic Education w w w. g c e e. o r g National Rules Hardest thing to do? Get teams to spend the $100,000!.75% Interest Earned on Unspent Cash 1% Transaction Fee (all transactions) 7% Interest Charged on Margin Loans

Georgia Council on Economic Education w w w. g c e e. o r g Teaching “Stuff” Student- “What stock should I buy?” Me- “If I knew the answer to that I would not be in this classroom with you. I would be living here and paying someone to count my money.”

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Georgia Council on Economic Education w w w. g c e e. o r g Teaching “Stuff” $7.00 per team fee No fee if you are a Title 1 school No fee for any school in Atlanta City, Decatur City, Fulton County, DeKalb County Teams of 3-5 students (suggested)

Georgia Council on Economic Education w w w. g c e e. o r g Teaching “Stuff” Teams of 3-5 (recommend friends) Do not liquidate portfolio on the last day Rankings posted weekly Grading activities, not profit/loss Awards by region and state – luncheon for all winners in May

Georgia Council on Economic Education w w w. g c e e. o r g How to Win Select stock kids are familiar with; NIKE Buy at $100/share 1000 shares with $100,000 Price rises to $101/share Account increases by $1,000 Select stock with a lot of volatility; XYZ Buy at $10/share 10,000 shares with with 100,000 Price rises to $11/share Account increases by $10,000

Georgia Council on Economic Education w w w. g c e e. o r g SMG Buy ↑ Sell [Long position] Short Sell ↓ Short Cover [Short position]

Georgia Council on Economic Education w w w. g c e e. o r g Your friend loans you this-

Georgia Council on Economic Education w w w. g c e e. o r g You immediately turn around and sell the thing for $ (the $ goes in your pocket)

Georgia Council on Economic Education w w w. g c e e. o r g What do you owe your friend at this point?

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Georgia Council on Economic Education w w w. g c e e. o r g You expect leather briefcases to be on clearance sale at Macy’s for $150.00

Georgia Council on Economic Education w w w. g c e e. o r g When they go on sale, you buy your friend a new briefcase for $ She gets her briefcase back and you just made $50.00!

Georgia Council on Economic Education w w w. g c e e. o r g Your broker loans you this-

Georgia Council on Economic Education w w w. g c e e. o r g You immediately turn around and sell it for $ (the $50.00 goes in your pocket)

Georgia Council on Economic Education w w w. g c e e. o r g What do you owe your broker at this point?

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Georgia Council on Economic Education w w w. g c e e. o r g You expect the CDC to announce that Coke causes cancer… bacon car battery …so you wait.

Georgia Council on Economic Education w w w. g c e e. o r g Instead, the CDC announces that Coke cures cancer! What happens to the price of Coke stock?

Georgia Council on Economic Education w w w. g c e e. o r g The Risk of Short Selling? If the price of the stock goes up before you return the stock to your broker, you will loose money.

Georgia Council on Economic Education w w w. g c e e. o r g What are Your Questions?