Financial Literacy: Knowing What You Need To Know To Achieve Your Financial Goals

1. Financial Literacy:Knowing What You Need To Know To Achieve Your Financial Goals

2. America’s financial literacy • American families: • The average American family spends $1.22 for every dollar it earns. • One in five American families with annual household income of less than $50,000 is spending 40% of after-tax income to service its debt. • In 2003, the average American household owed $8,000 in credit cards, compared to $2,600 in 1989. • In 2003, 1.6 million Americans filed for bankruptcy – the highest amount in history.

3. America’s financial literacy • 2 out of 3 households will probably fail to realize life goals • Financial illiteracy is passed to the next generation • Average high school senior failed 2004 financial knowledge survey

4. What is Financial Literacy?

5. Financial literacy • The ability to effectively evaluate and manage one’s finances in order to make prudent decisions toward reaching life’s goals • The understanding of: • Money • Cash flow • Basic economic/financial concepts • Debt/risk management

6. Achievingfinancialliteracy • Five Key Areas of Personal Finance: • Money and income • Money management • Spending and debt • Savings and investments • Risk management (protection)

7. Money and income • Time is money • How many hours do you need to work to pay for your mortgage, car insurance, electricity bills, extras, etc?

8. Money management • Budgeting • Prioritizing

9. Spending and debt • Benefits and costs of spending alternatives • Credit as a basic financial tool

10. Savings and investing • Saving means not spending money. • Investing means that you earn a return on the money you put into it.

11. Risk management • Insurance • Understanding the markets • 50% of Americans own stocks • Identity theft • Consumer protection

12. Financial literacy isn’t just a matter of knowing what you have and knowing your options. It is a matter of planning for life’s milestones.

13. Creating your first overall long-term financial plan

14. Buying your first home • Establish good credit • Understand “real costs” • Assess risks

15. Getting married • Understand “financial partnership” • Establish separate and joint credit and bank accounts • Create wills and trusts • Identify beneficiaries • Choose owners on title assets

16. Financing a family • Budget • Education, health care, child care • Manage risk, insurance • Create wills • Instill financial literacy

17. Starting a business • Understand • cash flow • expense timing • Manage income and expenses

18. Planning for Retirement • Determine how much money you will need. • Determine where your retirement income will come from. • Devise a budget and investment strategy to help you meet your goals.

19. Preparing a will • Designate beneficiaries • Determine asset distribution • Identify insurance

20. Financial literacy education • Lifelong learning courses • Financial media • Internet resources • Your CPA / accountant

21. For more information /PowerPoint Source material: • www.360financialliteracy.org features financial education to help consumers at every life stage.

22. Financial Literacy: Knowing What You Need To Know To Achieve Your Financial Goals