Financial Literacy

Financial Literacy Money grows on skills, not trees 10th- How to really be a Millionaire Choices we can make • “It’s not what you make, it’s what you keep,” James Henson, Sr.

Objectives for today • Define Financial Literacy and understand its importance in reaching your financial goals. • Evaluate choices that you can make now for a successful financial future.

What is Financial Literacy? • Understanding how to manage money effectively • Acquiring knowledge and skills to make informed decisions regarding money matters • Helping an individual fulfill personal, family, social and governmental responsibilities

Why do I need to be financially Savvy? • People who are financially literate are more likely to achieve their lifetime goals and reach a better quality of life. • Being financially savvy can: • Help you buy something you need or want (car, computer, etc.) • Save money for emergencies • Afford college tuition • Start a business • Live comfortably in retirement • Lead to financial independence “It’s not what you make; it’s what you keep.”

What does a million dollars look like? • How many bills would it take to equal $1 million? • It would take 50,000 $20 bills to reach the one million mark, or 10,000 $100 bills. Stuffing $20 bills into a sack wouldn’t add up to a million dollars. • How much space would $1 million take up? • Imagine a packet of 100 $100 bills – about half an inch high. Arrange 10 of those packets flat on the ground and stack another nine layers on top and then you’ll have $1 million. The pile would be approximately a foot wide by a foot deep and over four inches high. Using $20 bills, a million dollar pile would be five times bigger. • How much would $1 million weigh? • It depends on the number of bills, but even paper money gets heavy in large quantities. A lone thief would need at least one cohort to carry a bag containing $1 million in $20 bills because it would weigh about 110 pounds.

How to Really Be a Millionaire • YOUR TURN! Answer the T/F questions on the Millionaire Game to see how financially savvy you are.

What is a millionaire? This could be YOU! When your net worth is at least $1,000,000. What’s net worth? What you OWN — What you OWE ------------------------------ NET WORTH

Millionaire Game • A. Most millionaires are college graduates. True Four out of Five millionaires are college graduates. 18% have master’s degrees, 8% have law degrees, 6% have medical degrees, and 6% are PhDs. In the United States, approximately 7% of households are millionaires. Let’s Talk: COLLEGE and MAJOR. A very recent study of 10,000 “everyday millionaires” (people who steadily built wealth vs celebrities) showed that: "The National Study of Millionaires showed that it’s the degree itself that matters, not where the degree comes from. Almost two-thirds of millionaires (62%) graduated from public state schools, while only 8% went to a prestigious private school. But the bulk of millionaires did get that piece of paper. Eighty-eight percent (88%) of millionaires graduated from college, compared to 33% of the general population. And over half (52%) of the millionaires in the study earned a master’s or doctoral degree, compared to 12% of the general population.(2)"

Millionaire Game • B. Most millionaires work fewer than 40 hours a week. False About 2/3 of millionaires work 45-55 hours a week. Only 20% of millionaires are retirees, around 80% still go to work.

Millionaire Game • C. More than half of all millionaires inherited money. False Only 19 percent of millionaires received any income or wealth of any kind from a trust fund or an estate. Fewer than 10 percent of millionaires inherited 10 percent or more of their wealth.

Millionaire Game • D. Most millionaires attended private high schools. False Most millionaires attended public schools. Just 17% of millionaires or their spouses attended a private elementary or high school.

Millionaire Game • E. Most millionaires drive expensive new cars. False Most millionaires spend under $30,000 for a car. Only 23 percent of millionaires drive a current-year (new model) car. The preferred car of millionaires is a Ford. Cadillacs are second and Lincolns are third.

Millionaire Game • F. Most millionaires work in glamorous jobs, such as sports, entertainment, or high tech. False Most millionaires work in ordinary industries and jobs. They become wealthy because they make good investments. The people in the study became millionaires by consistently saving over time. In fact, they worked, saved and invested for an average of 28 years before hitting the million-dollar mark, and most of them reached that milestone at age 49

Millionaire Game

Millionaire Game • G. Most millionaires work for very large public companies. False About three out of four millionaires are self-employed and consider themselves to be entrepreneurs. Most of the others are professionals, such as doctors, accountants, and lawyers.

Millionaire Game • H. Many poor people become millionaires by winning the lottery. False • Few people get rich by luck. If you play the lottery, the chances of winning are worse than one in12 million. The average person who plays the lottery everyday would have to live about 33,000 years to win once. • In contrast, you have a one in 1.9 million chance of being struck by lightning. How many people do you know that have been struck by lightning?

Millionaire Game • I. A college graduate earns almost double the annual income of a high school graduate. True • People with professional degrees earned a median 240 % more than the typical high school graduate.

Millionaire Game • J. If you save $5,500 a year from age 22 to age 65 at 8 percent interest, your savings will likely be over $1,000,000 at age 65. True • Because of a financial concept called compound interest, the earlier you begin saving, the better. • Regular saving can make you a millionaire even if your salary is modest. • Your money earns money.

Millionaire Game • K. At age 18: • You decide not to buy an ice cream from Chick-fil-A, saving $1.50 a day & • You give up your $4.50 Starbucks each day, saving a total of $29,000 by age 28 (10 years). True • Imagine what you can do with that! New car…. Down payment on new home…Saving the same $6 a day, until age 67, you would have an amazing $457,000 saved. • Because of the power of compound interest, small savings can make a difference. • It pays to live below your means. Find a balance between spending now and saving for the future.

What can I do now to become financially literate? • 1. Get a good education. • 2. Work smart. • 3. Learn money management skills. • 4. Live below your means. • 5. Save early and often. • 6. Gather information before making decisions, ask questions, • Attend financial seminars.

What can I do now to become financially literate? • Brainstorm choices you can do now for a successful financial future. • Think: What would you do now to save $10.00 a week?

What can I do now to become financially literate? • For more information go to: • www.360financialliteracy.org • www.macpa.org • www.mdfinancialskills.org • www.mymoney.gov • This information brought to you by the Severna Park High School Business Advisory Board www.sphsbab.org

Financial Literacy