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FINANCIAL EDUCATION FOR YOUNG PEOPLE

FINANCIAL EDUCATION FOR YOUNG PEOPLE. Speaker: Centre: Date:. V Conference “ Financial Education for Young People ”. Aim of the conference , sponsored by Unicaja within the framework of the project Edufinet :. To bring the economic and financial world closer to young people .

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FINANCIAL EDUCATION FOR YOUNG PEOPLE

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  1. FINANCIAL EDUCATION FOR YOUNG PEOPLE Speaker: Centre: Date:

  2. V Conference “FinancialEducationfor Young People” Aim of theconference, sponsoredbyUnicajawithintheframework of theprojectEdufinet: Tobringtheeconomic and financialworldclosertoyoungpeople. Bytakingfinancialeducationtotheirownday-to-daylife and byadaptingittotheirspecialpriorities and needs.

  3. V Conference “FinancialEducationfor Young People” Aim of theconference, sponsoredbyUnicajawithintheframework of theprojectEdufinet: Tobringtheeconomic and financialworldclosertoyoungpeople. Bytakingfinancialeducationtotheirownday-to-daylife and byadaptingittotheirspecialpriorities and needs.

  4. IV FinancialOlympics “V ConferenceFinancialEducationfor Young People” + Rules at Edufinextwebsite IV FinancialOlympics Aim: Practical use of thecontents of Participants: Students of the centres attendingtheconference “FinancialEducationfor Young People”, organized in teams of 2 to 10 members. Howdoesitwork? Teamswill do a projecttoexplain in anoriginal, educational and creativewayone of thefollowingfinancialproducts: • Deposits • Fixedincomeproducts • Variable incomeproducts • Investmentfunds • Pensionplans • Insurances • Personal loans and mortgages • Cards(debit, credit, revolving, prepaymentor virtual cards)

  5. IV FinancialOlympics Howto do theproject? In one of theformatsaccepted in thecontest: • Comic: max. 10 pages (pdf) • Posters/boards: max. 10 (pdf). • Podcast: max.5 minutes (format mp3 or mp4). • Video: max. 5 minutes. • Powerpointpresentation: max. 10 slides. • Essay: max.10.000 characters (includingspaces). Contestresults: Draw of 1 USA grantbetweenthemember of theseteams • From 18/4/14 to 5/5/14: TheTechnicalCommitteewillchoosethe 10 top projects • From 5/5/14 to 18/5/14: A “popular jury” will vote throughthespaceenabledonEdufinext 1st prize 2nd prize 3rd prize Teacher Students Classroom

  6. FinancialEducation Comic

  7. INDEX Financial Education Edufinet Family Budget Economic and Financial Indicators Financial System and Main Products Practical Exercises

  8. INDEX Financial Education Edufinet Family Budget Economic and Financial Indicators Financial System and Main Products Practical Exercises

  9. Concept of FinancialEducation Itis a processdevelopping in threestages: • Knowledge and understandingof finances • Improvement of theknowledgeonfinancialproducts, concepts and risks. Competences: use of knowledgeforone’sownbenefit Development of skillsthatallowpeopletobe more aware of whatthey subscribe • Informedchoices: financialresponsibility • Decisionmakingaimedtoimproveone’sownfinancialwelfare

  10. Theimportance of FinancialEducation PilotprojectforFinancialEducation in 3rd year of ESO • Assessment of knowledge in FE • 75 countries • 15-years-old students

  11. Theimportance of FinancialEducation 1)Largeamountof financialproducts 2) Complexityof financialproducts 3) Consumershave a lack of information and advice Difficultyin makingfinancialdecisions

  12. Benefits of FinancialEducationforyoungpeople Understandingthevalue of money Planning of budget and savings and investmentneeds Training foranindependentlife Knowledge of financialproducts and services Theimportance of FinancialEducationforyoungpeople FinancialEducationisnot “forgrown-ups only” Nowwe are users of In thefuture, wewillbeusers of Cards Loans Deposits Cards Savingsbooks Currentaccounts

  13. INDEX Financial Education Edufinet Family Budget Economic and Financial Indicators Financial System and Main Products Practical Exercises

  14. Edufinet Project Exercise of CSR Tocontributeto: The transfer of knowledgerelatedtothefinancialsystem Theimprovement of thefinancialliteracy • PROMOTION OF: • Transparency • Security • Responsibility In thefinancialrelationships of thecitizens

  15. Aims • FinancialSystem • Internet • Simple Introductory vision • Clear Elaboration of a Manual • Financialproducts • and services • Book • Objective Informationformaking personal decisions Toincreasefinancialservicesuser’spersonal autonomy

  16. www.edufinet.com Enquiries Searchengine News Groups CONTENTS Simulators Glossary Library Games Edufinet’sprofiles in Facebookand Twitter Subscriptions and contact

  17. www.edufinet.com/edufinext Informationonfinancialeducationconferences Contents Informationonfinancialolympics Financialeducationgames

  18. INDEX Financial Education Edufinet Family Budget Economic and Financial Indicators Financial System and Main Products Practical Exercises

  19. FamilyBudget FamilyBudget Mainitems in thefamilybudget Documentcontaining: = = INCOME (I) • Income (I) Earnings • Relatedto: • A sameperiod of time • A familyunit EXPENSES (E) Payments • Expenses (E) (I)-(E) = BUDGETARY BALANCE If(I)>(E)= Surplus If(I)=(E)= Balance If(I)<(E)= Deficit

  20. FamilyBudget: example C/C: accrual Budget 2013 Budget 2012 C/C: +5.000 € 2014

  21. INDEX Financial Education Edufinet Family Budget Economic and Financial Indicators Financial System and Main Products Practical Exercises

  22. Economic and FinancialIndicators FinancialIndicators EconomicIndicators

  23. EconomicIndicators GDP Definition GDP: Value of theproductiveactivity In a givenperiod of time In a country orgeographiczone Residents(nationals and foreigners). Data • Quarter-on-quartervariationrate: variation (in %) in a quartercomparedtothepreviousone. • Year-on-yearvariationrate: variation (in %) in a yearcomparedtothepreviousone. Calculation of GDP Product (sectors): primary sector + industry and energy+ construction + market and non marketservices+ others Income: Salaries + GrossOperationg Surplus + Taxes Expenditure: Consumption + Investment+ Changes in stock + Exports - Imports

  24. EconomicIndicators Inflation Definition • Persistentincrease in the general pricelevel of aneconomy. • Severalinflationindicators, theCPIbeingthemostused. Example of calculation of CPI* *Source: European Central Bank

  25. EconomicIndicators LabourMarket TOTAL POPULATION WORKING-AGE POPULATION NON WORKING-AGE POPULATIONS (<16 YEARS OLD) LABOUR FORCE POPULATION NOT IN THE LABOUR FORCE EMPLOYED POPULATION UNEMPLOYED PEOPLE RETIRED PEOPLE EMPLOYEES SEEKING THEIR FIRST JOB STUDENTS SELF-EMPLOYED HAVE WORKED BEFORE OTHER GROUPS

  26. EconomicIndicators Exchange rate Definition Exchange rate: Theexchangerateistheprice of a currency in terms of anothercurrency. Example A good has a price of 300 dollars in the USA and of 310 euros in Spain. Theexchangerate euro/dollaris 1.35. Howmuchdoesthe USA goodcost in euros? 300 $ Cost of thegood in the USA = = 222 € 1,35 $/€

  27. FinancialIndicators Profit and Loss (2012) Balance (2012)

  28. FinancialIndicators

  29. INDEX Financial Education Edufinet Family Budget Economic and Financial Indicators Financial System and Main Products Practical Exercises

  30. DIFFERENCES • Term • Amount • Risk FINANCIAL SYSTEM PROVIDERS OF FINANCIAL RESOURCES ASYMMETRICAL INFORMATION Role of thefinancialsystem BORROWERS OF FINANCIAL RESOURCES

  31. Role of thefinancialsystem

  32. DecisionMaking Whatistheneedtocover? Otherfinancialservices Riskcoverage Obtainsavings Obtaincredit Savingsproducts Payments/ Guarantees/Others Loans Insurances • Profitability • Risk • Liquidity • Service/cost ratio • Interestrate • Fees and commissions • Term • Premiums • Coverages Taxation

  33. Variables toconsider in savingsproducts PROFITABILITY Whatistheyieldobtainedbytheinvested capital? TERM Forwhatperiod? RISK What are therisks? • Solvency of theinstitutionreceivingourmoney • Invested capital • Interesttobereceived LIQUIDITY Can I use theinvestedmoney at any time?

  34. Mainfeatures of Deposits • Bank statement • Cheque book Currentaccount + - • Maintenancefee • Management fee • Money Deposit at sight • Savingsbook • No cheque book Savingsaccount • Servicefees Depositor Custodian (Depositinstitution) Liquity Profitability Fixed-termdeposit(IPF) Earlycancellationcommission • Fundscustody • Movementstatements • Interest • Services • Fundsavailability - +

  35. Concept of Loan LOAN CYCLE Loan amount Term Potentialtaxbenefits Total redemption of the capital Initial commissions Taxes and arrangementfees Repaymentinstallments = Capital + interest Operationsetting

  36. Tipstoconsiderwhenapplyingfor a loan What do wewanttofinancewiththat loan? MORTGAGE LOAN LOAN WITH PERSONAL GUARANTEE What do I havetoconsider? Usually <60.000€ Not> 80% of thepropertyvalue Amount • Usually, variable interestrate • Indexused • Differential • Review date Personal rate> mortgage Usually, fixedinterestrate Interestrate Opening, study, cancellationcommissions Commissions and fees (Taxes) Opening and cancellationcommission, notary, valuation, … APR  Real cost of theoperation Short and mediumterm ( 10 years) Long term (> 20 years) Term

  37. Paymentinstrumentreplacingcoins and notes: cards, transfers, commercialdocuments (bill of exchange, cheque, drafts). Means of payment Concept Usual mean of payment: cards Debit Directdebittotheaccount. Credit Creditapprovedtobeused. Prepayment Use limitedtothepreloadedamount. Cards Virtual Requestfor a virtual cardforeach online purchase.

  38. Means of payment FRONT • Euro 6000 • 4B • Servired Issuerinstitution’s logo Nationalnetwork Security chip PAN 16 digits (unique) 1234 5678 9012 3456 International brand • Visa • Mastercard Validity date Month/Year BACK Name of thecardholder Magnetic band Codefor e-commerceoperations (3 digits) Signature CVV Contactdetails of theissuerinstitution

  39. INDEX Financial Education Edufinet Family Budget Economic and Financial Indicators Financial System and Main Products Practical Exercises

  40. Exercise1 • A termdepositfor 1 year, for 10.000 € receivesaninterest of 3.50%, withmonthlyinterestpayment. Whatistheamount of interesttoreceiveeachmonth? • 87,50 €. • 350 €. • 29,17€. • 175 €.

  41. Exercise1 C*R*T 360 10.000*3,5%*30 360 =

  42. Exercise1 • A termdepositfor 1 year, for 10.000 € receivesaninterest of 3.50%, withmonthlyinterestpayment. Whatistheamount of interesttoreceiveeachmonth? • 87,50 €. • 350 €. • 29,17 €. • 175 €.

  43. Exercise2 • A currentaccountisheldby 3 holderswith individual signature. To use theaccount: • Thesignature of thethreeholdersisrequired. • Thethreeholdersmustactjointly • Thesignature of any of thethreeholdersisenough. • Thesignature of at leasttwo of thethreeholdersisrequired.

  44. Exercise2

  45. Exercise2 • A currentaccountisheldby 3 holderswith individual signature. To use theaccount: • Thesignature of thethreeholdersisrequired. • Thethreeholdersmustactjointly • Thesignature of any of thethreeholdersisenough. • Thesignature of at leasttwo of thethreeholdersisrequired.

  46. Exercise3 • 3. A persongets a mortgage loan for 300.000 €, withaninterestrate of 4.5%, toberepaid in 25 yearswithmonthlyconstantrepayments (alwaysthesameamount). Themonthlyrepaymenttobepaidwillbe: • 1.667,50 €. • 1.125,00 €. • 1.725,30 €. • 1.532,20 €.

  47. Exercise 3 4,5% 12 -(25*12) ( ) 1- 1+ 300.000= a * 4,5% 12

  48. Exercise3

  49. Exercise3 Loan repaymenttable Interest Redeemed capital

  50. Exercise3 • 3. A persongets a mortgage loan for 300.000 €, withaninterestrate of 4.5%, toberepaid in 25 yearswithmonthlyconstantrepayments (alwaysthesameamount). Themonthlyrepaymenttobepaidwillbe: • 1.667,50 €. • 1.125,00 €. • 1.725,30 €. • 1.532,20 €.

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