Financial Literacy:Knowing What You Need To Know To Achieve Your Financial Goals
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.
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
What is Financial Literacy?What is Financial Literacy?
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
Achieving financial literacy
• Five Key Areas of Personal Finance:- Money and income- Money management- Spending and debt- Savings and investments- Risk management (protection)
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?
Money management
• Budgeting• Prioritizing
Spending and debt
• Benefits and costs of spending alternatives• Credit as a basic financial tool
Savings and investing
• Saving means not spending money.• Investing means that you earn a return on
the money you put into it.
Risk management
• Insurance• Understanding the markets
- 50% of Americans own stocks• Identity theft• Consumer protection
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.
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.
Creating your first overall long-term financial plan
Creating your first overall long-term financial plan
Buying your first home
• Establish good credit• Understand “real costs”• Assess risks
Getting married
• Understand “financial partnership”• Establish separate and joint credit and bank
accounts• Create wills and trusts• Identify beneficiaries• Choose owners on title assets
Financing a family
• Budget- Education, health care, child care
• Manage risk, insurance• Create wills• Instill financial literacy
Starting a business
• Understand - cash flow- expense timing
• Manage income and expenses
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.
Preparing a will
• Designate beneficiaries• Determine asset distribution• Identify insurance
Financial literacy education
• Lifelong learning courses• Financial media• Internet resources• Your CPA / accountant
For more information /PowerPoint Source material:
www.360financialliteracy.org features financial education to help consumers at every life stage.
Financial Literacy:Knowing What You
Need To Know To Achieve Your Financial Goals
Financial Literacy:Knowing What You
Need To Know To Achieve Your Financial Goals
