knowing what you need to know to achieve your financial goals

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

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Page 1: Knowing What You Need to Know to Achieve Your Financial Goals

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

Page 2: Knowing What You Need to Know to Achieve Your Financial Goals

America’s financial literacyAmerican 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.

Page 3: Knowing What You Need to Know to Achieve Your Financial Goals

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

Page 4: Knowing What You Need to Know to Achieve Your Financial Goals

What is Financial Literacy?What is Financial Literacy?

Page 5: Knowing What You Need to Know to Achieve Your Financial Goals

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

Page 6: Knowing What You Need to Know to Achieve Your Financial Goals

Achieving financial literacy

• Five Key Areas of Personal Finance:- Money and income- Money management- Spending and debt- Savings and investments- Risk management

Page 7: Knowing What You Need to Know to Achieve Your Financial Goals

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?

Page 8: Knowing What You Need to Know to Achieve Your Financial Goals

Money management

• Budgeting• Prioritizing

Page 9: Knowing What You Need to Know to Achieve Your Financial Goals

Spending and debt

• Benefits and costs of spending alternatives• Credit as a basic financial tool

Page 10: Knowing What You Need to Know to Achieve Your Financial Goals

Savings and investing

• Saving means not spending money.• Investing means that you earn a return on

the money you put into it.

Page 11: Knowing What You Need to Know to Achieve Your Financial Goals

Risk management

• Insurance• Understanding the markets

- 50% of Americans own stocks• Identity theft

Page 12: Knowing What You Need to Know to Achieve Your Financial Goals

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.

Page 13: Knowing What You Need to Know to Achieve Your Financial Goals

Creating your first overall long-term financial plan

Creating your first overall long-term financial plan

Page 14: Knowing What You Need to Know to Achieve Your Financial Goals

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

Page 15: Knowing What You Need to Know to Achieve Your Financial Goals

Getting married

• Understand “financial partnership”• Establish separate and joint credit and bank

accounts• Create wills and trusts• Identify beneficiaries• Choose owners on title assets

Page 16: Knowing What You Need to Know to Achieve Your Financial Goals

Financing a family

• Budget- Education, health care, child care

• Manage risk, insurance• Create wills• Instill financial literacy

Page 17: Knowing What You Need to Know to Achieve Your Financial Goals

Starting a business

• Understand - cash flow- expense timing

• Manage income and expenses

Page 18: Knowing What You Need to Know to Achieve Your Financial Goals

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.

Page 19: Knowing What You Need to Know to Achieve Your Financial Goals

Preparing a will

• Designate beneficiaries• Determine asset distribution• Identify insurance

Page 20: Knowing What You Need to Know to Achieve Your Financial Goals

Unexpected milestones

• Loss• Sandwich generation• Divorce

Page 21: Knowing What You Need to Know to Achieve Your Financial Goals

Financial literacy education

• Lifelong learning courses• Financial media• Internet resources• Your CPA

Page 22: Knowing What You Need to Know to Achieve Your Financial Goals

For more information

www.360financialliteracy.org features financial education to help consumers at every life stage.

Page 23: Knowing What You Need to Know to Achieve Your Financial Goals

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

Page 24: Knowing What You Need to Know to Achieve Your Financial Goals