©The Northwestern Mutual Life Insurance Company - Milwaukee, WI

Today’s Workout

Getting Grownups Into Shape

Three Exercises:– The Chessboard of Life

– Who Wants to Really Be a Millionaire?

– Does This Make Cents?

“Cool Down” Review

Tips for Future Workouts

February 2001

Northwestern Mutual Financial Network’s“Money Maladies” Study reveals:

Source: Northwestern Mutual Financial Network’s Money Maladies Study (2001)

Getting Grownups Into Shape

Americans whose parents talked with them as children about money management are more likely to save 20% of their income as adults.

However: – Most parents don’t feel comfortable talking about money

with their children.

– Therefore, the majority of children are inheriting poor money management and saving habits.

Curing Money Maladies

8 out of 10 Americans are comfortable with their own retirement planning.

However:– More than 33% has not even begun to save.

– 1/4 doesn’t know how much they have saved.

– 1/4 of Americans haven’t saved at all forlong-term goals such as retirement or achild’s education.

Source: Northwestern Mutual Financial Network’s Money Maladies Study (2001)

The Chessboard of Financial Life

This exercise is for illustration purposes only. It does not take into consideration fees, taxes, commissions, etc. and does not represent any specific product or investment.

X

.01

Chessboard of Financial Life

Chessboard of Financial Life

X

1.28.32.08.02 .64.16.04.01

Chessboard of Financial Life

X

163.8440.9610.242.56

1.28.32.08.02

327.6881.9220.485.12

.64.16.04.01

Chessboard of Financial Life

85M

10.7M

X20971.525242.881310.72

163.8440.9610.242.56

1.28.32.08.02

1.3M

41943.0410485.762621.44655.36

327.6881.9220.485.12

.64.16.04.01

The Magic of Compound Interest

Compounding -- multiplying that turns a penny into hundreds, then thousands, then millions.

Principal -- the amount originally saved.

Interest -- paid on the principal.

Compound interest -- paid on both the principal and interest already earned - makes the money grow much faster.

Rule of 72 (72 ÷ Interest Rate = Yrs)

Passbook Savings 3% 24

Money Market 6 12

U.S.Treasury Bond 7 10

Stock Market 10 7

Interest YearsInvestment Rate Double

This exercise is for illustration purposes only. It does not take into consideration fees, taxes, commissions, etc. and does not represent any specific product or investment.

Factors that affect how much savings grow:

Save Early and Often

When you begin to save

How much you save

The interest rate or return on investment

Individuals can have a largeincome and, due to their

liabilities, still have a low net worth.

Net Worth

1.List your family’s assets and their value.

2.List your family’s liabilities.

3.The difference between a family’s assets and liabilities is its net worth

How To Really Be A

1

True

Most millionaires arecollege graduates

4 of 5 millionaires are college graduates.

18% of millionaires have Master’s Degrees.

True OR False?

2

False

Most millionaires workfewer than 40 hoursa week

About 2/3 of millionaires work 45-55 hoursa week

True OR False?

3

False

Most millionairesreceived financialhelp from theirfamilies - like inheriting a trust fund or estate

Only 19% of millionaires received any income from a trust fund or estate

True OR False?

4

False

Gift money, tax refunds,earnings fromwinnings are“found money.”

Wealth builders view such funds as having the same potential for saving as any other money.

True OR False?

5

False

More millionaires have American Express Gold Cards thanSears Cards.

28.6% of millionaires have American Express Gold Cards -- 43% have Sears cards.

True OR False?

6

False

More millionaires drive Cadillacs than Fords

Ford is preferred by 9.4% of millionaires

Cadillac is preferred by 8.8%

Only 23% of millionaires drive a new car

True OR False?

7

False

Most millionaires work in glamorous jobs, such as sports, entertainment, or high tech

True OR False?

Most millionaires work in ordinaryjobs including: welding contractors,owners of mobile-home parks &paving contractors

8

False

Wealth builders always keep 2 to 3 credit cards toallow for a large line ofcredit for use in emergencies

Many keep only 1 credit card for renting cars, guaranteeing hotel rooms, etc.

Most pay off the monthly balance each month

True OR False?

9 True OR False?

False

The chances of winning the lottery are1 in 12 million.

Many poor people become millionaires by winning the lottery

10

False

In recent years, the average college graduate earned 66% more than the average high school graduate

True OR False?

College graduates earn about 33% more than high school graduates

11

False

Most millionaireswork for large,Fortune 500 companies

Most millionaires are self employed and consider themselves to be entrepreneurs.

Most others are professionals, such as doctors, lawyers and accountants

True OR False?

12Day traders usuallybeat the stock market and many of them

become millionaires.

Recent studies show that 80% of day traders lose money

True OR False?

False

13

False

If you want to be a millionaire, avoid the risky stock market.

Nearly 95% of millionaires own stocks.

Since 1926, stocks have increased11% at a compounded annualrate of return.

True OR False?

Hypothetical example. This example does not take into consideration fees, taxes, commissions, etc. and does not represent any specific product or investment.

14

True

If you save $2,000 a year from age 22 to age 65 at 8% interest, your savings will be over $700,000 at age 65.

The earlier you begin saving, the better.

True OR False?

Regular saving may make you amillionaire even if your income is modest.

Questions 1-15:Belsky & Gilovich. Why Smart People Make Big Money Mistakes. Simon & Schuster, 1999. Lee & McKenzie. Getting Rich in America. HarperBusiness, 1999.Stanley & Danko. The Millionaire Next Door. Longstreet Press, 1996.

15

False

Most millionaires are single

Most millionaires are married and stay married.

True OR False?

Divorce can be costly.

Rules for Improving YourFinancial Life

Get a good education

Work long, hard, and smart

Live below your means

Use credit cards with care

Regard all income – regardless of its source – as a chance to save

Solving the mysteries of finance and economics

Does This Make Cents?

Why does the kid who skipped college earn big bucks playing games while others -- nurses, police officers and teachers -- make far less?

Source: National Council on Economic Education and NBC Nightly News (2001)

Does This Make Cents?

Many derive pleasure from watching pro athletes -- high demand.– Will pay a lot for tickets– Own special TV sets for viewing

Pro skills are rare -- limited supply. High consumer demand + low supply = high salaries. But remember: Many of the pro athletes “retire” with little

or no money.– Failed to learn how to manage their money.

Why do we have high interest rates with credit cards when other rates are so much lower?

Source: National Council on Economic Education and NBC Nightly News (2001)

Does This Make Cents

Convenience

High risk

Easily consumed goods

Need to be profitable

But remember: Americans current credit card debt is about $600 billion!

Does This Make Cents

Why do people struggle to find special gifts when it would be easier and more efficient just to give money?

The gift giver feels good -- the incentive.

Money by itself is less satisfying because it takes less time and thought.

Money is the preferred gift for strangers -- paper and mail carriers and waiters.

But remember: gift money can grow as shown by the Rule of 72.

Review

What is the magic of compounding?

What are some of the characteristics of millionaires?

How do supply and demand affect salaries, prices?

How do people respond to incentives?

Additional Sources

If you like these activities, consider visiting

www.themint.org

Sign up for SmartCents newsletter.

TheMint.org

Why the Mint? Because what our kids don’t know will hurt them down the road.

Kids certainly know how to spend money-

TheMint.org

Teenagers spent an average of $135 per month on clothing and related items in spring 2002, up from $110 in spring 2001.1

Individually, kids age 5-17 spend an average $3,500-$4,000 annually.2

1. U.S. Bancorp Piper Jaffray, 20022Kipp Cheng,”Setting Their Sights in GenerationY” AdWeek, 1999

Consider these facts-

TheMint.org

About 28% of preteens do not know that credit cards are a form of borrowing.1

60% of preteens cannot explain the difference between cash, checks and credit cards.2

More 12th graders have their own credit cards, 12.1% in 2002, up from 7.7% in 19973

1Consumer Reports, 19972 V. Rice, Kids, Money and the Web, cited in Understanding money in everyday family life, April 2001, Kid Capital, Anne Schorr)32002 Personal Finance Survey, Jump$tart Coalition

TheMint.org can help kids understand-

TheMint.org

The value of money

the importance of saving

the risk of credit

the ways to stretch a

dollar

the ways to make money work for you

the difference between want and need

the connection between education and earning

how to track spending and budgeting

TheMint.org

©The Northwestern Mutual Life Insurance Company - Milwaukee, WI