FINANCIAL EDUCATION FOR YOUNG PEOPLE

FINANCIAL EDUCATION FOR YOUNG PEOPLE

Speaker:Centre:Date:

V Conference “Financial Education for Young People”

To bring the economic and financial world closer to young people.

Aim of the conference, sponsored by Unicaja within the framework of the project Edufinet:

By taking financial education to their own day-to-day life and by adapting it to their special priorities and

needs.

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.

By taking financial education to their own day-to-day life and by adapting it to their special priorities and

needs.

V Conference “Financial Education for Young People”

“V Conference Financial Education for Young People”+

IV Financial Olympics

Aim: Practical use of the contents of

Participants: Students of the centres attending the conference “Financial Education for

Young People”, organized in teams of 2 to 10 members.

How does it work? Teams will do a project to explain in an original, educational and creative way one of the following financial products:


• Deposits• Fixed income products• Variable income

products• Investment funds

• Pension plans• Insurances• Personal loans and mortgages• Cards (debit, credit, revolving, prepayment or virtual

cards)

Rules at Edufinext website


1st prize 2nd prize 3rd prize

Teacher

Students

Classroom

How to do the project? In one of the formats accepted in the contest:

• Comic: max. 10 pages (pdf)

• Posters/boards: max. 10 (pdf).

• Podcast: max.5 minutes (format mp3 or mp4).

• Video: max. 5 minutes.

• Powerpoint presentation: max. 10 slides.

• Essay: max.10.000 characters (including spaces).

Contest results:• From 18/4/14 to 5/5/14: The Technical Committee will choose the 10 top projects

• From 5/5/14 to 18/5/14: A “popular jury” will vote through the space enabled on

Edufinext

Draw of 1 USA grant between the member

of these teams

Financial Education Comic

Practical Exercises

Financial System and Main Products

Financial Education

Economic and Financial Indicators

INDEX

Edufinet

Family Budget

Concept of Financial Education

It is a process developping in three stages:

1) Knowledge and understanding of finances

Improvement of the knowledge on financial products, concepts and risks.

2) Competences: use of knowledge for one’s own benefit

Development of skills that allow people to be more aware of what they subscribe

3)Informed choices: financial responsibility

Decision making aimed to improve one’s own financial welfare

The importance of Financial Education

Pilot project for Financial Education in 3rd year of ESO

• 75 countries• 15-years-old students

• Assessment of knowledge in FE

The importance of Financial Education

1) Large amount of financial products

2) Complexity of financial products

3) Consumers have a lack of information and advice

Difficulty in making financial decisions

Benefits of Financial Education for young people• Understanding the value of money• Planning of budget and savings and investment needs• Training for an independent life• Knowledge of financial products and services

Financial Education is not “for grown-ups only”

Now we are users of In the future, we will be users of

Loans

Current accounts

DepositsSavings books Cards

Cards

The importance of Financial Education for young people

Practical Exercises


Financial Education


INDEX

Edufinet

Family Budget

Edufinet Project

Exercise of CSR

The transfer of knowledge related to the financial system

The improvement of the financial literacy

To contribute to:

PROMOTION OF: Transparency Security Responsibility

In the financial relationships of the citizens

http://www.unia.es/

http://www.upo.es/

http://www.uma.es/

http://www.uma.es/

Aims

Elaboration of a Manual

• Internet

• Book

• Simple • Clear

• Objective

• Financial System

• Financial products and services

Introductory vision

Information for makingpersonal decisions

To increase financial services user’s personal autonomy

www.edufinet.com

Games

CON

TEN

TS

Edufinet’s profiles in Facebook and Twitter

Search engine

Glossary

Enquiries

News

Simulators

Subscriptions and contact

Groups

Library

www.edufinet.com/edufinext

Information on financial education conferences

Information on financial olympics

Contents

Financial education games

Practical Exercises


Financial Education


INDEX

Edufinet

Family Budget

Family Budget

Document containing:

• Income (I)

=

=

Earnings

Payments

Related to:• A same period of time• A family unit

Family Budget Main items in the family budget

SalariesPensionsInvestment yield

Loans TaxesFamily expenses

TelecommunicationsTransportationHome energyClothing and footwearFoodLeisure

InsurancesPension plans

INCOME(I)

EXPENSES(E)

(I)-(E) = BUDGETARY BALANCEIf (I)>(E)= SurplusIf (I)=(E)= BalanceIf (I)<(E)= Deficit

• Expenses (E)

Family Budget: example

2013INCOME

Net salaries 48.500 € Dividends 225 € Deposit interests 15,80 € Tax return (IRPF) 1.500 € Use of current account 1.000 € TOTAL INCOME 51.240,80 €

EXPENSESLoan repayments 18.167 € Insurances 1.610 € Taxes (IBI and IVTM) 920 € Pension plan payment 3.000 € Family expenses 35.000 € TOTAL EXPENSES 58.697 € BALANCE (INCOME-EXPENSES) -7.456 €

2012INCOME

Net salaries 48.015 € Dividends 225 € Deposit interests 15,80 € Tax return (IRPF) 750 € Use of current account --- TOTAL INCOME 49.005,80 €

EXPENSESLoan repayments 18.167 € Insurances 1.610 € Taxes (IBI and IVTM) 920 € Pension plan payment --- Family expenses 23.309 € TOTAL EXPENSES 44.006 € BALANCE (INCOME-EXPENSES) 5.000 €

C/C: +5.000 €

2014

Budget 2012 C/C: accrual Budget 2013

Practical Exercises


Financial Education


INDEX

Edufinet

Family Budget


Economic Indicators Financial Indicators

•Gross Domestic Product (GDP)

•Inflation

•Labour Market

•Exchange rate

•Profitability

•Debt level

•Solvency

Economic Indicators

GDP Definition

Data

• Quarter-on-quarter variation rate: variation (in %) in a quarter compared to the previous one.

• Year-on-year variation rate: variation (in %) in a year compared to the previous one.

GDP:Value of the productive activity

In a given period of time

In a country or geographic zone

Residents (nationals and foreigners).

Calculation of GDPProduct (sectors): primary sector + industry and energy + construction + market and non market services + others

Income: Salaries + Gross Operationg Surplus + Taxes

Expenditure: Consumption + Investment + Changes in stock + Exports - Imports

Economic IndicatorsInflation

Definition

Amounts acquired in the base year Price (base year) PricePer item Total Per item Total

150 loaves of bread 1,50 € 225 € 1,30 € 195 €100 cups of coffee 2,40 € 240 € 2,40 € 240 €12 hair cuts 20,00 € 240 € 22,00 € 264 €1 coat 145,00 € 145 € 176,00 € 176 €Total cost of basket --- 850 € --- 875 €Price index --- 100 --- 102,9Inflation rate --- --- --- 2,90%

Example of calculation of CPI*

*Source: European Central Bank

• Persistent increase in the general price level of an economy.

• Several inflation indicators, the CPI being the most used.

Economic IndicatorsLabour Market

TOTAL POPULATION

WORKING-AGE POPULATION

NON WORKING-AGE POPULATIONS (<16

YEARS OLD)

LABOUR FORCE

POPULATION NOT IN THE

LABOUR FORCE

EMPLOYED POPULATION

UNEMPLOYED PEOPLE

EMPLOYEES

SELF-EMPLOYED

SEEKING THEIR FIRST JOB

HAVE WORKED BEFORE

RETIRED PEOPLE

STUDENTS

OTHER GROUPS

Economic Indicators

Exchange rateDefinition

Example

A good has a price of 300 dollars in the USA and of 310 euros in Spain. The exchange rate euro/dollar is 1.35. How much does the USA good cost in euros?

Cost of the good in the USA = 300 $

1,35 $/€= 222 €

Exchange rate:The exchange rate is the price of a currency in terms of another currency.

Financial Indicators

Balance (2012) Profit and Loss (2012)

Sales 15.946,14 13.945,05Cost of goods (6.416,83) (5.600,34)GROSS MARGIN 9.529,32 8.344,71Operating costs (5.604,78) (5.026,61)Other net profits and losses (11,578) (379,11)OPERATIVE RESULT (EBITDA) 3.912,96 2.938,99Depreciation and Amortisation (796,11) (427,71)EBIT (Earnings before interest and tax) 3.116,84 2.511,28Financial results 14,13 61,30RESULTS BEFORE TAX 3.130,97 2.572,58Tax on earnings (763,96) (625,46)NET RESULT OF THE YEAR 2.367,01 1.947,12*Figures in million eurosSource: annual report Inditex and H&M, 2012

Current assets 6.692 4.298Non current assets 6.198 2.648TOTAL ASSETS 12.890 6.946Current liabilities 3.485 1.617Non current liabilities 923 269EQUITY 8.482 5.060TOTAL LIABILITIES + EQUITY 12.890 6.946*Figures in million euros

Source: annual report Inditex and H&M, 2012

Financial Indicators

Which one is the most profitable?

ROA Net profit / Total assets 18,36% 28,03%

ROE Net profit / Total equity 27,91% 38,48%

Which one is more indebted?Leverage Liabilities / Total Assets 34,20% 27,15%

Which one is the most solvable?Solvency Net equity / Total assets 65,80% 72,85%

Practical Exercises


Financial Education


INDEX

Edufinet

Family Budget

Role of the financial system

BORROWERS OF FINANCIAL RESOURCES

PROVIDERS OF FINANCIAL RESOURCES

FINANCIAL SYSTEM

ASYMMETRICAL INFORMATION

DIFFERENCES- Term- Amount- Risk

Role of the financial system

Decision MakingWhat is the need to cover?

Obtain savings

Savings products

- Profitability- Risk- Liquidity

Obtain credit

Loans

- Interest rate- Fees and commissions- Term

Risk coverage

Insurances

- Premiums- Coverages

Other financial services

Payments/Guarantees/Others

- Service/cost ratio

Taxation

PROFITABILITY

RISK

LIQUIDITY

TERM

What is the yield obtained by the invested capital?

For what period?

What are the risks?• Solvency of the institution receiving our money• Invested capital• Interest to be received

Can I use the invested money at any time?

Variables to consider in savings products

Main features of Deposits

· Service fees

Depositor Custodian(Deposit institution)

· Money

· Funds custody· Movement statements· Interest· Services· Funds availability

+

-

-

+

Liqu

ity

Prof

itabi

lity

Fixed-term

deposit (IPF)

Deposit at sight

Early cancellation commission

Savings account

Current account

Bank statement Cheque book

Savings book No cheque book

Maintenance fee

Management fee

Concept of Loan

LOAN CYCLE

Loan amount

Term

Potential tax benefits

Total redemption of the capitalInitial

commissionsTaxes and arrangement fees

Repayment installments = Capital + interest

Operation setting

Tips to consider when applying for a loan

What do we want to finance with that loan?

LOAN WITH PERSONAL GUARANTEE

MORTGAGE LOANWhat do I have to consider?

Interest rate

Usually, fixed interest rate Personal rate > mortgage

AmountUsually < 60.000€ Not > 80% of the property value

Commissions and fees(Taxes)

Opening, study, cancellation commissions

Opening and cancellation commission, notary, valuation, …

TermShort and medium term( 10 years)

Long term(> 20 years)

APR Real cost of the operation

Usually, variable interest rate• Index used• Differential• Review date

Payment instrument replacing coins and notes: cards, transfers, commercial documents (bill of exchange, cheque, drafts).

Means of payment

Concept

Usual mean of payment: cards

Cards

Debit

Credit

Direct debit to the account.

Credit approved to be used.

Prepayment Use limited to the preloaded amount.

Virtual Request for a virtual card for each online purchase.

Means of payment

Validity date

Security chip

FRONT

• Visa• Mastercar

d

Issuer institution’s logo National network

1234 5678 9012 3456

Name of the card holder

Month/YearInternational brand

• Euro 6000• 4B• Servired

PAN 16 digits (unique)

BACK

Signature CVV

Contact details of the issuer institution

Magnetic band

Code for e-commerce operations (3 digits)

Practical Exercises


Financial Education


INDEX

Edufinet

Family Budget

1. A term deposit for 1 year, for 10.000 € receives an interest of 3.50%, with monthly interest payment. What is the amount of interest to receive each month?a. 87,50 €.b. 350 €.c. 29,17€.d. 175 €.

Exercise 1

Exercise 1

C*R*T360 =

10.000*3,5%*30360

Exercise 1

1. A term deposit for 1 year, for 10.000 € receives an interest of 3.50%, with monthly interest payment. What is the amount of interest to receive each month?

a. 87,50 €.b. 350 €.c. 29,17 €.d. 175 €.

2. A current account is held by 3 holders with individual signature. To use the account:

a. The signature of the three holders is required.b. The three holders must act jointlyc. The signature of any of the three holders is enough.d. The signature of at least two of the three holders is required.

Exercise 2

Exercise 2

2. A current account is held by 3 holders with individual signature. To use the account:

a. The signature of the three holders is required.b. The three holders must act jointlyc. The signature of any of the three holders is enough.d. The signature of at least two of the three holders is required.

Exercise 2

3. A person gets a mortgage loan for 300.000 €, with an interest rate of 4.5%, to be repaid in 25 years with monthly constant repayments (always the same amount). The monthly repayment to be paid will be:

a. 1.667,50 €.b. 1.125,00 €.c. 1.725,30 €.d. 1.532,20 €.

Exercise 3

Exercise 3

300.000= a * 1- 1+

4,5%12( )

4,5%12

-(25*12)

Exercise 3

Exercise 3

1 9 17 25 33 41 49 57 65 73 81 89 97 105 113 121 129 137 145 153 161 169 177 185 193 201 209 217 225 233 241 249 257 265 273 281 289 2970

200

400

600

800

1000

1200

1400

1600

1800Loan repayment table

Interest Redeemed capital

Exercise 3

3. A person gets a mortgage loan for 300.000 €, with an interest rate of 4.5%, to be repaid in 25 years with monthly constant repayments (always the same amount). The monthly repayment to be paid will be:

a. 1.667,50 €.b. 1.125,00 €.c. 1.725,30 €.d. 1.532,20 €.

4. Which one of the following sentences about these football clubs is right, according to the details below?

a. Barcelona has a better position in the three presented indicators.b. Real Madrid is the most indebted.c. Barcelona is the most profitable.d. Real Madrid is the less solvent.

Exercise 4

Real Madrid Club de Fútbol Fútbol Club BarcelonaROA 4,32% 6,46%Leverage 63,41% 97,53%Solvency 36,58% 2,47%

Exercise 5

5. What is the unemployment rate according to the information below?

a. Population not in the labour force/ Working-age population: 40,8%.b. Unemployed people / Working-age population: 21,19%.c. Unemployed people / Labour force: 35,79%.d. Population not in the labour force / Total population: 32,94%.

Thousand people

Total population 8.421,0Working-age population 6.799,0

Labour force 4.025,0Population not in the labour force 2.774,0

Unemployed people 1.440,4Source: EPA 2º Quarter 2013

Total population source: local register 2013

FINANCIAL EDUCATION FOR YOUNG PEOPLE

Speaker:Centre:Date:

FINANCIAL EDUCATION FOR YOUNG PEOPLE

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