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Financial Fitness for LifeTraining Conference
Becoming a Smart Money Manager
University of Illinois at Urbana-Champaign College of Agricultural, Consumer and Environmental Sciences
United States Department of Agriculture Local Extension Councils Cooperating
University of Illinois Extension provides equal opportunities in programs and employment.
Funding for this workshop is provided by:
National Council on Economic Education US Dept of Education
University of Illinois Extension
Instructors
Dr. Angela Lyons, Assistant Professor, University of Illinois Urbana-Champaign (217) 244-2612; [email protected]
Debra Bartman, Extension Educator, Quad Cities Center (309) 792-2500 (x217); [email protected]
Patricia Hildebrand, Extension Educator, Effingham Extension Center (217) 347-5126; [email protected]
Anecdotal Storiesfrom Real Students
Objectives
Introduce:
(1) Financial Fitness for Life
(2) Saving and Investing
(3) Budgeting
(4) Credit Reports and Credit Scores
(5) NEFE HSFPP
Experience activities to use in the classroom
Answer questions about curriculum and other resources
You will receive…
Curricula with lessons and activities to use in the classroom
6 CPDU’s
Network of colleagues to share experiences
Resources available at U of I Extension
Financial Fitness for Life
Overview:
Teacher Guide Student Workouts Parents’ Guide CD-Rom and web links
http://fffl.ncee.net
5 Themes and 22 Lessons:
The Economic Way of Thinking Earning Income Saving Spending and Using Credit Money Management
Each lesson includes:
Fitness Focus (lesson description and objectives) Workout (warm-up, exercise, cool down) Visuals Student Exercises Family Activities
Meets national and most state content standards in 4 critical areas:
EconomicsLanguage ArtsMathematicsPersonal Finance
FFFL Part 1(Lessons 1, 3, 8, 10, and 14)
How to Really Be a Millionaire
The Millionaire Game
The Rules:
For each statement, answer “TRUE” or “FALSE.”
For each correct answer, give yourself 5 points.
For each incorrect answer, take away 5 points.
For any 5 statements, you may use your “Millionaire” card. If you answer correctly, you receive 10 points. If not, you lose 10 points.
Question 1:Most millionaires are college graduates.
Let’s Get Started….
Answer 1:
TRUE
Question 2:Most millionaires work fewer than 40 hours a week.
Answer 2:
FALSE
Question 3:More than half of all millionaires never received money from a trust fund or estate.
Answer 3:
TRUE
Question 4:More millionaires have American Express Gold Cards than Sears cards.
Answer 4:
FALSE
Question 5:More millionaires drive Fords than Cadillacs.
Answer 5:
TRUE
Question 6:Most millionaires work in glamorous jobs, such as sports, entertainment, or high tech.
Answer 6:
FALSE
Question 7:Most millionaires work for big Fortune 500 companies.
Answer 7:
FALSE
Question 8:Many poor people become millionaires by winning the lottery.
Answer 8:
FALSE
Question 9:College graduates earn about 65% more than high school graduates earn.
Answer 9:
TRUE
Question 10:If an average 18-year-old high school graduate spends as much as an average high school dropout until both are 67 years old, but the high school graduate invests the difference in his or her earnings at 8% annual interest, the high school graduate would have $5,500,000.
Answer 10:
TRUE
Question 11:Day traders usually beat the stock market and many of them become millionaires.
Answer 11:
FALSE
Question 12:If you want to be a millionaire, avoid the risky stock market.
Answer 12:
FALSE
Question 13:At age 18, you decide not to smoke and save $1.50 a day. You invest this $1.50 a day at 8% annual interest until you are 67. At age 67, your savings from not smoking are almost $300,000.
Answer 13:
TRUE
Question 14:If you save $2,000 a year from age 22 to age 65 at 8% annual interest, your savings will be over $700,000 at age 65.
Answer 14:
TRUE
Question 15:Single people are more often millionaires than married people.
Answer 15:
FALSE
Lesson 8: Spending vs. Saving
begins with saving,then investing.
The road to wealth….
Managing money well
means taking things
one step at a time.
The factors that affect how much savings grow are:
TimeThe earlier or longer you save,
the more savings you will have.
Investment SizeThe more you save each year from yourincome, the more savings you will have.
Rate of ReturnThe higher the interest rate or rate of return, the more savings you will have.
Time Value of Money
The earlier you save, the more $
$’s you will have.
Exercise 8.2A Tale of Two Savers
Cool Million calculator:
www.myfico.com/CreditEducation/Calculators/Millionaire.aspx
Other Calculators:
MortgageAutoLoanDebit and Credit CardsSavingPersonal FinanceInvestmentRetirement
Exercise 8.3Why It Pays to Save Early and Often
Or, how long it takes for savings to grow to double your money
Divide 72 by the interest rate.
Example:Example:72 72 6% 6% 12 years 12 years
Rule of 72:
Activity (Exercise 10.1):
Investment Bingo
Free
Lunch
FFFL Lessons
Grades 9-12: Lesson 1, How to Really Be a MillionaireLesson 3, Decision MakingLesson 8, What’s the Cost of Spending and Saving?Lesson 10, Investment BingoLesson 14, All About Interest
Grades 6-8:Lesson 7, p. 61-64, Types of SavingsLesson 8, p. 65-81, Simple and Compound Interest
FFFL Part 2(Lesson 20)
Budgets are Beautiful!
Creating a Spending Plan (“Your Financial Plan”)
Identify your financial goals.
Determine the time frame for your budget: annual, by academic term, monthly.
Take stock of where you’re currently at.
Estimate your available financial resources.
Calculate your expenses.
Do the math.
Subtract expenses from resources.
Decide how much to borrow.
Borrow only what you can afford to pay back.
Note that your loans will be repaid with your FUTURE income.
Set Your Financial Goals
Types of goals Short-term (1 year or less) Medium term (1-5 years) Long-term (5 years or more)
Identify goals and write them down.
Prioritize your goals.
Develop strategies to achieve your goals.
Reassess your goals periodically.
ACTIVITY: Financial Goal Worksheets
Identify and Prioritize Your Goals
What do you want to buy after you graduate?
How soon do you hope to pay off any student loan or other education-related debt you have incurred?
What kind of lifestyle do you want?
Where do you want to live?
What are your hopes for a family?
Where do you want to work?
Where do you want to retire?
What kind of lifestyle do you want in retirement?
When creating a spending plan….
Set limits and prioritize.
Know your limits.
Learn by doing!
Get some practical experience.
When estimating your resources….
REMEMBER:
Borrowed funds are NOT your resources!!!
When calculating expenses….
Be honest and realistic.
Distinguish between “needs” and “wants.”
Consider fixed and variable (flexible) expenses.
Pay yourself first (PYF)
Can you cut expenses?
Find one or more roommates to share living expenses.
Eat at cheaper places when dining out; cook at home.
Have only one phone.
Dress for less.
Clip and use coupons.
Don’t buy a new car.
Beware of buying for convenience.
Avoid credit card debt.
Saving Dollars When You Don’t Have a Dime to Spare
Break a habit! Do without! Don’t buy!
Item How Often Price of Each Savings/Year
Eating Out 5 days/week $ 6.50 $ 1690.00
Magazine 1/week 4.00 208.00
Soft drink/candy bar/chips 1/day 1.00 365.00
Tank of gas 1/week 24.00 1248.00
Lottery ticket 2/week 2.00 208.00
Cigarettes 1 pack/day 4.00 1460.00
Alcoholic Beverage 1/day 2.00 730.00
Cable 1/month 45.00 540.00
Phone extras (call waiting, caller ID, voice mail, etc.) 1/month 11.00 132.00
Gifts (charity/family/friends) 2/month 20.00 480.00
Total $7061.00
Budgeting Really Does Work
A successful budget should:
Help increase savings Inhibit impulsive spending Determine what you can afford Identify expenses that can be reduced Repay debt
EVIDENCE: BYU Financial Path to Graduation
It’s not all about finances….
Emotions and decision makingFamily communicationPurpose and value of moneyFinancial habits and financial
socialization
Methods for Tracking Spending
Personal financial software programs (Quicken or Microsoft Money have built-in budget-making tools that can create your budget for you.)
PowerPay (Utah State University)
Worksheets / spreadsheets
Online budget planning calculators
Envelope method
www.powerpay.org
PowerPaySpending Plan
PowerSaveCalculators
Education Center
Basic Spending PlanExtended Spending Plan
PowerSave
Calculators
Education Center
Access Group, Inc.http://www.accessgroup.org/Student-Loans/learn-about-loans/wise-borrower-tutorial.htm
Calculators
Interest Rate Comparison CalculatorIn-School Budget CalculatorLoan Repayment Calculator Out-of-School Budget Calculator
Money 101: Making a Budgethttp://cgi.money.cnn.com/tools/instantbudget/instantbudget_101.jsp
www.finaid.org/calculators
College Cost ProjectorSavings Plan DesignerExpected Family Contribution and Financial Aid CalculatorLoan CalculatorsBudgeting Calculators
FFFL Lessons
Grades 9-12: Lesson 20, p. 98-101, Managing Your Money
Grades 6-8:Lesson 15, p. 128-134, Managing Cash
An Activity
The Bean Game!
A simulation game where
you learn how to prioritize
and make spending choices
based on what’s important
to you.
Iowa State University Extensionhttp://www.extension.iastate.edu/finances/personal/childrenmoney/Youth.htm
Spending Game Allowance Game
http://www.extension.iastate.edu/Publications/PM1103.pdf
http://www.extension.iastate.edu/Publications/PM1776.pdf
Credit Reports and Credit Scores
FFFL Part 3(Lessons 11, 12, 13)
How credit can affect your everyday life…
Getting a job
Renting an apartment
Getting a loan
Buying a car
Paying insurance
Getting married!!!
Take the Credit Challenge!Myths and Realities of Credit
The Rules:
For each statement, answer “TRUE” or “FALSE.”
For each correct answer, give yourself 5 points.
For each incorrect answer, take away 5 points.
For any 5 statements, you may use your “CREDIT” card. If you answer correctly, you receive 10 points. If not, you lose 10 points.
Question 1:Credit card companies only approve credit limits that an individual is able to afford.
Let’s Get Started….
Answer 1:
FALSE
Question 2:After you take out a loan, a lender is not required to provide information to credit reporting agencies about the loan and your history of paying it back.
Answer 2:
TRUE
Question 3:Approximately 10% of an individual’s credit score is determined by their payment history.
Answer 3:
FALSE
Question 4:Individuals are eligible to receive a free credit report once a year from each of the three credit reporting agencies.
Answer 4:
TRUE
Question 5:Credit reports contain information on where an individual has lived, past employers, and annual income.
Answer 5:
FALSE
Question 6:A potential employer is permitted to see an individual’s credit report without his/her consent.
Answer 6:
FALSE
Question 7:Requesting a copy of your own credit report can negatively affect your credit score.
Answer 7:
FALSE
Question 8:Negative information, such as filing for bankruptcy, can remain on a credit report for up to 10 years.
Answer 8:
TRUE
Question 9:By law, if an individual is unable to resolve a disputed item with a credit reporting agency, they have the right to delete the information from their credit report.
Answer 9:
FALSE
Question 10:If an individual resolves an error on their credit report with one credit reporting agency, the same error will automatically be corrected by the other credit reporting agencies.
Answer 10:
FALSE
What is a credit report?
An evaluation of your credit experience.
Similar to a report card.
Your credit record includes:• Personal information• Open lines of credit• Payment history • Inquiries • Public record and collection items
(bankruptcies, foreclosures, financial
judgements)
What info is not in your credit report?
Race
Religion
Medical history
Political affiliation
Criminal records
Annual income
Checking or savings accounts
Who has access to your credit report?
Creditors
Employers
Insurance companies
Certain professional organizations
Courts
IRS
Collection agencies (i.e., CCCS)
What is a credit score?
A number that summarizes your level of
creditworthiness.
Your score depends on the credit scoring model used.
FICO scores are the most common.
Scores range from 300-850.
Averages are between 690 and 740.
Visit www.myfico.com for more information.
FICO Score Ranges
20% are above 780
20% are between 740-780
20% are between 690-740
20% are between 620-690
20% are below 619
FICO Credit Score Estimator:
www.myfico.com/ficocreditscoreestimator
Your credit score is used to set the “price” of your loan.
Based on:
FICO Score Simulator:
Pay Bills on TimePay Down Balances on Credit CardsPay Down Delinquent Balances FirstSeek New CreditTransfer Credit Card BalancesMiss PaymentsMax Out Credit Cards
Other Calculators:
MortgageAutoLoanDebit and Credit CardsSavingPersonal FinanceInvestmentRetirement
Understanding Your Credit Score
www.myfico.com
Checking Your Credit Report
3 major credit bureaus:
Equifax (Beacon score)
(www.equifax.com, 1-800-685-1111)
Experian (PLUS score)
(www.experian.com, 1-888-397-3742)
TransUnion (Empirica score)
(www.transunion.com, 1-800-888-4213)
Obtaining a *FREE* Credit Report
www.annualcreditreport.com
Annual Credit ReportFrequently Asked Questions
Contact UsAbout Us
Fraud Alert
An Activity
Reading a Credit Report
Sample Credit Report:
http://experian.com/credit_report_basics/pdf/samplecreditreport1.pdf
FFFL: Evaluating Credit Reports
Grades 9-12: Ex. 13.1, p. 76Ex. 13.2, p. 79Illustration 13.1, p. 80-83
Grades 6-8:Lesson 13, p. 115-118Ex. 13.1A - 13.1E, p. 123-131
Grades 9-12:
Ex. 13.3, p. 84-85
Ex. 12.1, p. 74-75
Grades 6-8:
Lesson 13, p. 115-118
Ex. 13.1A - 13.1E, p. 123-131
FFFL: Evaluating Credit Applications
Helpful Resources
University of Illinois Extension
Consumer and Family Economics
www.ace.uiuc.edu/cfe
National Council on Economic Education
www.ncee.net
Illinois Council on Economic Education
www.econed-il.org
University of Illinois Extension Consumer and Family Economics
www.ace.uiuc.edu/cfe
NCEEwww.ncee.net
Contact Information
Dr. Angela Lyons, Assistant Professor, University of Illinois Urbana-Champaign (217) 244-2612; [email protected]
Debra Bartman, Extension Educator, Quad Cities Center (309) 792-2500 (x217); [email protected]
Patricia Hildebrand, Extension Educator, Effingham Extension Center (217) 347-5126; [email protected]
Questions