Graham McCaulley Extension Associate, MU Personal Financial Planning Extension

Missouri High School Personal Finance Institute Heart of Missouri Regional Professional Development Center

Risk – a word to describe the uncertainty of outcomes in life

Loss from risk or unexpected outcomes can be costly

Risk control: Control exposure to risk by avoiding or

reducing

Risk financing: You can finance all or part of the risk by

retaining it

You can transfer a large part of the by purchasing insurance

Types of Personal Risk

Earnings

Medical

Liability

Physical Assets

Financial Assets

Longevity

Risk Financial “Peril” Insurance

Disability/illness Loss of income, medical expenses, personal maintenance

Disability income, major medical, hospital insurance, long-term care insurance

Death Loss of income, medical/funeral expenses, unpaid debts

Life insurance, credit/mortgage insurance

Extended life span Loss of income, lower level of living

Annuities, retirement planning, personal investments

Damage or loss of property Replacement or repairs Homeowner’s or renter’s policies (property insurance) Automobile collision and comprehensive coverage

Legal liability Damages awarded to an injured party

Comprehensive personal liability, liability coverage in auto policy

Insurance provides indemnification (reimbursement)

Saving…different schools of thought on this

A fee that must be paid for you/your family to have a insurance plan

Who pays for your premium?

You may be responsible for the entire premium (e.g., auto insurance) OR

Your employer may pay for all of it OR

You and your employer may share this cost

The amount you pay before your insurance plan begins to cover any of your expenses (e.g., car repair, healthcare expenses)

The higher the deductible, the lower the premium For example, if your deductible is $1,000, your plan

won’t pay anything until you’ve met your $1,000 deductible

The share of the cost you must pay for a healthcare service

Calculated as a percent (%) of the total cost you pay

The insurance company pays the rest

This cost sharing begins only after your deductible is paid for in full for that year

Liability Personal Injury Protection

Collision

Comprehensive

Uninsured or Underinsured Motorist

Renters’ property likely isn’t covered Typically, the landlord or property owner only carries

insurance on the rental unit itself.

Most renters need coverage Renters insurance policies give a wide range of

coverage for both personal property and liability Renters insurance is usually quite affordable

Improves your health by: Preventing health problems Finding a health problem early on Better managing health conditions Preventing health problems from getting worse

Decreased risk of medical bankruptcy and less financial stress

More productive employees

Less strain on social services

1. Guaranteed coverage to all: Can NOT deny you coverage due to a pre-existing condition

2. Can NOT have an yearly or lifetime coverage limit

3. Can NOT drop your insurance if you get sick 4. No cost to you for preventive care

5. Children CAN stay on parent’s insurance up to age 26

Financial intermediaries include commercial banks, savings and loan associations, savings banks, credit unions and money market mutual fund companies.

Financial intermediaries act as the go-between borrowers and lenders.

Keep money safe

Track transactions, organize finances

Earn interest

Banks

Credit Unions

Deposit Rates

Loan Rates

Loans

Deposit Accounts What banks offer customers to hold their money for

deposits and withdrawals for the short and long term Checking accounts

The bank takes the money from your account and pays it to the person named on the check or paid by a checking account debit card

Savings accounts

A savings account is an account that earns interest (money generally not as liquid than a checking account)

Overdraft “protection” is when a bank or credit union covers overdrafts on a checking or share draft account.

New rule (CARD Act of 2010): Banks should ask you before enrolling you in an overdraft

“protection” program

Linked Accounts Line of Credit

Unbanked and underbanked

Payday (and related) lending- check cashing, money orders, used as a “deposit advance”

Prepaid cards

http://missourifamilies.org/money/ http://www.learnvest.com/knowledge-

center/banking-101/ http://www.consumerfinance.gov/blog/student-

banking-101/

Weagley, R. O., & Ivey, S. G. (2011). Personal and family finance workbook. Dubuque, IA: Kendall Hunt.

McCaulleyG@missouri.edu