Your Child’s Financial Future

Thank you FINRA The Estes Valley Library is providing this program through a grant from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation and the American Library Association (ALA). The grant is distributed as part of the smartinvesting@your library® initiative, an ALA program. This project is in its third year of educational partnership with libraries across the country Marsha Yelick CFA(retired) Financial Programs Consultant myelick@estesvalleylibrary.org 970-586-8116

Today’s youth face enormous financial issues! TODAY’S KIDS

A Typical College Graduate Credit card debt – Revolving average $3,000 College costs – Fees & Tuition/Year $9,000, $22,000, $30,000 Student loan debt – Average of ~$30,000 (plus private ~$19,000) Average starting salary – 2013 ~ $45,000 SOME FACTS

How to BEGIN? Financial STRESS Imagine planning for retirement, saving an emergency fund, making mortgage payments, paying taxes, and raising children with the overhang of enormous debt. Financial STRESS

BE THE EXAMPLE Things you can do! Take care of your finances Teach money management skills Use available tools and resources Things you can do! BE THE EXAMPLE

Take care of your finances Talk about your money & budgeting Have an emergency fund Check your health insurance Save for retirement !!! Eliminate ALL credit card debt Model financial SAVVY

DAILY LESSON 2. Teach money management skills Money is used EVERY DAY. Every money transaction or decision is an opportunity to teach children about the use and misuse of money. DAILY LESSON 0 - 4 years 13-17 years 5 -12 years 18-19 years

Financial TOOLS 3. Use available tools & resources Bank Accounts Allowances Brokerage Accounts (Uniform Gift to Minors Act) Jobs and IRAs College Savings Accounts 529 Coverdell Financial TOOLS

Financial Future: PART II Your Child’s Financial Future: PART II

PAYING YOUR Million Dollar DEBT WITH PENNIES A New Perspective

What is THE Most Important Thing That You want for your Children/ Grandchildren? CHOICE ! FREEDOM !

What is the Source of Personal Freedom? “Choice” Personal Freedom

6/19/2018

Freedom’s TWO Ballot Boxes: Economic Ballot Box Political Ballot Box Freedom has TWO Ballot Boxes 1. The POLITICAL BALLOT BOX — Federal: vote once every two years; 2. The ECONOMIC BALLOT BOX — The Cash Register’s Ka-ching: vote real time. IMAGINE…… if you could only shop once every two years. IMAGINE…… if you could only buy what the Government offered. Imagine if you could only spend what the government allowed you to have.

The Delicate Balance: between The TWO Sources of Freedom Political Ballot Box Economic Ballot Box

Debt you create of your own choice. 2. Debt you inherit from others. Two Types of Debt Debt you create of your own choice. 2. Debt you inherit from others. Modern Slavery

Debt Our Children/Grandchildren Inherit from US. Federal Debt: $20 Trillion … ($20,000,000,000,000) State Debt: $ 5 Trillion … ($ 5,000,000,000,000) Entitlements: $90 Trillion … ($90,000,000,000,000) $115,000,000,000,000 Indentured Servants US Citizens under age 25: 105 Million … (100,000,000 People) Inherited Federal Debt per Child: $ 20,000,000,000,000 / 100,000,000 = $200,000 per child. Interest on the $200,000 debt @ 5% p.a. = $10,000 p.a. 50% of adults do not pay taxes…. So, $400,000 per child + $20,000 p.a.

OUR Children Paying OFF OUR Debt AMOUNT OF DEBT plus Interest @ 5%: Individual: $400,000 Debt plus $20,000 p.a. interest Husband & Wife: $800,000 Debt plus $40,000 p.a. interest Disenfranchised ANNUAL DEBT Payment Ammortized over 40 years plus Interest @ 5%: Individual: $10,000 Debt plus $20,000 p.a.* interest = $30,000 Husband & Wife: $20,000 Debt plus $40,000 p.a.* interest = $60,000 * As Principal is reduced interest expense will decline to an average of $10,000 and $20,000, respectively. AVERAGE U.S. FAMILY INCOME (2012): …..$51,041

Two Sources of Your Children’s Economic Freedom: Sources of Freedom = (1) Political Freedom + (2) Economic Freedom (1) Livelihood …….. plus …….. (2) Life’s Savings How many have had any courses in personal investing either in school or elsewhere? Interest calculations, mutual funds, stocks, bonds? (1) Savings ………… plus …………(2) Return on Savings

To Get your Child Out of YOUR Debt Do Just 3 Things… To Get your Child Out of YOUR Debt

+ + = CSI COMMIT to become a millionaire. To offset the DEBT YOUR Child inherits from YOU: MAKE YOUR CHILD A MILLIONAIRE + + = COMMIT to become a millionaire. Commit to SAVE (“Compound Saving”) Commit to INVEST (“Wise Investing”) CSI

On the Installment Plan. NOW, You will learn how to BUY YOUR CHILD’S Economic Freedom On the Installment Plan. 2. SAVE

POWER # 1: THE POWER OF SMALL: To Change the World.

POWER # 1: THE POWER OF SMALL:

POWER # 2: THE POWER OF YOUTH—Starting Young (Bulbs show Annual Total of Daily Savings) $363 Age Daily Monthly Annual Total Savings to Age 65 ONE $1.00 $30.25 $363 $23,595 5 1.30 39.30 471 28,260 10 2.20 66 793 43,615 15 3.36 101 1,227 61,350 20 5.21 156 1,901 85,545 25 8.10 243 2,960 118,400 30 12.70 371 4,635 162,225 35 20.10 603 7,336 220,080 40 32.35 970 11,806 295,150 45 53.55 1,607 19,546 390,920 50 93.31 2,800 34,058 510,870 55 180.32 5,410 65,820 658,200

POWER 2: THE POWER OF YOUTH—Starting Young $658,200 $295,150 $118,400 $61,350 Age Daily Monthly Annual Total Savings to Age 65 ONE $1.00 $30.25 $363 $23,595 5 1.30 39.30 471 28,260 10 2.20 66 793 43,615 15 3.36 101 1,227 61,350 20 5.21 156 1,901 85,545 25 8.10 243 2,960 118,400 30 12.70 371 4,635 162,225 35 20.10 603 7,336 220,080 40 32.35 970 11,806 295,150 45 53.55 1,607 19,546 390,920 50 93.31 2,800 34,058 510,870 55 180.32 5,410 65,820 658,200 $23,595

POWER 3: THE POWER OF COMPOUND SAVING Simple Saving: Saving Once. Example: Saving $1,000 at the beginning of Year 1. Compound Saving: Saving Year after Year. Example: Saving $1,000 each year.

POWER 3—The Power of Compound Saving:. Simple Saving: POWER 3—The Power of Compound Saving: Simple Saving: ($1,000 saved One Time.) $1,000

POWER 3—The Power of Compound Saving:. Compound Saving: POWER 3—The Power of Compound Saving: Compound Saving: ($1,000 saved Each Year) $40,000

Where does the Other $976,000 come from ? SO, YOU USE POWERS # 1, 2 & 3: Where does the Other $976,000 come from ? $658,200 $295,150 $118,400 $61,350 Age Daily Monthly Annual Total Savings to Age 65 ONE $1.00 $30.25 $363 $23,595 5 1.30 39.30 471 28,260 10 2.20 66 793 43,615 15 3.36 101 1,227 61,350 20 5.21 156 1,901 85,545 25 8.10 243 2,960 118,400 30 12.70 371 4,635 162,225 35 20.10 603 7,336 220,080 40 32.35 970 11,806 295,150 45 53.55 1,607 19,546 390,920 50 93.31 2,800 34,058 510,870 55 180.32 5,410 65,820 658,200 $23,595

COMMITMENT THREE – Investing: I OWE YOU $ 976,000 AND … Someone writes a check to YOU for the amount in yellow. $1,000,000 You save the amount in red...

COMMITMENT THREE - Investing: The Most Powerful Formula in Finance “Compound interest is the most powerful force in the universe.” Albert Einstein Physicist Give me a place to stand, and I will move the earth. Archimedes (287-212 BC)

COMMITMENT THREE – Investing: The Most Powerful Formula in Finance Two Types of Interest: Simple: Where Only Principal Earns Interest. Compound: Where Principal and Interest Earn Interest.

COMMITMENT THREE – Investing : The Most Powerful Formula in Finance SIMPLE Interest: Year 0: $1,000 (Present Value) Year 1: $1,000 + ($1,000 x 10%) = $1,000 Year 2: $1,000 + ($1,000 x 10%) = $1,000 Year 3: $1,000 + ($1,000 x 10%) = $1,000 (Future Value) 100 100 100

COMMITMENT THREE – Investing: The Most Powerful Formula in Finance Compound Interest: Year 0: $1,000 (Present Value) Year 1: $1,000 + ($1,000 x 10%) = $1,100 Year 2: $1,100 + ($1,100 x 10%) = $1,210 Year 3: $1,210 + ($1,210 x 10%) = $1,331 (Future Value)

COMMITMENT THREE – Investing: The Most Powerful Formula. in Finance COMMITMENT THREE – Investing: The Most Powerful Formula in Finance Dirty Little Math Secret $1,000 Invested once. $45,260 $7,040

COMMITMENT THREE – Investing: The Most Powerful Formula in Finance So, at this point, the Potential Millionaire asks: How Do I Earn 9% Instead Of 3%? By Investing in Stocks, Bonds & Cash.

COMMITMENT THREE – Investing: Asset Class Performance Historic Returns: Historic: Stocks :* Inflation + 8.0 % p.a. 11.0% Bonds: Inflation + 2.5 % p.a. 5.5% Cash: Inflation + 0.5 % p.a. 3.5% * Standard & Poors 500 Stock Index Note: Long term inflation (70 years) has run 3% p.a. For ease of presentation, examples will assume 2%.pa.

Historic: Weighting Stocks : 11.0% x 65 % = 7.2 % COMMITMENT THREE – Investing: To Reduce Risk You Buy Stocks, Bonds and Cash (You “Diversify”) Historic: Weighting Stocks : 11.0% x 65 % = 7.2 % Bonds: 5.5% x 30 = 1.7 Cash: 3.5% x 5 = .2 BLENDED YIELD = 9.1 % * Standard & Poors 500 Stock Index Note: Long term inflation (70 years) has run 3% p.a.

This seems complicated… Can you make it easy to buy these Stocks and Bonds? Yes, we’ll use Balanced Mutual Funds. I have a picture of a typical millionaire to pass around. Pass around metal mirror.

COMMITMENT THREE – Investing: Definition: Mutual Fund A Mutual Fund is a basket of various investments like stocks, or bonds, or cash, or mixtures of all three (“balanced”).

YOUR Child’s FREEDOM

The Best Way to Predict the Future is to Create It …Peter Drucker YOUR Child’s FREEDOM FREE YOUR CHILDREN From YOUR DEBT.

Thanks for attending! BE MONEY SMART FOR LIFE