Personal Finance – Knowledge, Understanding and Skill Development

FEET Center Financial Wisdom Game® Presented by David L. McConico, CFP® FWG®

 What: A Team Competition, a financial planning game, with financial incentives awarded to the teams who build the highest positive account value.  Why: To educate youth for more informed financial decisions  Financial Wisdom Game Philosophy is 3t t = FUN t  Event Based: Personal Finance Game Identifying Concepts, Words, Terms, Exhibits and Diagrams.  Introduced in 2011: Education through Engagement  Event Play: Playing time minutes.

Time Frame:  Six Rounds - 5 minutes  Two halves- 30 minutes  Break Between halves - 5 minutes  End of Half and Final Question with Investment opportunity - 3 minutes each Teams:  4 Teams – four to six members  Must be member of Finance Club to play  All members must play in event competition

Rules ◦ Eligible member of Finance Club ◦ Team Name ◦ Team order determined by coin toss ◦ There are six rounds of four questions (for player) and there is one question (for team) at the end of rounds three and six.

Value of Questions per round:  Round points  Round points  Round * points  Round points  Round points  Round * points

 *Point values can be double in rounds three and six (Must be indicated by player on wisdom seat before the question is asked).  Point values are half if player seeks wisdom while on the wisdom seat.  Team can indicate value invested (up to current account value) for questions at the end of rounds 3 and 6.

Player  Player order must be determined by team before game starts.  Player on the wisdom seat has 30 seconds to respond with answer, seek wisdom, or pass. If player does not provide indicated respond within 30 seconds point value is subtracted from account value. Only player on the wisdom seat can ask for the question to be repeated or asked differently (10 seconds is added to the response time). Facilitator has discretion as to whether question can be asked beyond twice.  No player can be on the wisdom seat for more than two opportunities to answer questions (except in seeking wisdom situation) during the six rounds of competition. Player has unlimited opportunity to respond in seek wisdom option.

 If the player answers, team is awarded full point value to account if correct and subtracted if incorrect.  If player seeks wisdom, player must select from team member to answer within initial 30 second time frame. If selected team member answers team is awarded half point value to account if correct and subtracted if incorrect. Player on the wisdom seat still has option to answer after seeking wisdom, within the 30 second time limit (half point value).  If player passes, other teams in order of turn (and player) have the option to answer question that was passed. Teams point value is not affected if player passes. The next player on the next ordered team has 15 seconds to answer, seek wisdom or pass. Team is awarded full or half point value if correct and subtracted if incorrect.

Team Question  Teams will answer questions at half end (Round 3) and game end (Round 6) with the possibility to increase point value.  Team must indicate desire to respond to question. Then team must indicate the amount of points they are investing in their response. The response to the question must be in writing and it must be provided within 3 minutes after the question is asked. Points invested in response will be added or subtracted from account value if written response is correct or incorrect. Team question:  Ask Question  Respond (Y/N)  Determine Investment  Provide timely written response

Financial Incentives:  Financial Incentives are awarded to the teams with positive account point values at game end, allocated proportionally relative to total point value of teams with positive account values.  Total Incentives available: $$$$$$ “Financial Wisdom is obtained in the Finance Club through attendance, financial education and asset development activities.”

Round One 100 Points

Round One – 100 Points

The Process of setting spending priorities, defining goals and developing a plan to achieve them, and then putting the plan into action. The long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life.

Financial Planning

Things we must have to survive; for example, food, clothing, water, shelter.

Needs

Things that make life more interesting and fun but that people can live without if they have to.

Wants

The beliefs, qualities, or standards that you consider important or desirable.

Values

A statement of something a person wants or needs to do.

Goal

A goal to be achieved within the next three months.

Short-Term Goal

A goal that is set for three months to a year.

Intermediate-Term Goal

A goal that will take more than a year to achieve.

Long-Term Goal

The willingness to give up something you want now in order to get something better in the future.

Delayed Gratification

Movement of the money you receive and the money you spend.

Cash Flow

The value of what is given up when you choose one option over another.

Opportunity Cost

Smaller Decisions that can result from a major decision.

Satellite Decisions

SMART Goal. What does SMART stand for?

S pecific M easurable A ttainable R ealistic T ime-bound

Five Step to financial Planning.

1. Set Smart Goals 2. Analyze Information 3. Create A Plan 4. Implement The Plan 5. Monitor and Modify The Plan

1. Identify your goal 2. Establish your criteria 3. Examine your options 4. Weighs the pros and cons 5. Make your decision 6. Evaluate results

Making Decisions Financial Planning requires making many decisions, and making decisions about money can be particularly challenging because so many things come into play. For one the facts of the situation and many other things— your mood, values, culture, habits, and opinions of your friends and parents.

Step 1 Identify the problem or issue. Step 2: Gather and evaluate information. Step 3: Consider the costs and benefits of various alternatives. Step 4: Make a decision and take action. Step 5: Modify the decision and action as conditions change.

Decision-Making Process

A branch of psychology concerned with mental processes (perception, thinking, learning, and memory) that are connected to sensory stimulation and the overt expression of behavior.

Financial Wisdom Game® Cognitive Behavioral Therapy

A spending plan. A record of projected and actual income and expenses over a period.

Budget

An assertion, claim or expectation about reality that is false. Unbalanced and based solely on our judgments and opinion.

Irrational Belief

An assertion, claim or expectation about reality that is accurate and true.

Rational Belief

Step 1: Create financial goals Step 2: Create a current income and expense record Step 3: Create an insurance plan Step 4: Create a savings and investing plan Step 5: Create a budget

5-steps involved in creating your financial plan

Theory that an increasing consumption of goods is economically beneficial.

Consumerism

The cost of goods and services, including those that are fixed (such as rent, and auto loan payments) and those that are variable (such as food, clothing, and entertainment).

Expenses

Money earned from investments and employment.

A risk management tool that protects an individual from specific financial losses under specific terms and premium payments, as described in a written policy document. Major types include: Auto, Health, Homeowner, Life.

Insurance

The act of purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with the risk of loss.

Investing

A measure of the likelihood of loss or the uncertainty of an investment’s rate of return.

Risk

The process of calculating risk and developing methods to minimize or manage loss, for example, by buying insurance or diversifying investments.

Risk Management

The process of setting income aside for future spending. Saving provides ready cash for emergencies and short-term goals, and funds for investing.

Saving

When people compare their personal attributes and abilities with those of others who are deemed to be socially better off.

Social Comparison

Round Two – 200 points

A reciprocal relation between two or more things.

Correlation

Earnings from corporate stock or credit union share accounts.

Dividends

Earnings from employment, including commissions and tips.

Earned Income

Wages or salary before deductions for taxes and other purposes.

Gross Pay

The amount of income after all deductions and taxes are paid. Often known as “take-home pay”

Net Pay

Earnings from sources other than employment, including investment returns and royalties.

Unearned Income

A form of insurance that provides compensation medical care for employees who are injured in the course of employment.

Workers Compensation Insurance

The pleasurable emotional reaction of happiness in response to a fulfillment of a desire or the fulfillment of a goal.

Gratification

1. A source of supply, support, or aid, especially one that can be readily drawn upon when needed. 2.Available source of money; a new or reserve supply that can be drawn upon when needed.

Resources

Insufficient to meet a demand or requirement; in short supply.

Scarce

Another name for a budget.

Spending Plan

Translation of a consumer product price into the cost per standard size or weight. Unit price helps the consumer to make price/value comparisons between brands. Unit prices are usually displayed on supermarket shelf tags along with the package price.

Unit Price

The four most common tax deductions on a pay stub.

1. Federal Income tax 2. State Income tax 3. Medicare tax 4. Social Security tax

A tax that a person who owns a business typically also pay.

Self-Employment Tax

The federal government calculates your tax deductions from the information on this form you fill out when you start your job.

Form W- 4

5 Methods available for making sure you stay on track with your budget.

1. Envelope System 2. Tally System 3. Track with Checking Account Register 4. Budget Spreadsheet 5. Personal Finance Software

Round Three – 300 Points

The idea that money today is worth more than the same amount of money in the future due to its potential earning capacity. Refers to the relationship among time, money and rate of interest.

Time Value of Money

A rise in the cost of goods and services. An overall rise in the price of goods and services; the opposite of the less common deflation.

Inflation

The payment your receive for allowing a financial institution or corporation to use your money.

Earned Income

The idea of earning interest on interest. Interest credited daily, monthly, quarterly, semi-annually, or annually on both principal and previously credited interest. One of the most powerful principles in personal finance.

Compounding or Compound Interest

You earn $200 in financial incentives from the finance club and want to start saving for your own car, if you put you money in an account that earns six percent interest per year, how long will it take to grow to $400.

72 ÷ 6 % = 12 Years Rule of 72 says that you can see how long it will take you to double your money simply by dividing 72 by the interest rate. 72 ÷ 4 years = 18% The Rule of 72 can also tell you the interest rate you need to earn to double your money in a certain amount of time.

The place where stocks are bought and sold.

Stock Market

The difference between the purchase price and the selling price when an investor buys a stock and sells it later at higher price.

Capital Gain

The difference between the purchase price and the selling price when the investor sells a stock at a lower price than the purchase price.

Capital Loss

The amount of earned on an investment, expressed as a percentage of the total investment. The percentage of gain or loss on an investment over a period of time.

Return or Rate of Return

The amount of the likelihood of loss or the uncertainty of an investment’s rate of return. The probability that injury, damage, or loss will occur.

Risk

The degree of uncertainty an investor can handle in regard to a negative change in the value of his or her portfolio.

Risk Tolerance

Generally, people chose to invest for one of two reasons: Income or Growth Income means they get paid –in cash- for owning the account or investment. Growth means they buy and hold an investment with the hope that it will increase in price, over time.

Income Investments: Savings account Bonds (U.S. Savings, Corporate, and Government), Certificates of Deposits Money Market Deposit Accounts Money Market Mutual Funds. Growth Investments: Stocks Real Estate Mutual Funds Collectibles.

A strategy for reducing investment risk by selecting a wide variety of investments. (putting money in several different types of investments). By spreading your money around, you’re reducing the impact that a drop in any one investment value can have on your overall investment portfolio.

Diversification

The practice of investing a fixed amount in the same investment at regular intervals, regardless of what the market is doing. It another key investment principle to know because it eliminates having to worry about investing at the “right” or “wrong” time.

Dollar Cost Averaging

A person who provides financial information and advice. Example include employee benefit staff, bank and credit union employees, credit counselors, brokers, financial planners, accountants, insurance agents, and attorneys.

Financial Professional

The quality of an asset that permits it to be converted quickly into cash without loss of value. For example, a mutual fund is more liquid than real estate.

Liquidity

An amount of money originally invested, excluding any interest or dividends. An amount borrowed, or an outstanding loan balance.

Principal

When it comes to taking care of your basic financial needs, the first step is finding a financial institution. Name two of types of financial institutions that take care of basic financial services.

A bank is a for-profit company, owned by investors in its stock. or Credit union is a non-profit company, are owned by their customers, who are also called members. Both provide a variety of basic financial services, including savings and checking accounts, issuing credit and debit cards, and providing loans for cars, homes, and other purposes.

A financial institution deposit account that pays interest and allows withdrawals. And A financial institution deposit account that allows withdrawals by writing checks

Savings or Share Account and Checking or Share Draft Account

A savings which is a certificate representing a debt. A U.S. Savings Bond is a loan to the government. The government agrees to repay the amount borrowed, with interest, to the bondholder.

Series EE Savings Bond

Interest calculated periodically on loan principal or investment principal only, not on previously earned interest.

Simple Interest

Certificates representing the purchaser’s agreement to lend a business or government money on the promise that the debt will be paid – with interest- at a specific time.

Bonds

Mutual funds that sell shares of ownership and uses the proceeds to purchase short-term, high-quality securities such as Treasury bills, negotiable certificates of deposit, and commercial paper.

Money Market Funds

I investment companies that pool money from shareholders and invest in a variety of securities, including stocks, bonds, and short-term assets.

Mutual Funds

An investment that represents shares of ownership of the assets and earnings of a corporation. An investment that makes the investor a part owner of a company.

Stocks