The Investing For Farm Families Curriculum for Educating Farm Families Jason Johnson, Tim Eggers, Bob Wells, Ruth Hambleton

The project is guided by a team of 14 members from 10 states and USDA/CSREES.

What the ultimate impacts are Targeted audience will become more financially secure LOGIC MODEL: FINRA Online Investor Education Project Outcomes Actions InputsSituationActivities Knowledge What we invest (FINRA) Financial Investor Education Foundation Financial Security for All Community of Practice Online Investment Education (OIE) Investing For Your Future (IFYF) Remote-Learner (Instructional Design) Fleishman-Hillard (Marketing Analysis) eXtension Faculty and Staff Annie’s Project staff What the short-term results are Obj. 1: 50% of participants will have an increased knowledge & understanding of investing as a path to financial security Obj. 2: 50% of participants will understand asset- building alternatives to land ownership To see specific knowledge questions/indicators, go to: dicators dicators Description of challenge or opportunity - Farmers face increasing challenges from a volatile and changing production environment. -Farmers face many risks toward the continuation of their way of life: Financial; Human; Legal; Price/ Market; and Production. -Gaps exist between available educational information and the needs of this audience. -Objective and trustworthy information regarding financial management products and services and investment strategies are difficult to access. EXTERNAL FACTORS - External variables that could influence this project ‘s target population include the stability of financial markets, controlling for natural disasters, Federal government regulations What the medium- term results are Obj. 3: 25% of participants will change at least one behavior relative to investing and improve their financial security 50% of participants will determine their long range financial goals and investment plans 50% of participants will diversify their investments to include additional off farm/ranch investments To see specific behavior questions/indicators, go to: dicators dicators Conditions ASSUMPTIONS- This group of people will want to learn about investing and have an interest in creating wealth other than land development and usage What we do Partner with Fleishman- Hillard for market analysis Partner with Remote- Learner to create online Curriculum Pilot test IFYF with Annie’s Project participants and adapt curriculum Deliver online curriculum Measure outcomes Evaluate program Outputs 1/07/2009 Who we reach Small farm family operators who gross sales of $250,000 to $2,000,000 per year Owners/Operators who are Farmers, Ranchers, Forest Managers Males/Females Ages Have access to internet Have limited personal investments off farm

Primary and secondary research was conducted for the marketing/audience analysis. Total land in farms, at million acres, decreased 1.5 million acres, or 0.16 percent, from –Telephone survey of farm families. 300 farm families from 43 states, 255 counties. List provided by FarmMarket ID. Once contacted, 30% agreed to participate. Cooperative Extension identified as sponsor, helping cooperation rate. Interviewing conducted in early August, –Two telephone focus groups were conducted following the survey. 14 participants 90 minute discussions Recruited from same list as survey respondents Conducted mid August 2008

The survey research interviewed farm and ranch owner/operators 25 to 65 years of age involved in household financial decisions. The number of family farms has decreased to 155,000 in 2008 from 300,000 in The survey sample of 300 farm families was designed to focus on operations of intermediate size ($250,000 to $2,000,000 sales). Younger farm owner/operators were slightly oversampled. The respondent was screened to be involved in making decisions about your household’s personal finances. As expected, a majority of participants were women. Quotas were set to get a representative sampling by geographic region.

Two-thirds of respondents have broadband access to the Internet. Keep in mind that all respondents were screened. In the West, half rely on satellite. In the North Central region, DSL is the leader. The age of the farmer is not related to his or her use of dialup Internet services, however education does; 42% of those with no college education use dialup compared to 26% of those with a college education. North Central North- eastSouthWest Dial-up32%28%25%32% Satellite27%6%29%48% DSL34%31%28%24% Cable4%19%6%2% Households just below commercial farms ($100,000-$249,999 in sales) represent 8 percent of U.S. farms and produce 17 percent of sales. (USDA) Q25. Do you connect to the Internet through a dial-up telephone line, DSL, cable TV, a wireless or satellite connection, or a T-1 connection? *Less than one-half of one percent

Three-fourths of respondents browse the Internet. Since households were screened for Internet access, this level of activity is not a surprise. Women are more engaged in the Internet than men. Some comments suggest this is an artifact of having time available near the computer to use it. Larger operations are more likely to use the Internet for financial research. MenWomen Read and respond to 65%86% Browse Internet65%81% Farm sales < $499k$500k + Check value of investments 30%42% Conduct research on possible investments 27%36% In 2003, median wealth of farm households ($416,250) was five times the estimated median wealth of all U.S. households ($89,578). (USDA) Q26. Do you use the Internet regularly, occasionally, seldom, or not at all to do each of the following activities?

Three-fourths of survey households have a retirement account. In 2008, average farm operator HH income is projected to be $89,434, up 6.3 percent from (USDA) –This increases to 84% among those who feel they have an excellent or good investment plan in place. –Half have individual stock, bonds, or securities, an indication of involvement in the stock market. –One-fourth (25%) are vested in retirement accounts, stock, and mutual funds versus 15% in none of the three. Q11. Do you or your spouse have each of the following or not? Invested in retirement funds, stocks/bonds, mutual funds None of them15% One28% Two33% All three25%

Farm families have access to financial advisors and services. About 50 percent of North Carolina farmers indicated they never plan to retire (NCTTF survey). While some farmers may not have made use of financial planning resources, it is clear they are available. Note that more have worked on a financial plan for their farm as have worked on a personal investment plan. Two out of five indicate they have learned about investing from classes since leaving school and 33% have attended a retirement seminar. The 38% who have learned about investing from the Internet are highly relevant to OIE.

OIE leads seven suggested methods for education on the basics of investing on willingness to use. In Iowa, 71 percent of farmers had not chosen any successor to their operations (average age: 54 years). –The appeal of OIE is tied to the trust farm families have in Extension and the flexibility of the online approach. –The appeal of face-to-face interaction with people they know and trust is reflected in the second most popular option. –The last place finish (the high- school option) may be attributed to its inconvenience and interaction with strangers.

Financial Estimated Expenses and Emergency Cash Reserves Worksheet Integrate Balance Sheet / Net Worth Exercise Asset Allocation Worksheet Review your Personal Credit Report Evaluation of Financial Account Alternatives and Service Providers Human Risk Tolerance Quiz Personal Insurance Needs Assessment (Health, Life, Disability) Retirement Estimator for Farm Families Financial Advisor Questionnaire and Response Key Legal Emergency Preparedness Document Asset Management Transfer Plan Estate Plan Preparation Worksheet UCC Lending Report Production Crop Insurance Alternatives Production Technologies Price/Market Individual or Pooled Marketing Alternatives Pre- and Post- Harvest Marketing Alternatives Futures/Options Input Price Management Risk Management Areas and Activities to Address Them

 The Investing for Farm Families online course is organized into eight short lessons that are anywhere from slides long.  The progression of topics is entirely consistent with the approach than just about every financial planner would prescribe.  There are differences to address the unique issues affecting farm/ranch families.  "Investing for Farm Families" was designed to address these issues and demonstrates how to addressed them within the broader financial planning framework. Investing For Farm Families

 The design enables participants to go through the short topics at their own pace or pick and choose individual topics.  While the course was designed to go from beginning to end in a sequential progression, it is not a requirement.  Within each of the eight lessons, are individual and applied exercises that a participant can complete.  These will help the participant assess their current situation and consider alternatives to construct an effective investment plan. Investing For Farm Families

The Live Debt-Free Champions

The “Build Wealth” Champion

NEVER! Beyond Step 4: (and including your contributions to Step 3) – Invest in a Diversified Mix of Stocks, Bonds, Real Estate, Precious Metals, Natural Resources through Exchange Traded Funds at a Discount Brokerage NO! Highest Interest Rate 1st 529 Account or Brokerage Modifications to the “Debt-Free” Path

What percentage of women end up managing their own finances at some point in their lives ? a.60% b.70% c.80% d.90%

What percentage of women end up managing their own finances at some point in their lives ? a.60% b.70% c.80% d.90% - Divorce, Widowed, Live Longer

Most Americans save what percentage of their income ? a.20 % b.15 % c.10 % d. 5 %

Most Americans save what percentage of their income ? a.20 % b.15 % c.10 % d. 5 %

What’s Different About a Farm Family’s Financial and Investment Plans? Personal and Business Resources are often Combined. Feast/Famine Nature and Resource Intensity of Agricultural Enterprises. Land Ownership and the Asset Allocation Implications. Estate Planning and Transfer Decisions are both Personal and Business Oriented.

What’s Different About a Farm Family’s Financial and Investment Plans? –Many farm families do not have investment plans in place. –Many farm families are uncomfortable investing in the stock market. –Diversification is a difficult investment principle for farm families to implement.

Farm families are comfortable investing in farmland. Trends in the prices for farmland reinforce their allegiance to the land as an investment over stocks. Most farmers do not expect to retire as much as cut back the scope of their operations. This has significant implications for investing strategies.

8 Steps to Successful Investing for Farm Families First Things First: –Organizing Your Financial Information Investment Prerequisites: –Laying the Groundwork Debt Management and Credit Considerations for Farm Families Finding Money to Invest

8 Steps to Successful Investing for Farm Families Determining Your Asset Allocation and Risk Tolerance Evaluating Investment Products and Agriculture Oriented Alternatives Evaluating Financial Service Providers and Information Sources Investing for Retirement and Farm Succession Planning

Organizing Your Financial Information Understand the importance of having organized financial records Location of important financial documents and contact information Adequacy of cash reserves Amount of debt being carried Percentage of total household assets invested in the farm business

Complete the Emergency Financial First Aid Kit. Organizational tool for important accounts, contacts, account numbers, and policies. Beneficiaries are reviewed for relevant accounts.

Emergency fund Create an adequate emergency reserve fund Adequate insurance Life insurance coverage gaps? Importance of crop insurance risk management as a wealth-building tool Financial goals Determine specific personal/family financial goals with a date and estimated cost “Invest with a plan" when money becomes available Investment Prerequisites: Laying the Groundwork

Complete the Estimated Expenses & Emergency Cash Reserves Worksheet

Objectively Evaluate and Assess Insurance Needs (life, health, disability, etc.)

Investment Prerequisites: Laying the Groundwork Organized financial records Balance Sheets Have tools to record important household financial data including the value of assets and debts Have a better understanding of relationships between personal and farm finances Learn how non-farm investments can provide an opportunity for asset diversification

Complete an Integrated Business Balance Sheet & Personal Net Worth Statement.

Understand debt and credit in ag. businesses Determine "good debt" and "bad debt” Importance of regularly examining your personal credit report Common sources for farm credit Know how to access information describing liens against personal property Debt Management and Credit Considerations

The Average American Family Has: $6,892 in Credit Card Balances. On 9 different Credit Cards. Average consumer credit card rate: 13.88% Average student credit card rate: 14.45% Average business credit card rate: % Credit Cards

Nearly 144 Million Americans have general purpose credit cards. Approximately how many of them pay off their bill in full each month ? a.35 million b.55 million c.90 million d.115 million

Nearly 144 Million Americans have general purpose credit cards. Approximately how many of them pay off their bill in full each month ? a.35 million b.55 million – 38% c.90 million d.115 million 24% of cardholders make only the minimum payment each month

Obtain a free credit report detailing personal credit history and credit accounts.

Obtain UCC (Uniform Commercial Code) Lending Records to determine if personal or business property has been pledged or is encumbered.

Finding Money to Invest Understand unique cash flow considerations Develop investment strategies fitting cash flow patterns Learn about investments suitable where infrequent large sums become available Learn strategies to "find" money to invest Learn about small dollar investment products

Risk Tolerance and Asset Allocation Personal Investment Risk Tolerance Determine appropriate investments Investment value of land ownership Asset allocation and farm families Alternative asset classes Portfolio approach

Complete the Investment Risk Tolerance Quiz (for each financial decision maker in the family/operation).

Asset Allocation in a Portfolio Approach Framework

Complete the “Ideal” and “Current” Asset Allocation Review. Ideal AllocationCurrent Allocation

Evaluating Investment Products Agriculture Alternatives Equity investments Fixed-income investments Mutual funds Learn about farmers' off-farm investments Understand the benefits of investment diversification with uncorrelated assets Learn investment strategies to hedge against the production cost risks of an agricultural business

Evaluate alternative Individual Retirement Account (IRA) types for individuals and alternative retirement plans for businesses.

Evaluating Financial Service Providers Checking Accounts Savings Accounts CD’s Brokerages Match needs with best providers. Local service, best rates, best products, fees

Savings Account Options Rule of 72 Money doubles after only 1,440 YEARS!!!!

On-Line Savings Banks

Evaluate “on-line” and “brick and mortar” money market, certificate of deposit, savings, and checking account options.

Evaluate local brokerage and “on-line” discount brokerage options.

Investing for Retirement Farm Succession Planning Understand retirement planning for farm families Available IRA retirement investment plans Understand the process of estate planning Understand generational differences farm transfer decisions Understand common concerns about farm transfer decisions.

Complete the Estate Planning Questionnaire and Farm Asset/Management Transfer Plan

Complete the Retirement Estimator for Farm Families

Evaluate Potential Financial Advisors using the Financial Advisor Questionnaire

For More Information For course materials, enrollment, and resources, go to: This project was created to reach farm families nationwide with investment information that is relevant to their needs. It was funded with a two-year grant to the eXtension Foundation from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation.