Financial Literacy: Knowing What You Need To Know To Achieve Your Financial Goals

America’s financial literacy American families: -The average American family spends $1.22 for every dollar it earns. -One in five American families with annual household income of less than $50,000 is spending 40% of after-tax income to service its debt. -In 2003, the average American household owed $8,000 in credit cards, compared to $2,600 in In 2003, 1.6 million Americans filed for bankruptcy – the highest amount in history.

America’s financial literacy 2 out of 3 households will probably fail to realize life goals Financial illiteracy is passed to the next generation -Average high school senior failed 2004 financial knowledge survey

What is Financial Literacy?

Financial literacy The ability to effectively evaluate and manage one’s finances in order to make prudent decisions toward reaching life’s goals The understanding of: -Money -Cash flow -Basic economic/financial concepts -Debt/risk management

Achieving financial literacy Five Key Areas of Personal Finance: -Money and income -Money management -Spending and debt -Savings and investments -Risk management (protection)

Money and income Time is money How many hours do you need to work to pay for your mortgage, car insurance, electricity bills, extras, etc?

Money management Budgeting Prioritizing

Spending and debt Benefits and costs of spending alternatives Credit as a basic financial tool

Savings and investing Saving means not spending money. Investing means that you earn a return on the money you put into it.

Risk management Insurance Understanding the markets -50% of Americans own stocks Identity theft Consumer protection

Financial literacy isn’t just a matter of knowing what you have and knowing your options. It is a matter of planning for life’s milestones.

Creating your first overall long-term financial plan

Buying your first home Establish good credit Understand “real costs” Assess risks

Getting married Understand “financial partnership” Establish separate and joint credit and bank accounts Create wills and trusts Identify beneficiaries Choose owners on title assets

Financing a family Budget -Education, health care, child care Manage risk, insurance Create wills Instill financial literacy

Starting a business Understand -cash flow -expense timing Manage income and expenses

Planning for Retirement Determine how much money you will need. Determine where your retirement income will come from. Devise a budget and investment strategy to help you meet your goals.

Preparing a will Designate beneficiaries Determine asset distribution Identify insurance

Financial literacy education Lifelong learning courses Financial media Internet resources Your CPA / accountant

For more information /PowerPoint Source material: features financial education to help consumers at every life stage.

Financial Literacy: Knowing What You Need To Know To Achieve Your Financial Goals Financial Literacy: Knowing What You Need To Know To Achieve Your Financial Goals