1 Hour Crash Course. Core 12. Goals, Budgeting, Savings, Investing. Instructors Guide

Transcription

1 Core 12 1 Hour Crash Course Goals, Budgeting, Savings, Investing Instructors Guide

2 Core 12 1 Hour Crash Class Goals, Budgeting, Savings, Investing Published by the National Financial Educators Council

3 Copyright 2011 by the National Financial Educators Council All Rights reserved. No part of this book may be reproduced. Library of Congress Cataloging-in-Publication Data ISBN: Printed in the United States of America Requests for permission to make copies of any part of this book can be made to the National Financial Educators Council at No Earnings Projections, Promises, or Representations You recognize and agree that we have made no implications, warranties, promises, suggestions, projections, representations or guarantees whatsoever to you about future prospects or earnings, or that you will earn any money, with respect to your purchase of this financial education curriculum, and that we have not authorized any such projection, promise, or representation by others. Any earnings or income statements, or any earnings or income examples, are only examples for educational purposes. There is no assurance you will do as well as stated in any examples. If you rely upon any figures provided, you must accept the entire risk of not doing as well as the information provided. This applies whether the earnings or income examples are monetary in nature or pertain to advertising credits that may be earned (whether such credits are convertible to cash or not). Due Diligence You are advised to do your own due diligence when it comes to making business decisions and should use caution and seek the advice of qualified professionals. You should check with your accountant, lawyer, investment advisor, or other appropriate professional before acting on any investment information. You may not consider any examples, documents, or other content on the course or otherwise provided by us to be the equivalent of legal, accounting, or investment advice. Nothing contained in the course or in materials available for sale or download on the website provides legal, investment, or accounting advice in any way. You should consult with your own attorney, financial investment advisor, and accountant with any questions you may have. We assume no responsibility for any losses or damages resulting from your use of any information or opportunity contained within the course, on the related website, or within any information disclosed by the owner of the course and the website in any form whatsoever. Visit to review the complete earnings disclaimer and terms & conditions.

4 The Core 12 Financial Capability Curriculum is aligned with the Real Money Experience (RMX) Student Guide and the Virtual Learning Center. The student guide page numbers and PowerPoint Slide numbers are listed on the corresponding lessons and activities. To get addition RMX Student Guide Copies or increase your licenses for the virtual learning center, contact

5 Contents Lesson 1: Compounding Interest (motivation)... 6 Lesson 2: Dreams and Goals... 7 Lesson 3: Lets Learn to Budget (game)... 9 Lesson 4: Can I Afford that? (renting) Lesson 5: Can I Afford that? (automobile) Lesson 7: Compounding Interest (instruction) APPENDIX - Financial Literacy Pyramid. 25 APPENDIX - Financial Literacy Standards... 26

6 COMPOUND INTEREST Goal: To get participants interested in learning practical money skills. Resources: Student Guide page 139 Virtual Learning Center Investing section RMX PowerPoint slide 3 Ask students: Did you know that if you start saving and investing just $100* every month nothing complicated, just saving and making simple investments you could be a millionaire? o Listen to their thoughts. Hold up a $100 bill. Say: I worked hard for this $100. But let s say I invest this $100 and that $100 earns $10 in one year. Show a $10 bill. Say: I didn t have to work for this $10. Say: If I keep this money invested, next year I ll not only make money off the $100 I had to work for, but I ll also make money off the $10 I didn t have to work for. Who wants to make money without having to work? Raise your hand. Ask: Does anyone want to learn how to make money without having to work for it? Show of hands. Explain that this works according to the principles of compounding interest. Tell them you will show them later exactly how compounding interest works. Transition. Say: Before I demonstrate compounding interest, let s talk about what money is good for. If you had all the money you wanted, how would you spend it? What would you do? Listen to their ideas. Prompt if needed: Travel, help out your family, not work, play sports, shop, hang out with friends, concerts, parties. *Expressed in US Dollars. International organizations adjust $100 USD into your own currency.

7 DREAMS AND GOALS Goal: Students will understand the importance of setting personal goals. They will learn to connect the acquisition of solid money skills with successful goal achievement. Resources: Student Guide page 7 Virtual Learning Center Financial Psychology section RMX PowerPoint slide 9 Part I: Motivation Have students complete this assignment individually or divide them into groups of 3-4. Distribute poster board or scratch paper to each group or individual. Ask students to design a poster that completes the following statement: The most important thing money can provide me is. Tell students they may express themselves in any form they choose drawing, abstract expression, graphics, writing, or other methods. Give students or groups about minutes to design their posters. Write the word MOTIVATION on the board. Ask: What does this word mean to you? o Allow them to respond and write a few answers on the board. Then ask: Now think specifically about money. What motivates you to get money? o Write responses on the board. Say: Let s take that question a step further. Why do these things motivate you to obtain money? o Prompt with examples as needed: Does their mother motivate them so they can provide her with a better life? Does being affluent motivate them to stay that way? Are they motivated to work for more money so they can avoid living in poverty? o Allow time for discussion about what motivates students to get money and why.

8 After some discussion, ask: Is money itself the real motivator? Or is it what money can get you? Say: Your motivation to get money plays a factor in your overall financial success. Here are some examples of how financial skills impact your lives: o Certain lifestyle o Helping loved ones o Free time to do what you want o Positive effect on emotions (reduced stress and worry) o Making the world a better place to live Ask: What are some things you will miss out on if you don t handle your money situation? o Listen to their responses. So do we all agree that you need to know how to handle your money in order to do what you want and avoid a lot of the things you don t want to do? o Get their commitment. Say: The first step in handling your money situation positively is to set lifestyle and financial goals.

9 LET S LEARN TO BUDGET Goal: To build awareness of the importance of budgeting and to learn how to budget. Students will understand costs incurred with a car purchase and renting a home, and learn to budget these items accurately. Resources: Student Guide page 17 Virtual Learning Center Savings & Budget section RMX PowerPoint slide 12 Ask students: What percentage of lottery winners wastes all their winnings within a few years? o Wait for responses, and then tell them the answer: 70%. Ask: How many NBA and NFL players are broke or bankrupt within five years of retirement? o Wait for responses and tell them the answer: more than 60%. Say: People without money skills often make poor financial choices, regardless how much money they have. Explain: These statistics show how important it is to become financially literate. You don t want to be one of these statistics. No matter how much money you have, learning to budget makes a huge difference in your life. Explain that you ll be playing a budgeting game together to learn the importance of budgeting. Tell students that the game will help them build an understanding of how important budgeting is for your personal finances. Game Setup: Break students into groups of 3-4 and assign each group a Character Worksheet and a copy of the Character Lifestyle Guide. Explain that the objective of the game is to help the character reach his or her stated goal. Instruct students to have one person in the group read aloud the character s story. Have the group work together to adjust the character s lifestyle choices to meet his or her stated goals. Give students minutes to complete the story. Ask one person from each group read the character s story to the entire class.

10 Ask someone else from that group to share how they helped the character meet his or her financial goals. Open the class up for discussion after each group presents. Make notes on the board: key points, lifestyle choices, and other items of interest. When all presentations are finished, discuss the key points on the board. Characters Lifestyle Choices Guide Use figures from the guide below to help your characters accomplish their goals. HOUSING (includes monthly rent, water, and gas) $400 You get a small bedroom and share a bathroom with 2 other roommates. Your apartment is in a bad location and you don t feel safe when you get home late at night. $650 You have a few roommates and get the small bedroom but are able to enjoy your own bathroom. This is in a pretty good location and a short drive from a lot of the places where you want to hang out. $1200 You share a nice furnished loft at the center of town with a roommate. You have the master bedroom and when people come over they are impressed. CAR (Includes monthly payment, insurance, and gas) $300 Your car looks like a piece of junk, but it s paid for and gets you around. $500 You have a nicer-looking used car that gets good gas mileage. $900 You re turning heads with your ride and all your friends want to you to drive all the time. BASIC NEEDS $400 - This covers electric, Internet connection, cell phone, and really cheap food. A typical day s meal might include Mac & Cheese, Top Ramen, tuna, peanut butter & jelly sandwiches & tap water. You would have no money to eat out. $800 - This would cover your electric, Internet connection, cell phone, basic cable channels, and healthier food at home. You can eat out a few times a week. $1,400 -This covers your electric, Internet connection, cell phone, deluxe cable channels, home phone line, and good healthy food. You can eat out most meals and enjoy nicer meals from time to time. CLOTHING $50 You pick up a new piece of clothing every other month and have decent clothes for most occasions.

11 $175 You get one new complete outfit every month or two. $450 You get a new complete outfit with accessories every month. ENTERTAINMENT $100- You go out with friends a couple times a month. You and your friends try to find free or inexpensive things around town to do for fun. $200- You usually go out with friends to eat at least once a week. A typical weekend includes one activity with friends and a night at home playing games or watching videos. $300 You like to meet your friends after work for dinner. A typical weekend includes eating out with friends, a movie, and whatever activity is going on in your city (concert, festival, etc.) You are rarely home. TOYS $100 You don t buy a lot of new toys, but you like to buy new apps, music and games for those toys that you do have. $200 You like your toys, but try to limit your purchases to only a few each month. $300 You have to have all the latest gadgets. CREDIT CARD MINIMUM PAYMENTS $50 You only use your credit card for emergencies you can t cover with savings. $100 You don t buy anything with your credit card, but you used it for a vacation last year. $250 If you want it you get it. TRAVEL $100 - You do a little traveling, but usually stay in the homes of friends or family. $200 - You save up to take one big vacation a year. $300 - You and your friends try to do at least one mini-vacation every long weekend. You also save up for a big vacation every year. SAVINGS $50 You save a little here and there. $150 You save regularly each month $250 You keep your emergency fund high and also save for big purchases. GIVING BACK

12 $50 - You give small amounts when the opportunity presents itself; for example, when you run into girl scouts selling cookies. $100 - You give a little each month to charity. $200 You have become very successful and believe it is very important to pay it forward. You have a few charities you give to regularly. Character Worksheets Character: Carl Jobs: Office Mail Room & Pizza Delivery. Monthly Take-home Pay: $2,147 Carl is 23 years old. He likes to live large. He has a brand-new car, the latest clothes, and rents an expensive apartment. Although he appears wealthy, he has no money in the bank. He has $12,650 in credit card debt and has to work two jobs just to pay his bills. This month he is late on his car payment, so the credit card company has increased his minimum credit card payment. People in Carl s life are starting to become upset with him. He never has enough money to take his girlfriend out. When he goes out with friends, he never pays his fair share and they re getting tired of subsidizing him. He s taking a big risk because he has no medical or car insurance. If he gets sick or has an accident, he risks being sued and having money automatically deducted from his paycheck until the judgment is paid. Carl asked his employer for a raise, but was denied. He failed to graduate high school, so he cannot be promoted within his company. He works 65 hours a week: at an office mail room during the day and delivering pizzas at night. His gross pay is $3,520 per month but after taxes he only brings home $2,147 (rounded). Carl s goal: To pay off all his debt in one year and take a trip with his friends that will cost $1,000. Can you help? Income $3,520 Gross Pay Federal Tax (varies by income level) 25% State Tax (varies by state & income level) 6.35% FICA (Federal Insurance Contributions Act) 7.65% 39 % goes to taxes Take-home Pay - $2,147

13 Carl s Current Expenses Housing $1,200 Car (includes gas & insurance) $750 Needs (electricity, phone, basic food) $700 Clothes $400 Entertainment $100 Medical Insurance $0 Toys $0 Credit Card Debt $12,650; minimum payment $360 ($12,650 at 22% would need to make payments of $1,286 per month to pay it off in one year) Student Loan Debt $0 Travel $0 Friends & Family $0 Savings $0 Giving Back $0 Total Expenses $3,150 Take Home Income - $2,147 minus Total Expenses of -$3,150 = Carl is adding debt of - $1,002 (rounded) per month Character: Tonya Job: Sales Monthly Take-home Pay: $3,050 Tonya has a well-paying job in sales. She doesn t like her job much, but it pays the bills. She has always loved design and working with animals. She wishes she could be designing marketing material and advertisements for a nonprofit that helps abused animals. Tonya graduated from college with a Bachelor s Degree in Communications. Since high school, she has been volunteering once per month for a nonprofit that helps abused animals. Her resume for her dream job is not the strongest, but it would be good enough to get her an interview. To strengthen her chances of getting the job, she s practicing her interviewing skills with friends and creating marketing material to show potential employers. She recently interviewed for a position at a job she would love to have, but the pay is too low for her to pay her current bills. Her take home pay at the potential job would be only $2,750. Right now her gross income is $5,000 a month and she brings home $3,050 after taxes.

14 Tonya s Goal: To find a way to accept her dream job at the lower take-home rate and still meet her expenses. Can you help? Income $5,000 Gross Pay Federal Tax (varies by income level) 25% State Tax (varies by state & income level) 6.35% FICA (Federal Insurance Contributions Act) 7.65% 39 % goes to taxes Take-home Pay - $3,050 Tonya s Current Expenses Housing $800 Car (includes gas & insurance) $550 Needs (electricity, phone, basic food) $700 Clothes $400 Entertainment $500 Medical Insurance $75 Toys $200 Credit Card Debt $3,650; minimum payment $65 ($3,650 at 22% - $371 payments per month to pay it off in 1 year) Student Loan Debt $150 Travel $150 Friends & Family $200 Savings $0 Giving Back $50 Total Expenses $3,840 Take-home Income - $3,050 minus Total Expenses - Payments $3,840 = Tonya is adding debt of - $790 per month. Character: Tim Job: Brand Representative Take-home Pay: $1,625 Tim just graduated from college and has taken a job as a brand rep. He is into action sports and is working with a start up clothing company called Ethika. His pay is pretty low but he is able to travel around the country and go to all the surf, skate, moto, and snow contests. He makes $2,700 gross and takes home $1,625 after taxes. The

15 company also pays for his travel and food, covering about 10 days out of each month. Tim has built a reputation as a good worker and has developed a good network among people in the industry. He recently received an offer to rep for another company at the same time he works as a rep with Ethika. Tim has spoken with his boss, who said it was OK as long as it didn t take away time from his current job. The second job would give Tim additional take-home pay of $175 per month for only four extra work hours per week. Tim s Goal: To have 6 months of rent, car, needs, medical, and student loan debt in his savings account within one year. These expenses total $1,225 per month, so Tim needs a total of $7,350 saved. Currently he already has $5,900. Tim has met with many people and has asked a successful businessperson from his network to be his mentor. He thinks that once he starts his own business he can be earning $5,000 to $10,000 each month within a year. Can you help him meet his goal? Income $2,700 Gross Pay Federal Tax (varies by income level) 25% State Tax (varies by state & income level) 6.35% FICA (Federal Insurance Contributions Act) 7.65% 39 % goes to taxes Take-home Pay $1,625 Tim s Current Expenses Housing $400 Car (includes gas & insurance) $350 Needs (electricity, phone, basic food) $250 Clothes $0 Entertainment $100 Medical Insurance $75 Toys $50 Credit Card Debt $0 Student Loan Debt $150 Travel $0 Friends & Family $100 Savings $122 Giving Back $50 Total Expenses $1,625 = Tim has $0 money left over but is saving $122 each month and has the potential to earn another $175.

16 Character: Natasha Job: Manager Take-home Pay: $3,660 Natasha spent a year and a half working a low-paying entry-level job to build up the skills to get the job she always wanted. Next week she is starting her dream job. She will be managing a team of buyers for an import/export business. This new job pays her $6,000 per month gross and she will take home $3,660. Her medical insurance is paid, she has a company car, and she gets a company credit card so she can take clients out to eat many times a week. She will be able to travel the world all expenses paid. Although Natasha is a few years away from launching her own company, she has started to prepare now and is investing $200 per month in her future business. This early investment in her business has included expenses like seminars, books, and networking with like-minded people on social networking sites. Natasha s Goal: To save $5,000 in 10 months without touching her current savings and without taking any money away from starting a business. She plans to spend $1,000 to rent out a nightclub and have a party for her and her 2 best friends who all have birthdays in the same month. Income $6,000 Gross Pay Federal Tax (varies by income level) 25% State Tax (varies by state & income level) 6.35% FICA (Federal Insurance Contributions Act) 7.65% 39 % goes to taxes Take Home Pay $3,660 Natasha s Current Expenses Housing $1,400 Car (includes gas & insurance) $0 Needs (electricity, phone, basic food) $800 Clothes $0 Entertainment $300 Medical Insurance $0 Toys $200 Credit Card Debt $0 Student Loan Debt $220 Travel $0 Friends & Family $200 Savings $190

17 Giving Back $150 Starting a Business $200 Total Expense $3,260 Take Home Income $3,660 minus Total Expenses $3,260 = Natasha has $400 left over each month and is investing in her business & saving $190 per month. Character: Vince Job: Sales Total Income $9,220 Vince is a top salesperson and works with a lot of his friends. He is making $14,000 per month and brings home $8,120. He loves his job. He and his friends go out most weekends to have fun and entertain people they want to do business with. They get VIP tables, limos, concert tickets and tickets to sporting events to build their business contacts and deepen their relationship with current clients. He likes to have a good time but living on the beach of Costa Rica is his true dream Vince s Goal: To save enough to purchase another rental property within one year. He needs to save another $30,000 to meet his goal. Once he buys the property, he will have an additional monthly cash flow of $300. His long-term goal is to have investment income of $4,500 per month and move to Costa Rica, where he can live off his investment income alone, and maybe start some type of part-time business to make extra income. Income $14,000 Gross Pay Federal Tax (varies by income level) 28% State Tax (varies by state & income level) 6.35% FICA (Federal Insurance Contributions Act) 7.65% 42 % goes to taxes Take-home Pay $8,120 Other Income Cash flow from investments $1,100

18 Total income $9,220 Housing $1,400 Car (includes gas & insurance) $750 Needs (electricity, phone, basic food) $1,200 Clothes $200 Entertainment $1,900 Medical Insurance $75 Toys $500 Credit Card Debt $0 Student Loan Debt $100 Travel $400 Friends & Family $600 Savings $995 Giving Back $500 Continuing education $600 Total Expenses $9,220 Take Home Income $8,120 Investment Income $1,100 - minus total expense $9,220 = Vince is able to save $995 per month and have a good amount of money he can spend on fun. Character: Maria Job: Business Owner Take-home Pay: $17,040 Maria started a catering company in high school and now she is making $24,000 per month. Because she is a business owner and has a good accountant, she legally pays less in taxes (only 29%) and brings home $17,040 each month. She likes the finer things in life and her closet is filled with clothes she s never worn. She is impulsive and does not plan for her purchases. If she likes it, she buys it she never looks for sales or discounts. She often travels last-minute and pays a lot more because she doesn t book tickets in advance. Maria s Goal: To get out of debt this year, have $10,000 saved for emergencies, and another $5,000 to invest in new equipment for her business. The new equipment will generate additional revenue of $2,400 per month.

19 Income $24,000 Gross Pay Federal Tax (varies by income level) 15% State Tax (varies by state & income level) 6.35 & FICA (Federal Insurance Contributions Act) 7.65% 29 % goes to taxes Take Home Pay $17,040 Maria s Current Expenses Housing $3,600 Car (includes gas & insurance) $1,250 Needs (electricity, phone, basic food) $2,100 Clothes $1,700 Entertainment $2,700 Medical Insurance $400 Toys $2,800 Credit Card Debt $35,600; minimum payments $712 ($35,600 at 22% = $3,471 payments per month to pay it off in 1 year) Student Loan Debt $700 Travel $2,500 Friends & Family $600 Savings $0 Giving Back $150 Total Expenses $16,512 Take-home Income $17,400 - minus total expense $16,512 = Maria has an extra $888 per month but she doesn t know where that money goes. Personal Budget Plans Now students will be asked to complete personal budgets: one mapping out their current situation and a second one reflective of life after college graduation. Have students complete their own personal budget plans under the current column. Using the figures below (included in their student guide), have students create a future sample budget using the figures from the characters lifestyle choices provided at the beginning of this section.

20 Use figures from the guide below to help your characters accomplish their goals. HOUSING (includes monthly rent, water, and gas) $400 You get a small bedroom and share a bathroom with 2 other roommates. Your apartment is in a bad location and you don t feel safe when you get home late at night. $650 You have a few roommates and get the small bedroom but are able to enjoy your own bathroom. This is in a pretty good location and a short drive from a lot of the places where you want to hang out. $1200 You share a nice furnished loft at the center of town with a roommate. You have the master bedroom and when people come over they are impressed. CAR (Includes monthly payment, insurance, and gas) $300 Your car looks like a piece of junk, but it s paid for and gets you around. $500 You have a nicer-looking used car that gets good gas mileage. $900 You re turning heads with your ride and all your friends want to you to drive all the time. BASIC NEEDS $400 - This covers electric, Internet connection, cell phone, and really cheap food. A typical day s meal might include Mac & Cheese, Top Ramen, tuna, peanut butter & jelly sandwiches & tap water. You would have no money to eat out. $800 - This would cover your electric, Internet connection, cell phone, basic cable channels, and healthier food at home. You can eat out a few times a week. $1,400 -This covers your electric, Internet connection, cell phone, deluxe cable channels, home phone line, and good healthy food. You can eat out most meals and enjoy nicer meals from time to time. CLOTHING $50 You pick up a new piece of clothing every other month and have decent clothes for most occasions. $175 You get one new complete outfit every month or two. $450 You get a new complete outfit with accessories every month. ENTERTAINMENT $100- You go out with friends a couple times a month. You and your friends try to find free or inexpensive things around town to do for fun. $200- You usually go out with friends to eat at least once a week. A typical weekend includes one activity with friends and a night at home playing games or watching videos.

21 $300 You like to meet your friends after work for dinner. A typical weekend includes eating out with friends, a movie, and whatever activity is going on in your city (concert, festival, etc.) You are rarely home. TOYS $100 You don t buy a lot of new toys, but you like to buy new apps, music and games for those toys that you do have. $200 You like your toys, but try to limit your purchases to only a few each month. $300 You have to have all the latest gadgets. CREDIT CARD MINIMUM PAYMENTS $50 You only use your credit card for emergencies you can t cover with savings. $100 You don t buy anything with your credit card, but you used it for a vacation last year. $250 If you want it you get it. TRAVEL $100 - You do a little traveling, but usually stay in the homes of friends or family. $200 - You save up to take one big vacation a year. $300 - You and your friends try to do at least one mini-vacation every long weekend. You also save up for a big vacation every year. SAVINGS $50 You save a little here and there. $150 You save regularly each month $250 You keep your emergency fund high and also save for big purchases. GIVING BACK $50 - You give small amounts when the opportunity presents itself; for example, when you run into girl scouts selling cookies. $100 - You give a little each month to charity. $200 You have become very successful and believe it is very important to pay it forward. You have a few charities you give to regularly.

22 CAN I AFFORD THAT? Goal: Students will build an understanding of the costs that are incurred with the purchase of a car and then determine the affordability. Resources: Student Guide page 49, 55 Virtual Learning Center Investing section RMX PowerPoint slide 15 Ask students: When you hear the dollar amount listed on the advertisements to rent an apartment, do you think that amount represents the only expense you would have for that apartment? Explain that when you purchase or rent a house/apartment, there are a number of expenses that you must pay each month, in addition to the rent or mortgage. Write the following expenses on the board. Explain each term to the students: o Electricity o Gas to heat the space and the water o Water, sewer, and trash o Cable TV and Internet o Repairs o Renter s insurance insures your personal belongings in the apartment o Furniture/appliances if you have no furniture or hand-me-downs you will have to purchase them Gas Car Insurance Registration break down into monthly payments Maintenance Explain the BBB philosophy: Budget Before Buying. Always budget and include all the costs of purchasing something before you buy it. This is especially important when buying a car, renting a place to live, or when purchasing a home.

23 COMPOUND INTEREST (Part 2) Goal: Students will understand compound interest and its benefits for investment. Resources: Student Guide page 139 Virtual Learning Center Investing section RMX PowerPoint slide 18 Ask: Remember when we started I said I would show you how $100 a month grows into a million? Explain, now that you know about good credit, you will be able to save more than $100 a month in the future. Explain, you already know if you start saving and investing $100 per month before you re 21 you have a good chance of becoming a millionaire. o Listen to their thoughts. Explain that this happens as a result of something called compounding interest. o Explain that compounding interest allows money to grow. The younger one starts, the larger the money can grow. Have students take out their calculators and go through the following example. o Example: Tell them if you invest $10,000 and you just earn a return of 10% per year, you would have made $1,000. Explain how to do this on a calculator 10,000 times.10 = $1,000: that is how much you earned. Now if you want to calculate how much you have in your account, multiply $10,000 by 1.1 and you see $11,000. Now calculate how much you would make if you earned 10% a year off your $10,000 investment for 15 years and round it to the nearest dollar Answer: $41,772. This is the beginning of investing. Understanding this principle will be helpful when they begin investing later. Explain that compound interest is powerful because you earn interest on the money you initially saved or invested, and then as you earn interest, the interest money earns interest as well. At some point you will double your money with minimal work from you. Teach them this simple formula to figure out when their money will double: o The rule of 72 says to divide the interest rate you re receiving on an investment by 72 and the answer tells you how many years it will take for that money to double. The earlier you save for retirement, the better chance your money has to double.

24 Write this example on the board: If you have 10,000 in savings and earn a 10% interest rate, your money will double in 7.2 years. Ask them how much money they will have in 49 years when they retire? Give them a few minutes to work it out. Answer: $1,067,000. So if you invest just $10,000 and don t touch it until you retire, you could retire as a millionaire. If you put the same money in the bank you will earn a much lower interest rate; let s say 5%. So using the rule of 72 how long will it take to double your $10,000? Right, 14 years. How much will you have in 49 years when you retire? $109,000. If you put your $10,000 in your piggy bank at 0% interest how much will you have when you retire? $10,000. Write on the board If you start investing $100 per month before you are 21, you have an excellent chance of becoming a millionaire. Then ask what they would like to do with their million bucks. Finally ask what they will start doing immediately to get there. CLOSING Give them heartfelt encouragement and wish them the best.

25 APPENDIX FINANCIAL LITERACY PYRAMID Through partnerships with professionals, educators and business leaders the NFEC has created comprehensive and practical financial literacy standards. The NFEC s financial literacy pyramid highlights the key areas covered in the standards and within the curriculum. The NFEC s financial literacy pyramid has been evolving since 2008 and will continue to evolve along with the trends in the economy. The 2010 financial education pyramid reflects categories included in the NFECs Financial Literacy Curriculum and are designed with an education and practical use in mind. The standards and corresponding financial education pyramid features ten areas that feature key topics included within the lesson plans. These lessons are covered in detail in our Certified Financial Education Instructor training. Learn more about the NFEC s Standards, training and curriculum by visiting 79

26 APPENDIX - STANDARDS Financial Psychology NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Psychology, Standard 1: Understand the impact and motivation for money in life and develop the ability to identify and recognize the emotions involved in making financial decision. Psychology, Standard 2: Understand and recognize one s personal relationship and thoughts about money to build financial literacy. Psychology, Standard 3: Demonstrate an understanding regarding personal choices and how these feelings affect financial well being, as well as other areas of their life. Develop the ability to recognize and identify these choices through various examples. Psychology, Standard 5: Develop personal financial and lifestyle goals to successfully recognize the importance of maintaining said goals to become literate in the area of finances. Psychology, Standard 6: Identify lifestyle choices to show there direct or indirect relation to money. Psychology, Standard 8: Recognize the importance of becoming a good steward of money and how this correlates to long-term financial well-being. Psychology, Standard 9: Demonstrate necessary responsible traits needed to establish and maintain of financial well-being over a lifetime. Psychology, Standard 10: Understand and recognize how personal financial decisions can impact one s life and the community. Jump $tart Standards: Planning and Money Management, Standard 1: Develop a plan for spending and saving. Planning and Money Management, Standard 6: Develop a personal financial plan. Financial Responsibility and Decision Making, Standard 1: Take responsibility for personal financial decisions. Financial Responsibility and Decision Making, Standard 5: Develop communication strategies for discussing financial issues. 80

27 National Council for Teachers of English Standards: Standard #4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. Standard #3: Students apply a wide range of strategies to comprehend, interpret, evaluate, and appreciate texts. They draw on their prior experience, their interactions with other readers and writers, their knowledge of word meaning and of other texts, their word identification strategies, and their understanding of textual features (e.g., sound letter correspondence, sentence structure, context, graphics). Let s Learn to Budget NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Accounting and Budgeting, Standard 1: Develop an understanding and identify the importance of budgeting to achieve personal financial and lifestyle goals. Accounting and Budgeting, Standard 6: Demonstrate proficiency in the importance of maintaining a personal budget that reflects one s current or future financial situation. Accounting and Budgeting, Standard 8: Demonstrate an ability to identify common spending traps and understand how to live within your means. Jump $tart Standards: Financial Responsibility and Decision Making, Standard 1: Take responsibility for personal financial decisions. Financial Responsibility and Decision Making, Standard 5: Develop communication strategies for discussing financial issues. Planning and Money Management, Standard 1: Develop a plan for spending and saving. Planning and Money Management, Standard 2: Develop a system for keeping and using financial record. National Council of Teachers of Mathematics: Number Sense, Standard 1 (6th 8th): Understand numbers, ways of representing numbers, relationships among numbers, and number systems. 81

28 Number Sense, Standard 2 (6th 8th): Understand meanings of operations and how they relate to one another. National Council of Teachers of English Standards: Standard 3: Students apply a wide range of strategies to comprehend, interpret, evaluate, and appreciate texts. They draw on their prior experience, their interactions with other readers and writers, their knowledge of word meaning and of other texts, their word identification strategies, and their understanding of textual features (e.g., soundletter correspondence, sentence structure, context, graphics). Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. Banking Essentials NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Accounting and Budgeting, Standard 8: Demonstrate an ability to identify common spending traps and understand how to live within your means. Accounting and Budgeting, Standard 9: Demonstrate proficiency in basic banking procedures, specifically in account set up, management and automation of finances. Jump $tart Standards: Financial Responsibility and Decision Making, Standard 1: Take responsibility for personal financial decisions. Financial Responsibility and Decision Making, Standard 5: Develop communication strategies for discussing financial issues. Credit and Debt, Standard 1: Identify the costs and benefits of various types of credit. Credit and Debt, Standard 2: Explain the purpose of a credit record and identify borrowers credit report rights. National Council of Teachers of Mathematics: Number Sense, Standard 1 (6th 8th): Understand numbers, ways of representing numbers, relationships among numbers, and number systems. 82

29 Number Sense, Standard 2 (6th 8th): Understand meanings of operations and how they relate to one another. National Council of Teachers of English Standards: Standard 3: Students apply a wide range of strategies to comprehend, interpret, evaluate, and appreciate texts. They draw on their prior experience, their interactions with other readers and writers, their knowledge of word meaning and of other texts, their word identification strategies, and their understanding of textual features (e.g., soundletter correspondence, sentence structure, context, graphics). Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. Credit History NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Credit & Debit, Standard 1: Understand the importance of building a positive credit history. Credit & Debit, Standard 2: Demonstrate proficiency in reading a credit report and an understanding of how a credit report can impact financial wellbeing. Credit & Debit, Standard 3: Identify and recognize key elements that impact a credit score, as well as the organizations that maintain credit information. Credit & Debit, Standard 4: Understand how to build a positive credit history and improve credit scores. Jump $tart Standards: Credit and Debt, Standard 2: Explain the purpose of a credit record and identify borrowers credit report rights. Credit and Debt, Standard 3: Describe ways to avoid or correct debt problems. National Council for Teachers of English Standards: Standard 3: Students apply a wide range of strategies to comprehend, interpret, evaluate, and appreciate texts. They draw on their prior experience, their interactions with other readers and writers, their knowledge of word meaning and of other texts, their 83

30 word identification strategies, and their understanding of textual features (e.g., soundletter correspondence, sentence structure, context, graphics). Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. What is Credit? NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Credit and Debt, Standard 2: Demonstrate proficiency in reading a credit report and an understanding of how a credit report can impact financial wellbeing. Credit and Debt, Standard 4: Understand how to build a positive credit history and improve credit scores. Credit and Debt, Standard 9: Build an in-depth understanding of the various types of debt and differentiate between positive and negative debt. Credit and Debt, Standard 16: Apply systematic decision making to evaluate loan options within various products, such as; student loans, automobile loans, home loans and credit cards. Jump $tart Standards: Credit and Debt, Standard 1: Identify the costs and benefits of various types of credit. Credit and Debt, Standard 3: Describe ways to avoid or correct debt problems. National Council of Teachers of Mathematics Standard: Problem Solving Standard: Instructional programs from prekindergarten through grade 12 should enable all students to 1. Build new mathematical knowledge through problem solving; 2. Solve problems that arise in mathematics and in other contexts; 3. Apply and adapt a variety of appropriate strategies to solve problems; 4. Monitor and reflect on the process of mathematical problem solving. Number Sense Standard 1 (6th 8th): Understand numbers, ways of representing numbers, relationships among numbers, and number systems. Number Sense Standard 2 (6th 8th): Understand meanings of operations and how they relate to one another. 84

31 National Council for Teachers of English Standard: Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. Car Loans NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Credit and Debt, Standard 1: Understand the importance of building a positive credit history. Credit and Debt, Standard 11: Understand how lenders qualify potential borrowers. Credit and Debt, Standard 16: Apply systematic decision making to evaluate loan options within various products, such as; student loans, automobile loans, home loans and credit cards. Jump $tart Standards: Financial Responsibility and Decision Making, Standard 1: Take responsibility for personal financial decisions. Financial Responsibility and Decision Making, Standard 5: Develop com-munication strategies for discussing financial issues. Credit and Debt, Standard 1: Identify the costs and benefits of various types of credit. Credit and Debt, Standard 2: Explain the purpose of a credit record and identify borrowers credit report rights. National Council of Teachers of English Standards: Standard 3: Students apply a wide range of strategies to comprehend, interpret, evaluate, and appreciate texts. They draw on their prior experience, their interactions with other readers and writers, their knowledge of word meaning and of other texts, their word identification strategies, and their understanding of textual features (e.g., soundletter correspondence, sentence structure, context, graphics). Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. 85

32 Loan Management NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Credit and Debt, Standard 11: Understand how lenders qualify potential borrowers. Credit and Debt, Standard 16: Apply systematic decision making to evaluate loan options within various products, such as; student loans, automobile loans, home loans and credit cards. Jump $tart Standards: Financial Responsibility and Decision Making, Standard 1: Take responsibility for personal financial decisions. Credit and Debt, Standard 1: Identify the costs and benefits of various types of credit. Credit and Debt, Standard 2: Explain the purpose of a credit record and identify borrowers credit report rights. National Council of Teachers of English Standards: Standard 3: Students apply a wide range of strategies to comprehend, interpret, evaluate, and appreciate texts. They draw on their prior experience, their interactions with other readers and writers, their knowledge of word meaning and of other texts, their word identification strategies, and their understanding of textual features (e.g., soundletter correspondence, sentence structure, context, graphics). Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. Identifying Passions NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Income, Standard 1: Understand how economic and social trends can affect career and income potential. Income, Standard 2: Identify and recognize passions and strengths to locate potential career options that align with said passions and strengths. Income, Standard 3: Develop a plan for acquiring skills and necessary experience to achieve career goals. 86

33 Jump $tart Standards: Income and Careers, Standard 1: Explore career options. Income and Careers, Standard 2: Identify sources of personal income. National Council for Teachers of English Standards: Standard 1: Students read a wide range of print and non-print texts to build an understanding of texts, of themselves, and of the cultures of the United States and the world; to acquire new information; to respond to the needs and demands of society and the workplace; and for personal fulfillment. Among these texts are fiction and nonfiction, classic and contemporary works. Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. Prepare for Your Dream Job Today! NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Skill Development, Standard 3: Develop a plan for acquiring skills and necessary experience to achieve career goals. Skill Development, Standard 9: Posses the ability to set skill development goals and a timeline to build identified skill sets. Jump $tart Standards: Financial Responsibility and Decision Making, Standard 1: Take responsibility for personal financial decisions. Income and Careers, Standard 1: Explore career options. Income and Careers, Standard 2: Identify sources of personal income. National Council of Teachers of English Standards: Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. 87

34 Why People Invest NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Investing, Standard 1: Develop an understanding about what investing is and its relationship to ones financial goals. Investing, Standard 2: Understand of basic investment principles. Investing, Standard 3: Identify and understand the risk and reward potential of a variety of investment options. Investing, Standard 4: Understand basic investment strategies and techniques to increase long-term financial security. Investing, Standard 5: Develop knowledge of the steps necessary to make informed investment decisions. Jump $tart Standards: Financial Responsibility and Decision Making, Standard 5: Develop communication strategies for discussing financial issues. National Business Education Association Standards: Communication, Standard 2: Societal Communication, Apply basic social communication skills in personal and professional situations. Communication, Standard 1: Foundations of Communication Communicate in a clear, complete, concise, correct, and courteous manner on personal and professional levels. National Council of Teachers of Mathematics Standards: Number Sense, Standard 1 (6th 8th): Understand numbers, ways of representing numbers, relationships among numbers, and number systems. Number Sense, Standard 2 (6th 8th): Understand meanings of operations and how they relate to one another. Number Sense, Standard 11 (6th 8th): select appropriate methods and tools for computing with fractions and decimals from among mental computation, estimation, calculators or computers, and paper and pencil, depending on the situation, and apply the selected methods. National Council for Teachers of English Standards: 88

35 Standard 4: Students adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. Cash Flow NATIONAL FINANCIAL EDUCATORS COUNCIL S Standards: Long-Term Planning, Standard 1: Demonstrate an understanding of how cash flow and net worth impact one s long-term planning. Long-Term Planning, Standard 2: Understand and identify the factors that impact ones net worth and cash flow. Long-Term Planning, Standard 3: Demonstrate the ability to calculate ones net worth and/or cash flow necessary to live a desired lifestyle. Jump $tart Standards: Financial Responsibility and Decision Making, Standard 5: Develop communication strategies for discussing financial issues. Savings and Investing, Standard 1: Discuss how saving contributes to financial wellbeing. Savings and Investing, Standard 2: Explain how investing builds wealth and helps meet financial goals. National Council of Teachers of Mathematics Standards: Number Sense, Standard 1 (6th 8th): Understand numbers, ways of representing numbers, relationships among numbers and number systems. Number Sense, Standard 2 (6th 8th): Understand meanings of operations and how they relate to one another. Number Sense, Standard 11 (6th 8th): Select appropriate methods and tools for computing with fractions and decimals from among mental computation, estimation, calculators or computers, and paper and pencil, depending on the situation and apply the selected methods. 89