boot camp overview and activities felker award workshop-neafcs-09-11

Dean Don Felker Award Presentation Financial Education Boot Camp:

Overview and Learning Activities

Barbara O’Neill, Ph.D., CFP®Rutgers Cooperative Extension

oneill@aesop.rutgers.edu

Background Data: Council for Economic Education Survey of the States (2009)

• 13 states require a personal finance course as a graduation requirement (7 states in 2007)

• 34 states require implementation of personal finance content standards (28 in 2007)

• 2008-2009 financial crisis called attention to consequences of personal finance knowledge and skills

– NJ “perfect storm” for financial education

Jump$tart Financial Literacy SurveysJump$tart Financial Literacy Surveys Performance TrendsPerformance Trends

1997

57%

2000

51.9

%

2002

50.2

%

2004

52.3

%

2006

52.4

%

0

20

40

60

80

100

2008 average score: 48.3%!!!

Background Data: Way & Holden Study of Teachers’ Capacity to Teach Personal Finance

• Published in JFCP (2009, Volume 20, Issue 2): http://www.afcpe.org/publications/journal- articles.php?volume=384&article=369

• Online survey of K-12 teachers in 8 states (N = 504)

• Little formal education in personal finance

• YET…formal education is significant predictor of teachers’ perceived competence to teach personal finance

• Limited perceived preparedness in both subject matter and pedagogy (i.e., content and methods)

• Greatest hesitancy: insurance and saving/investing

Way & Holden Study Conclusion

“One of the main implications of this study is that there is a great need to expand personal finance educational opportunities for pre-service and in- service teachers in order to meet both their personal and professional needs.”

Enter Financial Education Boot Camp• Funded through NJ Coalition For Financial Education in

cooperation with Rutgers Cooperative Extension• Funders to date: Citi, NJ Credit Union Foundation, and

Council For Economic Education• Seeking funding for online Boot Camp in 2012

• Methods and impacts will be discussed in second workshop

• This workshop will describe four subject matter content learning activities from BC I and BC II

Financial Education Boot Camp

• Boot Camp Definition (Webster’s): “A short concentrated period of intensive training prior to assuming new roles, responsibilities, and/or challenges.”

• Includes both content and methods

Boot Camp Goals

1. Review personal finance content to improve subject matter knowledge

Increased knowledge and skills = better teaching!

2. Share activities, strategies, and resources to teach personal finance/financial literacy

3. Provide helpful information for personal use

4. Increase confidence to teach personal finance

Key Point: Teachers Don’t “Sit” Well

• Keep Boot Camp content lectures short (75 minutes max)

• 75% of Boot Camp is discussion or small group activities

• Provide opportunities for teachers to seek information (from free curricula, books, etc.) and teach each other

Intensive Small Group Learning Activities After Content Presentation

Boot Camp I (BASIC)

• Day 1- PowerPoint Jeopardy!-Style Game

• Day 2- PowerPoint “Millionaire”-Style game

Teachers together work in “cabins”

Boot Camp II (Advanced)

• Day 1- Time Value of Money Problems

• Day 2- Financial Case Study Analysis

100 100

200

300

400

500

100100 100 100100 100 100 100

200 200 200 200

300 300 300 300

400 400 400 400

500 500 500 500

100 100 100

The Time Value of Money Saving and InvestingTax Forms and Returns Tax Deductions and Credits Insurance

Game Developed by Boot Camp Participants

The Answer is:

Date that most U.S. individual income tax filings are due.

The Question is:

What is April 15?

The Answer is:

The person with more money: Barack who has $1 million and George W. who has 1cent (i.e., a penny) at the start of the month and doubles this amount for 30 straight days.

The Question is:

Who is George W. ?

151413121110987654321

$1 Million$500,000$250,000$125,000$64,000$32,000$16,000$8,000$4,000$2,000$1,000$500$300$200$100

The Personal Finance

Millionaire Game

50:50

151413121110987654321

$1 Million$500,000$250,000$125,000$64,000$32,000$16,000$8,000$4,000$2,000$1,000$500$300$200$100

A: Food

C: Clothing

B: Car payment

D: Gas

50:50

151413121110987654321

$1 Million$500,000$250,000$125,000$64,000$32,000$16,000$8,000$4,000$2,000$1,000$500$300$200$100

Which of the following is a fixed expense?

151413121110987654321

$1 Million$500,000$250,000$125,000$64,000$32,000$16,000$8,000$4,000$2,000$1,000$500$300$200$100

50:50

151413121110987654321

$1 Million$500,000$250,000$125,000$64,000$32,000$16,000$8,000$4,000$2,000$1,000$500$300$200$100

A: Origination fee

C: APY

B: FICO

D: APR

Which of the following is NOT a term related to credit?

YOU WIN $1 MILLION DOLLARS!

Basic Personal Finance

PowerPoint

Millionaire

Game

Question 1 for $100

Which of the following is a fixed expense in a family budget?

A. Car payment

D. GasolineC. Clothing

B. Food

50:50

Ask the Audience

Raise your hand for the letter of your choice when your teacher asks you to.

Phone a Friend!

Which student in class

would you like to ask for help?

I’m Sorry!

That is not the correct answer!

The Time Value of Money

• Changes in an amount of money as a result of interest earned.

• Saving today means more money tomorrow.

• 4 types of time value calculations

– Future value of a single amount (lump sum)

– Future value of a series of deposits (annuity)

– Present value of a single amount (lump sum)

– Present value of a series of deposits (annuity)

Key Variables in TV of Money Problems

• N- Number of compounding periods

• % i- Interest rate (for compounding FV or discounting PV)

• PV

• FV• For annuity calculations, periodic deposits or withdrawals

– Enter 3 known variables; solve for the 4th (unknown) variable

Future Value of a Lump Sum Example

Future Value (FV)–Value of an asset at the end of a particular time period.

?Example: Value of $1,000 in 4 years at 8% interest

FVF (8%, 4 years) = 1.360

1,000 x 1.3605 = $1,360

Future Value of an Annuity Example

FV of an Annuity (FVOA)- What principal will grow to over time if a series of regular deposits are made.

Example: $2,000 annual deposits to Roth IRA at 8% interest for 40 years from age 22 to 62 = $518,120

FVOA (8%, 40 years) = 259.060

$2,000 x 259.060

?

Present Value of a Lump Sum Example

Present/Discounted Value (PV)–Current value of an asset that will be received in the future.

Example: Today’s value of a $25,000 inheritance to be received in 10 years, assuming the principal earns an 8% average annual return.

PV (8%, 10 years) = 0.463

$25,000 x 0.463 = $11,575

Present Value of an Annuity Example

PV of an Annuity (PVOA)- Present value of a stream of payments to be received in the future.

Example: The amount to have invested at retirement to provide $30,000 of income per year for 20 years with a 7% return = $317,820

PVOA (7%, 20 years) = 10.594

$30,000 x 10.594

Problem #1

Your first “real” job pays $32,000 a year to start. How much will you need to be earning in 20 years to maintain the same purchasing power if inflation averages

3%?

4%?

5%?

Problem #10

Your grandparents, both age 62, have a retirement fund of $100,000 saved to supplement their pension and Social Security. Assuming an average annual interest rate of 7%, how long will the fund last if they withdraw $750 per month? What would you advise them to do?

NOW create and solve your own PERSONAL time value of money problem and share it with your cabin.

Group Case Study Analysis

• Choice of 10 case studies

• Small group review and analysis of cases

• Presentation to total group

• Application of content

Wrap Up• Learn more about Boot Camp methodology and impact

in Workshop #2 (Thursday, 2 pm)

• Used pre- and post-tests to measure knowledge gains

• CDs for four learning activities are available