knowing what you need to know to achieve your financial goals
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Financial Literacy:Knowing What You Need To Know To Achieve Your Financial Goals
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America’s financial literacyAmerican 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 1989.
- In 2003, 1.6 million Americans filed for bankruptcy – the highest amount in history.
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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
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What is Financial Literacy?What is Financial Literacy?
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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
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Achieving financial literacy
• Five Key Areas of Personal Finance:- Money and income- Money management- Spending and debt- Savings and investments- Risk management
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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?
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Money management
• Budgeting• Prioritizing
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Spending and debt
• Benefits and costs of spending alternatives• Credit as a basic financial tool
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Savings and investing
• Saving means not spending money.• Investing means that you earn a return on
the money you put into it.
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Risk management
• Insurance• Understanding the markets
- 50% of Americans own stocks• Identity theft
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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.
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.
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Creating your first overall long-term financial plan
Creating your first overall long-term financial plan
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Buying your first home• Establish good credit• Understand “real costs”• Assess risks
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Getting married
• Understand “financial partnership”• Establish separate and joint credit and bank
accounts• Create wills and trusts• Identify beneficiaries• Choose owners on title assets
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Financing a family
• Budget- Education, health care, child care
• Manage risk, insurance• Create wills• Instill financial literacy
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Starting a business
• Understand - cash flow- expense timing
• Manage income and expenses
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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.
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Preparing a will
• Designate beneficiaries• Determine asset distribution• Identify insurance
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Unexpected milestones
• Loss• Sandwich generation• Divorce
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Financial literacy education
• Lifelong learning courses• Financial media• Internet resources• Your CPA
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For more information
www.360financialliteracy.org features financial education to help consumers at every life stage.
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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
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