PERSONAL FINANCIAL LITERACY

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1 Beginning strains of Pink Floyd s Money here NEW CAR, CAVIAR, FOUR STAR DAYDREAM, THINK I'LL BUY ME A FOOTBALL TEAM PERSONAL FINANCIAL LITERACY

2 Money Get back I'm all right Jack Keep your hands off my stack! PINK FLOYD How many of you want to be rich? (elicit responses. Why? How?) How many of you think you will strike it rich in the lottery? (Talk about odds) How many of you would settle for not having to worry about money so much? (go to next slide)

3 Unfortunately, you still have to worry about money no matter how much you make. Whether you are a migrant farmer from the Depression, a modern-day carpenter, or future yacht owner. But, you can start saving a little bit now for things that might happen down the road, and get paid (a little) for doing it.

4 GET A GOOD JOB WITH MORE PAY AND YOUR O.K. ALL ABOUT SAVINGS Part 1 of today s lesson is about savings. What are savings? (Helps us prepare for future financial goals) What would be some financial goals? How can we save money? Where can we put our money to where it will be safe? (Alternately, why don t we walk around with cash briefcases?)

5 ALL ABOUT SAVINGS Bank/Credit Union Standard Savings Account Money Market Accounts Certificate of Deposit (CD) FDIC/NCUA Banks are owned by shareholders to profit from their customers (more on these terms later) Credit Unions are owned by the members (you) and put their profits back into the CU. Sav. Acct. - The bank/cu pays you (a little) for letting them hold your money. MM - In return for a larger deposit (say $500 or $1000), they will give you a little more. CD - In return for letting them hold onto your money for a set period of time (1,2, 5 years), the bank will give you even more money FDIC/NCUA - Each depositor is insured for up to $250k in case of bank failure. (Illustrate bank failures of ) So, what is it called when the bank pays us to hold our money?

6 I N T E R E S T The bank pays you interest to hold your money. Currently, they pay about 1%, meaning for every $100 you have, they will give you $1 per year. Money Markets and CD s pay out more, up to 2.5% Why is a bank paying you to use your money? (So they can use it for home loans, car loans, etc.) There is something magical about interest, though

7 Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it. ATTRIBUTED TO ALBERT EINSTEIN What is compound interest? Compound interest can be thought of as interest on interest, and will make a deposit grow at a faster rate.

8 This video will quickly explain the concept of compound interest.

9 SAVINGS/ CALCULATORS.PHTML Savings Growth Projector Annual Yield Calculator Compound Interest Calculator Activity: We are going to play with some calculators for a few minutes to see how saving can work for us. (Demonstrate the calculator first, then let them play. Have a few report their findings.) End: So we ve seen how we can make some money using savings. How about we find a way to make even more money.

10 GRAB THAT CASH WITH BOTH HANDS AND MAKE A STASH INVESTING IN YOU So we ve seen what a simple savings account can do, but now it s time to see what big time investing using stocks, bonds, and mutual funds can help us be better prepared for life s curveballs. Investing is big business. There are entire newspapers, TV channels, and book sections devoted to investing. It generates lots of income for banks and brokerage firms. There is a reason why the biggest buildings in a city house the investing firms (examples in Charlotte and NYC)

11 Money It's a crime Share it fairly But don't take a slice of my pie! PINK FLOYD Have class raise hands to see if they know stocks, bonds, mutual funds, index funds. See if anyone can explain them.

12 INVESTING IN YOU Stocks Bonds Mutual Funds Index Funds Stock Exchange Stocks are shares (parts) of a company. If you own a stock, you own part of the company (and can vote). The more shares you own, the more voting power you have. (Use example) Bonds let you lend money to company (or government) for set period of time in return for fixed (stays the same) interest rate. (Use example) Mutual Funds let you buy into a group of stocks & bonds. They are managed by a person, who tries to get the best return (profit). (You pay them a fee for this) Index Funds are like mutual funds, but they are usually managed by computer. Therefore, the fee is cheaper. A Stock Exchange is where stocks are bought, sold, & traded. In the US, the main exchanges are the NYSE and the NASDAQ.

13 Insert video here Now here is a short video that shows how it all works together. Pause for questions after the video.

14 COMMON WAYS TO INVEST Individually / Broker 401K / 403B Roth IRA You can invest individually through a broker. Online brokers are cheaper (like $6 a trade), full service brokers are more (for really rich) Most companies use a 401K as a retirement plan. You put in a little money each month, and the company matches half of it. It goes into certain mutual/ index funds. Benefit of 401K is that you don t pay taxes until you take it out (at 60y). Roth IRA (Indiv. Ret. Acct.) lets you put money into an account, and it can grow tax free. When you take it out at 60, you don t pay any taxes.

15 RISK VS REWARD This is the main component of investing. Investments are not insured by FDIC. You can make money, you can lose money. (Personal example) If you invest in something low risk, you will have a low reward. But you probably won t lose your money. Inversely, if you invest in something high risk, you might make lots of money, but you also might lose all of it as well. Global financial crisis is a good example of large banks/firms taking on too much risk, and failing spectacularly. If affected all of us. (elicit responses on the ways it affected us).

16 But if you ask for a rise It's no surprise that they're Giving none away Away PINK FLOYD

17 EATING YOUR PROFIT Brokerage Fees Capital Gains Tax Tax on Dividends!

18 CHECK OUT YOUR FAVORITE COMPANIES

19 ON YOUR OWN SIMULATOR/

20 Money So they say Is the root of all evil Today PINK FLOYD

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