Personal Financial Literacy An Introduction to Financial Planning

Personal Financial Personal Financial LiteracyLiteracy

An Introduction to Financial An Introduction to Financial PlanningPlanning

Teens get most of their money Teens get most of their money from part-time jobs.from part-time jobs.

1.1. TrueTrue

2.2. FalseFalse

Most teens who are 18 or 19 Most teens who are 18 or 19 years old have a checking years old have a checking account.account.

1 2

67%

33%

1.1. TrueTrue

2.2. FalseFalse

Ninety percent of high school students rely Ninety percent of high school students rely on their parents for information about on their parents for information about money.money.

1 2

25%

75%1.1. TrueTrue

2.2. FalseFalse

On average, American teens On average, American teens spend more than $10 billion a spend more than $10 billion a year.year.

1 2

10%

90%1.1. TrueTrue

2.2. FalseFalse

Timed Rally RobinTimed Rally Robin1.1. What is an item you would like to What is an item you would like to

have, but cannot currently afford?have, but cannot currently afford?

2.2. Assuming you are starting with no Assuming you are starting with no money and you cannot count on money and you cannot count on anyone else to simply give it to you, anyone else to simply give it to you, how will you go about saving enough how will you go about saving enough for the item?for the item?

3.3. How long do you think it will take you How long do you think it will take you to save enough money to buy the to save enough money to buy the item?item?

4.4. What are some other expenses you What are some other expenses you need to consider while saving up? need to consider while saving up? Will you make sacrifices?Will you make sacrifices?

Financial PlanningFinancial Planning

Process of setting goalsProcess of setting goals Developing a plan to achieve Developing a plan to achieve

themthem Putting the plan into actionPutting the plan into action

Step 1: Set GoalsStep 1: Set Goals““If one does not know to which port If one does not know to which port one is sailing, no wind is favorable.” one is sailing, no wind is favorable.”

(Seneca)(Seneca)

Think about what “things” one Think about what “things” one needs and wants in the short-, needs and wants in the short-, intermediate-, and long-termintermediate-, and long-term

IMPORTANTIMPORTANT Easier to find money if you plan Easier to find money if you plan

and save than searching frantically and save than searching frantically at the last minuteat the last minute

Step 1: Set GoalsStep 1: Set Goals

Distinguish between needs and Distinguish between needs and wantswants

Needs should come firstNeeds should come first

Three types of goals:Three types of goals: Short-term (less than 3 months)Short-term (less than 3 months) Intermediate (3 months- 1 year)Intermediate (3 months- 1 year) Long-term (more than one year)Long-term (more than one year)

Birthday present for a friend Birthday present for a friend whose birthday is next month.whose birthday is next month.

1 2 3

90%

5%5%

1.1. Short-termShort-term

2.2. IntermediateIntermediate

3.3. Long-termLong-term

Next week’s date.Next week’s date.

1 2 3

95%

0%5%

1.1. Short-termShort-term

2.2. IntermediateIntermediate

3.3. Long-termLong-term

Trip after you graduate.Trip after you graduate.

1 2 3

0%

75%

25%

1.1. Short-termShort-term

2.2. IntermediateIntermediate

3.3. Long-termLong-term

New pair of shoes.New pair of shoes.

1 2 3

60%

10%

30%

1.1. Short-termShort-term

2.2. IntermediateIntermediate

3.3. Long-termLong-term

WeddingWedding

1 2 3

10%

90%

0%

1.1. Short-termShort-term

2.2. IntermediateIntermediate

3.3. Long-termLong-term

Yearbook at the end of the Yearbook at the end of the school year.school year.

1 2 3

70%

20%

10%

1.1. Short-termShort-term

2.2. IntermediateIntermediate

3.3. Long-termLong-term

Long-term GoalsLong-term Goals

Instant gratification vs. delayed Instant gratification vs. delayed gratificationgratification

Many opt for instant Many opt for instant gratificationgratification credit cards credit cards

Step 2: Analyze InformationStep 2: Analyze Information

Where are your finances now?Where are your finances now? Receiving, spending and savingReceiving, spending and saving

Cash flowCash flow Keep track of amount received Keep track of amount received

and spentand spent

Step 3: Make DecisionsStep 3: Make Decisions

Make many decisionsMake many decisions ChallengingChallenging OptionsOptions opportunity costs opportunity costs

Stages of Decision MakingStages of Decision Making

Identify goal/problemIdentify goal/problem List alternativesList alternatives Establish criteria (expectations)Establish criteria (expectations) Evaluate alternatives using Evaluate alternatives using

criteriacriteria Make the decisionMake the decision Evaluate results Evaluate results

Making DecisionsMaking Decisions

Choose between 2 thingsChoose between 2 things Trade-off also knows as Trade-off also knows as

opportunity costopportunity cost

Step 4: Create and Implement Step 4: Create and Implement a Plana Plan

On the output page, complete the On the output page, complete the writing assignment:writing assignment:

““You have been asked by a friend to You have been asked by a friend to provide advice about how a financial provide advice about how a financial plan will help the person meet his or plan will help the person meet his or her financial goal. List specific steps her financial goal. List specific steps they should take and things they they should take and things they need to consider when creating their need to consider when creating their plan. Be sure to mention factors that plan. Be sure to mention factors that will affect the plan and strategies to will affect the plan and strategies to help them stick to it.”help them stick to it.”

Step 5: Monitor and Modify Step 5: Monitor and Modify the Planthe Plan

Once it’s developed:Once it’s developed: you have to reflect periodically (regular you have to reflect periodically (regular

intervals)intervals) make sure you are staying on trackmake sure you are staying on track

Not set in stoneNot set in stone Change as changes occur in priorities, Change as changes occur in priorities,

criteria and unexpected eventscriteria and unexpected events

Family ScenariosFamily Scenarios

Write down your scenarioWrite down your scenario Brainstorm with your team:Brainstorm with your team:

3 Financial decisions that may 3 Financial decisions that may need to be madeneed to be made

2 unexpected events that might 2 unexpected events that might impact financial planningimpact financial planning