Financial Fitness for LifeTraining Conference

Becoming a Smart Money Manager

University of Illinois at Urbana-Champaign College of Agricultural, Consumer and Environmental Sciences

United States Department of Agriculture Local Extension Councils Cooperating

University of Illinois Extension provides equal opportunities in programs and employment.

Funding for this workshop is provided by:

National Council on Economic Education US Dept of Education

University of Illinois Extension

Instructors

Dr. Angela Lyons, Assistant Professor, University of Illinois Urbana-Champaign (217) 244-2612; anglyons@uiuc.edu

Debra Bartman, Extension Educator, Quad Cities Center (309) 792-2500 (x217); dbartman@uiuc.edu

Patricia Hildebrand, Extension Educator, Effingham Extension Center (217) 347-5126; phildebr@uiuc.edu

Anecdotal Storiesfrom Real Students

Objectives

Introduce:

(1) Financial Fitness for Life

(2) Saving and Investing

(3) Budgeting

(4) Credit Reports and Credit Scores

(5) NEFE HSFPP

Experience activities to use in the classroom

Answer questions about curriculum and other resources

You will receive…

Curricula with lessons and activities to use in the classroom

6 CPDU’s

Network of colleagues to share experiences

Resources available at U of I Extension

Financial Fitness for Life

Overview:

Teacher Guide Student Workouts Parents’ Guide CD-Rom and web links

http://fffl.ncee.net

5 Themes and 22 Lessons:

The Economic Way of Thinking Earning Income Saving Spending and Using Credit Money Management

Each lesson includes:

Fitness Focus (lesson description and objectives) Workout (warm-up, exercise, cool down) Visuals Student Exercises Family Activities

Meets national and most state content standards in 4 critical areas:

EconomicsLanguage ArtsMathematicsPersonal Finance

FFFL Part 1(Lessons 1, 3, 8, 10, and 14)

How to Really Be a Millionaire

The Millionaire Game

The Rules:

For each statement, answer “TRUE” or “FALSE.”

For each correct answer, give yourself 5 points.

For each incorrect answer, take away 5 points.

For any 5 statements, you may use your “Millionaire” card. If you answer correctly, you receive 10 points. If not, you lose 10 points.

Question 1:Most millionaires are college graduates.

Let’s Get Started….

Answer 1:

TRUE

Question 2:Most millionaires work fewer than 40 hours a week.

Answer 2:

FALSE

Question 3:More than half of all millionaires never received money from a trust fund or estate.

Answer 3:

TRUE

Question 4:More millionaires have American Express Gold Cards than Sears cards.

Answer 4:

FALSE

Question 5:More millionaires drive Fords than Cadillacs.

Answer 5:

TRUE

Question 6:Most millionaires work in glamorous jobs, such as sports, entertainment, or high tech.

Answer 6:

FALSE

Question 7:Most millionaires work for big Fortune 500 companies.

Answer 7:

FALSE

Question 8:Many poor people become millionaires by winning the lottery.

Answer 8:

FALSE

Question 9:College graduates earn about 65% more than high school graduates earn.

Answer 9:

TRUE

Question 10:If an average 18-year-old high school graduate spends as much as an average high school dropout until both are 67 years old, but the high school graduate invests the difference in his or her earnings at 8% annual interest, the high school graduate would have $5,500,000.

Answer 10:

TRUE

Question 11:Day traders usually beat the stock market and many of them become millionaires.

Answer 11:

FALSE

Question 12:If you want to be a millionaire, avoid the risky stock market.

Answer 12:

FALSE

Question 13:At age 18, you decide not to smoke and save $1.50 a day. You invest this $1.50 a day at 8% annual interest until you are 67. At age 67, your savings from not smoking are almost $300,000.

Answer 13:

TRUE

Question 14:If you save $2,000 a year from age 22 to age 65 at 8% annual interest, your savings will be over $700,000 at age 65.

Answer 14:

TRUE

Question 15:Single people are more often millionaires than married people.

Answer 15:

FALSE

Lesson 8: Spending vs. Saving

begins with saving,then investing.

The road to wealth….

Managing money well

means taking things

one step at a time.

The factors that affect how much savings grow are:

TimeThe earlier or longer you save,

the more savings you will have.

Investment SizeThe more you save each year from yourincome, the more savings you will have.

Rate of ReturnThe higher the interest rate or rate of return, the more savings you will have.

Time Value of Money

The earlier you save, the more $

$’s you will have.

Exercise 8.2A Tale of Two Savers

Cool Million calculator:

www.myfico.com/CreditEducation/Calculators/Millionaire.aspx

Other Calculators:

MortgageAutoLoanDebit and Credit CardsSavingPersonal FinanceInvestmentRetirement

Exercise 8.3Why It Pays to Save Early and Often

Or, how long it takes for savings to grow to double your money

Divide 72 by the interest rate.

Example:Example:72 72 6% 6% 12 years 12 years

Rule of 72:

Activity (Exercise 10.1):

Investment Bingo

Free

Lunch

FFFL Lessons

Grades 9-12: Lesson 1, How to Really Be a MillionaireLesson 3, Decision MakingLesson 8, What’s the Cost of Spending and Saving?Lesson 10, Investment BingoLesson 14, All About Interest

Grades 6-8:Lesson 7, p. 61-64, Types of SavingsLesson 8, p. 65-81, Simple and Compound Interest

FFFL Part 2(Lesson 20)

Budgets are Beautiful!

Creating a Spending Plan (“Your Financial Plan”)

Identify your financial goals.

Determine the time frame for your budget: annual, by academic term, monthly.

Take stock of where you’re currently at.

Estimate your available financial resources.

Calculate your expenses.

Do the math.

Subtract expenses from resources.

Decide how much to borrow.

Borrow only what you can afford to pay back.

Note that your loans will be repaid with your FUTURE income.

Set Your Financial Goals

Types of goals Short-term (1 year or less) Medium term (1-5 years) Long-term (5 years or more)

Identify goals and write them down.

Prioritize your goals.

Develop strategies to achieve your goals.

Reassess your goals periodically.

ACTIVITY: Financial Goal Worksheets

Identify and Prioritize Your Goals

What do you want to buy after you graduate?

How soon do you hope to pay off any student loan or other education-related debt you have incurred?

What kind of lifestyle do you want?

Where do you want to live?

What are your hopes for a family?

Where do you want to work?

Where do you want to retire?

What kind of lifestyle do you want in retirement?

When creating a spending plan….

Set limits and prioritize.

Know your limits.

Learn by doing!

Get some practical experience.

When estimating your resources….

REMEMBER:

Borrowed funds are NOT your resources!!!

When calculating expenses….

Be honest and realistic.

Distinguish between “needs” and “wants.”

Consider fixed and variable (flexible) expenses.

Pay yourself first (PYF)

Can you cut expenses?

Find one or more roommates to share living expenses.

Eat at cheaper places when dining out; cook at home.

Have only one phone.

Dress for less.

Clip and use coupons.

Don’t buy a new car.

Beware of buying for convenience.

Avoid credit card debt.

Saving Dollars When You Don’t Have a Dime to Spare

Break a habit! Do without! Don’t buy!

Item How Often Price of Each Savings/Year

Eating Out 5 days/week $ 6.50 $ 1690.00

Magazine 1/week 4.00 208.00

Soft drink/candy bar/chips 1/day 1.00 365.00

Tank of gas 1/week 24.00 1248.00

Lottery ticket 2/week 2.00 208.00

Cigarettes 1 pack/day 4.00 1460.00

Alcoholic Beverage 1/day 2.00 730.00

Cable 1/month 45.00 540.00

Phone extras (call waiting, caller ID, voice mail, etc.) 1/month 11.00 132.00

Gifts (charity/family/friends) 2/month 20.00 480.00

Total $7061.00

Budgeting Really Does Work

A successful budget should:

Help increase savings Inhibit impulsive spending Determine what you can afford Identify expenses that can be reduced Repay debt

EVIDENCE: BYU Financial Path to Graduation

It’s not all about finances….

Emotions and decision makingFamily communicationPurpose and value of moneyFinancial habits and financial

socialization

Methods for Tracking Spending

Personal financial software programs (Quicken or Microsoft Money have built-in budget-making tools that can create your budget for you.)

PowerPay (Utah State University)

Worksheets / spreadsheets

Online budget planning calculators

Envelope method

www.powerpay.org

PowerPaySpending Plan

PowerSaveCalculators

Education Center

Basic Spending PlanExtended Spending Plan

PowerSave

Calculators

Education Center

Access Group, Inc.http://www.accessgroup.org/Student-Loans/learn-about-loans/wise-borrower-tutorial.htm

Calculators

Interest Rate Comparison CalculatorIn-School Budget CalculatorLoan Repayment Calculator Out-of-School Budget Calculator

Money 101: Making a Budgethttp://cgi.money.cnn.com/tools/instantbudget/instantbudget_101.jsp

www.finaid.org/calculators

College Cost ProjectorSavings Plan DesignerExpected Family Contribution and Financial Aid CalculatorLoan CalculatorsBudgeting Calculators

FFFL Lessons

Grades 9-12: Lesson 20, p. 98-101, Managing Your Money

Grades 6-8:Lesson 15, p. 128-134, Managing Cash

An Activity

The Bean Game!

A simulation game where

you learn how to prioritize

and make spending choices

based on what’s important

to you.

Iowa State University Extensionhttp://www.extension.iastate.edu/finances/personal/childrenmoney/Youth.htm

Spending Game Allowance Game

http://www.extension.iastate.edu/Publications/PM1103.pdf

http://www.extension.iastate.edu/Publications/PM1776.pdf

Credit Reports and Credit Scores

FFFL Part 3(Lessons 11, 12, 13)

How credit can affect your everyday life…

Getting a job

Renting an apartment

Getting a loan

Buying a car

Paying insurance

Getting married!!!

Take the Credit Challenge!Myths and Realities of Credit

The Rules:

For each statement, answer “TRUE” or “FALSE.”

For each correct answer, give yourself 5 points.

For each incorrect answer, take away 5 points.

For any 5 statements, you may use your “CREDIT” card. If you answer correctly, you receive 10 points. If not, you lose 10 points.

Question 1:Credit card companies only approve credit limits that an individual is able to afford.

Let’s Get Started….

Answer 1:

FALSE

Question 2:After you take out a loan, a lender is not required to provide information to credit reporting agencies about the loan and your history of paying it back.

Answer 2:

TRUE

Question 3:Approximately 10% of an individual’s credit score is determined by their payment history.

Answer 3:

FALSE

Question 4:Individuals are eligible to receive a free credit report once a year from each of the three credit reporting agencies.

Answer 4:

TRUE

Question 5:Credit reports contain information on where an individual has lived, past employers, and annual income.

Answer 5:

FALSE

Question 6:A potential employer is permitted to see an individual’s credit report without his/her consent.

Answer 6:

FALSE

Question 7:Requesting a copy of your own credit report can negatively affect your credit score.

Answer 7:

FALSE

Question 8:Negative information, such as filing for bankruptcy, can remain on a credit report for up to 10 years.

Answer 8:

TRUE

Question 9:By law, if an individual is unable to resolve a disputed item with a credit reporting agency, they have the right to delete the information from their credit report.

Answer 9:

FALSE

Question 10:If an individual resolves an error on their credit report with one credit reporting agency, the same error will automatically be corrected by the other credit reporting agencies.

Answer 10:

FALSE

What is a credit report?

An evaluation of your credit experience.

Similar to a report card.

Your credit record includes:• Personal information• Open lines of credit• Payment history • Inquiries • Public record and collection items

(bankruptcies, foreclosures, financial

judgements)

What info is not in your credit report?

Race

Religion

Medical history

Political affiliation

Criminal records

Annual income

Checking or savings accounts

Who has access to your credit report?

Creditors

Employers

Insurance companies

Certain professional organizations

Courts

IRS

Collection agencies (i.e., CCCS)

What is a credit score?

A number that summarizes your level of

creditworthiness.

Your score depends on the credit scoring model used.

FICO scores are the most common.

Scores range from 300-850.

Averages are between 690 and 740.

Visit www.myfico.com for more information.

FICO Score Ranges

20% are above 780

20% are between 740-780

20% are between 690-740

20% are between 620-690

20% are below 619

FICO Credit Score Estimator:

www.myfico.com/ficocreditscoreestimator

Your credit score is used to set the “price” of your loan.

Based on:

FICO Score Simulator:

Pay Bills on TimePay Down Balances on Credit CardsPay Down Delinquent Balances FirstSeek New CreditTransfer Credit Card BalancesMiss PaymentsMax Out Credit Cards

Other Calculators:

MortgageAutoLoanDebit and Credit CardsSavingPersonal FinanceInvestmentRetirement

Understanding Your Credit Score

www.myfico.com

Checking Your Credit Report

3 major credit bureaus:

Equifax (Beacon score)

(www.equifax.com, 1-800-685-1111)

Experian (PLUS score)

(www.experian.com, 1-888-397-3742)

TransUnion (Empirica score)

(www.transunion.com, 1-800-888-4213)

Obtaining a *FREE* Credit Report

www.annualcreditreport.com

Annual Credit ReportFrequently Asked Questions

Contact UsAbout Us

Fraud Alert

An Activity

Reading a Credit Report

Sample Credit Report:

http://experian.com/credit_report_basics/pdf/samplecreditreport1.pdf

FFFL: Evaluating Credit Reports

Grades 9-12: Ex. 13.1, p. 76Ex. 13.2, p. 79Illustration 13.1, p. 80-83

Grades 6-8:Lesson 13, p. 115-118Ex. 13.1A - 13.1E, p. 123-131

Grades 9-12:

Ex. 13.3, p. 84-85

Ex. 12.1, p. 74-75

Grades 6-8:

Lesson 13, p. 115-118

Ex. 13.1A - 13.1E, p. 123-131

FFFL: Evaluating Credit Applications

Helpful Resources

University of Illinois Extension

Consumer and Family Economics

www.ace.uiuc.edu/cfe

National Council on Economic Education

www.ncee.net

Illinois Council on Economic Education

www.econed-il.org

University of Illinois Extension Consumer and Family Economics

www.ace.uiuc.edu/cfe

NCEEwww.ncee.net

Contact Information

Dr. Angela Lyons, Assistant Professor, University of Illinois Urbana-Champaign (217) 244-2612; anglyons@uiuc.edu

Debra Bartman, Extension Educator, Quad Cities Center (309) 792-2500 (x217); dbartman@uiuc.edu

Patricia Hildebrand, Extension Educator, Effingham Extension Center (217) 347-5126; phildebr@uiuc.edu

Questions