i n p a r t n e r s h i p w i t h

Student Name

NEFE High SchoolFinancial Planning Program

Copyright 2006, National Endowment for Financial Education® (NEFE®). All rights reserved.

This publication is sponsored by the National Endowment for Financial Education (“NEFE”) in partnership with theCooperative State Research, Education, and Extension Service, USDA, and participating Land-Grant UniversityCooperative Extension Services, and Credit Union National Association, Inc., and America’s Credit Unions. This publication is intended for use as part of the NEFE High School Financial Planning Program® (HSFPP) as a publicservice to enhance the financial literacy of youth.

The use of this publication is subject to the following terms. This publication may be used only as expressly permitted by the following terms and may not be used in any way prohibited by the following terms:

• This publication may only be used for instructional and educational purposes as part of the NEFE HSFPP.

• No part of this publication may be copied or reproduced.

• This publication may be used only in the form provided by NEFE and may not be modified, amended, or combined with other material.

• This publication may not be used for any commercial purpose, or to sell, advertise, endorse, or otherwise promote any other service, product, or party.

• No separate fee or consideration may be charged in exchange for this publication or for participation in the NEFE HSFPP.

NEFE intends that the content in this publication is current as of the initial release of this publication by NEFE.Following the initial release of this publication by NEFE, however, changes may have occurred to the laws, regulations, and other practices relevant to the content in this publication. Before using this publication, NEFEencourages you to confirm that the content in this release of this publication is up-to-date.

The NEFE HSFPP is presented in facilities throughout the country by volunteers from the financial services industryand other industries. The facilities and instructors involved in the presentation of the NEFE HSFPP are independentfrom NEFE, and NEFE does not review, approve, sanction, or otherwise control the facilities or instructors involved inthe presentation of the NEFE HSFPP. NEFE disclaims and takes no responsibility for the performance of or any damage or liability caused by the facilities or instructors involved in the presentation of the NEFE HSFPP.

Please visit the NEFE HSFPP Web site at http://hsfpp.nefe.org. For more information about NEFE, the NEFE HSFPP, or this publication, contact NEFE at:

National Endowment for Financial EducationHigh School Department5299 DTC Boulevard, Suite 1300Greenwood Village, CO 80111Phone: (303) 224-3511

ABOUT THE SPONSORS OF THIS PUBLICATION:

About NEFEThe National Endowment for Financial Education is an independent, nonprofit foundation dedicated to the goal ofhelping all Americans improve the quality of their lives through their acquisition of information and skills thatenable sound and knowledgeable financial decision making.

About Cooperative State Research, Education and Extension Service, USDAThe Cooperative Extension System, a national educational network established through legislation, is a partner-ship of the Cooperative State Research, Education, and Extension Service, U.S. Department of Agriculture(CSREES, USDA), State land-grant universities, and county governments. CSREES prohibits discrimination in allits programs and activities on the basis of race, color, national origin, sex, religion, age, disability, political beliefs,sexual orientation, or marital or family status. (Not all prohibited bases apply to all programs.)

About CUNAWith its network of affiliated state credit union leagues, Credit Union National Association serves more than 90percent of America's 9,000 credit unions, which are owned by more than 88 million consumer members. Creditunions are not-for-profit cooperatives providing affordable financial services to people from all walks of life. Formore information, visit www.cuna.org.

Introduction iHow to Build on What You Learn in This Book ii

Beyond the Book: Your Own Web Space iii

Unit 1 Your Financial Plan: Where It All Begins 1

What’s So Important About Financial Planning? 3

Step 1: Set SMART Financial Goals 3

Do You Need It or Do You Want It? 3

Getting SMART About Your Goals 4

SMART Goal Examples 5

Step 2: Analyze Information: Where Does Your Money Go? 8

Step 3: Create a Plan: Your Financial Roadmap 9

Making Decisions 9

Step 4: Implement the Plan: Making It Happen 12

Being a Responsible Spender 12

Guidelines for Sticking With Your Plan 12

Step 5: Monitor and Modify the Plan: Staying on Track 13

Adding It Up 13

Unit 1 Assessment: My Financial Plan 14

Unit 2 Budgeting: Making the Most of Your Money 15

How Does Your Spending Measure Up? 16

Smart Spending 16

Part 1 of the Equation: Income 17

What’s a W-4 For? 18

Part 2 of the Equation: Expenses 19

The Most Important Expense 20

The 411 on Creating a Budget 22

Building a Budget 22

Keeping Track 23

Staying on Track 24

The Living Budget 25

Adding It Up 25

Unit 2 Assessment: My Personal Budget 26

Table of Contents

Unit 3 Investing: Making Money Work for You 27

Saving = Investing 28

The Time Value of Money 30

Show Me the Money! 31

The Price of Procrastination 31

The Rule of 72 32

Risky Business 33

An Array of Investment Options 34

Income Investments 35

Growth Investments 36

Many Baskets of Eggs 38

Smart, Steady Eddie 38

Adding It Up 39

Unit 3 Assessment: My Investing Plan 40

Unit 4 Good Debt, Bad Debt: Using Credit Wisely 41

What Is Credit? 42

Common Types of Credit 43

The Cost of Using Credit 44

Credit: The Good and the Bad 46

6 Questions to Ask When You Compare Credit 47

Are You Worthy? 47

The 4 C’s of Credit 47

Keeping Score With Your Credit 49

The Titans of Credit 49

Your Rights When Your Credit Report Is Wrong 50

Getting Your Piece of the Credit Pie 50

Be a Savvy Credit User 52

Pitfalls to Avoid With Credit 53

Look Out! 53

How to Avoid the Pitfalls 53

Credit-Related Record Keeping 54

The Dark Cloud of Debt 54

Bankruptcy 55

The Law and Order of Debt 56

Adding It Up 57

Unit 4 Assessment: My Plan to Handle Credit 58

Unit 5 Your Money: Keeping It Safe and Secure 59

Who’s Who in Financial Services 60Check In With Checking Accounts 62Follow the Bouncing Check 63The DNA of Debit Cards 657 Signs of Smart Debit Card Use 66Credit Card Confidential 68Automating Access to Your Money 70So Many Choices … 71When Fraud Comes Knocking 72Adding It Up 77Unit 5 Assessment: Using Financial Services 78

Unit 6 Insurance: Protecting What You Have 79

All About Risk 80Sharing the Risks 82

Driving Down Your Costs 83What to Keep and Where 83All About Auto Insurance 85Making Sure That You’re Covered 88If You Have an Accident 89Through the Years: Other Types of Insurance 90You Can Insure Just About Anything 91The Big Picture 92Adding It Up 93Unit 6 Assessment: My Insurance Plan 94

Unit 7 Your Career: Doing What Matters Most 95

What Should Dante Do? 96Making Cents of Your Career 96Skills: The Currency of Your Career 98Getting Educated About Education 100

Education Funding Options 101Beyond Salary—The Value of Benefits 103Other Factors Fueling Your Paycheck 105Being Your Own Boss 108Adding It Up 109Unit 7 Assessment: Planning for My Career 110

Epilogue 111Glossary 112Index 115

You probably never thought you’d need help with figuring out how to spend your money! After all, teens spend billionsupon billions of dollars every year, so it sounds like you know how to spend those bucks.

But there is much more to handling your money than just spending it. It’s just like learning to drive a car. It’s aboutmore than knowing how to turn on the engine, put the car into gear, and operate the steering wheel.

There are right and wrong ways to drive cars and handle money. Do either one the wrong way, and you’ll find yourselfin very big trouble. While this book won’t teach you anything about driving, it can give you what you need to knowright now about managing your money wisely. And if you learn these lessons well, you’ll find you have something thatwill pay off for you for the rest of your life!

Introduction

When it comes to managing money, there are three types of people.

• People Who Just Get By. First, there are people who just live on what they make. They can’t save because they spend everything they get, and they try to make the money last until the next payday. They pay their bills on time, so they don’t get into big trouble. But with no money left to save, they probably won’t end up getting many of the bigger things they want from life. These people usually make it to the end of their careers without having much to show for it, and having given up on getting many of the things they might otherwise have wanted.

• The Big Spenders. Then there are people who spend lots more than they earn. They end up owing so much money that they can end up in serious financial trouble. People in this category often have employment, marriage, and health problems that complicate their lives even more. Their total lack of understanding about how to handle money usually dooms them to a life of serious debt, bankruptcy, and sometimes even worse.

• People Who “Get It.” Finally, there are the people who really “get it.” These people know how to plan and save for things. They know the difference between needs and wants and know how to get the most out of the money they have. When they need to borrow for really big things, like a car, they will get loans at the best rates. And they will never borrow any more than they can afford to repay.

People who “get it” know how to use all the services of financial institutions like banks and credit unions to their advantage, and they realize that they need to protect what they have by insuring it. Finally, they will choose a career or job that is fulfilling and will also support their financial needs without ever having to go into serious debt.

The goal of this book is to make you one of those people who “get it.” The sad truth is that many millions ofAmericans fit into those first two categories, and far too few fall into the last one.

People who “get it” with their money are happier and more likely to get everything they want out of life.

If you take to heart everything that this book has to teach, you will be solidly on the path toward being one of thosepeople who “get it” about money.

i Introduction

How to Build on What You Learn in This Book

Learning to manage your money well comes with study and practice. If you successfully complete the lessons in thisbook, you’ll be setting solid goals, understanding your needs and wants, creating a plan for spending your money,and much more. You’ll have a good idea of how your job and career choices relate to how much money you’ll havefor the lifestyle you want, and you’ll be well on your way to knowing how insurance fits into your plans. And that’s asgood a start as anyone needs.

To learn more, visit hsfpp.nefe.org. ii

To make sure you get the most out of this Student Guide, you’ll want to take careful note of several tools that arefound throughout the book:

• Unit Overview—At the beginning of each unit, your teacher should hand out a unit overview. This handy one-pager tells what the unit is about, how you will be able to use this information in your life, and all the other things you will learn along the way. Finally, it will spell out how you will know when you have succeeded in mastering what the unit is teaching.

• “In this unit, you will …”—At the beginning of every unit is a highlighted box telling you what you’ll learn in that unit.

• “What Do You Think?”—In each unit, you’ll have a chance to take some time out to learn some relevant facts and figures about the topic at hand and why the topic is so important.

• “Did You Know?”—This feature gives you even more information about a topic you are studying. Look for some surprises!

• Highlighted Words—Every time you see a word that is highlighted,that’s a key term that you should take note of. When it is highlighted, it is also defined. At the end of the book, you’ll find a complete glossary of all these highlighted terms.

• “Try It!” Exercises—Be sure to complete all of the “Try It!” exercises in each unit. These will help you begin to “get your arms around” what the unit is all about.

• “You Can Do It!” Assignments—The assignments in each unit take the exercises and reading you have been doing to stretch your understanding even more. Be sure to do them all.

• Unit Assessments—This is where you get to show that you really understand what the unit has been all about. It is also where you will take what you have learned and start to apply it to your own life.

Beyond the Book: Your Own Web Space

We hope you’ll want to go even further than this book takes you. To do that, we have created a place on the Internet

for you. There you will find articles, tools, ideas, and games related to every unit in this book. At the end of each

unit, you will see a reminder to visit hsfpp.nefe.org. Once there, you’ll find many ways to help you increase your

knowledge and begin to apply all the skills this program teaches. And consider signing up for free newsletter updates

because there will always be new things being added to this site.

Here is how to get there.

When you get to the site, take some time to look around and see what’s there. You’ll find many tools relat-

ed to the units of this book, along with articles on financial topics you’re probably already thinking about or

will be thinking about soon. You’ll find eight games to play, each of which will test what you are learning

about money. The site also links to many other features, including calculators to help you begin to “run the

numbers” to calculate the cost of various types of financial transactions. During and beyond the time you

are studying the HSFPP, you should find this to be a very helpful tool to help you get your feet on the

ground around this important area of money.

iii Introduction

1 Go to hsfpp.nefe.org. That will take you to our

Main home page. To get to your page, click on

the “Students” link at the top of the home page.

2 That will bring you to the student’s page.