teen money management
DESCRIPTION
Teen Money Management. Presented by Glendale Public Library Instructor: Annette Fisher. What we learned yesterday. Auto Purchase and Insurance Planning for college Housing. Let’s Review. What are the steps when purchasing a car? What should you consider when planning for college? - PowerPoint PPT PresentationTRANSCRIPT
TEEN MONEY MANAGEMENTPresented by Glendale Public LibraryInstructor: Annette Fisher
WHAT WE LEARNED YESTERDAY Auto Purchase and Insurance Planning for college Housing
LET’S REVIEW What are the steps when purchasing a car? What should you consider when planning for
college? Where can you easily find a place to live?
WHAT WE WILL LEARN TODAY: Credit Identity Theft Investing
GOALS FOR THIS SESSION
To review investing prerequisites
To learn key investing concepts
To discuss strategies for finding money to invest
5
BASIC BUILDING BLOCKS OF SUCCESSFUL FINANCIAL
MANAGEMENT
6
CASH MANAGEMENT Live by spending plan Financial record keeping Maximize the amount of interest earned Complete annual financial checkup,
including net worth and cash flow Review and revise periodically
7
EMERGENCY CASH RESERVE Money for unexpected
expenses
3 to 6 months living expenses
Amount depends on situation
Money can be sub-divided 8
RISK MANAGEMENT Protect against catastrophic financial losses
Purchase comprehensive insurance coverage if needed
Evaluate current policies and be a smart consumer
9
TAX MANAGEMENT Pay only what you owe
Use tax laws to your financial advantage
As tax laws change, adjust financial strategies
10
$MART FINANCIAL GOALS $ SPECIFIC M MEASURABLE, MUTUAL A ATTAINABLE R RELEVANT, REALISTIC T TIME-LINE, TRADE-OFFS
11
CREDIT MANAGEMENT Avoid overuse of credit
Lower the total amount of debt
Shorten the term of debt
Reduce interest and finance charges
12
HOME OWNERSHIP Think of buying a home as purchasing shelter
Not as an investment that will rapidly appreciate
Home equity is an asset
13
INVESTMENTS
Begin investing after a firm foundation is laid
Develop investing strategies to accomplish specific financial goals
14
CHILDREN’S EDUCATION Start early Make an estimate of the cost Develop a plan for accomplishing goal Consider tax implications Explore other ways to pay for education
15
RETIREMENT PLANNING
AGAIN -
Start earlyMake an estimate retirement
needsDevelop plan for accomplishing
goalConsider tax implications 16
ESTATE PLANNING The prize for successfully managing finances
throughout your lifetime is the opportunity to pass assets on to loved ones or favorite causes at the end of your life
17
KEY INVESTING CONCEPTS Difference between saving and investing Risk tolerance Risk versus rate of return Impact of time on money accumulation Asset allocation Personal factors that affect investing
decisions
18
THE DIFFERENCE BETWEENSAVINGS AND INVESTING
Savings: Money held in a short-term cash assets Money used for emergencies and specific
purchases Investing:
Money used to increase net worth and achieve long-term financial goals
19
SAVINGS $ INVESTMENT $
20
Kept in safe, low-risk vehicles
Liquid
Yield low returns
Used for short-term goals
Involve risk
Value can go up and down in short time periods
Offer potential for growth
Used for mid-& long-term goals
INVESTMENT RETURN Total return
Profit (or loss) on an investment Income PLUS capital gain or loss $8.50 + $4.50 = $13 per share
Rate of return (%) Profit (or loss) on an investment
Return ÷ price of security $3 ÷ $24 = .125 or 12.5%
21
COMPOUND ANNUAL RATE OF RETURN 1925-2000
Large Company Stocks…….…….11.0% Small Company Stocks…………..12.4% Government Bonds………….……..5.3% Treasury Bills……………………….3.8% Inflation………………………………3.1% Source: Ibbotson Associates
22
RISK
Associated with all investments because the future value of investments is never certain.
Caused by: Inflation - Changes in economy Business failure - Interest rate changes
23
RISK AND RETURN ARE RELATED
24
TECHNIQUES TOOFFSET RISK:
Diversification Putting your money, “your eggs,” into several
baskets (assets)
Dollar Cost Averaging Investing regular amounts at regular intervals
regardless of price
25
IMPACT OF TIME AND RATE OF RETURN ON MONEY ACCUMULATION
To grow the largest sum of money you need: Maximum time A high rate of return Tax advantages A generous pot of money Frequent compounding of interest
26
ASSET ALLOCATION
The ratio of stocks, bonds and cash assets in your portfolio
Conservative Moderate Aggressive
The most important determinant of overall investment success
27
C
B
SC
B
S
C
B
S
FACTORS AFFECTING ASSET ALLOCATION DECISIONS
Investment goals and return needs Risk tolerance Time horizon Time & skill to manage portfolio Tax situation
28
INVESTING ACTION YOU CAN TAKE TODAY
Review your financial holdings and obligations. Calculate your net worth.
Read investment pubs Sign up for financial classes Set short and long-term financial goals. Seek assistance if you are short on time or
skill
29
FINDING MONEY TO INVEST70% of Americans live “paycheck to
paycheck”
Americans are not saving much money
30
REVIEW YOUR FINANCIAL STATUSDo you have 3-6 months income in an emergency fund?
Do you save regularly?Do you know how much you need to save to reach your goals?
Do you save to buy major items instead of using credit? 31
REVIEW YOUR FINANCIAL STATUSWhen you use credit, do you pay as large a down payment as possible?
Do you save at least 10% of your disposable income?
Do you know how much you need to save for retirement? 32
STRATEGIES FOR SAVING MONEY TO INVEST
33
Establish savings plan
Needs vs wants Pay yourself first Save bonus/coupon
money Continue loan
repayments
Collect loose change Save lunch money Shop for sale prices Plan a “Nothing
Week” Avoid paying credit
charges
BREAKING HABITS = $$ TO INVEST 6 EASY STEPS
1. Identify habit, frequency, and cost 2. Make decision to change 3. Act immediately 4. Share your plan 5. Stick with your plan to change 6. Celebrate your success
34
STEP 1IDENTIFY HABITS, FREQUENCY, & COST
Think of habits you might be able to adjust (hair care, soft drinks, cigarettes, …
Frequency of habit
Calculate total cost for a year
35
Where’s the Money?
STEP 2MAKE A DECISION TO CHANGE Look for alternative
ways to spend your money
Take control of your money
Choose another way to spend your money
36
STEP 3ACT IMMEDIATELY
Write down new behavior
Start within 24 hours
The sooner you begin a new behavior, the sooner it will become a habit
37
START
TODAY
STEP 4SHARE YOUR PLAN Tell others about
your plan Provides
opportunity for support
Increases your determination to succeed
Family must work together 38
STEP 5STICK WITH YOUR PLAN
This is a critical step
Stay focused Takes 30 days for a
new behavior to become a habit
Will serve you well Set an example for
your children 39
STEP 6CELEBRATE YOUR SUCCESS
Let others know of your success
Enjoy the fruits of your savings
Continue with your new behaviors
Watch pennies grow into dollars
40
OTHER STRATEGIESBe a
comparison shopper
Investigate untapped strategies
41
MORE STRATEGIES TO STRETCH YOUR MONEY...
Adopt the two-week rule
Avoid unnecessary waste
Become a coupon clipper
42
NEXT : CHARACTERISTICS OF SPECIFIC INVESTMENT PRODUCTS
Equity Investments (e.g., stock) Fixed-Income Investments (e.g., bonds) Mutual Funds
43
EQUITY INVESTING
44
CATEGORIES OF INVESTMENTS
Ownership
Loanership
45
RISK PYRAMID
46
FEES Cost of purchase and sale may include
brokerage fees
Comparison shop
47
INVESTING STRATEGIESDollar-Cost Averaging
Buy and Hold
48
REAL ESTATE OPTIONS Home Rental property Crop/mineral land Land for development Real Estate Investment Trust (REIT) Real estate limited partnership
49
COLLECTIBLES
Stamps Coins Art Cars Autographs Toys Books Cards
50
OWNING A BUSINESS
Many options
Know the risks
Plan carefully
Get help51
COMMODITIES Very high risk Be sure you can afford to lose Weigh costs of buying, selling, owning Know a lot about the commodity Know about the markets where it is created,
and sold Be aware of pertinent factors
52