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    1 : CONSUMER FINANCE Indiana Department of Financial Institutions Consumer Credit Education STUDY UNIT 1 The Basics of Financial Planning
    2 : INTRODUCTION This teaching guide is a product of cooperative efforts to provide accurate and objective information for teaching basic personal financial planning, saving, and investing. The easy-to-use format is designed for educators. The teaching guide is an introduction to financial planning and investing. It can be the framework of a short course or a supplement to an existing course in mathematics, home economics, business education, economics and personal finance.
    3 : KEY CONCEPTS how to design a personal financial plan how financial markets work how to select among various savings and investment options how to find and use investment information how to recognize and victim-proof yourself against investment fraud
    4 : PRETEST EXERCISE DIRECTIONS: Ask students to write a brief paragraph on the following: Your uncle just gave you $1,000 to spend as you wish. What will you do with this money and why? .
    5 : TOPIC 1 — Personal Financial Planning Objective: Students will learn that saving a percent of income is the start of committing to a plan to meet their financial goals. Students will know the benefits of a personal financial plan. Materials Needed: Vocabulary Reading 1 — “Benefits of a Personal Financial Plan ?” Worksheet 1 ? ”Money Management Checklist”
    6 : VOCABULARY adverse information — Information in a credit report which indicates a consumer may be unable or unwilling to repay credit.   balance ? Balance is the amount of money you have in your bank account.   bank ? A bank is a business that offers you a place to keep your money and uses it to make more money. Banks offer you different services for keeping your money.
    7 : checking account ? A checking account is an account that lets you write checks to pay bills or to buy goods. The financial institution takes the money from your account and pays it to the person named on the check. The financial institution sends you a monthly record of the deposits made, withdrawals, and the checks written.   Credit Union ? A nonprofit financial institution owned by people who have something in common. You have to become a member of the credit union to keep your money there. Vocabulary
    8 : credit bureau — A firm which collects and provides to creditors, employers, and insurers information on how consumers use credit as well as other personal and financial data.   credit file — All the information a consumer reporting agency has in its records on a particular consumer. Vocabulary
    9 : credit rating — A consumer's relative credit-worthiness as determined by a creditor based on information obtained from the credit report, credit application, and interview.   credit report — A written, oral, or other com-munication from a credit bureau to a creditor, employer, or insurer concerning a consumer's credit history.   Vocabulary
    10 : consumer reporting agency — Any firm which regularly collects and provides to others information on consumers' bill-paying habits including credit bureaus, investigative agencies and some creditors. deposit ? A deposit is money you add to your account. When you add money to your account, you must fill out a deposit slip. A deposit slip tells the bank how much money you are adding to your account. Vocabulary
    11 :  direct deposit ? Direct deposit is one method your employer or a government agency might choose to give you your paycheck or benefit check. With direct deposit, your paychecks or benefits checks are electronically transferred and directly deposited into your account. Some banks will not charge the monthly fees if direct deposit is used. Vocabulary
    12 : interest ? Interest is the extra money in your account that the bank pays you for keeping your money. One of the main advantages of having a deposit account is the interest you earn.   investigative report — A report on a consumer which contains information on the individual's character, reputation, personal habits, and life-style obtained through interviews with neighbors, friends, and associates. Vocabulary
    13 : savings account ? A savings account is an account that earns interest. You can open a savings account with a few dollars, but you might pay a monthly fee if your balance is below a certain amount. Some banks will give you a booklet called a “passbook” to keep track of your money.   statement of dispute — A statement included in a credit or investigative report in which a consumer explains why he/she believes information in a report is inaccurate. Vocabulary
    14 : valid business purpose — A credit, employment, insurance, or licensing decision or other bona fide reason for needing information contained in a credit report. Vocabulary
    15 : Could you spend 10 percent less and still have fun? If you could save 10 percent of your income for future goals, what would those goals be? It takes more than luck to get what you want out of life. You have to know what you want and then commit to a plan to meet your goals. The hazards of not planning include the risk of having a lifestyle of limited choices. BENEFITS
    16 : A financial plan can be a positive force that helps strengthen personal relationships as people work together to achieve goals. A financial plan helps people: live within their income identify financial priorities allocate funds to meet expenses meet financial emergencies and reduce credit use reduce uncertainty about financial affairs gain financial independence and control save and invest to reach financial goals Benefits
    17 : National Survey People want to feel comfortable about their financial affairs. A recent national survey showed that 75 percent of college freshmen are concerned about their future financial security as compared to only 44 percent in 1970.
    18 : Conditions That Promote Financial Well Being income to meet current needs savings to meet financial emergencies insurance to cover major risks (health, life, property and disability insurance) savings and investment programs to meet future goals participation in household financial affairs
    19 : Check List Discuss money management practices with your family and think of areas that could be improved. Use the Money Management Check List, Worksheet 1.
    20 : TOPIC 2 — Factors That Influence Decisions Objective: Students will learn the many different factors that can influence financial decisions. Students will create different case studies on decisions that influence financial goals. Materials Needed: Reading 2 to 4 ? Transparency 1 to 3 Reading 3 & 4 ? Worksheet 2 ? ”Budget Worksheet” Student Exercise 1
    21 : FINANCIAL DECISIONS Financial independence is an important goal. Yet people sometimes miss the opportunity to become financially independent because they avoid making decisions and taking action to influence their financial well being. Sometimes they may not know what action to take or they simply procrastinate.   Factors that influence our financial decisions are our values, goals and attitudes, age and stage in the life cycle, level of education, and external factors such as income, and employer benefits.
    22 : VALUES AND GOALS A value is something that a person considers to be important. Financial values vary from person to person. Not everybody wants the same life-style. Some people dream of having expensive cars, spacious homes, and many possessions. Others search for the simple life, uncluttered by material goods. Our values influence the way we earn, save, invest, and spend money. Personal values are influenced by family and friends, by television and movies, and by what attracts us in the marketplace.
    23 : Values and Goals You may want to go to college, yet you want to earn money to buy a new car. If you cannot afford both, you must make a choice. A goal is a preferred future condition. It is more than a hope. Our goals are based on our values. Since we have a limited amount of money, we choose those things we value most. Saving part of current income to purchase a car is taking action to reach a goal.
    24 : Social scientists explain that people often use money to gain security, power, freedom, love, and acceptance. If taken to extreme, such motivations will produce an unbalanced lifestyle. For example, the search for power can turn to greed which, in turn, can foster unethical behavior in the marketplace. Unit Six will focus on ethical standards as a deterrent to investment fraud. Values and Goals
    25 : AGE AND STAGE OF LIFE Financial responsibilities change as people live through various stages of the life cycle. Young single adults face a different set of financial tasks than do households with young children. People in their 40s and 50s are usually at the peak of their lifetime annual earnings. Yet these people often face financial challenges such as paying college costs for their children, stepping up their retirement savings program, and taking financial responsibility for aging parents.
    26 : Tasks Young Adults Face select and train for a career maintain a good credit record develop a personal financial plan consider insurance protection start a savings and investment program
    27 : Education & Income The odds are against winning the lottery or inheriting great wealth. So the primary source of funds for most people is income from employment. On average, the higher your educational level, the higher your annual income and overall lifetime income will be. People with job skills that are in high demand are less likely to be unemployed. These people have the choice of jobs that offer a favorable package of income and fringe benefits.
    28 : Employer Benefits Many employers provide group fringe benefits that would be expensive if purchased by individuals. A few years ago employee benefits left little opportunity for individual choice. Today, employers offer many options. For example, several different health insurance plans may be available to the employee.   Some employers contribute to employee savings and investment programs. For example, a company may contribute 50 cents for every dollar the employee saves or invests in company-approved plans.
    29 : Some employers offer flexible compensation plans which allow employees to divert some of their earnings to options such as child care or legal services. These flexible plans can be adapted to meet the different needs of households at various stages of the life cycle. As the number of options grows, so does the need for informed financial decision making. Employer Benefits
    30 : FINANCIAL PLANS A financial plan is a tool to help you reach your goals. It is not a straight jacket to keep you from enjoying life. Think of a financial plan as a road map to help you get where you want to go. People use a road map when they begin a trip where they have not traveled before, yet many will take a financial journey through life without a road map. As someone once said, "If you don't know where you are going, you may end up somewhere else."
    31 : Financial Tasks Of Young Adults Select and train for a career Maintain a good credit record Develop a personal financial plan Consider insurance protection Start savings and investment programs
    32 : Developing A Financial Plan A financial plan works best if you keep it simple, use realistic income and expense estimates, and periodically review and adjust the plan to reflect changing conditions and goals. A common mistake people make is to prepare a financial plan and then fail to put it into action.   An effective financial plan involves information gathering, decision making, action, and evaluation.
    33 : Steps in Financial Planning Steps in the financial planning process include: identify financial goals figure net worth estimate income and expenses review personal debt situation allocate savings to reach goals balance income and expenses implement the plan review and modify the plan as necessary
    34 : Questions to Answer When Designing a Plan What are my short and long term goals? What is our total income after taxes and deductions? What are our current living expenses? What changes in living expenses do we expect?
    35 : More Questions Are we using credit wisely? How can we protect against inflation? How can we plan for retirement? How much can we save each month for future goals such as college expenses or a down payment on a car?
    36 : IDENTIFY GOALS The first step in designing a financial plan is to identify your goals. Saving and investing will be more successful if you have specific goals in mind. And it is easier to identify and rank goals if you group them into short-term and long-term goals.

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