Category Financial Planning

Oct 21 2015

Teaching Financial Literacy

While science, math, and history are vital for academic and career success, many high school graduates lack knowledge of basic money management skills.   Along with other subjects, effective financial education should be rigorous, relevant, meets standards, and have engaging learning experiences. Those teaching personal finance should be well-qualified and supported by adequate resources.

In recent years, financial education is referred to as financial literacy or financial capability.  In the past, these topics were taught in math, social studies, business and, consumer science (previously called home economics) courses.  More recently, an extensive number of free or low-cost financial literacy programs and resources have been developed.  Financial institutions, businesses, government agencies, professional associations, and non-profit organizations have collaborated in this effort.  The National Standards in K-12 Personal Finance Education, published by the Jump$tart Coalition for Personal Financial Literacy, provides teachers with a guidance.

For additional information on teaching financial literacy, click here.

Jump$tart Coalition for Personal Financial Literacy

Teaching Suggestions

  • Have students ask people to describe their definition of “financial literacy.”
  • Have students develop a learning activity to effectively teach financial literacy.

Discussion Questions 

  1. What are considered to be the main elements of financial literacy?
  2. Why is financial literacy important for all students?
Sep 23 2015

Steps in Choosing an Investment Advisor

The investment professional (or team of professionals) you decide to work with will depend largely on your investing goals and the types of products and services that can help you meet those goals.  Your financial needs, and the professionals you work with, are likely to change over your lifetime.  The amount of money you have to invest and your investing priorities also will likely change.  What doesn’t change, though, is the best way to find help.   FINRA (Financial Industry Regulatory Authority), an independent not-for-profit organization authorized by Congress to protect Americans’ investors, offers the following key steps for choosing financial professionals:

  1. Identify your financial needs, starting with your goals.
  2. Understand the different types of people or firms you could work with, and what each can (and cannot) offer.
  3. Search for possible candidates.
  4. Check the work background and disciplinary history of your finalists.
  5. Make sure you read and understand any paperwork you’re asked to fill out or sign.

Searching for Possible Candidates

One place to start is by talking with your friends, neighbors, relatives, and colleagues—especially those who have some experience as individual investors.  Here’s what to ask:

  • What are the names of the investment professionals you have used?
  • How long have you done business with those individuals?
  • How much or how little have you relied on their advice?
  • Have you ever had a problem with that professional? And, if so, how well and how quickly was the matter resolved?
  • How often does your investment professional contact you? Different people like to interact in different ways and on different schedules, so this question can help assess whether the relationship would work for you.

For more information, click here.

Teaching Suggestions

  • Ask students if they are working with an investment advisor. And if so, what is their experience with him/her.
  • Did students check if their investment advisor is registered with a state, the SEC, or FINRA? If so, in what capacity?

Discussion Questions

  1. Does it matter if a professional investment advisor holds relevant professional designations? Why or why not?
  2. How are the investment advisors compensated? Should you choose a fee-only advisor?  Why or why not?
  3. Is it important to ask your investment advisor for a list of clients you can contact as references?
Sep 16 2015

Get Help to Make Informed Financial Decisions About How to Pay For College

It’s more important than ever for students and former students to make smart decisions about financing their college education.  Whether you are attending college soon, are a current student, or already have student loans, here are some tools and resources to help you make the best decisions for you.

For many people, how to pay for a college education is one of the first major financial decisions they’ll make.  The Consumer Financial Protection Bureau has published excellent guides on paying for college. These guides cover some of the big decisions you’ll face and will help you understand your options for financing your college education.

If you’re considering student loans to help pay for school, you’re not alone—many students need loans to cover their full cost of attendance.  If you have to take out a student loans, comparing your options can help you find the student loan best suited for your needs.

For more information, click here.

Teaching Suggestions

  • Ask students if they applied for a student loan. What steps did they take to successfully obtain a loan?
  • Ask students to prepare a list of several federal and state sources of student loans for college.
  • Ask students if they had any problems in filling the Free Application for Federal Student Aid (FAFSA) form. How was the problem resolved?

Discussion Questions

  1. If a student is eligible for a federal loan, why is it important to take subsidized loans first?
  2. If you have to borrow money for school, what are your options?
  3. What should you consider when shopping for a private loan?
Sep 9 2015

Retirement Can’t Wait

A few decades ago, Americans had a pretty solid three-legged retirement stool.  Social Security and personal savings combined with traditional pensions led to good middle-class retirements for millions.  But today’s stool is a little too wobbly to support that lifestyle for coming generations of workers and retirees.  The Great Recession shows all of us just how vulnerable 401(k) type plans and IRAs can be, and with the savings rates dangerously low, the need to strengthen the system is clear.  Today, workers are largely responsible for their own retirement investments.  The days of a defined benefit pension that you couldn’t outlive are a thing of the past.  Today, we have to take greater ownership for starting our savings, managing and then figuring out how much to draw in retirement.

Most workers need advice on how to invest their 401(k) and IRA savings.  Too often, that advice is not delivered in the customer’s best interest.  The Labor Department is working with the financial services industry, consumer groups and Members of Congress to come up with a plan that protects retirement savings from financial conflicts of interest.

For more information, click here.

Teaching Suggestions

  • Ask students to analyze their current assets and liabilities for retirement planning.
  • Will your students’ spending patterns change during retirement?
  • What are the basic steps in retirement planning?

Discussion Questions

  1. Why is retirement planning so important for today’s workers?
  2. Can you depend on Social Security and your company pension to pay for your basic living expenses in retirement? Why or why not?
  3. Why is it important to start early for a secure retirement?
Aug 26 2015

Many Americans Have No Savings

About three in ten Americans have no emergency savings, according to a study conducted by Bankrate.com. This number has increased in recent years, mainly due to the lack of growth in household income. Without an emergency fund, people tend to encounter even greater financial difficulties. A person will often use high-interest debt to cover unexpected expenses. In addition to the 29 percent with no savings, another 21 percent have less than three months worth of expenses saved.

For additional information on emergency savings, click here.

Teaching Suggestions

  • Have students ask several people who their might cope with a financial emergency.
  • Have students create a plan for creating a emergency savings fund.

Discussion Questions 

  1. What are methods that might be used to cope with a financial emergency?
  2. How might a person be encouraged to create an emergency fund?
Aug 22 2015

Vital Financial Concepts To Teach Children

Learning at home is the starting point for teaching children about money. These eleven key personal concepts should be explained and experienced by children as they are growing up:

  1. Saving
  2. Budget
  3. Loan
  4. Debt
  5. Interest
  6. Credit card
  7. Taxes
  8. Investment
  9. Stock
  10. 401(k)
  11. Credit score

The age at which these concepts are taught will vary.

For additional information on teaching vital personal finance concepts to children, click here.

Teaching Suggestions

  • Have students describe how they learned about these concepts.
  • Have students conduct a survey among young consumers to determine their knowledge of these topics.

Discussion Questions 

  1. What additional personal finance concepts might be added to this list?
  2. What actions might parents take to teach these concepts to their children?
Aug 19 2015

Revising Dave Ramsey’s Baby Steps

Dave Ramsey has taught and encouraged millions to get out of debt and to achieve an improved financial situation through his “seven baby steps,” which are: (1) establish a $1,000 emergency fund; (2) pay off debt; (3) save three to six months of expenses; (4) invest 15 percent of income in pre-tax retirement funds; (5) plan for the funding of the college education of children; (6) pay off mortgage as soon as possible; (7) build wealth and give.

An alternative perspective to this approach might be:

  1. Create a larger initial emergency fund.
  2. Instead of paying off the smallest debts first, pay off the ones with the highest interest.
  3. A minimum of six months for expenses is needed, with twelve months more realistic.
  4. Take advantage of any 401k matching offered by employers.
  5. College may not be the right educational choice for everyone. Also, those who go to college should be responsible for a portion of education costs.
  6. Home ownership may not be appropriate for everyone. When buying a home, paying off a mortgage may be a higher priority than saving for college to reduce the amount of interest paid.
  7. Making money, saving money, and donating to charity should be the main focus.

For additional information on personal financial planning actions, click here.

Teaching Suggestions

  • Have students survey others regarding their use of these personal financial planning suggestions.
  • Have students obtain additional financial planning suggestions using online research.

Discussion Questions 

  1. What do you believe are the most important actions that should be taken regarding wise personal financial planning?
  2. How would you communicate these financial planning actions to others?
Aug 8 2015

Your Path To Success

What separates successful people from others?   While favorable timing, personal connections, wealth or other advantages can lead to success, a person must also possess various success-oriented attitudes, behaviors, and skills. Some of the actions that can lead to academic, career, and personal success include:

  • Display poise and confidence in your ability.
  • Assess existing skills and knowledge.
  • Set personal and career goals that align with your abilities.
  • Develop a habit on ongoing learning.
  • Take risks that allow you the opportunity to achieve at a higher level.
  • Persevere in your work efforts
  • Be prepared to face and go beyond obstacles.
  • Rejection and criticism can lead to future success.
  • Develop effective interpersonal skills. Your ability to interact, gain support of others, and develop trust is critical.

 For additional information about a success path, click here.

 

Teaching Suggestions

  • Have students ask people to describe their definition of “success.”
  • Have students obtain suggested actions for personal and career success using online research.

Discussion Questions 

  1. What are common mistakes people make in their personal financial planning and career planning activities?
  2. What actions do you plan to take to improve your personal and career success?
Jul 29 2015

Free Financial Coaches Give the Working Poor a Second Chance.

“. . . Financial coaching initiatives that target the working poor have sprung up in communities across the country.”

For low-income wage earners, the idea of paying hundreds of dollars for professional financial help can seem about as far-fetched as buying a winning lotto ticket.  And yet, help is available in a number of the nation’s larger cities including Chicago and New York.  In most cases, the financial coaches volunteer their time and have a background in personal finance or have received financial and investment training.  The participants receive specific suggestions geared to their individual situation that are designed to improve their credit score and help them build a sound financial future.  According to Richard Cordray, the director of the Consumer Financial Protection Bureau, “Having a trusted, well-informed financial coach can increase your odds of financial success.”

For more information, click here.
Note:  There is a short video that accompanies this article.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Point out that often low wage earners don’t have the money to pay a financial coach to help them manage their finances.
  • Describe different situations where the advice from a financial coach could make a difference in someone’s financial future. For example, a coach’s suggestions on how to improve someone’s credit score could lead to obtaining a credit card for emergencies or a short-term loan to bridge the gap between unemployment and employment.

Discussion Questions

  1. Assume you are unemployed and have exhausted your emergency fund.  You are behind on monthly payments including your rent and utilities.  What steps can you take to improve your financial situation?
  2. In the above situation, what suggestions do you think a financial coach could provide that would help you work through this difficult situation?
Jul 4 2015

Quiz: What’s Your Financial SPF Factor?

“So put aside that beach read for a few minutes and take this quiz to assess your financial SPF factor.”

While most people recognize SPF as standing for sunscreen, SPF–as defined in this article stands for Save, Protect, and Fund.  After a brief explanation of each SPF financial term, the article asks 11 questions that someone can use to help gauge their financial knowledge and financial planning skills.

At the end of the quiz, you are also told how your answers stack up and then the article provides suggestions about how to improve not only your score, but also your ability to plan for your financial future and retirement.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of effective financial planning over your lifetime.
  • Begin a discussion about the benefits of long-term investments.
  • Review time value of money calculations.

Discussion Questions

  1. How can financial planning help you obtain your goals and objectives?
  2. Why should you begin investing sooner rather than later?
  3. A common problem for some people is they don’t have the money they need to begin an investment program. Given your current circumstances, what steps can you take to “find” the money to start an investment program?