Financial Literacy 101

FINANCIAL LITERACY 101 Do you have a household budget? Good for you - you're only slightly in the majority. More than four in 10 adults in the U.S. keep no household budget, and about the same number don't have savings that aren't already earmarked for retirement. In short, collectively we don't know much about the basics of responsible spending. FINANCIAL LITERACY REPORT CARD 56% 39% 71 million U.S. adults, about one-third, don't pay all of their bills on time. of U.S. adults carry credit card debt over month-to-month. of U.S. adults do not have a budget. 2015 adulis 39% of U.S. adults have no non-retirement savings. in the U.S. are saving less now than a year ago. A CLOSER LOOK Many Americans use short-term loans and have inadequate savings.2 55% of Americans report spending more than or about equal to their household income. 60% do not have a rainy-day fund to cover three months of unanticipated financial emergencies. 24% have engaged in some form of higher cost non-bank borrowing in the past five years, including payday loans or tax refund advances. STARTING YOUNG If young people have a working knowledge of saving, spending and credit, it's probably not because they learned it in school. of parents give schools an Fin financial of parents with kids in high school or college give schools below average grades in teaching responsible spending. 3 literacy, while about the same number (37%) say schools are successful at teaching safe sex. 37% 22% 5% of Americans learned from their fathers. of Americans say they learned basic money 25% management on their own. of Americans of parents give their children leamed about 51% of Americans learned money matters from a teacher. from their mothers. allowance FINANCIAL LITERACY QUIZ How much do you know? The average score on this quiz is 3. but only 4% See bottom for answers. 1 Suppose you have $100 in a savings account earning two percent interest a year. After five years, would you have. O More than $102 O Less than $102 O Exactly $102 require them to deposit that money into a bank account. 2 Imagine that the interest rate on your savings account is one percent a year and inflation is two percent a year. After one year, would the money in the account buy. 4. True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest over the life of the loan will be less. O More than it does today O Exactly the same as it does today O Less than it does today O True O False 3 If interest rates rise, what will typically happen to bond prices? 5. True or false: Buying a single company's stock usually provides a safer return than a stock mutual fund. O Rise O Fall O Stay the same There is no relationship O True O False EXTRA CREDIT HOW TO IMPROVE YOUR SCORE I Make financial goals Establish short- and long-term goals, using a worksheet if necessary, to start planning goals within important areas of your life including education, housing, healthcare and recreation. I Plan for the future - saving and investing Are you saving money each month? Do you have enough to live on if you were to lose your job? Are you investing your money to help it grow? You don't have to leap head-first into the stock market, but saving and investing can begin through small efforts. Open a I Follow a budget Even a simple budget that tallies what you earn versus what you spend can help improve your financial well-being. savings account and set up auto-deposit so that the same amount of money is going into the account each month, without you having to move it over. Speak with a trusted financial adviser to talk about your options for I Build credit wisely Don't be afraid of credit, but don't abuse it either. A strong credit profile can only be built through responsible use of credit cards. Many cards come with rewards programs that allow you to earn points, miles or cash back. investment. CashNetUSA. SOURCES Money's on the way [1] 2012 Financial Literacy Survey. National Foundation for Credit Counseling and the Network Branded Prepaid Card Association. (April 3, 2012). Retrieved from http://www.nfc.org/newsroom/newsreleases/SIGNIFICANT_GAPS.cfm. [2] State-by-State Financial Capability Survey. FINRA Investor Education Foundation. (December 8, 2010). Retrieved from http://www.finra.org/Newsroom/NewsReleases/2010/PI22538. [3] American Express Spending & Saving Tracker. American Express. (August 10, 2011). Retrieved from http://about.americanexpress.com/news/pr/2011/safespend.aspx. [4) Mom and Dad 'MIA' on Teaching Money Management? Visa. (April 2012). Retrieved from http://www.practicalmoneyskills.com/about/press/releases_2011/0524.php. [5] Study Reveals Need for Tools to Help Parents Teach Kids About Savings. DoughMain. (February 17, 2012). Retrieved from http://www.doughmain.com/odmpublic/includes/footer/about/docs/Help%20Parents%20Teach%20Kids%20About%20Savings.pdf [6] Financial Quiz. FINRA Investor Education Foundation. (2011). Retrieved from http://www.usfinancialcapability.org/financial_quiz.html