MODULE 8: FINANCIAL LITERACY

FINANCIAL LITERACY - refers to the knowledge and skills needed to make informed decisions about
money and personal finances.

The Importance of starting financial literacy while still young.

 Introducing financial literacy in early years, even during pre-school, is advantageous as it builds
knowledge. skills, and responsible financial behavior throughout education
 Early exposure empowers children to make informed decisions understand money's value, and
develop healthy financial habits

FINANCIAL PLAN - It is a systematic approach to managing finances and making informed decisions to
optimize financial well-being.

3 STEPS IN CREATING FINANCIAL PLAN

1. Calculating net worth - Net worth is the difference between your assets.
2. Determining cash flow - movement of money.
3. Consider the priorities - financial plan.

FIVE FINANCIAL IMPROVEMENT STRATEGIES - suggested by Investopedia

1. Identify your starting point - calculating net worth

2. Set your priorities - needs and wants.
3. Document your spending -Create a personal spending plan
4. Lay down your debt - reduce your debt.
5. Secure your financial future - financial stability in long term.

FINANCIAL GOAL PLANNING AND SETTING

-establishing specific objectives that you aim to achieve w/ your faces.

3 KEY AREAS IN SETTING INVESTMENT GOALS FOR CONSIDERATIONS

1. Time Horizon - indicates the bime when the money will be needed.
2. Risk Tolerance - personal comfort level with taking risks.
3. Liquidity needs - refers to how easily you can convert an investment into cash.
4. Investment goals - (Growth, income, and stability)
3 main investment goals

1. Growth - increase in the value of your investment over time.

2. Income - payments Investments
3. Stability -preserving your initial investment and protecting its value.

Budget and Budgeting

Budget - an estimation of revenue and expenses over a specified period of time; compiled and re-
evaluated on a periodic basis.

Budgeting - process of creating a plan to spend money.

Seven Steps to Good Budgeting

1. Set realistic goals.

2. Identify income and expenses.

3. Separate needs from wants.

4. Design your budget.

5. Put your plan into action.

6. Plan for seasonal expenses.

7. Look ahead.

Spending

If budget goals serve as a financial wish list, a spending plan is a way to make those wishes a reality.
Turn them into an action plan.

Strategies in Setting Budget Goals and Spending Plan

1. Start by listing your goals.

2. Divide your goals according to how long it will take to meet each goal.

A. short-term goals: less than a year; immediate needs & wants

B. medium-term: 1-5 years; you and your family want to achieve in the next 5yrs.

C. Long-term: more than 5yrs.; Planning for retirement and other future goals.

3. Estimate the cost of each goal and find out how much it costs.
4. Project future cost.

5. Calculate how much you need to set aside each period.

6. Prioritize your goals.

7. Create a schedule for meeting your goals.

Investment and Investing

- earn more money in a saved money.

4 aspects to consider:

1. How long will you invest the money? (Time Horizon)

2. How much money do you expect your investment to earn each year? (Expectation of Return)

3. How much of your investment are you willing to lose in the short-term in order to earn more in the
long-term? (Risk Tolerance)

4. What type of investment interest you? (Investment Type)

Savings

- can save you out of debt; help in buying things that are needed or wanted without borrowing.

10 Reasons Why Save Money

1. To become financially independent.

2. To save on everything you buy.

3. To buy a home or car.

4. To prepare for the future.

5. To get out of debt.

6. To augment annual expenses.

7. To settle unforseen expenses.

8. To respond to emergencies.

9. To mitigate losing your job or getting hurt.

10. To have a good life.

COMMON FINANCIAL SCAMS TO AVOID

A. PHISHING – a form of fraud in which an attacker masquerades as a reputable entity or person in

email.
B. SOCIAL MEDIA SCAMS – prime territory for internet-based scams that target teens.
C. PHONE SCAMS – are a common way for criminals to con people out of money using tricks to get
your personal information.
D. STOLEN CREDIT CARD NUMBERS – is when the consumer give their credit card number to
unfamiliar individuals.
E. IDENTITY THEFT – is the crime of obtaining the personal or financial information of another
person to use their identity to commit fraud.

10 TIPS TO AVOID COMMON FINANCIAL SCAMS

1. Never wire money to a stranger.

2. Don’t give out financial information.
3. Never click on hyperlinks in emails.
4. Use difficult passwords.
5. Never give your social security number.
6. Install Antivirus and Spyware protection.
7. Don’t shop with unfamiliar online retailers.
8. Don’t download software from pop-up windows.
9. Make sure the websites you visit are safe.
10. Donate to known charities only.

FINANCIAL SCAMS AMONG STUDENTS

A. Fake scholarships
B. Diploma mills
C. Online book scams
D. Credit card scams

Insurance - is the best form of risk management against uncertain loss.

Tax - is a mandatory payment or charge collected by local, state, and national governments from
individuals or businesses to cover the costs of general government services, goods, and activities.

Types of insurance

 Life insurance
 Health insurance
 Motor insurance
 Property insurance
 Business insurance

Concepts related to insurance and taxes

Employer-Sponsored Insurance – working in a company w/ 50 or more full time employees.

Marketplace Plans – available based on an area of residence and income upon meeting minimum
coverage requirements.

Premiums to the insurance company – in exchange for the financial protection offered, policyholder
agrees to pay a certain sum of money.

Life insurance – a type of insurance that compensates beneficiaries upon the death of the policyholder
the company will guarantee a payout for the beneficiaries in exchange of premiums. This compensation
is called “death benefit”.

Depend ending on the type of insurance on may have, these events can be anything from retirement,
to major injuries, to critical illness or even to death.

1. Proffered plus - the policyholder in excellent health, with normal weight, no history of smoking,
chronic illness or family history of any life-threatening disease.

2. Preferred - the policyholder is in excellent health but may have minor issues on cholesterol or blood
pressure but under control.

3. Standard plus - the policyholder is in very good health but one factors, like high blood pressure or
being overweight impede a better rating.

4. Standard - most policyholders belong to the category, as they are deemed to be healthy ad have
normal life-threatening disease or few minor health issues.

5. Substandard - those with serious health issues, like diabetes or hearth diseases are placed on a table
rating system. Ranked from highest to lowest. On average, the premiums will be similar to standard with
an additional 25% lower claim on table ratings.

6. Smokers - due to an added risk of smoking the policyholder in this category are guaranteed to pay
more aside health class. Age is also a critical factor in determining premiums. Therefore, older people
pay more expensive premiums.

BENEFITS OF LIFE INSURANCE

1. It pays for medical and funeral cost.
2. For financial support.
3. For funding various financial goals.
4. Act as a retirement secured conform.
5. It covers cost incurred from taxes and dept.
FINANCIAL STABILITY - being financial stable is means confidence with the financial situation, worriless
about the paying the bills because of available funds.

10 strategies in reaching financial stability

1. MAKE SAVINGS AUTOMAGICAL- saving should be made a top priority especially as an emergency
fund and bill payment from the amount are automatically transferred from the checking account.
2. CONTROL YOUR IMPULSIVE SPENDING - control yourself from impulsive spending on eating out,
shopping, and online purchases, that may ruin your finances and budget.

3.Evaluate your expenses and live frugally- analyze how you spend your money. see what can you
reduce and determine expenses necessary and eliminate the unnecessary.
4. Invest on your future- start preparing and investing for your future and retirement while you are still
young in your career field.
5. Keep your family secure- save for an emergency fund. so that you have something to spend if
anything happens on the family.

6. Eliminate and avoid debt- eliminate credit cards, personal loans or other debt forms as it will not
work o you but even pull you down and make you drowned with obligations that may even resort to
surrendering your properties.
7. Use the envelope system- set aside three amounts on your budget each payday with draw those
amounts and put them on three separate envelopes.
8. Pay bills immediately- pay bills immediately as soon as they come in and try to get your bills to be
paid through automatic deduction
9. Read about personal finances- the more you educate yourself the better your finances will be
10. Look to grow your net worth- do whatever you can to improve your net worth.
SIGNS OF BEING FINANCIAL STABLE
1. You never overdraw your checking account.
2. You don't sleep over finances
3. You use your credits for convenience and rewards but never out necessity.
4. You don't worry about losing your job.
5.You pay your bills ahead of time.
6. People ask your opinion about financial matters and you inspire them.
7. You're generally happy with your financial situation
8. You finance your cars over five years or less if you take loans at all.
9. You contribute more to your retirement.
10. You don't feel guilty when you're out for special occasions.

11. You can’t afford to buy the things you really want.
12. Recreational spending doesn't appeal to you.
13. You're a natural saver.
14. You're generous about money when it comes to charities or helping others.
15. You're confident about your future.
16. Your net worth grows significantly year to year.
17. You have substantial equity on your home.
18. You could survive for months without a paycheck.
19. You consistently live beneath your means.
20. You feel in control of your finances and never dominated by them.