Chapter 1

FINRA’s National Financial Capability Study (NFCS)

According to a recent FINRA study, the financial circumstances of Americans have improved over the last several years—driven in large part by an improving economy and job market.  For example, the percentage of survey respondents reporting no difficulty in covering their monthly expenses increased from 36 percent to 48 percent.  This is very significant and 12 percentage point improvement.

However, some groups are still struggling, particularly blacks and Hispanics, those without a high school education, and women.  Here are some sobering statistic: About half of respondents with only a high school diploma or no diploma could not come up with $2,000 in an emergency compared to 18 percent for those with a college degree.

Debt continues to be a problem for many Americans.  More than one-in-five Americans have unpaid medical debt.  Similarly, more than one-in-five Americans with credit cards have been contacted by a debt collection agency in the last year.

In terms of financial literacy, absolute levels are low; only 37 percent of respondents are considered highly financial literate—meaning they could answer four or five basic questions correctly on a five-question financial literacy quiz.  And, financial literacy is down slightly since 2009.

For more information,click here.

Teaching Suggestions

You may want to use the information in this article to

  • Help students understand that many minority groups are still struggling even though economy and job markets have improved.
  • Explain how people can improve their financial lives by saving even a tiny portion of their income for emergencies.

Discussion Questions

  1. What can be done to improve the financial circumstances of minorities?
  2. What might be some reasons that debt continues to be a problem for many Americans?
  3. Since financial literacy levels are so low, what can individuals, local, state and Federal governments can to improve financial literacy of all Americans?
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The Single Best Question to Ask in a Job Interview

“What did you do to prepare for this interview?”

According to CNBC contributor and author Suzy Welch, the above question is the most important question that a manager can ask and the best question a prospective employee can answer.  She explains she has asked this question for years and is always surprised at the answers she gets from prospective employees–answers that are the good, the bad, and the ugly.  One answer stands out.  When asked what she did to prepare for the job interview as my personal assistant, the applicant answered, I’ve been stalking you for three days.  Welch loved the answer because stalking  involved reading virtually everything she could find written about Welch plus reading and scanning everything I’ve ever written online and in print.

Not all answers display the passion that a job applicant should have.  For example, one applicant answered, “Well I drove here last night with my boyfriend so I wouldn’t get lost today.”  Not an answer that would demonstrate the kind of passion and curiosity and most importantly, the resourcefulness Welch was looking for.

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 doing some detective work when preparing for a job interview.
  • Point out there are many websites that can help job applicants prepare for a job interview.

Discussion Questions

  1. Assume you unemployed and have scheduled a job interview with a human resources manager for a bank teller position at a local Bank of America branch. What would you do to prepare for your interview?
  2. What traits or skills do you have that would make the bank want to hire you for this position? How can you tell or illustrate your traits and skills during the interview process?
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Smart Money Moves for January

With a new year, many people hope to get a fresh start with changes in their financial planning activities. To do so, the following actions are suggested:

  • Maintain or increase the amount of money in your emergency fund.
  • Pay off high-interest credit cards and other expensive loan accounts.
  • Set goals that will contribute to long-term financial security.
  • Review your cash flow (spending and income) from the previous year in an effort to increase saving by avoiding unnecessary payments.
  • Merge various banking, investment, and retirement accounts into one low-cost account.
  • Determine if changes are needed in your estate plan.
  • Increase your retirement account contributions.
  • Revise your tax withholding, as needed

For additional information on January money moves, click here.

Teaching Suggestions

  • Have students talk to various people about which actions they believe to be most valuable for long-term financial security.
  • Have students create a brief presentation describing the value of one of these suggested money actions.

Discussion Questions 

  1. Describe the January money actions that you consider to be most valuable for long-term financial security.
  1. What are some other money moves that you would recommend?
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: | Leave a comment

Learning How Money Works

 Many people grow up without learning how money works, which usually results in difficulties.  Studies reveal that less than one-fourth of millennials have basic financial knowledge.

A vital starting point in the learning process is admitting that you don’t know.  For example, most people do not know that credit scores show if a person has paid his or her bills on time and how much has been borrowed.  Most people are not aware that credit reports often contain incorrect information, or how to check for errors.

Credit card rewards may seem like a good deal but only is you pay your bill on time every month.  If you don’t, late fees and interest charges can more than outweigh any reward point benefits.

These are just two areas on which many young people, as well as others, lack a basic understanding. However, a wide variety of sources are available to add to your knowledge.

For additional information on learning how money works, click here.

Teaching Suggestions

  • Have students conduct research to determine the financial knowledge among various age groups.
  • Have students create a video presentation with suggestions for improving financial knowledge.

Discussion Questions 

  1. Why are people often not informed on basic money topics?
  2. What are the most common topics that on which many people lack basic financial knowledge?
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Financial Fears

According to the Northwestern Mutual Planning and Progress Study on financial well-being, Americans have several worries.  Based on interviews with 2,646 adults, 85 percent of respondents reported financial anxiety in some form.  Approximately two-thirds of those surveyed indicated that financial anxiety negatively affected their health.  In addition, 36 percent of those responding had increasing levels of financial anxiety over the past three years.

In the study, the greatest financial fears were:

  1. Having an unplanned emergency
  2. Having unplanned medical expenses
  3. Having insufficient savings for retirement
  4. Outliving retirement savings
  5. Becoming a financial burden
  6. Not able to afford healthcare
  7. Loss of a job
  8. Identity theft
  9. Extended unemployment
  10. Death/loss of primary wage earner
  11. Having poor credit
  12. Having to file bankruptcy
  13. Being a victim of a financial scam

To address these concerns, the study recommends the following actions:

  • build an emergency fund for unplanned expenses
  • invest properly for retirement and long-term financial security
  • review your finances regularly to revise goals and savings activities

These actions can help to reduce the financial anxiety reported by a large portion of Americans.

For additional information on financial anxiety, go to:

Link #1

Link #2

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The 1-Page Financial Plan: 10 Tips for getting what you want from Life

Carl Richards, author of The One Page Financial Plan, knows the financial mistakes–including the ones he has made–that people make.  Based on his experience as a financial planner, he provides 10 tips to help people get what they want from life.  Note:  An explanation and examples to illustrate each tip are provided in this article.  His tips are:

  1. Ask why money is important to you.
  2. Guess where you want to go.
  3. Know your starting point.
  4. Think of budgeting as a tool for awareness.
  5. Save as much as you reasonably can.
  6. Buy just enough insurance today.
  7. Remember that paying off debt can be a great investment.
  8. Invest like a scientist.
  9. Hire a real financial advisor.
  10. Behave for a really long time.

For more information, click here. 

Teaching Suggestions

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

  • Illustrate how each tip provided in this article could affect an individual’s financial plan.
  • Encourage students to read the entire article to help determine what’s really important in their life.

Discussion Questions

  1. It’s often hard (or maybe close to impossible) to determine what you value and where you want to go in the next 20 to 30 years with perfect accuracy. Still, experts recommend that you establish a long-term financial plan.  What steps can you take to make sure your plan will meet your future needs?
  2. Why is it important to evaluate your plan on a regular basis and make changes if necessary?
Categories: Chapter 1, Chapter_14, Financial Planning, insurance, Retirement Planning | Tags: , , , | Leave a comment

How the Presidential Election Will Affect Your Investment Strategy

“The sky is falling!  If my chosen candidate doesn’t win, the markets are doomed and so are my investments.”

In this article, Bijan Golkar points out that a presidential election can cause excitement or despair depending on if you are a Republican or a Democrat and who the major parties nominate for the highest and most powerful office in the world.

The article discusses market returns both before and after a presidential election year and some of the underlying reasons for market volatility.  Then the article stresses the importance of a person’s long-term goals and a plan for long-term growth as opposed to “emotional investing.”  Finally, the article discusses the pros and cons of our economy that could affect investment values.

For more information, click here. 

Teaching Suggestions

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

  • Discuss the importance of a long-term investment plan that will take advantage of the time value of money.
  • Describe some of the pitfalls of “emotional investing.”

Discussion Questions

  1. What are the typical characteristics of an emotional investor? Of a long-term investor?
  2. What are the advantages of a long-term investment program when compared to “emotional investing?”
Categories: Chapter 1, Chapter_11, Economy, Financial Planning, Investments, Savings | Tags: , , | Leave a comment

How to Find a Financial Advisor

“Finding your next financial advisor is as easy as counting from one to five.  You just need to know where to look and what to ask.”

The information in this article is provided by the National Association of Personal Financial Advisors (NAPFA) and was developed to help people find a financial advisor.  Specific suggestions include

  1. Before beginning a search for a financial advisor, have a conversation with your loved ones to determine what is important, what you value, and what you want to accomplish.
  2. To develop a list of potential advisors, talk to friends and relatives and visit websites like http://www.napfa.org.
  3. Narrow your list to the top three contenders then do your homework. Visit company websites and read each advisors biographical sketch, check information available on the SEC website (www.sec.gov), and develop a list of questions that you want to ask when you meet each advisor.
  4. Request a meeting with each potential advisor. Ask questions to help assess your comfort level with each advisor.  For help, visit the NAPFA website (www.napfa.org) and click on “Tips and Tools.”
  5. Often the key to building a relationship with a financial advisor is communication. Review your relationship with a financial advisor over time.  Don’t just look at investment results, but also determine if the advisor (and her or his firm) is helping you achieve your important goals.

For more information, click here.

Teaching Suggestions

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

  • Remind students that it is better to start financial planning earlier rather than later in life.
  • Stress that even beginning investors or investors with little money can still use a financial advisor.
  • Encourage students to visit the National Association of Personal Financial Advisors website (www.napfa.org). There is a great deal of quality information available with a click of a mouse.

Discussion Questions

  1. Often, the first step when choosing a financial advisor begins before you actually meet a potential advisor. How can determining your goals and what you value help you start financial planning?
  2. While many investors think that financial advisors are only for the rich, beginning investing or investors with little money can benefit from professional help. What steps can you take to find the right financial advisor to help you obtain your goals?
Categories: Chapter 1, Chapter_11, Financial Planning, Retirement Planning | Tags: , | Leave a comment

Financial Security and Longevity

While Americans are living longer and healthier lives, they also are facing more financially fragile situations. Uncertainty related to financial health in the later years of life has become more common. Lower, less predictable incomes among those retiring within 10 years has resulted in difficulty paying their bills. This group also reports a lower net worth. In 2013, the typical 56- to 61-year-old had an average of $17,000 in retirement savings. This lower level of net worth is partially the result of higher levels of debt than the previous generation. This debt is in the form of higher mortgages and education loans, including amounts owed for their children’s education.

To address these concerns, several policy actions are proposed:

  • Requiring and supporting strategies for to build effective financial capability, including coaching and workforce development programs.
  • Tax policies and other incentives that encourage savings and investment among lower-income and lower-wealth families.
  • Policies to increase educational opportunities without excessive debt.
  • Efforts for protection from financial difficulties caused by medical catastrophe.
  • Policies for improved housing stability of both owners and renters.

For additional information on financial security and longevity, click here.

Teaching Suggestions

  • Have students interview people to determine common actions used to save for retirement.
  • Have students create a presentation to suggest action for improved financial security for various income levels.

Discussion Questions 

  1. What are some financial pressures faced by households as people approach retirement age?
  2. What actions might government and business take to reduce the financial pressures of people approaching retirement age?
Categories: Chapter 1, Chapter_14 | Tags: , | Leave a comment

Eight Measurements of Financial Health

The Center for Financial Services Innovation has identified eight indicators to measure financial health. These measurements can serve as a framework for guiding individuals and financial service providers toward an improved quality of life for consumers.

The eight indicators of financial health, presented in four categories, are:

SPEND

  1. Difference between income and expenses
  2. Percent of bills that are paid on time and in full

SAVE

  1. Number of months of living expenses in liquid account balances
  2. Amount of one’s long-term savings, assets, and investments

BORROW

  1. Debt-to-income ratio
  2. Credit score or credit quality tier

PLAN

  1. Type and extent of insurance coverage
  2. Behaviors that demonstrate future financial orientation

For additional information on financial health indicators, click here.

 

Teaching Suggestions

  • Have students ask people to describe what is meant by “financial health.”
  • Have students create a list of actions that might be taken to achieve financial health.

 Discussion Questions 

  1. What are additional factors that might be considered when measuring a person’s financial health?
  2. What actions are you taking to achieve financial health?
Categories: Chapter 1, Financial Planning | Tags: , , | Leave a comment

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