financial literacy for high school students investing in your future
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Montana. Money School. Financial Literacy for High School Students Investing in Your Future. State Auditor John Morrison. Financial Literacy Defined. Financial literacy refers to the basic skills people need to manage money and make financial decisions. A Financial Literacy Crisis. - PowerPoint PPT PresentationTRANSCRIPT
Financial Literacy for High School Students
Investing in Your Future
MontanaMontanaMoney SchoolMoney School
State Auditor John Morrison
Financial Literacy Defined
Financial literacy refers to the basic skills people need to manage money and make financial decisions.
A Financial Literacy Crisis
61 percent of people age 24-64 have no retirement savings account of any kind.
Average credit card debt among college students is more than $2,300.
2002 Personal Finance Survey4,024 High School Seniors
Average Score 50.2% -- a failing grade
Yet, 65% of students said they felt very or somewhat sure about their ability to manage money
Where They Learned About Money
0
10
20
30
40
50
60
Home Friends Self
HomeSchoolFriendsMediaSelf
Jump$tart Coalition for Personal Financial Literacy Study
Financial Tasks of Young Adults
Train for a career Save and invest for future goals Establish a good credit record Develop a financial plan Consider insurance protection Start a family
The Time Value of Money
The time value of money is the growth of money over time as a result of investment earnings.
Investments made earlier in life have a greater pay-off than those
made later in life.
How Long to Double Your Money
Earnings Rate Years to Double2% 36
3% 24
6% 12
12% 6
18% 4
36% 2
Savings and Investment Products
Savings Products
• Savings Accounts
• Money-Market Funds
• CDs Investment Products
• Stocks represent ownership
• Bonds are a type of loan
• Mutual Funds
Types of InvestmentsStocks
– Ownership of a corporation represented by shares, which are a claim on the corporation’s earnings and assets.
Types of Investments
Bonds– A loan that pays interest over
a fixed term, or period of time. When the bond matures at the end of the term, the principal, or investment amount, is repaid to the lender, or the owner of the bond.
Types of Investments Mutual Funds
– A fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, futures, currencies or money market securities.
Selecting Savings & Investments
Liquidity: the speed and ease with which an asset can be converted into cash– How quickly will you need your money– Highly liquid: savings accounts & money
markets– Less liquid: stocks, bonds, CDs
Selecting Savings & Investments
When choosing investments consider…
risk = potential return or risk = potential return
Interest rate riskBusiness failure riskMarket price risk
Inflation riskPolitical riskFraud risk
Smart Investing Tips
Diversify your investments. Invest for the long term. Make regular contributions to
your savings and investments.
Work with an investment representative who understands your goals.
How Americans Invest
20% 18%5%
47%10%
Mutual Funds Stocks Bonds Savings Other
Bull vs. Bear Market
Bull Market When the stock market
moves upward for a period of time
Bear MarketWhen the stock market falls 15% to 20% for a period of time
Dow vs. Nasdaq
Dow Jones Industrial Average– Computed based on the stock prices of 30
major industrial companies, which are worth about 20% of the total value of all U.S. stocks
Nasdaq Composite Index– Tracks the performance of the 5,200
stocks traded on the Nasdaq Stock Market. It usually shows more volatility than other indexes because of the kinds of companies it includes
Investing Basics
Year 5%* 8% 15%
1 $1,050 $1,180 $1,1505 $1,276 $1,469 $2,011
10 $1,629 $2,159 $4,046
20 $2,653 $4,661$16,36
7
Future Value of a Single $1,000 Deposit
*Interest rates
Relationship between Education Level and Annual Income
Males (25 years and older) with a bachelor’s degree– $19,207 more than men who had a high school diploma
– $28,287 more than men who never graduated from high school
Females (25 years and older) with a bachelor’s degree– $13,629 more than women who had a high school
diploma
– $17,833 more than women who never graduated from high school
Source: U.S. Census Bureau
The Cost of CollegeMonthly investment for 4-year
cost
Years ‘til child starts college
Public Private
1 $3,808 $7,9573 $1,314 $2,7465 $815 $1,7027 $600 $1,253
15 $310 $647Source: T. Rowe Price Associates, 1996
The Cost of CollegeMonthly investment for 4-year
cost
Years ‘til child starts college
Public Private
1 $3,808 $7,9573 $1,314 $2,7465 $815 $1,7027 $600 $1,253
15 $310 $647Source: T. Rowe Price Associates, 1996
Tips for Financial Success
Get started early Invest for the long term Continue to study and learn Participate in employer-sponsored plans Know when to seek advice
Avoiding Scams
Do not give your credit card, bank account, or social security numbers or personal information to people who contact you.
Be wary of claims that you can earn huge profits in an investment with little or no risk.
Avoiding Scams
Get information in writing before you agree to buy a product or service.
Do not be pressured into making an immediate decision.
Make sure you know the per minute rate for any 900 call you make.
Get Rich Quick
Don’t be taken in by promises that you can “get rich quick.”
It’s a scam! Be a smart investor.
Where to Go for Help
Montana Securities Commissioner– 1-800-332-6148– www.discoveringmontana.com/
sao Securities and Exchange
Commission– 1-800-732-0330– www.sec.gov
Montana State AuditorJohn Morrison
840 Helena Avenue
Helena, MT 59601
1-800-332-6148
(406) 444-2040
www.discoveringmontana.com/sao