financial literacy for high school students. project overview what do you spend your money on?...

Financial Literacy for High School Students

Project Overview

• What do you spend your money on?

• Future Budget Scenario

• Checking Account vs. Savings

Account

• Credit Cards and Credit Scores

• “Who Wants to be a Millionaire?”

• Careers in Accounting and Finance

What do you spend your money on?• First Step: Think about what you currently spend

money on..o Food?

o Movies?

o Clothing?

o Transportation & Gasoline?

o Entertainment?

• Wait… How do you pay for those expenses?

• Traveling through time: What additional expenses

will you have to pay when you are an adult?

Future Budget Scenario

• Average Starting Salaries:o High School Graduate: $28,000 yearly

• (Monthly = $2,333) • (After Tax = $1,820)

o Two-Year Degree (Some College): $30,000 yearly

• (Monthly = $2500)• (After Tax = $1,950)

o Bachelor’s Degree (College) or More: $45,500 yearly

• (Monthly = $3,790)• (After Tax = $2,956)

o More expenses when you are grown-up!

Guess how much each expense will cost!

• How much should you spend (dollar amount) per

month on each of these categories?o Savings? ____

o Housing? ____

o Food? ____

o Clothing? ____

o Transportation? ____

o Entertainment? ____

Actual Amount for Expenses by SalariesHigh School Graduate: $1,820

Two-Year Degree:$1,950

Bachelor’s Degree:$2,956

Savings (5%) $91.00 $97.50 $147.80

Housing (27%) $491.40 $526.50 $798.12

Food (11%) $200.20 $214.50 $325.16

Clothing (4%) $72.80 $78.00 $118.24

Transportation(11%)

$200.20 $214.50 $325.16

Entertainment(7%)

$127.40 $136.50 $206.92

Total Expenses

$1,183.00 $1,267.50 $1,921.40

How much money would you have left?

• What other expenses will you have? o Utilities (Gas, Water, A/C)

o Medical

o Insurance

o School

o Vacations

o Invest?

High School Graduate:

Two-Year Degree:

Bachelor’s Degree:

After-Tax Income:

$1,820.00 $1,950.00 $2,956.00

Less: Expenses (1,813.00) (1267.50) (1,921.40)

Money Left $17.00 $682.50 $1,034.60

Checking vs. Savings Accounts

Checking Account

• Daily Use

• Few or no restrictions on number of withdrawals

• Debit Card

Savings Account

• Saving Purposes – Infrequent Use

• Limited number of withdrawals per month

• Pays higher interest rate than checking account

What about Credit Cards?

• What is a credit card?o Pay with Credit

o Use for expensive purchases

• Pay Monthly Billo Minimum Amount vs. Pay-in-Full

• Dangers of Credit Cards

Credit Scores

• Similar to a Report Cardo Generally, scores range from 300-800

• Credit monitored by an Agencyo Grades are monitored by school, teachers, and parents

• The Importance of a Credit Scoreo Cars, homes, loans, job applications, etc.

• Bad Credit = Consequences

Who Wants to be a Millionaire?

• Think back to the budgeting scenario.. If you took $1,000 and invested

it, what would happen?

• If you waited for 50 years, you could be a millionaire!!!! (Or at very

least a hundred-thousand-aire!))

• How??? Compounding Interest and Smart Investing!o What is compounding interest?

• Return Rateso Historical Average Return on the Stock Market = 11%

o Aggressive Approach (Good Investing) = 15%

Path to Becoming a Millionaire!

Year Total Amount: Avg. Market Rate Return = 11%

Total Amount:Aggressive Approach/ Return = 15%

0 $1,000.00 $1,000.00

1 $1,100.00 $1,150.00

2 $1,232,00 $1,322,50

10 $2,839.4 $4,045.56

20 $8,062.3 $16,366.54

35 $38,574.85 $133,175.52

50 $184,564.83 $1,083,657.44

Tips to Long Term Investing

• Understand Options and Returnso Bank Accounts

o Stocks

o Other Opportunities

• Be Patient!o Don’t track daily, weekly, monthly changes

o Some years you might lose money, don’t worry!

• Invest Earlier = More Money = Retire Earlier!

Careers in Accounting

• Certified Public Accountanto Audit

o Tax

• Corporate Accountanto Chief Financial Officer (CFO)

• Forensic Accountant

• Internal Audit

• Consultant/Advisor

Careers in Finance

• Banking

• Corporate Financing

• Financial Planningo Help others manage money and plan for savings/retirement

• Venture Capitalisto Fund new businesses with high growth potential

Summary

• Plan Weekly, Monthly, and Yearly Budgetso Understand personal finances first before going on a shopping

spree!

• Difference between Checking and Savings Accounts

• Credit Cards are NOT a necessity

• Importance of a Credit Score

• Invest Early! o Be patient!

• Maybe consider a career in Accounting and Finance!

Sources

• The Motely Foolo http://www.fool.com/teens/teens01.htm

• Junior Achievemento http://www.myja.org/programs/saveusa/ja_$ave_USA_middle_school_educators_2

009.

pdf

• Michigan Counseling Association o http://www.michigancounselingassociation.com/uploads/2/6/3/4/2634297/

budget__financial_education.pdf

• PEW Researcho http://www.pewsocialtrends.org

/2014/02/11/the-rising-cost-of-not-going-to-college/