personal finance – knowledge, understanding and skill development

Financial Wisdom Game®

Personal Finance – Knowledge, Understanding and Skill Development

FEET Center


Presented by

David L. McConico, CFP®

FWG®

Financial Education and Economic Transformation

Center

What: A Team Competition, a financial planning game, with financial incentives awarded to the teams who build the highest positive account value.

Why: To educate youth for more informed financial decisions

Financial Wisdom Game Philosophy is 3tt = FUNt

Event Based: Personal Finance Game Identifying Concepts, Words, Terms, Exhibits and Diagrams.

Introduced in 2011: Education through Engagement

Event Play: Playing time 60 - 90 minutes.


Time Frame: Six Rounds - 5 minutes Two halves- 30 minutes Break Between halves - 5 minutes End of Half and Final Question with Investment

opportunity - 3 minutes each

Teams: 4 Teams – four to six members Must be member of Finance Club to play All members must play in event competition


Rules ◦ Eligible member of Finance Club◦ Team Name◦ Team order determined by coin toss◦ There are six rounds of four questions (for player)

and there is one question (for team) at the end of rounds three and six.


Value of Questions per round:

Round 1 - 100 points Round 2 - 200 points Round 3 - 300* points Round 4 - 400 points Round 5 - 500 points Round 6 - 600* points


*Point values can be double in rounds three and six (Must be indicated by player on wisdom seat before the question is asked).

Point values are half if player seeks wisdom while on the wisdom seat.

Team can indicate value invested (up to current account value) for questions at the end of rounds 3 and 6.


Player Player order must be determined by team before game starts.

Player on the wisdom seat has 30 seconds to respond with answer, seek wisdom, or pass. If player does not provide indicated respond within 30 seconds point value is subtracted from account value. Only player on the wisdom seat can ask for the question to be repeated or asked differently (10 seconds is added to the response time). Facilitator has discretion as to whether question can be asked beyond twice.

No player can be on the wisdom seat for more than two opportunities to answer questions (except in seeking wisdom situation) during the six rounds of competition. Player has unlimited opportunity to respond in seek wisdom option.


If the player answers, team is awarded full point value to account if correct and subtracted if incorrect.

If player seeks wisdom, player must select from team member to answer within initial 30 second time frame. If selected team member answers team is awarded half point value to account if correct and subtracted if incorrect. Player on the wisdom seat still has option to answer after seeking wisdom, within the 30 second time limit (half point value).

If player passes, other teams in order of turn (and player) have the option to answer question that was passed. Teams point value is not affected if player passes. The next player on the next ordered team has 15 seconds to answer, seek wisdom or pass. Team is awarded full or half point value if correct and subtracted if incorrect.


Team Question Teams will answer questions at half end (Round 3) and game end

(Round 6) with the possibility to increase point value.

Team must indicate desire to respond to question. Then team must indicate the amount of points they are investing in their response. The response to the question must be in writing and it must be provided within 3 minutes after the question is asked. Points invested in response will be added or subtracted from account value if written response is correct or incorrect.

Team question: Ask Question Respond (Y/N) Determine Investment Provide timely written response


Financial Incentives: Financial Incentives are awarded to the teams with

positive account point values at game end, allocated proportionally relative to total point value of teams with positive account values.

Total Incentives available: $$$$$$

“Financial Wisdom is obtained in the Finance Club through attendance, financial education and asset

development activities.”


Round One

100 Points



Round One – 100 Points

The Process of setting spending priorities, defining goals and developing a plan to achieve them, and then putting the plan

into action.

The long-term process of wisely managing your finances so you can achieve your goals

and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life.


Financial Planning


Things we must have to survive; for example, food, clothing, water, shelter.


Needs


Things that make life more interesting and fun but that people can live without if they

have to.


Wants


The beliefs, qualities, or standards that you consider important or desirable.


Values


A statement of something a person wants or needs to do.


Goal


A goal to be achieved within the next threemonths.


Short-Term Goal


A goal that is set for three months to a year.


Intermediate-Term Goal


A goal that will take more than a year to achieve.


Long-Term Goal


The willingness to give up something you want now in order to get something better

in the future.


Delayed Gratification


Movement of the money you receive and the money you spend.


Cash Flow


The value of what is given up when you choose one option over another.


Opportunity Cost


Smaller Decisions that can result from a major decision.


Satellite Decisions


SMART Goal.

What does SMART stand for?


Specific

Measurable

Attainable

Realistic

Time-bound


Five Step to financial Planning.


1. Set Smart Goals

2. Analyze Information

3. Create A Plan

4. Implement The Plan

5. Monitor and Modify The Plan


1. Identify your goal

2. Establish your criteria

3. Examine your options

4. Weighs the pros and cons

5. Make your decision

6. Evaluate results


Making Decisions

Financial Planning requires making many decisions, and making decisions about money can be particularly challenging

because so many things come into play. For one the facts of the situation and many

other things—your mood, values, culture, habits, and opinions of your friends and

parents.


Step 1 Identify the problem or issue.

Step 2: Gather and evaluate information.

Step 3: Consider the costs and benefits of various alternatives.

Step 4: Make a decision and take action.

Step 5: Modify the decision and action as conditions change.


Decision-Making Process


A branch of psychology concerned with mental processes (perception, thinking,

learning, and memory) that are connected to sensory stimulation and the overt

expression of behavior.



Cognitive Behavioral Therapy

A spending plan. A record of projected and actual income and expenses over a period .


Budget


An assertion, claim or expectation about reality that is false. Unbalanced and based

solely on our judgments and opinion.


Irrational Belief


An assertion, claim or expectation about reality that is accurate and true.


Rational Belief


Step 1: Create financial goals

Step 2: Create a current income and expense record

Step 3: Create an insurance plan

Step 4: Create a savings and investing plan

Step 5: Create a budget


5-steps involved in creating your financial plan


Theory that an increasing consumption of goods is economically beneficial.


Consumerism


The cost of goods and services, including those that are fixed (such as rent, and auto loan payments) and those that are variable (such as food, clothing, and entertainment).


Expenses


Money earned from investments and employment.


A risk management tool that protects an individual from specific financial losses

under specific terms and premium payments, as described in a written policy

document. Major types include: Auto, Health, Homeowner, Life.


Insurance


The act of purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but

with the risk of loss.


Investing


A measure of the likelihood of loss or the uncertainty of an investment’s rate of

return.


Risk


The process of calculating risk and developing methods to minimize or manage

loss, for example, by buying insurance or diversifying investments.


Risk Management


The process of setting income aside for future spending. Saving provides ready cash for emergencies and short-term goals, and

funds for investing.


Saving


When people compare their personal attributes and abilities with those of others who are deemed to be socially better off.


Social Comparison



Round Two – 200 points

A reciprocal relation between two or more things.


Correlation


Earnings from corporate stock or credit union share accounts.


Dividends


Earnings from employment, including commissions and tips.


Earned Income


Wages or salary before deductions for taxes and other purposes.


Gross Pay


The amount of income after all deductions and taxes are paid. Often known as “take-

home pay”


Net Pay


Earnings from sources other than employment, including investment returns

and royalties.


Unearned Income


A form of insurance that provides compensation medical care for employees

who are injured in the course of employment.


Workers Compensation

Insurance


The pleasurable emotional reaction of happiness in response to a fulfillment of a

desire or the fulfillment of a goal.


Gratification


1. A source of supply, support, or aid, especially one that can be readily drawn upon when needed.

2. Available source of money; a new or reserve supply that can be drawn upon when needed.


Resources


Insufficient to meet a demand or requirement; in short supply.


Scarce


Another name for a budget.


Spending Plan


Translation of a consumer product price into the cost per standard size or weight.

Unit price helps the consumer to make price/value comparisons between brands.

Unit prices are usually displayed on supermarket shelf tags along with the

package price.


Unit Price


The four most common tax deductions on a pay stub.


1. Federal Income tax

2. State Income tax

3. Medicare tax

4. Social Security tax


A tax that a person who owns a business typically also pay.


Self-Employment Tax


The federal government calculates your tax deductions from the information on this form you fill out when you start your job.


Form W- 4


5 Methods available for making sure you stay on track with your budget.


1. Envelope System

2. Tally System

3. Track with Checking Account Register

4. Budget Spreadsheet

5. Personal Finance Software



Round Three – 300 Points

The idea that money today is worth more than the same amount of money in the

future due to its potential earning capacity.

Refers to the relationship among time, money and rate of interest.


Time Value of Money


A rise in the cost of goods and services.

An overall rise in the price of goods and services; the opposite of the less common

deflation.


Inflation


The payment your receive for allowing a financial institution or corporation to use

your money.


Earned Income


The idea of earning interest on interest.

Interest credited daily, monthly, quarterly, semi-annually, or annually on both principal

and previously credited interest.

One of the most powerful principles in personal finance.


Compounding or

Compound Interest


You earn $200 in financial incentives from the finance club and want to start saving for your own car, if you put you money in an account that earns six percent interest per year, how long will it take to grow to $400.


72 ÷ 6 % = 12 Years

Rule of 72 says that you can see how long it will take you to double your money simply by dividing

72 by the interest rate.

72 ÷ 4 years = 18%

The Rule of 72 can also tell you the interest rate you need to earn to double your money in a

certain amount of time.


The place where stocks are bought and sold.


Stock Market


The difference between the purchase price and the selling price when an investor buys

a stock and sells it later at higher price.


Capital Gain


The difference between the purchase price and the selling price when the investor sells a stock at a lower price than the purchase

price.


Capital Loss


The amount of earned on an investment, expressed as a percentage of the total

investment.

The percentage of gain or loss on an investment over a period of time.


Return or

Rate of Return


The amount of the likelihood of loss or the uncertainty of an investment’s rate of

return.

The probability that injury, damage, or loss will occur.


Risk


The degree of uncertainty an investor can handle in regard to a negative change in

the value of his or her portfolio.


Risk Tolerance


Generally, people chose to invest for one of two reasons: Income or Growth

Income means they get paid –in cash- for owning the account or investment.

Growth means they buy and hold an investment with the hope that it will

increase in price, over time.


Income Investments: Savings accountBonds (U.S. Savings, Corporate, and Government),Certificates of DepositsMoney Market Deposit AccountsMoney Market Mutual Funds.

Growth Investments: Stocks

Real EstateMutual FundsCollectibles.


A strategy for reducing investment risk by selecting a wide variety of investments.

(putting money in several different types of investments).

By spreading your money around, you’re reducing the impact that a drop in any one investment value can have on your overall

investment portfolio.


Diversification


The practice of investing a fixed amount in the same investment at regular intervals, regardless of what the market is doing.

It another key investment principle to know because it eliminates having to worry about investing at the “right” or “wrong” time.


Dollar Cost Averaging


A person who provides financial information and advice.

Example include employee benefit staff, bank and credit union employees, credit counselors, brokers, financial planners,

accountants, insurance agents, and attorneys.


Financial Professional


The quality of an asset that permits it to be converted quickly into cash without loss of

value.

For example, a mutual fund is more liquid than real estate.


Liquidity


An amount of money originally invested, excluding any interest or dividends.

An amount borrowed, or an outstanding loan balance.


Principal


When it comes to taking care of your basic financial needs, the first step is finding a

financial institution.

Name two of types of financial institutions that take care of basic financial services.


A bank is a for-profit company, owned by investors in its stock.

orCredit union is a non-profit company, are owned by

their customers, who are also called members.

Both provide a variety of basic financial services , including savings and checking accounts, issuing

credit and debit cards, and providing loans for cars, homes, and other purposes.


A financial institution deposit account that pays interest and allows withdrawals.

And

A financial institution deposit account that allows withdrawals by writing checks


Savings or Share Account

and

Checking or Share Draft Account


A savings which is a certificate representing a debt. A U.S. Savings Bond is a loan to the government. The government agrees to

repay the amount borrowed, with interest, to the bondholder.


Series EE Savings Bond


Interest calculated periodically on loan principal or investment principal only, not

on previously earned interest.


Simple Interest


Certificates representing the purchaser’s agreement to lend a business or

government money on the promise that the debt will be paid – with interest- at a

specific time.


Bonds


Mutual funds that sell shares of ownership and uses the proceeds to purchase short-

term, high-quality securities such as Treasury bills, negotiable certificates of

deposit, and commercial paper.


Money Market Funds


I

investment companies that pool money from shareholders and invest in a variety of securities, including stocks, bonds, and

short-term assets.


Mutual Funds


An investment that represents shares of ownership of the assets and earnings of a

corporation.

An investment that makes the investor a part owner of a company.


Stocks


personal finance – knowledge, understanding and skill development

Documents

player player order

wisdom seat

player answers

player passes

wisdom option

team question teams

team order

team competition