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Financial Literacy for High School Students Investing in Your Future

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.

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Financial Literacy for High School Students Investing in Your Future

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  1. Montana Money School Financial Literacy for High School StudentsInvesting in Your Future State Auditor John Morrison

  2. Financial Literacy Defined Financial literacy refers to the basic skills people need to manage money and make financial decisions.

  3. 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.

  4. 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 Jump$tart Coalition for Personal Financial Literacy Study

  5. 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

  6. 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.

  7. How Long to Double Your Money Earnings RateYears to Double 2% 36 3% 24 6% 12 12% 6 18% 4 36% 2

  8. 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

  9. Types of Investments • Stocks • Ownership of a corporation represented by shares, which are a claim on the corporation’s earnings and assets.

  10. 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.

  11. 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. Types of Investments

  12. 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

  13. Selecting Savings & Investments When choosing investments consider… risk = potential return or risk = potential return RISK • Interest rate risk • Business failure risk • Market price risk • Inflation risk • Political risk • Fraud risk

  14. 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.

  15. How Americans Invest

  16. Bull vs. Bear Market Bull Market When the stock market moves upward for a period of time Bear Market When the stock market falls 15% to 20% for a period of time

  17. 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

  18. Investing Basics Future Value of a Single $1,000 Deposit *Interest rates

  19. 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

  20. The Cost of College Source: T. Rowe Price Associates, 1996

  21. The Cost of College Source: T. Rowe Price Associates, 1996

  22. 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

  23. 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.

  24. 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.

  25. Get Rich Quick • Don’t be taken in by promises that you can “get rich quick.” • It’s a scam! • Be a smart investor.

  26. 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

  27. Montana State AuditorJohn Morrison 840 Helena Avenue Helena, MT 59601 1-800-332-6148 (406) 444-2040 www.discoveringmontana.com/sao

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