The document discusses the importance of financial literacy in America. It notes that the average American family spends more than they earn, many Americans are spending a large portion of their income on debt payments, and bankruptcy filings are at record highs. Additionally, most households will fail to achieve their life goals due to financial illiteracy, which is also passed to future generations. The document then defines financial literacy as having the ability to effectively manage one's finances to reach life goals, and identifies five key areas of personal finance: money and income, money management, spending and debt, savings and investments, and risk management. It provides examples for each area and emphasizes that financial literacy involves lifelong learning and planning for various life milestones and events

1. Financial Literacy:
Knowing What You Need
To Know To Achieve Your
Financial Goals

2. America’s financial literacy
American families:
- The average American family spends $1.22 for
every dollar it earns.
- One in five American families with annual
household income of less than $50,000 is
spending 40% of after-tax income to service its
debt.
- In 2003, the average American household owed
$8,000 in credit cards, compared to $2,600 in
1989.
- In 2003, 1.6 million Americans filed for
bankruptcy – the highest amount in history.

3. America’s financial literacy
• 2 out of 3 households will probably fail to
realize life goals
• Financial illiteracy is passed to the next
generation
- Average high school senior failed 2004
financial knowledge survey

4. What is Financial Literacy?

5. Financial literacy
• The ability to effectively evaluate and
manage one’s finances in order to make
prudent decisions toward reaching life’s goals
• The understanding of:
- Money
- Cash flow
- Basic economic/financial concepts
- Debt/risk management

6. Achieving financial literacy
• Five Key Areas of Personal Finance:
- Money and income
- Money management
- Spending and debt
- Savings and investments
- Risk management

7. Money and income
• Time is money
• How many hours do you need to work to pay
for your mortgage, car insurance, electricity
bills, extras, etc?

8. Money management
• Budgeting
• Prioritizing

9. Spending and debt
• Benefits and costs of spending alternatives
• Credit as a basic financial tool

10. Savings and investing
• Saving means not spending money.
• Investing means that you earn a return on
the money you put into it.

11. Risk management
• Insurance
• Understanding the markets
- 50% of Americans own stocks
• Identity theft

12. Financial literacy isn’t just
a matter of knowing what you
have and knowing your options.
It is a matter of planning for
life’s milestones.

13. Creating your first
overall long-term financial plan

14. Buying your first home
• Establish good credit
• Understand “real costs”
• Assess risks

15. Getting married
• Understand “financial partnership”
• Establish separate and joint credit and bank
accounts
• Create wills and trusts
• Identify beneficiaries
• Choose owners on title assets

16. Financing a family
• Budget
- Education, health care, child care
• Manage risk, insurance
• Create wills
• Instill financial literacy

17. Starting a business
• Understand
- cash flow
- expense timing
• Manage income and expenses

18. Planning for Retirement
• Determine how much money you will need.
• Determine where your retirement income will
come from.
• Devise a budget and investment strategy to
help you meet your goals.

19. Preparing a will
• Designate beneficiaries
• Determine asset distribution
• Identify insurance

20. Unexpected milestones
• Loss
• Sandwich generation
• Divorce

21. Financial literacy education
• Lifelong learning courses
• Financial media
• Internet resources
• Your CPA

22. For more information
www.360financialliteracy.org features financial
education to help consumers at every life stage.

23. Financial Literacy:
Knowing What You
Need To Know To Achieve
Your Financial Goals