FINANCIAL LITERACY
Program Overview
Men with Vision Association (MWVA) teach financial planning, financial management & financial literacy to teens and adults. MWVA have financial advisors on their team that have worked in the banking industry over 30 years. Cultivating solid financial literacy skills, financial management skills and financial planning skills are critical to the development of teens, adults and our communities as a whole. The impact of financial literacy will help empower our communities. These tools creates positive habits such as: (improve rates of savings, lower levels of debt and increase rates of asset accumulation). This will be very beneficial once your young adult establishes their own financial independence.
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5 Key Components of Financial Literacy
1.) Earn: Understanding your paycheck
Before you can start spending, saving, and investing, you need to know how much money you make. If you make the same amount each month, this part is pretty easy. Take a good look at your paycheck to identify your gross and net income, and note any other deductions, such as employer-sponsored health insurance or a retirement plan.
2.) Spend: Creating a personal budget
A personal budget is just a plan for how you want to spend your money, but it’s also the most useful tool for achieving your financial goals. To create a monthly personal budget, you’ll need to track your spending over the course of one month, and then break everything down into categories.
3.) Save: Determining your financial goals
Everyone knows it’s important to save money, but it’s hard to spend less than you earn without specific financial goals to work towards. Your financial goals will depend on your unique situation, but should include:
A. Saving for an emergency fund. Setting aside some money in a designated emergency fund will give you peace of mind, and also prevent a financial setback from overtaking your life. Financial experts recommend having at least three months’ worth of basic living expenses in an emergency fund.
B. Planning for retirement. The experts agree: The earlier you start saving for retirement, the better. Most financial planners suggest setting aside at least 10% of your take-home pay each month for retirement savings in a 401(k), IRA, or both.
C. Saving for a big purchase. Whether you’re hoping to buy a car, a home, or pay for graduate school, the sooner you start saving, the less you’ll have to put aside each month.
D. Paying off personal debts. Most people have some kind of debt, whether that’s student loans, credit card debt, or both. Check the interest rates on your loans: Paying off loans on time (or ahead of schedule) can save you thousands of dollars in interest.
4.) Borrow: Credit cards, loans, and your credit score
Even if you’re a diligent saver, at some point you may have to borrow money to cover a large expense like a home or car. Maybe you borrowed money as a college student and are currently dealing with student loans or credit card debt. Borrowing isn’t necessarily a bad thing—as long as you know how to compare loans and maintain a healthy credit score.
APR (Annual Percentage Rate) is the key to comparing loans and credit cards. APR takes into account both the interest rate and fees to give you a more accurate idea of how much interest you’ll pay each year. A low APR means you’ll pay less interest over time, but how do you get one?
In general, the higher your credit score, the less interest you’ll be charged. That means that if you’ve had financial difficulties in the past, you can get stuck in a vicious cycle where all of your money goes to paying off interest. That’s why building healthy credit is one of the most important steps to becoming financially literate.
Keeping a balance on your credit card is one of the easiest ways to rack up debt, but choosing the right credit card and using it responsibly can actually help you improve your credit score. Learn more about how credit cards work in our complete guide.
5.) Protect: Preventing fraud and buying insurance
Once you’ve set yourself up with a solid budget and investment strategy, it’s important to protect the money that you’ve made. This means regularly reviewing your bank accounts and credit card statements for mistakes or suspicious activity; keeping documents and passwords secure to prevent scams and identity theft; and buying the right kind of insurance to protect yourself in the event of an emergency.
How to Access Your Financial Literacy
An easy way to assess your financial literacy is to ask yourself some questions about your own personal finances.
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Do you know how to create a personal budget?
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Do you have an emergency fund that covers at least three months of basic living expenses?
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Do you have a plan for retirement?
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If you have debt, do you have a plan to pay it off?
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Do you know your credit score and how to improve it?
Personal Finance Information for Teens & Parents
Only four states (Virginia, Tennessee, Missouri, and Utah) require high school students to complete a stand-alone course in personal finances to graduate high school, but every teen should enter adulthood with basic financial literacy.
Sadly, few teens understand basic financial terms (such as “interest rate”, “debit card”, and “financial institution”), or are saving for long term goals, like college or buying a home. And less than one-third of teens know how credit card interest works,
Ideas For Your Kids To Earn Money Right Away
Another way for kids to learn a lot about money is by earning it. Depending on the age of your child, you may need to assist with some of these ideas.
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Babysitting.
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Yard work for a neighbor.
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House and/or pet sit for vacationing neighbors.
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Sell crafts on a website, such as Etsy.
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Organize a yard or garage sale.
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Shovel driveways for neighbors in the winter.
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Do extra chores for money.
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Wash neighbors' cars.
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Collect recyclables.
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Tutoring.
What is a Credit Score?
Are you wondering, “What is a credit score?” Your credit score is a number assigned to you based on your financial habits that represents your “creditworthiness”. It’s a universal grading scale that shows how “good” you are at managing your debts.
10 MWVA Financial Tips
1. Needs vs. Wants
Your teen may think they need the latest smartphone, video game, or even a car. And be prepared for a well thought out rationale if you question why they think it's a need.
2. Spend Less Than You Earn, Save The Difference
Your teen understands negative numbers from math class, so it shouldn't be hard to transfer that to money. When you consistently spend more than you make, you will end up with a negative account balance.
We need to teach our teens that if you spend every dollar coming in, you'll never get ahead.
3. Track Expenses and Start a Budget
Whether your teen has a job, gets an allowance, or has money from gifts in an account, they should track what they spend and set up a simple budget.
4. Save, But Start Investing Early
When your teen starts budgeting and works to grow the gap between earning and spending, they'll have more money to save. Once teens have accumulated some savings, they should consider investing too. The longer their money is invested, the more wealth they will build over time - even if they deposit tiny amounts.
Introduce your teen to simple investing terms and help them open an investment account. At this point, you want them to use the "set it and forget it" investing strategy knowing that this is money for long-term goals in the very distant future.
5. Use the Power of Compound Interest
Your teen now understands why they should use a high-interest savings account. After all, teens love money! Why should they settle for a local bank only giving a few pennies of interest when an online bank lets you earn dollars?
Now it's time to show them the power of compound interest. When they invest money, and it starts making money, they'll keep earning interest on top of interest. If they leave the money invested over several decades, they'll see the "magic" or power of compounding - even if they never add more money to the initial investment.
6. Understand Gross vs. Net Pay
When your teen gets a job, they'll count the days until their first paycheck. But the excitement of getting paid can turn to disappointment real fast.
7. Good vs. Bad Debt
Teens need to learn about different kinds of debt. While all liabilities need to be repaid as a part of every budget, one type of debt can move you forward while the other holds you back.
8. Your Credit Score Matters
As young adults age, they may be able to open up credit cards. Even with small lines of credit, your teen can make mistakes such as making late payments, keeping high balances on their account, or only making minimum payments.
9. Big Loans Can Really Affect Your Life
Teens can be faced with adult-level decisions when it comes to taking out large sums of money for things like cars and college. Before they earn a steady paycheck, they can be thousands (or tens of thousands) of dollars in debt without understanding how long or difficult it will be to pay the money back.
10. You Can Be an Entrepreneur Without Taking on Much Debt
Some teens are natural entrepreneurs and have terrific ideas for starting small businesses. But they may spend time online trying to figure out how to grow their business - including spending too much money to get their business started.
