ISABELA STATE UNIVERSITY
Cauayan Campus
MODULE 8:
FINANCIAL LITERACY
ISABELA STATE UNIVERSITY
Cauayan Campus
FINANCIAL LITERACY
Financial Literacy is a core life skill in an increasingly complex
world where people need to take charge of their own finances,
budget, financial choices, managing risks, saving, credit, and
financial transactions.
ISABELA STATE UNIVERSITY
Cauayan Campus
THE IMPORTANCE OF STARTING FINANCIAL LITERACY
WHILE STILL YOUNG?
According to national polls, young adults have the lowest levels of financial
literacy, as seen by their inability to select appropriate financial products and a
lack of interest in solid financial planning. As a result, financial education should
begin as early as feasible and be implemented in schools. According to Akdag
(2013), financial literacy is critical in the current financial crisis and is most
beneficial when presented in the early years, such as preschool. Financial
education is a long-term process, and including it into curricula at a young age
allows children to gain information and abilities while developing appropriate
financial conduct throughout their schooling (OECD, 2005).
ISABELA STATE UNIVERSITY
Cauayan Campus
FINANCIAL PLAN
According to Kagan (2019), a Teachers need to understand
financial plan is a complete and develop their own financial
description of an individual's plans. It is advisable to begin
long-term security and well- planning as soon as they earn
being goals, as well as a detailed their first salary, including any
savings and investing strategy for incentives, bonuses, or other
accomplishing them. compensation they may receive
ISABELA STATE UNIVERSITY
Cauayan Campus
STEPS IN CREATING A
FINANCIAL PLAN
Net worth is the amount by which assets
exceed liabilities. In so doing, consider (1)
assets that entail one's cash, property,
Calculating Net investments, savings, jewelry and wealth;
Worth and (2) liabilities that include credit card
debt, loans and mortgage. Formula: total
assets. -minus total liabilities = current net
worth.
A financial plan is knowing where
money goes every month.
Determining Documenting it will help to see how
much is needed every month for
Cash Flow necessities, and the amount for
savings and investment
The heart of a financial plan is the person's clearly
defined goals, which can include: (1) A retirement
strategy for accumulating retirement income; (2) A
comprehensive risk management plan that includes a
Considering review of life and disability insurance, personal
liability coverage, property and casualty coverage,
the Priorities and catastrophic coverage; (3) A long-term investment
plan based on specific investment objectives and a
personal risk tolerance profile; and (4) A tax reduction
strategy for minimizing taxes on personal income
allowed by law.
ISABELA STATE UNIVERSITY
Cauayan Campus
Five Financial Improvement Strategies
1. Identify your starting point.
2. Set your priorities.
3. Document your spending.
4. Lay down your debt.
5. Secure your financial future.
ISABELA STATE UNIVERSITY
Cauayan Campus
Financial Goal Planning and Setting
Setting goals is a very important part of life, especially in
financial planning. Before investing the money, consider
setting personal financial goals. Financial goals are targets,
usually driven by specific future financial needs, such as
saving for a comfortable retirement, sending children to
college, or enabling a home purchase.
ISABELA STATE UNIVERSITY
Cauayan Campus
1. Time horizon. It indicates the time when the money will be needed.
2. Risk tolerance. Investors may let go of the possibility of a large gain
if they knew there was also a possibility of a large loss (they are called
risk averse); while others are more willing to take the chance of a large
loss if there were also a possibility of a large gain (they are called risk
seekers).
3. Liquidity needs. Liquidity refers to how quickly an investment can be
converted into cash (or the equivalent of cash).
ISABELA STATE UNIVERSITY
Cauayan Campus
4. Investment goals: Growth, income and stability. Once determined the
financial goals and how time horizon, risk tolerance, and liquidity needs affect
them, it is time to think about how investments may help achieve those goals.
When considering any investment, think about what it offers in terms of three
key investment goals:
a. Growth (also known as capital appreciation) is an increase in the value of
an investment;
b. Income, of which some investments make periodic payments of interest or
dividends that represent investment income and can be spent or reinvested;
c. Stability, or known as capital preservation or protection of principal.
ISABELA STATE UNIVERSITY
Cauayan Campus
Budget and Budgeting
A budget is an estimate of revenue and expenses over a
specified period, typically compiled on an individual or periodic
basis. It helps individuals determine their spending needs and
preferences, ensuring they have enough money for essential
expenses and keeping them out of debt.
ISABELA STATE UNIVERSITY
Cauayan Campus
Seven Steps to Good Budgeting:
Step 1: Set realistic goals.
Step 2: Identify income and expenses.
Step 3: Separate needs from wants.
Step 4: Design your budget.
Step 5: Put your plan into action.
Step 6: Plan for seasonal expenses.
Step 7: Look ahead.
ISABELA STATE UNIVERSITY
Cauayan Campus
Spending
If budget goals serve as a financial wish list, a spending
plan is a way to make those wishes a reality. Turn them
into an action plan.
ISABELA STATE UNIVERSITY
Cauayan Campus
The following are practical strategies in setting and prioritizing
budget goals and spending plan:
1. Start by listing your goals.
2. Divide your goals according to how long it will take to meet each goal
3. Estimate the cost of each goal and find out how much it costs.
4. Project future cost.
5. Calculate how much you need to set aside each period.
[Link] your goals.
[Link] a schedule for meeting your goals.
ISABELA STATE UNIVERSITY
Cauayan Campus
Investment and Investing
As teachers, when you have saved more money than what you expect at a
time of need, consider investing this money to earn more interest than what your
savings account is paying you.
four aspects:
1. How long will you invest the money? (Time Horizon)
2. How much money do you expect your investment to earn each year?
(Expectation of Return)
3. How much of your investment are you willing to lose in the short-term in
order to earn more in the long-term? (Risk Tolerance)
4. What types of investment interest you? (Investment Type)
ISABELA STATE UNIVERSITY
Cauayan Campus
Savings
In order to get out of debt, it is important to set some money aside and
out it into a savings account on a regular basis. Savings will also help in
buying things that are needed or wanted without borrowing.
Emergency Savings Fund
Start as early, setting aside a little money for emergency savings fund.
If you receive a bonus from work, an income tax refund or earnings from
additional or side jobs, use them as an emergency fund.
ISABELA STATE UNIVERSITY
Cauayan Campus
10 Reasons Why Save Money
1. To become financially independent.
2. To save on everything you buy.
3. To buy a home or a car.
4. To prepare for the future.
5. To get out of debt.
6. To augment annual expenses.
7. To settle unforeseen expenses.
8. To respond to emergencies.
9. To mitigate losing your job or getting hurt.
10. To have a good life.
ISABELA STATE UNIVERSITY
Cauayan Campus
Common Financial Scams to Avoid
Financial fraud can happen to anyone, including the
teachers at any time. While some forms of financial fraud,
such as massive data breaches, are out of one's control, there
are many ways to proactively get rid of financial scams and
identity theft
ISABELA STATE UNIVERSITY
Cauayan Campus
Here are some of the most common financial scams,
along with ways to identify them early and how to
protect one's self from being victimized:
A. Phishing.
B. Social Media Scams.
C. Phone Scams.
D. Stolen Credit Card Numbers.
E. Identity Theft.
ISABELA STATE UNIVERSITY
Cauayan Campus
10 Tips to Avoid Common Financial Scams
1. Never wire money to a stranger.
2. Don't give out financial information.
3. Never click on hyperlinks in emails.
5. Never give your social security number.
6. Install Antivirus and Spyware protection.
7. Don't shop with unfamiliar online retailers.
8. Don't download software from pop-up windows.
9. Make sure the websites you visit are safe.
10. Donate to known charities only.
ISABELA STATE UNIVERSITY
Cauayan Campus
Financial Scams among Students
1. Fake scholarships
2. Diploma mills
3. Online book scams
4. Credit card scams
ISABELA STATE UNIVERSITY
Cauayan Campus
Insurance and Taxes
Insurance is a contract (in the form of a policy) between the
policyholder and the insurance company, whereby the company agrees to
compensate for any financial loss from specific insured events.
1. Employer-Sponsored Insurance. If working in a company with 50 or
more full-time employees, the employer is required to provide employee-
only insurance that meets minimum guidelines.
Examine the plan offered, but do not pay over 9.66 percent of household
income in premiums.
ISABELA STATE UNIVERSITY
Cauayan Campus
Life Insurance
Life insurance is a type of insurance that compensates beneficiaries upon the
death of the policyholder. The company will guarantee a payout for the
beneficiaries in exchange of premiums. This compensation is called "death
benefit."
The following are common risk categories:
1. Preferred Plus- The policyholder is in excellent health, with normal weight,
no history of smoking, chronic illnesses, or family history of any life-threatening
disease.
ISABELA STATE UNIVERSITY
Cauayan Campus
2. Preferred - The policyholder is in excellent health but may have
minor issues on cholesterol or blood pressure but under control.
3. Standard Plus - The policyholder is in very good health but some
factors, like [Link] pressure or being overweight impede a better
rating.
4. Standard - Most policyholders belong to this category, as they are
deemed to be healthy and have a normal life expectancy although, they
may have a family history of life-threatening diseases or few minor
health issues.
ISABELA STATE UNIVERSITY
Cauayan Campus
5. Substandard - Those with serious health issues, like diabetes or heart
disease are placed on a table rating system, ranked from highest to
lowest. On average, the premiums will be similar to Standard with an
additional 25% lower claim on table ratings.
6. Smokers - Due to an added risk of smoking, the policyholders in this
category are guaranteed to pay more. Aside from health class, age is also
a critical factor in determining premiums. Therefore, older people pay
more expensive premiums.
ISABELA STATE UNIVERSITY
Cauayan Campus
Benefits of Life Insurance
1. It pays for medical and funeral costs.
2. For financial support.
3. For funding various financial goals.
4. Acts as a retirement secured conform.
5. It covers costs incurred from taxes and debt.
ISABELA STATE UNIVERSITY
Cauayan Campus
Types of Life Insurance
TYPE CHARACTERISTIC ADVANTAGE DISADVANTAGE
1. Endowment It grants a lump sum after a It allows for saving up for It requires higher premiums
specified amount of time or specific purposes. than other types of life
upon death. The policy owner It guarantees returns upon insurance.
is required to pay the premium maturity. It is not the best option for
for a predetermined number of It offers some form of those looking at full life
years or until a specific age is insurance coverage. protection.
reached.
2. Term It is the simplest form of life It entails low premium It has no benefit if
insurance to obtain, of which requirements. policyholder outlives the term
upon death, the beneficiaries It is a strong option for period set.
are paid with the benefit. policyholders who need Premium usually
insurance but cannot afford gets higher upon renewal of
whole life or endowment. terms.
It is easy to understand.
ISABELA STATE UNIVERSITY
Cauayan Campus
TYPE CHARACTERISTIC ADVANTAGE DISADVANTAGE
3. Whole Life It provides coverage for the It offers permanent protection It requires higher premiums.
policyholder's entire life or until for full life or 100 years. It is difficult to
they reach 100 years old. It acts It is flexible in terms of understand due to complexity.
both as protection and savings payments of premiums.
mechanisms since a portion of It entails fixed premiums.
the premium is allocated to build It usually comes with additional
up cash values. features and
"living" benefits.
4. Variable Universal Life It serves as both life protection It takes dual purpose: Life Cash values and dividends are
(VUL) and investment vehicle in one insurance plus investment tool. not guaranteed.
package. A portion of the It has no maturity age. Face amount and death benefit
premium is allocated into The cash value is payable along are dependent on investment
various investment vehicles for with the assured sum. performance.
the purposes of wealth creation. The death component is not It includes various investment
The contract's earnings are limited to face value. fees.
based on the performance of It depicts liquidity, wherein
selected investments. funds can be accessed in times
of need and can serve as
emergency. funds.
ISABELA STATE UNIVERSITY
Cauayan Campus
Financial Stability
Teachers aim to achieve financial stability, focusing on
confidence, debt-free living, savings, and emergency
funds. Financial stability is not about wealth, but a
mindset that allows stress-free living and focuses on other
aspects of life.
ISABELA STATE UNIVERSITY
Cauayan Campus
10 Strategies in Reaching Financial Stability
1. Make savings automagical
2. Control your impulsive spending.
3. Evaluate your expenses and live frugally.
4. Invest in your future.
5. Keep your family secure.
6. Eliminate and avoid debt.
7. Use the envelope system.
8. Pay bills immediately.
9. Read about personal finances.
10. Look to grow your net worth.
ISABELA STATE UNIVERSITY
Cauayan Campus
Signs of Being Financially Stable
1. You never overdraw your checking account.
2. You don't lose sleep over finances.
3. You use credit cards for convenience and rewards but never out of necessity.
4. You don't worry about losing your job.
5. You pay your bills ahead of time.
6. People ask your opinion about financial matters and you inspire them.
7. You're generally happy with your financial situation.
8. You finance your cars over five years or less if you take loans at all.
9. You contribute more to your retirement.
10. You don't feel guilty when you're out for special occasions.
ISABELA STATE UNIVERSITY
Cauayan Campus
Signs of Being Financially Stable
11. You can afford to buy the things you really want.
12. Recreational spending doesn't appeal to you.
13. You're a natural saver.
14. You're generous with money when it comes to charities or helping others.
15. You're confident about your future.
16. Your net worth grows significantly from year to year.
17. You have substantial equity in your home.
18. You consistently live beneath your means.
19. You could survive for months without a paycheck.
20. You feel in control of your finances and never dominated by them.
ISABELA STATE UNIVERSITY
Cauayan Campus
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