Module 8: FINANCIAL LITERACY

LEARNING OUTCOMES:
1. Define financial literacy
2. Distinguish among financial plan, budgeting saving, spending and investing
3. Present ways on how to avoid financial crises and scams
4. Demonstrate understanding of insurance and taxes
5. Describe a financially stable person
6 Determine ways on how to integrate financial literacy in the curriculum
7 Draw relevant life lessons and significant values from personal experiences on financial crises
and scams
8. Analyze research abstract on financial literacy and its implications to the teaching learning
process
9. Make a personal financial plan based on short-term and long-term goals

INTERACTIVE PRESENTATION
Deal or No Deal. This is an interactive activity adapted from a TV game show segment which
entails a student to pick any of the briefcases containing an amount and he/she then takes deal
or no deal with the banker's offer against the amount in the last briefcase.

Procedure:

1. The teacher will choose 10 students who will prepare different amounts written in 10 folders
that will serve as briefcases.
2. During the game, the class will choose a player.
3. While playing the "Deal or No Deal with background music downloaded from the Internet, the
pinver will choose the briefcase to be opened to see the amount
4. The selection of briefcases to be opened shall continue until only the last three remain.
5. Then, the teacher will say. "The banker has an offer".
6. There will be bidding of amount offered by the banker in lieu of opening the remaining
briefcases by the player.
7. The last briefcase will be opened and find out if the banker's offer is higher than the amount
in the chosen last briefcase.
8. There shall be a reflection in the class asking "What will you do if banker will offer an amount
of mone The teacher will generate answers from the students.

CONCEPT EXPLORATION
In some instances, teachers are confronted with issues and concerns on financial debt, being
victimized by the and other related scams, both personal and electronic ways. More so, some
teachers are drowned by emergent financial needs and unexpected debt. especially in difficult
times, sickness and inevitacie circumstances and calamities. Others do not prepare for their
retirement that they usually end up highly frustrated. This is the reason why financial literacy has
been a subject in many faculty development programs, seminars, and even becomes a topic for
researches, while many schools have integrated it in the curriculum.

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..

Poor financial decisions can have a long-lasting impact on individuals, their families and the
society caused by lack of financial literacy. Low levels of financial literacy are associated with
lower standards of living, decreased psychological and physical well-being and greater reliance
on government support. However, when put into correct practice, financial literacy can
strengthen savings behavior, eliminate maxed-out credit cards and enhance timely debt.

Financial literacy is the ability to make informed judgments and make effective decisions
regarding the use and management of money. Hence, teaching financial literacy vields better
financial management skills.

The importance of starting financial literacy while still young. National surveys show that young
adults have the lowest levels of financial literacy as reflected in their inability to choose the right
financial products and lack of interest in undertaking sound financial planning. Therefore,
financial education should begin as early as possible and be taught in schools Akdag (2013)
stressed that in the recent financial crisis, financial literacy is very crucial and tends to be
advantageous if introduced in the very early years as preschool years. Financial education is a
long-term process and incorporating it into the curricula from an early age allows children to
acquire the knowledge and skills while building responsible financial behavior throughout each
stage of their education (OECD, 2005).

Likewise, financial literacy is the capability of a person to handle his/her assets, especially cash
more efficiently while understanding how money works in the real world.

Financial Plan
Teachers need to have a deeper understanding and capacity formulate their own financial plan.
It is wise to consider starting to plan the moment they hand in their first salary, including the
incentives, bonuses and extra remunerations that they receive.

Kagan (2019) defines a financial plan as a comprehensive statement of an individual's long-

The following are steps in creating a financial plan.

1. Calculating net worth. Net worth is the amount by which assets exceed liabilities. In so doing,
consider (1) assets that entail one's cash, property, investments, savings, jewelry and wealth;
and (2) liabilities that include credit card debt, loans and mortgage. Formula: total assets minus
total liabilities = current net worth.

2. Determining cash flow. A financial plan is knowing where money goes every month.
Documenting it will help to see how much is needed every month for necessities, and the
amount for savings and investment.

3. Considering the priorities. The core of a financial plan is the person's clearly defined goals
that may include: (1) Retirement strategy for accumulating retirement income; (2)
Comprehensive risk management plan including a review of life and disability insurance,
personal liability coverage, property and casualty coverage, and catastrophic coverage: (3)
Long-term investment plan based on specific investment objectives and a personal risk
tolerance profile; and (4) Tax reduction strategy for minimizing taxes on personal income
allowed by the tax code. (https://www.investopedia.com/terms/financial plan.asp)

Five Financial Improvement Strategies

Financial literacy shapes the way people view and handle money. The following are financial
improvements suggested by Investopedia as a journey to financial literacy.

1. Identify your starting point. Calculating the net worth is the best way to determine both current
financial status and progress over time to avoid financial trouble by spending too much on wants
and nothing enough for the needs.

2. Set your priorities. Making a list of rated needs and wants can help set financial priorities.
Nenos are things one must have in order to survive (l.e. food, shatter clothing, healthcare and
transportation); while wants are things one would like to have but are not necessary for survival
IES ACROSS THE CURR
3. Document your spending. One of the best ways to figure out cash flow or what comes in and
what goes out is to create a budget or a personal spending plan. A budget lists down all income
and expenses to help meet financial obligations.

4. Lay down your debt. Living with debt is costly not just because of interest and fees, but it can
also prevent people from getting ahead with their financial goals.

5. Secure your financial future. Retirement is an uncontrollable stage in a worker's life, of which
counterpart are losing the job, suffering from an illness or injury, or be forced to care for a loved
one that may lead to an unplanned retirement. Therefore, knowing more about retirement
options is an essential part of securing financial future.

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.

There are three key areas in setting investment goals for consideration.

A. Time horizon. It indicates the time when the money will be needed. To note, the longer the
time horizon, the more risky (and potentially more lucrative) investments can be made.

B. 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 cit a large loss if there were also a possibility of a large gain (they are called
risk seekers). The time horizon can affect risk tolerance.

C. Liquidity needs. Liquidity refers to how quickly an investment can be converted into cash (or
the equivalent of cash). The liquidity needs usually affect the type of chosen investment to meet
the goals.

D. 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: (1) Growth (also known as capital appreciation is
an increase in the value of an investment; (2) Income of which some investments make periodic
payments of interest or dividends that represent investment income and can be spent or
reinvested; and (3) Stability, or known as capital preservation or protection of principal.
An investment that focuses on stability concentrates less on increasing the value of investment
and more on trying to ensure that it never loses value and can be taken when needed
(https://www.flexscore.com/leamingcenter/setting-financial-and investment-goals).

Budget and Budgeting

A budget is an estimation of revenue and expenses over a specified future period of time and is
usually compiled and re- evaluated on a periodic basis. Budgets can be made for a variety of
individual or business needs or just about anything else that makes and spends money.
Budgeting, on the other hand, is the process of creating a plan to spend money. Creating this
spending plan allows one to determine in advance whether he/she will have enough money to
do the things he/she needs or likes to do.

Thus, budgeting ensures to have enough money for the things needed and those important
ones and will keep one out of debt.

Seven Steps to Good Budgeting

The following are seven steps that may help in attaining good budgeting.

Step 1: Set realistic goals. Goals for the money will help make smart spending choices upon
deciding on what is important.

Step 2: Identify income and expenses. Upon knowing how much is earned each month and
where it all goes, start tracking the expenses by recording every single cent.

Step 3: Separate needs from wants. Set clear priorities and the decisions become easier to
make by identifying wisely those that are really needed or just wanted.

Step 4: Design your budget. Make sure to avoid spending more than what is earned. Balance
budget to accommodate everything needed to be paid for.

Step 5: Put your plan into action. Match spending with income time. Decide ahead of time what
you will use each payday. Non-reliance to credit for the living expenses will protect one from
debt::

Step 6: Plan for seasonal expenses. Set money aside to pay for unplanned expenses so to
avoid going into debt.

Step 7: Look ahead. Having a stable budget can take a month or two so, ask for help if things
are not getting well.
Spending

If budget goals serve as a financial wish list, a spending plan is a way to make those wishes a
reality. Tum them into an action plan. The following are practical strategies in setting and
prioritizing budget goals and spending plan:

1. Start by listing your goals. Setting budget goals requires forecasting discussing future needs
and dreams with the family.

2. Divide your goals according to how long it will take to meet each goal

Classify your budget goals into three categories: short-term goals (less than a year), medium-
term goals (one to five years), and long-term goals (more than five years). Short-term goals are
usually the immediate needs and wants; medium- term goals are things that you and your family
want to achieve during the next five years; and long-term goals extend well into the future, such
as planning for retirement.

3. Estimate the cost of each goal and find out how much it costs. Before assigning priority to
goals, it is important to determine the cost of each goal. The greater the cost of a goal, the more
alternative goals must be sacrificed in order to achieve it.

4. Project future cost. For short-term goals, inflation is not a big factor, but for medium and long-
term goals, it is a big factor. To calculate the future cost of the goals, there is a need to
determine the rate of inflation applied to each particular goal.

5. Calculate how much you need to set aside each period. Upon knowing the future cost of the
goals, next is to determine how much to put aside each period to meet all the goals.

6. Prioritize your goals. Upon listing down all the goals and the estimated amount needed for
each goal, prioritize them. This serves as guide in decision-making.

7. Create a schedule for meeting your goals. It is important to lay down all the goals according
to priority with the corresponding amount of money needed, the time it will be needed, and the
instaliments needed to meet the goals. (https://www.flexscore.com/learningcenter/the-spending-
plan-setting-and- prioritizing-your-budget-goals
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. There are many ways you can invest your money but consider four aspects:

1. How long will you invest the money? (Time Horizon)

Savings

In order to get out of debt, it is important to set some money aside and put 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.

10 Reasons Why Save Money

With credit so easy to get, here are ten practical reasons why it is important to save money that
everyone, including teachers, must know.

1. To become financially independent. Financial independence is not having to depend on

2. To save on everything you buy. With savings, you can buy things when they are on sale and
can make better spending choices without being compromised on credit card interest charges.

3. To buy a home or a car. Savings can be used in buying a home in full or down payment,
especially in times of promo deals, bids and inevitable sale and at a reasonable interest rate.

4. To prepare for the future. Through savings, you can be confident to face the future without
worrying on how you will - survive. 200
5. To get out of debt. If you want to get out of debt, you have to save money.

6. To augment annual expenses. In order to attain a good, stress-free financial life, there is a
need to save for annual expenses in advance.

7. To settle unforeseen expenses Savings can respond to unforeseen in times of need.

8. To respond to emergencies. Emergencies may happen anytime and these can be expensive
so, there is a need to get prepared rather than potentially become another victim of an
emergency.

9. To mitigate losing your job or getting hurt. Bad things can happen to anyone, such as losing a
job, business bankruptcy or crisis, being injured or becoming too sick to work. Therefore, having
savings is the key to resolve such a dilemma.

10. To have a good life. Putting aside some money to spend needed can bring about quality and
worry-free life at all times.