Module Financial Football

Post date: Mar 15, 2013 5:48:13 PM

MODULE 1 // INSTRUCTION GUIDE

A touchdown in football is often the most dramatic moment of the game, when a player reaches the end

zone in the final seconds and the crowd goes wild. Equally important as these fleeting heroic game day

feats is the everyday training players perform. The most successful players on the field are often the most

disciplined, who started out establishing good training habits and stayed with them. Financial fitness is

no different. One of the best habits a young adult can learn is how to save money. Saving money may

not sound as exciting as scoring a touchdown in the final seconds and winning a game, but it’s a skill

that will help your students win in the game of life.

Open your discussion by asking students if any of them save money and, if so, what they save for, as

well as things they might want to save for in the future. How long do they think it will take them to reach

their goals? After reinforcing how saving money can make a concrete difference in their lives, continue

the discussion by describing how savings works and by introducing the different ways to save.

SAVINGS KEY TERMS AND CONCEPTS

(Bolded, italicized words indicate important vocabulary words. Consider having students define these

words as an additional written exercise.)

Why save money?

Saving money is the cornerstone of a strong financial game plan. Some of the main reasons to save include:

• To meet a very specific goal (e.g., a summer road trip with friends).

• To be ready for the unexpected (e.g., car repair costs).

• To plan for a future goal (e.g., saving for college or an apartment).

How much to save

Your students may already be saving, at least on a small scale, with a change jar or a savings account.

Here are some savings guidelines:

• Experts suggest saving at least 10% of your income.

• If you can’t save a lot, save a little. Saving is habit forming.

• Save for emergencies. You should have three to six months of living expenses saved.

Ways to save

The first rule of saving: Pay yourself first. Don’t treat savings as the lowest priority, or you may never

get around to it.

An easy way to get started saving is simply to look for creative ways to shave money off your daily

spending. We’ll learn more about budgeting in the next module, but for now, help students understand

how easy it can be to start saving. Consider the following examples:

• Eat breakfast at home instead of buying a drink and muffin. $5 saved.

• Spend the afternoon in the park (free) instead of going to a fast food restaurant. $5 saved.

• Skip the movie theatre ($20, with popcorn and soda) and rent a DVD instead ($1 to $5.) $15 to

$19 saved.

That’s $25 or more saved in just one day. Now let’s see what can happen to $25 when it is deposited

into a savings account.

How saving works

First, some key terms: In a savings account, principal refers to the amount of money you deposit in your

account to begin saving.

A withdrawal is when you take money out of your account, thereby reducing your principal.

A deposit is when you add money to your account and increase your principal.

The difference between saving money in a jar at home and in a savings account at a bank is how your

principal (your money) grows. At home, your money grows only when you add (deposit) more money

(principal) to the jar. In a savings account, your money grows not only when you deposit more money but

also by accumulating interest. Interest is money the bank pays you for leaving it in your savings account.

It’s as if you are loaning the bank your money. You give them your money to hold. They pay you interest

so your money grows. They are able to use your money to fund loans and investments to other people.

The interest rate is the percentage amount of your principal that the bank agrees to pay into your account.

An interest rate is often referred to as an APR, or Annual Percentage Rate.

There are two types of interest rates: fixed rate and variable rate. A fixed rate is unchanging, and guarantees

the same percentage of interest. A variable rate can go up and down and is usually determined by current

economic conditions.

There are also two types of interest: simple interest and compound interest. Simple interest is a

“simple” fee paid to you on your principal, expressed as a percentage of the principal over time.