Module 8

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 v literacy can strengthen savings behavior, eliminate maxed-out credit cards and
enhance timely debt.
Financial literacy D is U the ability to -make • informed judgments and make
effective decisions regarding the use and management of money. Hence, teaching financial
literacy yields 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 to 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-term objectives for security and well-being and detailed savings and
investing strategy for achieving the objectives. It begins with a thorough evaluation of the
individual’s current financial state and future expectations.
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 now. 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 ) 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.
Five Financial Literacy Improvement Strategies
 Financial literacy shapes the way people view and handle money. The following are
financial improvements suggested by Investopedia to financial literacy.
1. Identify your starting point. Calculating the net worth is best way to determine both
current financial status and progress over time to avoid financial trouble by spending too
on wants and nothing enough for the needs.
2. Set your priorities. Making a list of rated needs and wants help set financial priorities.
Needs are things one must in order to survive (i.e. food, shelter, clothing, healthcare
transportation); while wants are things one would like to but are not necessary for
survival.
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 of 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 j 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.

Budget and Budgeting

 A budget is an estimation of revenue and expenses over a specified future period of
time and is usually compiled and reevaluated 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 following are seven steps that may help in attaining good
1. Set realistic goals. Goals for the money will help make smart spending choices
upon deciding on what is important.
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.
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.
4. Design your budget. Make sure to avoid spending more than what is earned.
Balance budget to accommodate everything needed to be paid for.
5. Put your plan into action. Match spending with income time. ô Decide ahead of
time what you will use each payday. Non-reliance to credit for the living expenses
will protect one from debt.
6. Plan for seasonal expenses. Set money aside to pay for unplanned expenses so to
avoid going into debt.
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 make those wishes
a reality. Turn them into an action plan. The following are practical strategies in setting and
prioritizing budget goals plan:
1. Start by listing your goals. Budget goals requires forecasting and 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 .0f money needed, the time it will be
needed, and the installments needed to meet the 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)
2. How much money do you expect your investment to ear n 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)
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 receiving a certain pay but setting aside an amount to have savings that can be relied 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.
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 expenses irr 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 when needed can bring about
quality and worry-free life at all times.
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.
 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. Using this common tactic, scammers send an email that appears to come from
a financial institution, such as a bank and asks you to click on a link to update your account
information. If you receive any correspondence that asks for your information, never click
on the links or provide account details. Instead, visit the company's website, find official
contact information, and call them to verify the request.
B. Social Media Scams. Scammers are adept at using Social Media to gather information
about the traveling habits of potential victims. They also have phishing tactics, including
posts seeking charity donations with bogus links that allow them to keep your money.
Therefore, be conscious -of the information you post online, especially personal details and
plans for a vacation that you would leave your house unoccupied.
C. Phone Scams. Another prevalent tactic scamming phone calls. The scammers pose as a
government agency, such as the Bureau of Internal Revenue or local law enforcement
agencies, and use scare tactics- to acquire your personal information and account numbers.
Never provide your account information over the phone. Look for the agency's contact
information, and call them to verify any request. To note, government agencies will never
text or call you to ask for money.
D. Stolen Credit Card Numbers. There are numerous ways that scammers can obtain your
credit card information, including hacking, phishing, and the use of skimming devices, such
as small card readers attached to unmanned credit card readers (i.e. ATMs, gas pumps, and
more). These small devices pull data from your card when you swipe it. Before you use an
ATM or swipe your card, look for suspicious devices that may be attached to the card
reader.
E. Identity Theft. Depending on the amount of -information a scammer is able to obtain,
identity theft may extend beyond unauthorized charges on a debit or credit card. If
scammers are able to obtain your Social Security number, date of birth' and other personal
information, they may be able to open new accounts in your name without your knowledge.
Be' aware an information you share and with whom, and always shred sensitive
information before disposing it.
By taking preventative measures and being aware of scams, u can minimize the risks
of fraud. Monitoring your online or mobile banking accounts daily can also help you see
fraudulent charges quickly.
Tips to Avoid Common Financial Scams
Every year, fraud cases are getting worse, leaving countless victims in trouble and
danger through data breaches, identity theft and online scams. Unfortunately, new and
improved technology only gives fraudsters an edge, making it easier than ever for scam
artists to nab financial data from unsuspecting consumers (Bell, 2019).
1. Never wire money to a stranger. Although it is one of the oldest Internet scams, there
are still consumers who fall for this rip-off or some variations of it.
2. Don't give out financial information. Never reveal sensitive personal financial
information to a person or business you don't know, thru phone, text or email.
3. Never click on hyperlinks in emails. If you receive an email from a stranger or
company asking you to click on a hyperlink or open an attachment and then, enter your
financial information, delete the email immediately.
4. Use difficult passwords. Hackers can easily find passwords that are simple -number
combinations. Create passwords that are at least eight characters long and that include
some lower and upper case letters, numbers and special characters. You should also use a
different password for every website you visit.
5. Never give your social security number. If you receive an email or visit a website that
asks for your Social Security number, ignore it.
6. Install Antivirus and Spyware protection. Protect the sensitive information stored on
your computer by installing antivirus, firewall and spyware protection. Once you install the
program, turn on the auto-updating feature to make sure the software is always up-to-date.
7. Don't shop with unfamiliar online retailers. When it comes to online shopping, only
do business with familiar companies. When purchasing -a product from an unfamiliar
retailer, do some research to ensure the business is legit and reputable.
8. Don't download software from pop-up windows. When you are online, do not trust
pop-up windows that appear and claim your computer is unsafe. If you click on the link in
the pop-up to start the "system scan" or some other programs, malicious software known
as "malware" could damage your operating system.
9. Make sure the websites you visit are safe. Before enter • your financial information on
any the website's privacy rules. Also, make encryption, which is usually symbolized the
web address which means it is safe hackers.
10. Donate to known charities only. If email for solicitation of charity donations, some
scammers create bogus charities information.
Financial Scams among Students. Students can also be susceptible to different financial
scams and manage finances and being aware of financial every student should master:
The following are Common financial scams watch out for, and learn to protect one's
identity
A. Fake scholarships. While it is apply for as many scholarships, it aware of related scams
and thoroughly check scholarship sources verify legitimacy. Never apply for a money in
return.
B. Diploma mills. There are schools that offer fake degrees and diplomas in exchange for a
fee. Check from government education agencies the prospective government-recognized,
legitimate or accredited.
C. Online book scams. While students best deals on textbooks online, opportunity to get
students' credit buying anything online, be sure to do.
D. Credit card scams. Oftentimes, to school campuses to convince applications. Scammers
may also students' information: It is important union or bank for credit card check the
credit card statement and unrecognized charges, contact immediately.
Insurance and Taxes
Insurance is a contract (in the form of and the insurance company, whereby compensate
for any financial loss from for the financial protection offered, policyholder agrees to pay a
certain sum of money, known as premiums to the insurance company. Insurance is the best
form of risk management against uncertain loss.
There are various types of insurance to choose from, such as life insurance, health
insurance, motor insurance; property insurance, business insurance, etc. Besides, the
financial protection derived from insurance benefit claim on the paid premiums.

The following are concepts related to insurance and taxes that every teacher should
know. However, he/she should carefully analyze and critically examine well before
pursuing any deal with them.
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,
2. Marketplace Plans. Marketplace plans are available based on an area of residence
and income upon meeting minimum coverage requirements. Marketplace plans
come in three tiers: bronze, silver and gold. Generally, bronze plans offer the least
coverage at the lowest premiums, while gold plans provide the most coverage at the
highest price.
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."
Depending on the type of insurance one may have, these events can be anything from
retirement, to major injuries, to critical illness or even to death.
The following are common risk categories:
1. Preferred Plus —The policyholder is in excellent health, with norrnal weight, no
history of smoking, chronic illnesses, or family history of any life-threatening
disease.
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
high blood 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.
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.
Benefits of Life Insurance
The following are the benefits of life insurance.
1. It pays for medical and funeral costs. Life insurance helps solve the incurred expenses
for medical and funeral services to lessen the grief among family and relatives for being
unprepared.
2. For financial support. Life insurance can become a Source of temporary income during
the difficult period of adjusting and coping with the loss of a loved one, especially if he/she
is the breadwinner.
3. For funding. Various financial goals. Life insurance offers additional benefits through
the form of fund accumulation for specific future financial goals.
4. Acts as a retirement secured conform. Modern life insurance also serves as a tool that
principal holders can use to get in a better financial position in the future.
5. It covers costs incurred from taxes and debt. Life insurance can serve as protection
since the premium can be used to pay for unsettled debts and taxes.

Types of Life Insurance

The table below shows a comparative analysis of different types of life insurance along
characteristics, advantages and disadvantages that may serve as a reference.
 Types Characteristic Advantage Disadvantage
1. Endowment It grants a lump sum It allows for saving It requires higher
after a specified up for specific premiums than
amount of time or purposes. other types of life
upon death. The It guarantees insurance.
policy owner is returns upon
required to pay the maturity. It is not the best
premium for a It offers some form option for those
predetermined of insurance looking at full life
number of years or coverage. protection.
until a specific age is
reached.
2. Term It is the simplest It entails low It has no benefit if
form of life premium policyholder
insurance to obtain, requirements. outlives the term
of which upon It is a strong option period set.
death, the for policyholders
beneficiaries are who need insurance Premium usually
paid with the but cannot afford gets higher upon
benefit. whole life or renewal of terms.
endowment.
It is easy to
understand.
3. Whole Life It provides coverage It offers permanent It requires higher
for the protection for full premiums.
policyholder's life or 100 years.
entire life or until It is flexible in terms It is difficult to
they reach 100 of payments of understand due to
years old. It acts premiums. complexity.
both as protection It entails fixed
and savings premiums. It usually
mechanisms since a comes with
portion of the additional features
premium is and '"living"
allocated to build up benefits.
cash values.
4. Variable It serves as both life It takes dual Cash values and
Universal Life (VUL) protection and purpose: Life dividends are not
investment vehicle insurance plus guaranteed.
in one package. A investment tool.
portion of the It has no maturity Face amount and
premium is age. The cash value death benefit are
allocated into is payable along dependent on
various investment with the assured investment
vehicles for the sum. performance.
purposes of wealth The death
creation. The component is not It includes various
contract's earnings limited to face value. investment fees.
are based on the It depicts liquidity,
performance of wherein funds can
selected be accessed in times
investments. of need and can
serve as emergency
funds.

Financial Stability
Like anyone else, teachers also aim to become financially stable if not today, maybe
in the future. Being financially stable means confidence with the financial situation,
worriless paying the bills because of available funds, debt-free, money savings for future
goals and enough emergency funds.
Financial stability is not about being rich but rather more of a mindset. It is living a
life without worrying about how to pay the next bill, and becoming stress-free about money
while focusing energy on other parts of life (Silva, 2019).

10 Strategies in Reaching Financial Stability

Just like any goal, getting the finances stable and becoming financially successful
requires the development -of good financial habits. Babauta (2007) suggests 10 habits
toward financial stability and success.
1. Make savings auto magical. Savings should be made a top priority, especially as an
emergency fund and a bill payment from • the amount are automatically transferred from
the checking account, like an online savings account.
2. Control your impulsive spending. Control yourself from impulsive spending on eating
out, - shopping and online purchases that may ruin your finances and budget.
3. Evaluate your expenses and Jive frugally. Analyze how you spend your money, see
what you can reduce and determine expenses that are necessary and eliminate the
unnecessary.
4. Invest in your future. Start preparing and investing for your future retirement while
still young in your career field.
5. Keep your family secure. Save for an emergency fund, so that you have something to
spend if anything happens with the family emergently.
6. Eliminate and avoid debt. Eliminate credit cards, personal loans, or other debt forms as
it will not work on you but even pull you down and make you drowned with obligations
that may even resort to surrendering your properties, jewelry and investments as payment.
7. Use the envelope system. Set aside three amounts in your budget each payday,
withdraw those amounts and put them in three separate envelopes. In that way, you can
easily track how much remains for each of the expenses or if you already run out of money.
8. Pay bills immediately. One good habit is to pay bills as soon as they come in and try to
get your bills to be paid through automatic deduction.
9. Read about personal finances. The more you educate yourself, the better your finances
will be.
10. Look to grow your net worth. Do whatever you can to improve your net worth, either
by reducing your debt, increasing your savings, or increasing your income, or all of the
above.
Signs of Being Financially Stable
Teachers, like any one else, often work to the extent to earn more even through
additional jobs on the side just for their desire for financial stability.
Rose (2019) presents some signs of a financially stable person.
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.
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.
Integrating Financial Literacy into the Curriculum
Financial education in schools should be part of a collaborative national strategy to
ensure relevance and long-term sustainability. The education system and profession
should be involved in the development of the strategy.
In Support, BarrH2013) underscored that financial literacy has a wide repercussion
outside the family circle and more precisely, the school. Hence, administrators and
professors need to develop a curriculum that would provide students insights on having
the value of financial literacy including the effect it can bring them.
Moreover, there should be a learning framework, which sets out goals, learning
outcomes; content, pedagogical approaches, resources and evaluation -plans. The content
should cover knowledge, skills, attitudes and values. A sustainable source of funding
should be identified at the outset.
Financial education should ideally be a core part' of the school curriculum. It can be
integrated into other subjects like mathematics, economics, social studies, technology and
home economics, values education and others. Financial education can give a range of 'real-
life' contexts across a range of subjects.
Teachers should be adequately trained and resourced, made aware of the
importance of financial literacy and relevant pedagogical methods and they should receive
continuous support to teach it or integrate in their lesson. More so, there should be easily
accessible, objective, high-quality and effective learning tools and pedagogical resources
available to schools and teachers that are appropriate to the level of study. Students'
progress should also be assessed through various high impact modes.