FINANCIAL EDUCATION FOR YOUNG PEOPLE
Speaker:Centre:Date:
V Conference “Financial Education for Young People”
To bring the economic and financial world closer to young people.
Aim of the conference, sponsored by Unicaja within the framework of the project Edufinet:
By taking financial education to their own day-to-day life and by adapting it to their special priorities and
needs.
Aim of the conference, sponsored by Unicaja within the framework of the project Edufinet:
To bring the economic and financial world closer to young people.
By taking financial education to their own day-to-day life and by adapting it to their special priorities and
needs.
V Conference “Financial Education for Young People”
“V Conference Financial Education for Young People”+
IV Financial Olympics
Aim: Practical use of the contents of
Participants: Students of the centres attending the conference “Financial Education for
Young People”, organized in teams of 2 to 10 members.
How does it work? Teams will do a project to explain in an original, educational and creative way one of the following financial products:
IV Financial Olympics
• Deposits• Fixed income products• Variable income
products• Investment funds
• Pension plans• Insurances• Personal loans and mortgages• Cards (debit, credit, revolving, prepayment or virtual
cards)
Rules at Edufinext website
IV Financial Olympics
1st prize 2nd prize 3rd prize
Teacher
Students
Classroom
How to do the project? In one of the formats accepted in the contest:
• Comic: max. 10 pages (pdf)
• Posters/boards: max. 10 (pdf).
• Podcast: max.5 minutes (format mp3 or mp4).
• Video: max. 5 minutes.
• Powerpoint presentation: max. 10 slides.
• Essay: max.10.000 characters (including spaces).
Contest results:• From 18/4/14 to 5/5/14: The Technical Committee will choose the 10 top projects
• From 5/5/14 to 18/5/14: A “popular jury” will vote through the space enabled on
Edufinext
Draw of 1 USA grant between the member
of these teams
Financial Education Comic
Practical Exercises
Financial System and Main Products
Financial Education
Economic and Financial Indicators
INDEX
Edufinet
Family Budget
Practical Exercises
Financial System and Main Products
Financial Education
Economic and Financial Indicators
INDEX
Edufinet
Family Budget
Concept of Financial Education
It is a process developping in three stages:
1) Knowledge and understanding of finances
Improvement of the knowledge on financial products, concepts and risks.
2) Competences: use of knowledge for one’s own benefit
Development of skills that allow people to be more aware of what they subscribe
3)Informed choices: financial responsibility
Decision making aimed to improve one’s own financial welfare
The importance of Financial Education
Pilot project for Financial Education in 3rd year of ESO
• 75 countries• 15-years-old students
• Assessment of knowledge in FE
The importance of Financial Education
1) Large amount of financial products
2) Complexity of financial products
3) Consumers have a lack of information and advice
Difficulty in making financial decisions
Benefits of Financial Education for young people• Understanding the value of money• Planning of budget and savings and investment needs• Training for an independent life• Knowledge of financial products and services
Financial Education is not “for grown-ups only”
Now we are users of In the future, we will be users of
Loans
Current accounts
DepositsSavings books Cards
Cards
The importance of Financial Education for young people
Practical Exercises
Financial System and Main Products
Financial Education
Economic and Financial Indicators
INDEX
Edufinet
Family Budget
Edufinet Project
Exercise of CSR
The transfer of knowledge related to the financial system
The improvement of the financial literacy
To contribute to:
PROMOTION OF: Transparency Security Responsibility
In the financial relationships of the citizens
Aims
Elaboration of a Manual
• Internet
• Book
• Simple • Clear
• Objective
• Financial System
• Financial products and services
Introductory vision
Information for makingpersonal decisions
To increase financial services user’s personal autonomy
www.edufinet.com
Games
CON
TEN
TS
Edufinet’s profiles in Facebook and Twitter
Search engine
Glossary
Enquiries
News
Simulators
Subscriptions and contact
Groups
Library
www.edufinet.com/edufinext
Information on financial education conferences
Information on financial olympics
Contents
Financial education games
Practical Exercises
Financial System and Main Products
Financial Education
Economic and Financial Indicators
INDEX
Edufinet
Family Budget
Family Budget
Document containing:
• Income (I)
=
=
Earnings
Payments
Related to:• A same period of time• A family unit
Family Budget Main items in the family budget
SalariesPensionsInvestment yield
Loans TaxesFamily expenses
TelecommunicationsTransportationHome energyClothing and footwearFoodLeisure
InsurancesPension plans
INCOME(I)
EXPENSES(E)
(I)-(E) = BUDGETARY BALANCEIf (I)>(E)= SurplusIf (I)=(E)= BalanceIf (I)<(E)= Deficit
• Expenses (E)
Family Budget: example
2013INCOME
Net salaries 48.500 € Dividends 225 € Deposit interests 15,80 € Tax return (IRPF) 1.500 € Use of current account 1.000 € TOTAL INCOME 51.240,80 €
EXPENSESLoan repayments 18.167 € Insurances 1.610 € Taxes (IBI and IVTM) 920 € Pension plan payment 3.000 € Family expenses 35.000 € TOTAL EXPENSES 58.697 € BALANCE (INCOME-EXPENSES) -7.456 €
2012INCOME
Net salaries 48.015 € Dividends 225 € Deposit interests 15,80 € Tax return (IRPF) 750 € Use of current account --- TOTAL INCOME 49.005,80 €
EXPENSESLoan repayments 18.167 € Insurances 1.610 € Taxes (IBI and IVTM) 920 € Pension plan payment --- Family expenses 23.309 € TOTAL EXPENSES 44.006 € BALANCE (INCOME-EXPENSES) 5.000 €
C/C: +5.000 €
2014
Budget 2012 C/C: accrual Budget 2013
Practical Exercises
Financial System and Main Products
Financial Education
Economic and Financial Indicators
INDEX
Edufinet
Family Budget
Economic and Financial Indicators
Economic Indicators Financial Indicators
•Gross Domestic Product (GDP)
•Inflation
•Labour Market
•Exchange rate
•Profitability
•Debt level
•Solvency
Economic Indicators
GDP Definition
Data
• Quarter-on-quarter variation rate: variation (in %) in a quarter compared to the previous one.
• Year-on-year variation rate: variation (in %) in a year compared to the previous one.
GDP:Value of the productive activity
In a given period of time
In a country or geographic zone
Residents (nationals and foreigners).
Calculation of GDPProduct (sectors): primary sector + industry and energy + construction + market and non market services + others
Income: Salaries + Gross Operationg Surplus + Taxes
Expenditure: Consumption + Investment + Changes in stock + Exports - Imports
Economic IndicatorsInflation
Definition
Amounts acquired in the base year Price (base year) PricePer item Total Per item Total
150 loaves of bread 1,50 € 225 € 1,30 € 195 €100 cups of coffee 2,40 € 240 € 2,40 € 240 €12 hair cuts 20,00 € 240 € 22,00 € 264 €1 coat 145,00 € 145 € 176,00 € 176 €Total cost of basket --- 850 € --- 875 €Price index --- 100 --- 102,9Inflation rate --- --- --- 2,90%
Example of calculation of CPI*
*Source: European Central Bank
• Persistent increase in the general price level of an economy.
• Several inflation indicators, the CPI being the most used.
Economic IndicatorsLabour Market
TOTAL POPULATION
WORKING-AGE POPULATION
NON WORKING-AGE POPULATIONS (<16
YEARS OLD)
LABOUR FORCE
POPULATION NOT IN THE
LABOUR FORCE
EMPLOYED POPULATION
UNEMPLOYED PEOPLE
EMPLOYEES
SELF-EMPLOYED
SEEKING THEIR FIRST JOB
HAVE WORKED BEFORE
RETIRED PEOPLE
STUDENTS
OTHER GROUPS
Economic Indicators
Exchange rateDefinition
Example
A good has a price of 300 dollars in the USA and of 310 euros in Spain. The exchange rate euro/dollar is 1.35. How much does the USA good cost in euros?
Cost of the good in the USA = 300 $
1,35 $/€= 222 €
Exchange rate:The exchange rate is the price of a currency in terms of another currency.
Financial Indicators
Balance (2012) Profit and Loss (2012)
Sales 15.946,14 13.945,05Cost of goods (6.416,83) (5.600,34)GROSS MARGIN 9.529,32 8.344,71Operating costs (5.604,78) (5.026,61)Other net profits and losses (11,578) (379,11)OPERATIVE RESULT (EBITDA) 3.912,96 2.938,99Depreciation and Amortisation (796,11) (427,71)EBIT (Earnings before interest and tax) 3.116,84 2.511,28Financial results 14,13 61,30RESULTS BEFORE TAX 3.130,97 2.572,58Tax on earnings (763,96) (625,46)NET RESULT OF THE YEAR 2.367,01 1.947,12*Figures in million eurosSource: annual report Inditex and H&M, 2012
Current assets 6.692 4.298Non current assets 6.198 2.648TOTAL ASSETS 12.890 6.946Current liabilities 3.485 1.617Non current liabilities 923 269EQUITY 8.482 5.060TOTAL LIABILITIES + EQUITY 12.890 6.946*Figures in million euros
Source: annual report Inditex and H&M, 2012
Financial Indicators
Which one is the most profitable?
ROA Net profit / Total assets 18,36% 28,03%
ROE Net profit / Total equity 27,91% 38,48%
Which one is more indebted?Leverage Liabilities / Total Assets 34,20% 27,15%
Which one is the most solvable?Solvency Net equity / Total assets 65,80% 72,85%
Practical Exercises
Financial System and Main Products
Financial Education
Economic and Financial Indicators
INDEX
Edufinet
Family Budget
Role of the financial system
BORROWERS OF FINANCIAL RESOURCES
PROVIDERS OF FINANCIAL RESOURCES
FINANCIAL SYSTEM
ASYMMETRICAL INFORMATION
DIFFERENCES- Term- Amount- Risk
Role of the financial system
Decision MakingWhat is the need to cover?
Obtain savings
Savings products
- Profitability- Risk- Liquidity
Obtain credit
Loans
- Interest rate- Fees and commissions- Term
Risk coverage
Insurances
- Premiums- Coverages
Other financial services
Payments/Guarantees/Others
- Service/cost ratio
Taxation
PROFITABILITY
RISK
LIQUIDITY
TERM
What is the yield obtained by the invested capital?
For what period?
What are the risks?• Solvency of the institution receiving our money• Invested capital• Interest to be received
Can I use the invested money at any time?
Variables to consider in savings products
Main features of Deposits
· Service fees
Depositor Custodian(Deposit institution)
· Money
· Funds custody· Movement statements· Interest· Services· Funds availability
+
-
-
+
Liqu
ity
Prof
itabi
lity
Fixed-term
deposit (IPF)
Deposit at sight
Early cancellation commission
Savings account
Current account
Bank statement Cheque book
Savings book No cheque book
Maintenance fee
Management fee
Concept of Loan
LOAN CYCLE
Loan amount
Term
Potential tax benefits
Total redemption of the capitalInitial
commissionsTaxes and arrangement fees
Repayment installments = Capital + interest
Operation setting
Tips to consider when applying for a loan
What do we want to finance with that loan?
LOAN WITH PERSONAL GUARANTEE
MORTGAGE LOANWhat do I have to consider?
Interest rate
Usually, fixed interest rate Personal rate > mortgage
AmountUsually < 60.000€ Not > 80% of the property value
Commissions and fees(Taxes)
Opening, study, cancellation commissions
Opening and cancellation commission, notary, valuation, …
TermShort and medium term( 10 years)
Long term(> 20 years)
APR Real cost of the operation
Usually, variable interest rate• Index used• Differential• Review date
Payment instrument replacing coins and notes: cards, transfers, commercial documents (bill of exchange, cheque, drafts).
Means of payment
Concept
Usual mean of payment: cards
Cards
Debit
Credit
Direct debit to the account.
Credit approved to be used.
Prepayment Use limited to the preloaded amount.
Virtual Request for a virtual card for each online purchase.
Means of payment
Validity date
Security chip
FRONT
• Visa• Mastercar
d
Issuer institution’s logo National network
1234 5678 9012 3456
Name of the card holder
Month/YearInternational brand
• Euro 6000• 4B• Servired
PAN 16 digits (unique)
BACK
Signature CVV
Contact details of the issuer institution
Magnetic band
Code for e-commerce operations (3 digits)
Practical Exercises
Financial System and Main Products
Financial Education
Economic and Financial Indicators
INDEX
Edufinet
Family Budget
1. A term deposit for 1 year, for 10.000 € receives an interest of 3.50%, with monthly interest payment. What is the amount of interest to receive each month?a. 87,50 €.b. 350 €.c. 29,17€.d. 175 €.
Exercise 1
Exercise 1
C*R*T360 =
10.000*3,5%*30360
Exercise 1
1. A term deposit for 1 year, for 10.000 € receives an interest of 3.50%, with monthly interest payment. What is the amount of interest to receive each month?
a. 87,50 €.b. 350 €.c. 29,17 €.d. 175 €.
2. A current account is held by 3 holders with individual signature. To use the account:
a. The signature of the three holders is required.b. The three holders must act jointlyc. The signature of any of the three holders is enough.d. The signature of at least two of the three holders is required.
Exercise 2
Exercise 2
2. A current account is held by 3 holders with individual signature. To use the account:
a. The signature of the three holders is required.b. The three holders must act jointlyc. The signature of any of the three holders is enough.d. The signature of at least two of the three holders is required.
Exercise 2
3. A person gets a mortgage loan for 300.000 €, with an interest rate of 4.5%, to be repaid in 25 years with monthly constant repayments (always the same amount). The monthly repayment to be paid will be:
a. 1.667,50 €.b. 1.125,00 €.c. 1.725,30 €.d. 1.532,20 €.
Exercise 3
Exercise 3
300.000= a * 1- 1+
4,5%12( )
4,5%12
-(25*12)
Exercise 3
Exercise 3
1 9 17 25 33 41 49 57 65 73 81 89 97 105 113 121 129 137 145 153 161 169 177 185 193 201 209 217 225 233 241 249 257 265 273 281 289 2970
200
400
600
800
1000
1200
1400
1600
1800Loan repayment table
Interest Redeemed capital
Exercise 3
3. A person gets a mortgage loan for 300.000 €, with an interest rate of 4.5%, to be repaid in 25 years with monthly constant repayments (always the same amount). The monthly repayment to be paid will be:
a. 1.667,50 €.b. 1.125,00 €.c. 1.725,30 €.d. 1.532,20 €.
4. Which one of the following sentences about these football clubs is right, according to the details below?
a. Barcelona has a better position in the three presented indicators.b. Real Madrid is the most indebted.c. Barcelona is the most profitable.d. Real Madrid is the less solvent.
Exercise 4
Real Madrid Club de Fútbol Fútbol Club BarcelonaROA 4,32% 6,46%Leverage 63,41% 97,53%Solvency 36,58% 2,47%
4. Which one of the following sentences about these football clubs is right, according to the details below?
a. Barcelona has a better position in the three presented indicators.b. Real Madrid is the most indebted.c. Barcelona is the most profitable.d. Real Madrid is the less solvent.
Exercise 4
Real Madrid Club de Fútbol Fútbol Club BarcelonaROA 4,32% 6,46%Leverage 63,41% 97,53%Solvency 36,58% 2,47%
Exercise 5
5. What is the unemployment rate according to the information below?
a. Population not in the labour force/ Working-age population: 40,8%.b. Unemployed people / Working-age population: 21,19%.c. Unemployed people / Labour force: 35,79%.d. Population not in the labour force / Total population: 32,94%.
Thousand people
Total population 8.421,0Working-age population 6.799,0
Labour force 4.025,0Population not in the labour force 2.774,0
Unemployed people 1.440,4Source: EPA 2º Quarter 2013
Total population source: local register 2013
Exercise 5
5. What is the unemployment rate according to the information below?
a. Population not in the labour force/ Working-age population: 40,8%.b. Unemployed people / Working-age population: 21,19%.c. Unemployed people / Labour force: 35,79%.d. Population not in the labour force / Total population: 32,94%.
Thousand people
Total population 8.421,0Working-age population 6.799,0
Labour force 4.025,0Population not in the labour force 2.774,0
Unemployed people 1.440,4Source: EPA 2º Quarter 2013
Total population source: local register 2013
FINANCIAL EDUCATION FOR YOUNG PEOPLE
Speaker:Centre:Date: