National Extension Money
Management
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Extension Money Management Education Framework
Concepts, Processes
and Skills, and Tools
Extension teaches concepts, processes, and
skills, and provides tools for individuals
and families to learn and practice effective
money management techniques. These factors,
along with money management desired outcomes
(see Section Four), contribute to understanding
the money management education framework.
The factors are part of the complex whole
of money management. Concepts, processes
and skills, and tools are each briefly examined
here to provide clarity about their meaning
in the money management education framework.
CONCEPTS
Concepts make up the core of the framework.
They express generalizations based on observations
or experiences that are reinforced by research.
Five primary concepts have been identified
as components of the money management education
framework.
Concept #1: Obtaining Money
Financial resources are obtained in many ways:
- Employment
- Entrepreneurship
- Transfer payments
- Pensions
- Interest and investment income
- Bartering
- Selling assets
- Inheritance
- Gifts
Concept #2: Spending Money
Money is spent in different categories
- Basic needs like food, clothing, shelter,
transportation
- Discretionary spending like education,
entertainment, donations, savings
and investments, retirement, taxes, and interest on debt.
In a variety of ways . . .
- Cash
- Check
- Credit card
- Debit card
- Electronic transfer
Over a range of intervals . . .
- Annually
- Monthly
- Weekly/Biweekly
- Daily
Concept #3: Protecting Assets
Assets are protected by identifying the risks to be faced and deciding how
to deal with them through:
- Avoidance
- Retention
- Reduction
- Transference
Concept #4: Saving and Investing
Money
The choice of savings and investment alternatives depends on:
- The need for liquidity versus long-term
needs and protection
- Ability to assume financial risk
- The investment's earning potential
Concept #5: Borrowing Money
When future income is spent to acquire goods and services (education, vehicles,
homes, etc.):
- Interest is paid to cover the cost
- The loan term may be long, medium, or
short.
- Loans are obtained from many sources:
- Financial institutions like banks, credit
unions, savings and loan associations
- Mortgage company
- Credit cards
- Family
- Other outlets like finance companies,
pawn shops
PROCESSES AND SKILLS
Processes and skills are used to effectively
apply knowledge to accomplish goals. They
can be learned and refined through practice.
The following processes and skills are essential
for effective money management.
Assessment/Evaluation
When people are ready to make a change
in how they manage money, they likely have
assessed their current status. Assessment
can range from an informal "in one's
head" to a formal, exhaustive record
of all spending and income and changes in
net worth.
Goal-setting
Setting or revising goals frequently occurs
at the same time as assessment. Goals point
toward desired outcomes (see Section Four).
Goals are usually set for two reasons: a)
to maintain status quo or b) to make a change.
Factors to be considered in goal-setting
are:
- Period of time for goal completion (short-,
medium-, and long-term)
- Degree of importance
- Influence of values
- Fit of goals to total financial plan
Planning
Planning involves deciding on the components,
the order, and the course of action. A budget
is a plan since it allocates resources to
meet various goals (i.e., pay rent, pay bills,
save for down payment on a house, save for
retirement). There are short-, medium-, and
long-term planning approaches, designed to
meet differing goals.
Decisionmaking
Decisionmaking goes on all the time, consciously
or unconsciously. People decide how, when,
where, and why to spend money. There are
many "models" for decisionmaking.
Steps in the decisionmaking process include:
- Identify the problem
- Gather alternatives
- Weigh alternatives
- Select an alternative
- Take action
- Evaluate
- Make revisions as needed
Implementing
Implementing is taking the action steps
identified in the plan. It is carrying out
the decisions made, such as: save money each
week, reduce debt, save for the future. Identifying
benchmarks along the way helps in monitoring
the effectiveness of the plan.
Recordkeeping
Recordkeeping provides an understanding
of how money is managed. It provides information
to assess progress toward goals and helps
identify the need for adjustments in the
plan. It details what a person plans to spend
or save, provides a comparison for monitoring
the plan, and provides a record of what was
actually spent or saved.
TOOLS
Tools are helpful instruments used to gather
and organize information for making appropriate
money management decisions. Most tools are
available in different forms to meet individual
needs and preferences. Types of tools used
for money management include:
- Budget forms/spending plans
- List of goals
- List of wants and needs
- Comparison shopping charts
- Record keeping systems
- Tracking spending methods
- Net worth statements
- Income and expense records
- Household inventories
- Consumer guides
- Tax records/plans
- Risk management plans
- Investment plans
- Retirement plans
- Estate plans
Extension educators employ a variety of
teaching techniques. To encourage utilization
of the tools of money management, the following
educational methods may be employed:
- Lectures/workshops
- Seminars
- Interactive experiences
- Home study and correspondence courses
- Coalition building
- Simulation games
- Computer programs
- Comparison shopping surveys
- Role playing
- Displays
- Volunteer staff training
- Mentoring
- Newsletters and news articles
- Radio/television
- Fact sheets
- Videos
- Satellite programming
- Internet web sites and Electronic mail
Measurement of
Money Management Desired Outcomes
As a result of money management education,
individuals and families achieve financial
stability leading to financial security and
higher levels of satisfaction. Desired outcomes
have related performance goals, which can
be measured by a variety of indicators.
Definitions:
The desired outcome is the benefit from applying money management principles.
The performance goal is the change in behavior and/or perceptions of a person's
money management knowledge, skills and attitudes.
The indicator is a measure of change in knowledge, skills, attitude, and/or
behaviors about money management.
DESIRED OUTCOME: Financial
Stability
PERFORMANCE GOAL: Ability
to meet short-term (day-to-day) financial
obligations.
INDICATORS: Examples include:
- Use of appropriate community resources
- Initiated the savings habit
- Re-evaluated what is important or essential
- Comparison shopped for major purchases
- Reduced debt to a controllable level
- Secured insurance to cover possible major
losses
- Set or revised spending and saving goals
- Set up a system for paying bills on time
- Established an emergency fund equal to
three to six months' living expenses
DESIRED OUTCOME: Financial
Security
PERFORMANCE GOAL: Ability
to meet long-term (future) needs (i.e.,
financing children's education, assuring
good health, providing for a secure retirement,
building an estate).
INDICATORS: Possible examples
include:
- Secured regular income
- Began saving on a regular basis or increased
regular savings
- Identified and/or reduced money leaks
in spending
- Determined retirement and/or future income
needs and how to meet them
- Understood legal liability and protections
regarding the use of credit and debit cards
- Reviewed and/or updated pension, annuity,
and other retirement plans
- Established or revised investment goals
- Compared financial institution deposit
alternatives
- Set up comprehensive system for keeping
and storing financial records
- Discussed financial matters with other
family members
- Recognized how changes in the economy
influence people's economic status
- Used electronic technology in making
financial transactions
- Recognized tax consequences of financial
decisions
- Developed adequate plan for taking care
of dependents in case of death or disability
DESIRED OUTCOME: Financial
Satisfaction
PERFORMANCE GOAL: Degree
to which a person's desired standard of
living matches his/her actual level of
living.
INDICATORS: Possible examples
include level of satisfaction with:
- Level and predictability of income
- Money available for individual and/or
family wants and needs
- Current level of savings
- Money available for future emergencies
- Amount of money owed
- Confidence to achieve financial goals
- Ability to solve financial problems
- Ability to set money priorities
- Knowledge of community provided resources
for assistance
For further information, contact the Cooperative
Extension System (CES) at the county, state,
or federal level. County Extension offices
are conveniently located in courthouses or
other government buildings. To reach a state-level
Extension office, contact the nearest land-grant
university. To reach the federal partner
of the CES, The USDA Cooperative State Research,
Education, and Extension Service, call 202-720-5119
or visit their Web
site.
1. The Cooperative Extension System (CES)
is a publicly funded, nonformal educational
system that links the educational and research
resources and activities of the U.S. Department
of Agriculture (USDA), 103 land-grant universities,
and nearly 3,150 county administrative units.
The CES mission is to "help people improve
their lives and communities through learning
partnerships that put knowledge to work." Among
Extension's key objectives is to improve
the financial management competency of this
country's individuals and families. Extension
brings educational programs to consumers
where they live and work on such topics as
basic budgeting, financial planning through
the life cycle, credit, insurance, and retirement
planning.
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