Financial Planning for Young Adults (FPYA), developed in partnership with the CFP Board, is designed to provide an introduction to basic financial planning concepts for young adults. The FPYA course is organized across eight separate modules within a 4-week window. Topics covered include financial goal setting, saving and investing, budgeting, financial risk, borrowing and credit. Because financial planning is such a personal topic, you will be encouraged to define your own financial goals and objectives while we discuss concepts and provide tools which can be applied in helping you reach those goals. Within each module, you will view a combination of traditional lecture style videos along with video vignettes that introduce financial topics for discussion among participants. The video vignettes provide a unique and exciting component to this course. Each vignette introduces a real-world scenario where financial decisions must be made and financial planning concepts can be applied. You will be challenged to think critically about each scenario and decide how you might come to a resolution if ever faced with a similar situation. Finally, the course also includes material throughout which is focused on career opportunities in financial planning, including video interviews with actual CFP® professionals and other professionals working in this exciting and growing career area. The final module in the class is devoted to the topic of financial planning as a career.
Lecture: Barriers to Saving
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來自 University of Illinois at Urbana-Champaign 的課程
Financial Planning for Young Adults
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從本節課中
Module 3: Saving Strategies
In this module you'll have the opportunity to explore best practices for building a saving habit and discuss barriers to saving. Mental accounting will be introduced and considered in terms of how it can affect saving behavior.
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Nicholas PaulsonAssociate Professor
Department of Agricultural and Consumer Economics
Kathryn L. SweedlerConsumer Economics Educator
University of Illinois Extension
Charles R. ChaffinDirector of Academic Programs and Initiatives
Certified Financial Planner Board of Standards
[MUSIC]
Hi, we've been talking a lot about the advantages of savings and
how to get started and I might have been making it sound easy.
Because I think once you get started on it, it'll get easier and easier, but let's
be realistic as well and recognize the fact that there are barriers to savings.
Let's talk about them today, so that you are aware of those barriers and
maybe that will help you avoid some of those and
then let's also talk about again, back to my favorite topic of compounding returns.
When is it advantage to you?
And when is it a disadvantage?
And how can that possibly be a barrier to your saving plan?
So, what are some of these barriers to savings that we know happen for people.
One thing is we have a lot of competing goals and desires in our life.
There maybe that we have our short-term needs and
desires like today, I want to go out and have fun.
And our long-term things, which are I really want to achieve something or
I want to do something bigger and I need to save overtime for that.
It's hard to resist that daily desire and focus on the long-term.
So, that's one thing that we need to be aware of.
Keep it in the front of your mind and think about how you can manage that.
Sometimes people find that if they put a picture of whatever their long-term goal
is up front and center, maybe on your refrigerator or your mirror that,
that helps them keep that in focus.
The other thing is we often in our lives have multiple long-term goals and it could
be a challenge to figure out how to save for all of them all at the same time.
So maybe you're saving for a new home and a new car or you're saving for
a trip, and money to transition once you get out of college.
So, these are things that are challenges and I recognize that.
But again, by sitting down and thinking through them and being aware of them,
it can help you.
We've talked earlier in a different part of this course about emotional spending,
but I think it's worth bringing it up again here.
And by this,
I mean, a lot of people do have to be ware of the fact that when they're stressed or
they're worried, that there's a tendency to go out and spend money.
And it may not be things that are focused on those particular goals,
it's more the act of going out and shopping and spending money and
that can really the feature saving goals.
So being aware of that,
if that something that you need to be concern about, again, it's important.
Here's another thing that happens to us that again, I think it's very interesting,
because it's about how our brain works and it's called decision fatigue.
And with decision fatigue is, is that we when we've had to make a lot of decisions?
We kind of run out of metal energy for making decisions and
we may actually find that the decisions we're making aren't the best.
So when you have decision fatigue,
you may make some spending choices that aren't really in your favor and
that you wouldn't have made if you had really kind of been at your best moment.
So we want to be careful about this,
because we don't want to end up making impulse purchases that we didn't want.
So think about this when you're going out and you're doing any kind of big shopping,
especially.
So for example, lets say, you went out and you were shopping for a car and
there's a lot of decisions to make when you're shopping for a car.
You have to think about what kind of car do you want?
What style?
What color?
What kind of mileage do you want?
All these different choices.
You might think you have all those decisions made.
But when you get out there and you're making the purchase,
odds are you're going to be offered more choices, like do you want the package A or
do you want package B, or do you want package C?
And it can be exhausting, because you're making all of these different decisions
dealing with a fair amount of money and it can lead you to say, fine.
You know what?
I didn't know that I wanted leather seats.
But now that I'm tired, leather seats is sounding really good.
So yes, let's go ahead and get the leather seats.
So be aware of that when you're making large decisions,
especially about decision fatigue.
It also can lead to sort of default options.
Watch out for this.
At least in the US, a lot of our different plans that we've signed up for
come with a lot of defaults.
So you may again, for example, go down to buy a cellphone and
you may think you know exactly what you want, but then there's all these options.
And without maybe, they'll just say, well,
this plan just comes with all these options.
Maybe you didn't need all that.
Maybe you didn't need all that cost.
So, think about it before you sign up for those things.
The other thing that we really need to be aware of when we're looking at barriers
for saving is how much of our money is being locked up into debt and
what kind of interest are having to pay on that debt?
Because when you're having to pay large amounts of debt pack and
you have those interest cost on top of that, it can really stop you from having
money available to work towards your saving goals.
So in this example, we're looking at making a purchase of a car again and
the only real difference here is the interest rate.
For one purchase, the interest rate is at over 9%.
And in the other one, it's 24%.
Those might sound high in today's interest world, but
actually this can be that expensive, depending on somebody's credit ratings.
So looking at that, what you'll see is that at the end of four years,
the cost was significantly different for the two different plans.
Over $3000 difference in interest costs.
So when you're making decisions to go make a purchase use debt,
pay attention to interest rates and think about the fact that
the money you're putting toward interest can't be going toward savings.
There's an opportunity cost there that you need to be aware of.
So, these are the things that can kind of stop you from getting to your savings
goal and being aware of them in your mind might help you avoid these barriers.
One more tip that might help you out.
Again, going back to behavioral economics, we know that people have different ways
that they can say something to themselves which will effect their decision.
So let me array these two statements to you and
I want you to think about, which one bothers you the most?
Statement one, if I paid up my credit card,
I would save $50 a month in interest charges.
Now statement number two,
every month I have a revolving balance on my credit card, I lose $50.
Which bothers you most when I read it out loud?
Was it statement A or statement B?
A lot of people are going to find that statement B bothers them more and
that's because of something called loss aversion.
We don't like loss and we don't like it when things are stated as a loss.
So if you're trying to keep yourself motivated to payoff interest and
credit card debt, you might want to think about stating and
in your own mind is how much you're losing every month and
see if that helps motivate you to get that paid off quickly.
So, you can work towards your saving goals.
So, we've talked a lot about different things in this module.
We've talked about the importance of having emergency savings and
how the time value of money can really help you have your money grow over time.
We've talked about some strategies that might help you save money.
Things like mental accounting where you categorize money and
have money in different buckets to work towards your goals.
We've talked about small amounts can add up and we've talked about the importance
of saving regularly, and putting in on automatic.
It's important to be aware on the barriers to savings, things like competing goals,
decision fatigue, interest costs on debts, but
not to let those barriers discourage you.
Being aware of all these different strategies and options can put you on
a path where you can work towards saving for the things that are important to you.
[MUSIC]
