Based on Wells Fargo's Hands on Banking ®
PROJECT PRO$PER
PRESENTS
The Basics of Building Wealth
Investing, Retirement, Insurance
Participant Guide
The Hands on Banking® program is a free public service provided by Wells Fargo. You may also access the program anytime at
www.handsonbanking.org & www.elfuturoentusmanos.org
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Table of Contents
BUILDING WEALTH .......................................................................................................... 2
THE IMPORTANCE OF MAKING FINANCIAL GOALS ........................................................... 4
AT HOME GOAL SETTING WORKSHEET............................................................................. 5
INVESTING BASICS ........................................................................................................... 6
POWER OF COMPOUNDING............................................................................................. 7
TYPES OF INVESTMENTS .................................................................................................. 8
THE RULE OF 72 ............................................................................................................. 10
PLANNING FOR RETIREMENT ......................................................................................... 11
RETIREMENT BASICS ............................................................................................................. 11
TYPES OF RETIREMENT SOURCES .............................................................................................. 11
TYPES OF RETIREMENT PLANS ................................................................................................. 12
PROTECTING YOUR ASSETS ............................................................................................ 15
THE VALUE OF INSURANCE ..................................................................................................... 15
BASIC DEFINITIONS FOR COMMON INSURANCE VOCABULARY ...................................... 17
GLOSSARY...................................................................................................................... 19
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Building Wealth
Which of these two families is wealthier?
FAMILY
ONE
FAMILY
TWO
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Family One
Family Two
Income: $150,000 annually
Income: $665,000 annually
Assets
Assets
Home Value
$200,000
Home Value
$600,000
Car Value
$10,000
Car Value
$35,000
Savings
$25,000
Savings
$5000
Investments
$250,000
Investment
$25,000
Total
$485000
Total
$665000
Liabilities
Liabilities
Mortgage
$120,000
Mortgage
$540,000
Car Loan
$0
Car Loan
$40,000
Credit Card Debt
$0
Credit Card Debt
$20,000
Student Loan Debt
$10,000
Student Loan Debt
$46,000
Total
$130,000
Total
$646,000
Net Worth
$355,000
Net Worth
$19,000
Lesson Learned:
“Having Money” and “Building Wealth” are really two different things. When you have wealth, you have
more than just income. You should have a set of resources like assets and investments that will help you
take advantage of life’s opportunities.
Wealth building usually doesn’t happen overnight, in a
year, or in three years. Building wealth is a series of steps
that you make over time. It’s an ongoing process that
requires patience and discipline to reach your goals.
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The Importance of Making Financial Goals
Setting financial goals throughout your life will help you see what’s really important to you and where to
focus your time, effort, and money.
When making financial goals, you should write them down in a journal. This will help you determine
exactly what you want to accomplish and by when. Writing down your goals is a great first step for
moving your ideas from dreams to reality.
Types of goals
Immediate Goals These are goals that you would like to achieve in 6 months to 1 year.
 Examples are: employment, learn English, and obtain work authorization.
Short Term Goals
 These are financial goals that you want to achieve in the next 1 to 5 years.
 Examples are: saving for a car down payment, apartment security deposit, citizenship filing
fees, etc…
Long Term Goals
 These are financial goals that you want to achieve in 5 years and more.
 Examples are: down payment for a house, retirement, starting a business, college or
professional education, etc…
Review your list annually (once a year)
Goals can change based on time, situations or events. As your personal circumstances change, your goals
may need to be updated. This is totally acceptable. Review your list once a year and if you experience big
life changes consider updating your goals.

Life Changes can include: Income changes, family growth, purchase of a home, etc…
Activity: Take a moment and write a few of your own short term and long term goals.
Short Term Goals
Long Term Goals
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At Home Activity
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Investing Basics
The basics
Investing is putting money you’ve saved into things you think will increase in value over time. The best
way to make a profit when investing is to buy when the price is low and sell when the price is high. With
investing there’s always a risk of losing some or even all of your money if the investment doesn’t perform
well. Any time you sell an investment for a profit, your earnings are called CAPITAL GAIN and if you lose
money when you sell your investment you’ll have what’s called a CAPITAL LOSS.
Savings vs. Investing
It is important to remember that there is a difference between saving your money and investing your
money.
Savings
Investing
Ready Cash
Achieve Goals
 Can help you achieve long Gives you ready cash; provides
term, major financial goals.
funds for emergencies; often
used for specific purchases in
the near future (usually three
years or less).
Minimal Risk
 Minimal or no risk
Always Involves Risk
 You may lose some or all of
the money you invest.
Earn Interest
 You earn interest, but savings
accounts generally earn a
lower return than do
investments.
Potential for Profit
 Investments have the
potential for higher return
than a regular savings
account.
 This increases your net worth,
which is the value of your
assets (what you own) minus
your liabilities (what you owe).
 If you sell for higher price than
you invested initially, you
make a profit.
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Power of Compounding
Whether gains come from interest earned in a savings account or dividends from investments,
compounding allows your money to grow larger for you.
What is compounding?



Compounding occurs when your earnings on an investment are added to the amount you
originally invested (Capital).
As your total investment grows larger, your earnings have the potential to grow larger too.
It pays to start investing as soon as you can, and to take advantage of the power of compounding.
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Types of Investments
Type


Stocks


Type


Mutual Funds




Bonds



Description
When you invest in stocks, you’re investing in businesses.
These could be small, medium, or large companies in the U.S.
or around the world.
Buying stock gives you part ownership in a company. That’s
why you should only buy stocks in companies you believe in
and believe can do well.
Stocks are usually bought and sold in units called SHARES.
The value of shares and share prices rise and fall based on
how much people will pay for a share.
Sometimes the company will pay its investors a DIVIDEND.
That’s when the company pays the shareholders a part of its
profits.
Description
Mutual Funds are a collection of money from a group of
investors placed in a variety of stocks, bonds and other
products.
These types of investments are professionally managed by a
mutual fund manager.
Instead of deciding for yourself what stocks and bonds to
buy, the mutual fund manager makes the decisions of what
to buy, sell and when for everyone in the group.
There is usually greater POTENTIAL for profit than many lowrisk investments and less risk than buying individual stocks
and some bonds.
Corporations, governments and municipalities issue bonds to
raise funds. In return they typically repay the bond owners
with interest.
When you purchase a bond, you are lending money to a
corporation or to the government for a certain period of time
called a TERM.
Bond terms can range from a few months to 30 years.
Usually, the longer the bond term the higher the return.
The bond certificate is a promise from the issuer that they
will repay you on the specific date usually with a fixed rate of
interest.
Government bonds tend to be lower risk because they are
backed by the government. Corporate bonds are higher risk.
Be sure to research the company before investing.
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Low Risk
Investments
Real Estate
 Low-risk investments enable you to earn interest on your
money while maintaining liquid funds (flexible access to your
cash).
 Low-risk means that your odds of losing your money through
investments are extremely low. However, the potential of
return (profit) is also low.
 Examples of low risk investments- Certificates of Deposits
(CDs) A type of savings account with fixed term, higher
opening balance, and higher interest rate than regular
savings accounts. CDs at banks and credit unions are
FDIC/NCUA insured.
 These are investments in homes or properties. Like stocks,
you earn money when you sell real estate for more than
what you paid (capital).
 Real estate usually, but not always, increases in value over
time without daily ups and downs as in stocks.
 Remember, selling property can take time. Also, there are
costs involved in buying, selling, and maintaining properties.
The greater the risk of a loss on an investment, the greater the potential return. The
lower the risk of loss, the lower the potential return.
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The Rule of 72
The Rule of 72 is a mathematical formula used to determine how many years it will take you to double
the money of your investment.
Formula: 72 ÷ interest rate = years it will take to double your investment
1. Take the interest rate of your investment.
2. Divide 72 by the interest rate.
3. The number you come up with is how many years it will take your original investment to double.
Activity:
You have a mutual fund that’s earning 6% per year. How many years will it take to double your
investment? ___________________________________
You have a Certificate of Deposit which earns 2% interest per 12 month term. How long will it take you to
double your investment? _______________________________
Mutual Funds
Real Estate
Certificate of Deposits
Real Estate
How to Get Started with Investing
There are 3 basic steps you should take before investing:
1. Save enough money to cover 6 months of your expenses.
Be sure you’re prepared to cover your expenses in case of an emergency, a sudden illness,
or if you lose your job.
2. Meet with an investment advisor and make an investment plan that fits your budget and the level
of risk that works for you.
a. Advisors can be located at your financial institution(s) and/or investment firms.
3. Budget how much money you need to invest every month and make a COMMITMENT to do so.
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Planning for Retirement
Retirement Basics
Most of us would like to retire someday with the peace of mind that we can take care of ourselves
financially. When it comes to creating a retirement plan, there is no such thing as “one size fits all”.
Having a financial plan is very important because you want to have the necessary funds for the full length
of your retirement.



The length of your retirement may equal the number of years you were employed.
o If you retire at 65 and have a life expectancy of 87 then you will need retirement income
for at least 22 years.
With a personal retirement plan, you will know how much you can afford to spend each month
and not outlive your retirement savings.
Start to implement your retirement savings plan as early as you can.
Types of Retirement Sources
Money Source
Description
Employer Investment Plans
These plans include 401ks, IRAs, Pensions
Investments
Your investment portfolio might include stocks, mutual
funds, bonds, etc…
This is money you save. Try to earn the highest rate of
compound interest you can.
If you are a homeowner, the equity your home has
accumulated over the years could be used as a source
of income. (Equity = Home value – Mortgage balance)
This is money from part time jobs, running a small
business, working off and on throughout the years.
Personal Savings
Home Equity
New Income
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Social Security Benefits
The amount you receive in Social Security will vary
based on how much you earned and how long you paid
into the Social Security System.
Do not depend on Social Security to fully fund your
retirement years. In 2016 the average social security
benefit for a person of retirement age is $1341/month.
This comes to $16,092 a year.
Types of Retirement Plans
401k
This is the most common type of company sponsored employee retirement plans. The most popular
reason to have a 401k is that you do not have to pay taxes on this money until you use the money when
you retire. If your company offers a 401k plan, study the specifics and talk with a retirement plan expert.
Strongly consider investing as much as you can as soon as you can. Some companies offer a match to
your contribution. If your company offers this, then take full advantage of the program by making your
contribution enough to get the full match if possible.
If you are over the age of 50, ask your company about the new “catch up” provision to help maximize the
amount you can contribute for your retirement.
Traditional Individual Retirement Account
This is a personal investment account that you have opened with a financial institution. This account can
include CDs, mutual funds and/or stocks. As you earn income, you can contribute up to $5000-$6000 a
year up to the age of 70½. The major benefit is that the government does not tax the interest you earn
until after you withdraw the money for retirement. This will allow your funds to compound faster to give
you more money at retirement.
Traditional IRAs are good investments for money you don’t need right away and can afford to invest for a
period of time. If you need it before you reach age 59½, unless you buy your first hoe or pay education
expenses, you’ll pay both a penalty fee and taxes on your withdrawal.
A second type of IRA is called a ROTH IRA. A Roth IRA is an individual retirement account that offers taxfree growth and tax-free withdrawals in retirement. Roth IRA rules dictate that as long as you've owned
your account for 5 years* and you're age 59½ or older, you can withdraw your money when you want to
and you won't owe any federal taxes.
To better understand the differences between traditional and Roth IRAs and to set up an account, it’s
important to work with a banker, a financial advisor, or a retirement specialist.
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SEP (Simplified Employee Pension)
This retirement plan is designed for people who are self-employed. Funds may be invested the same way
as an IRA. As the employer, you can contribute up to 25% of the participant's compensation or a
maximum of $53,000 (for the 2016 tax year), whichever is less. Contributions are deductible as a business
expense and are not required every year. Employees who are in the plan can also make personal
contributions.
It’s never too early to start saving for retirement. Start saving as much
as you can now at the best interest rate possible. Give your money
time to grow! There may be different retirement plan options available
to you. Be sure to consult with a retirement planning expert and tax
advisor.
The value of starting early
Anna invested $5,000 a year for 11 years beginning at age 25, for a total investment of $55,000
Tomas began investing $5,000 a year at age 35 and continued to invest through age 60 for a total
investment of $130,000.
Who had more money to fund retirement, Anna or Tomas?
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What Affects My Retirement Plans
1. Where you plan to live and the cost of living there.
 Some cities, towns, and states are more expensive than others.
2. How many years you’ll live in retirement.
 Remember that if you retire at age 65 and expect to live until age 85, that means you will
need to live off of your retirement for 20 years. That’s almost as long as you were in the
workforce.
 Social Security offers a life expectancy calculator: www.ssa.gov/planners/lifeexpectancy.html
3. How much your health care expenses will be during your retirement years.
 As you know healthcare expenses can be expensive. Please remember to include this
future cost in your retirement planning.
4. INFLATION- Occurs when the general price level of goods and services goes up which means the
purchasing power of your dollar goes down. This can really consume your future purchasing
power.
Who Can Help You with Your Retirement Plans
1. Employer Human Resources- Speak with a representative in your human resource department
about your retirement options at your company.
2. Financial Advisor- Your financial institution (bank, credit union, or financial firm) employs
specialists who can talk to you about your future plans. Also, certified financial planners are
professionals who assist individuals with planning for retirement
3. Accountant- This person usually handles your taxes (personal and business) and can possibly help
you with your plans for retirement.
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Protecting Your Assets
The Value of Insurance
Insurance protects you from major expenses that you otherwise couldn’t afford. For example, insurance
could help you repair a car that was damaged in an accident, pay hospital bills, or repair your home after
a fire.
You can insure just about anything. (Rock star Tina Turner insured her legs for $250,000).
Things you should insure:
1. Car
2. Health
3. Home
4. Life
5. Valuable personal property such as jewelry and the contents of your home. (Even if you don’t own a
home, you can insure your personal property with renter’s insurance.)
Your Credit Score can impact how much insurance
companies charge you in premiums
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Car Insurance:
1. In the state of Florida, Car insurance is mandatory.
2. Auto insurance can include many different types of coverage on one policy. (Examples include
collision, liability and uninsured motorist coverages)
3. The higher the value of your car and/or the greater your net worth the more coverage you should
consider.
4. Ask an insurance professional to find out what kinds of coverage you need.
Health Insurance:
Why should I obtain Health Insurance?
It’s the law!

Americans are required by law to have health insurance. If you choose not to be covered
then you will be charged a penalty when you file your taxes. The penalty for 2015 was
$695 for adults and $347 for kids.

Visit Healthcare.gov for information on available insurance plans, costs and eligibility for
government help with medical costs.
Protect Your Assets!


You may be able to handle the expense of minor health problems, but one serious illness
has the potential to financially destroy you and your family.
The number one reason people in the U.S. file for bankruptcy is medical bills.
Peace of Mind!


You can seek medical care in times of emergencies and/or for routine medical needs
knowing that insurance will cover some or all of the cost.
Your expenses are capped with the healthcare marketplace insurance.
What do you do if you don’t have health insurance?


If you do not have health insurance, you can still visit clinics for an affordable price
o In-store clinics, such as Walgreens Take Care Clinic orCVS Minute Clinic
o Department of Health
o Community Health Services
o Free Clinics
o Walk in Clinics
o Urgent Care Clinics- For emergencies
Most of these clinics will require you to make an appointment. You can always call ahead
to find out the cost of individual procedures.
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Basic definitions for common insurance vocabulary
INSURANCE POLICY- Document that spells out exactly what is covered and what is not in the insurance
you purchased.
The amount you pay for insurance is called a PREMIUM. Premiums can be paid monthly, quarterly, or
annually.
INSURANCE BENEFITS are the items that are covered in your insurance policy. For example, a car
insurance benefit would be Comprehensive/collision. In health insurance your benefits could include
vision or prescriptions.
DEDUCTIBLE – This is the amount of money you have to pay before the insurer will pay a covered cost.
Most insurance types require a deductible. You decide how high or low you want your deductible to be.
The higher your deductible the lower your premium and the lower your deductible then the higher your
premium.
Sample health insurance premium: Affordable Care Act Health Insurance Marketplace:
Example Only
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CO PAY AND COINSURANCE- The share of healthcare expenses you must pay. This is usually paid directly
to the medical office where you received services. Like a deductible, the lower your copay and
coinsurance the higher your monthly premiums.
Example Only
Types of Health Insurance Plans:
HMO (Health Maintenance Organization)
An HMO minimizes your out of pocket health care expenses provided you use pre-approved network
physicians, health care professionals and facilities. To take advantage of the cost savings an HMO
provides, you must choose a primary care physician. In order to see a specialist you must receive a
referral from your primary care physician. The specialist must be in the HMO’s network of physicians.
This plan is less flexible, but is generally less costly.
PPO (Preferred Provider Organization)
PPO plans give you flexibility. You don’t need a primary care physician. You can go to any health care
professional you want without a referral—inside or outside of your network.
Staying inside your network means smaller co pays and full coverage. If you choose to go outside your
network, you'll have higher out-of-pocket costs, and not all services may be covered.
EPO (Exclusive Provider Organization)
EPO plans combine the flexibility of PPO plans with the cost-savings of HMO plans. You won't need to
choose a primary care physician, and you don't need referrals to see a specialist.
But you'll have a limited network of doctors and hospitals to choose from. And EPO plans don't cover care
outside your network unless it's an emergency.
It's important to know who participates in your EPO plan's network. If you go to a doctor or hospital that
doesn't accept your plan, you'll be responsible for all charges.
Life Insurance
Life insurance can cover the funeral expenses, and provide money to support your family after your
death.
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GLOSSARY
Appreciate - Increase of value of assets
Assets - Something valuable that you or your business owns or benefits from, in creating income.
Examples are cash, securities, accounts receivable, inventory, office equipment, real estate a car,
and other property.
Capital Gain - The money you earn/make(profit) from the sale of property or of an investment.
Capital Loss - The money you lose when an asset such as an investment or real estate loses value.
Commitment - a willingness to give your time and energy to something that you believe in, or
a promise or firm decision to do something:
Compounding - Earning interest on both principal and earned interest.
Goals - something that you are trying to do or achieve.
Human Resources (H.R.) - your company department charged with finding, screening, recruiting and
training job applicants, as well as administering employee-benefit programs.
Inflation - an increase in the price you pay for goods in an economy over a period of time.
Investments - An asset or item that is purchased with the hope that it will generate income or
will appreciate in the future.
Net Worth - everything you own of significance (your assets) minus what you owe in debts (your
liabilities). Assets include cash and investments, your home and other real estate, cars or anything else of
value you own.
Potential - a chance or possibility that something will happen or exist in the future.
Profit- money that is made in a business, through investing, etc., after all the costs and expenses are
paid.
Retirment - the act of ending your working or professional career
Risk - the potential of gaining or losing something of value.
The Rule of 72 - determines how many years it will take your financial investment to double.
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Basics of Building Wealth
Post Course Survey
Please answer the following questions. When finished remove this paper and hand it to
our instructor. Thank you for attending our class!
1. At what age should a person begin saving for retirement?
At age 21
10 years before they plan to retire
As soon as they possibly can
I don't know
2. Which are the best type of investments for profit making?
Real Estate Investments
Low Risk Investments
It depends on your comfort level
I don't know
3. Which is order of events is best to build wealth?
Savings, Investing, Plan for Retirement
Plan for Retirement, Savings, Investing
Savings, Plan for Retirement, Investing
I don't know
School Name ___________________________________________