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Money Management Workshop Objectives By the end of the learning session participants will, have: Discussed the purpose of the personal finance workshop. Time 15 minutes Methods Short presentation, brainstorming.

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Money Management Workshop

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Money Management Workshop


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Objectives

By the end of the learning session participants will, have:

Discussed the purpose of the personal finance workshop.


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Time

15 minutes

Methods

Short presentation, brainstorming.


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The purposes of the financial education workshop are to assist participants to:

  • Appreciate the importance of financial planning

  • Manage money more productively

  • Recognize life cycle financial needs and manage future risks

  • Analyze trade-offs between various financial options

  • Recognize how Bank and other financial products can help you to improve your financial situation

  • Make a financial plan for your household


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DAILY MONEYMANAGEMENT PRACTICES


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Objectives

By the end of the learning session members will have:

  • Distinguished between good and poor daily money management practices

  • Analyzed their own daily money management practices and identified ways to improve them


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Time60 minutes


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  • In this session, participants will review their day-to-day money management in order to find ways of improving their practices.


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Distinguish between good and bad financial managers in a large group – 20 minutes


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STORY TIME.

The stories help participants to see simple examples of one person who plans and another who does not.


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John’s story

  • John is a salary earner who earns K 400 a fortnight. He plans his household purchases and searches for the least expensive groceries. He saves daily with Bank. The savings allow him to borrow from bank rather than the moneylender if he needs a loan. By examining what money came in and out of his household regularly, he was able to save enough each month to put his current savings into a fixed deposit to earn more interest. When his child got sick he had savings to withdraw to buy medicine. He is also saving for his daughter’s wedding in three years. It is to be a collective wedding with some other families in her village so it will be less expensive than other types of weddings.


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Sarah’s story

  • Sarah is a salaried worker who earns K 750 a fortnight. She likes to buy lots of tea and is always buying ice-cream for the kids. Sarah does not save. When his son joined university she had to borrow K 200.00 from the moneylender at 1.00 per month for each K 10. Then she borrowed from her brother to keep her household going. She buys household necessities at the last minute and has to pay higher prices. Her father suddenly got ill. She could not pay for the hospital and borrowed money from her neighbor. She has a lot of debt that is eating away her earnings.


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How do John and Sarah think differently about money?


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(John plans, saves short and long term, saves money by buying in bulk, reduces costs by having a collective marriage, has money for unexpected sickness. Sarah buys things for herself, borrows a lot at high cost, and does not save regularly.)


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Which persons approach do you prefer and why?


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(John, because he saves on costs to have more money, has money for unexpected events, invests in productive uses to earn more, and stays out of debt.)

Summary of the key points of the discussion.


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3. Large and small groups analyze their own money management practices – 35 minutes

The way to improve money management practices is to, like John, lower your costs and look for ways to increase your income

Exercise


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Please call out the regular expenditures you have on a day-to-day basis. These are things that you spend money on regularly.

Expenditure items

Food shopping

Rent for the house

Transport to the work place

Utility payments

Payments on debt

Sweets for children

Entertainment activities

Hygiene supplies


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Are there ways of reducing the amount of money that we are spending on these items? (Cutting down on things that we don’t need such as tobacco, ice-cream,buying in bulk; making fewer trips to the market; thinking before you spend; planning your purchases; trying not to spend more than you have; reducing borrowing.)


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The following tables can be useful in helping participants to track their expenditure.


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Tracking your expenditure means not only looking at your daily expenses, but at your weekly, monthly, seasonal, and annual expenses to find items and services big and small that can be eliminated, or reduced for big spending.


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Weekly Expense Tracking

  • If you don’t know where your money is going, it’s time to start tracking your spending. Different methods of tracking work for different people – some like to save receipts while others prefer to jot down all purchases in a small notebook they carry with them. Remember, tracking is only effective if you count every expense, including the morning newspaper and the change you put in the office vending machine. Use the sheets on the next two pages to record weekly and monthly spending totals. (Make copies of the charts so that you can track for longer than one week.)


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Weekly Expense Tracking


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Monthly Expense Tracking


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key learning points – Daily Money Management Practices

  • Think before you spend

  • Reduce unnecessary costs

  • Put aside extra money for the future and unexpected events


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The cash flow

  • Understanding cash flow

  • It is clear that money helps us to manage our lives. We can store it, carry it around with us and use it to buy things we need. It becomes a problem when we don't have any. To avoid this we need to plan, to understand where we get money from and when and to be able to decide what we spend it on and when. We need to understand our cash flow.


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Cash flow means the pattern of money coming in and going out of your life.

  • Money coming in (income) usually results from employment, salaries, wages, gifts, rent, remittances from other family members, the sale of goods (crops, livestock, processed food, etc.) or services ( bicycle repair, sewing, etc.) etc.

  • Money going out (expenses) will include family expenses, e.g. for food, clothes, furniture, medicine, fuel, school fees, ceremonies, travel, and business expenses, e.g. for equipment, livestock, vaccines, tools, goods for resale, wages, etc.


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Here is an example cash flow tree


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Time for a discussion: Group work


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Discuss the different types of expenditure and how each of you decides what to spend money on.

What are some ways that you could increase the income coming to the household?

Are there differences between the cash flow trees of men and women? How does this affect the household?

Which sources of income are most important and reliable?

Are there some types of expenditure you can do without?

Does anyone plan savings or does it just happen that you find you have accumulated some surpluses?

How do you know if you can save up enough to invest in a new enterprise?

Compare your cash flow trees.


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CASH FLOW PLANNING

Aim

  • To learn how to prepare cash flow forecasts which show when money is likely to be received or spent.

  • To see how we can predict if we will be able to save and when we would be able to buy something we want.


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Can you tell in which months there is more coming in than going out and vice versa? When there is more coming in we have a cash surplus and when there is more going out we have a cash deficit.

If you estimate the difference each month to see if it is a surplus or a deficit, you could draw a chart like this showing if the differences are large or small.


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In this example there are cash deficits in February, August, October and November. In June the amount coming in equals the amount going out.


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Time for a discussion:

  • What is the best way to cope with deficit months?

  • Do you know how much you need to save in order to cope with months when you have many things to pay for?

  • What kind of unplanned cash requirements might arise? (Medical expenses and funerals are common examples.) How should people prepare for these?

  • What are some ways that you could increase the income coming to the household?


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MAKING A CASH FLOW PLAN

Aim:

  • • To ensure that each person is able to prepare his or her own cash flow plan.


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It may be a good idea to work in small groups and do one cash flow at a time, discussing it together as you go. It is important to try and show each person's own personal situation as accurately as possible. However there is likely to be a lot of guesswork needed and this is quite OK – all budgeting is guesswork.


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1) Write in the names of the months on the form you are going to fill and put your name and which year we are in at the top.

2) Next you must think of all the sources of cash income that you anticipate in the plan period. If you made a cash flow tree, this should help you remember. Think of any sources of income that come your way and include them. Think of everything you are going to sell, any cash wages you may earn, money someone in the family may send back from the town, rent you may receive, and list them in the "money coming in" section.

3)add up all you expenses involving any details of expenditure per month.

Instruction for making a cash flow statement.


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PLANNING FOR FUTURE EVENTS


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Objectives

By the end of the learning session participants will have:

  • Reviewed key points from the last learning session

  • Defined planning and stated the importance of long-term planning

  • Stated dreams and prioritized future life cycle events

  • Identified various financial options and their characteristics

  • Practiced analyzing trade-offs between different financial options


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Time

75 minutes


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Preparation/Materials

  • Practice telling the story

  • Life cycle cards


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Methods

  • Short presentation, story-telling, large-group discussions, brainstorming.


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Volunteers report on the results of improving money management practices – 5 minutes

Will a few volunteers please tell us what you would decide to do in your family to improve money management practices?

What are some other ways to improve these practices?


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15 minutes

Story-telling about the ant and the grasshopper to discuss the importance of long-term planning


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Ant and grasshopper

  • This is the story of a farsighted ant and a lazy grasshopper. The grasshopper and the ant were good friends living in the jungle together. In the season of spring, the ant was working hard, stock-piling food for the rainy season. The grasshopper was wasting time by wandering on trees and was also advising the ant not to do any hard work in the spring season, saying that this is the time to enjoy yourself. The ant replied that she was doing hard work to prepare for the rainy season.

    At the time of the rains, the ant does not have to worry because she has planned for the rainy days. But the poor grasshopper had to get wet because he had not planned for the rainy days. Today, the ant’s savings will help to overcome the times of crisis.


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What do you learn from the story?

(It is important to plan for the long term.)


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Brainstorm with participants:

What is financial planning?

  • (Setting goals; making conscious decisions about the use of time and resources; preparing for the future; trying to decide the best choice between several options; sacrificing a little bit now to gain more later.)


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The ant is a good animal to think about as a long-term planner. She regularly stores more food than she consumes. She does this regularly and often, not at the last minute, so that she can build up wealth over time.

Planning involves making choices. When you plan for tomorrow, you will most likely have to give up something today. When your resources are limited, you must choose between different things. Sometimes these choices are hard. In the long run, good choices will make for a happier, more secure life.


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Participants describe their goals and dreams and how to achieve them – 25 minutes

  • What are your goals and dreams for the future?

  • Please think about this question for one or two minutes. Think about the goals or dreams that you truly want to happen in your lives that require money such as building a new house or sending a daughter to school.

  • Write or draw your dreams on a small index card.


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Think for a few minutes what must happen – what you will need – to achieve your goals and dreams

Then find another person with whom to share these. Tell her two things:

What are the two or three goals and dreams that require money? five minutes


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How will you secure the money to achieve these dreams? 10 minutes

After completing the dream card participants go into groups with similar categories


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We are going to look at our events in terms of when they are going to occur. These are called long term goals. Some will happen very soon. These are called short-term goals. Medium-term goals are somewhere between these two.10 minutes


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the participants to group their life cycle event cards in terms of the short term, medium term and long term.

the participants go back to a large groups for discussion.

volunteers to report on their groupings.

It is important for us to be able to know the time frame of our goal in order to plan accordingly and to choose the best financial option.


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life cycle events

  • the circular diagram of life cycle events which represents the typical life cycle events of participants.

  • a card to represent each category.

  • How do the life cycle events in the diagram compare with the life cycle events or dreams that you mentioned?


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Poster and discussion on means of securing money – 15 minutes

How will you secure money to finance your dreams?

  • Draw from their savings

  • Invest more in an income-generating activity to earn more

  • Set up a long-term savings account

  • Borrow from a bank, moneylender, family member

  • Set up a pension scheme


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There are many financial options for realizing your dreams. In some cases, the right approach may be a mix of a few different options. The option that is best for you and your household depends on your particular situation.

Savings – you give little lumps and you will get a big lump at the end. The longer you leave it the bigger the lump at the end.

Loans – big lump at the beginning, pay little lumps as you go.

Insurance – you give little lumps regularly and you will get a lump when you need it. ONLY if the event happens.


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Scenario to analyze the trade-offs between different financial options – 15 minutes

Scenario: Mary has some extra earnings. She would like to have money for her children’s education but one of her children has a history of illness. She would also like to buy more stock for her grocery business.

  • What should she do and why?


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Review of previous session. 5 minutes

  • a volunteer to review the key points of the last session.


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SAVINGS AND INVESTMENT


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Objectives

By the end of the learning session participants will have:

  • Stated the match between different types of savings services and life cycle uses

  • Analyzed the trade-offs between various long- and short-term savings and investment alternatives

  • Identified what factors affect the choice of a short- or long-term savings service


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Time

90 minutes


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Preparation/Materials

Practice story-telling

Picture scenario cards

Methods

Story-telling, report, brainstorming.


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Review previous session – 5 minutes

  • How do you decide how to finance your future plans?

  • How many of you are saving?

  • Where are you saving?

  • Why do you save?


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Testimonies to demonstrate the importance of saving and the difference between long- and short-term savings and investing – 20 minutes

How many of you are using long-term savings for a secure future?

What is the difference between saving and investing?


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Summary

  • Savings is both a long- and a short-term strategy. Savings for the short term can be drawn upon more easily. Long-term savings have a higher return but you must keep them in an account longer and it cannot be drawn on as often. Investment is similar to long-term savings in that the money is tied up and cannot easily be drawn upon.

  • Investment is when money (either savings or additional income) is put back into productive activities either in the form of a purchased asset or working capital. Returns will depend on the activity. For example, investment in a sewing machine for the business may yield more income for the business.


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Saving is important for big expenses in the future

You earn more interest if you save early and often (zebra, ant)

The longer you save the higher will be your returns

You need to be able to get your money when you need it (giraffe)

There are trade-offs to using different savings services


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You CAN Save For Your Future

  • Saving money is a basic concept of personal financial planning, and key to financial success. Yet many of us don't have a formal savings plan. Without such a plan, the chances of ever saving enough money to meet long-term financial goals or achieve financial security are very limited.


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A common misconception.

It seems simple. In order to save money, you need to have "extra" cash. This is a common misconception.

Having a spending plan ("budget"), will help you create money for savings. Start , by setting spending goals, then you can manage to save regularly.


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First, set a few short-term and long-term financial goals to work towards, like a down payment on a car or home.

Include the amount and a time frame for achieving the goal. It's much more motivating to save when you know what you're saving for. And remember, a goal that isn't written down is only a dream.


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Short-term goals are where you'd like to see yourself in a few years. For instance, perhaps you want to buy a home.

Intermediate goals might include sending children who are young now to college in the future.

Long-range goals are your plans for retirement and your estate.


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Separate your savings account

Set up a separate savings account. If you mingle your savings with your regular checking account, you'll almost certainly dip into your savings and may never pay them back. Having your savings in a separate account is a constant reminder that these funds are earmarked for your future, and watching the balance grow is not only rewarding and motivating - it's downright exciting


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The story and poster of the three animals that illustrate the key principles of saving and investment:

  • The zebra foal (baby) when it is born stands up within an hour of birth. From this we learn, start early.

  • The ant, as we recall, put away food often for the future. From this we learn to save regularly.

  • The giraffe has a part of his stomach that stores food. He can eat from food stored in this part when he is hungry. It doesn’t have to eat again. From this we learn that we want ways to get our money back when we need it most.


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This reinforce these basic principles:

  • Early

  • Often

  • When you need it most


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BORROWINGAND LOAN MANAGEMENT


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Objectives

By the end of the learning session participants will have:

  • Reviewed key points from the last learning session

  • Stated the difference between good and poor loan management

  • Matched life cycle needs with Bank services

  • Analyzed trade-offs between different options for borrowing

  • Identified ways to improve personal loan management


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Why do you take out loans?

  • Business capital – money to buy materials for what you sell

  • Business equipment – money to buy equipment to make what you sell

  • House purchase

  • House repair

  • Social or personal expenses

  • Land (rural)

  • Livestock, cattle or trees (rural)


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Why is it better to save or invest for social or personal expenses than borrow?

Borrowing can be very expensive. If the reason for borrowing is not productive (does not earn income) it may be difficult to repay and can result in a cycle of debt. Borrowing is the opposite of saving or investing. The longer time that you borrow for and the less frequently that you make payments, the more that you will spend in interest.


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Where do you currently obtain loans?

What are the advantages and disadvantages of these sources of loans?

Sources such as moneylenders are much more expensive than other sources. The goal is to ensure that you have as much money from cheaper sources as you can and as little money from more expensive sources as you can. Also, moneylenders do not require collateral or security for the loan whereas banks and credit unions do.


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The squirrel is an interesting animal to help us think about good loan management. The squirrel hides nuts in different places in the woods. He may risk losing more nuts in some places compared to others.


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How can you improve the way you use loans that will be less costly and easier to repay?

What are you using loans for – so that savings or investment can be better addressed?


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RISK MANAGEMENT AND INSURANCE


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Objectives

By the end of the learning sessions the participants will have:

  • Reviewed key points from the last learning session

  • Stated the importance of risk management.

  • Distinguished between insurance payments and savings payments.

  • Reviewed important issues in risk management.


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Time55 minutes


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Preparation/Materials

  • Risk picture cards

  • Worksheet and pencil for each participant


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Review the last session – 10 minutes

  • volunteers to summarize the last session and describe how they manage their own loans.

  • What are the main things you learned about loan management? (Pay on time, do not take more than you can pay, use loans for investment and savings primarily for future plans and emergencies.)


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Definition for insurance

  • Insurance is a way of preparing for a potential emergency. By paying small amounts of money on a regular basis you ensure that, in a difficult time, you have enough money to cover it.

  • The payments are called premiums. If you do not have an emergency, you will not access the money, or make what is called a claim. Without insurance people sometimes have to borrow at a very high cost and find it difficult to repay.


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WHAT IS RISK

  • Synonymous with chance of loss

  • Uncertainty of loss

  • Loss of probability


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Risk Management is defined as :

  • The identification of risks.

  • Analysis of Risks.

  • Economic control of risks.


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Internal and External risks

  • What are internal risks and external risks that affect your economic livelihood?


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FINANCIAL AND NON-FINANCIAL RISK

  • Examples:


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FREQUENCY AND SEVERITY OF RISK

  • High Frequency and low severity profile.

  • Less frequency but high severity.


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Potential risk treatments

  • Avoidance (elimination)

  • Reduction (mitigation)

  • Retention (acceptance)

  • Transfer (insurance)


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Why is Risk Management is important ?

Risk management encourages a safety culture.


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Has risk no beneficial side? What are the benefits?


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RISK IDENTIFICATION

Starts from the very basic issues and look broadly at more bigger issues.


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RISK CONTROL

  • It is the final step in risk management


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RISK AND LOSS CONTROL

  • Prevention and the minimizing of loss are the most effective means of reducing the cost of risk.

  • Risk control is essential at every stage.


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CONTINGENCY PLANNING

We should always prepare plans for preventing and coping with actual or potential losses


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MAKING A

FINANCIAL PLAN


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Objectives

By the end of the learning session the participants will have:

  • Reviewed key points from the previous learning sessions

  • Stated the aspects of a good financial plan

  • Practiced preparing a good financial plan

  • Stated whether or not they feel better prepared to realize their dreams

  • Described how to share their plans and planning with their family


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Time

90 minutes


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Preparation/Materials

  • Life cycle event cards

  • Practice story-telling


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LIFE CYCLE EVENT CARDS

1. Marriage

2. House purchase

3. House repair

4. Accident

5. Education of children

6. Business equipment

7. Riots/home burning

8. Business inputs/operations

9. Death

10. Old age

11. Puberty ceremony

12. Earthquake/floods

13. Maternity


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Discuss the events on the cards and decide which financial service would be best to use for these events and why


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Uses of finance services


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How is a financial plan different than a budget? (A budget only calculates income and expenses at a given time, whereas a financial plan tries to increase income and lower costs over a long term through different financial options such as savings, investment, loan management and insurance. A financial plan is broader.)


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What are your goals for the future to build and protect your resources?

Find one other participant with whom to share your financial goals. Tell her how you plan to reach these goals.

What changes will you make in how you manage your money to reach these goals? Why?

Choose a change you plan to make and explain it to your partner

What financial services will help you reach your goals? Describe a goal and the financial service you will use. Explain why

15 minutes for this discussion


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three or four volunteers to share their plans.

  • What do you like about the plan?

  • What suggestions do you have?

  • Life has many problems that make reaching goals difficult. It is important to keep going.


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THANK YOU


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