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National Extension Money Management: Part 2

Extension teaches concepts, processes, and skills, and provides tools for individuals and families to learn and practice effective money management techniques.

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 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 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.


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.


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 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.


Decision-making goes on all the time, consciously or unconsciously. People decide how, when, where, and why to spend money. There are many "models" for decision-making. Steps in the decision-making process include:

  • Identify the problem
  • Gather alternatives
  • Weigh alternatives
  • Select an alternative
  • Take action
  • Evaluate
  • Make revisions as needed


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 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 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.

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 website.

1. The Cooperative Extension System (CES) is a publicly funded, non-formal 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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