The Investing For Farm Families
Curriculum for Educating Farm
Families
Jason Johnson, Tim Eggers,
Bob Wells, Ruth Hambleton
The project is guided by
a team of 14 members from 10 states and USDA/CSREES.
LOGIC MODEL: FINRA Online Investor Education Project
Situation
Inputs
Activities
Outputs
Outcomes
Knowledge
Description of
challenge or
opportunity
- Farmers face
increasing
challenges from
a volatile and
changing
production
environment.
-Farmers face many
risks toward the
continuation of
their way of life:
Financial; Human;
Legal; Price/
Market; and
Production.
-Gaps exist
between available
educational
information and
the needs of this
audience.
-Objective and
trustworthy
information
regarding financial
management
products and
services and
investment
strategies are
difficult to access.
What we invest
What we do
Who we reach
(FINRA) Financial
Investor
Education
Foundation
Partner with FleishmanHillard for market analysis
Small farm family operators
who gross sales of $250,000 to
$2,000,000 per year
Financial Security
for All Community
of Practice
Online Investment
Education (OIE)
Investing For Your
Future (IFYF)
Partner with RemoteLearner to create online
Curriculum
Pilot test IFYF with Annie’s
Project participants and
adapt curriculum
Deliver online curriculum
Measure outcomes
Remote-Learner
(Instructional
Design)
Evaluate program
Fleishman-Hillard
(Marketing
Analysis)
eXtension Faculty
and Staff
Annie’s Project
staff
ASSUMPTIONS- This group of people will want to learn about investing and have an
interest in creating wealth other than land development and usage
Owners/Operators who are
Farmers, Ranchers, Forest
Managers
Have limited personal
investments off farm
Conditions
What the short-term
results are
What the mediumterm results are
What the ultimate
impacts are
Obj. 1: 50% of
participants will have
an increased
knowledge &
understanding of
investing as a path to
financial security
Obj. 3: 25% of
participants will
change at least one
behavior relative to
investing and improve
their financial security
Targeted audience
will become more
financially secure
Males/Females Ages 25-65
Have access to internet
Actions
Obj. 2: 50% of
participants will
understand assetbuilding alternatives to
land ownership
To see specific
knowledge
questions/indicators,
go to:
http://tinyurl.com/IFFin
dicators
50% of participants
will determine their
long range financial
goals and investment
plans
50% of participants
will diversify their
investments to include
additional off
farm/ranch
investments
To see specific
behavior
questions/indicators,
go to:
http://tinyurl.com/IFFin
dicators
EXTERNAL FACTORS - External variables that could influence this project ‘s target population
include the stability of financial markets, controlling for natural disasters, Federal government
regulations
1/07/2009
Total land in farms, at 930.9 million acres, decreased 1.5 million acres,
or 0.16 percent, from 2006.
Primary and secondary research was conducted for the marketing/audience
analysis.
– Telephone survey of farm
families.
• 300 farm families from 43 states,
255 counties.
• List provided by FarmMarket ID.
• Once contacted, 30% agreed to
participate.
• Cooperative Extension identified
as sponsor, helping cooperation
rate.
• Interviewing conducted in early
August, 2008.
– Two telephone focus groups
were conducted following the
survey.
• 14 participants
• 90 minute discussions
• Recruited from same list as
survey respondents
• Conducted mid August 2008
The number of family farms has decreased to 155,000 in 2008 from
300,000 in 1950.
The survey research interviewed farm and ranch owner/operators 25 to 65 years of
age involved in household financial decisions.
The survey sample of 300 farm families
was designed to focus on operations of
intermediate size ($250,000 to
$2,000,000 sales).
Younger farm owner/operators were
slightly oversampled.
The respondent was screened to be
involved in making decisions about
your household’s personal finances.
As expected, a majority of participants
were women.
Quotas were set to get a representative
sampling by geographic region.
Households just below commercial farms ($100,000-$249,999 in sales)
represent 8 percent of U.S. farms and produce 17 percent of sales. (USDA)
Two-thirds of respondents have broadband access to the Internet.
Keep in mind that all respondents were screened.
In the West, half rely on satellite.
In the North Central region, DSL is the leader.
The age of the farmer is not related to his or her
use of dialup Internet services, however education
does; 42% of those with no college education use
dialup compared to 26% of those with a college
education.
North
Central
Northeast
South
West
Dial-up
32%
28%
25%
32%
Satellite
27%
6%
29%
48%
DSL
34%
31%
28%
24%
Cable
4%
19%
6%
2%
Q25. Do you connect to the Internet through a
dial-up telephone line, DSL, cable TV, a wireless
or satellite connection, or a T-1 connection?
*Less than one-half of one percent
In 2003, median wealth of farm households ($416,250) was five times
the estimated median wealth of all U.S. households ($89,578). (USDA)
Three-fourths of respondents browse the Internet.
Since households were screened for Internet access, this level
of activity is not a surprise.
Women are more engaged in the Internet than men. Some
comments suggest this is an artifact of having time available
near the computer to use it.
Larger operations are more likely to use the Internet for
financial research.
Men
Women
Read and respond to e-mail
65%
86%
Browse Internet
65%
81%
Farm sales
< $499k
$500k +
Check value of investments
30%
42%
Conduct research on possible
investments
27%
36%
Q26. Do you use the Internet regularly,
occasionally, seldom, or not at all to do each
of the following activities?
In 2008, average farm operator HH income is projected to be $89,434,
up 6.3 percent from 2007. (USDA)
Three-fourths of survey households have a retirement account.
– This increases to 84% among those
who feel they have an excellent or
good investment plan in place.
– Half have individual stock, bonds, or
securities, an indication of involvement
in the stock market.
– One-fourth (25%) are vested in
retirement accounts, stock, and mutual
funds versus 15% in none of the three.
Invested in retirement funds,
stocks/bonds, mutual funds
None of them
15%
One
28%
Two
33%
All three
25%
Q11. Do you or your spouse have each of the following
or not?
About 50 percent of North Carolina farmers indicated they never plan to
retire (NCTTF survey).
Farm families have access to financial advisors and services.
While some farmers may not have
made use of financial planning
resources, it is clear they are available.
Note that more have worked on a
financial plan for their farm as have
worked on a personal investment plan.
Two out of five indicate they have
learned about investing from classes
since leaving school and 33% have
attended a retirement seminar.
The 38% who have learned about
investing from the Internet are highly
relevant to OIE.
In Iowa, 71 percent of farmers had not chosen any successor to their
operations (average age: 54 years).
OIE leads seven suggested methods for education on the basics of investing on
willingness to use.
– The appeal of OIE is tied to the
trust farm families have in
Extension and the flexibility of the
online approach.
– The appeal of face-to-face
interaction with people they know
and trust is reflected in the
second most popular option.
– The last place finish (the highschool option) may be attributed
to its inconvenience and
interaction with strangers.
Risk Management Areas and Activities to Address Them
Financial
Human
Legal
Production
Price/Market
Estimated
Expenses and
Emergency Cash
Reserves
Worksheet
Risk Tolerance
Quiz
Emergency
Preparedness
Document
Crop Insurance
Alternatives
Individual or Pooled
Marketing
Alternatives
Integrate Balance
Sheet / Net Worth
Exercise
Personal Insurance
Needs Assessment
(Health, Life,
Disability)
Asset Management
Transfer Plan
Production
Technologies
Pre- and PostHarvest Marketing
Alternatives
Asset Allocation
Worksheet
Retirement
Estimator for Farm
Families
Estate Plan
Preparation
Worksheet
Futures/Options
Review your
Personal Credit
Report
Financial Advisor
Questionnaire and
Response Key
UCC Lending
Report
Input Price
Management
Evaluation of
Financial Account
Alternatives and
Service Providers
Investing For Farm Families
 The Investing for Farm Families online course is
organized into eight short lessons that are anywhere from
10-15 slides long.
 The progression of topics is entirely consistent with the
approach than just about every financial planner would
prescribe.
 There are differences to address the unique issues
affecting farm/ranch families.
 "Investing for Farm Families" was designed to address
these issues and demonstrates how to addressed them
within the broader financial planning framework.
Investing For Farm Families
 The design enables participants to go through the short topics
at their own pace or pick and choose individual topics.
 While the course was designed to go from beginning to end in
a sequential progression, it is not a requirement.
 Within each of the eight lessons, are individual and applied
exercises that a participant can complete.
 These will help the participant assess their current situation
and consider alternatives to construct an effective investment
plan.
The Live Debt-Free Champions
The “Build Wealth” Champion
Modifications to the “Debt-Free” Path
NO! Highest Interest Rate 1st
529 Account or Brokerage
NEVER!
Beyond Step 4: (and including your contributions to Step 3) – Invest in a
Diversified Mix of Stocks, Bonds, Real Estate, Precious Metals, Natural
Resources through Exchange Traded Funds at a Discount Brokerage
What percentage of women end up
managing their own finances at some
point in their lives ?
a.
b.
c.
d.
60%
70%
80%
90%
What percentage of women end up
managing their own finances at some
point in their lives ?
a.
b.
c.
d.
60%
70%
80%
90% - Divorce, Widowed, Live
Longer
Most Americans save what
percentage of their income ?
a.
b.
c.
d.
20 %
15 %
10 %
5%
Most Americans save what
percentage of their income ?
a.
b.
c.
d.
20 %
15 %
10 %
5%
What’s Different About a Farm Family’s
Financial and Investment Plans?
• Personal and Business Resources are often
Combined.
• Feast/Famine Nature and Resource Intensity
of Agricultural Enterprises.
• Land Ownership and the Asset Allocation
Implications.
• Estate Planning and Transfer Decisions are
both Personal and Business Oriented.
What’s Different About a Farm Family’s
Financial and Investment Plans?
– Many farm families do not have investment
plans in place.
– Many farm families are uncomfortable
investing in the stock market.
– Diversification is a difficult investment
principle for farm families to implement.
Farm families are comfortable
investing in farmland.
Trends in the prices for
farmland reinforce their
allegiance to the land
as an investment over
stocks.
Most farmers do not
expect to retire as much
as cut back the scope
of their operations. This
has significant
implications for
investing strategies.
8 Steps to Successful
Investing for Farm Families
• First Things First:
– Organizing Your Financial Information
• Investment Prerequisites:
– Laying the Groundwork
• Debt Management and Credit Considerations
for Farm Families
• Finding Money to Invest
8 Steps to Successful
Investing for Farm Families
• Determining Your Asset Allocation and Risk
Tolerance
• Evaluating Investment Products and
Agriculture Oriented Alternatives
• Evaluating Financial Service Providers and
Information Sources
• Investing for Retirement and Farm
Succession Planning
Organizing Your Financial
Information
 Understand the importance of having
organized financial records
 Location of important financial documents and
contact information
 Adequacy of cash reserves
 Amount of debt being carried
 Percentage of total household assets invested
in the farm business
Complete the Emergency Financial First Aid Kit.
Organizational tool for important accounts, contacts,
account numbers, and policies.
Beneficiaries are reviewed for relevant accounts.
Investment Prerequisites:
Laying the Groundwork
Emergency fund
Create an adequate emergency reserve fund
Adequate insurance
Life insurance
coverage gaps?
Importance of crop insurance
risk management as a wealth-building tool
Financial goals
Determine specific personal/family financial goals with a date
and estimated cost
“Invest with a plan" when money becomes
available
Complete the Estimated Expenses &
Emergency Cash Reserves Worksheet
Objectively Evaluate and Assess Insurance Needs
(life, health, disability, etc.)
Investment Prerequisites:
Laying the Groundwork
 Organized financial records
 Balance Sheets
 Have tools to record important household
financial data including the value of assets
and debts
 Have a better understanding of relationships
between personal and farm finances
 Learn how non-farm investments can provide
an opportunity for asset diversification
Complete an Integrated Business Balance
Sheet & Personal Net Worth Statement.
Debt Management and Credit
Considerations
Understand debt and credit in ag. businesses
Determine "good debt" and "bad debt”
Importance of regularly examining your
personal credit report
Common sources for farm credit
Know how to access information
 describing liens against personal property
Credit Cards
The Average American Family Has:
• $6,892 in Credit Card Balances.
• On 9 different Credit Cards.
• Average consumer credit card rate: 13.88%
• Average student credit card rate: 14.45%
• Average business credit card rate: 10 - 11%
Nearly 144 Million Americans have general
purpose credit cards.
Approximately how many of them pay off their
bill in full each month ?
a.
b.
c.
d.
35 million
55 million
90 million
115 million
Nearly 144 Million Americans have general
purpose credit cards.
Approximately how many of them pay off their
bill in full each month ?
a.
b.
c.
d.
35 million
55 million – 38%
90 million
115 million
24% of cardholders make only
the minimum payment each
month
Obtain a free credit report detailing personal credit
history and credit accounts.
www.annualcreditreport.com
Obtain UCC (Uniform Commercial Code) Lending
Records to determine if personal or business
property has been pledged or is encumbered.
Finding Money to Invest
Understand unique cash flow considerations
Develop investment strategies fitting cash flow
patterns
Learn about investments suitable where
infrequent large sums become available
Learn strategies to "find" money to invest
Learn about small dollar investment products
Risk Tolerance and
Asset Allocation
Personal Investment Risk Tolerance
Determine appropriate investments
Investment value of land ownership
Asset allocation and farm families
Alternative asset classes
Portfolio approach
Complete the Investment Risk Tolerance Quiz (for
each financial decision maker in the
family/operation).
Asset Allocation in a Portfolio Approach Framework
Complete the “Ideal” and “Current”
Asset Allocation Review.
Ideal Allocation
Current Allocation
Evaluating Investment Products
Agriculture Alternatives
Equity investments
Fixed-income investments
Mutual funds
Learn about farmers' off-farm investments
Understand the benefits of investment diversification
with uncorrelated assets
Learn investment strategies to hedge against the
production cost risks of an agricultural business
Evaluate alternative Individual Retirement Account
(IRA) types for individuals and alternative
retirement plans for businesses.
Evaluating Financial
Service Providers
Checking Accounts
Savings Accounts
CD’s
Brokerages
Match needs with best providers.
Local service, best rates, best products, fees
Savings Account Options
Rule of 72
Money doubles after only 1,440 YEARS!!!!
On-Line Savings Banks
www.ingdirect.com
www.emigrantdirect.com
www.hsbc.com
Evaluate “on-line” and “brick and mortar”
money market, certificate of deposit, savings,
and checking account options.
Evaluate local brokerage and “on-line” discount
brokerage options.
Investing for Retirement
Farm Succession Planning
Understand retirement planning for farm
families
Available IRA retirement investment plans
Understand the process of estate planning
Understand generational differences
farm transfer decisions
Understand common concerns about farm
transfer decisions.
Complete the Estate Planning Questionnaire and
Farm Asset/Management Transfer Plan
Complete the Retirement Estimator for Farm Families
Evaluate Potential Financial Advisors using the
Financial Advisor Questionnaire
For More Information
• For course materials, enrollment, and resources, go to:
www.extension.org/pages/Investing_for_Farm_Families
This project was created to reach
farm families nationwide with
investment information that is
relevant to their needs.
It was funded with a two-year grant
to the eXtension Foundation from
the Financial Industry Regulatory
Authority (FINRA) Investor
Education Foundation.