Money Management Quiz You will receive an e*mail within the next 24 hours at your student e*mail (@student.kaplan.edu). You will have 20 attempts to pass the quiz.
Where we are now… Many young adults admit they dont know as much about finances as they should. –In fact, young Americans are more likely to say they know more about their iPod (40 percent very knowledgeable) than about how to file their taxes (26 percent), buy a home (21 percent), invest outside of the workplace (15 percent), and save for retirement (15 percent). Source: American Savings Education Council and AARP, A Look at the Financial State of Gen X and Gen Y, 2008. Undergraduates are using easy credit more often: –In 2008, 84 percent of undergraduates had at least one credit card, up from 76 percent in 2004. The average number of cards has grown to 4.6, and half of college students had four or more cards. Source: Sallie Mae, How Undergraduate Students Use Credit Cards, 2009
Advanced Finances: Your Loan Debt Students are borrowing more to pay for school: –The average debt level for students graduating in the class of 2007 was nearly $21,900. This is up six percent from the amount students borrowed in the class of 2006. Source: The Project on Student Debt, Student Debt and the Class of 2007, October 2008
Budgeting Considerations Borrowing less can have a BIG impact on your budget. Loan balance:$21,900 Loan interest rate:6.8 percent Loan term:20 years Minimum monthly loan payment:$167.17 Number of payments:240 Cumulative payments:$40,121.49 Total interest paid:$18,221.49
Budgeting Considerations Borrowing less can have a BIG impact on your budget. Loan balance:$16,900 Loan interest rate:6.8 percent Loan term:10 years Minimum monthly loan payment:$194.49 Number of payments:120 Cumulative payments:$23,338.07 Total interest paid:$6,438.07
Budgeting Considerations You will save: $16,783.42 Would you turn down $16,783.42? Question to ask yourself: Have you planned on how much you need to borrow while you are in school?
An investment in college still makes plenty of sense. http://www.bls.gov/emp/ep_chart_001.htm
Quick Poll What are your reasons for not doing a budget? Who considers budgeting important? Who is currently on a budget? What are the benefits of doing a budget?
Beginner Budgeting: Fixed vs. Discretionary Expenses
Group Discussion Which type of expenses – fixed or discretionary – make the biggest impact in your budget?
Quick Poll Who knows how to get a FREE copy of their credit report every 12 months? www.annualcreditreport.com www.freecreditreport.com
Credit Report Facts The basic facts : -A record of your credit payment history -Shows the amount you borrowed in credit cards and loans -Illustrates the timeliness of payment -Contains identifying information -Used to determine creditworthiness
Anatomy of a Credit Report There are several parts of a credit report: -Personal identification information -Credit inquiries -Trade lines -Public Record and collection items Interactive Credit Report: http://www.aie.org/managing-your-money/credit-scores-and-reports/reading-a- credit-report.cfm
How to Get a Credit Report It is easy to get a copy of your credit report from a consumer-reporting agency. Equifaxwww.equifax.com Experianwww.experian.com Trans Unionwww.transunion.com One free report from each agency every 12 months: www.annualcreditreport.com
Credit Score Facts Knowledge is power. -Reflection of the information on your credit report -Formula developed by Fair and Isaac Corporation (FICO), but there are many different models today -FICO scores remain the most popular -Scores range from 300–850 -The lower the score, the greater the risk it is to lend you money (Source: www.myfico.com, 2009)
Credit Score Factors FICO scoring can be a useful model for all credit-scoring models. (Source: www.myfico.com, 2009)
General Politics: The CARD Act The critical elements of reform in this new law: -Bans Unfair Rate Increases -Prevents Unfair Fee Traps -Plain Sight /Plain Language Disclosures -Accountability -Protections for Students and Young People http://www.whitehouse.gov/the_press_office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders/ The financial overhaul put restrictions on card issuers marketing practices. On-campus advertising was banned, as was giving gifts with applications for student credit cards. More, colleges would have to disclose any exclusive relationships with card companies, such as an alumni credit card partnership. http://www.businessinsider.com/credit-card-presence-on-campus-falls-sharply-2011-7 No one under age 21 can get a credit card unless a parent, guardian or spouse is willing to co-sign or unless the young adult has proof of sufficient income to cover the credit obligations. http://articles.moneycentral.msn.com/Banking/YourCreditRating/under-21-no-credit-card-for-you.aspx
Know What You Owe Its easy to keep track of student loans. -Subsidized Stafford loan -Unsubsidized Stafford loan -Private loans
Loan ExampleMinimize Borrowing Loan balance: $20,000.00 Monthly loan payment: $230.16 Cumulative payments: $27,619.31 Total interest paid: $7,619.31 You will save $13,809.65 and $115.08 per month in payments. When you borrow less, you save money over the long term. Loan balance: $10,000.00 Monthly loan payment: $115.08 Cumulative payments: $13,809.66 Total interest paid: $3809.66
Loan ExampleEarly Repayment Loan balance: $20,525.00 Loan interest rate: 6.80% Loan term: 10 years Monthly loan payment: $236.20 Number of payments: 120 Cumulative payments: $28,344.41 Total interest paid: $7,879.41 Loan balance: $20,525.00 Loan interest rate: 6.80% Loan term: 7 years Monthly loan payment: $307.77 Number of payments: 84 Cumulative payments: $25,853.16 Total interest paid: $5,328.16 You saved nearly $2,495.25 in interest charges. Paying off debt is an investment in your future.
REMEMBER!!!!! Small expenses add up over time. -Dinner out every Saturday night: $1,664 per year ($32 per meal) -One large cup of gourmet coffee per weekday: $910 per year ($2.50 per cup) -Average fast food combo meal + tax twice a week: $587 per year ($5.64 per meal)
Retirement 101: Individual Retirement Account Savings account w/ large tax breaks A basket which holds stocks, bonds, and other assets An account opened by an individual, no company sponsorship/contribution Eligibility restrictions and income/employment status determine who gets to take out an IRA.
Retirement 101: IRA (cont) IRA Deductible = pre-tax contributions you claim on your tax return Non-deductible = use of after-tax income, not able to claim on taxes You must begin withdrawal of funds at age 70 ½ No contributions may be made after age 70 ½ ROTH IRA After-tax contributions You pay no taxes to withdraw in your retirement Grows tax free No required withdrawal age, but any withdrawal before age 59 ½ is penalized. Contributions can be made at any age
Retirement 101: 401(k) A pre-determined percentage of income is put into an account by your company on your behalf You choose what your money is invested in, i.e. bonds or stocks Your company may contribute as well, usually between 3% - 6% of your yearly salary (FREE MONEY!) Matched contributions often vest meaning you must stay employed a specific amount of time to keep the employer match Withdrawals are taxed, withdrawals prior to age 59 ½ are penalized ROTH 401(k) is post-tax contributions, no taxed withdrawals www.money.cnn.com/retirement
Group Discussion How do you save money? What useful websites are you using?
Saving Money 101: Good Student Auto Insurance Discount You must be younger than 25 -This is due to getting better rates once you reach 25-years-old. You must receive a B average. 15%-20% discount depending on the company that offers it. Companies that offer this discount (according to website): -Allstate -GEICO -State Farm -Liberty Mutual -Nationwide Check with your insurance agent for more information.
Saving Money 201: Budget Boosters -Calculates your budget for you by creating categories based on your transactions www.tlc.com/ -Gives you tips to finding coupons www...com/everyday/gasstations -Allows you to find the cheapest gas prices offered in your area
www..com - Promotional codes to get free shipping, % off your purchase, freebies w/ purchase, etc. www..com www..com/ - Discounted coupons for food, movies, oil changes, car washes, etc. www..com -Coupons for restaurants, up to 90% off. READ THE FINE PRINT! www..com/group-coupon-sites
Saving Money 201: Budget Boosters For Your Phone: SCVNGR My Coupons Amazon App Store
Where we are now… Many young adults admit they dont know as much about finances as they should. –You know about basic retirement funds –You know how to access a free credit report –You know your federal loan repayment options Undergraduates are using easy credit more often: –You know the new laws that protect you –Beginner Budgeting –You know how to determine fixed v. discretionary expenses –You know how to save money no matter what you are buying
Remember! There are three things to remember to manage your money wisely: 1.Track your expenses 2.Get your credit reports 3.Set financial goals Dont forget to take your Money Management Quiz!