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Disadvantages: The interest they pay ____ as much as Id like. p.12, Req. 6: Pretend you have $1,000 to save/invest, and help prepare yourself for the.

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Presentation on theme: "Disadvantages: The interest they pay ____ as much as Id like. p.12, Req. 6: Pretend you have $1,000 to save/invest, and help prepare yourself for the."— Presentation transcript:

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2 Disadvantages: The interest they pay ____ as much as Id like. p.12, Req. 6: Pretend you have $1,000 to save/invest, and help prepare yourself for the future. Explain to your merit badge counselor the advantages or disadvantages of saving or investing for each of the following: (e) (e).S avings account at a bank or credit union : Advantages : They pay us _________ Very ____ risk of loss (insured by _____ or _____) lowFDIC NCUA interest isnt

3 Disadvantages: –Timing risk: I may need my money _____ the CD matures. Advantages: –They pay us ______ (usually ______ rate than savings) –Very _____ risk of loss:(insured by _____ or ______) low FDIC NCUA interest p. 12, Requirement 6 (d) Certificate of Deposit (CD) at a Bank or Credit Union before higher

4 –If the stock market in general goes down, I probably ____ _____ –Timing risk: If I buy when the price is high and sell when it is low, I ____ ______. –If the company I invested in loses money, I probably ___ _____ –The value of the stock could ___ ___ and I could get _________. –Compared to bank or cu savings, the risk of loss is ______. –If I invest in a company that is very profitable and if the stock market does well, I could ____ ____ of money, p. 12, Req. (6a) Common Stocks. Advantages: higher lose money lose money lose money earn lots go up Disadvantages: dividends

5 –Compared to bank or cu savings, the risk of loss is ______. –If the stocks in the fund do poorly, I am likely to ____ ______ –If the stocks in the fund do well, I am likely to earn ____ _____ –The return on the investment is often ______ than at a bank. –Compared to stock in a particular company, the risk of loss is supposed to be _____ Advantages: p. 12 Req. (6b) Mutual Funds (invest in stocks of _________ companies) higher lower lose money more money higher Disadvantages: different –If the fund mgr blows it or takes off, I ____ lose (but some have lost $ in scandals) –If the stock market in general goes down, I probably ____ ________ lose money

6 Invest vs. Save A particular mutual funds performance vs. 5% savings avg.

7 –Some policies invest part of the premium so people dont have to ___ to get some money. –Life insurance pays money to my ___________ when I die. Advantages: p. 12 Req. (6c) Life Insurance beneficiaries die – The insurance portion costs ______. Disadvantages: money – The investment portion is not _______ by the US Government insured

8 p. 13 Req. 7 Explain to your merit badge counselor the following: Explain what a loan is : moneythings use it A loan is ________ or ________ owned by someone who allows another person to _____ ___

9 The amount earned as _____ passes. p. 13 Req. 7(a) Explain what interest is: Interest is the amount of money paid to a lender in ________ of what was borrowed. interest principal excess time

10 p. 13 Req. 7(a) Explain how the Annual Percentage Rate (APR) measures the true cost of a loan. 4. It is expressed as a _______ rate. yearly 1. The APR is the ________ ____ established by the U.S. Government standard rate 2. So we can _______ the cost of borrowing. compare 3. It includes ______ and _____ interest fees (just as _____ is for highway speed) MPH

11 p. 13 Req. 7(a) Explain how the Annual Percentage Rate (APR) measures the true cost of a loan. If you borrow $ 100, and pay back $ 110 : What is the cost? $____ What is the APR if you pay back $110 one year later? _____% APR What is the per centage rate ? ____ % 10 What is the APR if you pay back $110 one month later? _____% APR What is the APR if you pay back $110 one week later? _____% APR APR? What is the cost if you pay $10 interest each week for a year? $_____ 520

12 I might be able to borrow from a relative for ____. p. 13 Req. 7(b) Explain the different ways to borrow money : free I can borrow from myself for very ___ ____.low cost I can borrow from bank or credit un at a ______ ___.higher cost I can borrow by ________ a ________. (usually higher) financing purchase I can borrow by charging things using a _____ ____.credit card If I am really stupid: I can borrow from ultra high-cost lenders at outrageous interest ____. rates

13 BEST BORROWING TIPS: 1.Avoid _____________ borrowing! unnecessary 2.Only borrow for things that _________ in value. increase 3.Pay off loans ______. early 4.If you dont have the money, _____ ____ _________. dont buy 5.When you do borrow, always pay less than _______ APR. 13% anything

14 TOO EASY LOAN COMPANY Promissory Note with Security Interest Security: 1996 Olds Ciera Annual Percentage Rate Annual Percentage Rate The cost of your credit as a yearly rate. 300% Finance Charge Finance Charge The dollar amount the credit will cost you. $4, Amount Financed The amount of credit provided to you or on your behalf. $ Total of Payments The amount you will have paid after you have made all payments as scheduled. $6, % per month 25% per month Payment Schedule: 12 Payments of $ Beginning 2/4/99 and on the 4th of each month thereafter until final payment is made on January 4, Default Charge:If the payment is late 10 days, you will be charged 5% of the payment amount.

15 TV $ cash

16 TV $ Credit Card $26.00 per mo. 18% A.P.R. 18 mo. pmts $59.00 interest Total Cost $ 459

17 TV $ Finance Company 36% A.P.R. 18 mo. Pmts. $29.00 per mo. $ int. Total Cost $ 523

18 TV $ Rent-to-Own $70.00 mo. pmt 18 months Total Cost $ 1260 $ (int.) (196% APR)

19 TV $ Too Easy Loan (Bad Credit OK) 300% A.P.R. Car Title Pawn If 18 months $ payments $1,433 interest Total Cost $ 1833

20 TV $ Payday Loan 10% x 52 =520%

21 $174 payments $2,725 interest 18 months (12 weeks max ) Total Cost $ 3125 TV $ Payday Loan 10% per week 520% APR

22 p.13 Req. 7(c) Explain the differences between: A Credit Card A Debit Card A Charge Card

23 Credit Cards: Our Friends? Or Our Foes?

24 is used to make purchases using the ____ ____ _________ money. p.13 Req. 7(c) A CREDIT CARD It may be paid off ____ _____ (without interest - most cards), or it may be paid ____ ____ (plus interest charges) credit card companys each month over time Advantages: –One way to start building a good ______ ______ for free (if you pay it off each monthon time!) credit rating –Very ___________ convenient!

25 –Too easy to spend money, especially if its money I _____ _____ p.13 Req. 7(c) A CREDIT CARD Pitfalls: dont have Costs: –If I dont payoff each month, I pay ________ –Nearly always at a rate _______ than I want to pay. interest higher

26 A CHARGE CARD is a type of credit card, where a person is using the companys money, but no periodic interest rate is charged, and the person is usually required to pay the balance ____ ______ each month. p. 13Req. 7(c) Pitfalls: Too easy to spend money, especially money you _____ _____ dont have. Costs: ______ fees. annual

27 p.14 req. #7 (c) contd –Is one way to withdraw money from a persons ______________ account. Advantages: –Using _____ ______ money, so if you dont have it, you dont spend it. checking your own A DEBIT CARD

28 p.14 Debit Cardreq. #7 (c) contd Pitfalls: –If somebody else uses your debit card, or a mistake is made, your money may be gone when you _____ _. need it –Some places (like gas stations & motels) place a _____ on your acct. hold

29 –Causing returned item ____ p.14 req. #7 (c) contd Costs: –If you dont have enough money in your checking account to cover the withdrawal, your transaction(s) may _______ (get returned – unpaid). bounce fees

30 youll probably get ________ _____ fees. p.14 req. 7(c) Costs of debit cards (checking accounts) If you dont have a backup plan, like an overdraft ____ __ _____ (an empty loan), line of credit Some checking accounts have monthly ____ fees returned item

31 p. 14 So, the differences between: Requirement 7(c). Charge CardDebit Card Credit Card Borrowed money. No interest charge (Reg. Z 226.2(15)) Must pay off each month. Borrowed money. May pay off each month (no int) Money from your checking account. or pay over time (high interest).

32 p. 13 Explain the advantages & disadvantages: requirement 7(c). Charge Card Debit Card Credit Card Borrowing money Too easy to spend money Using your own money Your money gone… Builds your credit rating Very convenient Protections

33 p. 14 Req. 7(c) Explain why it is unwise to make only the minimum payment on your credit card. A person who only pays the minimum stays in debt a ____ ____ time. And pays ___ and ____ of interest. very long lots At typical terms, it would take about _____ years to pay off a $5,000 balance. 34

34 Simplified Credit Card Statement Last Months Balance Payments received (128.42) Interest 0 Auto Repair Center Joes Gas & Goodies Babes Apparel Store Ending balance Required (min) Payment Due *

35 Credit Card Summary: If used well, a great tool, if used poorly, financial ruin!

36 And if he has made his payments ___ _____ Credit Reports or Credit Records: A credit report is a report of a persons credit ______ history Credit reports show what ______ and _____ _____ a person has had. p. 14 Explain Credit Reports Requirement 7(d). loans on time And it usually includes a credit _____ or credit _____ rating score If he was late, it shows how late he was and how _____ _____ he was late. many times credit cards

37 Explain Credit Reports (History) Bill S. Preston Score 380 Creditor Limit Bal Comments Department Store >30, 3>60 Credit Card >30,3>60,1>90 Dumpy Bikes Collection agency Fast Car Lot Repossession Credit Card as agreed Home Mortgage current Overdraft Line of Cr as agreed

38 If I have too much debt, Ill have a ___ credit rating, or a ____ credit score I will also be required to pay ____ ____, and next time I borrow Ill pay interest at a ______ ____. And if I dont borrow too much, Ill have a good credit ______ or _______ If I am irresponsible, and pay my bills late: Ill have a ____ credit history & ______ or ______ p. 14Req. 7(d) Explain how your personal responsibility can affect your credit record: If I pay my bills on time, I will have a good credit ______. history rating score badrating score late fees higher rate bad low

39 Is it possible To have a good credit history while having A bad credit score? ______ YES!

40 *** Pay ____ ________ (more $ than required). p. 14 Req. 7(e). Describe ways to reduce or eliminate debt: extra principal

41 Bal Rate Term Pmt Total Int Pd (If simple interest) 10,000 12% 60 mo ,346 3,346 Example of Paying Extra Principal 10,000 12% 57 mo ,167 3,167 10,000 12% 47 mo ,582 10, % 38 mo ,069 2,069 1,277 Savings 179 2,

42 *** Pay ____ ________ (more $ than required). p. 14 Req. 7(e). Describe ways to reduce or eliminate debt: *** Pay off highest rate debt _____ first extra principal Then, when it is paid off, add what you were paying on that debt to the amount you were paying on your next _______ ____ debt. highest rate

43 After 1 year New New New Bal. Pmt. Term 77, , , , Example: of paying highest rate debts first. Existing Balance Payment RateRemaining Obligations (p & i) Term (yrs.) 1st Mort 78, % 22.9 yrs. Auto Loan 10, % 4.1 yrs. Trailer 5, % 3.6 yrs. Credit Card 6, % 9.5 yrs. Doctor %.9 yrs. Dentist 1, % 2.5 yrs. Totals 102,

44 Existing Balance Payment RateRemaining Obligations (p & i) Term (yrs.) 1st Mort 78, % 22.9 yrs. Auto Loan 10, % 4.1 yrs. Trailer 5, % 3.6 yrs. Credit Card 6, % 9.5 yrs. Doctor %.9 yrs. Dentist 1, % 2.5 yrs. Totals 102, After.8 year (1.8 yrs total) New New New Bal. Pmt. Term 76, , , , Reduce or eliminate debt quicker, by paying highest rate debts first.

45 After 1.8 more (3.7 yrs tot) New New New Bal. Pmt. Term 73, , , Reduce or eliminate debt quicker, by paying highest rate debts first. Existing Balance Payment Rate Remaining Obligations (p & i) Term 1st Mort 78, % 22.9 yrs. Auto Loan 10, % 4.1 yrs. Trailer 5, % 3.6 yrs. Credit Card 6, % 9.5 yrs. Doctor %.9 yrs. Dentist 1, % 2.5 yrs. Totals 102,

46 Reduce or eliminate debt quicker, by paying highest rate debts first. Existing Balance Payment Rate Remaining Obligations (p & i) Term 1st Mort 78, % 22.9 yrs. Auto Loan 10, % 4.1 yrs. Trailer 5, % 3.6 yrs. Credit Card 6, % 9.5 yrs. Doctor %.9 yrs. Dentist 1, % 2.5 yrs. Totals 102, After.7 more (4.4 years tot) New New New Bal. Pmt. Term 72,760 1, Out of debt in 10.6 Out of debt in 10.6 yrs.

47 *** Pay ____ ________ (more $ than required). p. 14 Req. 7(e). Describe ways to reduce or eliminate debt: *** Pay _____ often than required (if allowed). *** Pay off highest rate debt _____ first extra principal more Then, when it is paid off, add what you were paying on that debt to the amount you were paying on your next _______ ____ debt. highest rate ***Bi-weekly payments can be an easy way to make extra principal payments

48 p.14 Req 7d. Describe ways to eliminate Debt. Most loans: Monthly payments

49 Some Loans: Bi-Weekly Payments: (every other week) By paying ½ payment every other week…

50 13 full payments Some: Bi-Weekly Payments: (every other week) By paying ½ payment every other week:

51 p. 15, Req 8(a) Write a "to do" list of tasks or activities, such as homework assignments, chores, and personal projects, that must be done in the coming week. List these in order of importance to you. TO DO LIST. Things that must be done in the coming week (in order of importance): 1________________13 ________________ 2________________14 ________________ 3________________15 ________________ 4________________16 ________________ 5________________17 ________________ 6________________18 ________________ 7________________19 ________________ 8________________20 ________________ 9________________21 ________________ Eat Sleep School Church Scouts Date BB Shower

52 ScheduledActivityActualScheduledActivityActual Times 12: PM 6: AM 1: PM 7: AM 2: PM 8: AM 3: PM 9: AM 4: PM 10: AM 5: PM 11: AM 6: PM 7: PM 8: PM 9: PM 10: PM p.15, Req. 8(b) & (c). Make a 7-day calendar or schedule… Day 1 Day of the week __________ Date________

53 p.19, Req. 8(d) Review your to do list… Discuss it with your merit badge counselor.

54 Start Finish p. 19, Req. 9. Prepare a written project or plan… could include a camping trip… a.Define the project ___________________ What is your goal? ___________________ b.Develop a timeline… c.Describe your project ________________

55 p.19 Req. #9(d) & (e) Develop a list of resources… If necessary develop a budget. (e) budget (d) Develop a list Identify how these resources Already Est. cost if you of Resources needed: will help you achieve the goal have it don't already have it ______________ ____________________ ______ ______________ Discuss your completed project plan with your mb counselor.

56 p. 20, Req. 10. Do the following: Choose a career you might want to enter… Research the limitations…

57 p. 20, Req. 10. Do the following: Choose a career you might want to enter… Research the limitations, qualifications. Career:_______________________________ (b)Research the limitations of your anticipated career: LimitationsWhere you learned about itQualifications ____________________________________________________ Pay average Bank Examiner MB Class InstructorCollege Degree Sometimes boring Banking Experience Sometimes conflicts Communicate

58 Personal Management Merit Badge $ Lots of effort, but totally worth it! More things to finish. When youve completed ALL the requirements, contact your scoutmaster and/or merit badge counselor. Take the handout with you. Discuss the things and be excellent to each other!


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