Financial Literacy 101 for Teens

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Presentation transcript:

Financial Literacy 101 for Teens Presented by Michael A. Goldberg, BComm, BEd October/November 2010 Money 101 M.A. Goldberg, October/November 2010

Opening a Bank Account & Debts & Credit Cards Tuesday October 26, 2010 Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Opening a Bank Account Types Savings Chequing Which one’s for Me? Money 101 M.A. Goldberg, October/November 2010

Opening a Bank Account Types Savings vs. Chequing Money 101 M.A. Goldberg, October/November 2010

Opening a Bank Account Savings Account What is it? A safe place to keep your money in a bank, trust company, credit union or caisse populaire Banks pay interest Percentage based on the balance of your account. What does Percent mean? Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 What does Percent mean? % Per Cent out of/ divided by 100 Money 101 M.A. Goldberg, October/November 2010

Opening a Bank Account Savings Account Advantages of savings accounts: Good for emergencies Good if you’re not comfortable with investing Convenient – can use a debit card for deposits (putting-in) or withdrawals (taking-out) No risk of losing your money Deposits in Canada are protected by the CIDC (Canadian Deposit Insurance Corporation) Insures up to $100,000/institution Image Source: (http://www.cdic.ca/Protecting_Your_Deposits.html, October 23, 2010) Money 101 M.A. Goldberg, October/November 2010

Opening a Bank Account Chequing Account What is it? Chequing accounts are a safe place to keep money that you plan to use over the next month or so for bill payments and buying things A chequing account is for money you plan to use soon Money 101 M.A. Goldberg, October/November 2010

Opening a Bank Account Chequing Account Similar to Savings accounts? Chequing accounts are a safe, covered by the CDIC Differences? Used for different reasons (bill payments, etc.) Pays less interest Can cost more in fees Cheques Transaction charges Service charges Minimum balance charges NSF (non-sufficient funds) charges Money 101 M.A. Goldberg, October/November 2010

Opening a Bank Account Chequing Account Risks? Low return (you’ll earn little interest) High costs (be aware of fees charged) Bounced cheques (can be costly) Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Which One’s for Me? Depends on the purpose of having an account Save money? Pay bills? Internet banking/access? Debit card needed? Whatever you use the bank for, make sure you minimize any charges!!! Money 101 M.A. Goldberg, October/November 2010

Who can get an account/ what’s needed? Anyone can have an account If you’re under 18, you need a parent/guardian to help you sign-up When you get your account, you will need to provide identification Money 101 M.A. Goldberg, October/November 2010

High Interest Savings Accounts This should be considered Lately, some high interest savings accounts are paying 2% interest/year Examples – President’s Choice Financial, ING Direct, ICICI Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards Why do People Borrow Money? Why you should Avoid Borrowing Money Credit Ratings Types of Debt Credit Cards Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards Why do People Borrow Money? Large purchases they couldn’t otherwise afford, like… House Car Education (after high school) Start a business Emergency Pay off another debt, but at a lower interest rate Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards Why you should avoid borrowing money (using credit wisely) It can become a habit You have to pay interest (takes money away from other things you need) If misused, it could damage your credit rating Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards Credit Rating Your ability to repay you borrow is scored Your credit rating will have an effect on how much or at what rate you may borrow in the future If your credit rating’s bad, you may not be able to borrow at all Once you start borrowing, you should check your credit rating every year (sometimes mistakes are made) Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards Types of Debt Credit Cards Overdraft Protection (let’s your chequing account go negative without bouncing checks – a big money maker for banks!) Loan Mortgage (used to finance house) Lease (like a long term rental) Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards Credit Cards Let’s you pay for things without money (for now!) Most are issued by banks (Visa/Mastercard) Charge Cards Issued by particular stores Avoid these, as their use is limited to the one store Charge higher interest rates than regular credit cards Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards Credit Card Tips Pay credit cards off every month – once you carry a balance, you get charged interest (and it’s expensive debt) Ask the bank for a better/lower interest rate Avoid cards with annual fees Look for rewards associated with the card (travel point, groceries, cash bonuses, etc.) Shop around – lots of banks will eventually offer you a credit card – find the lowest interest rate Only own ONE credit card Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Debts & Credit Cards APR Annual Percentage Rate The interest rate you’ll pay, which is quoted on an annual basis Must be quoted/stated when you sign-up for credit Always try to figure out “What will this cost me per year?” 18%??? Money 101 M.A. Goldberg, October/November 2010

M.A. Goldberg, October/November 2010 Resources cdic.ca (Canada Deposit Insurance Corporation) getsmarteraboutmoney.ca (Investor Education Fund) http://www.getsmarteraboutmoney.ca/education-programs/Documents/2008_fm_10_creditreport.pdf (Additional information on Credit Reports) Chilton, David. The Wealthy Barber. Toronto: Stoddart, 1989. Money 101 M.A. Goldberg, October/November 2010