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

Money 101 M.A. Goldberg, October/November 2010 Managing Money & Saving & Investing Tuesday November 2, 2010

Money 101 M.A. Goldberg, October/November 2010 Managing Money 1.Income 2.Expenses 3.Budgeting

Money 101 M.A. Goldberg, October/November 2010 Managing Money Income & its Sources What is Income? –Basically, its Money you Earn or simply receive What are sources of Income? –Job –Parents! (eg. Allowance, gifts) –Government –Investments –Others?

Money 101 M.A. Goldberg, October/November 2010 Managing Money Expenses What are Expenses? –Things you pay for, that have little value once purchased What are some examples of Expenses? –Clothing –Entertainment (eg. movies, video games, music) –Transportation –Food –Haircut –Rent

Money 101 M.A. Goldberg, October/November 2010 Managing Money Budget What’s a Budget? –A plan for saving and spending (calculated monthly or yearly) What are the steps involved in creating a budget? –Calculate all income –Calculate all expenses –Find the difference between Income & Expenses to determine if you have a Budget surplus (positive result) Budget deficit (negative result) Balanced Budget

Money 101 M.A. Goldberg, October/November 2010 Managing Money Budget Budget Surplus/ = Income – Expenses Deficit

Money 101 M.A. Goldberg, October/November 2010 Managing Money Budget Example Imagine that over the last month, your parents gave you a $10.00 allowance per week and you made an extra $10.00 from a late birthday gift from your aunt. These are your sources of Income for the month. You went to the movies one time ($10.00) and bought a new shirt on sale ($23.00). These are your expenses. Calculate all of your Income and Expenses for the month (assuming four weeks in the month) and determine whether you had a budget Surplus or Budget Deficit for the month.

Money 101 M.A. Goldberg, October/November 2010 Managing Money Expenses How do you control Expenses? –Make sure you really need the purchase –Comparison shop Don’t just go into a store and buy something – do some research and ask yourself “Is this the best price?” –Ask “Can you do any better on the price?” This sometimes gets you a better deal What’s the worst that can happen? They say “No!” –Avoid going into debt because of the purchase Ask yourself “Can I afford this?” –Find cheaper ways to play eg. Rent movies instead of buying (or borrow from the library) –Coupons!

Money 101 M.A. Goldberg, October/November 2010 Managing Money Budget What’s next? Figure out where you can reduce expenses Do something with the surplus! What would happen if the end result was a budget deficit?

Money 101 M.A. Goldberg, October/November 2010 Managing Money Budget Tips Keep receipts when making purchases (to get accurate calculations) Keep it up-to-date – things change over time Always look for places where you can spend less If you’re comfortable with computers, use a spreadsheet, or other pre-set budget maker. Keep it realistic! Sometimes things don’t go as planned, so don’t be too critical.

Money 101 M.A. Goldberg, October/November 2010 Managing Money Budget Tips – Cut Spending! The Latte Factor! Avoid getting into the habit of buying expensive coffees/drinks EVERYDAY!!! (This could save you about $1000/year!) Bag your lunch instead of buying it Think of the yearly (annual) expense Try the Daily Spending Calculator!Daily Spending Calculator

Money 101 M.A. Goldberg, October/November 2010 Saving & Investing

Money 101 M.A. Goldberg, October/November 2010 Saving Why Save for the Future? – Rainy Day – To meet certain Goals – Emergency – Retirement

Money 101 M.A. Goldberg, October/November 2010 Saving – The 10% Solution How much should I save? –According to David Chilton, author of The Wealthy Barber, you should save 10-percent of all the money you receive (income)

Money 101 M.A. Goldberg, October/November 2010 With saving, the most important step is to get started.

Money 101 M.A. Goldberg, October/November 2010 Investing Definition? It’s an item of value that you buy to get income or to grow in value.

Money 101 M.A. Goldberg, October/November 2010 Investing Types of Investments – GICs (Guaranteed Investment Certificates) – Savings Bonds – Stocks – Mutual Funds – ETFs (Exchange Traded Funds) – Real Estate

Money 101 M.A. Goldberg, October/November 2010 Investing Five Basic Steps of Investing 1.Set Goals 2.Determine what kind of investor you are (how much risk can you handle) 3.Pick a mix of investments (asset mix) 4.Choose investments 5.Keep track of your investments

Money 101 M.A. Goldberg, October/November 2010 Investing - The Miracle of Compound Interest Compounding is simply making interest on interest. YearPrincipalInterestTotal 1$100.00$10.00$ $11.00$ $12.10$ $13.21$145.31

Money 101 M.A. Goldberg, October/November 2010 Investing - Rate of Return Calculation (New-Old)/Old x 100 For example, if you have a $100 investment that has turned into $110 after a year, the rate of return is calculated like this: ($110-$100)/100 x 100 =10/100 x 100 =.1 x 100 = 10 (or 10%)

Money 101 M.A. Goldberg, October/November 2010 Investing – Rule of 72 This is a simple calculation used to determine how many years it will take your money to double. Example: Your investment earns 8%. 72/8=9, so it will take 9 years for your investment to double. 72 Interest Rate

Money 101 M.A. Goldberg, October/November 2010 Investing Tax Shelters TFSA (Tax-Free Savings Account) RRSP (Registered Retirement Savings Plan) RESP (Registered Educational Savings Plan) RDSP (Registered Disability Savings Plan)

Money 101 M.A. Goldberg, October/November 2010 Resources Chilton, David. The Wealthy Barber. Stoddart: Toronto, Daily Spending Calculator. Industry Canada. Google Finance. Investor Education Fund. Vaz-Oxlade, Gail. Debt Free Forever. Collins: Toronto, Vaz-Oxlade, Gail. (The site includes a link to an Excel/spreadsheet version! Check out the rest of her site.)