Person Financial Literacy

True False Questions  Teens get most of their money from part- time jobs  Most teens who are 18 or 19 years old have a checking account  90% of high school students rely on their parents from information about money.  On average, American teens spend more than $10 Billion a year.

 What is an item that you would like to have, but cannot currently afford?  Assuming you are starting with no money and you cannot count on anyone else to simply give it to you, how will you go about saving enough for the item?  How long do you think it will take you to save enough money to buy the item?  What are some other expenses you need to consider while saving up? Will you make any sacrifices?

Step 1: Set Goals  “If one does not know to which port one is sailing, no wind is favorable.” Short-term, intermediate, and long-term goals. Short-term, intermediate, and long-term goals. Which of the following are short, intermediate, or long-term goals. Which of the following are short, intermediate, or long-term goals. Birthday present for a friend’s birthday next monthBirthday present for a friend’s birthday next month Next week’s dateNext week’s date Trip after GraduationTrip after Graduation New Pair of ShoesNew Pair of Shoes Video GameVideo Game Yearbook at the end of the school yearYearbook at the end of the school year Down Payment on a houseDown Payment on a house WeddingWedding

 Instant Gratification vs. Delayed Gratification  Using the “My Financial Goals Chart” think about a short, intermediate, and long term goal. On this sheet think about how you plan to meet this goal.

Step 2: Analyzing Info.  Where do you Finances Currently Stand???  How much money a they think they spend in 4 weeks? (ball park answer)

 Now give it deeper thought and try to come up with a realistic figure? If you are having trouble thinking of more expenses then think about what your parents spend on you in a 4 week span. (Food, clothes, school supplies) If you are having trouble thinking of more expenses then think about what your parents spend on you in a 4 week span. (Food, clothes, school supplies)  Now you will be keeping a two week Personal Spending Log: Note on the log your parents/guardians expenditures on you Note on the log your parents/guardians expenditures on you Please give at least 5 expenditures and 2 sources of income. Please give at least 5 expenditures and 2 sources of income.

Step 3: Making Decisions  Decisions are affected by: Personal Spending Records Personal Spending Records Mood, values, culture, habits Mood, values, culture, habits  So how do you decide? STEPS Stages of Decision Making: Stages of Decision Making: 1.Identify your goal 2.Establish your criteria 3.Examine your options 4.Weigh the pros and cons 5.Make your decision 6.Evaluate results

 Identify your goal: You want to see a movie with friends  Establish your Criteria: Type of movie, when, how much can you spend,  Examine your options: Movie is sold out. What ware your options? Rent a movie, buy a later ticket, see a different movie. Rent a movie, buy a later ticket, see a different movie.  Weigh the pros and cons:  Make your decision:  Evaluate results: was the movie worth it? Could I have spent my money better.

 When we make decisions we are making a trade-off. What we choose not to do is what??? What we choose not to do is what???  Now you and a partner do your own scenario. The scenario is buying a car.

Step 4: Create and Implement a Plan  We have talked about financial planning and its importance. The pros and cons to every decision. Now your job is to write a letter to your friend. Your friend has asked for some advice about intermediate financial goal. The following should be on the index card: Now your job is to write a letter to your friend. Your friend has asked for some advice about intermediate financial goal. The following should be on the index card: List steps they should take in planning.List steps they should take in planning. Mention factors that will affect the planMention factors that will affect the plan Strategies to help them stick to it.Strategies to help them stick to it.

Step 5: Monitor and Modify the Plan  The best way to monitor and stick to a plan is check regularly to see if you are sticking to the plan. Plan may change as different factors come into your life. (Car breaks down, heat or air conditioning goes out at home) Plan may change as different factors come into your life. (Car breaks down, heat or air conditioning goes out at home)

Family Scenario  Get into groups of 4.  You are a family and you have been given a scenario for your family.  You must think about what types of financial decisions they might need to make given the circumstances on their card. 5 minutes brainstorm  Now identify 2 potential unexpected events that might impact your financial planning.

Credit

Credit Warm-up  Do any of you relate with Tiffany? Have you ever wanted something that you don’t have?  How did Tiffany choose to get what she wanted?  Evaluate Tiffany’s decision. Was this a smart move on her part? Why?  What mistakes did Tiffany make? What consequences might result from these mistakes?  Is this scenario realistic?

 What is your definition of Credit???

 Credit means someone is willing to loan money-called principal-in exchange for your promise to repay it, usually with interest. Interest is the amount you pay to use someone else’s money. The higher to interest rate, the more money you spend.

Credit Stats  Nearly ____% of teens owe money to either a person or company, with an average debt of $ ____.  About ____% of teens ages already have money than $1,000 in debt.  ___% of teens say that understand how credit and interest fees work.  ___% of teens say they know how to establish good credit.

 What are different types of credit?? Ex. Credit card Ex. Credit card

 Installment loans: loans that have terms and monthly installments  Student loans: loans which usually have an interest rate that does not start until after graduation. Usually low  Mortgage loans: loans specifically used to buy a home.

 Have any of you ever gotten a loan before or bought something on credit?  What were the conditions of that loan? Did you repay the loan? Did you repay the loan?  When is credit appropriate? When is it not?

Interest rates  Advertisers usually like to focus on the monthly payments. Ex. Buy it now for only $99 a month, but they do not tell you that you will be paying more in the long run. Ex. Buy it now for only $99 a month, but they do not tell you that you will be paying more in the long run.

Back to Tiffany  Tiffany spent $375 on the clothes. How long will it take her to pay off the money if she pays $15 a month?

 Now look at the chart I just provided.  Now after look at Tiffany’s scenario, why do people use credit cards.  What advice would you give Tiffany?  What is a common mistake people make after they get behind on credit card payments?

Be a Savvy Shopper  Read fine print of credit card and loan applications Need to know interest rates Need to know interest rates Is it fixed or can it change?Is it fixed or can it change?

Credit: The Good and the Bad  Tell me the good and the bad things about using credit.

Credit: The Good and the Bad  Pros Convenience Convenience Protection Protection Emergencies Emergencies Opportunity to build credit Opportunity to build credit Quicker Gratification Quicker Gratification Special Offers Special Offers Bonuses Bonuses  Cons: Interest Overspending Debt Identity theft

Credit Reports  This is a record that tracks their success in managing money responsibly. Credit history follows them for the rest of their lives. Credit history follows them for the rest of their lives. Current habits can carry over into adulthood. Current habits can carry over into adulthood.

Credit Reports  Tells your credit history  Lenders look at: Credit history, current loans, past loans, bills paid on time, late, or not at all. Credit history, current loans, past loans, bills paid on time, late, or not at all.  Out of these factors you get a credit score which tells your creditworthiness. This tells creditors how risky you are and might affect your interest rate or ability to get a loan. This tells creditors how risky you are and might affect your interest rate or ability to get a loan. Report.pdf Report.pdf Report.pdf Report.pdf

Who looks at credit reports?  All lenders  Cell phone companies  Renters  Employers

Developing Good Credit  Always pay bills on time  Savings account: make regular deposit no matter the amount  Be choose with credit card and loans  Surprisingly it is better to maintain low balance on one card and pay it off each month than to have no balance at all.

Developing Bad Credit  Making late payments  Writing bad checks  Having a lot of credit cards  Changing credit cards often.

Activity  Come up with 3 to 5 questions to ask an adult about their experience with using credit. Questions should focus on the steps taken to get approved for credit and lessons learned from their experience, whether positive or negative.

Savings and Investing “It takes money to make money”

 How many of you have a savings account? Savings is what people often do to meet shorter-term goals. Money is put aside for later, but is accessible when it is needed. Savings is what people often do to meet shorter-term goals. Money is put aside for later, but is accessible when it is needed. Investing is what people do to meet longer-term goals. Money is put aside for use far into the future and is typically not accessible for specified period of time. Higher risk, but higher reward. Investing is what people do to meet longer-term goals. Money is put aside for use far into the future and is typically not accessible for specified period of time. Higher risk, but higher reward. So when should you invest and when should you save?So when should you invest and when should you save?

Value of a Dollar  If I put a $100 dollars in my dresser and leave it in there for a year will it still buy me as much then? Can of soda used to be 5 cents. Can of soda used to be 5 cents. How much was gas when you were 5 years old? How much was gas when you were 5 years old? What does this tell use we should do with our money so it does not lose its value? What does this tell use we should do with our money so it does not lose its value?

Invest  Interest=Principal X Interest Rate X Time So you invest $100 at 4% interest annually for 1 year. How much do you have at the end of one year. So you invest $100 at 4% interest annually for 1 year. How much do you have at the end of one year.  3 Rules to Investing: The more money you invest the more you earn The more money you invest the more you earn The higher interest rate you have, the more likely to gain. The higher interest rate you have, the more likely to gain. The sooner you invest the more likely that you could earn much more. The sooner you invest the more likely that you could earn much more.

 Now complete the “power of Compounding” Handout.

Compound Interest  Now there is a better way to figure out compound interest?  Amount=Principal (1+Interest Rate) Number of years compounded

 Risk/Reward Tradeoff: When investing never over extend yourself or put everything you have in a high risk investment. High risk equals high reward, but you may lose everything. When investing never over extend yourself or put everything you have in a high risk investment. High risk equals high reward, but you may lose everything. If you are making short-term investment probably more willing to do low risk. If you are making long-term investment high risk will be better. If you are making short-term investment probably more willing to do low risk. If you are making long-term investment high risk will be better.

Types of Investment  Income Investment: Can access money at anytime. (like savings) Paid cash for owning investment. Few months.  Growth Investment: Are those that you buy and hope that it gains. Long term investment (Decades) and penalty for accessing money early.  You read through handout about Income and Growth Investments.

Checking

Checks over Cash!!!  What are the benefits to having a checking account rather than just using cash?

 Benefits: Safety: not safe to have a lot of cash. Safety: not safe to have a lot of cash. Convenience: Don’t always have to have cash or easier to make purchases. Convenience: Don’t always have to have cash or easier to make purchases. Easier Budgeting: Tracking money easier (Online banking) Easier Budgeting: Tracking money easier (Online banking) Proof of Payment: Proof that you paid for something. Check Proof of Payment: Proof that you paid for something. Check

Factors When Picking Location: hours, ATMs Location: hours, ATMs Fees: monthly fees, balance inquiry fees, ATM fees, overdraft Fees: monthly fees, balance inquiry fees, ATM fees, overdraft Interest: rate earned Interest: rate earned Restrictions: Minimum deposit, insurance Restrictions: Minimum deposit, insurance Special features: Direct Deposit, overdraft protection, online banking, discounts for students. Special features: Direct Deposit, overdraft protection, online banking, discounts for students.

 Opening checking account 2 forms of ID 2 forms of ID Money to deposit Money to deposit  Get checks in about a week. Usually get temporary checks until then. Usually get temporary checks until then.

Precautions You Need To Take  When writing your check you are entering a binding contract for that amount of money. (Bounced check fee will be charged if you have insufficient funds $25)  Always write in ink  Once endorsed anyone can cash it.  Keep unused checks up  Check statements often to ensure no unauthorized activity.

 To Deposit: Cash:$ Cash:$ Checks: Check #9283: $ (Paycheck) Checks: Check #9283: $ (Paycheck) Check #738: $12.42 (Rebate Check) Check #738: $12.42 (Rebate Check) Check #342: $50.00 (Gift) Check #342: $50.00 (Gift) Fill out the deposit slips that have been provided. The transfer the deposits on to the Register. Make sure that all 4 deposits are on the register and fill out correctly. (1 st one is done)

 Now you have $450 in your checking account. You each have been given 4 items to sell that are unlimited. You are to go different people and make purchases of items that you want. You write a check and put it on your register. When you sell an item put in one the register as a deposit. You have 12 minutes. (If you run out of room just continue the chart down yourself)

 Final Activity Complete the Worksheet “Keeping a Running Balance Activity provided. If you do not finish then the worksheet will be due Monday.