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Money 101M.A. Goldberg, May 2012
Presented by
Michael A. Goldberg, BComm, BEd
May 2012
Money 101 Financial Literacy for Teens
Money 101M.A. Goldberg, May 2012
Agenda
1. Selecting & Opening a Bank Account
2. Percentage & Interest Calculation 3. Debt & Credit Cards4. Budgeting - managing your
• Income• Savings• Expenses and budgets more effectively
5. Saving & Investing
Money 101M.A. Goldberg, May 2012
Opening a Bank Account
1. Types2. Savings3. Chequing4. Which one’s for Me?
Money 101M.A. Goldberg, May 2012
Opening a Bank AccountSavings 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 101M.A. Goldberg, May 2012
Opening a Bank AccountSavings 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 CDIC (Canadian Deposit Insurance Corporation)• Insures up to $100,000/institution
Image Source: (http://www.cdic.ca/Protecting_Your_Deposits.html, October 23, 2010)
Money 101M.A. Goldberg, May 2012
Opening a Bank AccountChequing 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 101M.A. Goldberg, May 2012
Opening a Bank AccountChequing 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 101M.A. Goldberg, May 2012
Opening a Bank AccountChequing Account
Risks?1. Low return (you’ll earn little interest)2. High costs (be aware of fees charged)3. Bounced cheques (can be costly)
Money 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
Debts & Credit Cards
1. Why do People Borrow Money?2. Why you should Avoid Borrowing
Money3. Credit Ratings4. Types of Debt5. Credit Cards
Credit Card Video
Money 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
Debts & Credit Cards
Credit Rating• Your ability to repay what 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 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
Debts & Credit Cards
Credit Cards– Let 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 101M.A. Goldberg, May 2012
Debts & Credit CardsCredit 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 points, 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 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
Managing MoneyIncome & 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 101M.A. Goldberg, May 2012
Managing MoneyExpenses
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 101M.A. Goldberg, May 2012
Managing MoneyBudget
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 101M.A. Goldberg, May 2012
Managing MoneyBudget 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 101M.A. Goldberg, May 2012
Managing MoneyExpenses
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 101M.A. Goldberg, May 2012
Managing MoneyBudget
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 101M.A. Goldberg, May 2012
Managing MoneyBudget 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 101M.A. Goldberg, May 2012
Managing MoneyBudget 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
Money 101M.A. Goldberg, May 2012
Saving
Why Save for the Future?– Rainy Day– To meet certain Goals– Emergency– Retirement
Money 101M.A. Goldberg, May 2012
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 101M.A. Goldberg, May 2012
Investing
Definition?It’s an item of value that you buy to get income or to grow in value.
Investing Video
Money 101M.A. Goldberg, May 2012
Investing
Types of Investments– GICs (Guaranteed Investment Certificates)– Savings Bonds– Stocks– Mutual Funds– ETFs (Exchange Traded Funds)– Real Estate
Money 101M.A. Goldberg, May 2012
Investing
Five Basic Steps of Investing1. Set Goals2. Determine what kind of investor you
are (how much risk can you handle)3. Pick a mix of investments (asset
mix)4. Choose investments5. Keep track of your investments
Money 101M.A. Goldberg, May 2012
Investing - The Miracle of Compound Interest
• Compounding is simply making interest on interest.
Year Principal
Interest
Total
1 $100.00
$10.00 $110.00
2 $110.00
$11.00 $121.00
3 $121.00
$12.10 $132.10
4 $132.10
$13.21 $145.31
Money 101M.A. Goldberg, May 2012
Investing - Rate of Return Calculation
(New-Old) Old
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
=10/100 x 100%= .1 x 100%= 10%
X 100%
X 100%
Money 101M.A. Goldberg, May 2012
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% interest per year. How long will it take to double? Answer: It will take 9 years for your investment to double.
72
Interest Rate
72
8
Money 101M.A. Goldberg, May 2012
Investing
Tax Shelters• TFSA (Tax-Free Savings Account)• RRSP (Registered Retirement
Savings Plan)• RESP (Registered Educational
Savings Plan)• RDSP (Registered Disability Savings
Plan)
Money 101M.A. Goldberg, May 2012
ResourcesChilton, David. The Wealthy Barber. Stoddart:
Toronto, 1989.Daily Spending Calculator. Industry Canada.
http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca01808.html
Investor Education Fund. <getsmarteraboutmoney.ca>
Vaz-Oxlade, Gail. Debt Free Forever. Collins: Toronto, 2009.
Vaz-Oxlade, Gail. <gailvazoxlade.com/resources/interactive_budget_worksheet.html> (The site includes a link to an Excel/spreadsheet version! Check out the rest of her site.)
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