Financial Literacy 101 for Teens

Money 101M.A. Goldberg, October/November 2010 $101

Financial Literacy 101 for Teens

Presented by

Michael A. Goldberg, BComm, BEd

October/November 2010


Opening a Bank Account&

Debts & Credit Cards

Tuesday October 26, 2010


Opening a Bank Account

1. Types2. Savings3. Chequing4. Which one’s for Me?


Opening a Bank AccountTypes

Savings vs. Chequing


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?


What does Percent mean?

Per Centout of/

divided by100

%


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 CIDC (Canadian Deposit Insurance Corporation)• Insures up to $100,000/institution

Image Source: (http://www.cdic.ca/Protecting_Your_Deposits.html, October 23, 2010)


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



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



Risks?1. Low return (you’ll earn little interest)2. High costs (be aware of fees charged)3. Bounced cheques (can be costly)


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!!!


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


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



1. Why do People Borrow Money?2. Why you should Avoid Borrowing

Money3. Credit Ratings4. Types of Debt5. 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



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



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)



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)



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


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 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



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%???


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)