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Money 101 M.A. Goldberg, May 2012 Presented by Michael A. Goldberg, BComm, BEd May 2012 Money 101 Financial Literacy for Teens

Money 101 Financial Literacy for Teens

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Money 101 Financial Literacy for Teens. Presented by Michael A. Goldberg, BComm, BEd May 2012. Agenda. 1.Selecting & Opening a Bank Account 2.Percentage & Interest Calculation 3.Debt & Credit Cards 4.Budgeting - managing your Income Savings Expenses and budgets more effectively - PowerPoint PPT Presentation

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Page 1: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

Presented by

Michael A. Goldberg, BComm, BEd

May 2012

Money 101 Financial Literacy for Teens

Page 2: 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

Page 3: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

“FLingo!”

Page 4: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

Opening a Bank Account

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

Page 5: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

Opening a Bank AccountTypes

Savings vs. Chequing

Page 6: Money 101 Financial Literacy for Teens

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?

Page 7: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

What does Percent mean?

Per Centout of/

divided by100

%

Page 8: Money 101 Financial Literacy for Teens

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)

Page 9: Money 101 Financial Literacy for Teens

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

Page 10: Money 101 Financial Literacy for Teens

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

Page 11: Money 101 Financial Literacy for Teens

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)

Page 12: Money 101 Financial Literacy for Teens

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!!!

Page 13: Money 101 Financial Literacy for Teens

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

Page 14: Money 101 Financial Literacy for Teens

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

Page 15: Money 101 Financial Literacy for Teens

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

Page 16: Money 101 Financial Literacy for Teens

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

Page 17: Money 101 Financial Literacy for Teens

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

Page 18: Money 101 Financial Literacy for Teens

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)

Page 19: Money 101 Financial Literacy for Teens

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)

Page 20: Money 101 Financial Literacy for Teens

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

Page 21: Money 101 Financial Literacy for Teens

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

Page 22: Money 101 Financial Literacy for Teens

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%???

Page 23: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

Managing Money

1. Income2. Expenses3. Budgeting

Page 24: Money 101 Financial Literacy for Teens

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?

Page 25: Money 101 Financial Literacy for Teens

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

Page 26: Money 101 Financial Literacy for Teens

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

Page 27: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

Managing MoneyBudget

Budget Surplus/ = Income – Expenses Deficit

Page 28: Money 101 Financial Literacy for Teens

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.

Page 29: Money 101 Financial Literacy for Teens

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!

Page 30: Money 101 Financial Literacy for Teens

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?

Page 31: Money 101 Financial Literacy for Teens

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.

Page 32: Money 101 Financial Literacy for Teens

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

Page 33: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

Saving & Investing

Page 34: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

Saving

Why Save for the Future?– Rainy Day– To meet certain Goals– Emergency– Retirement

Page 35: Money 101 Financial Literacy for Teens

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)

Page 36: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

With saving, the most important step is to

get started.

Page 38: Money 101 Financial Literacy for Teens

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

Page 39: Money 101 Financial Literacy for Teens

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

Page 40: Money 101 Financial Literacy for Teens

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

Page 41: Money 101 Financial Literacy for Teens

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%

Page 42: Money 101 Financial Literacy for Teens

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

Page 43: Money 101 Financial Literacy for Teens

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)

Page 44: Money 101 Financial Literacy for Teens

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.)

Page 45: Money 101 Financial Literacy for Teens

Money 101M.A. Goldberg, May 2012

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)