Person Financial Person Financial LiteracyLiteracy

True False QuestionsTrue False Questions

Teens get most of their money from part-Teens get most of their money from part-time jobstime jobs

Most teens who are 18 or 19 years old Most teens who are 18 or 19 years old have a checking accounthave a checking account

90% of high school students rely on their 90% of high school students rely on their parents from information about money.parents from information about money.

On average, American teens spend more On average, American teens spend more than $10 Billion a year.than $10 Billion a year.

What is an item that you would like to have, What is an item that you would like to have, but cannot currently afford?but cannot currently afford?

Assuming you are starting with no money and Assuming you are starting with no money and you cannot count on anyone else to simply you cannot count on anyone else to simply give it to you, how will you go about saving give it to you, how will you go about saving enough for the item?enough for the item?

How long do you think it will take you to save How long do you think it will take you to save enough money to buy the item?enough money to buy the item?

What are some other expenses you need to What are some other expenses you need to consider while saving up? Will you make any consider while saving up? Will you make any sacrifices?sacrifices?

Step 1: Set GoalsStep 1: Set Goals ““If one does not know to which port one is If one does not know to which port one is

sailing, no wind is favorable.”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-Which of the following are short, intermediate, or long-

term goals.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 Instant Gratification vs. Delayed GratificationGratification

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

Step 2: Analyzing Info.Step 2: Analyzing Info.

Where do you Finances Currently Where do you Finances Currently Stand???Stand???

How much money a they think they spend How much money a they think they spend in 4 weeks? (ball park answer)in 4 weeks? (ball park answer)

Now give it deeper thought and try to come up Now give it deeper thought and try to come up with a realistic figure? with a realistic figure? If you are having trouble thinking of more expenses If you are having trouble thinking of more expenses

then think about what your parents spend on you in a then think about what your parents spend on you in a 4 week span. (Food, clothes, school supplies)4 week span. (Food, clothes, school supplies)

Now you will be keeping a two week Personal Now you will be keeping a two week Personal Spending Log:Spending Log: Note on the log your parents/guardians expenditures Note on the log your parents/guardians expenditures

on youon you Please give at least 5 expenditures and 2 sources of Please give at least 5 expenditures and 2 sources of

income. income.

Step 3: Making DecisionsStep 3: Making Decisions

Decisions are affected by:Decisions are affected by: Personal Spending RecordsPersonal Spending Records Mood, values, culture, habitsMood, values, culture, habits

So how do you decide? STEPSSo how do you decide? STEPS Stages of Decision Making:Stages of Decision Making:

1.1. Identify your goalIdentify your goal2.2. Establish your criteriaEstablish your criteria3.3. Examine your optionsExamine your options4.4. Weigh the pros and consWeigh the pros and cons5.5. Make your decisionMake your decision6.6. Evaluate resultsEvaluate results

Identify your goalIdentify your goal: You want to see a movie : You want to see a movie with friendswith friends

Establish your CriteriaEstablish your Criteria: Type of movie, when, : Type of movie, when, how much can you spend, how much can you spend,

Examine your optionsExamine your options: Movie is sold out. What : Movie is sold out. What ware your options?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 consWeigh the pros and cons:: Make your decisionMake your decision:: Evaluate resultsEvaluate results: was the movie worth it? Could : was the movie worth it? Could

I have spent my money better.I have spent my money better.

When we make decisions we are making a When we make decisions we are making a trade-off.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 Now you and a partner do your own scenario. The scenario is buying a car. scenario. The scenario is buying a car.

Step 4: Create and Implement a Step 4: Create and Implement a PlanPlan

We have talked about financial planning We have talked about financial planning and its importance. The pros and cons to and its importance. The pros and cons to every decision.every decision. Now your job is to write a letter to your friend. Now your job is to write a letter to your friend.

Your friend has asked for some advice about Your friend has asked for some advice about intermediate financial goal. The following intermediate financial goal. The following should be on the index card: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 Step 5: Monitor and Modify the PlanPlan

The best way to monitor and stick to a The best way to monitor and stick to a plan is check regularly to see if you are plan is check regularly to see if you are sticking to the plan.sticking to the plan. Plan may change as different factors come Plan may change as different factors come

into your life. (Car breaks down, heat or air into your life. (Car breaks down, heat or air conditioning goes out at home)conditioning goes out at home)

Family ScenarioFamily Scenario

Get into groups of 4.Get into groups of 4. You are a family and you have been given a You are a family and you have been given a

scenario for your family.scenario for your family. You must think about what types of financial You must think about what types of financial

decisions they might need to make given the decisions they might need to make given the circumstances on their card. 5 minutes circumstances on their card. 5 minutes brainstormbrainstorm

Now identify 2 potential unexpected events that Now identify 2 potential unexpected events that might impact your financial planning.might impact your financial planning.

CreditCredit

Credit Warm-upCredit Warm-up

Do any of you relate with Tiffany? Have you ever Do any of you relate with Tiffany? Have you ever wanted something that you don’t have?wanted something that you don’t have?

How did Tiffany choose to get what she wanted?How did Tiffany choose to get what she wanted? Evaluate Tiffany’s decision. Was this a smart Evaluate Tiffany’s decision. Was this a smart

move on her part? Why?move on her part? Why? What mistakes did Tiffany make? What What mistakes did Tiffany make? What

consequences might result from these consequences might result from these mistakes?mistakes?

Is this scenario realistic?Is this scenario realistic?

What is your definition of Credit???What is your definition of Credit???

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

Credit StatsCredit Stats

Nearly ____% of teens owe money to Nearly ____% of teens owe money to either a person or company, with an either a person or company, with an average debt of $ ____.average debt of $ ____.

About ____% of teens ages 16-18 already About ____% of teens ages 16-18 already have money than $1,000 in debt.have money than $1,000 in debt.

___% of teens say that understand how ___% of teens say that understand how credit and interest fees work.credit and interest fees work.

___% of teens say they know how to ___% of teens say they know how to establish good credit.establish good credit.

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

Installment loans: loans that have terms Installment loans: loans that have terms and monthly installmentsand monthly installments

Student loans: loans which usually have Student loans: loans which usually have an interest rate that does not start until an interest rate that does not start until after graduation. Usually lowafter graduation. Usually low

Mortgage loans: loans specifically used to Mortgage loans: loans specifically used to buy a home.buy a home.

Have any of you ever gotten a loan before Have any of you ever gotten a loan before or bought something on credit?or bought something on credit?

What were the conditions of that loan?What were the conditions of that loan? Did you repay the loan?Did you repay the loan?

When is credit appropriate? When is it When is credit appropriate? When is it not?not?

Interest ratesInterest rates

Advertisers usually like to focus on the Advertisers usually like to focus on the monthly payments.monthly payments. Ex. Buy it now for only $99 a month, but they Ex. Buy it now for only $99 a month, but they

do not tell you that you will be paying more in do not tell you that you will be paying more in the long run.the long run.

Back to TiffanyBack to Tiffany

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

Now look at the chart I just provided.Now look at the chart I just provided. Now after look at Tiffany’s scenario, why Now after look at Tiffany’s scenario, why

do people use credit cards.do people use credit cards. What advice would you give Tiffany?What advice would you give Tiffany? What is a common mistake people make What is a common mistake people make

after they get behind on credit card after they get behind on credit card payments? payments?

Be a Savvy ShopperBe a Savvy Shopper

Read fine print of credit card and loan Read fine print of credit card and loan applicationsapplications Need to know interest ratesNeed to know interest rates

• Is it fixed or can it change?Is it fixed or can it change?

Credit: The Good and the BadCredit: The Good and the Bad

Tell me the good and the bad things about Tell me the good and the bad things about using credit.using credit.

Credit: The Good and the BadCredit: The Good and the Bad

ProsPros ConvenienceConvenience ProtectionProtection EmergenciesEmergencies Opportunity to build Opportunity to build

creditcredit Quicker GratificationQuicker Gratification Special OffersSpecial Offers BonusesBonuses

Cons:Cons: InterestInterest OverspendingOverspending DebtDebt Identity theftIdentity theft

Credit ReportsCredit Reports

This is a record that tracks their success in This is a record that tracks their success in managing money responsibly.managing money responsibly. Credit history follows them for the rest of their Credit history follows them for the rest of their

lives.lives. Current habits can carry over into adulthood.Current habits can carry over into adulthood.

Credit ReportsCredit Reports

Tells your credit historyTells your credit history Lenders look at:Lenders look at:

Credit history, current loans, past loans, bills paid on Credit history, current loans, past loans, bills paid on time, late, or not at all.time, late, or not at all.

Out of these factors you get a credit score which Out of these factors you get a credit score which tells your creditworthiness.tells your creditworthiness. This tells creditors how risky you are and might affect This tells creditors how risky you are and might affect

your interest rate or ability to get a loan.your interest rate or ability to get a loan. www.truecredit.come/pdf/learnCenter/Reading_Your_www.truecredit.come/pdf/learnCenter/Reading_Your_

Report.pdfReport.pdf

Who looks at credit reports?Who looks at credit reports?

All lendersAll lenders Cell phone companiesCell phone companies RentersRenters EmployersEmployers

Developing Good CreditDeveloping Good Credit

Always pay bills on timeAlways pay bills on time Savings account: make regular deposit no Savings account: make regular deposit no

matter the amountmatter the amount Be choose with credit card and loansBe choose with credit card and loans Surprisingly it is better to maintain low Surprisingly it is better to maintain low

balance on one card and pay it off each balance on one card and pay it off each month than to have no balance at all.month than to have no balance at all.

Developing Bad CreditDeveloping Bad Credit

Making late paymentsMaking late payments Writing bad checksWriting bad checks Having a lot of credit cardsHaving a lot of credit cards Changing credit cards often.Changing credit cards often.

ActivityActivity

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

Savings and InvestingSavings and Investing

““It takes money to make money”It takes money to make money”

How many of you have a savings account?How many of you have a savings account? SavingsSavings is what people often do to meet shorter-term is what people often do to meet shorter-term

goals. Money is put aside for later, but is accessible goals. Money is put aside for later, but is accessible when it is needed.when it is needed.

InvestingInvesting is what people do to meet longer-term is what people do to meet longer-term goals. Money is put aside for use far into the future goals. Money is put aside for use far into the future and is typically not accessible for specified period of and is typically not accessible for specified period of time. Higher risk, but higher reward.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 DollarValue of a Dollar

If I put a $100 dollars in my dresser and If I put a $100 dollars in my dresser and leave it in there for a year will it still buy leave it in there for a year will it still buy me as much then?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 How much was gas when you were 5 years

old?old? What does this tell use we should do with our What does this tell use we should do with our

money so it does not lose its value?money so it does not lose its value?

InvestInvest

Interest=Principal X Interest Rate X TimeInterest=Principal X Interest Rate X Time So you invest $100 at 4% interest annually for 1 year. So you invest $100 at 4% interest annually for 1 year.

How much do you have at the end of one year.How much do you have at the end of one year.

3 Rules to Investing:3 Rules to Investing: The more money you invest the more you earnThe more money you invest the more you earn The higher interest rate you have, the more likely to The higher interest rate you have, the more likely to

gain.gain. The sooner you invest the more likely that you could The sooner you invest the more likely that you could

earn much more. earn much more.

Now complete the “power of Now complete the “power of Compounding” Handout.Compounding” Handout.

Compound InterestCompound Interest

Now there is a better way to figure out Now there is a better way to figure out compound interest?compound interest?

Amount=Principal (1+Interest Rate) Amount=Principal (1+Interest Rate) Number of years compoundedNumber of years compounded

Risk/Reward Tradeoff:Risk/Reward Tradeoff: When investing never over extend yourself or When investing never over extend yourself or

put everything you have in a high risk put everything you have in a high risk investment. High risk equals high reward, but investment. High risk equals high reward, but you may lose everything.you may lose everything.

If you are making short-term investment If you are making short-term investment probably more willing to do low risk. If you are probably more willing to do low risk. If you are making long-term investment high risk will be making long-term investment high risk will be better.better.

Types of InvestmentTypes of Investment

Income Investment: Can access money at Income Investment: Can access money at anytime. (like savings) Paid cash for anytime. (like savings) Paid cash for owning investment. Few months.owning investment. Few months.

Growth Investment: Are those that you buy Growth Investment: Are those that you buy and hope that it gains. Long term and hope that it gains. Long term investment (Decades) and penalty for investment (Decades) and penalty for accessing money early.accessing money early.

You read through handout about Income You read through handout about Income and Growth Investments.and Growth Investments.

CheckingChecking

Checks over Cash!!!Checks over Cash!!!

What are the benefits to having a checking What are the benefits to having a checking account rather than just using cash?account rather than just using cash?

Benefits: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 Convenience: Don’t always have to have cash

or easier to make purchases.or easier to make purchases. Easier Budgeting: Tracking money easier Easier Budgeting: Tracking money easier

(Online banking)(Online banking) Proof of Payment: Proof that you paid for Proof of Payment: Proof that you paid for

something. Checksomething. Check

Factors When PickingFactors When Picking

Location: hours, ATMsLocation: hours, ATMs Fees: monthly fees, balance inquiry fees, Fees: monthly fees, balance inquiry fees,

ATM fees, overdraftATM fees, overdraft Interest: rate earnedInterest: rate earned Restrictions: Minimum deposit, insuranceRestrictions: Minimum deposit, insurance Special features: Direct Deposit, overdraft Special features: Direct Deposit, overdraft

protection, online banking, discounts for protection, online banking, discounts for students.students.

Opening checking accountOpening checking account 2 forms of ID2 forms of ID Money to depositMoney to deposit

Get checks in about a week.Get checks in about a week. Usually get temporary checks until then.Usually get temporary checks until then.

Precautions You Need To TakePrecautions You Need To Take

When writing your check you are entering When writing your check you are entering a binding contract for that amount of a binding contract for that amount of money. (Bounced check fee will be money. (Bounced check fee will be charged if you have insufficient funds $25)charged if you have insufficient funds $25)

Always write in inkAlways write in ink Once endorsed anyone can cash it.Once endorsed anyone can cash it. Keep unused checks upKeep unused checks up Check statements often to ensure no Check statements often to ensure no

unauthorized activity.unauthorized activity.

To Deposit:To Deposit: Cash:$200.00Cash:$200.00 Checks: Check #9283: $187.58 (Paycheck)Checks: Check #9283: $187.58 (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. Fill out the deposit slips that have been provided. The transfer the deposits on to the Register. The transfer the deposits on to the Register. Make sure that all 4 deposits are on the register Make sure that all 4 deposits are on the register and fill out correctly. (1and fill out correctly. (1stst one is done) one is done)

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

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