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• Introduction to Financial Services • Basic Banking Services • Money Management • Credit. Activity 1…….Where Do I Keep My Money? Activity 2…….Evaluating Financial Services Activity 3…….Banks, Yesterday and Today. Introduction to Financial Services - Activity 1. ACTIVITY 1

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Presentation Transcript
slide1

• Introduction to Financial Services

• Basic Banking Services

• Money Management

• Credit

slide2
Activity 1…….Where Do I Keep My Money?
  • Activity 2…….Evaluating Financial Services
  • Activity 3…….Banks, Yesterday and Today
introduction to financial services activity 1
Introduction to Financial Services - Activity 1

ACTIVITY 1

Where Do I Keep My Money?

Overview

• The functions of banks

• The cost of alternative financial services

• The stability of banks

3

slide4
Slide 1 - Places to Save MoneyLesson Reference: Introduction to Financial Services, Activity 2 – Overhead 1
  • PLACES TO SAVE MONEY
  • Would you save your money in any of these places? Why? Why not? Can you think of other places to save money?
      • Bed & Mattress
      • Cookie Jar
      • Pillow
      • Wallet
      • Money Belt
      • Small House Safe

4

slide5
Slide 2 - Alternative Financial Services Lesson Reference: Introduction to Financial Services, Activity 1 – Handout 1
  • ALTERNATIVE FINANCIAL SERVICES
  • Check-Cashing Services
  • Check-Deferrals, Cash Advances, Payday Loans
  • Pawn Shops
  • Rapid Tax Refunds
  • Rent-to-Own
  • Other Financial Services

5

slide 3 fdic lesson reference introduction to financial services activity 1 overhead 2
Slide 3 – FDIC Lesson Reference: Introduction to Financial Services, Activity 1 – Overhead 2
  • FEDERAL DEPOSIT INSURANCE
  • CORPORATION (FDIC)
  • Established in 1933.
  • Insures most Savings, Checking,
  • and other Deposit Accounts, up to $100,000 per depositor,
  • per institution.
  • Applies to most Commercial Banks, Savings Banks, and
  • Savings Associations.

6

slide7

ACTIVITY 2Evaluating Financial Services

  • Overview
  • Formal and informal financial services
  • Costs of alternative financial services and average bank accounts
  • Advantages of establishing a banking relationship

7

Introduction to Financial Services – Activity 2

slide8

FORMALFINANCIAL SERVICES

  • Accounts
  • Credit cards
  • Loans
  • Investment vehicles
  • Direct deposit
  • Wire transfers/ remittances
  • INFORMAL
  • FINANCIAL
  • SERVICES
  • Payday lenders
  • Check cashing services
  • Rent-to-own stores
  • Pawn shops
  • Title lenders
  • Loans from family/friends
  • Cultural savings clubs
  • Remittances offered through nonfinancial institutions

8

Slide 1 – Formal and Informal Financial Services Lesson Reference: Introduction to Financial Services, Activity 2 – Overhead 1

slide9

HOW A BANK CAN SAVE YOU MONEY

Monthly Fees without a Bank Monthly Fees with a Bank*

  • $0 to directly deposit paycheck
  • $0 to get cash from bank's ATMs or make debit card purchase
  • $0 to pay monthly bills using electronic bill payment
  • $5 to send money to family
  • Monthly cost: $5.00
  • Annual cost: $60.00
  • $80 to cash paychecks
  • $3.81 on money orders and stamps to pay bills
  • $15 to send money to family with a wire transfer company
  • Monthly cost: $98.81
  • Annual cost: $1,185.72

Annual Savings by Using a Bank: $1,125.72

9

Slide 2 – How a Bank Can Save You Money Lesson Reference: Introduction to Financial Services, Activity 2 – Handout 2

slide10

ADVANTAGES OF ESTABLISHING A BANKING RELATIONSHIP

Nearly everyone needs a bank account to help manage his or her day-to-day money.

Bank accounts can help you to:

• Pay bills

• Manage your money

• Receive money

• Send money to a friend or family member

• Keep your money secure

• Start building wealth

• Earn interest

10

Slide 3 – Advantages of a Banking Relationship Lesson Reference: Introduction to Financial Services, Activity 2 – Overhead 2

introduction to financial services activity 3
Introduction to Financial Services - Activity 3

ACTIVITY 3Banks, Yesterdayand Today

Overview

  • The many traditional financial services provided by a bank
  • Other expanded financial services provided by a bank
  • The impact of banks throughout the community

11

slide12
Slide 1 - Traditional Services of Banks Lesson Reference: Introduction to Financial Services, Activity 3 – Overhead 1
  • TRADITIONAL
  • SERVICES
  • OF BANKS
  • Checking Accounts
  • Savings Accounts
  • CDs (Certificates of Deposit)
  • Savings Bonds
  • Loans
    • Car
    • Home
    • Personal
  • Safe Deposit Boxes

12

slide13
Slide 2 - Expanded Services of Banks Lesson Reference: Introduction to Financial Services, Activity 3 – Overhead 2
  • TRADITIONAL
  • SERVICES
  • OF BANKS
  • Checking Accounts
  • Savings Accounts
  • CDs (Certificates of Deposit)
  • Savings Bonds
  • Loans
    • Car
    • Home
    • Personal
  • Safe Deposit Boxes
  • EXPANDED
  • SERVICES
  • OF BANKS
  • Insurance Sales
  • Small Business Advising and Loans
  • Investments
  • Credit Cards
  • Remittances

13

slide14
Slide 3 - Financial Services Modernization Act Lesson Reference: Introduction to Financial Services, Activity 3 – Overhead 3
  • FINANCIAL SERVICES
  • MODERNIZATION ACT (1999)
  • Transformed the banking industry. Eliminated many
  • restrictions among companies in the securities,
  • banking, and insurance industries.
  • Results?
  • Banks may offer some insurance and investment services.
  • Investment and insurance companies may offer some traditional banking services. Investments are not insured by FDIC.

14

slide15
Slide 4 - Some Community-Related Services Lesson Reference: Introduction to Financial Services, Activity 3 – Overhead 4
  • SOME COMMUNITY-RELATED
  • SERVICES OF BANKS
  • Bank employees mentor students in areas of basic financial skills.
  • Bank employees serve on community organizations’ boards of directors.
  • Banks provide scholarships to students going into the banking profession.
  • Banks fund affordable housing construction.

15

slide16
Activity 1………….Why Do You Need A Bank?
  • Activity 2………The Many Services of a Bank
  • Activity 3….The ABCs of a Checking Account
  • Activity 4……….Opening a Checking Account
  • Activity 5………………….How to Write a Check
  • Activity 6…..Maintaining a Checking Account
  • Activity 7……The ABCs of a Savings Account
basic banking services activity 1
Basic Banking Services - Activity 1
  • ACTIVITY 1
  • Why Do You
  • Need a Bank?
  • Overview
  • Purposes of banks
  • The differences between banks and
  • credit unions
  • Safety of financial institutions
  • Banks as money management tools
  • The Earned Income Tax Credit

17

slide18
Slide 1 – Safety of Financial Institutions Lesson Reference: Basic Banking Services, Activity 1 – Overhead 3

SAFETY OF FINANCIAL INSTITUTIONS

COMMERCIAL BANKS CREDIT UNIONS

18

slide 2 eitc lesson reference basic banking services activity 1 handout 2
Slide 2 – EITC Lesson Reference: Basic Banking Services, Activity 1 – Handout 2

THE EARNED INCOME TAX CREDIT

The Earned Income Tax Credit (EITC) is a federal tax credit used to reduce the tax burden on low-income working people and to supplement low-income working people’s wages. Low-income workers often use this refund for the initial deposit required to open a bank account and then pay off debt, save for emergencies, or save for long-term goals such as homeownership.

Workers are eligible for the EITC when they earn an annual income that is less than a specified amount. This is possible even if they have no tax liability and no money was withheld from their paychecks for taxes.

In order to qualify for the EITC, a taxpayer must have a Social Security Number and an annual income and/or investment income that falls below a certain level. Contact the IRS, a tax preparer, or a VITA representative to obtain the current income level requirements.

19

basic banking services activity 2
Basic Banking Services - Activity 2
  • ACTIVITY 2
  • The Many Servicesof a Bank
  • Overview
  • Financial services provided by a bank
  • Bank employees
  • Services that might be of personal benefit
  • The impact of state and federal regulations upon the security of a bank

20

slide21

REMITTANCE OPTIONS

  • TO SEND AND RECEIVE MONEY
  • 1. Money Transfer Organizations
  • 2. Bank Transfers
  • 3. Hand Delivery
  • 4. Mail
  • 5. Hawala
  • 6. Post Offices
  • 7. Stored Value Cards

21

Slide 1 – Remittance Options Lesson Reference: Basic Banking Services, Activity 2 - Overhead 1

slide22

BANK OCCUPATIONS

  • • Tellers
  • • Platform Bankers
  • • Mortgage Lenders
  • • Operations Manager
  • • Branch Manager

22

Slide 2 – Bank Occupations Lesson Reference: Basic Banking Services, Activity 2 – Overhead 2

slide 3 electronic bank services lesson reference basic banking services activity 2 overhead 3
Slide 3 - Electronic Bank Services Lesson Reference: Basic Banking Services, Activity 2 – Overhead 3
  • ELECTRONIC BANK SERVICES
  • Online banking is the fastest growing Internet
  • activity in the U.S.
  • Types of Services
  • Bank Cards
  • Automated Services
  • Protect Your Passwords!

23

slide 4 bank card types lesson reference basic banking services activity 2 overhead 4
Slide 4 - Bank Card Types Lesson Reference: Basic Banking Services, Activity 2 – Overhead 4

BANK CARD TYPES

  • TYPE
  • Check Cards or
  • ATM/Debit Cards
  • Stored Value Cards
  • DESCRIPTION
  • Bank cards that allow for the payment of goods and services to be subtracted directly from a bank deposit account.
  • Can be used with merchants that take major credit cards—known as point of sale (POS) transactions.
  • Bank cards with preset, limited value.
  • Used to pay for goods and services.
  • Alternative to cash.

24

slide25

ELECTRONIC BANK SERVICES

  • • Direct Deposit
  • • Transfers between Accounts
  • • Transfers to a Third Party
  • • Online Banking
  • • Bank by Phone
  • • ATM

25

Slide 5 – Electronic Bank Services Lesson Reference: Basic Banking Services, Activity 2 – Handout 3

slide26
Slide 6 - Regulation of Electronic Banking Lesson Reference: Basic Banking Services, Activity 2 – Overhead 5
  • REGULATION OF ELECTRONIC
  • BANKING SERVICES
  • Electronic Fund Transfer Act
  • Protects consumers using any type of electronic
  • banking from loss and protects their privacy.
  • Banks must:
  • Offer consumers a record or receipt for all computer
  • transactions.
  • Investigate errors and report to consumer within ten days of error notification.
  • Customers are responsible to report any errors.

26

basic banking services activity 3
Basic Banking Services - Activity 3
  • ACTIVITY 3
  • The ABCs of a Checking Account
  • Overview
  • Purposes of a checking account
  • Shopping for and comparing checking accounts

27

slide28

CHECKING ACCOUNT TERMS

  • Bank Statement
  • Cancelled Check
  • Check
  • Check Register/Ledger
  • Endorsement
  • Fee
  • Interest
  • Minimum Balance
  • Outstanding Transactions
  • Overdraft
  • Overdraft Protection
  • Payee
  • Reconciling a Bank Statement
  • Transaction Limits

28

Slide 1 - Checking Account Terms Lesson Reference: Basic Banking Services, Activity 3 – Handout 1

slide 2 shopping around lesson reference basic banking services activity 3 handout 2
Slide 2 - Shopping Around Lesson Reference: Basic Banking Services, Activity 3 - Handout 2

SERVICES

Location of bank

Location of ATMs

Banking hours

Minimum balance required

Minimum transactions or limits

Interest-bearing accounts?

Other

COSTS

Non-primary bank ATM transactions

In-branch transaction fees

Per-check fees

Other checking fees

Overdraft protection

Printing of checks

SHOPPING

AROUND

(THINGS TO ASK ABOUT WHEN

OPENING A CHECKING ACCOUNT)

29

basic banking services activity 4
Basic Banking Services - Activity 4

ACTIVITY 4

Opening a Checking Account

Overview

• Checking Account Application Process

• The Application

• Acceptable Forms of ID

• The Signature Authorization Card

• The PATRIOT Act

30

slide31

OPENING A CHECKING ACCOUNT

31

Slide 1 – Opening a Checking Account Lesson Reference: Basic Banking Services, Activity 4 – Handout 1

slide 2 commonly accepted forms of id lesson reference basic banking services activity 4 handout 2
Slide 2 - Commonly Accepted Forms of IDLesson Reference: Basic Banking Services, Activity 4 – Handout 2

COMMONLY ACCEPTED FORMS OF ID

Primary ID*

  • Photo Driver’s License issued within the U.S. or Canada
  • State Non-Driver Photo ID
  • Photo Learner’s Permit
  • Government Photo ID
  • U.S. Passport
  • Non-U.S. Passport
  • Resident Registration Card
  • Mexican Consular ID (Matricula Consular)
  • Naturalization Certificate
  • Employee Photo ID (from a recognizable employer)
  • Photo Trade License (barber, plumber, electrician, etc.)
  • Student Photo ID (college/trade school)
  • Medicare Card (must be 65 or older)

* Financial institutions' ID requirements may differ; check with the institution first before applying for an account.

32

slide 3 commonly accepted forms of id lesson reference basic banking services activity 4 handout 2
Slide 3 - Commonly Accepted Forms of IDLesson Reference: Basic Banking Services, Activity 4 – Handout 2

COMMONLY ACCEPTED FORMS OF ID

Secondary ID*

  • Pay Stub
  • Car Registration
  • Mortgage Statement
  • Letter of Introduction from Bank, Embassy, or well-known Employer
  • Welfare Card
  • Supplemental Health Insurance Card
  • Foreign Driver’s License
  • State/Local Gun Permit
  • Utility Bill (Name and address of individual account should be listed)
  • Current Bank Statement
  • National Credit Card
  • Bank-issued Debit or Check Card

* Financial institutions' ID requirements may differ; check with the institution first before applying for an account.

33

slide34

THE PATRIOT ACT

Congress passed the PATRIOT Act in response to the terrorist attacks of September 11, 2001. Financial institutions are now required to collect certain information when a new account is opened.

1. The customer must provide identification that includes name, date of birth, address, and identification number.

2. The institution must maintain a copy of the information used to verify the person’s identity.

3. The institution must determine whether the applicant appears on the lists of known or suspected terrorists or terrorist organizations.

34

Slide 4 – The PATRIOT Act Lesson Reference: Basic Banking Services, Activity 4 – Overhead 1

slide35

SIGNATURE AUTHORIZATION CARD

35

Slide 5 – Signature Authorization Card Lesson Reference: Basic Banking Services, Activity 4 – Handout 3

basic banking services activity 5
Basic Banking Services - Activity 5

ACTIVITY 5

How to Write a Check

36

slide 1 writing a check lesson reference basic banking services activity 5 handout 1
Slide 1 - Writing a Check Lesson Reference: Basic Banking Services, Activity 5 – Handout 1

WRITING A CHECK

37

basic banking services activity 6
Basic Banking Services - Activity 6
  • ACTIVITY 6
  • Maintaining a
  • Checking Account
  • Overview
  • Check 21
  • Keeping a check register
  • Making a deposit into a checking account
  • Reconciling a bank statement
  • Maintaining a checking account
  • Avoiding Overdrafts

38

slide39

CHECK 21

Check 21 is a federal law that helps banks handle more checks electronically and that makes check processing faster and more efficient.

Under this law, a check deposited in a bank is typically “delivered” overnight to the paying bank and deducted from the checkwriter’s account on the next business day.

Money may be deducted from your checking account almost immediately.

39

Slide 1 – Check 21 Lesson Reference: Basic Banking Services, Activity 6 – Handout 1

slide 2 keeping a check register lesson reference basic banking services activity 6 handout 2
Slide 2 - Keeping a Check Register Lesson Reference: Basic Banking Services, Activity 6 – Handout 2

KEEPING A CHECK REGISTER

40

slide41
Slide 3 - Making a Deposit - Endorsing a Check Lesson Reference: Basic Banking Services, Activity 6 – Handout 2

MAKING A DEPOSIT - ENDORSING A CHECK

The Back Side of a Check

Restrictive Endorsement

(most secure)

Blank Endorsement(least secure)

Endorsement to a third party

41

slide42
Slide 4 - Making a Deposit - Completing a Deposit Slip Lesson Reference: Basic Banking Services, Activity 6 – Handout 2

MAKING A DEPOSIT - COMPLETING A DEPOSIT SLIP

42

slide 5 reconciling a bank statement lesson reference basic banking services activity 6 handout 2
Slide 5 - Reconciling a Bank Statement Lesson Reference: Basic Banking Services, Activity 6 – Handout 2

RECONCILING A BANK STATEMENT

43

slide44
OVERDRAFTS AND BOUNCED CHECKS

Overdrafts and bounced checks occur when you complete a financial transaction (e.g., write a check) for more than what is available in the account. Your financial institution may pay the amount and charge you a fee, known as an “overdraft fee” or a “nonsufficient funds fee.”

Tip: Avoid overdraft or non-sufficient funds fees by making a habit of monitoring the balance in your checking account.

44

Slide 6 – Overdrafts and Bounced Checks Lesson Reference: Basic Banking Services, Activity 6 – Overhead 1

basic banking services activity 7
Basic Banking Services - Activity 7
  • ACTIVITY 7
  • The ABCs of aSavings Account
  • Overview
  • Purpose of a savings account
  • Shopping for a savings account
  • Applying for a savings account
  • Monthly bank statement checkup

45

slide 1 reasons to save lesson reference basic banking services activity 7 overhead 1
Slide 1 - Reasons to Save Lesson Reference: Basic Banking Services, Activity 7 – Overhead 1
  • REASONS TO SAVE
  • Emergencies
  • Future Purchases
  • Future Investments

46

slide47
Slide 2 - Shopping for a Savings Account Lesson Reference: Basic Banking Services, Activity 7 – Overhead 2
  • SHOPPING FOR A
  • SAVINGS ACCOUNT
  • Factors to consider:
  • Safety
  • Risk
  • Liquidity
  • Minimum Account Balance Requirements
  • Fees and Service Charges
  • Interest Rate
  • Returns (Earnings)
  • Automatic Transfer
  • Direct Deposit

47

slide48

OPENING A SAVINGS ACCOUNT

48

Slide 3 – Opening a Savings Account Lesson Reference: Basic Banking Services, Activity 7 – Overhead 3

slide49

BANK STATEMENT

49

Slide 4 – Bank Statement Lesson Reference: Basic Banking Services, Activity 7 – Overhead 4

slide50
Activity 1………………Saving vs. Investing
  • Activity 2……….….Saving for a Rainy Day
  • Activity 3……………………..1 + 1 = Saving
  • Activity 4…..Investing for the Long Term
money management activity 1
Money Management - Activity 1
  • ACTIVITY 1
  • Saving vs. Investing
  • Overview
  • Saving vs. investing
  • Information on a paycheck
  • Making a financial plan
  • Budgeting

51

slide 1 do you save do you invest lesson reference money management activity 1 overhead 1
Slide 1 - Do You Save? Do You Invest? Lesson Reference: Money Management, Activity 1 – Overhead 1

DO YOU SAVE?

DO YOU INVEST?

52

slide 2 saving vs investing lesson reference money management activity 1 overhead 2
Slide 2 - Saving vs. Investing Lesson Reference: Money Management, Activity 1 – Overhead 2
  • SAVING VS. INVESTING
  • Saving
  • Short-term.
  • Postpones spending.
  • Has safety precautions.
  • Investing
  • Long-term.
  • Exchanges money for something with the future expectation of receiving a profit.
  • Has risk factors.

53

slide54

TAKE A GOOD LOOK AT A PAYCHECK

54

Slide 3 – Paycheck Lesson Reference: Money Management, Activity 1 – Handout 1

slide55

MAKING A SUCCESSFUL

  • FINANCIAL PLAN
  • Start as early as possible.
  • Set goals.
  • Include both short- and long-term strategies.
  • Support the plan with a practical, working budget.
  • Review the plan on a regular schedule.
  • Do your homework while working on your plan.
  • Put the plan in writing.

55

Slide 4 – Making a Successful Financial Plan Lesson Reference: Money Management, Activity 1 – Handout 2

slide 5 financial plan assistance lesson reference money management activity 1 overhead 3
Slide 5 - Financial Plan Assistance Lesson Reference: Money Management, Activity 1 – Overhead 3
  • FINANCIAL PLAN ASSISTANCE
  • Bankers
  • Certified Financial Planners
  • Schools and Courses
  • Peer Groups and Investment Clubs
  • The Media
  • The Internet

56

slide57
Savings & Investments
  • Fixed Expenses
  • Periodic Fixed Expenses
  • Variable Expenses
  • Debts

BUILDING MY

MONTHLY BUDGET

Slide 6 – Building my Monthly Budget Lesson Reference: Money Management, Activity 1 – Handout 4

57

money management activity 2
Money Management - Activity 2
  • ACTIVITY 2
  • Saving for a
  • Rainy Day
  • Overview
  • Reasons to save
  • Concerns and issues with saving
  • Where to save

58

slide 1 saving for a rainy day lesson reference money management activity 2 overhead 1
Slide 1 - Saving for a Rainy Day Lesson Reference: Money Management, Activity 2 – Overhead 1

SAVING FOR A RAINY DAY

59

slide 2 reasons to save lesson reference money management activity 2 overhead 2
Slide 2 - Reasons to Save Lesson Reference: Money Management, Activity 2 – Overhead 2
  • REASONS TO SAVE
  • Provide for unexpected emergencies.
  • Purchase expensive items in the future.
  • Ensure retirement.
  • Plan for investment opportunities.

60

slide61

CONCERNS AND ISSUES

  • WHEN SAVING
  • • Safety
  • • Restrictions
  • • Liquidity
  • • Earnings
  • • Taxes

61

Slide 3 – Concerns and Issues When Saving Lesson Reference: Money Management, Activity 2 – Handout 1

slide62

PLACES TO SAVE

  • • Savings Accounts
  • • Money Market Accounts
  • • Certificates of Deposit (CDs)
  • • Savings Bonds
  • • Insurance

62

Slide 4 – Places to Save Lesson Reference: Money Management, Activity 2 – Handout 2

slide 5 looking at places to save lesson reference money management activity 2 overhead 3
Slide 5 - Looking at Places to Save Lesson Reference: Money Management, Activity 2 – Overhead 3

LOOKING AT PLACES TO SAVE

On a scale of 1 to 5 (with 1 being low and 5 being high), rate the

following places to save your money.

Based on the above ratings, where would you save your money? Why?

63

money management activity 3
Money Management - Activity 3

ACTIVITY 3

1 + 1 = Saving

Overview

  • Types of interest
  • The impact of saving
  • Savings regulations

64

slide 1 types of interest lesson reference money management activity 3 overhead 1
Slide 1 - Types of Interest Lesson Reference: Money Management, Activity 3 – Overhead 1

TYPES OF

INTEREST

Which type of return on

your money would you

prefer?

What’s the difference?

65

slide66

IMPACT OF RETURNS ON SAVINGS

This chart shows what happens at several different rates to $100 in an account when no money is withdrawn and interest is compounded yearly.

66

Slide 2 – Returns on Savings Lesson Reference: Money Management, Activity 3 – Handout 2

slide 3 savings regulations lesson reference money management activity 3 overhead 2
Slide 3 - Savings Regulations Lesson Reference: Money Management, Activity 3 – Overhead 2
  • SAVINGS REGULATIONS
  • Federal Government Insurance
  • Deposits are potentially insured up to $100,000.
  • FDIC (Federal Deposit Insurance Corporation)
  • NCUA (National Credit Union Administration)
  • Truth in Savings Act
  • Financial institutions must disclose the following
  • information about their consumer savings accounts:
  • Fees on accounts
  • Interest rate
  • General terms and conditions
  • Defines the year as 365 days for purposes of
  • determining the annual percentage rate of interest.

67

money management activity 4
Money Management - Activity 4
  • ACTIVITY 4
  • Investing for the Long Term
  • Overview
  • The Historical Performance of the S&P 500
  • • Reasons to Invest
  • • Investing Considerations
    • Investment Concerns
    • Places to Invest
  • • Online Money Management

68

slide 1 savings vs investing lesson reference money management activity 4 overhead 1
Slide 1 - Savings vs. Investing Lesson Reference: Money Management, Activity 4 – Overhead 1
  • SAVING vs. INVESTING
  • SAVING
  • Short-term.
  • Postpones spending.
  • Has safety precautions.
  • INVESTING
  • Long-term.
  • Exchanges money for something with the future expectation of receiving a profit.
  • Has risk factors.

69

slide70

SAVING VS. INVESTING, HISTORICALLY

The S&P 500 stock index has increased almost 200 percent since 1970. On average, the stock market returns 12 percent per year, including dividends.

Savings rates, by comparison, have been much lower – anywhere from 1.5% to 5%, usually depending on the length of time the savings are deposited.

70

Slide 2 - Saving vs. Investing, Historically Lesson Reference: Money Management, Activity 4 – Overhead 2

slide 3 places to invest lesson reference money management activity 4 overhead 3
Slide 3 - Places to Invest Lesson Reference: Money Management, Activity 4 – Overhead 3
  • PLACES TO INVEST
  • Stocks
  • Bonds
  • Mutual Funds
  • Retirement Plans
  • Real Estate
  • Collectibles/Valuables

71

slide72

QUESTIONS TO ASK BEFORE

  • MAKING AN INVESTMENT
  • How safe is the investment?
  • What types of returns can I expect?
  • What kind of risk is involved?
  • Can I get my money back if I need it? How long will it take and how much will it cost to get it back quickly?
  • Are my investments in a variety of places to spread my risks (diversification)?

72

Slide 4 – Questions to Ask Lesson Reference: Money Management, Activity 4 – Handout 2

slide73

INTERNET PRIVACY & SECURITY

  • Avoid passwords or screen names that are easy to guess.
  • Change passwords often.
  • Read privacy policies.
  • Check online accounts often. Report unfamiliar transactions.
  • Do not open emails with unsolicited offers that sound too good to be true.

73

Slide 5 – Internet Privacy & Security Lesson Reference: Money Management, Activity 4 – Overhead 4

slide74
Activity 1………….…………The ABCs of Credit
  • Activity 2……………….……………Credit Scores
  • Activity 3………….…………Establishing Credit
  • Activity 4………….…Maintaining Good Credit
  • Activity 5………….………………….Credit Cards
  • Activity 6……….Managing Credit Challenges
  • Activity 7……………..…………….Identity Theft
  • Activity 8………Prime and Subprime Lending
  • Activity 9……………………..Predatory Lending
  • Activity 10……………………………..Bankruptcy
credit activity 1
Credit - Activity 1
  • ACTIVITY 1
  • The ABCs of Credit
  • Overview
  • What is credit?
  • The five Cs of credit
  • Pros and cons of using credit
  • The big decision—Should I use credit?

75

slide76

CREDIT DEFINITIONS

Credit

Trust given to another person for future payment of a loan, credit card balance, etc.

Creditor

A person or company to whom a debt is owed.

76

Slide 1 – Credit Definitions Lesson Reference: Credit, Activity 1 – Handout 1

slide 2 the five cs of credit lesson reference credit activity 1 overhead 1
Slide 2 - The Five Cs of Credit Lesson Reference: Credit, Activity 1 – Overhead 1

THE FIVE Cs OF CREDIT

C = Capacity

C = Capital

C = Collateral

C = Conditions

C = Character

77

slide78

WHEN TO USE CREDIT

Can you describe a situation when it is a good time to use credit and when it is NOT a good time to use credit?

78

Slide 3 – When to Use Credit Lesson Reference: Credit, Activity 1 – Handout 2

slide79

QUESTIONS TO ASK

BEFORE USING CREDIT

1.

2.

3.

4.

5.

6.

7.

79

Slide 4 – Questions to Ask Lesson Reference: Credit, Activity 1 – Handout 3

slide80

ACTIVITY 2

  • Credit Scores
  • Overview
  • Credit scores and their impact
  • The factors that make up a credit score
  • Strategies to improve your credit score

80

Credit - Activity 2

slide81

WHAT IS A CREDIT SCORE?

  • A credit score is a number that helps a lender predict how likely an individual is to repay a loan, or make credit payments on time.
  • A credit score is a number that changes as the elements in a credit report change.
  • A credit score has broad use and impact. Your credit past is your credit future.
  • FICO® scores, one of the most common credit scoring systems, vary between 350 and 850.
  • VantageScoreSM, a new credit scoring system developed by the three credit bureaus, ranges from 501-990.

81

Slide 1 – What Is a Credit Score? Lesson Reference: Credit, Activity 2 – Overhead 1

slide82

WHAT MAKES UP A TYPICAL

CREDIT SCORE?

Source: Fair Isaac and Consumer Federation of America, 2005

82

Slide 2 – What Makes Up a Typical Credit Score? Lesson Reference: Credit, Activity 2 – Overhead 2

slide83

IMPROVING YOUR CREDIT SCORE

  • Pay bills on time.
  • Get current and stay current.
  • Don’t open a lot of new accounts too rapidly.
  • Correct mistakes.
  • Shop for loan rates within a focused period of time.
  • Keep balances low on revolving credit.
  • Pay off debt.
  • Check your credit report.

83

Slide 3 – Improving Your Credit Score Lesson Reference: Credit, Activity 2 – Handout 2

credit activity 3
Credit - Activity 3
  • ACTIVITY 3
  • Establishing Credit
  • Overview
  • Types and sources of credit
  • Credit safeguards
  • Applying for credit
  • Questions to ask when applying for credit

84

slide85

TYPES OF CREDIT

Cash Credit

Sales Credit

Secured Credit

Revolving Credit

I.O.U.

Single Payment Credit

Installment Credit

Other Types of Credit

85

Slide 1 – Types of Credit Lesson Reference: Credit, Activity 3 – Handout 1

slide 2 sources of credit lesson reference credit activity 3 overhead 1
Slide 2 - Sources of Credit Lesson Reference: Credit, Activity 3 – Overhead 1

SOURCES OF CREDIT

Banks

Credit

Unions

Retail

Stores

Finance

Companies

Savings & Loan

Associations

Internet

Stores

What are other sources of credit?

What sources of credit should be avoided? Why?

86

slide87

STEPS TO TAKE TO AVOID

  • ABUSIVE LENDING
  • Have you shopped around for the best deal?
  • Do you feel the lender pressured you to take the loan?
  • Do you understand the terms of the loan?

87

Slide 3 – Avoiding Abusive Lending Lesson Reference: Credit, Activity 3 – Handout 2

slide88

COMMON PARTS OF A

  • CREDIT APPLICATION
  • Reason for Loan
  • Personal Identification Information
  • Employment Information
  • Mortgage/Rental Information
  • Documentation Required (for some applications)
  • Current Debts
  • Credit References
  • Collateral (for some applications)
  • Bank References
  • Signature and Date

88

Slide 4 – Parts of a Credit Application Lesson Reference: Credit, Activity 3 – Handout 3

slide89

SAMPLE CREDIT APPLICATION

89

Slide 5 – Sample Credit Application Lesson Reference: Credit, Activity 3 – Handout 3

slide90

QUESTIONS TO ASK WHEN

  • APPLYING FOR CREDIT
  • What is the annual fee?
  • What is the annual percentage rate (APR)?
  • When are payments due?
  • What is the minimum payment required each month?
  • Is there a grace period?
  • Are there other fees associated with the credit, such as minimum finance charges?
  • What is the credit limit?
  • What are the penalties for late or missed payments?
  • What are the terms and conditions of the credit? What else is included in the fine print?

90

Slide 6 – Questions to Ask Lesson Reference: Credit, Activity 3 – Handout 5

credit activity 4
Credit - Activity 4
  • ACTIVITY 4
  • Maintaining
  • Good Credit
  • Overview
  • Debt to income thermometer
  • Credit process
  • Credit reporting agencies
  • Credit safeguards for consumers
  • Credit reports, ratings and scores
  • Establishing a credit history

91

slide 1 debt to income thermometer lesson reference credit activity 4 overhead 1
Slide 1 – Debt-to-Income Thermometer Lesson Reference: Credit, Activity 4 – Overhead 1

DEBT-TO-INCOME THERMOMETER

92

slide 2 the credit process lesson reference credit activity 4 overhead 2
Slide 2 - The Credit Process Lesson Reference: Credit, Activity 4 – Overhead 2

THE CREDIT PROCESS

CREDIT HISTORY

CREDIT BUREAU

CREDIT REPORT

CREDIT SCORE

CREDIT RATING

93

slide94

SAMPLE CREDIT REPORT

94

Slide 3 – Sample Credit Report Lesson Reference: Credit, Activity 4 – Handout 2

slide 4 credit safeguards for consumers lesson reference credit activity 4 handout 3
Slide 4 - Credit Safeguards for Consumers Lesson Reference: Credit, Activity 4 – Handout 3

CREDIT SAFEGUARDS FOR CONSUMERS

Truth In Lending Act

Fair Credit Reporting Act

Equal Credit Opportunity Act

Fair Credit Billing Act

Fair Debt Collection Practices Act

95

slide96

THE FAIR AND ACCURATE CREDIT TRANSACTION ACT

  • One of the primary objectives behind the Fair and Accurate Credit Transaction Act (the FACT Act) is to help consumers fight the growing crime of identity theft. The following are some highlights of the Act.
    • Free credit reports
    • Fraud alerts and Active Duty alerts
    • Truncation: credit cards, debit cards, Social Security Number
    • Red flags
    • Disposal of consumer reports
    • Credit scores

96

Slide 5 – FACT Act Lesson Reference: Credit, Activity 4 – Handout 4

slide 6 things to establish good credit lesson reference credit activity 4 overhead 3
Slide 6 - Things to Establish Good Credit Lesson Reference: Credit, Activity 4 – Overhead 3

THINGS TO DO TO ESTABLISH

AND MAINTAIN GOOD CREDIT

What can everyone do to establish and maintain good credit?

1. Pay all bills on time.

2. Avoid late fees.

3.

4.

5.

6.

97

credit activity 5
Credit - Activity 5
  • ACTIVITY 5
  • Credit Cards
  • Overview
  • Types of credit cards
  • Shopping for a credit card
  • Costs of credit

98

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Slide 1 - Types of Credit Cards Lesson Reference: Credit, Activity 5 – Overhead 1
  • TYPES OF CREDIT CARDS
  • Private Label
  • Issued by a single source
  • Can only be used at a single source
  • Examples: Department Stores, Gasoline Companies
  • General Label
  • Issued by a single source
  • Can be used in many places
  • Examples: Bank Card, Major Credit Card

99

slide 2 shopping for a credit card lesson reference credit activity 5 overhead 2
Slide 2 - Shopping for a Credit Card Lesson Reference: Credit, Activity 5 – Overhead 2

SHOPPING FOR A CREDIT CARD

DECISIONS, DECISIONS...

ANNUAL FEE?

APR?

COMPUTATION METHOD?

GRACE PERIOD?

FINANCE CHARGE?

CREDIT LIMIT?

CARD INCENTIVES?

100

slide101

QUESTIONS TO ASK WHEN SHOPPING FOR A CREDIT CARD

    • Annual fee
    • Annual percentage rate (APR)
    • Minimum payment
    • Computation method
    • Grace period
    • Finance charges
    • Card incentives

101

Slide 3 – Questions to Ask Lesson Reference: Credit, Activity 5 – Handout 1

slide102

COSTS OF CREDIT

How much can credit cost? If you make only the minimum payment for an item, here are some examples of what you might actually pay and how long it will take you to pay it.

102

Slide 4 – Costs of Credit Lesson Reference: Credit, Activity 5 – Handout 2

credit activity 6
Credit - Activity 6
  • ACTIVITY 6
  • Managing Credit
  • Challenges
  • Overview
  • Warning signs of credit abuse
  • Credit card reductions
  • Correcting credit errors
  • Resources and assistance

103

slide104

MEASURING THE SERIOUSNESS OF CREDIT TROUBLE SIGNS

Rate how serious you think each of the following trouble signs is.

1 = Not Serious 4 = Very Serious

Trouble Signs

  • Delinquent Payments
  • Default Notices
  • Repossessions
  • Collection Agencies
  • Lien
  • Garnishment
  • Others?

104

Slide 1 – Rating Trouble Signs Lesson Reference: Credit, Activity 6 – Handout 1

slide105

WARNING SIGNS OF DEBT PROBLEMS

  • Delinquent Payments
  • Default Notices
  • Repossessions
  • Collection Agencies
  • Judgment Lien
  • Garnishment

105

Slide 2 – Warning Signs Lesson Reference: Credit, Activity 6 – Handout 2

slide106

CREDIT CARD REDUCTIONS

Paying only the minimum payments on your credit card may seem appealing, but if only minimum payments are made, it can take years, and sometimes decades, to achieve full repayment.

Paying the minimum amount due keeps your credit history clean, but it also costs you more.

106

Slide 3 – Credit Card Reductions Lesson Reference: Credit, Activity 6 – Handout 3

slide107

CORRECTING CREDIT ERRORS

  • Circle the incorrect items on your credit report.
  • Write a letter to the reporting agency, telling them which information you think is inaccurate. Provide supporting documentation.
  • Send all materials by certified mail.
  • Send a similar letter to the creditor whose reports you disagree with.
  • The reporting agency will conduct an investigation.
  • If negative information is accurate, it can stay on your report for 7-10 years.

107

Slide 4 – Correcting Credit Errors Lesson Reference: Credit, Activity 6 – Handout 4

slide108

CORRECTING CREDIT PROBLEMS

    • Take responsibility for actions.
    • Communicate with creditors.
    • Debt Consolidation
    • Credit Counseling
    • Bankruptcy

108

Slide 5 – Correcting Credit Problems Lesson Reference: Credit, Activity 6 – Handout 5

slide109

ACTIVITY 7

  • Identity Theft
  • Overview
  • The growing problem of identity theft and how it occurs
  • Strategies to protect your personal information
  • Steps to take if your identity has been stolen.

109

Credit - Activity 7

slide110

IDENTITY THEFT

Identity theft occurs when someone uses your personal identifying information to either establish credit under your name or to take over an existing account that you established without your authorization.

This information may include:

  • Social Security Numbers
  • Name
  • Address
  • Date of birth
  • Mother’s maiden name
  • Passwords
  • PINs

110

Slide 1 – Identity Theft Lesson Reference: Credit, Activity 7 – Overhead 1

slide111

HOW TO AVOID IDENTITY THEFT

  • Monitor your credit report.
  • Don’t give out personal information to unknown persons or companies.
  • Protect your credit and debit cards.
  • Protect your mailbox.
  • Protect your wallet.
  • Use passwords and PINs that can’t be easily guessed.
  • Use anti-virus software on your computer.
  • Notify your bank when you change your address or phone number.
  • Other suggestions?

111

Slide 2 – How to Avoid Identity Theft Lesson Reference: Credit, Activity 7 – Handout 2

slide112

WHAT TO DO IF YOUR IDENTITY

HAS BEEN STOLEN

If you think your identity has been stolen, take the following steps:

  • Contact the three major credit bureaus (Equifax, Experian, and Trans Union).
  • Close accounts.
  • Contact all creditors involved.
  • File a police report.
  • Keep a record of your contacts.

112

Slide 3 – What to Do Lesson Reference: Credit, Activity 7 – Overhead 2

slide113

ACTIVITY 8

  • Prime and Subprime Lending
  • Overview
  • Subprime and prime lending definitions
  • Alternative institutions that provide higher-cost loans
  • Strategies to improve credit in order to qualify for prime loans.

113

Credit - Activity 8

slide114

PRIME AND SUBPRIME

MORTGAGE LENDING

Prime

Prime credit is typically available to an individual who has paid his or her outstanding credit on time.

Subprime

A subprime loan is typically available to a person with either no credit history or a damaged credit history and who is considered to be a high-risk borrower. Subprime loans have higher-than-average interest rates.

114

Slide 1 – Prime and Subprime Lending Lesson Reference: Credit, Activity 8 – Overhead 1

slide115

THE PRICE OF SUBPRIME LENDING

How much does a subprime loan cost you? If you are making payments on a car, for example, you could be paying significantly more just for getting a loan with a higher interest rate. This added interest is significant over the life of the loan.

115

Slide 2 – The Price of Subprime Lending Lesson Reference: Credit, Activity 8 – Handout 1

slide116

MOVING FROM

  • SUBPRIME TO PRIME
  • Pay bills on time.
  • Correct mistakes.
  • Pay more than the minimum required.
  • Use credit sparingly.
  • Work with a reputable nonprofit credit counseling organization.

If you currently have a lower credit score and want to be able to qualify for prime loans in the future, you should take steps to improve your credit. The following steps can help.

116

Slide 3 – Moving from Subprime to Prime Lesson Reference: Credit, Activity 8 – Handout 2

slide117

ACTIVITY 9

  • Predatory Lending
  • Overview
  • Characteristics and warning signs of predatory lending.
  • The key targets of predatory lending.
  • Common abuses and scams.
  • Nonprofit organizations that can help consumers plagued by predatory lending.

117

Credit - Activity 9

slide118

PREDATORY LENDING

  • Sell properties for much more than they are worth, using false appraisals.
  • Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
  • Knowingly lend more money than a borrower can afford to repay.
  • And many other scams.

In communities across America, people are losing their homes and their investments because of predatory lenders, corrupt appraisers, mortgage brokers, and home improvement contractors who:

118

Slide 1 – Predatory Lending Lesson Reference: Credit, Activity 9 – Overhead 1

slide119

IDENTIFYING

  • PREDATORY LENDING
  • Packaging a loan with single-premium credit insurance products
  • Repeatedly refinancing a loan in a short period of time
  • Charging excessive rates and fees to a borrower who qualifies for lower rates and fees

Predatory lending is not defined by federal law except to the extent that a loan is a high-cost loan and contains one of a fixed list of terms or conditions. Predatory or abusive lending practices can include:

119

Slide 2 – Predatory Lending Lesson Reference: Credit, Activity 9 – Handout 1

slide120

TEN WARNING SIGNS OF

  • PREDATORY MORTGAGES
      • Unreasonably high interest rates
      • Multiple refinancing
      • Unnecessary debt consolidation
      • Balloon payment
      • Negative amortization
      • Door-to-door solicitation
      • Back-dating of documents
      • Large loan broker fees
      • Kickbacks between lender and broker
      • Single-premium credit life insurance

120

Slide 3 – Ten Warning Signs Lesson Reference: Credit, Activity 9 – Handout 1

slide121

COMMON SCAMS

      • Advance fee schemes
      • The prize that will cost you
      • Online auctions
      • Fraud jobs
      • Moneymaking schemes
      • Bogus charities
      • Scam schools

121

Slide 4 – Common Scams Lesson Reference: Credit, Activity 9 – Handout 2

slide122

TOP STRATEGIES TO AVOID SCAMS

  • Don’t become a victim.
  • Investigate strangers who have deals too good to be true.
  • Always stay in charge of your money.
  • Don’t be fooled by appearances.
  • Watch out for salespeople who prey on fears.
  • Monitor your investments.
  • Report fraud or abuse.
  • Do your homework.
  • Be wary of door-to-door solicitations.

122

Slide 5 – Top Strategies to Avoid Scams Lesson Reference: Credit, Activity 9 – Handout 2

slide123
ADDITIONAL RESOURCES
  • Department of Housing and Urban Development (HUD)— Office of Consumer and Regulatory Affairs, Interstate Land Sales/RESPA Division. (202) 708-4560; www.hud.gov/complaints/landsales.cfm.
  • Federal Deposit Insurance Corporation (FDIC)— Consumer Affairs Division. (877) ASK-FDIC (925-4618); www.fdic.gov.
  • Federal Trade Commission (For federal lending violations involving mortgage and consumer finance companies.) (877) FTC-HELP (382-4357); TTY (202) 326-2502; www.ftc.gov.
  • Federal Reserve Board of Governors of the Federal Reserve System— Division of Consumer Affairs. (202) 452-3693; www.federalreserve.gov/pubs/complaints.

123

Slide 6 – Additional Resources Lesson Reference: Credit, Activity 9 – Handout 3

slide124

ACTIVITY 10

  • Bankruptcy
  • Overview
  • Chapter 7, 11, and 13 bankruptcies
  • Provisions of the new bankruptcy legislation
  • The credit counseling component of the new law
  • Strategies to avoid bankruptcy

124

Credit - Activity 10

slide125

BANKRUPTCY

Chapter 7 wipes out all allowable debts and allows certain personal property exemptions.

Chapter 13 is a court-approved repayment plan.

Chapter 11 is typically used for business bankruptcies.

125

Slide 1 – Bankruptcy Lesson Reference: Credit, Activity 10 – Overhead 1

slide126

NEW PROVISIONS OF THE BANKRUPTCY LAW

  • A test to determine eligibility to file bankruptcy
  • Determining what you can afford to pay
  • Tougher homestead exemptions
  • Lawyer liability
  • Credit counseling and money management
  • New debt may not be discharged.
  • Quicker collections process

126

Slide 2 – Provisions of the Bankruptcy Law Lesson Reference: Credit, Activity 10 – Handout 1

slide127

THINGS TO CONSIDER BEFORE FILING FOR BANKRUPTCY

  • A bankruptcy filing could determine whether or not you get a job.
  • Your insurance rates could rise.
  • You may find it difficult to rent an apartment or qualify for a home loan.
  • Bankruptcies stay on your credit report for 10 years.
  • Bankruptcy can lower your credit score.

127

Slide 3 – Things to Consider Lesson Reference: Credit, Activity 10 – Overhead 2

slide128

THINGS TO DO BEFORE DECIDING TO FILE BANKRUPTCY, CONT.

  • Reduce your spending
  • Talk with your creditors.
  • Talk with a nonprofit counseling agency.
  • Talk with an attorney and understand the consequences of declaring bankruptcy.
  • Consider consolidation carefully.

128

Slide 4 – Things to Do Lesson Reference: Credit, Activity 10 – Handout 2

slide129

TIPS TO REMEMBER

  • Keep track of your daily expenses.
  • Save money on a regular basis.
  • Make changes right away if you see yourself starting to get into financial trouble.
  • Pay attention to your household finances, especially if you are married.

129

Slide 5 – Tips to Remember Lesson Reference: Credit, Activity 10 – Handout 2