Financial Education

1. Financial Education SHPE Foundation Jr. Chapter 2013

2. Outline Today will cover the importance of Financial Education on the following topics: • Bank accounts • Credit • Creating and sticking to a budget SHPE Foundation

3. Bank Accounts SHPE Foundation

4. Type of Bank Accounts There are many types of bank accounts: • Saving Accounts • Free Checking • Interest Bearing Checking • Certificate of Deposits (CDs) • Money Market Deposit Accounts (MMDAs) SHPE Foundation

5. Saving Accounts Money in this account is not for daily usage • Limited free transfer/transaction • Interest rate: earn a modest percentage • Cannot write checks for this account Better than a piggy bank SHPE Foundation

6. Free Checking Money in this account is for daily use • Money is available through ATMs • Interest rate: No interest earned • Can write checks from this account • No minimum balance required Easier access to money SHPE Foundation

7. Interest Bearing Checking Money in this account can be for daily use • Interest rate: earned interest varies on the balance • Can write checks from this account • Balance required: varies from bank to bank • Other fees and requirements can apply Look for any possible hidden fees in this account SHPE Foundation

8. Certificate of Deposits (CDs) Money is not available for a certain period of time • Money cannot be used for a designated time • Interest rate depends on the duration • The longer your commitment, the more interest you can earn • Time Period • 3 months or 6 months • 1 year to 5 years Make your money work for you SHPE Foundation

9. Money Market Deposit Accounts (MMDAs) Money availability is limited • Limited transfers/transactions to approximately 5 or less per month • Interest rate is competitive • Higher rates than other accounts • Typically maintain a balance of at least $1,000 or higher SHPE Foundation

10. Deeper Look Into Banking • Interest Rate • Simple interest • P= Principal • I= Annual interest rate • N=years SHPE Foundation

11. Deeper Look Into Banking • Interest Rate • Compound interest • P= Principal • I= Interest rate • N= months SHPE Foundation

12. Deeper Look Into Banking • For example, With a principal of $1000, annual interest rate is 6%, for 8 months • You have gain 40 dollars • You have gained 40.70 dollars SHPE Foundation

13. Deeper Look Into Banking Common Fees • Overdraft Fee • Withdrawal higher amount than available in your account • Return Item Fee • When a check bounces because your account does not have enough funds • Monthly Maintenance Fee • For some checking and saving accounts SHPE Foundation

14. Credit Cards SHPE Foundation

15. Credit Cards Credit cards are a line of credit given to you by a lender • Credit cards are similar to a loan • Each time youswipe your credit card, the lender is paying for you • In return, you will pay the lender back with interest SHPE Foundation

16. Credit Cards • Interest rates • Vary from 10% to 30% • These interest rate can be increased or decreased by the credit company without any reason • Fees • Annual Fee - Yearly fee for cardholders to pay • Cash Advanced Fee - Charge when you withdraw money from your credit card • Late Fee - Charge when you make a late payment Avoid withdrawing money from your credit card at all times! SHPE Foundation

17. Advantages of Credit Cards Credit cards may provide advantages. • A safe alternative to cash • Bails you out of emergencies • Can track fraudulent purchases not made by you SHPE Foundation

18. Disadvantages of Credit Cards The real problem is how easy credit cards are to use! • Highly tempting • You can use money that you do not have the ability to repay • You can easily go into debt SHPE Foundation

19. Disadvantages of Credit Cards • Carrying a balance • The plain fact is that most of us carry a balance (owe money) from month to month • Getting out of debt • Interest charges can add up, which makes paying off the credit card take longer (money you could have saved or used for other needs) SHPE Foundation

20. Credit Score Credit scores range from 300 to 850 Excellent credit is in the 700’s • There are 3 credits scores given by the 3 main lenders of credit • These scores are highly important • Interest rates are based on these scores • Amount of credit line are based on these scores • Your possibility to buy a house is based on these scores SHPE Foundation

21. Creating and Sticking to a Budget SHPE Foundation

22. Making a Budget When making a budget consider the following: • Monthly Income • Fixed Expenses • Variable Expenses SHPE Foundation

23. Fixed Expenses • Housing • Communication • Cell Phone • Cable TV • Broad Band Internet • Transportation • Public Transportation • Car Payment • Insurance • Auto Insurance • Renters Insurance SHPE Foundation

24. Fixed Expenses • Debt • Credit cards payments • College loans • Savings • Add percentage of your monthly income into your savings account SHPE Foundation

25. Variable Expenses • Food • Groceries • Lunch and dinner • Miscellaneous • Clothing • Movies • Coffee • Tank of gas SHPE Foundation

26. Creating a Budget After adding expenses, take: Total Monthly Income - Monthly Expenses = Left over This leftover money can be used for investing, saving, and/or additional wants such as planning a trip SHPE Foundation

27. By monitoring what you spend, creating and keeping a workable budget will be simple! Making a budget will help you avoid debt you are not be able to pay for! SHPE Foundation