FINANCIAL LITERACY

FINANCIAL LITERACY

Financial Literacy Vocabulary Assignment Directions: Using the vocabulary we will go over, you are to pick two words. After picking your 2 words you are to create a “poster” for each word on a separate pieces of computer paper. Your poster needs to include the following: The word The definition A picture or symbol clearly showing what the word means A sentence clearly showing an understanding of the word's meaning with the vocab word included in the sentence. Color and creativity

Where does money come from? One things for sure, it doesn’t grow on trees! Even though we wish it did. How money is printed

INTRODUCTION

Complete the questionnaire on your notes. We will discus your Reponses in a few minutes.

Survey Do you currently have a savings account? Do you currently have a checking account? Do you plan on owning or currently own a car? What is a good interest rate for a car loan? Do you plan on owning a house one day? What would you do to finance your house? What is a down payment? Can you purchase a house without a down payment? Do you currently have a credit card or loan? What is a co-signer? What happens if you have a co-signer on a loan and you neglect your payments?

Basic Vocabulary Revenue—what you earn Expenses—what you spend Net Profit—total revenues minus total expenses Net Income—same as net profit Depreciation—reduction in value over time Appreciation—increase in value over time Equity—ownership in a company

More Vocabulary Vesting—earning equity over time instead of all at once Asset—something you own that has value Liability—something you owe for Balance—the difference between credits and debits in an account Bond—debt instrument through which companies and governments can raise money

Why study financial literacy? The state says we need to! The number of foreclosures and bankruptcies are increasing. Unemployment continues to be unstable. Credit card use has gotten out of control. You have the chance to be smart with your finances from the very beginning!

Vocabulary Assignment Using the definitions just given to you, you need to create a sentence (that includes the vocab word!) and picture that represents the vocabulary word. This is your LAST vocab assignment for the year!!!

SPENDING MONEY & DEBT

Do you never have enough money? Housing/Utilities Food Transportation Retirement Education Health Care Insurance Household Supplies Savings Entertainment Personal Care Products Charitable Donations Taxes Miscellaneous

What do I do? Mortgage: 900 Utilities: 175- 225 Groceries: 500 Transportation: 200 for gas a month Car Payment: 180 Retirement: 400 Education: 200 for my student loan Health Care: 200 Insurance: 175 a month Household Supplies: varies-- 200 a month Savings: 400 a month Entertainment: 150 Donations: 500 Other - 1,500 Internet Credit Cards Shopping Gifts

What do others do? Food is a huge expense for people! 81% of consumers are spending more or the same on groceries as they were 2 years ago How can people save money on food? How can you cut back on other expenses?

PAYING TAXES

How We’re Taxed We are taxed when we work, and often taxed when we make a purchase On April 15th each year, we mail in forms showing what we’ve paid in local, state, and federal taxes. Sometimes we get a refund (because we’ve overpaid) Sometimes we owe more (because we didn’t pay enough)

Why We’re Taxed What kinds of goods and services does the government provide? Defense Consumer Rights Disability Welfare Environment Education And now Health Insurance Where does it get the money to do this? From Taxes!

The U.S. History of Taxation Remember the Colonists were not thrilled to be taxed —hence the Boston Tea Party The Revolutionists were upset! No taxation without representation!

Why They Can Tax After the Revolutionary War, we were in debt! We needed taxes to pay that debt off Article I, section 8 of the U.S. Constitution gave Congress the right to tax The 16th Amendment added an income tax

Can We Skip Taxes? Failure to pay your taxes legally due is called Tax Evasion. Some don’t report all income Some don’t file at all The penalty can be financial or even jail We can legally try to decrease our taxes through Tax Avoidance. We claim as many deductions as possible to lower the amount we owe

Filing Taxes All the forms you’ll need can be found at the IRS website. You need the forms You need your W-2 and proof of income You need any investment and banking papers Any education expenses or charity donations If you haven’t received your W-2s by February 15th, you can report your employer to the IRS You CAN file your taxes on your own!

CREDIT CARDS

Credit The definition of credit is the borrowing capacity of an individual or company You cannot borrow money without a credit history; sometimes a lender will require a co-signer You build your credit history by borrowing money and paying it off paying bills on time

Credit Scores Most lenders use the FICO method The numbers range from 300 to 850 The higher the score, the better your credit Your score is based on Your payment history (35%)—higher if you pay on time Outstanding debt (30%)—an if you owe more than you earn Length of credit history (15%)—how long you’ve been borrowing money New credit (10%)—getting a new card or loan Types of credit (10%)—are you diverse?

Warning: Careful How You Spend Keeping your credit score healthy allows you to take out loans with a lower interest rate Lower Interest Rate Lower Payment! Your credit limit The amount you are approved for on a credit card You cannot go over your limit! Make sure to only use 30% of your credit limit, to keep your score healthy and high i.e. 100 Credit Limit Spending no more than 30 a month i.e. 7,000 Credit Limit Spending no more than 2,100 a month

Credit Card Use You can buy Easier to spend something when you don’t have the cash for it Safer than carrying cash Easier to use than a check Helps establish credit money you don’t have Need to pay interest —and rates vary Can charge an annual fee Penalties for late or missed payments

How do I Get a Credit Report Free Credit Reports—don’t trust the comme rcials! Online: Visit AnnualCreditReport.com (This is the ONLY site that's truly free! Don't be fooled by ads saying otherwise.) Due to the passage of the 2003 Fair and Accurate Credit Transaction Act (FACTA), all Americans are entitled to one free credit report from each of the three major credit reporting agencies—Equifax, Experian and TransUnion—upon request every 12 months.

INSURANCE

Purpose To protect yourself or your family against the financial impact of a tragedy

Different Types Health: can cover everything or just hospitalization Life: to help your family after you die; should help with the lost income of the insured Auto: required by law; helps when a car is severely damaged Home Owners: protects against natural disasters, fires, or someone who is injured at your home Renters: protects the items inside the house Product: on a specific purchase

Important Tips Carry a high deductible to keep premiums low—hopefully you won’t ever need the insurance Don’t over-insure old cars—you won’t get enough money for a brand new car Keep careful records so replacement isn’t an issue

Insurance Vocabulary Complete the crossword puzzle using the following words: Actuary Adjuster Agent Annuity Arson Burglary Carrier Catastrophe Claim Conditions Coverage Deductible Depreciation Exclusion Fraud Hurricane Insured Limit Loss Maturity Peril Policy Policyholder Premium Rate Schedule Term Write

BANKING & SAVINGS ACCOUNTS

There are five different types of accounts that are available at most banks.

Checking Account Uses a check as the primary manner of withdrawing money Can also use a check to make purchases Most have ATM/Debit cards attached to them

Writing a Check 1. Date 2. Who you’re paying 3. Dollar amount in 4. 5. 6. 7. 8. 9. numbers Dollar amount in words Optional memo Signature Name/Address/Phone Check Number Codes for the bank 10. Codes for the branch 11. Routing number

Savings Account Keeping your money “in the bank” Often limits the number of deposits and withdraws per month Need to keep a minimum amount Earns interest Insured by the federal government

Money Market Account Money is deposited, just like in a savings account Instead of just sitting in the bank, the money is invested Also insured by the government A very safe investment, but lower returns

Time Deposits Also known as Certificates of Deposit (CDs) Money is held in an account for a fixed period of time There’s an agreed upon rate of return prior to the deposit Advanced notice must be given to withdraw the money

No-Frills Bank Account An account with no bells or whistles Will not require a lot of fees In other words, it’s a cheap alternative (like shopping at Aldi’s instead of Heinen’s)

Deposit Slips 1 5 2 1. 2. 3. 4. 5. Date 6 3 Name on the Account Account Number 7 4 Bank Information 8 Cash you are putting 9 into the account 6. Amount of money you are putting into the account via checks 7. Subtotal: The total amount on the slip, of both money and checks 8. Less Cash: If you want to keep money out of the subtotal. i.e. If you put 1,000 on the deposit slip but want 50.00 cash back you would only be putting 950 in the account. 9. Total: The total amount you are putting into the account. Subtotal, minus less cash.

INVESTING

Definition Investing is the act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit. In other words, making money off the money you already have!

Stocks A portion of an ownership in a corporation If you own stock, you own a share in the company Buy and sell through a broker who trades on the Stock Exchange

Bonds Issued by some large entity—a bank, the government, or a company Pay out a specific amount at a specified time Pays out less prior to that specified date

Mutual Funds Operated by an investment company Takes money from investors and buys a number of stocks, bonds, etc. Have a portfolio of accounts, not a lot of one type

Let Me Introduce Mint What is it: A personal finance, budgeting money management website and app

Writing a check 101 5/13/1 5 Ford Auto 592.89 Five Hundred Ninety-Two & 89/100 Acct #: 321876004 Shayla Greer Bill for: Ford Auto Price: 592.89 Account Number: 321876004