How Do I “Manage” My Money? Personal Finance Unit: Banks, Credit, and Credit Unions

Why should you have a personal budget? EOC study guide Personal Finance #3 It’s really about understanding how much money you have, where it goes, and then planning how to best allocate those funds.

Why Shouldn’t I just Keep My Money In My Mattress?

Inflation!!—an overall increase in prices EOC study guide Macroeconomics #8 What’s inflation? It’s a general increase in prices and fall in the purchasing value of money.

Banks pay interest

Remember all of the banks that failed during the great depression?

Can I really trust a Bank? If they are Federal Deposit Insurance Corporation (FDIC) members Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure Depositors are insured for up to $250,000 How does FDIC work? EOC study guide Personal Finance #8 FDIC Shuts Down Syringa Bank in Boise

Okay, but what’s the difference between a bank and a credit union? Commercial Bank Provides transactional savings, money market accounts Like all businesses, their goal is to maximize corporate profits. EOC study guide Personal Finance #2

Okay, but what’s the difference between a bank and a credit union? Financial institution that is not-for-profit and customers are members EOC study guide Personal Finance #2

Banks vs. Credit unions: accessibility Big banks ATMs are typically plentiful and branches are open on the weekend Most offer a wealth of mobile and online tools Credit unions Meant to serve local communities, often not available outside the area Branded ATMs are practically nonexistent, most offer to reimburse customers for ATM fees if customers have to go out of network

Banks vs. Credit unions: Checking account fees Big banks Notorious for levying major fees against customers— from overdrafts to monthly maintenance fees According to MoneyRates.com the average monthly maintenance fee is $12.26 Typical charge for out-of-network ATMs is $2.60 Credit unions Fewer fees across the board, for the most part Overdraft fees are $20-$30, but usually only required to keep $30 in an account 70% offer free checking (39% of banks do) Many charge a $2-$5 maintenance fee

Banks vs. Credit unions: Customer service Big banks In 2012 they scored a 77 on the American Customer Satisfaction Index Credit unions Scored an 82 on the American Customer Satisfaction Index in 2012

Why do banks loan people money? To make money!

Key Debt Terms Principal— a sum of money lent or invested on which interest is paid. Interest— money paid regularly at a particular rate for the use of money lent EOC study guide Personal Finance #11

Why may you need to borrow money?

Student loan repayment

Should I buy it? The monthly payments aren’t too bad

Car loan calculator

How much would you pay for this home? Do interest rates really matter? $150,000

Does your Credit score really matter? Why? Financial institutions care about your character!!! It matters what kind of "financial citizen" you have been How do they know? By looking at your credit history What is a credit score? Showed video 1A

What do they care about most? EOC study guide Personal Finance #10 Factors that impact personal credit: Payment history—have you paid your bills on time Amounts owed—charge no more than 25% of your limit Length of credit history—have you been reliable for years? 3 important credit score factors

Simple--Pay your bills on time. Good credit is common sense--Right? Unexpected things that lower your credit score

Month Balanced Owed Payment New Balance January $1,000 $20 February Interest portion of payment (.17/12 x balance) Portion applied to principle (payment - interest portion) New Balance January $1,000 $20   February March April May June July August September October November December