MONEY 101

Types of Bank Accounts  Savings—long term money storage  bank pays you interest = $$ can grow!  Checking—used for everyday usage (deposits and withdraws back and forth)  NO interest rate  Write checks = IOU from bank; money pulled directly from bank account  Debit cards = plastic checks

What is Interest?  “The money paid by a borrower to the lender for the privilege of borrowing the money.”  When banks pay you interest… it is a percentage of the amount in your account. The number rises and falls with the economy.  When you pay banks interest (ie. credit cards, loans etc.), it is a percentage of the money spent/borrowed. The number is usually fixed.

Methods of Payments  Cash  worth the value in your pocket  harder to track  Credit  borrows money from a bank (aka. a LOAN)  safest method of payment for online purchases  Debit  pulls money from checking account  easier to track purchases

Debit Card  Swipes like a credit card, but pulls money directly from checking account.  Immediately pays the store.  Usually also doubles as an ATM card (Automated Teller Machine) which allows you to get cash.

What is a Loan?  To borrow money from a bank or financial institution.  Paid back over time in monthly payments.  Examples—  Credit card—used for individual purchases  Student loan—used to pay for college  Car loan—used to pay for a car  Mortgage—used to pay for a house (to own NOT rent)

Loans--some terms  Principal—the amount of money you initially borrow  Interest—the percentage you pay back on top of the principal  Debt—owing money (usually the word is used to imply that you do not have the money to pay it back right away)

…more terms  Minimum monthly payment— the min. amount allowed to be paid each month.  Balance—the amount you owe if it carries over each month  Statement —summary of all transactions within a billing cycle. (see calendar)

Why have a credit card?!

Advantages of credit cards  A safe alternative to cash  Build a good credit history  Bails you out of emergencies  Gives you time to pay

Disadvantages to credit cards  Too tempting to spend  Carry a balance  DEBT

How do credit cards actually work?  Banks sign up with one or more  Payments take 2-3 business days to clear.  Businesses pay a small fee for each item purchased.  3 major processing companies:  Visa  Mastercard  American Express

How do you get $$?  Salary—a set of fixed payments measured out usually monthly from employer to employees (Contract)  Hourly—payments based on each job, hour, or other unit of work (Time Cards)

How do you spend $$?  Income—the amount of money you take in regularly during any given period.  Expenses—$$ amounts paid for goods and services  Fixed—consistent payments (ie. rent, tuition)  Discretionary—extra things above and beyond basic necessities. (ie. fashion, music)

Remember our “needs”?  Survival—tend to be “fixed expenses”  Thrival—tend to be “discretionary expenses”  Budget—an itemized list or summary of expenses to help plan using your money wisely.