1. Personal Financial Management for Teens M.A. Goldberg Presented by Michael A. Goldberg, B.Comm., B.Ed., OCT @MrMGoldberg Fairview Branch - Toronto Public Library, March 2016 Personal Financial Management for Teens

2. Agenda A) Budgeting - managing your Income Savings Expenses and budgets more effectively B)Percentage & Interest Calculation C)Saving & Investing D)Debt & Credit Cards E)Selecting & Opening a Bank Account Personal Financial Management for Teens M.A. Goldberg

3. “FLingo!” Personal Financial Management for Teens M.A. Goldberg

4. A) Budgeting 1.Income 2.Expenses 3.Creating a Budget Personal Financial Management for Teens M.A. Goldberg

5. 1. Income & its Sources What is Income? –Basically, its Money you Earn or simply receive –Write down all of your sources of income! Income Sources: –Job –Parents! (eg. Allowance, gifts) –Government –Investments –Others? Personal Financial Management for Teens M.A. Goldberg

6. 2. Expenses What are Expenses? –Things you pay for, that have little value once purchased –Write down all of your expenses Examples of Expenses: –Clothing –Entertainment (eg. movies, video games, music) –Transportation –Food –Haircut –Rent Personal Financial Management for Teens M.A. Goldberg

7. Personal Financial Management for Teens M.A. Goldberg 3. Creating a Budget What’s a Budget? –A plan for saving and spending (calculated monthly or yearly) What are the steps involved in creating a budget? –Calculate all income –Calculate all expenses –Find the difference between Income & Expenses to determine if you have a Budget surplus (positive result) Budget deficit (negative result) Balanced Budget

8. Personal Financial Management for Teens M.A. Goldberg Budgeting Budget Surplus/ = Income – Expenses Deficit

9. Personal Financial Management for Teens M.A. Goldberg Budgeting What’s next? Figure out where you can reduce expenses/increase surplus Do something with the surplus! What would happen if the end result was a budget deficit?

10. Personal Financial Management for Teens M.A. Goldberg How do you Control Expenses? When Buying Larger Items… –Make sure you really need the purchase –Comparison shop Don’t just go into a store and buy something – do some research and ask yourself “Is this the best price?” –Ask “Can you do any better on the price?” This sometimes gets you a better deal What’s the worst that can happen? They say “No!” –Avoid going into debt because of the purchase Ask yourself “Can I afford this?” –Find cheaper ways to play eg. Borrow books, music, games and attractions, instead of buying (from the library) –Use Coupons! (Don’t forget online coupons too.)

11. Personal Financial Management for Teens M.A. Goldberg Budgeting Tips Keep receipts when making purchases (to get accurate calculations) Keep it up-to-date – things change over time Always look for places where you can spend less If you’re comfortable with computers, use a spreadsheet, or other pre-set budget maker. Use a Budgeting App! Keep it realistic! Sometimes things don’t go as planned, so don’t be too critical.

12. Personal Financial Management for Teens M.A. Goldberg For More Financial Information…visit GetSmarterAboutMoney.ca

13. Saving Tips – Cut Spending! The Latte Factor! Avoid getting into the habit of buying expensive little things like coffees/drinks EVERYDAY!!! (This could save you $1000s/year!) Bag your lunch instead of buying it Think of the yearly (annual) expense

14. Personal Financial Management for Teens M.A. Goldberg B) What does Percent mean? PerCent out of/ divided by 100 %

15. Personal Financial Management for Teens M.A. Goldberg C) Saving & Investing

16. Personal Financial Management for Teens M.A. Goldberg Saving Why Save for the Future? – Rainy Day – To meet certain Goals – Emergency – Retirement

17. Personal Financial Management for Teens M.A. Goldberg How much should I save? The 10% Solution –According to David Chilton, author of The Wealthy Barber, you should save 10-percent of all the money you receive (income)

18. Personal Financial Management for Teens M.A. Goldberg With saving, the most important step is to get started.

19. Personal Financial Management for Teens M.A. Goldberg, November 2012

20. Personal Financial Management for Teens M.A. Goldberg Investing Definition? It’s an item of value that you buy to get income or to grow in value.

21. Personal Financial Management for Teens M.A. Goldberg Investing Types of Investments – GICs (Guaranteed Investment Certificates) – Savings Bonds – Stocks – Mutual Funds – ETFs (Exchange Traded Funds) – Real Estate – Others?

22. Personal Financial Management for Teens M.A. Goldberg Investing Five Basic Steps of Investing 1.Set Goals 2.Determine what kind of investor you are (how much risk can you handle) 3.Pick a mix of investments (asset mix) 4.Choose investments 5.Keep track of your investments

23. Personal Financial Management for Teens M.A. Goldberg Investing - The Miracle of Compound Interest Compounding is simply making interest on interest. YearPrincipalInterestTotal 1$100.00$10.00$110.00 2 $11.00$121.00 3 $12.10$132.10 4 $13.21$145.31

24. Personal Financial Management for Teens M.A. Goldberg Investing – Rule of 72 This is a simple calculation used to determine how many years it will take your money to double. Example: Your investment earns 8% interest per year. How long will it take to double? Answer: It will take 9 years for your investment to double. 72 Interest Rate 72 8

25. Personal Financial Management for Teens M.A. Goldberg Investing Tax Shelters TFSA (Tax-Free Savings Account) RRSP (Registered Retirement Savings Plan) RESP (Registered Educational Savings Plan) RDSP (Registered Disability Savings Plan)

26. Personal Financial Management for Teens M.A. Goldberg D) Debts & Credit Cards 1.Why do People Borrow Money? 2.Why you should Avoid Borrowing Money 3.Credit Rating 4.Types of Debt 5.Credit Cards Another video...

27. Personal Financial Management for Teens M.A. Goldberg, November 2012

28. Personal Financial Management for Teens M.A. Goldberg 1. Why do People Borrow Money? Large purchases they couldn’t otherwise afford, like… House Car Education (after high school) Start a business Emergency Pay off another debt, but at a lower interest rate

29. Personal Financial Management for Teens M.A. Goldberg 2. Why you should avoid borrowing money It can become a habit You have to pay interest (takes money away from other things you need) If misused, it could damage your credit rating

30. Personal Financial Management for Teens M.A. Goldberg 3. Credit Rating Your ability to repay what you borrow, is scored Your credit rating will have an effect on how much, or at what rate, you may borrow in the future If your credit rating’s bad, you may not be able to borrow at all Once you start borrowing, you should check your credit rating every year (sometimes mistakes are made)

31. Personal Financial Management for Teens M.A. Goldberg 4. Types of Debt Credit Cards Overdraft Protection (let’s your chequing account go negative without bouncing checks – a big money maker for banks!) Loan Mortgage (used to finance house) Lease (like a long term rental)

32. Personal Financial Management for Teens M.A. Goldberg 5. Credit Cards Credit Cards –Let you pay for things without money (for now!) –Most are issued by banks (Visa/Mastercard) Charge Cards –Issued by particular stores –Avoid these, as their use is limited to the one store –Charge higher interest rates than regular credit cards

33. Personal Financial Management for Teens M.A. Goldberg Credit Card Tips –Pay credit cards off every month – once you carry a balance, you get charged interest (and it’s expensive debt) –Ask the bank for a better/lower interest rate –Avoid cards with annual fees –Look for rewards associated with the card (travel points, groceries, cash bonuses, etc.) –Shop around – lots of banks will eventually offer you a credit card – find the lowest interest rate –Only own ONE credit card

34. Personal Financial Management for Teens M.A. Goldberg APR –Annual Percentage Rate The interest rate you’ll pay, which is quoted on an annual basis –Must be quoted/stated when you sign-up for credit –Always try to figure out “What will this cost me per year?” 18%???

35. Personal Financial Management for Teens M.A. Goldberg E)Selecting & Opening a Bank Account 1.Types 2.Savings 3.Chequing 4.Which one’s for Me? 5.Who can get an account? 6.High Interest Savings Accounts!

36. Personal Financial Management for Teens M.A. Goldberg 1. Types of Bank Accounts Savings vs. Chequing

37. Personal Financial Management for Teens M.A. Goldberg 2. Opening a Bank Account Savings Account Advantages of savings accounts: Good for emergencies Good if you’re not comfortable with investing Convenient – can use a debit card for deposits (putting-in) or withdrawals (taking-out) No risk of losing your money Deposits in Canada are protected by the CIDC (Canadian Deposit Insurance Corporation) Insures up to $100,000/institution Image Source: (http://www.cdic.ca/Protecting_Your_Deposits.html, October 23, 2010)

38. Personal Financial Management for Teens M.A. Goldberg 3. Opening a Bank Account Chequing Account Similar to Savings accounts? Chequing accounts are a safe - covered by the CDIC Differences? –Used for different reasons (bill payments, etc.) –Pays less interest –Can cost more in fees Cheques Transaction charges Service charges Minimum balance charges NSF (non-sufficient funds) charges

39. Personal Financial Management for Teens M.A. Goldberg 4. Which One’s for Me? Depends on the purpose of having an account –Save money? –Pay bills? Internet banking/access and a Debit Card should come with both accounts –Whatever you use the bank for, make sure you minimize any charges!!!

40. Personal Financial Management for Teens M.A. Goldberg FCAC’s Bank Selector Tool

41. Personal Financial Management for Teens M.A. Goldberg 5. Who can get an account/ what’s needed? Anyone can have an account If you’re under 18, you need a parent/guardian to help you sign-up When you get your account, you will need to provide identification

42. Personal Financial Management for Teens M.A. Goldberg 5. High Interest Savings Accounts If you’re opening up a savings account, look into these High Interest Savings Accounts. Chart Source: https://www.highinterestsavings.ca/chart/, February 14, 2015

43. Personal Financial Management for Teens M.A. Goldberg 5. High Interest Savings Accounts Note that things change over time! Chart Source: https://www.highinterestsavings.ca/chart/, March 6, 2016

44. Personal Financial Management for Teens M.A. Goldberg FLingo Revisited & Feedback!

45. Personal Financial Management for Teens M.A. Goldberg Resources Canada Deposit Insurance Corporation. “Canadian High Interest Savings Accounts.” Chilton, David. The Wealthy Barber. Stoddart: Toronto, 1989. Financial Consumer Agency of Canada. Investor Education Fund. http://www.getsmarteraboutmoney.ca “List of CDIC Members.” Canada Deposit Insurance Corporation. Vaz-Oxlade, Gail. Debt Free Forever. Collins: Toronto, 2009. Vaz-Oxlade, Gail. (The site includes a link to an Excel/spreadsheet version. Check out the rest of her site!) http://www.getsmarteraboutmoney.ca/education- programs/Documents/2008_fm_10_creditreport.pdf (Additional information on Credit Reports)