1. Personal Finance (part II)
Objective: SWBAT evaluate how saving and borrowing wisely can help them reach for their financial goals and establish financial stability.
Do Now: List 3 strategies that can help you save money in your daily life.

2. Why Save & Borrow?
Brainstorm a few financial goals you will have for your future.
Does it involve any big purchases like car or house?
You obviously are earning money from a job because you need to pay for your expenses.
However, saving and borrowing is the only way to help you meet both short-term and long-term financial goals.

3. I. Savings – Types of Financial Institutions
Bank
Credit Union
Take deposits, engage in lending and operate for a profit.
Owned by and serve individuals with a common affiliation.
Banks offer checking and savings accounts to the general public.
Credit unions offer checking and savings accounts to members.

4. I. Savings – Financial Services
Savings and deposits
Pay bills
Transfer funds
Withdrawal for daily use
Electronic banking
Credit and loan services
Safe deposit

5. I. Savings – Saving Accounts
Regular Saving Account
High liquidity that allows for frequent deposit and withdrawal, but with low interest rate
Money Market Account
Saving account that earn interest that varies from month to month
Certificate of Deposit (CDs)
Money is left on deposit for a stated period of time to earn a specific rate of return
U.S. Savings Bonds

6. I. Savings – Electronic Banking
Online Banking
Electronic Fund Transfer
Direct Deposit - an automatic deposit of net pay to an employee’s designated bank account
Automatic Payment - with your authorization, funds will be withdrawn from your checking account to pay for your monthly bill
Automated Teller Machine (ATM)
Debit Card – allows for funds to be withdrawn from your checking or saving account without writing a check

7. I. Savings – Electronic Banking
Guidelines for Safe Internet Banking:
Make sure the institution is legitimate
Create a strong password
Keep your ID and password private
Don’t fall for phishing scams
Be careful when using public wireless networks (Wi-Fi) or shared computers
Monitor account activity regularly

8. Checking Accounts
Checking account helps you avoid carrying large amount of cash and you can access it by using your debit card or writing checks
Advantages:
Safe place to keep cash
Easy to withdraw cash
More secure way to send money through the mail
Detailed record of spending
Method of establishing a credit history
Paychecks can be deposited directly

9. Making Deposit Deposit slip must be filled out
An endorsement (signature on the back of the check) is required to legally transfer value

10. Writing Checks

11. Writing Checks

12. II. Borrowing Credit is a powerful financial tool
Borrowing can either help you achieve your financial goals or being trapped by the pitfalls of credit
Credit – the present use of future income that allows consumers to buy goods and services now and pay for them later

13. II. Borrowing
Financial Charges are the total amount a borrower must pay for the use of credit
Amount of credit used
Interest rate
Length of repayment period
Interest is the price paid for the use of others’ money
When you are saving money, you shop for a high interest rate
When you are borrowing, shop for a low interest rate

14. Types of credit Credit card Charge accounts Installment account
Vehicle leasing / car loan
Cash loan
Mortgage / home equity loan
Student loan

15. Credit Card Accounts Advantages: Disadvantages:
Avoid carrying large amount of cash
Helps you build credit history
Cash rebates at time
Coverage for damaged or stolen items
Proof of purchase
Online purchase
Disadvantages:
Cost of using is often high
Annual fee
High interest rate
Late fee
Tempt to overspend
Risk of identity theft

16. Loans
A borrower might be required to pledge collateral in order to obtain a loan
Collateral: something of value held by the creditor in case you are unable to repay the loan
In cases where a person have nothing to pledge as collateral, getting a loan is still possible
Cosigner: a responsible person who signs a loan agreement with the borrower

17. Mortgage / Home Equity Loan
Mortgage: a loan in which property or real estate is used as collateral
Home equity loan
Equity the difference between the house value and how much is still owed on the house
Home equity loan is a loan based on the equity
It is also known as second mortgage

18. Creditworthiness
Creditworthiness is an assessment of a borrower’s ability to repay a loan
Three Cs of credit: Character, capital, capacity
Credit score comes from the 3 major credit bureaus: Equifax, TransUnion, Experian

19. Creditworthiness Credit score range from 300-850
Debt-to-income ratio: comparing debts to income or assets (monthly debt obligations ÷ monthly gross pay)