1. Finance SMARTS! Intro to consumer economic topics

2. What’s the first step toward being financially SMART?  Goal Setting: creating a plan to achieve success in a timely manner  Edwin Lock’s widely accepted theory: Specific, Measurable, Achievable, Realistic and Time- targeted

4. What else can I do to be financially smart? 1:30 http://www.youtube.com/watch?v=VzfhKEMWuCY

5. What is a budget?  a financial plan and a list of all planned expenses and revenues (income)  Monthly Income minus expesnses

6. Banking, Credit and Debit

7. Banking  Allows customer to build person to person relationship w/ bankers  Don’t charge for cashing checks  Average currency exchange charges 2.50- 4.00 per check  If you cash all pay checks there for a year, that’s 60-96/yr

8. Checking vs. Savings CheckingSaving -allows multiple withdrawals -accepts direct deposit -can be overdrawn -allows few withdrawals implementing fees for “too much activity” -accepts direct deposit -can be overdrawn

9. Debit cards  Offered with bank accounts  Funds are immediately withdrawn from CHECKING account  When using a debit card a check register should be up-to-date

10. Debit card troubles… DateStoreAmount Friday 5/25/12Jewel20.00 Friday 5/25/12Sprint80.00 Friday 5/25/12McDonalds8.00 Saturday 5/26/12BP Gas1.00 pending Sunday 5/27/12Walgreens10.00 Kevin has $125 in his account on Friday before he goes to Jewel. He then makes some more purchases such as $30 in gas. Did he overdraw? Why did the gas station only charge him 1$?

11. So what’s the difference between credit and debit?  Credit cards are loans; debit cards are your cash  Help build credit score which is necessary for a home loan, car loan (leasing/ financing)  Credit cards come with various reward programs; not traditional of debit cards  Credit cards have COMPOUNDING INTEREST; debit cards are likely to have “fees” http://www.youtube.com/watch?v=B9WZyWaGa50

12. What’s compounding interest?  An amount added to the principal balance  A=P(1+ r/n) ^(nt)  A = amount (what you’re solving for  P = principal amount  r = annual rate of interest (as a decimal)  t = number of years the amount is collecting interest  n = number of times the interest is compounded per year ALWAYS 12

13. Sample problem  John buys a stereo on a credit card that has 17% APR. The stereo cost $1,500 with interest compounding monthly. If he chose not to make a payment for 6 months, what would the amount owed be?  How much would be in interest?

14. What types of credit are out there?  Revolving credit. With revolving credit, you are given a maximum credit limit, and you can make charges up to that limit. Each month, you carry a balance (or revolve the debt) and make a payment.  Charge cards. While they often look like revolving credit cards and are used in the same way, charge accounts differ in that you must pay the total balance every month or the credit line closes.

15.  Service credit. Your agreements with service providers are all credit arrangements. You receive electricity, cellular phone service, gym membership, etc., with the agreement that you will pay for them each month. Not all service accounts are reported in your credit history.  Installment credit. With installment credit, a creditor loans you a specific amount of money, and you agree to repay the money and interest in regular installments of a fixed amount over a set period of time. Car loans and mortgages are two examples of installment credit.