Teen Money Management

1
Teen Money Management

• Presented by Glendale Public Library
• Instructor Annette Fisher

2
Introductions

• Name and what you hope to get out of the class.

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Why Money Management?

• If you Google money 1,280,000,000 references
  online
• 57 of divorces claim money issues as the reason
  why
• As of Feb., 2009 current consumer credit in US
  - 2.56 trillion
• U.S. Bankruptcy filings up 31 in 2008 (includes
  both business and consumers)
• 2,350 versus in the Bible on how to handle money
  and possessions.

4
What we will cover

• Goals
• Budgeting car, insurance, etc
• Net worth assets, liabilities
• Saving - Checking/Savings accounts
• Borrowing credit cards, loans, etc
• Investing - basics

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Goal Sheet

• In groups of two or three, fill out your goal
  sheet

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How much do we need to save to meet that Goal

• http//www.finra.org/Investors/index.htm

7
Bank Products

• Two Main products
• Checking Accounts also called transaction
  accounts, which allow you to transfer money by
  check or electronic payment to a person or
  organization
• Savings Accounts also known as savings
  accounts, which pay interest on your money in
  those accounts

8
Other Services

• Cashiers checks
• Notary service
• Online banking and bill pay
• Lines of Credit
• Loans
• Investment accounts

9
Safety in Banking

• Commercial Banks are insured against loss by the
  Bank Insurance Fund (BIF) of the FDIC Federal
  Deposit Insurance Company
• Savings and loans are insured through the Savings
  Association Insurance Fund (SAIF) of the FDIC

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Safety in Banking

• Credit Unions are insured through the National
  Credit Union Share Insurance Fund (NCUSIF) which
  is administered through the National Credit Union
  Administration.

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FDIC Indicator at a Bank

• look for the official FDIC sign where deposits
  are received. Beginning in 2007, insured banks
  will display this new official FDIC sign

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FDIC Covers

• the balance of each depositor's account,
  dollar-for-dollar, up to the insurance limit,
  including principal and any accrued interest
  through the date of the insured bank's closing.

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FDIC doesnt cover

• money invested in stocks, mutual funds, life
  insurance policies, annuities, or municipal
  securities, even if these investments were bought
  from an insured bank.
• U.S. Treasury bills, bonds, or notes. These are
  backed by the full faith and credit of the United
  States government.

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Checking Accounts

• Write checks
• Online Bill Pay
• Transfer Funds
• Debit Card
• ATM withdraws

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Types of Checking Accounts

• Basic
• Lifeline
• Free Checking
• Interest Bearing
• NOW Super Now
• Express
• No-Frills
• Credit Union Share Drafts
• Relationship Accounts

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Basic Checking

• Basic checking accounts let you deposit and
  withdraw money and write checks to pay bills and
  daily expenses. They are perfect if you don't
  plan to keep a high account balance.
• The details of basic checking accounts are
  different for each financial institution

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Lifeline Checking

• Bare bones, low-cost for qualifying low-income
  customers
• This type of checking accounts waive many of the
  fees banks may charge, such as monthly service
  fees for low balances and surcharges for ATM
  usage.

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Lifeline Checking

• Lifeline checking accounts are meant for
  low-income bank customers. Lifeline accounts have
  low
• Minimum deposit and balance requirements.
• Monthly fees, ranging from zero to 3 depending
  on the bank.
• Limits on the number of checks per month that you
  can write.
• Certain states have laws requiring banks to offer
  lifeline accounts. Currently, those states are
  Illinois, Massachusetts, Minnesota, New Jersey,
  New York, Rhode Island and Vermont.

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Free Checking

• A way to reduce fees
• Typically require you to maintain a minimum
  balance in your account
• Fees for ATM and check fees are eliminated

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Interest-Bearing Accounts

• Earn Interest on your account
• Usually require more money to open
• A high minimum balance or you will be charged
  fees
• Interest paid monthly
• Be aware, the fees for falling below the minimum
  balance may be more than the interest you earn

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Now Accounts

• A NOW account (Negotiable Order of Withdrawal) is
  a "Free Checking" and an interest-bearing account
  offered by a savings and loan or "thrift"
  institution.
• Super Now has a higher interest rate and a higher
  minimum balance.

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Express Checking

• Express checking accounts are designed for people
  who are on the move and who don't go inside the
  bank often. These people prefer to bank by ATM,
  telephone or computer.

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Express Checking

• Usually offer
• Unlimited check writing
• Low minimum balance requirements
• Low or no monthly feesNote There is a catch.
  When you do visit a bank branch, you can expect
  to pay a fee to talk to a teller on either a per
  visit or a monthly basis.

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No-Frills Checking

• Many banks offer special checking deals if you
  are age 55 or over or if you are a student.

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No-Frills Checking

• The benefits may include
• Free personal checks
• Free cashiers or traveler's checks
• Wider ATM use
• Better rates on loans and credit cards
• Discounts on a variety of items including travel
  or prescriptions

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Credit Union Share Drafts

• Most Credit Unions offer checking accounts,
  called Share Drafts, often with no service
  charges or reduced fees.

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Relationship Accounts

• These accounts link all the accounts you have
  with the bank. They typically offer free
  checking and ATM withdrawals along with other
  banks services if your combined balance is high
  enough.

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Questions to Ask

• Does the financial institution
• Pay interest on a basic checking account?Note
  Most basic checking accounts do not pay interest.
  
• Require direct deposit or a minimum balance?
• Charge a monthly fee for services?
• Charge a fee for each check you write over a
  certain limit?

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Questions to Ask

• Does the financial institution
• Charge fee for online bill pay?
• Charge fee for ATM at other banks?
• Charge fee to download transactions?
• Is there a charge for using your debit card to
  pay for a purchase?
• Is overdraft protection available?

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Checking Dos and Donts

• The Golden Rule of Checking Accounts Only write
  checks for money you have in your account. If you
  remember nothing else, following this rule will
  help you the most in keeping your account in good
  standing.

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Tips to be a Smart Bank Customer

• Regularly balance your checkbook.
• Use the telephone, Internet, or ATM to get the
  most current information about your account.
• Ask your bank about their fees so that you are
  not surprised when you get your statements
• Don't get caught "floating".
• Use overdraft protection.

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Common mistakes to avoid

• You forgot to stop automatic payments from being
  taken out before you closed your account.
• You close your checking account by letting it go
  to a zero balance.
• A check you deposit in your account does not
  clear or bounces, causing the account to go into
  overdraft.
• You forgot about your recent ATM (or other)
  withdrawals.
• You co-signed on an account that was abused the
  other party.

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Common mistakes to avoid

• You gave your PIN (Personal Identification
  Number) to someone else and they took funds from
  your account.
• You post-dated a check and it was cashed too
  early.
• Your checks get lost or stolen.
• You're not receiving statements or correspondence
  from your financial institution.
• Account or handling error by the financial
  institution.

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Overdraft Protection

• Checking linked to savings account
• Line of credit
• Credit card charge
• Banks may cover amounts and still charge a fee.
  They usually pay the clear the largest check
  first and then you get charged a fee for the
  smaller ones.

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Deposit Accounts

• Savings
• Money Market Accounts
• Money Market Mutual Funds
• Certificates of Deposit

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Savings Accounts

• Usually low minimum balance to maintain.
• Usually no fees
• Allows frequent deposits and withdrawals
• May impose limits on transfers
• Earn compound interest (APY)

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Money Market Accounts

• Minimum Balance
• Tiered Interest Rates based on size of the
  account
• Write limited number of checks usually three
• Can withdraw in person
• FDIC Insured

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Money Market Mutual Funds

• Similar to money market accounts
• Pay interest at about the same rate
• May offer check writing privileges
• Usually no limit on number of checks but may
  need to be a minimum amount 500
• Not FDIC Insured and could lose some principal

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Certificates of Deposit

• Fixed Term
• Can rollover at maturity
• Less liquid than savings accounts
• Penalty if cash early
• Pay higher interest rates
• FDIC Insured
• Consider laddering

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Picking a CD

• Think about your Financial Goals
• Find out when the CD matures
• Investigate any call features
• Confirm the interest rate youll receive and how
  youll be paid
• Ask whether interest rate ever changes
• Research any Penalties for Early withdrawal

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Check out Bank Rates

• http//bankrate.com

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Balance Sheet Net Worth

• Assets
• Liabilities
• Net Worth

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Balance Sheet Net Worth

• Assets what you own
• Cash
• Car
• House
• Investments

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Balance Sheet Net Worth

• Liabilities what you owe
• Credit Cards
• Car Loan
• Mortage
• School Loans

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Balance Sheet Net Worth

• Net Worth
• Assets minus Liabilities

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Budget

• What do we spend our money on?

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Spending Information

• Government
• http//www.bls.gov/cex/
• http//www.nytimes.com/interactive/2008/05/03/busi
  ness/20080403_SPENDING_GRAPHIC.html
• http//www.prx.org/pieces/36912-teen-spending-way-
  down
• http//www.crown.org/Library/ViewArticle.aspx?Arti
  cleId263

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Budgeting Tools

• Sheet in Book
• Excel Software
• Quicken
• Money

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Conclusion

• What we learned today
• Goals
• Interest/Savings
• Bank Accounts
• Net Worth
• Budgeting
• What to expect tomorrow
• Review Budget Sheet
• Auto Purchase
• College
• Housing