Financial Literacy Tool Kit

By: Isabella DeCurtis

Savings

Your savings is the amount of money a person puts aside over time to pay for something they want. It is easier to pay for something when that person has time to earn enough money. This is why it is easier to pay for something if you start saving your money earlier on or right away. Saving as little as 3 dollars a week allows one to have an extra 162 dollars at the end of the year. Although it may not sound like much, an extra 162 dollars can do a lot in one's life.Also, your money grows, with earning interest, if you set aside a good amount of it each week. This not only lets you earn more interest on your money, but it allows the time for saving speed up.


Savings vehicles: Accounts designed to let you put money aside that is separate from your checking account. You can open savings vehicles at most banks. Some savings vehicles are: savings accounts, money market accounts, and Certificates of Deposits.

Interest (Simple vs. Compound)

Interest is the fee someone pays to be able to borrow money. You can either pay interest on money you borrow (like taking out a loan) or you can make interest on the money you save (like a bank pays you interest on money in your savings account). The rule of 72 tells you how long it take for your money to double.


Simple interest is the amount of interest you earn based on the money in your account. You can earn simple interest with a checking and savings accounts.


Compound interest is interest that's generated from both the money you put into an account and from the interest you make on that money. With compound interest, you earn interest on your interest. Certificate of Deposit accounts only offer compound interest.

Budgeting

A budget is a plan of how you will spend the money that you make or receive. A budget is something that everyone should be comfortable with having. One who wants to buy something should take record of how much money they already have saved, their estimated income, and how much that item costs. It takes time for one to buy something they want if they still need to earn the money to buy it. A budget plan can take a while depending on one's expenditures and how much they earn weekly, monthly, or annually.

Budget Plan: Polaroid Camera and Film

Cost of Camera: $75.00

Cost of Film: $145.00

Total: $220.00


It will take me 5 months to save enough money for a Polaroid camera and film.

Deposit vs. Withdrawal

Deposit: When money is added into a bank account (also known as a 'credit').

Withdrawal: When money is taken out of a bank account (also known as a 'debit').

Banking

Putting your money in a bank is the safest option. It can also help to earn interest on your money. There are different types of banking options such as a Retail Bank, a Credit Union, and an Online Bank.


Retail Bank: Offer services like savings and checking accounts, mortgages, personal loans, and credit and debit cards.

Credit Union: Privately owned by its members and a not-for-profit cooperative bank, offer similar services as retail banks, but you have to become a member to join a credit union

Online Bank: Similar to Retail banks, but instead of a physical building, the business is done online


There are many people that do many jobs to keep banks running smoothly.

Branch Manager: Their job is to manage transactions customers make to their accounts like depositing or withdrawing money.

Customer Service Representative: This person's job is to help bank customers with any questions they may have.

Loan Officer: This person advises, evaluates, and signs off on loans to individuals and businesses.

Bank Teller: This person's job is to help with account transactions like depositing or withdrawing money.

Payments

Payment types are what you use to buy an item. There are many different ways to pay for something such as, cash, checks, debit cards, and credit cards.


Credit: A credit card is a payment type that does not automatically draw money from your account. It provides a short-term loan that you can use to make daily purchases. However, if you do not pay your bills on time, you will be charged an extra interest cost. Because your money isn't drawn directly from your checking account, it is possible for you to spend more money than you actually have. You will then be in debt, and this is hard to get out of.


Selecting a Credit Card: Try to pick credit cards that have the lowest APR (Annual Percentage Rate). The APR is the interest rate you will pay on your credit card balance. When looking for a credit card, it is best to find one with no annual membership fee.


Debit: A debit card is a payment type that allows you to make purchases while the cost of the purchase directly from your checking account. Because of this, it is only possible for you to buy the amount that is in your checking account.


Payment History: A history of the payments you have made on things you buy affects your credit score. Things such as whether or not you pay your bills on time, whether or not you always pay at least the minimum amount (etc) can alter whether or not you have a good credit score.

Credit Examples (Good vs. Bad)

A credit score shows how likely you are to pay off your debts. Credit scores range from around 350 to 850, and the higher your credit score is, the more likely you would allowed to take out a loan from a bank. Many things may be affected by your credit score such as, buying a new car, getting a job, renting a home, or getting a new credit card. There are many things that impact your credit score. These things (in order from most important to least) are, payment history, amounts owed, length of credit history, new credit, and types of credit used.


Good Credit Score: In order to have a good credit score, one should be paying bills on time. Also, if a person has a good credit score, they are offered higher loan terms, and a lower interest rate (considered low risk). Good credit scores range from 700-850.


Bad Credit Score: In order to have a bad credit score, one could be maxing out credit cards, and, because of this, they may not qualify for a loan. Banks may also offer higher interest rate because you may be considered a high risk. Bad credit scores range from 350-600.

Top 10 Financial Tips

  1. Make sure you know how much money you have in order to stay away from debt.
  2. Borrow DVD's or books from a library instead of buying them.
  3. Try to bring lunch from home rather than buying it.
  4. Don't go out to movies/dinner as much if it isn't necessary.
  5. Try to create a savings plan and stick to that plan.
  6. If you have supplies or clothes that are still in good quality, reuse them.
  7. Listen to the radio or music streaming websites instead of buying songs.
  8. Spend less money that you earn so you will have enough for an emergency (rainy day cash).
  9. Take care of your belongings so they will last longer.
  10. Be smart with what you want to buy or are trying to buy. Decide if it is really worth it.