An interactive game designed to familiarize students with the personal finance management issues they are beginning to face as young adults Features financial questions throughout the game Like football, successful financial management requires strategy and endurance
We will review the 4 financial concepts that the game covers: Saving Money Budgeting Credit, Debit, and Prepaid Cards Creditworthiness
Why save money? Saving money is one of the best habits you can learn as you grow up. It will allow you to: Meet a very specific short term goal (buying a new bike) Be ready for unexpected expenses (bike repair costs) Plan for a future goal (saving for college)
How much to save? Experts suggest saving 10% of your income Save for emergencies. When you re an adult and living on your own, you should have 3-6 months of living expenses saved
Ways to save: The first rule of saving is PAY YOURSELF FIRST (put aside money before you use it up) Where to put the money you save? A savings account will keep your money safe, and you can open one at most banks
In a savings account, principal refers to the amount of money you deposit in your savings account to begin saving A withdrawal is when you take money out of your account A deposit is when you add money to your account Your money grows not only when you deposit more money but also by accumulating interest
Interest is money the bank pays you for lending them your money to hold in a savings account The interest rate is the percentage amount of your principal that the bank agrees to pay into your account An interest rate is often referred to as an APR, or annual percentage rate
Simple interest is calculated: Principal x interest rate x time = interest earned Types of savings and how to choose one: Traditional savings account Checking account Certificate of Deposit (also called a CD) Choosing the right one involves 3 steps: Determine how much access you want to your money, called liquidity Determine how much money you have to deposit Find the best interest rate
High liquidity means your money can flow freely, like liquid, in and out of your account A traditional savings or checking account offers the highest liquidity. Of the two, a savings account will offer the better interest rate If you have money that can be untouched for a long amount of time, you should consider a CD. The longer you agree to leave your money in, the better the interest rate
More liquid Less money to save Lower interest rate Less liquid More money to save Higher interest rate Checking account Savings account Certificate of Deposit (CD)
A budget is a financial plan that takes a person s income (the money they earn) and determines where all of that money is spent. It s an effective way to see if you are spending too much on certain items, or if you could be saving more money than you currently are Expenses: where does your money go?
Typical Adult Household Expenses U.S. 30% Housing 18% Transportation 16% Food 5% Clothing 5% Medical 5% Recreation/Entertainment 5% Utilities 8% Miscellaneous 4% Savings 4% Other Debt
Needs vs. wants Your needs are all of the monthly expenses associated with the goods and services that keep your life stable Wants are goods and services that are not essential to daily living Your expenses can be divided into 2 types: Fixed expenses- are the same amount every month (rent, car payment) Variable expenses change throughout the year (groceries, phone bill)
When you spend money on something you want instead of something you need its discretionary spending (movie tickets) Income Expenses = Net gain or loss When net amount is positive its good, your living within your budget When net amount is negative that means your spending more money than you re making, which is bad. Either have to decrease expenses or increase income. Consistency is key to successful budgeting.
The main difference between these types of cards: Pay Now= Debit cards Pay Later= Credit cards Pay in Advance= Prepaid cards A Debit card (or check card) looks like a credit card but the funds are immediately withdrawn from your checking account when you buy something Because it links directly to your bank account, you can only spend how much money you have in your account
Main things to remember about Debit cards: They are an easy, safe alternative to carrying cash There is no interest charged There are no charges or fees if the card is lost or stolen You can t go into debt using a Debit card. BUT, make sure you have enough money in your checking account, or you ll be charged an overdraft fee.
A Credit card entitles you to make purchases based on your promise to pay for these purchases at a later date Credit limit is the maximum amount the issuer will let you borrow each month Each month, you receive an account statement that lists all of your purchases and the total amount you ve spent The total amount due is called your balance If you pay the full balance, the card issuer doesn t charge interest, BUT if you don t pay the full amount, you have to pay interest
Main things to remember about credit cards: They let you shop now and pay later, without using cash Used wisely, they can help you establish a good credit history. Abuse them and they can damage your financial future. If your card is lost or stolen you won t be responsible for unauthorized charges. Many offer rewards programs that let you earn airline miles, or cash back on purchases Purchases are loans and you will pay interest on them unless you pay the balance in full each month CAUTION, they make impulse buying easier, which can throw off your budget and increase debt
A Prepaid card looks like a credit or debit card, but instead of being linked to your account (debit) or giving you a loan (credit), this card lets you spend only the amount that s been pre-loaded onto it There are 2 kinds of prepaid cards: Gift cards Reloadable cards
Main things to remember about prepaid cards: Its easy to budget and impossible to get into debt, because you can only spend the amount already loaded on the card No need to carry a lot of cash Lets you make online purchases without a credit card BUT, some are limited to certain stores, some expire, and some charge fees
Annual fee- a fee that some card issuers charge to use their credit card Annual percentage rate(apr)- interest rate, the percentage used to calculate the charges on an outstanding balance Available credit- amount of unused credit available on your account Cardholder agreement- document that details the terms and conditions of the card Finance charge- based on interest rate, the amount of interest you pay on the outstanding balance Late payment fee- amount charged if payment is late Minimum monthly payment- the least amount you can pay each month Overdraft- when you write a check or make a debit card withdrawal that leaves you with an account balance below zero
Protecting your identity and preventing fraud: If your credit card is lost or stolen report it immediately Protect your PIN. A Personal Identification Number (PIN) is a numerical password known only to you that you use during a transaction. Without the correct PIN the card can t be used
The 3 C s of credit used to determine your creditworthiness: Character- how well you handle financial obligations, how likely you are to repay Capital- the assets you own (real estate, savings) Capacity- how much debt you can manage, based on your income
How to increase you creditworthiness: Pay off your debts- pay credit card balances off in full each month Spend less than you earn Keep old accounts open Pay your bills on time Avoid bankruptcy (a legal state granted by a court of law that declares you are unable to pay back your debts to creditors, a last resort)
Test your money management skills by answering financial questions that allow you to move down the field and score touchdowns! http://www.practicalmoneyskills.com/ga mes/trainingcamp/ff/
A game that challenges the way you think about poverty and homelessness. Sometimes all it takes is one lifechanging experience to land you on the streets (job loss, illness, natural disaster, death of a loved one, divorce) The game is a simulation of 1month in a person s shoes that is in poverty. You have to make decisions like they would and try to stretch your money to survive the whole month. http://playspent.org/