Financial literacy for the Elementary classroom

1. Financial literacy for the Elementary classroom In Class Day Two. Sponsored by: Maryland Council on Economic Education and Towson University College of Business and Economics.

2. Questions? Online Material for Standards Three and Five: Three: Money Management and Spending Plans, Products at Financial Institutions, Developing Financial Goals. Five: Savings Goals, Saving vs. Investing, Achieving Financial Goals.

3. Morning Session Standard Four Manage Credit and Debt

4. Why Do We Borrow? • Why do people borrow? • Insufficient income or savings to cover current expenses. • To make an investment in an large asset (home, car, business) • What are common things that we borrow for? • Homes, home repairs • Automobiles • Education • Vacations • Clothes, computers,

5. Where Can You Get Credit? • Who can you borrow / get credit from? • Friends/relatives – borrow directly from or use as a cosign (avoid whenever possible) • Credit union / bank – credit cards, home equity loans, car loans. • store credit card – generally financed through a bank and use at store only. • VISA / MC – financed through a bank (often not local)

6. Credit Products and Services • Loans from family / store / bank / credit union often comes with requirements for repayment (loan contract or “note”) These may include: • Interest: • Payment in excess of loan amount. • Why? Time value of money. • How it matters (next slide). • Fees • Common for processing paperwork or payments. • Flat or variable rates that depend upon loan size.

7. Sidenote: Who pays interest? • Account types that commonly pay interest: • Money market • Savings (very small) • Certificates of Deposit (CDs) • Interest bearing checking accounts • Account types that do NOT commonly pay interest: • Mortgage • Insurance • Basic checking accounts

8. How does APR / payment matter Interest rate matters but so does minimum payment in the total interest paid. Even with slightly higher mandated (2009 law) minimum payments, still takes long time period to pay off debt.

9. The Credit Card • 2009 Credit Card Accountability, Responsibility, and Disclosures Act passed because of past abuses by credit card companies (snowballing finance charges, large penalties and fees). • Credit vs. debit – how different? • Stored value cards (these are NOT credit cards even though have VISA logo). • Credit cards considered LOW priority debt.

10. Can You Get Credit • Credit is like a good friend. What characteristics do you look for in a good friend? • Creditors do the same thing when considering whether to loan money out. Creditworthiness is generally determined by three things: • Character – past behavior as well as education and training that will sustain income. • Capacity – do you have enough excess cash. • Capital (collateral) – assets to support the loan. • The boy who cried wolf

11. Standard Six Manage Risks and Preserve Wealth

12. The good, the bad and the ugly.

13. Insurance – why do you need it? • Property – theft, fire, burglary or natural calamity. • Life – demise of policy holder. • Auto – accident of a vehicle. • Health – injury or ailment. • Others (travel, credit, third party, amusement). • Why? Risk. Generally insure things that are expensive to lose.

14. Advertising Effects • To convey information to consumers about products or otherwise encourage interest in, or purchase of, a product. • However, some can be purposely misleading (false advertising is a type of fraud). • There are three main types of advertising and many techniques…

15. Three Types of Advertising • Standard (offline) Advertising: made of printing (imprinted resources like flyers, cards, plus direct advertising through postal mail), radio stations and television as well as interactive and personalized advertising by providing products plus samples. • Referral Advertising: This is probably the most effective powerful tool – using word of mouth. • Internet Advertising: This is actually the newest, and may end up being the most powerful. Includes online marketing, marketing with articles, online community, writing a blog.

16. Advertising Techniques • Emotional appeal • Promotional Advertising (samples) • Bandwagon Advertising • Facts and Statistics • Unfinished Ads • Weasel Words • Endorsements

17. Advertising Techniques (more) • Complementing the Customer • Ideal Family and Ideal Kids • Patriotic Advertisements • Questioning the Customers • Bribe • Surrogate Advertising

18. The Informed Consumer • Advertisers are smart so you want to be an informed consumer - aware of what is inside the product, ask questions and have knowledge about the risks and benefits of the product. • Be aware of hidden costs (S&H, taxes, set up fees, …) • “If it sounds too good to be true, it probably is.” • How can you be an informed consumer? What do you need to do?

19. To be an informed consumer: 1. Know who you are dealing with. 2. Protect your personal information. 3. Take your time. Resist any urge to “act now” 4. Read the small print. Get all promises in writing 5. Never pay for a “free” gift. 6. Know the risks

20. Fraud and Identity Theft • Fraud is a plan to cheat people or get their money dishonestly (forgery, bait and switch, counterfeiting, ponzi schemes, false advertising, false insurance claims, identity theft,…) • Identity theft is a type of fraud that involves using personal information on someone to take advantage of them. • When someone else uses any personal identifying information to commit fraud you have been a victim of identity theft. • Whose information are they stealing and how do they get my information?

22. Ways Identity Is Stolen Fraudulent e-mail 1.7% Computer virus/Hacker 2.2% Taken from Trash 2.6% Computer spyware 5.2% Lost/Stolen Wallet, Checkbook, Credit Card Stolen mail/ Fraudulent address change 28.8% 8.0% 8.7% Corrupt employee 11.4% 12.9% Friends/relatives Accessed during transaction Source: USA Today, January 27, 2005

23. So, who is stealing your identity?

24. Who Misused Your Personal Information? Someone at Your Workplace Someone Else 4% Someone at a Company with Access to Your Info Family Member or Relative 8% 32% 13% 18% Friend, Neighbor or In-Home Employee 24% Complete Stranger Outside the Workplace Source: 2004 Javelin Strategy & Research

25. What Are They Doing With Your Information? • open credit accounts • get a driver’s license • apply for insurance benefits in your name • get cash advances from your accounts • possibly commit another crime in your name

26. What can I do? • Secure yourself: protect your personal information (contact information, age, ss number, account numbers.) • Put outgoing mail in an actual postal mailbox. If you have to use your mailbox, NEVER put the flag up. • Shred any mail that has account numbers, social security numbers or “preapproved” credit offers. • Be careful with your Social Security number – don’t carry card in your wallet. • Write down your account numbers and keep the list in a safe place you can access it if you need it. • Make sure your payment tools such as credit cards, debit cards, checks and account information are secure. • Secure your computer – anti virus and anti spyware software updated • NEVER respond to emails asking for sensitive information or click on links in these emails. • Don’t save your password on your computer.

27. How to Detect Identity Theft • Check your credit card and bank account balances electronically and often. • Check your credit reports. • Review your paper statements. • Know your billing and statement cycles. • Watch out for unexpected phone calls.