Financial Literacy 101 for Teens

1. Financial Literacy 101 for Teens Presented by Michael A. Goldberg, BComm, BEd October/November 2010 Money 101 M.A. Goldberg, October/November 2010

2. Opening a Bank Account& Debts & Credit CardsTuesday October 26, 2010 Money 101 M.A. Goldberg, October/November 2010

3. Opening a Bank Account • Types • Savings • Chequing • Which one’s for Me? Money 101 M.A. Goldberg, October/November 2010

4. Opening a Bank AccountTypes Savings vs. Chequing Money 101 M.A. Goldberg, October/November 2010

5. Opening a Bank AccountSavings Account What is it? • A safe place to keep your money in a bank, trust company, credit union or caisse populaire • Banks pay interest • Percentage based on the balance of your account. What does Percent mean? Money 101 M.A. Goldberg, October/November 2010

6. What does Percent mean? % Per Cent out of/ divided by 100 Money 101 M.A. Goldberg, October/November 2010

7. Opening a Bank AccountSavings Account Advantages of savings accounts: • Good for emergencies • Good if you’re not comfortable with investing • Convenient – can use a debit card for deposits (putting-in) or withdrawals (taking-out) • No risk of losing your money • Deposits in Canada are protected by the CIDC (Canadian Deposit Insurance Corporation) • Insures up to $100,000/institution Image Source: (http://www.cdic.ca/Protecting_Your_Deposits.html, October 23, 2010) Money 101 M.A. Goldberg, October/November 2010

8. Opening a Bank AccountChequing Account What is it? • Chequing accounts are a safe place to keep money that you plan to use over the next month or so for bill payments and buying things • A chequing account is for money you plan to use soon Money 101 M.A. Goldberg, October/November 2010

9. Opening a Bank AccountChequing Account Similar to Savings accounts? • Chequing accounts are a safe, covered by the CDIC Differences? • Used for different reasons (bill payments, etc.) • Pays less interest • Can cost more in fees • Cheques • Transaction charges • Service charges • Minimum balance charges • NSF (non-sufficient funds) charges Money 101 M.A. Goldberg, October/November 2010

10. Opening a Bank AccountChequing Account Risks? • Low return (you’ll earn little interest) • High costs (be aware of fees charged) • Bounced cheques (can be costly) Money 101 M.A. Goldberg, October/November 2010

11. Which One’s for Me? Depends on the purpose of having an account • Save money? • Pay bills? • Internet banking/access? • Debit card needed? • Whatever you use the bank for, make sure you minimize any charges!!! Money 101 M.A. Goldberg, October/November 2010

12. Who can get an account/what’s needed? • Anyone can have an account • If you’re under 18, you need a parent/guardian to help you sign-up • When you get your account, you will need to provide identification Money 101 M.A. Goldberg, October/November 2010

13. High Interest Savings Accounts • This should be considered • Lately, some high interest savings accounts are paying 2% interest/year • Examples – President’s Choice Financial, ING Direct, ICICI Money 101 M.A. Goldberg, October/November 2010

14. Debts & Credit Cards • Why do People Borrow Money? • Why you should Avoid Borrowing Money • Credit Ratings • Types of Debt • Credit Cards Money 101 M.A. Goldberg, October/November 2010

15. Debts & Credit Cards Why do People Borrow Money? • Large purchases they couldn’t otherwise afford, like… • House • Car • Education (after high school) • Start a business • Emergency • Pay off another debt, but at a lower interest rate Money 101 M.A. Goldberg, October/November 2010

16. Debts & Credit Cards Why you should avoid borrowing money (using credit wisely) • It can become a habit • You have to pay interest (takes money away from other things you need) • If misused, it could damage your credit rating Money 101 M.A. Goldberg, October/November 2010

17. Debts & Credit Cards Credit Rating • Your ability to repay you borrow is scored • Your credit rating will have an effect on how much or at what rate you may borrow in the future • If your credit rating’s bad, you may not be able to borrow at all • Once you start borrowing, you should check your credit rating every year (sometimes mistakes are made) Money 101 M.A. Goldberg, October/November 2010

18. Debts & Credit Cards Types of Debt • Credit Cards • Overdraft Protection (let’s your chequing account go negative without bouncing checks – a big money maker for banks!) • Loan • Mortgage (used to finance house) • Lease (like a long term rental) Money 101 M.A. Goldberg, October/November 2010

19. Debts & Credit Cards Credit Cards • Let’s you pay for things without money (for now!) • Most are issued by banks (Visa/Mastercard) Charge Cards • Issued by particular stores • Avoid these, as their use is limited to the one store • Charge higher interest rates than regular credit cards Money 101 M.A. Goldberg, October/November 2010

20. Debts & Credit Cards Credit Card Tips • Pay credit cards off every month – once you carry a balance, you get charged interest (and it’s expensive debt) • Ask the bank for a better/lower interest rate • Avoid cards with annual fees • Look for rewards associated with the card (travel point, groceries, cash bonuses, etc.) • Shop around – lots of banks will eventually offer you a credit card – find the lowest interest rate • Only own ONE credit card Money 101 M.A. Goldberg, October/November 2010

21. Debts & Credit Cards APR • Annual Percentage Rate • The interest rate you’ll pay, which is quoted on an annual basis • Must be quoted/stated when you sign-up for credit • Always try to figure out “What will this cost me per year?” 18%??? Money 101 M.A. Goldberg, October/November 2010

22. Resources cdic.ca (Canada Deposit Insurance Corporation) getsmarteraboutmoney.ca (Investor Education Fund) http://www.getsmarteraboutmoney.ca/education-programs/Documents/2008_fm_10_creditreport.pdf (Additional information on Credit Reports) Money 101 M.A. Goldberg, October/November 2010