Personal Finance 101

1. Personal Finance 101 Hudson River Financial Federal Credit Union “Like A Bank, Only Better” www.hudsonriverfinancial.org

2. Personal Finance 101:Introduction Personal Finance: The Management of money and financial decisions for a person or family including budgeting, saving/spending/borrowing, retirement planning, and more. A strong knowledge of basic personal finance can help you: Plan for short and long-term financial goals Maximize the value of your earnings and minimize the cost of borrowing funds Reduce stress and help your overall quality of life

3. Personal Finance 101:What You’ll Learn Our “101” overview of personal finance will help you build a foundation of knowledge on basic areas of finance and banking, including: Types of Financial Institutions/Companies Types of Savings Accounts Types of Loan Accounts Debits and Credits Interest Earned and Interest Payments Basic Account Management

4. Personal Finance 101:Financial Institutions Financial Institutions are organizations that provide individuals with access to products and services that help them manage their money. These organizations include: Credit Unions Member-owned, not-for-profit, dedicated to service Typically offer better rates on products due to structure Smaller in size compared to banks, so work with partners to offer products, services and access. The “local” and “small business” banking option Banks For-profit, owned by stockholders Typically much larger than Credit Unions and more complex Range from multinational to regional and differ based on structure (commercial, mutual savings)

5. Other financial organizations that someone could work with throughout their lives include: Investment Services/Financial Planning Companies Offer complex accounts – usually for retirement – and charge fees for services. Typically for “high net worth” or “private” clients Specialty Loan Companies Offer specific loan products and no other banking services, many of these companies operate purely online Credit Card Companies Primarily offer Credit Card products, some offer other loans or online-only savings accounts Trading/Stock Brokers Allow individuals access to stock market, charge transaction fees Personal Finance 101:Other Financial Orgs.

6. Personal Finance 101:Types of Savings Accounts Savings Accounts are the primary account that you can get from a retail financial institution (for example, a Credit Union) that allow you to save money and watch it grow. Typically have no fee, no or low minimums, lower interest earned on funds, and easy access. NOTE: At Credit Unions, Savings Accounts are called “Share” Accounts, because at a Credit Union, you are a member-owner, not a customer. Checking Accounts are the other most common savings account available, and provide you with easier access to funds – usually a debit card that you can use at ATMs, online and in stores - limited fees (based on transactions), and low or no interest.

7. Personal Finance 101:Other Savings Accounts Other types of savings accounts include: Money Market Accounts Slightly higher interest, less access to funds, typically require a minimum deposit Certificates of Deposit (CDs) Higher interest, very limited access to funds, typically require a minimum deposit Club Accounts Similar to savings accounts with slightly higher interest rates and specific periods of time in which you can access funds. Retirement Accounts (IRAs, 401k, etc) More complex accounts with more risk and rules

8. Financial Institutions Offer A Variety of Loans where Members/Customers can Borrow Money for something they need: Personal Loan No collateral, higher interest rates, typically for smaller financial needs, lump sum payment. Credit Cards No collateral, higher interest rates, access to a line of credit that can be used for purchasing goods and services. Vehicle Loan Used for purchase of vehicle (car, boat, motorcycle, etc.), lower interest rates, borrower signs the vehicle over as collateral Home Loan (Mortgage) Used for purchase of a home, interest rates and other costs depend on type of loan, borrower signs home over as collateral. Personal Finance 101:Types of Loan Accounts

9. Other types of loan accounts include: Savings Secured Loans Loans with low interest rates because they are “backed” by funds in a savings account. A great way to build or re-build credit Home Equity Loans Loans where borrowers can take out money that they have invested in their home. Like Mortgages, they require more complex processes than other loan types. Student Loan Specialized personal loans that are specifically used for paying for higher education. Lines of Credit Like a “hybrid” of a personal loan and credit card. Borrowers can access funds on an “as needed” basis to pay off other debts Personal Finance 101:Other Loan Accounts

10. Personal Finance 101:Debits and Credits Most transactions you conduct will fall into two buckets – Debits and Credits. Debits: When you purchase a good, make a withdrawal or bill payment, or transfer money out of your account. Credits: When you receive a payment (i.e. paycheck), make a deposit, or transfer money into your account DEBIT: OUT THE DOOR. CREDIT: CASH IS YOURS.

11. Personal Finance 101:Debit/Credit Quiz Jane Smith has a very busy Friday with her Credit Union Account. Check out her activity below and let us know if each item is a Debit or a Credit:

12. Personal Finance 101:Interest Interest: a payment made by a borrower or deposit-taking institution to a lender or depositor of an amount above the principal amount of funds borrowed or deposited at a particular rate (typically an Annual Percentage Rate, or APR) Deposit Interest: payments made by a financial institution to an account holder who deposits and holds funds in a savings account. Payments can be made monthly, quarterly, or annually. Loan Interest: payments made by a borrower to a financial institution to re-pay a loan. Payments are typically made monthly and interest can be fixed (always the same) or variable (changes based on the market).

13. Personal Finance 101:Fixed vs Variable Rate Savings and loan accounts can come with either Fixed Interest Rates or Variable Interest Rates. Fixed Interest Rate: The interest rate on the account or loan is set at a fixed number and does not change, making it easier to calculate the amount of interest earned or charged. Variable Interest Rate: The interest rate on the account or loan changes during pre-set periods of time (monthly, quarterly or annually), based on changes in the Prime Rate, which is a rate set federally by the US Federal Reserve.

14. There are two ways in which interest can be calculated: Simple Interest: More basic way of calculating interest, not commonly used by financial institutions. Compound Interest: Most common way of calculating interest rates for financial institutions. The interest is calculated annually and at each interval of calculation, interest is calculated using both the principal balance and the interest earned. Personal Finance 101:Simple vs Compound Interest

15. Here are two compound interest calculations on a deposit made into a credit union account, along with the same example with simple interest: Simple: $1,000 deposit at 2.00% APY. End of year one: $1,020, End of year two: $1,040.00. Compound (Annually): $1,000 deposit at 2.00% APY, compounded annually. End of year one: $1,020, End of year two: $1,040.40. Compound (Quarterly): $1,000 deposit at 2.00% APY, compounded annually. End of year one: $1,020.15. End of year two: $1,040.71. **As you save and borrow larger amounts of money, compound interest can make a big difference in the amount you earn or owe.** Personal Finance 101:Compound Interest Example

16. Let’s see if you can do the math on a compound interest loan. Personal Finance 101:Compound Interest Test Can you figure out: Monthly payment amounts? Total interest paid?

17. Personal Finance 101:Compound Interest Test Monthly payment amounts? $87.92 Total interest paid? $54.99

18. How about a larger loan with a longer term? Personal Finance 101:Compound Interest Test Can you figure out: Monthly payment amounts? Total interest paid?

19. Personal Finance 101:Compound Interest Test Monthly payment amounts? $322.67 Total interest paid? $1,616.20

20. Paying back a loan or debt with a set rate, set term, and compound interest gradually using regularly scheduled payments is known as Amortization. When you get a loan, you’ll also get an Amortization schedule that gives you a detailed breakdown of each payment you make, including the amount of money that goes to principal and the amount that goes to interest. Personal Finance 101:Amortization

21. Personal Finance 101:Amortization

22. Personal Finance 101:Managing Your Accounts Knowing how debits and credits work, as well as interest earned, interest owned, and loan payments provide you with a great foundation for managing your personal accounts. Can you keep up with balancing Jane’s account?

23. Personal Finance 101:Managing Your Accounts

24. Personal Finance 101:Managing Your Accounts Staying on top of debits and credits can help you avoid running into a situation where your account cannot cover a payment that it being made. Fortunately, there are multiple ways to manage your accounts in real-time, including: Online Banking Mobile Banking Visiting Your Local Branch Keeping a Spreadsheet or Ledger

25. Personal Finance 101:In Closing Personal finance can seem overwhelming with so many bills, cards, accounts, and transactions going on throughout our lives. The best way to easily manage your accounts? Stay informed Be organized Check and double check your accounts and calculations Maximize your money with high interest earned and low interest owed Ask for help when you need it

26. Thank You! Address: 3563 Mohegan Ave. Mohegan Lake, NY 10547 Email: info@hudsonriverfinancial.org Phone: 914-526-4015 Linkedin: Hudson River Financial Federal Credit Union Instagram: @Hudsonriverfin Twitter: @Hudsonriverfin Facebook: @Hudsonriverfinancialfcu Personal Finance 101