Managing Money: Budgeting, Banks, and Credit Unions

1. How Do I “Manage” My Money? Personal Finance Unit: Banks, Credit, and Credit Unions

2. Why should you have a personal budget? EOC study guide Personal Finance #3 • It’s really about understanding how much money you have, where it goes, and then planning how to best allocate those funds.

3. Why Shouldn’t I just Keep My Money In My Mattress?

4. Inflation!!—an overall increase in prices EOC study guide Macroeconomics #8 What’s inflation? It’s a general increase in prices and fall in the purchasing value of money.

5. Banks pay interest

6. Remember all of the banks that failed during the great depression?

7. Can I really trust a Bank? • If they are Federal Deposit Insurance Corporation (FDIC) members • Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure • Depositors are insured for up to $250,000 • FDIC Shuts Down Syringa Bank in Boise How does FDIC work? EOC study guide Personal Finance #8

8. Okay, but what’s the difference between a bank and a credit union? • Commercial Bank • Provides transactional savings, money market accounts • Like all businesses, their goal is to maximize corporate profits. EOC study guide Personal Finance #2

9. Okay, but what’s the difference between a bank and a credit union? • Credit Union • Financial institution that is not-for-profit and customers are members EOC study guide Personal Finance #2

10. Banks vs. Credit unions: accessibility • Big banks • ATMs are typically plentiful and branches are open on the weekend • Most offer a wealth of mobile and online tools • Credit unions • Meant to serve local communities, often not available outside the area • Branded ATMs are practically nonexistent, most offer to reimburse customers for ATM fees if customers have to go out of network

11. Banks vs. Credit unions: Checking account fees • Big banks • Notorious for levying major fees against customers—from overdrafts to monthly maintenance fees • According to MoneyRates.com the average monthly maintenance fee is $12.26 • Typical charge for out-of-network ATMs is $2.60 • Credit unions • Fewer fees across the board, for the most part • Overdraft fees are $20-$30, but usually only required to keep $30 in an account • 70% offer free checking (39% of banks do) • Many charge a $2-$5 maintenance fee

12. Banks vs. Credit unions: Customer service • Big banks • In 2012 they scored a 77 on the American Customer Satisfaction Index • Credit unions • Scored an 82 on the American Customer Satisfaction Index in 2012

13. To make money! Why do banks loan people money?

14. Key Debt Terms Principal— a sum of money lent or invested on which interest is paid. Interest— money paid regularly at a particular rate for the use of money lent EOC study guide Personal Finance #11

15. Why may you need to borrow money?

16. Student loan repayment

17. Should I buy it? The monthly payments aren’t too bad

18. Car loan calculator

20. How much would you pay for this home? Do interest rates really matter? $150,000

23. Does your Credit score really matter? Why? Financial institutions care about your character!!! • It matters what kind of "financial citizen" you have been • How do they know? By looking at your credit history • What is a credit score?

24. What do they care about most? EOC study guide Personal Finance #10 Factors that impact personal credit: • Payment history—have you paid your bills on time • Amounts owed—charge no more than 25% of your limit • Length of credit history—have you been reliable for years? • 3 important credit score factors

25. Simple--Pay your bills on time.Good credit is common sense--Right? • Unexpected things that lower your credit score