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Personal Money Management Choices

Understand the basics of personal money management, live within your income, budget wisely, save for the future, and use credit responsibly. Learn ways to earn income, the importance of savings, benefits of investing, and pros and cons of credit.

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Personal Money Management Choices

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  1. Personal Money Management Choices

  2. Standards: Understand that a basic principle of effective personal money management is to live within one’s income. a. Understand that income is received from work and is limited. b. Understand that a budget is a tool to plan the spending and saving of money. c. Understand the reasons and benefits of saving. d. Understand the uses and costs of credit.

  3. List 5 ways to earn income as a teenager.

  4. Income: money received from work, investments, or financial supportWage, salary:terms used for work income

  5. Incomes Vary • Some employees are paid by a set salary; some earn wages from sales commission. • The average U.S. citizen works full-time (40 hours a week). Part-time employees work 20-30 hours a week. • Low-skill jobs do not earn as much as high-skill jobs.

  6. No matter the income… • It is important NOT to overspend. • People MUST live within their income to be financially successful!

  7. BUDGET: a plan for spending and saving one’s income

  8. People have three choices about what to do with their income:SPEND, SAVE, or INVEST

  9. SAVINGS: the income that is set aside for later use after expenses are paid

  10. Expenses might include: NEEDS WANTS

  11. NEEDS:you cannot live withoutWANTS: would be nice to have, but not necessary

  12. Why is it important to save money? • replace old technology • loss of job • down payment on a house or car • repairs • vacations • security

  13. INVESTING: put money aside now in order to grow the money for the future

  14. Why do people invest money? • To make money.

  15. When you invest money, you usually earn INTEREST. Interest: a fee you get paid for allowing the bank or company to use your money.

  16. What are the advantages to investing ? • You can make a lot of money in a short amount of time. • You don’t have to do anything but give your $!

  17. What are the disadvantages to investing? • Investing is risky. • Your money is NOT protected. • There is a chance you could lose all of the money you invest!

  18. Examples of Investments: • Stocks • Certificates of Deposit • bonds • mutual funds

  19. CREDIT = the ability to borrow money from a lender.Forms of credit used by consumers:car loanshome mortgage loanscredit cards

  20. When people borrow money from a lender, they must pay back the money PLUS interest.It is best to borrow money from a lender when the interest rates are LOW. That way you pay back less money in interest!

  21. How does buying on credit work? • You must be pre-approved. • Company gives you a spending limit; you receive a bill each month you have a balance due. • If you do not pay the entire bill, you are charged interest (extra $). • DEBT: money owed

  22. Why do people use credit? • They don’t have the money for an expense. • Emergencies • Poor choices/don’t understand effects • To earn points/rebates

  23. What are disadvantages of using credit? • Create too much debt. • End up purchasing items you do not really need. • Sometimes leads to money problems.

  24. What are the advantages of using credit? • If you are disciplined, you can earn rewards through points earned on a credit card. • Allows you to buy things you would not be able to afford otherwise- like a car or home.

  25. Real Life Examples: • Cell phone purchased on a credit card. • Paid $500.00 for the phone. Credit card company charges 18% interest. • You make only the minimum (least) payment each month. • It takes 7 years to pay off the entire bill. • You actually paid $867.00 back to the credit card company. • YOU LOSE $367.00!

  26. Real Life Examples: • New laptop put on your credit card. • You pay $1,000.00 for the laptop. Credit card company charges 18% interest. • You pay only the minimum (least) amount each month. • It takes 13 years to pay off the bill. • You actually pay $2,129.00 for the computer. • YOU LOSE $1,129.00!

  27. Credit Website • http://senseanddollars.thinkport.org/games/home.html

  28. 1. Which condition causes people to use less credit?(a) They have no savings account(b) They have no collateral(c ) Interest rates are high(d) They have other debts

  29. 2. The BEST time to borrow money is when(a) interest rates are low(b) when a person has a good credit rating.(c ) when a person wants to purchase an expensive item.(d) when a person has a good job so he or she can repay the loan

  30. 3. What is credit?(a) the ability to borrow money(b) a type of card used to get money from a checking account(c ) a useful tool for borrowing more money that you can afford to repay(d) a way to borrow money that is only used by businesses and the government.

  31. 4. Which is true of buying goods with credit?(a) Loans should last longer than the item being purchased.(b) Credit is useful for buying very expensive items such as cars and houses.(c ) Credit is good for paying for things in the future that were used in the past.(d) When people buy something with credit, they usually have to pay back less than they borrowed.

  32. Stocks---Certificates of Deposit ----Bonds Mutual Funds 5. Which statement explains what these items have in common? (a) They are ways to invest extra money (b) They are things that wealthy people purchase (c ) Banks sell them as a way to improve their profit (d) They are bought by people as a way to save money

  33. Is a debit card and credit card the same thing?

  34. Debit Cards • Your own money! • Money is IMMEDIATELY taken out of your personal checking account. • Eliminates check writing. • Money must be in account when you use it.

  35. Credit Cards • Not your money!! • Looks like a debit card. • Not connected to your checking account- it’s borrowed money you have to pay back. • You receive a bill every month. • If you don’t pay the whole bill, they charge you interest (extra money).

  36. Checks • Connected to your checking account. • Money must be in the account when you write a check or bank will charge you a service fee. • Takes several days to process. • Not many places accept them. • Good for when you need a receipt.

  37. Budgeting Videos • https://www.youtube.com/watch?v=y78Edl8Xn7Y • https://www.youtube.com/watch?v=GawH48QNDfc

  38. Start SMART: Money Management for Teens • Practice self control. • Make a list before you shop. • Before you shop, set a limit you will spend. • Limit the amount of cash you take with you when you go shopping.

  39. Be Smart!! • Research before you buy. • Make sure you are getting a good value. • Check several stores and online. • Use coupons or wait for sales.

  40. Grow up Smart!! • Every time you receive money---allowance, gift, birthday, etc. automatically put some of it into savings. • Don’t spend it all. “Pay yourself first” • Try to save 25% or one out of every four dollars you get.

  41. $15 every Month Equals Over $1,000 In 5 years Making 3.5% interest Saving $ can really add up…

  42. Stay Smart!! • Keep track of your spending. • Use a notebook to write down what you buy. • Borrow things when you can (friends, library). • Think “used” instead of “new”. • Take good care of what you buy.

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