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In this module, you will learn

  • important habits of savings and budgeting.
  • how interest fuels savings accumulation and what vehicles can augment this process for individuals.
  • topics covered include interest, compound interest, The Rule of 72, principal, capital, budgeting and managing expenditures to creating a savings plan, and types of savings vehicles.
  • to create a monthly budget for expenses like insurance, student loans, utilities, transportation, credit card payments, rent, food, and entertainment.
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  1. SAVINGS

    Compounding Frequency

    Key Concepts

    The more frequently your interest compounds, the more interest you will earn over time. Simple interest accounts compound only once per year.

    Rule of 72

    Key Concepts

    The Rule of 72 is a way to estimate how long it will take your money to double.

    Savings Vehicle Practice

    Key Concepts

    Certificates of Deposit (CDs) and Money Market Accounts (MMAs) typically pay higher interest rates, but usually require higher minimum balances.

    What is a Budget?

    Key Concepts

    Retail banks, credit unions & online banks offer a wide variety of services and account types. Online banks may not have a physical branch location, and credit unions are owned and controlled by their members.

    Your Budget: Start Saving!

    Key Concepts

    When setting up a budget, try to set aside some of your income for savings each month. The earlier you start saving, the more time your money has to grow by earning interest.

    BANKING

    Inside a Bank – Part 1

    Key Concepts

    Liquidity refers to how easy it is to get at your money. If an account has a high liquidity, it is easier to take your money out right away.

    Comparing Account Types

    Key Concepts

    Accounts that are highly liquid (like checking accounts) generally pay lower interest rates. This is basically the cost of having easier access to your money.

    Account Fees

    Key Concepts

    Keep track of account fees – like ATM fees (charges for using an ATM outside your bank’s network) or service fees (charges for using certain accounts) – since they can add up quickly!

    Your Online Account – Part 1

    Key Concepts

    Balancing your account means tracking of the amount of money coming into and out of your account. Some banks allow you to monitor your accounts online.

    PAYMENT TYPES

    Payment Types

    Key Concepts

    With certain paper payment methods – like cash, cashier’s checks, and money orders – you are providing the money for a purchase upfront. With debit cards and checks, however, the money for a purchase comes directly out of your checking account.

    When you use a credit card to make a purchase, you’re getting a loan from a credit card company. With debit cards (sometimes called check cards), the money is debited directly from your checking account.

    Credit vs. Debit

    Key Concepts

    Credit cards allow you to build your credit history and may protect you against fraudulent charges, but also come with high interest rates on any outstanding balance.

    Debit cards can help you stick to a budget, but beware of spending more money than you have in your account. This can lead to overdraft fees and interest payments. Unlike credit cards, debit cards will not build your credit or provide as much protection from fraudulent charges.

    Credit Card Terms

    Key Concepts

    If you charge something to your credit card and don’t pay off the full balance before the next billing cycle, you’ll be charged interest. Credit cards typically charge high APRs. You can avoid paying high interest rates by paying off your credit card in full each billing cycle.

    Credit Card Offer Comparison

    Key Concepts

    When choosing a credit card, look for annual fees, changes to your APR, and other finance charges. Credit card rewards programs can be appealing, but be sure you understand how they work beforehand.

    Paying More Than The Minimum

    Key Concepts

    The average minimum payment only equals 2 to 3% of your total debt, so making only the minimum payments on your credit card bill may keep you in debt for a long time.

    How To Manage Existing Debt

    Key Concepts

    Paying more than the minimum payment can help you get out of debt faster. If you’re already in debt, try to avoid missing a credit card payment, as it can lead to additional late fees and even raise your APR.

    CREDIT SCORES

    What Is A Credit Score?

    Key Concepts

    A credit score is a numerical rating that indicates how likely an individual is to repay their debts. A low credit score can impact your ability to get a loan, open up a credit card, or even being approved to rent housing.

    Components of a Credit Score

    Key Concepts

    Nobody knows exactly credit bureaus calculate your score, but it is known that certain financial behaviors – like payment history and amounts owed – can impact your score.

    Help Your Credit

    Key Concepts

    You can increase your credit score by paying bills on time, using a low percentage of your available credit, and using a variety of credit types. Opening several new lines of credit at once can hurt your credit score.

    Explore A Credit Report

    Key Concepts

    Credit checks are classified as either soft or hard inquiries. Hard inquiries show up on your credit report. This is when someone checks your credit to make a lending decision (like when applying for a mortgage).

    Keeping Tabs On Your Credit

    Key Concepts

    You should check your credit report yearly for accuracy, and notify the credit bureaus immediately if notice any information is incorrect. You are entitled to a free credit report each year (one from each credit bureau – for a total of 3 per year!)

    HIGHER EDUCATION

    Education ROI – Part 1

    Key Concepts

    Higher education loans generally have a positive ROI because you are building skills and work experience that can increase your future earnings. More education is correlated with higher lifetime earnings.

    Types of Federal Loans

    Key Concepts

    Federal student loans are advantageous because they generally have the lowest interest rates and don’t require a credit check. These loans can be subsidized or unsubsidized. To receive a subsidized loan, you must demonstrate financial need. Most student loans have a grace period – usually six months after you graduate – before you have to start repaying your loan.

    The FAFSA form – Part 1

    Key Concepts

    To apply for federal student loans, grants, and work study, you have to submit a FAFSA form by the January 1st good idea to send in your FAFSA form early, since it may allow you to qualify for more financial aid.

    RENTING VS. OWNING

    Types of Assets

    Key Concepts

    Some assets (like cars) will decrease in value over time, and are called depreciating assets. Appreciating assets increase in value over time.

    Renting Pros & Cons

    Key Concepts

    Renting offers greater flexibility, since you no longer have rights to the property after your rental agreement is up.

    Explore a Lease Agreement

    Key Concepts

    A lease is the document you sign with the owner giving you the rights to property in exchange for making regular payments. Typical housing leases will address the length of the lease, any payments or fees you are responsible for, and other regulations.

    Owning Pros & Cons

    Key Concepts

    Owning tends to be cheaper in the long-term, since at the end of your payments you own the property – which builds your wealth and enables you to potentially sell the property in the future.

    Mortgages

    Key Concepts

    A mortgage is a loan used to buy a home. Most mortgages require that you put a down payment, which is a large sum of money you pay towards the property upfront.

    INSURANCE & TAXES

    CONSUMER PROTECTION

    INVESTING

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