Your Money Matters...Your Money Matters A Financial Literacy Workshop Presented by the Office of...
Transcript of Your Money Matters...Your Money Matters A Financial Literacy Workshop Presented by the Office of...
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Your Money MattersA Financial Literacy Workshop
Presented by the
Office of Student Financial Aid Services
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• Your Financial Future• Banking• Investing• Savings• Save One Million Dollars• Personal Finance• Budgeting
• Giving• Credit vs. Debit Cards• Debt• Credit Report and Score• Student Loans• Plans for After Graduation
Agenda
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Your Financial Future
Financial Goals
Financial Plan
Financial Values
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Banking
• Banks safeguard and lend money
• Products:
– Checking Account
– Savings Account
– Certificate of Deposit
– Home Mortgage
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Investing
• The act of committing money with the expectation of additional income or profit– Retirement accounts, education savings plans,
stock market accounts
• Investor / Investment Company
• Choosing a Financial Advisor
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Saving
Top 3 Reasons to Save
•Your Future
•Major Purchases
•Emergencies
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How to Save
One Million Dollars
You are age 25 Your investments are earning 7% Save monthly:
$100/58 Years
$200/48 Years
$400/39 years
$750/31 Years
$1000/27 Years
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Personal Finance
• Creating a budget
• Saving for retirement
• Using credit wisely
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Budgeting
• Make a plan; stick to it
• Track monthly
transactions
– Income
– Expenses
• Monitor patterns of
spending
Why is Budgeting Important ?
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Budgeting
Monthly Cash Flow
Income - Expenses = Net Income
Net Income can be:
* Cash flow positive - money left over after expenses have been paid
* Cash flow negative –expenses exceed cash flow sometimes forcing individuals to turn to credit card usage
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Budgeting – Positive
Cash Flow
Monthly Cash Flow
Income = $2,000.00
Cell Phone = ($100.00)
Entertainment = ($300.00)
Transportation = ($200.00)
Gifts = ($100.00)
Clothes = ($300.00)
Personal Items = ($100.00)
Total Expenses = ($1,100.00)
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Net Income: $900.00
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Budgeting – Negative
Cash Flow
Monthly Cash Flow
Income = $2,000.00
Cell Phone = ($200.00)
Entertainment = ($500.00)
Transportation = ($500.00)
Gifts = ($200.00)
Clothes = ($1,000.00)
Personal Items = ($200.00)
Total Expense = ($2,600.00)
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Net Income: ($600.00)
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Credit Card vs. Debit
Card
Credit Card Charges:
Must be repaid
May accrue interest charges if a balance
exists, typically after 30 days
Credit Limit based on credit rating, FICO
score
Debit Card:
Connected with a bank account.
Comes directly out of the account balance.
Account balance is $100. You make a
purchase for $10, now your account then
has $90 remaining
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Understanding
Different Types of Debt
Open-End Credit (Revolving Credit)
• Require monthly payments that are less than the amount due
• Available credit remaining may be used while paying toward balance due
• Can be in the form of Credit Cards/Lines of Credit
Closed-End Credit
• Fixed amounts of money to finance a specific purpose expense over specific time period such as:
• Home Mortgages
• Car loans
• Student loans
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Understanding
Different Types of Debt
Unsecured: Lent by individual or
institution,
Collateral not required
Backed by borrower’s ability to repay
Secured: Lent by individual or
institution
Collateral required as a pledge against an asset
Home Mortgage
Car loan
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Understanding
Different Types of Debt
Potentially Harmful: Purchase of durable
goods Purchase of
merchandise that declines in value
Clothing / store credit card
Good: Creates Value Student loans Real estate loans Business loans
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Limit Debt
• Minimize accumulation of debt
• Pay off existing debt quickly
• Stick to your budget
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UConn Students
• UConn Students Receiving Federal Loans: 50%
• Average Debt at Graduation: $24,999*
• Graduation Rate 83%, above national average
• Earning Above High School Graduates 79%
• Salary After Attending $53,900, above national average
• UConn Students Paying Down Their Debt 93%, above national average of 66%
3/2016 Data obtained from CollegeScoreCard.ed.gov.
*Average debt at graduation, reported for 2014 published with US News and World Report.
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Giving
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Understanding Different
Interest Rates
Fixed interest rates vs. Variable interest rates
• A fixed rate is a set interest rate that remains level for the duration of the loan period
• A variable rate is a changing interest rate over the duration of the loan – the rate may increase or decrease depending on interest rate environments.
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Credit
FICO Score:
Fair Isaac Corporation (FICO) was founded in 1956 by Bill Fair & Earl Isaac.
3 digit number which determines your credit limit and eligibility for lending.
Primary score used by lenders.
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Credit Report vs
Credit Score
Credit Report
CreditScore
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Credit Reporting
Agencies
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Credit Score
Payment History - 35%
Amounts Owed - 30%
Length of Credit History - 15%
New Credit - 10%
Types of Credit Used - 10%
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FICO Credit Score
Very Poor Poor Fair Good Excellent
300 580 640 700 750 850
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How to Build Credit
• Pay student loans on time.
• Pay bills on time to build
credit history and avoid late
fees and interest charges.
• Cell phone
• Utility bills
• Car loans
• Apply for a credit card and make reasonable purchases.
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Your Student Loans
• Investment in your future and career
• It is important to understand terms and conditions for student loans and plan for repayment
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Undergraduate Loans at a Glance
Program Borrower Credit Check Required?
Interest Rate Repayment Begins
Federal Perkins Loan Students with financial need enrolled at least
half-time
No 5% Nine monthsafter graduation
Federal Direct Subsidized Stafford
Loan
Students with financial need enrolled at least
half-time
No 4.29% Six months after graduation
Federal Direct Unsubsidized Stafford
Loan
Students enrolled at least half-time
No 4.29% Six months after graduation
Federal Direct Parent Loan for
Undergraduate Students
Parents of undergraduate students
enrolled at least half-time
Yes 6.84% Sixty days after second
disbursement unless deferred
Private/Alternative Loans
Students with a creditworthy cosigner
Yes Variable or fixed; usually depend on borrower/cosigner
credit scores
Varies by loanproduct
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National Student Loan
Data System for Students
NSLDSNSLDS.ed.gov
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A Plan for After
Graduation
• Start your new career
• Develop a budget
• Research student loan repayment options and choose a repayment plan via studentaid.ed.gov
• Six months after graduation date most student loan payments begin (May graduation = November payment due)
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Questions?