It’s March!

Time to Think Green

HOW MONEY $MART ARE YOU?

Test your knowledge and learn about financial concepts in the following slides. Once you have finished, you will create a cartoon that teaches others about one of

these concepts.

1) Which of these items might increase in value after you purchase it?

A

B

C

1) Which of these items might increase in value after you purchase it?

A

B

C

Why?Clothing and automobiles depreciate or lose value as soon as they are used. So do items such as computers, phones and other gadgets.

The price of gold and other precious metals changes with the market; sometimes it decreases but often it increases. Other items that can appreciate or increase in value are homes, land, and special collections (artwork, coins, etc.).

True or False: All bank accounts offer the same features?

a. True

b. False

True or False: All bank accounts offer the same features?

a. True

b. False

• Banks offer different types of accounts:– Savings accounts are protected by insurance and therefore risk-free; they usually offer

low interest rates. Some might require a minimum deposit. Many allow you to use an ATM card.

– Checking accounts are used for more frequent access to money (paying bills) and come with paper checks and often an ATM card. Again deposits are protected by insurance. Many checking accounts do not offer interest. There are frequently charges for overdrawing (spending more than you have).

– Money market accounts usually pay a higher interest rate but require a large minimum balance. They are often used for the infrequent purchase of big-ticket (expensive items.)

– Certificates of deposit, or CDs, usually require you to keep your money in an account for a specific amount of time, anywhere from 3 months to 10 years. They pay a higher rate of interest but you cannot access your money during the term of the CD.

• It’s important to do your research before you choose a bank. Check to see what fees the bank might charge; what interest it offers on various accounts; and what requirements they have to open and maintain an account.

True or False: Using credit cards is a form of borrowing?

a. True

b. False

True or False: Using credit cards is a form of borrowing?

a. True

b. False

Why?

• Credit cards are a very expensive way to borrow money, because the interest rates (the percentage you pay for borrowing money) are very high and can be accompanied by other fees –such as an annual cost for having the card, and charges for withdrawing cash, making late payments, etc.).

• Credit cards should only be used for purchases that can be paid off each month.

2) Which of these long-term savings plans will result in the largest sum by the time the individual is 65?

a. Joe saves $1,000 per year from age 25 to 35 in an account earning 8 percent interest; after 35 he simply leaves his money in the account.

b. Gina saves $1,000 per year from age 35 to 65 in an account earning 8 percent interest.

c. Both will have the same.

2) Which of these long-term savings plans will result in the largest sum by the time the individual is 65?

a. Joe saves $1,000 per year from age 25 to 35 in an account earning 8 percent interest; after 35 he simply leaves his money in the account.

b. Gina saves $1,000 per year from age 35 to 65 in an account earning 8 percent interest.

c. Both will have the same.

Why?• That is the beauty of compound interest! Your

money earns interest, and then you earn more interest based on your original investment plus that interest. Over time, compound interest can result in significant money earned.

• Joe saved $10,000 but comes out ahead with $169,000. Hard to believe? (Gina saved $30,000 but her money did not have as much time to grow. Still, she has $125,000 in her account.)

• See how Joe’s interest is compounded on the next page.

Age Begin Year Interest End Year25 $1,000.00 $80.00 $1,080.0026 $2,080.00 $166.40 $2,246.4027 $3,246.40 $259.71 $3,506.1128 $4,506.11 $360.49 $4,866.6029 $5,866.60 $469.33 $6,335.9330 $7,335.93 $586.87 $7,922.8031 $8,922.80 $713.82 $9,636.6332 $10,636.63 $850.93 $11,487.56

33 $12,487.56 $999.00 $13,486.56

34 $14,486.56 $1,158.92 $15,645.49

35 $16,645.49 $1,331.64 $17,977.13

36 $17,977.13 $1,438.17 $19,415.30

37 $19,415.30 $1,553.22 $20,968.52

38 $20,968.52 $1,677.48 $22,646.00

39 $22,646.00 $1,811.68 $24,457.68

40 $24,457.68 $1,956.61 $26,414.30

41 $26,414.30 $2,113.14 $28,527.44

42 $28,527.44 $2,282.20 $30,809.64

43 $30,809.64 $2,464.77 $33,274.41

44 $33,274.41 $2,661.95 $35,936.36

45 $35,936.36 $2,874.91 $38,811.27

46 $38,811.27 $3,104.90 $41,916.17

47 $41,916.17 $3,353.29 $45,269.46

48 $45,269.46 $3,621.56 $48,891.02

49 $48,891.02 $3,911.28 $52,802.30

50 $52,802.30 $4,224.18 $57,026.49

51 $57,026.49 $4,562.12 $61,588.60

52 $61,588.60 $4,927.09 $66,515.69

53 $66,515.69 $5,321.26 $71,836.95

54 $71,836.95 $5,746.96 $77,583.90

55 $77,583.90 $6,206.71 $83,790.62

56 $83,790.62 $6,703.25 $90,493.87

57 $90,493.87 $7,239.51 $97,733.37

58 $97,733.37 $7,818.67 $105,552.04

59 $105,552.04 $8,444.16 $113,996.21

60 $113,996.21 $9,119.70 $123,115.90

61 $123,115.90 $9,849.27 $132,965.18

62 $132,965.18 $10,637.21 $143,602.39

63 $143,602.39 $11,488.19 $155,090.58

64 $155,090.58 $12,407.25 $167,497.83

65 $167,497.83 $13,399.83 $180,897.66

The slight difference in the finishing amount is due to the fact that this chart reflects annual compounded interest, rather than monthly compounded interest, which the retirement account would pay.

2) Jasmine and Chris just had a baby. They received money as baby gifts and want to put some of it away for the baby’s college education. Which of the following tends to have the highest growth over longer periods of time (in this case, about 18 years)?

a. A U.S. Government savings bond

b. A savings account

c. A checking account

d. Stocks

2) Jasmine and Chris just had a baby. They received money as baby gifts and want to put some of it away for the baby’s college education. Which of the following tends to have the highest growth over longer periods of time (in this case, about 18 years)?

a. A U.S. Government savings bond

b. A savings account

c. A checking account

d. Stocks

Why?Stocks are a RISKIER investment than bonds or bank accounts. With greater risk (the possibility of losing money) comes the potential for higher returns (earnings) when the stock’s value grows.

Without expertise about the stock market, it is better to use this type of investment for longer-term goals and to invest in a mutual fund or other tool that allows you to own a mix of stocks, rather than a single stock.

3) What is one thing that will NOT improve your credit score?

a) Pay all your bills on time.b) Keep more than one credit card.c) Always pay in cash.d) Keep your credit card balances under 30%

of your credit limit.

3) What is one thing that will NOT improve your credit score?

a) Pay all your bills on time.b) Keep more than one credit card.c) Always pay in cash.d) Keep your credit card balances under 30%

of your credit limit.

Why?A credit score is a rating system that identifies the risk a potential lender, such as a bank or credit card company, might face by giving you money.

You build a credit score by showing that you pay bills on time, over a long period of time. When you pay in cash, you do not establish a track record. As an adult, it is good to have a credit card that you can pay in full each month; this establishes you as responsible with your money to potential lenders (for example, if you needed to apply for a loan for a major purchase).

What does it mean to be on a budget?

a. You pay bills every month at the due date

b. You follow a plan that keeps your expenses less than or equal to your income

c. You are earning enough money to be able to live well

d. Your bills are mostly paid by their due date

What does it mean to be on a budget?

a. You pay bills every month at the due date

b. You follow a plan that keeps your expenses less than or equal to your income

c. You are earning enough money to be able to live well

d. Your bills are mostly paid by their due date

What is a budget?

• A budget is a plan for your money, a map to your financial destination, made up of two major components:– Income: what your earn– Expenses: what you spend, both NEEDS (housing,

food, healthcare, basic clothing) and WANTS (bling, entertainment, travel etc.)

– The trick is to cover your NEEDS before you spend money on your WANTS.

Let’s Review the Financial Concepts• Appreciate• Depreciate• Compound Interest• Risk• Returns• Credit Score• Budget

Which one can you teach to others?

Time for you to show your money $marts!

Assignment:

Using one of the concepts you reviewed in this presentation, you are going to create a comic strip to help build the money $marts of others.

1) Read the assignment sheet.

2) Choose a concept from the assignment sheet.

3) Using stripcreator.com, Create a 2 or 3 panel comic that teaches others about that concept.

4) Review a sample on the next page.

5) Look at the rubric on the assignment sheet to see how your comic will be graded.

Sample Cartoon

Financial concept?Compound interest