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Youth Money Management

Learning Good Spending Habits

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Checking vs. Savings

• Savings Account• Interest bearing

• Limited withdrawal potential

• Back-up for unexpected expenses

• Checking Account• Convenience of Debit Card

• Used for every day expenses

• Limit spending to only what you can afford

• Keeping track of your balance to avoid overdraft fees

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The Budget Process

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Needs vs. Wants

• Needs are items that you must have for basic survival.

• Wants are items that you desire – that make life more fun – but you can live without.

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So How Do You Spend?

• How much money do you spend today for:• Meals• Snacks• Gasoline• Music• Movies• ???

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Preparing a Budget

• Income Key Terms• Gross Income• Net Income• Bi-weekly pay• Weekly

• Expenses Key Terms• Fixed expense (car payment, or rent)• Flexible expense (food, cell phone, entertainment)• Variable expense (car insurance)

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Ways to Control Spending

• Write down your savings goal• Pay your bills on time to avoid late fees• Carry small amounts of cash• Use Direct Deposit• Control the use of Credit Cards• Use Coupons to save money• Use a grocery list• Shop for the best deals

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Saving - The Right Choice

• Live within your means

• Pay your savings account

• Plan for your future!

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10 Ways to Save Money

• Don’t shop as a form of entertainment. If you really need something, go buy it.

• Live within your means.• Paying cash eliminates extra interest charges, which lowers

the price.

• Forces you to use and enjoy what you now have.

• Take care of what you have.

• Wear it out. Use the parts.

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10 Ways to Save Money

• Do it or make it yourself.

• Anticipate needs.

• Eliminates impulse buying.

• Can take advantage of sales.

• Research value, quality, durability and multiple uses before buying.

• Get it for less — look for discounts.

• Buy it used.

• Borrow it, rent it, or share it

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Step 1: Budget Analysis - Where your Money GoesJane Doe: Single, No Kids, Gross Annual Income: $22,000

Average Monthly Expenses

Partner’s Take Home Pay -0-

Average Monthly Income

Monthly Take Home Pay $1,465

Total Monthly Income $1,785

Monthly Income $1,785Less Monthly Expenses -1,450

Other Income - roommate 320(include child support, alimony, Social Security, direct deposits for savings

Amount Available for debt $335

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Basic Rules of Money Management

• Plan!

• Set financial goals

• Determine if it is a need or want

• Know your financial situation

• Keep a record of your daily expenditures

• Develop a realistic spending plan

• Expenses can not exceed income

• Save!

• Pay bills on time

• Use credit wisely

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Borrowing BasicsWhat Can I Really Afford to

Borrow?

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Credit vs. Debit

Credit Card•Revolving line of credit•Borrowed Funds•Expensive rates•Monthly payments•Late fees•Over limit fees•Credit building

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Credit vs. Debit

Debit Card•Comes out automatically from your checking account•Limit spending to only what you have available on hand•Avoid interest charges•Can be used as credit – Allowing you to use it anywhere Mastercard or Visa is accepted•Access to overdraft protection•Courtesy Pay fees involved•Gives you access to your savings account at an ATM•Forces good judgment and balancing techniques

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Credit & Debt

• In 2008, the total amount of US consumer debt was $57 trillion dollars = $186,717 per person

• The annual personal savings rate of Americans continues to decline – below a minus 1%. The lowest since the Great Depression.

• Average college students leave college with $20,000 in student loans. Nearly 10% of undergraduates owe more than $7000 in credit card debt.

• On average, each US Consumer has 4 credit cards with a $11,950 balance

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Checklist for Credit Decisions

Three Cs:• Capacity

• Present• Future

• Capital• Savings• Assets• Collateral

• Character• How you pay• Credit Accounts

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Credit – it is not free!

• Interest

• Fees• Annual maintenance fees

• Services charges

• Late fees

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Things to Consider Before You Borrow

• Do I need this?

• Do I need it now?

• Can I wait until I have cash to pay for it?

• Can I get credit?

• How much more will I pay if I buy on credit?

• Can I afford the monthly payments?

• What is the total cost of credit?

• Are there any fees?

• What is the annual percentage rate

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Your Credit History

• Good Credit• Make your payments on time

• Pay back the money you owe

• Easier to borrow money in the future

• Bad Credit• Late payments

• Default

• Difficult to borrow in the future

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Loan Payoff Decisions

• Pay off loans with high interest rates

• Talk to your creditors

• Consider debt consolidation

• Get professional advice

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Monitor Your Credit Report

• FACT Act • Effective Dec 1, 2004• 1 free credit report annually

• Free Annual Credit Report• 877-322-8228• www.annualcreditreport.com

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Mi Consumers Products & Services

• Geared towards the Gen Y

• Easy credit card approvals for college

• Local checking and savings

• Instant issue debit cards

• Text Banking/Mobile Banking

• Product bundle

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Questions?