Education

The National Economics DepartmentFinancial Freedom Campaign

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Financial

Agenda

• Banking Basics• Borrowing Basics• Budgeting Basics• Saving Basics• Credit Basics• Financial Recovery• Consumer Rights • Resources

Banking BasicsRequirements for opening an account

– Opening Deposit You'll usually need at least $1 to open an account, but some banks will require a higher amount, such as $100, $500, or more, depending on the type of checking account you want.

– IdentificationAcceptable identification includes:• Your Social Security number• Tax identification number• Permanent resident card • Driver's license or state identification card

If you are opening a U.S. bank account and are not a U.S. resident, you'll need at least one and probably two of the following: • Foreign passport with photo• Foreign driver's license, nonimmigrant Visa and border crossing card (DSP-150 with photo), • nonresident alien border crossing card (I-586 with photo)

– Contact InformationThis will include your address, phone number and email address.

Guide To Financial InstitutionsInstitutions Overview

Banks

•They offer small business loans, consumer loans, including mortgages, as well as credit cards, deposit products and checking accounts for everyone. •Banks can now offer insurance and investment products such as mutual funds and IRAs. Many banks also offer trust services, estate planning and asset management

Thrifts

•Today's thrifts offer checking accounts and provide business and consumer loans as well as mortgages. • Thrifts can be owned by their shareholders (stock ownership) or by their depositors (mutual ownership).

Guide to Financial Intuitions Cont. Institutions Overview

Credit Unions

•Are nonprofit, cooperative financial institutions•Many credit unions simply require that you live or work in a certain geographic area in order to become a member•Credit unions frequently offer higher interest on deposit products than banks or thrifts; and they have a tendency to offer loans at lower rates. Credit unions are exempt from federal taxation.

Online Banks

•Do not have physical locations, but first gained attention by offering higher rates on deposit products than traditional banks. •The FDIC warns that not all banks operating on the Internet are insured by the FDIC.

Why Use An FDIC Insured Banking Institution?

• Your money is protected by the FDIC (up to $250,000)

Security

• Located in a central place that can be accessed from anywhere

Convenience

• Opportunity to take advantage the stock market or earn interest on deposits

Saving & Investing

Borrowing Basics

• Interest: The Cost of Borrowing Money

• Avoid Alternative Finance Services (i.e. Payday loans, Car Title Loans, etc) – Usually charge higher fees

for products/services– Not considered to be

credit building institution(s)

Know the FACTSPros

Credit Costs $$$

Credit =Temptation

Easy to lose track

Cons

• Helpful for Emergencies

• Its Convenient

• Increased purchasing power

The Golden Rule of Money

When you use someone else’s money you have to pay for it!

Most of the time that payment is in the form of INTEREST!!!!

Line of Credit V.S. Loan

Line of Credit • A line of credit works like a

credit card in the sense that you have a credit limit and can borrow as needed and pay at least a minimum payment based on your balance.

Loan • A loan usually refers to

borrowing a fixed amount at one time and paying a set amount each month for the term of the loan.

Types of CreditRevolving Credit: Allows you to borrow

money at any time up to a set limit. The most common types are credit cards.

Installment Credit: A loan that must be repaid over a specific period of time. This type of credit is common for larger purchases such as a home, car, or education.

Non-installment or Service Credit: Allows you to pay for a used service at a later date usually without an interest charge. (i.e. A utility bill)

Types of Credit Continued

• Secured Credit: Requires you to provide something of value to guarantee that you will repay your debt. It is usually used for installment loans. If you fail to repay, the lender takes your item as repayment

• Unsecured Credit: Does not require a guarantee (collateral)

Budgeting Basics

• Track daily spending habits

• Prepare a personal spending plan or budget to estimate monthly income and expenses

• Identify ways to decrease spending

• Identify possible ways to increase income

• Identify budgeting tools that will help you manage your bills

• List and prioritize financial goals

• Recognize how to create a plan to achieve financial goals

Financial Goal Setting: The 5 Steps 1. Set and write down your financial goals

2. Breakdown the goals into bite-size chunks3. Create a detailed plan of action4. Grow your financial knowledge5. Evaluate progress

Setting Financial Goals

Saving Basics

• Explain why it's important to save.• Determine goals toward which you want to save.• Identify savings options.• Determine which savings options will help you reach

your savings goals.• Recognize investment options that will work for you.• List ways you could save for retirement.• List ways to save for large-expense goals, including

child’s college tuition, car or home purchase, or a vacation.

Credit: Money you borrow and plan to repay.

It allows you to make a purchase without having to pay the entire price at once.

Interest: Is the cost of borrowing money.

Credit Basics

U.S. Credit System

Public RecordsCreditors Collection Agencies

Credit Bureaus/Inquiries

Data Furnishers

TransUnion Equifax Experian

The FICO Score: Factors that influence credit

• 35% Payment History

• 30% Amounts Owed

• 15% Length of Credit History

• 10% New Credit

• 10% Type of Credit in Use

Want GOOD Credit???• Tip 1: Pay your bills on time

• Tip 2: Contact your lenders immediately if you foresee a payment problem

• Tip 3: Borrow at a minimum

• Tip 4: Do not overdraft accounts

• Tip 5: Understand loan terms/agreements before signing

The Credit Report: Explored

Information typically included:

• Indentifying Information– Name, Address, Social

• Credit Information– Dates opened, credit limits

• Public Record Information– Bankruptcy, Foreclosures

• Inquiries– Others who looked at report

Common errors on the report

• Duplicate Information

• Uninvited Inquiries

• Items that should no longer be listed on your credit report

The Credit Report: Explored

Credit Report: A record of how you have paid your credit card debt and other loans.

It reflects the following:– How much debt you have– If you’ve made your payments on time– Whether or not you’ve paid back your loans

The Credit Report: Explored Credit reports are

complied by national credit reporting agencies called credit bureaus

• There are three Credit Bureaus:– TransUnion– Equifax– Experian

Financial Recovery Tips Assess your current financial

situation Identify ways to increase income

and decrease and prioritize expenses

Develop a financial recovery plan Identify steps to successfully

implement a financial recovery plan

Recognize how to guard against credit repair scams

Identify timeframes to review and adjust your financial recovery plan.

Financial Recovery Plan1. Evaluate the Damage

Catalog all of your losses as well as your remaining capital

2. Set short-term financial goals This can include saving a modest amount each month and

paying off high interest loans

3. Re-do your budget Be sure to track your spending habits and eliminate any

superfluous expenses.

Financial Recovery Plan4. Follow your revised budget5. Update your budget regularly

- This will allow you to track your progress while adapting to your ever shifting economic climate

6. Pad Your Income -Find creative and realistic ways to increase your income

7. Set new financial goals -once you’ve accomplished your short term goals it will be time to

set some longer term goals

Recognizing Credit Repair Scams

• The company wants you to pay for credit repair services before they provide any services.

• The company recommends that you do not contact any of the three major national credit reporting companies directly.

• The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

• The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.

• The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.

• Each of the nationwide consumer reporting companies Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report once every 12 months, if you ask for it.

• It doesn’t cost anything to dispute mistakes or outdated items on your credit report.

• No one can legally remove accurate and timely negative information from a credit report

Consumer Rights

ResourcesAnnual Credit Report: www.annualcreditreport.com

Experian: www.experian.com

Equifax: www.equifax.com

TransUnion: www.transunion.com

National Foundation For Credit Counseling: www.nfcc.org

Federal Trade Commission: Choosing a Credit Counselor www.ftc.gov

Department of Justice: List of Credit Counseling Agencies- http://1.usa.gov/2P1Bq4

Better Business Bureau: See if there are any alerts on the organization you are considering www.bbb.org

Association of Independent Consumer Credit Counseling Agencies: www.aiccca.org