Financial Literacy Handbook

Financial Literacy Handbook

Why is it important to care about creating a budget, saving money or making sure that you have good credit? Because it s YOUR money. Money allows you to buy things that you need and want. By setting goals, saving your money and making sure you have high credit, you can buy bigger and better things that you really want and need. Let s first talk about money. 2

WHAT IS MONEY? Money is used to buy Goods or Services that you Want and Need. Money usually comes in the form of coins and bills. DID YOU KNOW? Before there was money, people used to trade other items? This is called bartering. Can you imagine carrying chickens in your pocket to trade for a cow? Money is easier to carry around, comes in different amounts and keeps its value. 3

What are Goods and Services? Goods = Objects Goods are things that are made or grown. You can touch a good. Many times, goods are made from natural resources. Services = Actions Services are work that someone does for someone else. A doctor, a barber and a chef are examples of people that perform services for people. 4

Needs vs. Wants NEEDS are things that we need to survive. Some things we NEED are nutritious food, water, shelter and clothes. WANTS are things we would like to have. Some things we WANT are toys, video games, candy and electronics. Most people have jobs so then can pay for the things they need and some of the things they want. Deciding what is a Need and a Want is hard sometimes. A budget can help you decide what you really need and what you want. Can you identify a Need or a Want? Circle the Needs and put an X through the Wants. 55

Income Spending = Savings Income > Spending = Savings Income < Spending = Debt What is a budget? A budget is a step by step plan to help you reach your money goals. Start by writing down how much money you make. Then write down how much money you spend. Subtract the money you spend from the money you make. The amount that is left is how much you saved. You can save more by spending less and deciding if something is really a Need or just a Want. Learning the difference between Needs and Wants will lead to making GOOD spending choices. 6

Learning to make good spending choices will help you make sure you first take care of your Needs and then your Wants. Remember that we can t have all the money we want and that we do have to make choices. Once you have taken care of your needs, the money left can be saved to buy the things you want. 7

It all adds up! 1 McDonalds Big Mac @ $4.59 $4.59 x 7 days = $32.13 $4.59 x 365 days = $1,675.35 1 Bag of CHEETOS @ $1.09 $1.09 x 7 days = $7.63 $1.09 x 365 days = $397.85 8

Where do I start? Start by making a list of things you want and put them in the order that is most important to you. You should think about the reasons why you want to buy it and reasons you don t want to buy it. This will help you keep only a few items on your list that you really want. Now it s time to save your money so you can buy those really cool things. Mercedes Morton Founder & Board Chair Los Angeles Conservation Corps 9

How do I save money? You can start by using a piggy bank or even a jar to keep your money in. Remember to write down your budget with how much money you have to start with, how much money you make and how much the things you want cost. You should write down how much money you added every week to show how much closer you are getting to your goal. It is also important to save for emergencies. This helps you prepare for the unexpected things that happen in life. Another way you can save your money is to open a savings or checking account with a bank. What is a savings account? A savings account is where you can put your money in a bank and earn more money for saving it there. That s right, the bank will reward you for saving your money with them by paying you interest. FDIC Insurance Make sure your account is with a bank that is FDIC insured. When your deposits are FDIC-insured, you can t lose a penny, no matter what. 10

So why do I need a bank account? Interest will help you save more money faster. The bank will keep your money safe. No matter what, even if the bank is robbed or goes out of business, your money is SAFE. The bank also allows you different ways to get your money like ATM s, debit cards and the internet. What is a checking account? You can open a checking account in a bank that allows you easier access to your money than a savings account. A checking account gives you access to your money without having to carry cash. A checking account is great when you need to pay bills, buy groceries or go to the movies. When you open a checking account, the bank will give you a check book and a debit card. The check book lets you write a check to a person or business and they can go to their bank, give them the check and the bank will transfer your money to their account. The debit card lets you pay like a credit card except it takes the money out of your checking account and puts it in the business s account. Remember that since you will be using a checking account and debit card to pay for things, you need to keep track of what you are spending and that you keep enough money in the account. 11

What is credit? Credit is money that you borrow to pay for things that you don t have enough money saved to buy. This is sometimes called a loan or a debt. Most of the time when you borrow money, you have to pay interest on top of paying the loan back. So it will cost you money to borrow money. Your credit will be measured with a credit score and credit report. Lenders will review your credit score and credit report to review your payment history and determine if you should be given a loan or credit card. Your credit will also be used for insurance and even renting an apartment. Martice Mills Director, Business Development Clearinghouse CDFI 12

How do I begin building credit? When you pay your debts on time, you build high credit. When you are late making payment or don t pay it back at all, you build low credit. Building high credit is very important when you want to buy a house, a car or even start a business. THE COST OF CREDIT Interest Money you pay for using someone else s money. Fees Money you may have to pay for applying for a loan. Money penalty you pay if you make your payment late. Amount financed Interest (12%) Application Fee Total Paid $5,000.00 $600.00 $75.00 $5,675.00 13

How do I pay for college? Going to college and continuing your education is very important and will help you gain the tools and knowledge to be successful in the workforce. It is important to start saving for college now. If you don t save enough, it s not the end of the world. There are a lot of programs that provide financial aid, grants and scholarships which will help you pay for school. You can also get a student loan. There are two types of student loans: federal loans and private loans. Both of them will require you to pay interest on the amount that you borrow until you pay back the loan. Remember that people that earn a degree may enjoy more job security and earn a higher income. 14

BE SMART WITH YOUR MONEY! It s your money and making good spending choices will help you achieve your goals as you get older. Establish what your Needs and Wants are and make a budget. Keep track of your money and what you spend it on. The more you SAVE, the more money you will have to buy the things you need and want as well as being prepared for unexpected events. 15

Fill in the Banc Down 1. Money you earn for saving in a bank. 3. Money you borrow to pay for things you don t have enough money saved to buy. 5. Money that comes in from a job. 7. Things you buy that you can touch. Across 2. You use this to buy good and services. 4. Work that someone does for someone else. 6. A step by step plan to help you reach your money goals. 8. Things we need to survive. Answers: 1. Interest, 2. Money, 3. Credit, 4. Services, 5. Income, 6. Budget, 7. Goods, 8. Needs 16

LEARN THE VALUE OF SAVING. IT IS AN INVESTMENT IN YOUR FUTURE. 17

CONTINUE ON THE PATH TO FINANCIAL LITERACY. Fill out this form, have your parent or guardian co-sign it and bring it into one of our branches. We will email you information about upcoming financial literacy events sponsored by Banc of California. And you can earn $10 just by opening your own savings account. Name Age Email Address Parent Signature

Notes 19

Welcome to California s Bank. With 38 banking locations throughout Southern California, we re here to serve you in your neighborhood. Anaheim - Main Anaheim Hills Brea Century City - Private Century City Commerce Costa Mesa Downey Fullerton - East Fullerton - West Garden Grove Hacienda Heights Irvine - Headquarters La Habra La Habra Fashion Square La Jolla La Mirada Laguna Hills Long Beach Los Angeles Manhattan Beach Montebello Newport Beach Pacific Palisades Paramount Pasadena Placentia Rancho Bernardo Rancho Santa Fe Rowland Heights San Marcos Santa Barbara Santa Fe Springs Santa Monica Tustin Whittier Whittier - East Wilmington bancofcal.com 877-770-BANC (2262) 2015 Banc of California, N.A. All rights reserved. MEMBER FDIC CRA02W032315