Setting Financial Goals

FDIC Money Smart for Young Adults

Building: Knowledge, Security, Confidence

Why Create a Spending Plan?
What is a Spending Plan?

• A spending plan is:

– A step-by-step guide for meeting
expenses in a given period of time
Financial Goals

• Be realistic
• Be specific
• Have a timeframe
• State the action to be taken
• Have milestones
Preparing a Spending Plan

1. Keep track of your daily

spending
2. Determine what your
monthly income and
expenses are the month
before they are due
3. Find ways to decrease
spending
4. Find ways to increase
income
Step 1: Keep Track of Daily
Spending
• What is the difference
between a “need” and a
“want”?
• Do you know where you
money goes each month?
– To control your money:
• Understand where your
money goes
• Keep a personal spending
diary
Step 2: Determine Income and
Expenses
• Income–money
that comes to • Expenses–items
you from: you spend
– Jobs money, on
– Allowances including:
– Interest and – Bills
dividends – Transportation
– Other sources expenses
– Entertainment
 What You REALLY Earn:
Income
• Gross income – deductions = Net income
• Deductions include:
– Federal and state income taxes
– Social Security taxes
– Retirement savings contributions
– Premiums for medical insurance
Paying Up: Expenses

• Fixed expenses do not change from

month to month
– Example: car payment, rent, and
savings
• Flexible expenses might change from
month to month
– Example: electricity, food, clothing, and
entertainment
Step 3: Decreasing Spending

• Decreasing spending = Increasing

your cash flow
• What are some ways you can
decrease your spending?
Step 4: Increasing Income

• Other than finding a job or finding a

job that pays more, what are some
ways you can increase your income?
 Monthly Payment Calendar
Month: April
Sunday Monday Tuesday Wednesday Thursday Friday Saturday

1 2 3 4 5 6 7
$425.00 $60.00 $25.00 $30 cell phone
paycheck gas/car personal
$150.00 car maintenance
payment
$30.00
insurance
$25.00 savings

8 9 10 11 12 13 14

15 16 17 18 19 20 21
$10 credit
card/ loan
22 23 24 25 26 27 28
$40
entertainment
29 30
Module Summary
 Bank On It
FDIC Money Smart for Young Adults

Building: Knowledge, Security, Confidence

Do You Have a Bank Account?
Why Keep Your Money in a
Bank?

• Safety
• Convenience
• Cost
• Security
• Financial Future
What Is Account Verification?

Proving your identity by providing

the bank with your:
• Name
• Address
• Date of birth
• SSN or ITIN
• State- or government-
issued ID
Banking Terms
Deposit Put money into your account
Withdrawal Take money out of your account
Balance The amount of money you have in
your account
Fees Money charged by the bank for
different services
Overdraft Options in the event you overdraw
Programs your account (spend more money
than you have in your account)
Checking Accounts

• Allow you to pay bills and

buy goods by using checks
or an ATM or debit card
• You will receive a monthly
bank statement
• Compare the rules of the
different checking accounts
Savings Accounts

• You generally:
– Are paid interest
– Cannot write checks
– Can open an account with a
few dollars
• Review your account
statement
Non-Deposit Accounts

• Examples: stocks, bonds, and

mutual funds
• These products are not insured by
the FDIC and you could lose some or
all of the money that you invest in
these products.
Did Someone Steal Your
Information?
• File a report with the police as
soon as possible
• Contact your bank as soon as
possible
• Place a fraud alert on your
credit report
• Contact the major check
verification companies
 Charge It Right
FDIC Money Smart for Young Adults

Building: Knowledge, Security, Confidence

Objectives
• Describe the purpose of credit cards
• Determine which credit card is best for
you, or if a credit card is a good option
for you
• Identify the factors credit card
companies look for when making credit
decisions
• Describe how to use a credit card
responsibly
• Identify the steps to take when a credit
card is lost or stolen
Why Is Credit Important?

• Credit:
– Can be useful in times of emergencies
– Is more convenient and safer than
carrying large amounts of cash
– Allows you to make a large purchase
(e.g., car or house), and pay for it over
time
– Can affect your ability to obtain a job,
buy or rent a house, or obtain insurance
What Is a Credit Card?

• Credit cards:
– Are a convenient form of borrowing
– Provide a revolving line of credit
– Require you to pay the minimum
payment each month
• Charge cards:
– Require you to pay the entire balance
every month
APR
• The cost of borrowing money on a
yearly basis
• Includes interest and fees
• Rate may be fixed or variable
• Different APR for types of use
– Purchases
– Balance transfers
– Cash advances
– Penalties
Application Requirements

• Must be at least 21 years old unless you:

– Can show independent means of repaying
the debt
– Have a cosigner
• Providing false information on a credit
application is a crime
Credit Report

• A credit report tells creditors:

– Who you are
– How much debt you have
– Whether you have made payments on
time
– Whether there is negative information
about you in public records
– How many inquiries are listed in your
credit report
Lost or Stolen Credit Card

• Tell your credit card company

immediately if:
– Your card is lost or stolen
– You identify errors on your statement
• Never give your confidential personal
information over the telephone
unless you have made the call
Common Forms of Identity
Theft
• Phishing
– Unsolicited emails that appear to be from a
legitimate source
• Pharming
– Fake websites seeking personal or private
information by appearing legitimate
• Skimming
– Special storage device used to obtain
credit/debit card numbers
 Paying for College and Cars
FDIC Money Smart for Young Adults

Building: Knowledge, Security, Confidence

Objectives
• Differentiate between secured and
unsecured installment loans
• Identify the factors lenders use to make
loan decisions
• Identify the questions to ask when
purchasing a car
• Describe various types of college loan
programs
Installment Loans

• Money you borrow and

repay:
– In fixed monthly
payments or installments
– Over a set period of time,
usually several years
The Four Cs
Cost Terms Related to
Installment Loans

• Annual percentage rate (APR)

• Fixed-rate loan

• Variable-rate loan

• Finance charge
Financing a Car

“Getting a car loan” = “Financing a car”

• Car is collateral for the loan
• Lender holds the car title
• Amount you pay depends on
the price of the car, the APR,
and the length of loan
Total Cost of a Car
$225.00 Monthly payment
x 60 Number of payments
$13,500.00 Total of payments

$13,500.00 Total of payments

$2,500.00 Down payment
+ $575.00 Tax and registration fee
$16,575.00 Total cost of the car
Where to Obtain Car Loans

• Banks/thrifts
• Credit unions
• Finance companies
• Car dealerships
College Costs

• Tuition
• Books
• Fees
• Housing

• Use the “Cost of College Calculator”

Scholarships
• Money for college that you will not be
expected to repay
• Designated for students who fit a
particular profile
• Avoid scholarships scams by visiting
the FTC’s website
Financial Aid Overview
• Federal Student Aid (FSA) programs
include:
– Pell grants
– Student loans
– College work-study program
• Complete the Free Application for
Federal Student Aid (FAFSASM)
• FAFSA is used to calculate your
Expected Family Contribution (EFC)
Potential Grant Programs
• Federal Pell Grants
• Federal Supplemental Educational
Opportunity Grant (FSEOG)
• Teacher Education Assistance for
College and Higher Education Grant
(TEACH Grant)
• Iraq and Afghanistan Service Grant
• Institutional grants
Federal Loan Programs

• Federal loans include:

– Federal Perkins Loan
– Direct Stafford Loans (Direct LoansSM)
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans
• Direct Consolidation Loans
Repaying Your Federal Loan

• After you graduate, leave school, or

drop below half-time enrollment you
have a “grace period” before you
must repay your loan:
– Federal Perkins Loan: 9 months
– Federal Direct Stafford Loan: 6 months
– Direct PLUS Loan: no grace period
Nonfederal Loans

• A private student loan is issued by a

lender (e.g., a bank or credit union).
– They often have higher interest rates
and loan fees.
– They usually require a credit check.
– They do not provide the benefits of
federal student loans.
Managing Your Student Loan
Payments
• Choose a repayment plan
• Research the pros and cons before
applying for a student loan
consolidation
• Visit the United States (U.S.)
Department of Education’s National
Student Loan Data System
(NSLDSSM) at [Link]
Federal Work-Study Program

• Provides part-time jobs for

undergraduate and graduate
students who need financial
assistance
• Jobs: usually with your school; may
be with private nonprofit
organization or a public agency
Module Summary
Congratulations! You learned about:
• Secured and unsecured loans
• The Four Cs of loan decisions
• Car loans and auto financing
• Some of the ways to finance a
college education
 Pay Yourself First
FDIC Money Smart for Young Adults

Building: Knowledge, Security, Confidence

Benefits of Paying Yourself
First
• Learn to manage
money better
• Save money toward
identified goals
• Improve your standard
of living
• Have money for
emergencies
How Your Money Can Grow

• Interest
– Paid to you for keeping your money on
deposit with financial institutions
– A percentage of the money in your
account
• Compound interest
– Money earned on the previously paid
interest and money already in your
account
Savings Products
• Types:
– Savings account
– Money market deposit account
– Certificate of deposit (CD)
• Choose savings products that are
federally insured
• Calculate your insurance coverage:
– Electronic Deposit Insurance Estimator
(EDIE): [Link]
Non-Deposit Investment
Products
• Investments:
– Are long-term savings options
purchased for future income or financial
benefit
– Are NOT FDIC insured or bank
guaranteed, so you could lose all the
money you invest
– May earn and grow more than a regular
savings account because of the risk
you take when you invest
Types of Investment Products

• Stocks
• Bonds
• Mutual funds
• U.S. Treasury securities
• Retirement investments
Stocks

• You:
– Own a share/part of a company
– May receive dividends if the
company profits
• The value of your investment
changes (up or down) according
to the stock market
Bonds

• You lend money to a corporation or

government entity for a certain
period of time
• I Bonds
– Purchased at face value
• EE Bonds
– Normally purchased at half their face
value
Mutual Funds

• A product that combines money from

many investors to purchase
numerous separate investments
• Diversify: spread your risk of loss
across many savings and investment
options
U.S. Treasury Securities

– Treasury (T) bills

– Treasury (T) notes
– Treasury Inflation-Protected Securities
(TIPS)
– Treasury (T) Bonds
• Minimum purchase price: $100.00
• Backed by the U.S. Government
Retirement Investments

• Products to help you save toward

retirement:
– Individual retirement arrangements
(IRAs)
– 401(k) and 403(b) plans
– Variable annuities
IRAs

• May include a combination of

investment products

• Are tax exempt

• Fluctuate with stock market

• Include Traditional IRAs and Roth IRAs

401(k) and 403(b) Plans

• 401(k):
– Established by an employer
• 403(b):
– Offered to employees of public schools and
certain tax-exempt organizations