Transcript Financial literacy for the Elementary classroom

FINANCIAL LITERACY FOR THE
ELEMENTARY CLASSROOM
In Class Day Two.
Sponsored by:
Maryland Council on Economic Education and
Towson University College of Business and Economics.
Questions?
Online Material for Standards Three and Five:
Three: Money Management and Spending Plans,
Products at Financial Institutions, Developing
Financial Goals.
Five: Savings Goals, Saving vs. Investing,
Achieving Financial Goals.
Morning Session
Standard Four
Manage Credit and Debt
Why Do We Borrow?
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Why do people borrow?
Insufficient income or savings to cover current expenses.
 To make an investment in an large asset (home, car, business)
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What are common things that we borrow for?
Homes, home repairs
 Automobiles
 Education
 Vacations
 Clothes, computers,
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Where Can You Get Credit?
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Who can you borrow / get credit from?
 Friends/relatives
– borrow directly from or use as a
cosign (avoid whenever possible)
 Credit union / bank – credit cards, home equity loans,
car loans.
 store credit card – generally financed through a bank
and use at store only.
 VISA / MC – financed through a bank (often not local)
Credit Products and Services
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Loans from family / store / bank / credit union
often comes with requirements for repayment (loan
contract or “note”) These may include:
Interest:
 Payment
in excess of loan amount.
 Why? Time value of money.
 How it matters (next slide).

Fees
 Common
for processing paperwork or payments.
 Flat or variable rates that depend upon loan size.
Sidenote: Who pays interest?

Account types that commonly pay interest:
 Money
market
 Savings (very small)
 Certificates of Deposit (CDs)
 Interest bearing checking accounts

Account types that do NOT commonly pay interest:
 Mortgage
 Insurance
 Basic
checking accounts
How does APR / payment matter
Balance
APR
Minimum
monthly
payment
Total interest
Time to pay
$4,500
12%
2%
$4,196
24y 1mo
$4,500
12%
4%
$1,455
10y 4mo
$4,500
18%
2%
$12, 431
44y 4mo
$4,500
18%
4%
$2,615
12y 2mo
Interest rate matters but so does minimum payment in the
total interest paid.
Even with slightly higher mandated (2009 law) minimum
payments, still takes long time period to pay off debt.
The Credit Card
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2009 Credit Card Accountability, Responsibility,
and Disclosures Act passed because of past abuses
by credit card companies (snowballing finance
charges, large penalties and fees).
Credit vs. debit – how different?
Stored value cards (these are NOT credit cards
even though have VISA logo).
Credit cards considered LOW priority debt.
Can You Get Credit

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Credit is like a good friend. What characteristics do
you look for in a good friend?
Creditors do the same thing when considering whether
to loan money out. Creditworthiness is generally
determined by three things:
Character – past behavior as well as education and training
that will sustain income.
 Capacity – do you have enough excess cash.
 Capital (collateral) – assets to support the loan.

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The boy who cried wolf
Standard Six
Manage Risks and Preserve Wealth
The good, the bad and the ugly.
Insurance – why do you need it?
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Property – theft, fire, burglary or natural calamity.
Life – demise of policy holder.
Auto – accident of a vehicle.
Health – injury or ailment.
Others (travel, credit, third party, amusement).
Why? Risk. Generally insure things that are
expensive to lose.
Advertising Effects
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To convey information to consumers about products
or otherwise encourage interest in, or purchase of, a
product.
However, some can be purposely misleading (false
advertising is a type of fraud).
There are three main types of advertising and
many techniques…
Three Types of Advertising
1.
2.
3.
Standard (offline) Advertising: made of printing (imprinted
resources like flyers, cards, plus direct advertising through
postal mail), radio stations and television as well as
interactive and personalized advertising by providing
products plus samples.
Referral Advertising: This is probably the most effective
powerful tool – using word of mouth.
Internet Advertising: This is actually the newest, and may end
up being the most powerful. Includes online marketing,
marketing with articles, online community, writing a blog.
Advertising Techniques
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Emotional appeal
Promotional Advertising (samples)
Bandwagon Advertising
Facts and Statistics
Unfinished Ads
Weasel Words
Endorsements
Advertising Techniques (more)
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Complementing the Customer
Ideal Family and Ideal Kids
Patriotic Advertisements
Questioning the Customers
Bribe
Surrogate Advertising
The Informed Consumer

Advertisers are smart so you want to be an
informed consumer - aware of what is inside the
product, ask questions and have knowledge about
the risks and benefits of the product.
 Be
aware of hidden costs (S&H, taxes, set up fees, …)
 “If it sounds too good to be true, it probably is.”

How can you be an informed consumer? What do
you need to do?
To be an informed consumer:
1. Know who you are dealing with.
2. Protect your personal information.
3. Take your time. Resist any urge to “act now”
4. Read the small print. Get all promises in writing
5. Never pay for a “free” gift.
6. Know the risks
Fraud and Identity Theft
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Fraud is a plan to cheat people or get their money
dishonestly (forgery, bait and switch, counterfeiting, ponzi
schemes, false advertising, false insurance claims, identity
theft,…)
Identity theft is a type of fraud that involves using personal
information on someone to take advantage of them.
When someone else uses any personal identifying
information to commit fraud you have been a victim of
identity theft.
Whose information are they stealing and how do they get
my information?
Identity Theft Complaints By Age
Under 18: 3%
10%
60+
28%
13%
18 -29
50 - 59
40 - 49
30 - 39
25%
21%
Source:Federal Trade Commission
Ways Identity Is Stolen
Fraudulent e-mail 1.7%
Lost/Stolen
Wallet,
Checkbook,
Credit Card
28.8%
Computer virus/Hacker 2.2%
Taken from Trash 2.6%
Computer spyware
5.2%
Stolen mail/
Fraudulent
8.0%
address
change
8.7%
12.9%
Corrupt
employee
11.4%
Friends/relatives
Accessed during transaction
Source: USA Today, January 27, 2005
So, who is stealing
your identity?
Who Misused Your Personal
Information?
Someone at Your Workplace
Someone Else
Someone
at a
Company
with
Access to
Your Info
Friend,
Neighbor or
In-Home
Employee
4%
8%
13%
32%
Family
Member or
Relative
18%
Source: 2004 Javelin Strategy & Research
24%
Complete
Stranger Outside
the Workplace
What Are They Doing With Your Information?
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open credit accounts
get a driver’s license
apply for insurance benefits in your name
get cash advances from your accounts
possibly commit another crime in your name
What can I do?
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Secure yourself: protect your personal information
(contact information, age, ss number, account
numbers.)
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Put outgoing mail in an actual postal mailbox. If you have to use your mailbox, NEVER put
the flag up.
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Shred any mail that has account numbers, social security numbers or “preapproved” credit
offers.
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Be careful with your Social Security number – don’t carry card in your wallet.
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Write down your account numbers and keep the list in a safe place you can access it if you
need it.
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Make sure your payment tools such as credit cards, debit cards, checks and account
information are secure.
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Secure your computer – anti virus and anti spyware software updated
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NEVER respond to emails asking for sensitive information or click on links in these emails.
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Don’t save your password on your computer.
How to Detect Identity Theft
1.
2.
3.
4.
5.
Check your credit card and bank account
balances electronically and often.
Check your credit reports.
Review your paper statements.
Know your billing and statement cycles.
Watch out for unexpected phone calls.