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managing money banking basics protecting your identity & money resources Invest EdTM my money handbook This handbook is made possible by the Oklahoma Department of Human Services, the University of Oklahoma National Resource Center for Youth Services and Invest Edtm. contents Made possible by... Introduction Pre-Quiz Chapter I: Money Management First Paycheck Spending vs. Saving Budgeting Basics Chapter II: Banking Basics Types of Banks Checking Accounts Savings Accounts Savings & Investing Products Investing Risk Credit Chapter III: Protection Protecting Your Identity Protecting Your Money Chapter IV: Conclusion Conclusion Resource List Contact List Post Quiz Answer Key Evaluation The views expressed herein are those of the cited resources selected and adapted for this workbook by the individual contributors and are not necessarily those of the Oklahoma Securities Commission, Department of Securities and its Administrator, the University of Oklahoma Outreach, the Oklahoma Department of Human Services, the employees of these organizations or any associated partners. Revised 2008 Copyright © 2008 Oklahoma Securities Commission 2 4 5 6 9 15 19 20 23 33 37 41 45 53 54 58 65 66 67 68 69 70 71 what to look out for can save you (and your money) from becoming a victim. How do I use thi s handbook? Consider your Money Handbook a reference, tool or guide, but not an absolute authority. The information contained in this handbook is current as of July 2008 and is subject to change. For the most up-to-date information, talk with an expert before making any decisions about how to manage your money, even if it is just opening a checking account. If you are not comfortable doing this on your own, ask someone to go with you whom you trust. Now with that stuff out of the way... it is time to talk money!! >> THIS IS ________________ MONEY HANDBOOK. << (your name here) It is your money and we promise this will all make cents. In school we learn a lot about English, math, history and science. But the subject you will use every day (if you do not already) of your life is called money management. Money management is all about know-ing how to use your money wisely. There is a lot more to it than you might think, but this handbook will break it down in ways that make it easy to understand and fun to do, as we talk about bank-ing basics, savings and investing, and protecting your identity and money. We think you will enjoy these pages, and hope you will hang on to this handbook as a reference guide for years to come. Why it is important? The material things we need or want in life are not without cost. It is not enough just to make money - you have to get the most out of your money by spending and investing in smart ways. But there is another side that not every-one thinks about: the losers who want to cheat you out of it. Knowledge is protection. We want to help you learn how to be wise when it comes to your money management and how to protect yourself from those who are dishonest and want to steal your money from you. Knowing who and intro 2 I n t r o d u c t i o n 3 i n t r o d u c t i o n 69 15 my money Invest EdTM handbook i cha p t e r i pop quiz, hot shot! Just for fun, let us see how much you know about what to do with your money before we get into it. Do not worry - it is not for a grade. 1 Which of the following is NOT a deduction on a paycheck? A. Social Security tax B. Medicaid tax C. State income tax D. Medicare tax 2 Which investment vehicle has the potential for higher returns as well as greater risk? A. Savings bonds B. Stocks C. Treasury bills D. Certificates of deposit 3 What does APR stand for? A. Annual Percentage Rate B. Approximate Percentage Rate C. Applicable Payment Rate D. Annual Payment Ratio 4 When will having bad credit affect you most? A. When cashing in credit card rewards points B. When applying for a loan C. When applying for a job D. When renewing your driver’s license 5 Which one is not considered an investment tool? A. Treasury bill B. Savings bond C. CD D. Checking account 6 You have been asked to pay cash to get in on a money making opportunity. You will get money by getting others to pay cash to join. This scam is an example of: A. Penny stock fraud B. A commission C. Affinity fraud D. A pyramid scheme 7 When someone uses your personal information to obtain a credit card, it is called: A. Declined card B. Mail fraud C. Identity theft 4 D. Credit crisis p r e - q u i z first paycheck to spend or to save: wants vs. needs budgeting basics $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Bank on it! words you need to know deduc t i ons gr o s s pay ne t pay Welcome to the wonderful world of deductions. Those are the amounts taken out of your pay before you take it home. It is not your boss’ fault, either. No matter where you work in this country, whether you make thousands or mil-lions of dollars a year, deductions are a part of life. So you might as well know what they are. (AND HOW TO READ IT) >> Wrong. money management: your first paycheck So you have your first paycheck.Congratulations! You get paid $6 an hour and you worked 20 hours, so that comes to $120 in your pocket, right? Though there could be more, here are four basic deductions: 1 Social Security tax 2 Medicare tax 3 Federal income tax 4 State income tax Social Security and Medicare are the fed-eral programs that help out the elderly with monthly payments and health insurance. And income taxes fund all kinds of government programs that are intended to benefit people. Once these deductions are made, you take home the rest. You may see your share listed as net pay. Gross pay is what you made before deductions. You can remember the difference by thinking of a net: What you catch in it is what you keep. All these amounts are clearly shown on your paycheck. Usually your pay stub will list what you have made since the last check and what you have made for the year to date. Once you have made it, the next step is figur-ing out what to spend and what to save. 6 7 m o n e y m a n a g e m e n t f i r s t p ay c h e c k When b uying things, it is important to realize the difference between a need and a want. A need is something you cannot do without, like food and shelter. A want is just that: something you would like to have, but you can survive without. That is not to say you should only buy things you need, but buying something you want should not take priority over your needs or blow your budget (and we will get to that next). Some things should be saved for over time. Remember, to make a smart purchase, all you have to do is P.I.C.K. it: P Problem: What is the issue? I Information: Get it. C Consequences: Think about them. K Kick it into action! to mon sepye mnda noarg teom seanvte:? >> But do you need it? Have you ever spotted some-thing at the mall that caught your eye and made you say, “I need this.” exercise Using the paycheck example above, answer the following questions: 1 How much money have you earned all year before deductions? 2 How much net pay have you earned for this check only? 3 How many hours did you work for this check? 4 How much were you paid per hour? 5 How much has been deducted for Medicare for the year? John Doe 1234 Main St. Anytown, OK 73071 Taxable Marital Status: Single Exemptions/Allowances Federal: 1 State: OK State 1 Earnings rate hours this period year to date 6.50 40 $ 260.00 Gross Pay $ 260.00 Deductions Federal Income Tax -$ __ 3.12 Social Security -$__16.12 Medicare -$ __ 3.77 Oklahoma State Tax -$ __ 2.00 Net Pay $ 234.99 $1560.00 $ 204.85 $ 96.72 $ 22.62 $ 79.00 $1156.81 Tax by the state to pay for state programs. Funds medical care for the elderly. Federal fund to assist the elderly. Tax to pay for federal programs. Pay after deductions. This is what you get to take home. Pay before deductions. Amount of money earned from the beginning of the year to the current date. Answer key on page 70. 8 m o n e y m a n a g e m e n t 9 s p e n d o r s a v e ? Let us apply the P.I.C.K. rule to Sandy to see how her needs and wa n t s p l ay out agains t each other... P Problem: Sandy wants a new CD that is coming out this Tuesday. I Information: By checking out ads in the Sunday paper and on the internet, Sandy finds out what the CD costs at various retailers. C Consequences: Now that she knows what she would be spending, Sandy can determine whether the CD is affordable with the money she has for the week. K Kick it into action: Sandy needs to fill her car with gas to get to and from work this week. She decides to wait and buy the CD later. By recognizing the problem, researching the information and considering the benefits and trade-offs, Sandy was able to make a smart financial decision. What are your wants? Circle them! How need savvy are you? circle your needs! r ent vacat i o n c lothe s wat e r mounta in b ike sof t dr inks ga s o l ine lunch $ dent i s t car p rom dr e s s plasma s c r e en purse insur anc e c r edi t card b i l l s c e l l phone 10 Bank on it! words you need to know ne ed wa n t m o n e y m a n a g e m e n t Now let us compare how the P.I.C.K. rule plays out for Daryl’s need. P Problem: Daryl’s electric bill doubled this month because last month was so hot. He owes $100. Paying an extra $50.00 on his elec-tric bill was not something Daryl expected this month. He planned to spend the money on a concert. I Information: Disappointed, Daryl considers how he should spend the $50.00. He remembers turning down the air conditioning more than ususal to stay cool, so he knows his bill is not a mistake. Also, the month-by-month history on his bill shows that $100 is about what he paid this time last year. So Daryl knows he owes the extra money to the electric company, but he really wants to go to the concert with his friends. C Consequences: This is a no-brainer. If Daryl pays the bill, he will have air conditioning for another month. If he chooses not to pay the bill, Daryl will have a very hot summer. In this case, all the concerts in the world will not substitute for air conditioning. K Kick it into action: Daryl decides to skip the con-cert this month and pay the bill. To avoid another unexpected high electric bill, he will not turn down his thermostat. 11 s p e n d o r s a v e ? 13 need ___________________________________________ ___________________________________________ PROBLEM ______________________________ ___________________________________________ ___________________________________________ ___________________________________________ INFORMATION _________________________ ___________________________________________ ___________________________________________ ___________________________________________ CONSEQUENCES ______________________ ___________________________________________ ___________________________________________ ___________________________________________ KICK IT INTO ACTION _________________ ___________________________________________ ___________________________________________ ___________________________________________ want ___________________________________________ ___________________________________________ PROBLEM ______________________________ ___________________________________________ ___________________________________________ ___________________________________________ INFORMATION _________________________ ___________________________________________ ___________________________________________ ___________________________________________ CONSEQUENCES ______________________ ___________________________________________ ___________________________________________ ___________________________________________ KICK IT INTO ACTION _________________ ___________________________________________ ___________________________________________ ___________________________________________ Think about something that you need and something that you want. Apply the P.I.C.K. rule to each. Would you think twice about buying either item after going through these steps? Why or why not? s p e n d o r s a v e ? exercise The decision process wa s the same. By recognizing the problem, gathering the information, and considering the benefits and trade-offs, both Sandy and Daryl were able to make smart financial decisions that met their needs first. The stuff we want may not always cost a lot, but you would be sur-prised at how fast inexpensive wants can add up. Think about less expensive ways to spend on your needs. To save money, Daryl chose not to turn his air conditioning down the next time he feels a little uncomfortable in his apartment. Instead of spending $10.00 at the movies on opening night, consider saving money by going to a matinee, waiting until the movie plays at the dollar theater, or renting the DVD. Tips & tricks my notes 12 m o n e y m a n a g e m e n t A need is something you cannot do without. money management: and a whole pizza has been placed in front of you. In order to take care of what matters most (your growling stomach), which slice do you reach for first? The biggest one, of course. Budgeting your money is some-what like that. The greatest needs are taken care of first. Imagine you are starving you cannot fudge it with a budget 14 m o n e y m a n a g e m e n t Bank on it! words you need to know disposable income my notes exercise Savings Food & Groceries Clothes & Cosmetics Rent & Utilities Telephone Car & Gas Entertainment Charity & Gifts Medical Miscellaneous TOTAL Today, start your budget by writing an “Amount Budgeted” for each category, using your monthly take-home pay. If you do not currently work, use $524.00; this figure is based upon four 20-hour work weeks at a $6.55-per-hour minimum wage. For the next 30 days, every time you spend money in one of the categories subtract it from the “Amount Budgeted” and write that number in “Amount Left After Spending.” On the 30th day, add the “Amount Left After Spending” column up. The total shows how much un-der budget you were. How did you do? AMOUNT BUDGETED AMOUNT LEFT AFTER SPENDING 16 m o n e y m a n a g e m e n t Budgeting lets you see where your money needs to go, and helps you make sure that hap-pens. Once your needs are met, you know exactly how much you have left to spend on the things you want. This “fun money” is called disposable income. Imagine if you got your monthly pay all in cash, and had to divide the cash up into piles according to where they were going to be spent. Think about all the things you have to pay for every month: rent, food, bills, gas - that sort of thing. Then think about all the fun things you would like to do, like movies or con-certs. Even though the stuff you want may not always cost a lot, you will be surprised how fast it adds up. The goal of budgeting is to have some money left over. After all, you cannot spend what you do not have. Do not forget about setting money aside for savings or for emergencies that might come up. CD Rent Bills Gas Food 17 b u d g e t i n g 20 23 33 37 41 45 Invest EdTM ii chapterii types of banks checking accounts savings accounts savings & investing products investing risk credit 1 2 3 4 5 Answer key on page 70. QUIZ ch.i Circle the letter that best answers the question. Which of the following is not a deduction on a paycheck? A Social Security tax B Medicaid tax C State income tax D Medicare tax Certain deductions are taken from your paycheck because: A This money is put away until you turn 65 B Employers get a percentage of what you earn C They are required by the government D They fund other programs of the company In making smart financial decisions, what does P.I.C.K. stand for? A Problem/Information/Consequences/ Kick it into action B Pursue/Information/Consequences/ Kick it into action C Problem/Intelligence/Consequences/ Kick it into action D Problem/Information/Control/ Kick it into action In budgeting, money left over after all needs are taken care of is called what? A Leftover funds B Free money C Net pay D Disposable income Which of these budget items is a want? A Utilities C Entertainment B Gasoline D Groceries 18 c h a p t e r i q u i z my money handbook take that to the bank... Most banks offer checking and savings accounts, credit cards, loans, travelers’ checks and safety deposit boxes for both business and personal use. Generally, your deposits are insured up to $100,000 in regular accounts and up to $250,000 in retirement accounts by the governmental Fed-eral Deposit Insurance Corporation or FDIC (in case your bank fails). Savings and loans may offer some of the same services, but focus on loans for people who want to buy or fix up a home. Here, your deposits are also similarly government-insured, but by the Savings Association Insurance Fund (SAIF) administered by the FDIC. Credit unions also operate like banks, but are owned and operated by a group of people having something in common, like attending the same church or working at the same place. They only serve their own members, who can buy life or health insurance or get loans at low rates. Generally, deposits in federal and most state-chartered credit unions are insured up to $100,000 in regular accounts and up to $250,000 in retire-ment accounts by the governmental National Credit Union Administra-tion (NCUA). Just as those three groups offer different services, they also offer those services at different prices. For example, many banks offer free check-ing accounts or ATM transactions, while others charge fees. Just asking around can help you find the institution that is right for you. > > > BUT WHICH ONE? Check-cashing and “cash in advance” businesses you see around town and in strip malls, may be convenient and quick, but they are not banks. These businesses may charge a big fee for cashing your paycheck! (You have worked way too hard for your money to throw it away like that!) Thirsty for a soda? be aware! Check Cashing & Cash in Advance Busineses: What kind? Regular? Diet? Cherry? Vanilla? Lime? Not all soft drinks are exactly alike, and the same goes for banks and other finan-cial institutions. We think of them as places that store money and have free lollipops at the drive-thru window, but there is much more to it than that. They fall into three main categories: banks, savings and loans, 20 and credit unions. 21 b a n k r e v i e w b a n k i n g b a s i c s banking basics: Bank on it! words you need to know commercial banks full-service banks savings and loans credit unions fdi c sai f A ___________________ is owned and operated by a group of people having something in common, like a place of employment. It is supervised and may be insured by the government. A ___________________ offers checking and savings accounts, credit cards, loans, travelers’ checks and safety deposit boxes. Your deposits are insured up to $100,000 in regular accounts and up to $250,000 in retirement accounts by the Federal Deposit Insurance Corporation. A ___________________ offers the usual accounts and other services, but focuses on loans. Your money is in-sured by the Savings Association Insurance Fund. That is why getting a checking account may be a good idea - besides safety, it is a good way to keep track of your money and lets you pay bills by mail or online instead of in person. When you cash your paycheck, it is a nice feeling to have all that money in your pocket. Unfortunately, it is not very safe! >>>>> Bank on it! words you need to know che ck r egi s t e r ov e rdraf t r e conc i l ing checking out checking accounts banking basics: 22 23 b a n k i n g b a s i c s exercise For each situation below, fill in whether it best describes a bank, savings and loan or credit union. 1 2 3 Answer key on page 70. >>>>>>>>>>>>>>>>>>>>>> >>>>>>>>>>>>>>>>>>>>>> 1 The date you write the check 2 The name of the person or business to whom you are writing the check (payee) 3 The amount of the check in numeric form (such as $27.34) 4 The dollar amount of the check in word form and the cents amount in numeric form (such as twenty-seven dollars and 34 cents) 5 Your signature (payor) (There is also a “Memo” line where you can write what the check is for, but you do not have to use it. However, it comes in handy when noting the last four digits of an account number for paying bills.) 24 b a n k i n g b a s i c s Jane Doe 1500 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1500 0009876543" "0000012300,’" BANK May 12, 2008 Grocery Store 27.34 Twenty-seven dollars and 34/100 groceries Jane Doe The name of the person or business to whom you are writing the check. The date you write the check The amount of the check in numeric form (example: $27.34) The dollar amount of the check in word form and cents amount in numeric form (example: twenty-seven dollars and 34 cents) Used to write what the check is for. Your signature There are five areas you must fill out: Writing a check can be easy, too. It is all about filling in the blanks. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> What is a check card? A check card is a combination of a check and an ATM card; you can use your check card to buy and pay for things and to get money at the ATM. A check card is linked directly to your checking account, so every time you use it, money is taken out of your checking account. Remember to always write down your check card purchases and ATM withdrawals in your check register. You do not want to spend more money than you have in your checking account by accident. 25 c h e c k i n g a c c o u n t s making ATMs a-ok! What to do when writing a check: • Write clearly, in black or blue ink. • Fill remaining spaces with a line to avoid tampering. • Immediately record each transaction in the register, so you do not overdraft your account. Spending more than you have in the bank can cost you penalty fees and hurt your credit rating. What not to do when writing a check: • Use a pencil. • Use incomplete names or nicknames. • Leave it blank. • Date it with a day that has not happened yet. By keeping an accurate record, it will be easy to check your register against the monthly account state-ment you will get from the bank. Do this every time to make sure there are no errors, yours or the bank’s. There, you will note: 1 The date you write the check or make the transaction. 2 The check number. 3 The name of the person or business to whom the check is written. 4 The amount of the check in numeric form (such as $20.34). 5 Your remaining balance, once the check, ATM withdrawal or check card transaction is subtracted from the previous amount. 6 If you have online banking and check your account online, remember that some transactions take longer to post to your account, so you may not see them taken out right away, but they will show up, so do not spend money you have already spent. The other blanks you will have to fill are on your check register, which is where you list the details on each and every check you write. (You will also use the check register to record all deposits into your account, as well as all ATM and check card transactions.) 26 • • • • • • • • • • • • Remember to write down all ATM, check or debit card transactions in your register. If you do not have it with you, stick that receipt in your wallet until you get home! • • • • • • • • • • • • Choose a PIN number you can easily remember, but do not tell anyone! • • • • • • • • • • • • Check with your bank to see if fees are charged for using ATMs they do not own. Those fees can add up! • • • • • • • • • • • • Treat your ATM, check or debit card transactions as you would a check - it is not “free” money! • • • • • • • • • • • • b a n k i n g b a s i c s s 27 c h e c k i n g a c c o u n t s Vital Records Service Oklahoma State Department of Health 1000 Northeast 10th Oklahoma City, OK 73117 405.271.4040 Social Security 1.800.772.1213 www.ssa.gov/dollars Reconcile! To make sure your register matches up with the bank - called reconciling - follow these four simple steps. You will likely find them on the back of your statement as well: 1 In your register, check off every transaction that also appears on your statement. 2 On a piece of paper, write down your balance ac-cording to the statement. 3 Add in all unchecked deposits from your regis-ter that are not on the statement. 4 Subtract all unchecked withdrawals (or checks you wrote not yet cashed) from your register balance that are not on the state-ment. That amount should now match the balance on your statement. If not, recheck your math. Do not be afraid to ask your bank for help - that is what they are there for! You also should not be afraid to ask questions when opening a checking account, especially how much it costs. Many banks offer free check-ing, while others will charge a fee for every check written. yh ogeuroe! >>>>>>>>> 28 b a n k i n g b a s i c s YOU: I saw your free checking pro-motion and I wanted to ask about opening an account. TELLER: I can help you. All you need are two forms of I.D. and your opening deposit. YOU: I only have a library card and my driver’s license. Will those work? TELLER: Driver’s license, yes, but you need an original birth certificate or So-cial Security card for your second form. YOU: Where would I get those? TELLER: The Department of Vital Statistics for a birth certificate, and the Social Security office for your card. There may be processing fees. YOU: I was not born in Oklahoma, so can they still help me? TELLER: Call the Department of Vital Statistics in your birth state for a birth certificate. I am sorry for the inconve-nience, but that is how we protect cus-tomers from having their identity stolen. When applying, dress nicely, act pro-fessionally and be prepared to show two forms of valid identification. Here is a quick scenario of what you might expect: STATEMENT FOR Jane Doe 123 Main St. Oklahoma City, OK 74066 CHECKING ACCOUNT 0009876543 THIS STATEMENT COVERS 4/20/08 through 05/12/08 Previous Statement Balance on 4/19/08 Total of 1 Deposit Total of 3 Withdrawls New Balance 500.32 72.23 + 69.85 - 502.70 CHECKS AND OTHER DEBITS CHECK 1499 DATE PAID 5/10 AMOUNT 40.03 Withdrawl #031 at ATM Withdrawl #0123 Check Card 5/11 5/12 21.50 8.32 DEPOSITS AND OTHER CREDITS DATE POSTED 5/9 AMOUNT Direct Deposit from #1234 on 5/8 72.23 BANK 29 c h e c k i n g a c c o u n t s Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1502 0009876543” “0000012300,’” BANK Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1503 0009876543” “0000012300,’” BANK 30 b a n k i n g b a s i c s exercise Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1501 0009876543” “0000012300,’” BANK Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1500 0009876543” “0000012300,’” BANK 1501 1500 1502 1503 • On April 4, pay John Doe the $20.25 he loaned you. • On April 18, pay your $42.73 bill with Gasoline Credit, account number 7158-6402. • On April 23, give $74.66 to Dan’s Market for your groceries. • On April 27, write yourself a check for $15.00 cash. Write checks for each of the following situations and record them on the sample check register on the next page. 31 c h e c k i n g a c c o u n t s 32 CHECK NUMBER DATE DESCRIPTION OF TRANSACTIONS PAYMENT/DEBIT {-} ?FEE {-} DEPOSIT/CREDIT {+} BALANCE exercise On the check register below, record the following: • Include a $237.42 deposit on April 16 from your paycheck. • Also note ATM transactions for $20.00 on April 2 and $40.00 on April 30, each having a transaction fee of $1. When you put money into an interest-bearing account, it does not just sit there - it earns interest. We have all heard money does not grow on trees. > > > But it does grow when you save and/or invest. >>> >>> >>> >>> >>> >>> >>> BANKING BASICS: saving and investing puts your cash on the grow b a n k i n g b a s i c s 33 Saving is important for two major reasons: 1 You never know what life is going to throw your way. We do not know when emergencies will happen - like a health problem or losing your job - but we know they will, and savings gives you a cushion to fall on. 2 There are some things you will want to buy that you cannot swing right now. Someday when it comes time to buy a house or pay for your college education or some other high-ticket item, you will be glad you socked some bucks away. Oh, you could treat a savings account like checking and take money out of it all the time, but let us show you why you do not want to do that. Say you put $25 a month into savings for a whole year, that would be $300. If that $300 earned an interest rate of 5% (meaning the bank would pay you 5% of what your balance was), it would grow to almost $400 in fi ve years, to nearly $500 in 10 years and just shy of $800 in 20 years. And that assumes you did not add another penny. Interest is money paid to you by the bank for saving and for letting the bank use your money to loan to others. The more you put in and the longer it stays there, the more interest you earn. Even better, the deposits are insured up to $100,000 or more. And there lies the major difference between checking and savings accounts. Your balance gets smaller in checking be-cause you are writing checks, but it gets bigger in savings because you are not touching it. Think of money in savings like a seed you have planted and interest like the water you pour on it. Interest helps make your money grow. > > > But noW We Bet you Want to! And the earlier you start, the more you will have when you need it. >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> 34 35 s a v i n g s a c c o u n t s b a n k i n g b a s i c s Bank on it! words you need to know s av ings ac c ount int e r e s t int e r e s t r at e the earlier you start saving, the more money you will have when you need it Consider all the things you buy in a month. What could you give up and instead put that money into savings? List them below with how much each item costs. Then total it and think about how that money would grow in savings. item cost exercise 36 b a n k i n g b a s i c s banking basics: Cars all do the same thing: Take us from Point A to Point B. But no two are exactly alike. Some are built for speed, while others work for the long haul. And savings accounts are just like that, too. Even though they all can make your money grow, they do it in different ways, at different rates. You just have to pick which one fits your savings goals, whether it is for the short term or the long term. savings and investing products: when a piggy bank just does not cut it 37 We have talked about the standard bank sav-ings accounts. These are popular because: • you can take money out at any time. (Double check with your financial institution, they may have a limit on the number of free withdrawals per month.) • they are FDIC-insured. • and many financial in-stitutions offer a savings account with a low mini-mum monthly balance requirement. And those other options include: • Certificates of deposit - You might hear these called “CDs” (but they sure do not play music). With CDs, you put your money in for a set amount of time, anywhere from a few weeks to several years. The longer term CD you buy, the more interest you will make. Just do not take any money out before the time is up, or you will be charged a penalty. • U.S. savings bonds - These are backed by our federal government. You can buy a bond for $50 and let it mature (or earn interest) for 30 years before cash-ing it in. It works like an IOU; you are loaning money (in this case, $50) to the government, who promises to pay it all back - with interest - at the maturity date (30 years). The interest rates may not be huge, but the invest-ment is backed by the U.S. government. Whatever the interest, you have to report it on your yearly income taxes when you cash in the bond. If it was more than $1,500, note it on Schedule B of Form 1040 or Schedule 1 of Form 1040A. If it was less than $1,500, simply note it with any other interest on the “Interest” line of your return. If you are paying your own way through college at the time, you may be able to exclude it. Just consult the In-ternal Revenue Service rules at www.irs.gov. • Treasury bills and notes - These also are backed by the government. Treasury bills are for short-term investing (between a few days to six months) and can be bought at a discount. Treasury notes are for longer-term invest-ments, and they earn in-terest every six months. • Stocks - Instead of investing in the gov-ernment as savings bonds and Treasury bills and notes, through purchasing stocks you can invest in specific companies. You buy shares - or pieces - of that company, making you a shareholder - or owner - of that portion of the entire company. There is no guarantee in stocks, but the earn-ings can be huge. You could make a fortune or lose your shirt. This potential to win or lose, like in a game, is why you might hear people talking about “playing” the stock market. But investing is a serious business. • Mutual funds - These take your money and put it together with other investors’ money to invest in certain stocks and bonds. When the stocks and bonds do well, so does the mutual fund. They often are considered a valuable long-term investment tool. • Money market funds - These are mutual funds that invest in extremely short-term, govern-ment- guaranteed bonds. Interest rates are usu-ally higher than those of saving accounts, so these may be best if you are planning on saving some money for years, or even decades. But you can take money out at any time without be-ing penalized. All of these carry a different amount of risk, or danger, which we will 38 get to next. 39 s a v i n g s & i n v e s t i n g p r o d u c t s b a n k i n g b a s i c s Bank on it! words you need to know c e rt i f i cat e s of depos i t U.S. s av ings b onds mat u r e maturi ty dat e Tr easury b i l l s Tr easury no t e s s tocks shar e s shar eholde r mu t ua l funds mo n ey marke t funds 40 Using the following investment products and clues, fill in this crossword puzzle. use these words: BONDS DEPOSIT MONEY MARKET MUTUAL FUNDS SAVINGS STOCKS TREASURY BILLS TREASURY NOTES D O W N A C R O S S exercise b a n k i n g b a s i c s clues 4 Investment specializing in extremely short-term bonds 5 Short-term, discounted, government-backed investment 7 Certificates of __________ charge penalties if money is taken out before the specified time period 8 U.S. savings ________ work like IOUs 1 Purchasing makes you a shareholder of the company 2 Long-term, government-backed investments earning interest twice a year 3 Investments which pool investors’ money 6 ________ accounts are insured by the FDIC, but provide low returns Bank on it! words you need to know r i sk r e turn the risky business of investing banking basics: 41 Quick, pick a number between 1 and 1,000,000. Wh at is it? No, sorry, we were thinking 64,237. You were not even close. Answer key on page 70. 42 43 i n v e s t i n g r i s k b a n k i n g b a s i c s Lower-risk investments include bank savings accounts, money market accounts, CDs, U.S. savings bonds and Treasury bills and notes. These are considered safe because most of them are either guaranteed or backed by the federal government. And because they are less risky, the interest you earn will not be as great as the other categories. Stocks and mutual funds generally fall into the medium-risk and high-risk categories. Remember, stocks are an equity investment in various corporations, and sometimes companies lose money and may even go out of business. When they do, those stocks can become worthless. On the other hand, when those businesses do well, so does their stock. Generally, the older and more well-known a company is, the less chance you take. But each stock and mutual fund are classified according to risk, so you are likely to find one that fits your comfort level. Note that mutual funds often charge fees, typically per transaction, for changes you make in your account. So if you make too many changes, your fees could exceed your earnings – just something to keep in mind. Good thing we did not put money on that one! With odds like that, you were not likely to ever win. However, in the world of investing, having zero return on your in-vestment is not the norm. But risk - the possibility that you may not win - does exist. The different types of savings and investing options we discussed pre-viously can fall into one of three categories: 1 Lower risk 2 Medium risk 3 Higher risk Generally, the lower the risk, the lower the return - or increase - on your invest-ment. So which is which? Are you a risk taker? Think of the biggest risk you have taken. YIKES! exercise LOWHEIRG RIHSKE R RISK At this point in your life, are you ready for low-risk or high-risk investments? Circle your answer to each question, and you will see what road might be right for you. Have you ever invested before? Are you wanting a return on your invest-ment right away? Are you willing to give up security in exchange for higher returns? Is your income high and stable? LOWER RISK NO NO NO NO HIGHER RISK YES YES YES YES Stick a nice hunk of cheese in a trap and the mice will come for it. And also get into a heap of trouble for doing so. Today, credit can be just as tempting and just as dangerous. But it is designed to help you. And as long as you use it wisely, it will. charging ahead wi t h c r edi t banking basics: 44 45 b a n k i n g b a s i c s Where credit can be dan-gerous is in the form of a little piece of plastic called the credit card. Here is why: • If you fail to pay off your monthly credit card bill in full you are charged interest on the closing date balance. • The finance charge is added to your balance every month, reducing your available credit and increasing the amount you owe. Making even one late payment can negatively affect your credit rating. • Additional fees are also charged for going over your credit limit and for taking out cash advances, which usu-ally carry a higher interest rate. The bank issuing your credit card will provide you with a fee statement. Read it carefully before you use your card! Credit card companies make money from you in the fees and interest rates. Shop around for the lowest interest rate, because the lower the rate, the lower the finance charges, and the lower your debt will be if you cannot pay the bill in full each month. If you do pay your bill in full month after month, you get a good credit rating. That is a score of how well you do with credit. If you have good credit, banks will want to loan you money for a home or car at a low interest rate. If you do not, you may have some problems. 46 47 c r e d i t b a n k i n g b a s i c s Bank on it! words you need to know c r edi t l ende r bor rowe r de b t c r edi t r at i n g annua l p e r c entage r at e c r edi t limit Credit is when you are loaned money that you promise to pay back by a certain date, with interest. If you plan to buy a home or a car that comes with a hefty price tag, lenders - or those who loan the money - will give you credit so you can move in or drive away immediately. As the borrower, you make monthly payments until you are no longer in debt - or owing the lender - for that amount. Credit b a n k i n g b a s i c s •Ask the seller as much as you can about the vehicle, including mile-age, accident history, repairs. • Then find out how much the car is worth considering the shape it is in by logging on to www.kelleybluebook.com or www.nadaguide.com • Always take it for a test spin. • Have it checked out by a trusted mechanic before buying. • Look the car over for scratches, dents, stains or anything that may help you negotiate a lower price. • Bring an adult you trust with you for a second opinion. You can get good credit by: • Having a steady job. • Having a savings and a checking account. • Paying your bills in full and on time. • Never bouncing checks. • Paying off debts on time or even ahead of time. • Making regular monthly payments on time. When you sign up for a credit card, be sure you know: • The interest rate (or APR - annual percentage rate) and late fees. • Whether the interest rate goes up after a certain period. • The due date and grace period for payments. • The minimum monthly payment. • The credit limit (the maximum you can charge). • The company - do not sign up if it is not a trusted name. Just remember, credit cards are not “free money.” They are handy, but you do not want to get in over your head. Before you make a credit card purchase, apply the P.I.C.K. method from Chapter 1 to figure out if this is something you really need and can afford, and what will happen if you cannot pay it back. Taking a minute to do that can save you months of heartache later. WHAT YOU ‘AUTO’ KNOW WHEN BUYING A CAR You may not need credit if you are buying a car from some-one other than a dealership. But you wi l l ne ed s ome know-how. To make sure you do not throw your money away on a lemon, follow these tips: 48 b a n k i n g b a s i c s 49 c r e d i t 51 1 2 3 4 5 6 7 8 9 On what date was gasoline purchased?__________________ How much was spent at Music World? _______________ What is the amount owed this month?_____________________ What is the minimum pay-ment due?__________________ When is payment due? _________________________ What is the current interest rate? ____________________ How much is the credit limit? _____________________________ What was the balance on last month’s bill? ___________ How much was the last pay-ment made? _________________ exercise Look at this sample credit card bill and answer the following questions. BANK ACCOUNT NUMBER 1234-56-789 NAME Jane Doe CREDIT LINE $500.00 CREDIT AVAILABLE $433.73 MINIMUM DUE PAYMENT DUE DATE 05/06/08 CLOSING DATE 04/28/08 DUE DATE 05/06/08 REFERENCE POSTED ACTIVITY AMOUNT 43567BF 04/05 GAS STOP ANYTOWN, OK 34.15 FTX456 04/06 PAYMENT THANK YOU - 120.34 78SD32F 04/12 MUSIC WORLD ANYTOWN, OK 24.12 TX23476 04/15 BIG SCREEN MOVIES SMALLTOWN, OK 8.00 CURRENT AMOUNT DUE $66.27 $20.00 NEW BALANCE $66.27 PREVIOUS BALANCE - PAYMENTS + PURCHASES CASH ADVANCES 120.34 120.34 66.27 0.00 FINANCE CHARGES NEW BALANCE APR CURRENT AMOUNT DUE 0.00 66.27 19.80% 66.27 SUMMARY OF TRANSACTIONS 50 b a n k i n g b a s i c s Answer key on page 70. my notes c r e d i t 54 58 64 protecting your identity protecting yourself from investment scams quiz my money Invest EdTM handbook iii c H a p t e r iii 1 2 3 4 5 Answer key on page 70. QUIZ ch.ii Circle the letter that best answers the question. wHicH of tHe following is not like a bank? A Savings and loan B Credit union C Cash in advance D Commercial bank reconciling your cHeckbook means: A Not writing more checks than you have money for B Keeping it in a safe place C Writing the date of a check before that date has happened D Making sure your transactions match your bank statement if you wanted to see a larger return on your investment, wHicH option migHt provide tHat? A Savings bonds B Stocks C Treasury bills D Certifi cates of deposit wHat does apr stand for? A Annual Percentage Rate B Approximate Percentage Rate C Applicable Payment Rate D Annual Payment Ratio wHen will Having bad credit affect you most? A When cashing in credit card rewards points B When applying for a loan C When applying for a job 52 D When renewing your driver’s license c H a p t e r i i q u i z Ever have one of those days where you just do not feel like yourself? Well, what if you really were not? In a way, it could happen. Imagine applying for your driver’s license and being told you already have one ... Or trying to open your first bank account and being told you cannot because you have a history of writing bad checks ... Or even being arrested for stealing ... when you did not, because someone assumed your identity. It sounds crazy, but it is happening more and more. And it is called identity theft, when someone uses your personal information - often your Social Security number - to pretend to be you, either to get a driver’s license to replace their suspended one, or to rack up huge bills they have no intention of paying. It can destroy your credit, complicate your life and even get you thrown in jail. Even worse, your identity may be stolen by someone you know and trust, includ-ing a parent, a relative or a friend. Kids are often targeted for identity theft because it can take years for the crime to be discovered, because after all, what six-year-old needs to get a loan? Many victims do not know they are a victim at all until years have passed, when they: • Cannot get credit or a loan • Cannot get a checking or savings account • Cannot get an apartment • Cannot get utility service • Cannot get a driver’s license • Cannot get a job • Cannot get Social Security or welfare benefits • Are sent bills for accounts they never opened • Are investigated or arrested for a crime they never committed Tip: Check your credit history for free each year at annualcreditreport.com. No need to commit to any program or pay money to check your credit history. You won’t get your credit score for free, but you will find out if other people have applied for credit cards us-ing your social security number. You will also find out if there are any mistakes in current accounts or addresses and have a chance to correct them. Check it out! It’s worth it. Bank on it! words you need to know ident i t y thef t c r edi t r e port identity theft: has someone stolen you? protecting yourself: 54 55 i d e n t i t y t h e f t p r o t e c t i n g y o u r s e l f If you find your identity has been stolen, immedi-ately take these steps: • Call the three main agencies for credit reports, which are detailed listings of your entire credit history (see pg. 68) • Call the police • Call all the credit issuers and collection agencies involved, speaking only to fraud investi-gators • Write down the name and num-ber of everyone that you speak to, including the time and date you called, and a brief summary of the conversation • Clear your records following the steps provided in the Identity Theft Resource Guide, available from www. idtheftcenter.org If your identity was stolen by someone close to you, like a parent or family member, you have every right to feel betrayed. But do not feel guilty, as the fault does not lie with you. But how do you avoid becom-ing a victim at all? First, protect your Social Security number as if it were worth a million dollars - because it just might be! Do not carry the card in your wallet, do not use it on your driver’s license or student I.D. and do not give it out to just anyone who asks for it, especially on the Internet. It is your number; you have the right to ask what they might need it for, as well as to say “no.” You should also shred any mail or papers you get with the num-ber on it, instead of just throwing them away. And request a copy of your credit report once a year at annualcreditreport.com to make sure nothing sneaky is going on that you do not know about. exercise If some of the impor-tant cards in your wallet or purse already have your Social Security number on them, experts suggest you make a copy of those cards and cut out the last four digits to prevent identity theft. But how can you eas-ily recall what those last four digits are? Using the letters associated with a numeric phone keypad, play around with your numbers until they spell a word that you can remember. For example, if your Social Security number ends in 6427, that could spell out “mics,” “nibs” or “ogar.” It does not have to be a real word - just something you can remember off the top of your head. MY WORDS ________________________ ________________________ ________________________ ____________________________________________________________________________________________________ ________________________ ________________________ ________________________ ________________________________________________________________ ________________________ ________________________ ________________________ ________________________ ________________________ ________________________________________ ________________________ ________________________ ________________________ ________________________________________________________________________________________ ________________________ 1 4 7 2 5 8 3 6 9 GHI PQRS ABC JKL TUV DEF MNO WXYZ 56 57 i d e n t i t y t h e f t p r o t e c t i n g y o u r s e l f GET REAL: A TRUE STORY When John, age 20, tried to move into his own apartment after saving $400, he was told he could not until he paid off a $665 electric bill and a $550 gas bill. But he had never lived alone before! Turns out that years earlier, his own mother used his name and Social Security number to set up accounts for her own use. John could either pay the bills (which he couldn’t afford) or file fraud charges against his mom. the 411 on investment s cams protecting yourself: Fraud or a scam is the art of deception. Con artists misrepresent the truth on purpose to build your trust, and then steal your money. BE AWARE . Phony investments scams are an ever present danger for an investor who is unsuspecting or uninformed. Get educated before investing. Understand the different types of investment scams a con artist might use to separate you from your money (see pages 59 and 60) and learn how to protect yourself (page 61). Investing is a risky enough business without adding a lack of knowledge to your vulnerability. Ask questions and remember to always investi-gate before giving your money to anyone for an investment of any kind. If it sounds too good to be true, it probably is. Scam artists know what it takes to get your money, so be careful, ask questions and investigate before giving your money to anyone for an investment of any kind. TIP: Before you invest check that a security or your broker-dealer/ investment advisor is registered with the Oklahoma Securities Commission. To do this, visit securities.ok.gov. The Scams Common investment swindles seen in Oklahoma are pyramid schemes - a scam in which people invest in the right to sell the investment to other people, there is no significant profit from sales of goods or services, and cash comes from recruiting new investors who pay for the right to enlist more future investors. Inevitably, a point is reached where there are not any new suckers. Bank on it! words you need to know py ramid s cheme Ponz i s cheme p enny s tock f r aud af f ini ty f r aud boi l e r rooms f r audul ent You’ve heard it before, “If It Sounds Too Good To Be True, It Probably Is”. Investment Con Artists Will Promise “BIG”, “RISK-FREE” Returns To Get Your Money. Don’t Believe Them or You Will Lose Your Money! Investigate Before Investing. 58 59 i n v e s t m e n t s c a m s p r o t e c t i n g y o u r s e l f * Ponzi Schemes: Early investors are paid off with money from new investors. The scheme may operate for a long time before the promoter “pulls the plug” or disappears with all the cash or reveals that the investments have gone “sour.” For everyone who makes money some-one loses money. Promoters or early investors show checks and claim they are profits. * Penny Stock Fraud involves investment in promotional bogus com-panies with untested products, or no as-sets, employees or business plan. Insid-ers get cheap stock, control the market price, artificially inflate the price and then dump the worthless stock on you at the high price. * Affinity Fraud targets an entire group at once, like professional organi-zations, minority groups, or church or religious groups. Here, the con artists often pose as a member of the group to get their foot in the door and win over everyone’s trust. Their goal is to get the group excited about a supposedly “safe” investment, which usually takes the form of a pyramid or Ponzi scheme. The money is pocketed, not invested. * Boiler Rooms are another com-mon scam to watch out for. They use the phone, even your cell phone, to get your money. Telemarketers will give scripted sales pitches using lines like, “Act now or the deal is gone” or “You are silly or stupid not to take advantage of this op-portunity.” You may be asked to give out information like your Social Security or bank account numbers. If you get a call like this one, just hang up. With all the scams out there, how do you avoid becoming the next victim? Easy! HERE YOU GO! To report a con artist, contact these organizations: Oklahoma Securities Commission (405) 280-7700 www.securities.ok.gov Financial Industry Regulatory Authority (FINRA) (301) 590-6500 www.finra.org North American Securi-ties Administration As-sociation (202) 737-0900 www.nasaa.org U.S. Securities and Exchange Commission (202) 551-6551 www.sec.gov 60 p r o t e c t i n g y o u r s e l f • Stay away from “investments” that offer you money to recruit others, ask for cash to join or want you to buy goods or services. • Do your research before deciding to buy in. If there is little or no informa-tion or history, beware. • Do not be afraid to say “no” or hang up the phone. • Do not be pushed around by the high-pressure sales pitches of salespersons that want you to act immediately. Never purchase any investment unless you have had time to get informa-tion and make a thoughtful decision. Worthwhile investments rarely involve such short time constraints. • Do not trust sales people just because they seem friendly. • Never give out your bank account number or other financial informa-tion. • Be suspicious of offers of “free” trips or gifts. • Remember there is no such thing as a “guaranteed” or “risk-free” investment. However, if you do lose money to a scam, report it to the Oklahoma Securi-ties Commission! It is totally natural to be embarrassed, but reporting the scam to authorities can improve your chances of getting your money back. Investment fraud is not only lying, it is illegal, and the losers who cheat honest people out of their money can only go to jail with your help. scams 61 i n v e s t m e n t s c a m s 62 63 p r o t e c t i n g y o u r s e l f exercise TRUTH?OR LINES? When are you being fed a line? For each of the con artists’ quotes below, match it to the reason you should be suspicious of their pitch. LINES 1 “I’ll need an answer today if you want to get in on this deal.” 2 “Your money will double in the first two months.” 3 “What’s great about this deal is that there is no risk involved.” 4 “You haven’t heard of this company because what they’re doing is top secret.” TRUTHS A Beware of outrageous claims of profit. If it sounds too good to be true, it probably is. B The business likely does not even exist. C Virtually any investment is subject to a risk of loss. D Before investing, you should take your time to research it. Investigate before you invest. Answer key on page 70. my notes i n v e s t m e n t s c a m s Nigerian Scams We get e-mails from foreign nations, like from Nigeria, that seek your aid in getting large sums of money out of that country. The hook is that you have to give information like your bank account number and send cash before you get anything. Once your money is sent, you never hear from them again. Beware, phony investment scams abound on the Internet. 1 2 3 4 5 66 67 68 69 70 71 conclusion resources contact list post quiz answer key evaluation Invest EdTM my money Answer key on page 70. QUIZ ch.iii Circle the letter that best answers the question. Identity theft can affect all of the following except: A Your credit history B Your criminal record C Your transcript D Your welfare benefits The three major credit report companies are: A Equicare, ExpoNet and TransCredit B Equalcom, Experian and TransCom C Equifax, Expert and TransUnion D Equifax, Experian and TransUnion The scam named for a person is: A Ponzi B Penny C Affinity D Pyramid Which group is most likely to be targeted for affinity fraud? A Unions B Republican Party C Shriners D First Christian Church Which investment does not exist? A Risk-free B Slight risk C Moderate risk D High risk 64 c h a p t e r i i i q u i z handbook 66 c o n c l u s i o n By now, you have gone through a crash course in money basics from that first paycheck to learning how to protect yourself (and your money) from an investment scam artist. Hopefully you know a little bit more about the importance of treating money wisely, so you can get a lot more out of it, both today and in all your tomorrows. We have discussed spending vs. saving, how to budget your money, the differ-ent types of banks, investment options, credit, investment scams and protecting your identity and earnings. While you might not encounter all of these down the road, each piece gives you the knowledge to make smart, careful deci-sions about your income. We know money is not easy to come by, but now that you have completed this workbook-cd, it will be much easier to make it work for you. And just knowing that is priceless. This handbook is yours to keep and use anytime you need it. Remember to investigate before you invest in any financial product. conclusion: it was all about the benjamins Whew! That was not so hard, was it? resources The following resources were used to create your Money Handbook. 67 r e s o u r c e s handbook: American Association of Retired Persons, “ID Theft: What’s It All About?,” Federal Trade Commission: 2003 Ansell, Dorothy I., The New Making It on Your Own, Vir-ginia Commonwealth University School of Social Work: 1995 CNMoney.com, “How Fast Will My Savings Grow?,” http://cgi. money.cnn.com/tools/saving-scalc/ savingscalc.html: 2006 Identity Theft Resource Center, “Fact Sheet 120: Identity Theft and Children,” http://www. idtheftcenter.org/artman2/ publish/v_fact_sheets/Fact_ Sheet_120.shtml Identity Theft Resource Center, “Fact Sheet 120: To Order a Credit Report for a Child,” http://www.idtheftcenter.org/ artman2/publish/v_fact_sheets/ Fact_Sheet_120_A-.shtml Identity Theft Resource Center, “Fact Sheet 120b: A Guide for Parents Regarding Child Iden-tity Theft Indicators,” http://www.idtheftcenter.org/ artman2/publish/v_fact_sheets/ Fact_Sheet_120b_A_Guide_for_ Parents_-_Child_Identity_Theft_ Indicators.shtml Latzko, Marian, B., I Can Do It!: A Micropedia of Living on Your Own, Microlife: 1996 Mannix, Darlene, Life Skills Activities for Secondary Stu-dents with Special Needs, John Wiley & Sons, Inc.: 1995 Oklahoma Department of Securities, “Personal Finance for the Economics Classroom: A Teaching Guide for Econ Instructors,” http://www.fl2010.org/ U.S. Census Bureau, “Three- Year Average Median House-hold Income by State: 2002 - 2004,” http://www.census.gov/ hhes/www/income/income04/ statemhi.html: 2005 additional resources: National Resource Center for Youth Services University of Oklahoma On-line Catalog www.nrcys.ou.edu/catalog National Resource Center for Youth Services University of Oklahoma Schusterman Center 4502 E. 41st Street, Bldg. 4W Tulsa, OK 74135 Tel: (918) 660-3700 Fax: (918) 660-3737 www.nrcys.ou.edu Jesus Salas University of Oklahoma Mr. Salas reviewed all sections except “Investing Products”, “Investing Risk”, and “Protect-ing Your Money”. 2008 Investor Protec-tion Trust (IPT) Suite 300 919 Eighteen Street, NW Washington, DC 20006-5517 www.investorprotection.org Invest Edtm Investor Educa-tion Programs Partnership: Oklahoma Securities Commission l University of Oklahoma Outreach Suite 860, First National Center 120 N Robinson OKC, OK 73102 Tel: (405) 280-7700 Fax: (405) 280-7742 www.investedok.org/links Financial Industry Regula-tory Authority (FINRA) (301) 590-6500 l www.finra.org North American Securities Administration Association (202) 737-0900 www.nasaa.org U.S. Securities and Exchange Commission (202) 551-6551 l www.sec.gov contacts CALL NOW! OPERATORS ARE STANDING BY! In case you missed them the first time, here - on one handy page - is a list of organizations you may find helpful... pop quiz, hot shot Remember that quiz from the front of the book? Well here it is again and something tells us that when you take it this time, it is going to be a breeze!! Well done!! 1 Which of the following is NOT a deduction on a paycheck? A. Social Security tax B. Medicaid tax C. State income tax D. Medicare tax 2 Which investment product has the potential for higher returns as well as greater risk? A. Savings bonds B. Stocks C. Treasury bills D. Certificates of deposit 3 What does APR stand for? A. Annual Percentage Rate B. Approximate Percentage Rate C. Applicable Payment Rate D. Annual Payment Ratio 4 When will having bad credit affect you most? A. When cashing in credit card rewards points B. When applying for a loan C. When applying for a job D. When renewing your driver’s license 5 Which one is not considered an investment tool? A. Treasury bill B. Savings bond C. CD D. Checking account 6 You have been asked to pay cash to get in on a money making opportunity. You will get money by getting others to pay cash to get in on it, too. This scam is an example of: A. Penny stock fraud B. A commission C. Affinity fraud D. A pyramid scheme 7 When someone uses your personal information to obtain a credit card, it’s called: A. Declined card B. Mail fraud C. Identity theft D. Credit crisis y e s , aga in! 68 c o n c l u s i o n 69 c o n t a c t s + q u i z Independent Living Program Alumni: Yes I Can 1-800-397-2945 If you need a copy of your birth certificate or your Social Security card: Oklahoma State Department of Health - Vital Records Service (405) 271-4040 www.health.state.ok.us/program/vital/ brec.html Social Security 1-800-772-1213 www.ssa.gov/dallas Better Investing 1-877-275-6242 www.betterinvesting.org Oklahoma Department of Human Services (405) 521-3778 If you need to request or discuss a credit report: AnnualCreditReport.com www.annualcreditreport.com Equifax 1-800-685-1111 www.equifax.com Experian 1-888-EXPERIAN (397-3742) www.experian.com TransUnion 1-800-916-8800 www.transunion.com If you need to report a con artist: Oklahoma Securities Commission (405) 280-7700 www.securities.ok.gov U.S. Securities and Exchange Commission (202) 551-6551 www.sec.gov evaluation Wh at did you think? Pl e a s e he l p us out b y c omp l e t ing thi s e va luat i on. answer key 70 c o n c l u s i o n 71 a n s w e r s + e v a l 1 D id you find the workbook helpful? o Yes o No Why / why not?____________________________ ___________________________________________ 2 W hat did you like most and least about the workbook? ___________________________________________ ___________________________________________ 3 W hat did you like most and least about the CD ? ___________________________________________ ___________________________________________ 4 D id you find the workbook easy to read and follow? o Yes o No Why / why not?____________________________ ___________________________________________ 5 W hich elements of My Money Handbook did you use? o Workbook o CD o Workbook + CD Why / why not?____________________________ ___________________________________________ 6 W hich elements of My Money Hand-book did you find most helpful for learning? o Workbook o CD o Workbook + CD Why / why not?____________________________ ___________________________________________ 7 W ere the instructions clear? o Yes o No ___________________________________________ ___________________________________________ 8 W ill you use My Money Handbook in the future? o Yes o No Why / why not?____________________________ ___________________________________________ 9 W hat topics would you like to see added? ___________________________________________ ___________________________________________ 10 W hat topics would like to see taken out? ___________________________________________ ___________________________________________ 11 How would you change the handbook? ___________________________________________ ___________________________________________ 12 A ny other comments about the handbook you would like to share? ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ PRE-QUIZ/ POST QUIZ 1. B 2. B 3. A 4. B 5. D 6. D 7. C CHAPTER I: money management Paycheck Exercise (pg. 8) 1. $1,560.00 2. $234.99 3. 40 4. $6.50 5. $22.62 Chapter I Quiz 1. B 2. C 3. A 4. D 5. C CHAPTER II: banking basics Banks: Overview (pg. 22) 1. Credit union 2. Commercial bank 3. Savings and loan Savings Products: Crossword Puzzle (pg. 40) Credit Card Bill (pg. 51) 1. 04/05 2. $24.12 3. $66.27 4. $20.00 5. 05/06/06 6. 19.8% 7. $500.00 8. $120.34 9. $120.34 Chapter II Quiz 1. C 2. D 3. B 4. A 5. B CHAPTER III: protection Protecting your money: Truth or Lines? (pg. 63) 1. D 2. A 3. C 4. B Chapter III Quiz 1. C 2. D 3. A 4. D 5. A www.investedok.org v i s i t u s o n l i n e !
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Okla State Agency |
Securities Commission, Oklahoma |
Okla Agency Code | '630' |
Title | Invest Ed my money handbook |
Alternative title | My money handbook. |
Authors |
Oklahoma. Securities Commission. University of Oklahoma. Outreach. Oklahoma. Department of Human Services. Invest Ed (Program) |
Publisher | Oklahoma Securities Commission |
Publication Date | 2008-07 |
Publication type |
Handbook Student Materials |
Subject |
High school students--Finance, Personal. |
Purpose | In school we learn a lot about English, math, history and science. But the subject you will use every day (if you do not already) of your life is called money management. Money management is all about knowing how to use your money wisely. There is a lot more to it than you might think, but this handbook will break it down in ways that make it easy to understand and fun to do, as we talk about banking basics, savings and investing, and protecting your identity and money. |
Notes | "This handbook is made possible by the Oklahoma Department of Human Services, the University of Oklahoma National Resource Center for Youth Services and Invest Ed."; Revised 2008 |
OkDocs Class# | S1200.5 M995m 2008 |
Digital Format | PDF, Adobe Reader required |
ODL electronic copy | Downloaded from agency website: http://www.investedok.org/InvestEdRedirect.asp?Title=My%20Money%20Handbook&File=/MyMoneyHandbook/MMHandbook.asp |
Rights and Permissions | This Oklahoma state government publication is provided for educational purposes under U.S. copyright law. Other usage requires permission of copyright holders. |
Language | English |
Full text | managing money banking basics protecting your identity & money resources Invest EdTM my money handbook This handbook is made possible by the Oklahoma Department of Human Services, the University of Oklahoma National Resource Center for Youth Services and Invest Edtm. contents Made possible by... Introduction Pre-Quiz Chapter I: Money Management First Paycheck Spending vs. Saving Budgeting Basics Chapter II: Banking Basics Types of Banks Checking Accounts Savings Accounts Savings & Investing Products Investing Risk Credit Chapter III: Protection Protecting Your Identity Protecting Your Money Chapter IV: Conclusion Conclusion Resource List Contact List Post Quiz Answer Key Evaluation The views expressed herein are those of the cited resources selected and adapted for this workbook by the individual contributors and are not necessarily those of the Oklahoma Securities Commission, Department of Securities and its Administrator, the University of Oklahoma Outreach, the Oklahoma Department of Human Services, the employees of these organizations or any associated partners. Revised 2008 Copyright © 2008 Oklahoma Securities Commission 2 4 5 6 9 15 19 20 23 33 37 41 45 53 54 58 65 66 67 68 69 70 71 what to look out for can save you (and your money) from becoming a victim. How do I use thi s handbook? Consider your Money Handbook a reference, tool or guide, but not an absolute authority. The information contained in this handbook is current as of July 2008 and is subject to change. For the most up-to-date information, talk with an expert before making any decisions about how to manage your money, even if it is just opening a checking account. If you are not comfortable doing this on your own, ask someone to go with you whom you trust. Now with that stuff out of the way... it is time to talk money!! >> THIS IS ________________ MONEY HANDBOOK. << (your name here) It is your money and we promise this will all make cents. In school we learn a lot about English, math, history and science. But the subject you will use every day (if you do not already) of your life is called money management. Money management is all about know-ing how to use your money wisely. There is a lot more to it than you might think, but this handbook will break it down in ways that make it easy to understand and fun to do, as we talk about bank-ing basics, savings and investing, and protecting your identity and money. We think you will enjoy these pages, and hope you will hang on to this handbook as a reference guide for years to come. Why it is important? The material things we need or want in life are not without cost. It is not enough just to make money - you have to get the most out of your money by spending and investing in smart ways. But there is another side that not every-one thinks about: the losers who want to cheat you out of it. Knowledge is protection. We want to help you learn how to be wise when it comes to your money management and how to protect yourself from those who are dishonest and want to steal your money from you. Knowing who and intro 2 I n t r o d u c t i o n 3 i n t r o d u c t i o n 69 15 my money Invest EdTM handbook i cha p t e r i pop quiz, hot shot! Just for fun, let us see how much you know about what to do with your money before we get into it. Do not worry - it is not for a grade. 1 Which of the following is NOT a deduction on a paycheck? A. Social Security tax B. Medicaid tax C. State income tax D. Medicare tax 2 Which investment vehicle has the potential for higher returns as well as greater risk? A. Savings bonds B. Stocks C. Treasury bills D. Certificates of deposit 3 What does APR stand for? A. Annual Percentage Rate B. Approximate Percentage Rate C. Applicable Payment Rate D. Annual Payment Ratio 4 When will having bad credit affect you most? A. When cashing in credit card rewards points B. When applying for a loan C. When applying for a job D. When renewing your driver’s license 5 Which one is not considered an investment tool? A. Treasury bill B. Savings bond C. CD D. Checking account 6 You have been asked to pay cash to get in on a money making opportunity. You will get money by getting others to pay cash to join. This scam is an example of: A. Penny stock fraud B. A commission C. Affinity fraud D. A pyramid scheme 7 When someone uses your personal information to obtain a credit card, it is called: A. Declined card B. Mail fraud C. Identity theft 4 D. Credit crisis p r e - q u i z first paycheck to spend or to save: wants vs. needs budgeting basics $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Bank on it! words you need to know deduc t i ons gr o s s pay ne t pay Welcome to the wonderful world of deductions. Those are the amounts taken out of your pay before you take it home. It is not your boss’ fault, either. No matter where you work in this country, whether you make thousands or mil-lions of dollars a year, deductions are a part of life. So you might as well know what they are. (AND HOW TO READ IT) >> Wrong. money management: your first paycheck So you have your first paycheck.Congratulations! You get paid $6 an hour and you worked 20 hours, so that comes to $120 in your pocket, right? Though there could be more, here are four basic deductions: 1 Social Security tax 2 Medicare tax 3 Federal income tax 4 State income tax Social Security and Medicare are the fed-eral programs that help out the elderly with monthly payments and health insurance. And income taxes fund all kinds of government programs that are intended to benefit people. Once these deductions are made, you take home the rest. You may see your share listed as net pay. Gross pay is what you made before deductions. You can remember the difference by thinking of a net: What you catch in it is what you keep. All these amounts are clearly shown on your paycheck. Usually your pay stub will list what you have made since the last check and what you have made for the year to date. Once you have made it, the next step is figur-ing out what to spend and what to save. 6 7 m o n e y m a n a g e m e n t f i r s t p ay c h e c k When b uying things, it is important to realize the difference between a need and a want. A need is something you cannot do without, like food and shelter. A want is just that: something you would like to have, but you can survive without. That is not to say you should only buy things you need, but buying something you want should not take priority over your needs or blow your budget (and we will get to that next). Some things should be saved for over time. Remember, to make a smart purchase, all you have to do is P.I.C.K. it: P Problem: What is the issue? I Information: Get it. C Consequences: Think about them. K Kick it into action! to mon sepye mnda noarg teom seanvte:? >> But do you need it? Have you ever spotted some-thing at the mall that caught your eye and made you say, “I need this.” exercise Using the paycheck example above, answer the following questions: 1 How much money have you earned all year before deductions? 2 How much net pay have you earned for this check only? 3 How many hours did you work for this check? 4 How much were you paid per hour? 5 How much has been deducted for Medicare for the year? John Doe 1234 Main St. Anytown, OK 73071 Taxable Marital Status: Single Exemptions/Allowances Federal: 1 State: OK State 1 Earnings rate hours this period year to date 6.50 40 $ 260.00 Gross Pay $ 260.00 Deductions Federal Income Tax -$ __ 3.12 Social Security -$__16.12 Medicare -$ __ 3.77 Oklahoma State Tax -$ __ 2.00 Net Pay $ 234.99 $1560.00 $ 204.85 $ 96.72 $ 22.62 $ 79.00 $1156.81 Tax by the state to pay for state programs. Funds medical care for the elderly. Federal fund to assist the elderly. Tax to pay for federal programs. Pay after deductions. This is what you get to take home. Pay before deductions. Amount of money earned from the beginning of the year to the current date. Answer key on page 70. 8 m o n e y m a n a g e m e n t 9 s p e n d o r s a v e ? Let us apply the P.I.C.K. rule to Sandy to see how her needs and wa n t s p l ay out agains t each other... P Problem: Sandy wants a new CD that is coming out this Tuesday. I Information: By checking out ads in the Sunday paper and on the internet, Sandy finds out what the CD costs at various retailers. C Consequences: Now that she knows what she would be spending, Sandy can determine whether the CD is affordable with the money she has for the week. K Kick it into action: Sandy needs to fill her car with gas to get to and from work this week. She decides to wait and buy the CD later. By recognizing the problem, researching the information and considering the benefits and trade-offs, Sandy was able to make a smart financial decision. What are your wants? Circle them! How need savvy are you? circle your needs! r ent vacat i o n c lothe s wat e r mounta in b ike sof t dr inks ga s o l ine lunch $ dent i s t car p rom dr e s s plasma s c r e en purse insur anc e c r edi t card b i l l s c e l l phone 10 Bank on it! words you need to know ne ed wa n t m o n e y m a n a g e m e n t Now let us compare how the P.I.C.K. rule plays out for Daryl’s need. P Problem: Daryl’s electric bill doubled this month because last month was so hot. He owes $100. Paying an extra $50.00 on his elec-tric bill was not something Daryl expected this month. He planned to spend the money on a concert. I Information: Disappointed, Daryl considers how he should spend the $50.00. He remembers turning down the air conditioning more than ususal to stay cool, so he knows his bill is not a mistake. Also, the month-by-month history on his bill shows that $100 is about what he paid this time last year. So Daryl knows he owes the extra money to the electric company, but he really wants to go to the concert with his friends. C Consequences: This is a no-brainer. If Daryl pays the bill, he will have air conditioning for another month. If he chooses not to pay the bill, Daryl will have a very hot summer. In this case, all the concerts in the world will not substitute for air conditioning. K Kick it into action: Daryl decides to skip the con-cert this month and pay the bill. To avoid another unexpected high electric bill, he will not turn down his thermostat. 11 s p e n d o r s a v e ? 13 need ___________________________________________ ___________________________________________ PROBLEM ______________________________ ___________________________________________ ___________________________________________ ___________________________________________ INFORMATION _________________________ ___________________________________________ ___________________________________________ ___________________________________________ CONSEQUENCES ______________________ ___________________________________________ ___________________________________________ ___________________________________________ KICK IT INTO ACTION _________________ ___________________________________________ ___________________________________________ ___________________________________________ want ___________________________________________ ___________________________________________ PROBLEM ______________________________ ___________________________________________ ___________________________________________ ___________________________________________ INFORMATION _________________________ ___________________________________________ ___________________________________________ ___________________________________________ CONSEQUENCES ______________________ ___________________________________________ ___________________________________________ ___________________________________________ KICK IT INTO ACTION _________________ ___________________________________________ ___________________________________________ ___________________________________________ Think about something that you need and something that you want. Apply the P.I.C.K. rule to each. Would you think twice about buying either item after going through these steps? Why or why not? s p e n d o r s a v e ? exercise The decision process wa s the same. By recognizing the problem, gathering the information, and considering the benefits and trade-offs, both Sandy and Daryl were able to make smart financial decisions that met their needs first. The stuff we want may not always cost a lot, but you would be sur-prised at how fast inexpensive wants can add up. Think about less expensive ways to spend on your needs. To save money, Daryl chose not to turn his air conditioning down the next time he feels a little uncomfortable in his apartment. Instead of spending $10.00 at the movies on opening night, consider saving money by going to a matinee, waiting until the movie plays at the dollar theater, or renting the DVD. Tips & tricks my notes 12 m o n e y m a n a g e m e n t A need is something you cannot do without. money management: and a whole pizza has been placed in front of you. In order to take care of what matters most (your growling stomach), which slice do you reach for first? The biggest one, of course. Budgeting your money is some-what like that. The greatest needs are taken care of first. Imagine you are starving you cannot fudge it with a budget 14 m o n e y m a n a g e m e n t Bank on it! words you need to know disposable income my notes exercise Savings Food & Groceries Clothes & Cosmetics Rent & Utilities Telephone Car & Gas Entertainment Charity & Gifts Medical Miscellaneous TOTAL Today, start your budget by writing an “Amount Budgeted” for each category, using your monthly take-home pay. If you do not currently work, use $524.00; this figure is based upon four 20-hour work weeks at a $6.55-per-hour minimum wage. For the next 30 days, every time you spend money in one of the categories subtract it from the “Amount Budgeted” and write that number in “Amount Left After Spending.” On the 30th day, add the “Amount Left After Spending” column up. The total shows how much un-der budget you were. How did you do? AMOUNT BUDGETED AMOUNT LEFT AFTER SPENDING 16 m o n e y m a n a g e m e n t Budgeting lets you see where your money needs to go, and helps you make sure that hap-pens. Once your needs are met, you know exactly how much you have left to spend on the things you want. This “fun money” is called disposable income. Imagine if you got your monthly pay all in cash, and had to divide the cash up into piles according to where they were going to be spent. Think about all the things you have to pay for every month: rent, food, bills, gas - that sort of thing. Then think about all the fun things you would like to do, like movies or con-certs. Even though the stuff you want may not always cost a lot, you will be surprised how fast it adds up. The goal of budgeting is to have some money left over. After all, you cannot spend what you do not have. Do not forget about setting money aside for savings or for emergencies that might come up. CD Rent Bills Gas Food 17 b u d g e t i n g 20 23 33 37 41 45 Invest EdTM ii chapterii types of banks checking accounts savings accounts savings & investing products investing risk credit 1 2 3 4 5 Answer key on page 70. QUIZ ch.i Circle the letter that best answers the question. Which of the following is not a deduction on a paycheck? A Social Security tax B Medicaid tax C State income tax D Medicare tax Certain deductions are taken from your paycheck because: A This money is put away until you turn 65 B Employers get a percentage of what you earn C They are required by the government D They fund other programs of the company In making smart financial decisions, what does P.I.C.K. stand for? A Problem/Information/Consequences/ Kick it into action B Pursue/Information/Consequences/ Kick it into action C Problem/Intelligence/Consequences/ Kick it into action D Problem/Information/Control/ Kick it into action In budgeting, money left over after all needs are taken care of is called what? A Leftover funds B Free money C Net pay D Disposable income Which of these budget items is a want? A Utilities C Entertainment B Gasoline D Groceries 18 c h a p t e r i q u i z my money handbook take that to the bank... Most banks offer checking and savings accounts, credit cards, loans, travelers’ checks and safety deposit boxes for both business and personal use. Generally, your deposits are insured up to $100,000 in regular accounts and up to $250,000 in retirement accounts by the governmental Fed-eral Deposit Insurance Corporation or FDIC (in case your bank fails). Savings and loans may offer some of the same services, but focus on loans for people who want to buy or fix up a home. Here, your deposits are also similarly government-insured, but by the Savings Association Insurance Fund (SAIF) administered by the FDIC. Credit unions also operate like banks, but are owned and operated by a group of people having something in common, like attending the same church or working at the same place. They only serve their own members, who can buy life or health insurance or get loans at low rates. Generally, deposits in federal and most state-chartered credit unions are insured up to $100,000 in regular accounts and up to $250,000 in retire-ment accounts by the governmental National Credit Union Administra-tion (NCUA). Just as those three groups offer different services, they also offer those services at different prices. For example, many banks offer free check-ing accounts or ATM transactions, while others charge fees. Just asking around can help you find the institution that is right for you. > > > BUT WHICH ONE? Check-cashing and “cash in advance” businesses you see around town and in strip malls, may be convenient and quick, but they are not banks. These businesses may charge a big fee for cashing your paycheck! (You have worked way too hard for your money to throw it away like that!) Thirsty for a soda? be aware! Check Cashing & Cash in Advance Busineses: What kind? Regular? Diet? Cherry? Vanilla? Lime? Not all soft drinks are exactly alike, and the same goes for banks and other finan-cial institutions. We think of them as places that store money and have free lollipops at the drive-thru window, but there is much more to it than that. They fall into three main categories: banks, savings and loans, 20 and credit unions. 21 b a n k r e v i e w b a n k i n g b a s i c s banking basics: Bank on it! words you need to know commercial banks full-service banks savings and loans credit unions fdi c sai f A ___________________ is owned and operated by a group of people having something in common, like a place of employment. It is supervised and may be insured by the government. A ___________________ offers checking and savings accounts, credit cards, loans, travelers’ checks and safety deposit boxes. Your deposits are insured up to $100,000 in regular accounts and up to $250,000 in retirement accounts by the Federal Deposit Insurance Corporation. A ___________________ offers the usual accounts and other services, but focuses on loans. Your money is in-sured by the Savings Association Insurance Fund. That is why getting a checking account may be a good idea - besides safety, it is a good way to keep track of your money and lets you pay bills by mail or online instead of in person. When you cash your paycheck, it is a nice feeling to have all that money in your pocket. Unfortunately, it is not very safe! >>>>> Bank on it! words you need to know che ck r egi s t e r ov e rdraf t r e conc i l ing checking out checking accounts banking basics: 22 23 b a n k i n g b a s i c s exercise For each situation below, fill in whether it best describes a bank, savings and loan or credit union. 1 2 3 Answer key on page 70. >>>>>>>>>>>>>>>>>>>>>> >>>>>>>>>>>>>>>>>>>>>> 1 The date you write the check 2 The name of the person or business to whom you are writing the check (payee) 3 The amount of the check in numeric form (such as $27.34) 4 The dollar amount of the check in word form and the cents amount in numeric form (such as twenty-seven dollars and 34 cents) 5 Your signature (payor) (There is also a “Memo” line where you can write what the check is for, but you do not have to use it. However, it comes in handy when noting the last four digits of an account number for paying bills.) 24 b a n k i n g b a s i c s Jane Doe 1500 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1500 0009876543" "0000012300,’" BANK May 12, 2008 Grocery Store 27.34 Twenty-seven dollars and 34/100 groceries Jane Doe The name of the person or business to whom you are writing the check. The date you write the check The amount of the check in numeric form (example: $27.34) The dollar amount of the check in word form and cents amount in numeric form (example: twenty-seven dollars and 34 cents) Used to write what the check is for. Your signature There are five areas you must fill out: Writing a check can be easy, too. It is all about filling in the blanks. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> What is a check card? A check card is a combination of a check and an ATM card; you can use your check card to buy and pay for things and to get money at the ATM. A check card is linked directly to your checking account, so every time you use it, money is taken out of your checking account. Remember to always write down your check card purchases and ATM withdrawals in your check register. You do not want to spend more money than you have in your checking account by accident. 25 c h e c k i n g a c c o u n t s making ATMs a-ok! What to do when writing a check: • Write clearly, in black or blue ink. • Fill remaining spaces with a line to avoid tampering. • Immediately record each transaction in the register, so you do not overdraft your account. Spending more than you have in the bank can cost you penalty fees and hurt your credit rating. What not to do when writing a check: • Use a pencil. • Use incomplete names or nicknames. • Leave it blank. • Date it with a day that has not happened yet. By keeping an accurate record, it will be easy to check your register against the monthly account state-ment you will get from the bank. Do this every time to make sure there are no errors, yours or the bank’s. There, you will note: 1 The date you write the check or make the transaction. 2 The check number. 3 The name of the person or business to whom the check is written. 4 The amount of the check in numeric form (such as $20.34). 5 Your remaining balance, once the check, ATM withdrawal or check card transaction is subtracted from the previous amount. 6 If you have online banking and check your account online, remember that some transactions take longer to post to your account, so you may not see them taken out right away, but they will show up, so do not spend money you have already spent. The other blanks you will have to fill are on your check register, which is where you list the details on each and every check you write. (You will also use the check register to record all deposits into your account, as well as all ATM and check card transactions.) 26 • • • • • • • • • • • • Remember to write down all ATM, check or debit card transactions in your register. If you do not have it with you, stick that receipt in your wallet until you get home! • • • • • • • • • • • • Choose a PIN number you can easily remember, but do not tell anyone! • • • • • • • • • • • • Check with your bank to see if fees are charged for using ATMs they do not own. Those fees can add up! • • • • • • • • • • • • Treat your ATM, check or debit card transactions as you would a check - it is not “free” money! • • • • • • • • • • • • b a n k i n g b a s i c s s 27 c h e c k i n g a c c o u n t s Vital Records Service Oklahoma State Department of Health 1000 Northeast 10th Oklahoma City, OK 73117 405.271.4040 Social Security 1.800.772.1213 www.ssa.gov/dollars Reconcile! To make sure your register matches up with the bank - called reconciling - follow these four simple steps. You will likely find them on the back of your statement as well: 1 In your register, check off every transaction that also appears on your statement. 2 On a piece of paper, write down your balance ac-cording to the statement. 3 Add in all unchecked deposits from your regis-ter that are not on the statement. 4 Subtract all unchecked withdrawals (or checks you wrote not yet cashed) from your register balance that are not on the state-ment. That amount should now match the balance on your statement. If not, recheck your math. Do not be afraid to ask your bank for help - that is what they are there for! You also should not be afraid to ask questions when opening a checking account, especially how much it costs. Many banks offer free check-ing, while others will charge a fee for every check written. yh ogeuroe! >>>>>>>>> 28 b a n k i n g b a s i c s YOU: I saw your free checking pro-motion and I wanted to ask about opening an account. TELLER: I can help you. All you need are two forms of I.D. and your opening deposit. YOU: I only have a library card and my driver’s license. Will those work? TELLER: Driver’s license, yes, but you need an original birth certificate or So-cial Security card for your second form. YOU: Where would I get those? TELLER: The Department of Vital Statistics for a birth certificate, and the Social Security office for your card. There may be processing fees. YOU: I was not born in Oklahoma, so can they still help me? TELLER: Call the Department of Vital Statistics in your birth state for a birth certificate. I am sorry for the inconve-nience, but that is how we protect cus-tomers from having their identity stolen. When applying, dress nicely, act pro-fessionally and be prepared to show two forms of valid identification. Here is a quick scenario of what you might expect: STATEMENT FOR Jane Doe 123 Main St. Oklahoma City, OK 74066 CHECKING ACCOUNT 0009876543 THIS STATEMENT COVERS 4/20/08 through 05/12/08 Previous Statement Balance on 4/19/08 Total of 1 Deposit Total of 3 Withdrawls New Balance 500.32 72.23 + 69.85 - 502.70 CHECKS AND OTHER DEBITS CHECK 1499 DATE PAID 5/10 AMOUNT 40.03 Withdrawl #031 at ATM Withdrawl #0123 Check Card 5/11 5/12 21.50 8.32 DEPOSITS AND OTHER CREDITS DATE POSTED 5/9 AMOUNT Direct Deposit from #1234 on 5/8 72.23 BANK 29 c h e c k i n g a c c o u n t s Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1502 0009876543” “0000012300,’” BANK Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1503 0009876543” “0000012300,’” BANK 30 b a n k i n g b a s i c s exercise Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1501 0009876543” “0000012300,’” BANK Your Name 123 Main St 405-555-5555 Oklahoma City, OK 74066 DATE PAY TO THE ORDER OF $ DOLLARS MEMO |: 123456789 |:1500 0009876543” “0000012300,’” BANK 1501 1500 1502 1503 • On April 4, pay John Doe the $20.25 he loaned you. • On April 18, pay your $42.73 bill with Gasoline Credit, account number 7158-6402. • On April 23, give $74.66 to Dan’s Market for your groceries. • On April 27, write yourself a check for $15.00 cash. Write checks for each of the following situations and record them on the sample check register on the next page. 31 c h e c k i n g a c c o u n t s 32 CHECK NUMBER DATE DESCRIPTION OF TRANSACTIONS PAYMENT/DEBIT {-} ?FEE {-} DEPOSIT/CREDIT {+} BALANCE exercise On the check register below, record the following: • Include a $237.42 deposit on April 16 from your paycheck. • Also note ATM transactions for $20.00 on April 2 and $40.00 on April 30, each having a transaction fee of $1. When you put money into an interest-bearing account, it does not just sit there - it earns interest. We have all heard money does not grow on trees. > > > But it does grow when you save and/or invest. >>> >>> >>> >>> >>> >>> >>> BANKING BASICS: saving and investing puts your cash on the grow b a n k i n g b a s i c s 33 Saving is important for two major reasons: 1 You never know what life is going to throw your way. We do not know when emergencies will happen - like a health problem or losing your job - but we know they will, and savings gives you a cushion to fall on. 2 There are some things you will want to buy that you cannot swing right now. Someday when it comes time to buy a house or pay for your college education or some other high-ticket item, you will be glad you socked some bucks away. Oh, you could treat a savings account like checking and take money out of it all the time, but let us show you why you do not want to do that. Say you put $25 a month into savings for a whole year, that would be $300. If that $300 earned an interest rate of 5% (meaning the bank would pay you 5% of what your balance was), it would grow to almost $400 in fi ve years, to nearly $500 in 10 years and just shy of $800 in 20 years. And that assumes you did not add another penny. Interest is money paid to you by the bank for saving and for letting the bank use your money to loan to others. The more you put in and the longer it stays there, the more interest you earn. Even better, the deposits are insured up to $100,000 or more. And there lies the major difference between checking and savings accounts. Your balance gets smaller in checking be-cause you are writing checks, but it gets bigger in savings because you are not touching it. Think of money in savings like a seed you have planted and interest like the water you pour on it. Interest helps make your money grow. > > > But noW We Bet you Want to! And the earlier you start, the more you will have when you need it. >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> >>> 34 35 s a v i n g s a c c o u n t s b a n k i n g b a s i c s Bank on it! words you need to know s av ings ac c ount int e r e s t int e r e s t r at e the earlier you start saving, the more money you will have when you need it Consider all the things you buy in a month. What could you give up and instead put that money into savings? List them below with how much each item costs. Then total it and think about how that money would grow in savings. item cost exercise 36 b a n k i n g b a s i c s banking basics: Cars all do the same thing: Take us from Point A to Point B. But no two are exactly alike. Some are built for speed, while others work for the long haul. And savings accounts are just like that, too. Even though they all can make your money grow, they do it in different ways, at different rates. You just have to pick which one fits your savings goals, whether it is for the short term or the long term. savings and investing products: when a piggy bank just does not cut it 37 We have talked about the standard bank sav-ings accounts. These are popular because: • you can take money out at any time. (Double check with your financial institution, they may have a limit on the number of free withdrawals per month.) • they are FDIC-insured. • and many financial in-stitutions offer a savings account with a low mini-mum monthly balance requirement. And those other options include: • Certificates of deposit - You might hear these called “CDs” (but they sure do not play music). With CDs, you put your money in for a set amount of time, anywhere from a few weeks to several years. The longer term CD you buy, the more interest you will make. Just do not take any money out before the time is up, or you will be charged a penalty. • U.S. savings bonds - These are backed by our federal government. You can buy a bond for $50 and let it mature (or earn interest) for 30 years before cash-ing it in. It works like an IOU; you are loaning money (in this case, $50) to the government, who promises to pay it all back - with interest - at the maturity date (30 years). The interest rates may not be huge, but the invest-ment is backed by the U.S. government. Whatever the interest, you have to report it on your yearly income taxes when you cash in the bond. If it was more than $1,500, note it on Schedule B of Form 1040 or Schedule 1 of Form 1040A. If it was less than $1,500, simply note it with any other interest on the “Interest” line of your return. If you are paying your own way through college at the time, you may be able to exclude it. Just consult the In-ternal Revenue Service rules at www.irs.gov. • Treasury bills and notes - These also are backed by the government. Treasury bills are for short-term investing (between a few days to six months) and can be bought at a discount. Treasury notes are for longer-term invest-ments, and they earn in-terest every six months. • Stocks - Instead of investing in the gov-ernment as savings bonds and Treasury bills and notes, through purchasing stocks you can invest in specific companies. You buy shares - or pieces - of that company, making you a shareholder - or owner - of that portion of the entire company. There is no guarantee in stocks, but the earn-ings can be huge. You could make a fortune or lose your shirt. This potential to win or lose, like in a game, is why you might hear people talking about “playing” the stock market. But investing is a serious business. • Mutual funds - These take your money and put it together with other investors’ money to invest in certain stocks and bonds. When the stocks and bonds do well, so does the mutual fund. They often are considered a valuable long-term investment tool. • Money market funds - These are mutual funds that invest in extremely short-term, govern-ment- guaranteed bonds. Interest rates are usu-ally higher than those of saving accounts, so these may be best if you are planning on saving some money for years, or even decades. But you can take money out at any time without be-ing penalized. All of these carry a different amount of risk, or danger, which we will 38 get to next. 39 s a v i n g s & i n v e s t i n g p r o d u c t s b a n k i n g b a s i c s Bank on it! words you need to know c e rt i f i cat e s of depos i t U.S. s av ings b onds mat u r e maturi ty dat e Tr easury b i l l s Tr easury no t e s s tocks shar e s shar eholde r mu t ua l funds mo n ey marke t funds 40 Using the following investment products and clues, fill in this crossword puzzle. use these words: BONDS DEPOSIT MONEY MARKET MUTUAL FUNDS SAVINGS STOCKS TREASURY BILLS TREASURY NOTES D O W N A C R O S S exercise b a n k i n g b a s i c s clues 4 Investment specializing in extremely short-term bonds 5 Short-term, discounted, government-backed investment 7 Certificates of __________ charge penalties if money is taken out before the specified time period 8 U.S. savings ________ work like IOUs 1 Purchasing makes you a shareholder of the company 2 Long-term, government-backed investments earning interest twice a year 3 Investments which pool investors’ money 6 ________ accounts are insured by the FDIC, but provide low returns Bank on it! words you need to know r i sk r e turn the risky business of investing banking basics: 41 Quick, pick a number between 1 and 1,000,000. Wh at is it? No, sorry, we were thinking 64,237. You were not even close. Answer key on page 70. 42 43 i n v e s t i n g r i s k b a n k i n g b a s i c s Lower-risk investments include bank savings accounts, money market accounts, CDs, U.S. savings bonds and Treasury bills and notes. These are considered safe because most of them are either guaranteed or backed by the federal government. And because they are less risky, the interest you earn will not be as great as the other categories. Stocks and mutual funds generally fall into the medium-risk and high-risk categories. Remember, stocks are an equity investment in various corporations, and sometimes companies lose money and may even go out of business. When they do, those stocks can become worthless. On the other hand, when those businesses do well, so does their stock. Generally, the older and more well-known a company is, the less chance you take. But each stock and mutual fund are classified according to risk, so you are likely to find one that fits your comfort level. Note that mutual funds often charge fees, typically per transaction, for changes you make in your account. So if you make too many changes, your fees could exceed your earnings – just something to keep in mind. Good thing we did not put money on that one! With odds like that, you were not likely to ever win. However, in the world of investing, having zero return on your in-vestment is not the norm. But risk - the possibility that you may not win - does exist. The different types of savings and investing options we discussed pre-viously can fall into one of three categories: 1 Lower risk 2 Medium risk 3 Higher risk Generally, the lower the risk, the lower the return - or increase - on your invest-ment. So which is which? Are you a risk taker? Think of the biggest risk you have taken. YIKES! exercise LOWHEIRG RIHSKE R RISK At this point in your life, are you ready for low-risk or high-risk investments? Circle your answer to each question, and you will see what road might be right for you. Have you ever invested before? Are you wanting a return on your invest-ment right away? Are you willing to give up security in exchange for higher returns? Is your income high and stable? LOWER RISK NO NO NO NO HIGHER RISK YES YES YES YES Stick a nice hunk of cheese in a trap and the mice will come for it. And also get into a heap of trouble for doing so. Today, credit can be just as tempting and just as dangerous. But it is designed to help you. And as long as you use it wisely, it will. charging ahead wi t h c r edi t banking basics: 44 45 b a n k i n g b a s i c s Where credit can be dan-gerous is in the form of a little piece of plastic called the credit card. Here is why: • If you fail to pay off your monthly credit card bill in full you are charged interest on the closing date balance. • The finance charge is added to your balance every month, reducing your available credit and increasing the amount you owe. Making even one late payment can negatively affect your credit rating. • Additional fees are also charged for going over your credit limit and for taking out cash advances, which usu-ally carry a higher interest rate. The bank issuing your credit card will provide you with a fee statement. Read it carefully before you use your card! Credit card companies make money from you in the fees and interest rates. Shop around for the lowest interest rate, because the lower the rate, the lower the finance charges, and the lower your debt will be if you cannot pay the bill in full each month. If you do pay your bill in full month after month, you get a good credit rating. That is a score of how well you do with credit. If you have good credit, banks will want to loan you money for a home or car at a low interest rate. If you do not, you may have some problems. 46 47 c r e d i t b a n k i n g b a s i c s Bank on it! words you need to know c r edi t l ende r bor rowe r de b t c r edi t r at i n g annua l p e r c entage r at e c r edi t limit Credit is when you are loaned money that you promise to pay back by a certain date, with interest. If you plan to buy a home or a car that comes with a hefty price tag, lenders - or those who loan the money - will give you credit so you can move in or drive away immediately. As the borrower, you make monthly payments until you are no longer in debt - or owing the lender - for that amount. Credit b a n k i n g b a s i c s •Ask the seller as much as you can about the vehicle, including mile-age, accident history, repairs. • Then find out how much the car is worth considering the shape it is in by logging on to www.kelleybluebook.com or www.nadaguide.com • Always take it for a test spin. • Have it checked out by a trusted mechanic before buying. • Look the car over for scratches, dents, stains or anything that may help you negotiate a lower price. • Bring an adult you trust with you for a second opinion. You can get good credit by: • Having a steady job. • Having a savings and a checking account. • Paying your bills in full and on time. • Never bouncing checks. • Paying off debts on time or even ahead of time. • Making regular monthly payments on time. When you sign up for a credit card, be sure you know: • The interest rate (or APR - annual percentage rate) and late fees. • Whether the interest rate goes up after a certain period. • The due date and grace period for payments. • The minimum monthly payment. • The credit limit (the maximum you can charge). • The company - do not sign up if it is not a trusted name. Just remember, credit cards are not “free money.” They are handy, but you do not want to get in over your head. Before you make a credit card purchase, apply the P.I.C.K. method from Chapter 1 to figure out if this is something you really need and can afford, and what will happen if you cannot pay it back. Taking a minute to do that can save you months of heartache later. WHAT YOU ‘AUTO’ KNOW WHEN BUYING A CAR You may not need credit if you are buying a car from some-one other than a dealership. But you wi l l ne ed s ome know-how. To make sure you do not throw your money away on a lemon, follow these tips: 48 b a n k i n g b a s i c s 49 c r e d i t 51 1 2 3 4 5 6 7 8 9 On what date was gasoline purchased?__________________ How much was spent at Music World? _______________ What is the amount owed this month?_____________________ What is the minimum pay-ment due?__________________ When is payment due? _________________________ What is the current interest rate? ____________________ How much is the credit limit? _____________________________ What was the balance on last month’s bill? ___________ How much was the last pay-ment made? _________________ exercise Look at this sample credit card bill and answer the following questions. BANK ACCOUNT NUMBER 1234-56-789 NAME Jane Doe CREDIT LINE $500.00 CREDIT AVAILABLE $433.73 MINIMUM DUE PAYMENT DUE DATE 05/06/08 CLOSING DATE 04/28/08 DUE DATE 05/06/08 REFERENCE POSTED ACTIVITY AMOUNT 43567BF 04/05 GAS STOP ANYTOWN, OK 34.15 FTX456 04/06 PAYMENT THANK YOU - 120.34 78SD32F 04/12 MUSIC WORLD ANYTOWN, OK 24.12 TX23476 04/15 BIG SCREEN MOVIES SMALLTOWN, OK 8.00 CURRENT AMOUNT DUE $66.27 $20.00 NEW BALANCE $66.27 PREVIOUS BALANCE - PAYMENTS + PURCHASES CASH ADVANCES 120.34 120.34 66.27 0.00 FINANCE CHARGES NEW BALANCE APR CURRENT AMOUNT DUE 0.00 66.27 19.80% 66.27 SUMMARY OF TRANSACTIONS 50 b a n k i n g b a s i c s Answer key on page 70. my notes c r e d i t 54 58 64 protecting your identity protecting yourself from investment scams quiz my money Invest EdTM handbook iii c H a p t e r iii 1 2 3 4 5 Answer key on page 70. QUIZ ch.ii Circle the letter that best answers the question. wHicH of tHe following is not like a bank? A Savings and loan B Credit union C Cash in advance D Commercial bank reconciling your cHeckbook means: A Not writing more checks than you have money for B Keeping it in a safe place C Writing the date of a check before that date has happened D Making sure your transactions match your bank statement if you wanted to see a larger return on your investment, wHicH option migHt provide tHat? A Savings bonds B Stocks C Treasury bills D Certifi cates of deposit wHat does apr stand for? A Annual Percentage Rate B Approximate Percentage Rate C Applicable Payment Rate D Annual Payment Ratio wHen will Having bad credit affect you most? A When cashing in credit card rewards points B When applying for a loan C When applying for a job 52 D When renewing your driver’s license c H a p t e r i i q u i z Ever have one of those days where you just do not feel like yourself? Well, what if you really were not? In a way, it could happen. Imagine applying for your driver’s license and being told you already have one ... Or trying to open your first bank account and being told you cannot because you have a history of writing bad checks ... Or even being arrested for stealing ... when you did not, because someone assumed your identity. It sounds crazy, but it is happening more and more. And it is called identity theft, when someone uses your personal information - often your Social Security number - to pretend to be you, either to get a driver’s license to replace their suspended one, or to rack up huge bills they have no intention of paying. It can destroy your credit, complicate your life and even get you thrown in jail. Even worse, your identity may be stolen by someone you know and trust, includ-ing a parent, a relative or a friend. Kids are often targeted for identity theft because it can take years for the crime to be discovered, because after all, what six-year-old needs to get a loan? Many victims do not know they are a victim at all until years have passed, when they: • Cannot get credit or a loan • Cannot get a checking or savings account • Cannot get an apartment • Cannot get utility service • Cannot get a driver’s license • Cannot get a job • Cannot get Social Security or welfare benefits • Are sent bills for accounts they never opened • Are investigated or arrested for a crime they never committed Tip: Check your credit history for free each year at annualcreditreport.com. No need to commit to any program or pay money to check your credit history. You won’t get your credit score for free, but you will find out if other people have applied for credit cards us-ing your social security number. You will also find out if there are any mistakes in current accounts or addresses and have a chance to correct them. Check it out! It’s worth it. Bank on it! words you need to know ident i t y thef t c r edi t r e port identity theft: has someone stolen you? protecting yourself: 54 55 i d e n t i t y t h e f t p r o t e c t i n g y o u r s e l f If you find your identity has been stolen, immedi-ately take these steps: • Call the three main agencies for credit reports, which are detailed listings of your entire credit history (see pg. 68) • Call the police • Call all the credit issuers and collection agencies involved, speaking only to fraud investi-gators • Write down the name and num-ber of everyone that you speak to, including the time and date you called, and a brief summary of the conversation • Clear your records following the steps provided in the Identity Theft Resource Guide, available from www. idtheftcenter.org If your identity was stolen by someone close to you, like a parent or family member, you have every right to feel betrayed. But do not feel guilty, as the fault does not lie with you. But how do you avoid becom-ing a victim at all? First, protect your Social Security number as if it were worth a million dollars - because it just might be! Do not carry the card in your wallet, do not use it on your driver’s license or student I.D. and do not give it out to just anyone who asks for it, especially on the Internet. It is your number; you have the right to ask what they might need it for, as well as to say “no.” You should also shred any mail or papers you get with the num-ber on it, instead of just throwing them away. And request a copy of your credit report once a year at annualcreditreport.com to make sure nothing sneaky is going on that you do not know about. exercise If some of the impor-tant cards in your wallet or purse already have your Social Security number on them, experts suggest you make a copy of those cards and cut out the last four digits to prevent identity theft. But how can you eas-ily recall what those last four digits are? Using the letters associated with a numeric phone keypad, play around with your numbers until they spell a word that you can remember. For example, if your Social Security number ends in 6427, that could spell out “mics,” “nibs” or “ogar.” It does not have to be a real word - just something you can remember off the top of your head. MY WORDS ________________________ ________________________ ________________________ ____________________________________________________________________________________________________ ________________________ ________________________ ________________________ ________________________________________________________________ ________________________ ________________________ ________________________ ________________________ ________________________ ________________________________________ ________________________ ________________________ ________________________ ________________________________________________________________________________________ ________________________ 1 4 7 2 5 8 3 6 9 GHI PQRS ABC JKL TUV DEF MNO WXYZ 56 57 i d e n t i t y t h e f t p r o t e c t i n g y o u r s e l f GET REAL: A TRUE STORY When John, age 20, tried to move into his own apartment after saving $400, he was told he could not until he paid off a $665 electric bill and a $550 gas bill. But he had never lived alone before! Turns out that years earlier, his own mother used his name and Social Security number to set up accounts for her own use. John could either pay the bills (which he couldn’t afford) or file fraud charges against his mom. the 411 on investment s cams protecting yourself: Fraud or a scam is the art of deception. Con artists misrepresent the truth on purpose to build your trust, and then steal your money. BE AWARE . Phony investments scams are an ever present danger for an investor who is unsuspecting or uninformed. Get educated before investing. Understand the different types of investment scams a con artist might use to separate you from your money (see pages 59 and 60) and learn how to protect yourself (page 61). Investing is a risky enough business without adding a lack of knowledge to your vulnerability. Ask questions and remember to always investi-gate before giving your money to anyone for an investment of any kind. If it sounds too good to be true, it probably is. Scam artists know what it takes to get your money, so be careful, ask questions and investigate before giving your money to anyone for an investment of any kind. TIP: Before you invest check that a security or your broker-dealer/ investment advisor is registered with the Oklahoma Securities Commission. To do this, visit securities.ok.gov. The Scams Common investment swindles seen in Oklahoma are pyramid schemes - a scam in which people invest in the right to sell the investment to other people, there is no significant profit from sales of goods or services, and cash comes from recruiting new investors who pay for the right to enlist more future investors. Inevitably, a point is reached where there are not any new suckers. Bank on it! words you need to know py ramid s cheme Ponz i s cheme p enny s tock f r aud af f ini ty f r aud boi l e r rooms f r audul ent You’ve heard it before, “If It Sounds Too Good To Be True, It Probably Is”. Investment Con Artists Will Promise “BIG”, “RISK-FREE” Returns To Get Your Money. Don’t Believe Them or You Will Lose Your Money! Investigate Before Investing. 58 59 i n v e s t m e n t s c a m s p r o t e c t i n g y o u r s e l f * Ponzi Schemes: Early investors are paid off with money from new investors. The scheme may operate for a long time before the promoter “pulls the plug” or disappears with all the cash or reveals that the investments have gone “sour.” For everyone who makes money some-one loses money. Promoters or early investors show checks and claim they are profits. * Penny Stock Fraud involves investment in promotional bogus com-panies with untested products, or no as-sets, employees or business plan. Insid-ers get cheap stock, control the market price, artificially inflate the price and then dump the worthless stock on you at the high price. * Affinity Fraud targets an entire group at once, like professional organi-zations, minority groups, or church or religious groups. Here, the con artists often pose as a member of the group to get their foot in the door and win over everyone’s trust. Their goal is to get the group excited about a supposedly “safe” investment, which usually takes the form of a pyramid or Ponzi scheme. The money is pocketed, not invested. * Boiler Rooms are another com-mon scam to watch out for. They use the phone, even your cell phone, to get your money. Telemarketers will give scripted sales pitches using lines like, “Act now or the deal is gone” or “You are silly or stupid not to take advantage of this op-portunity.” You may be asked to give out information like your Social Security or bank account numbers. If you get a call like this one, just hang up. With all the scams out there, how do you avoid becoming the next victim? Easy! HERE YOU GO! To report a con artist, contact these organizations: Oklahoma Securities Commission (405) 280-7700 www.securities.ok.gov Financial Industry Regulatory Authority (FINRA) (301) 590-6500 www.finra.org North American Securi-ties Administration As-sociation (202) 737-0900 www.nasaa.org U.S. Securities and Exchange Commission (202) 551-6551 www.sec.gov 60 p r o t e c t i n g y o u r s e l f • Stay away from “investments” that offer you money to recruit others, ask for cash to join or want you to buy goods or services. • Do your research before deciding to buy in. If there is little or no informa-tion or history, beware. • Do not be afraid to say “no” or hang up the phone. • Do not be pushed around by the high-pressure sales pitches of salespersons that want you to act immediately. Never purchase any investment unless you have had time to get informa-tion and make a thoughtful decision. Worthwhile investments rarely involve such short time constraints. • Do not trust sales people just because they seem friendly. • Never give out your bank account number or other financial informa-tion. • Be suspicious of offers of “free” trips or gifts. • Remember there is no such thing as a “guaranteed” or “risk-free” investment. However, if you do lose money to a scam, report it to the Oklahoma Securi-ties Commission! It is totally natural to be embarrassed, but reporting the scam to authorities can improve your chances of getting your money back. Investment fraud is not only lying, it is illegal, and the losers who cheat honest people out of their money can only go to jail with your help. scams 61 i n v e s t m e n t s c a m s 62 63 p r o t e c t i n g y o u r s e l f exercise TRUTH?OR LINES? When are you being fed a line? For each of the con artists’ quotes below, match it to the reason you should be suspicious of their pitch. LINES 1 “I’ll need an answer today if you want to get in on this deal.” 2 “Your money will double in the first two months.” 3 “What’s great about this deal is that there is no risk involved.” 4 “You haven’t heard of this company because what they’re doing is top secret.” TRUTHS A Beware of outrageous claims of profit. If it sounds too good to be true, it probably is. B The business likely does not even exist. C Virtually any investment is subject to a risk of loss. D Before investing, you should take your time to research it. Investigate before you invest. Answer key on page 70. my notes i n v e s t m e n t s c a m s Nigerian Scams We get e-mails from foreign nations, like from Nigeria, that seek your aid in getting large sums of money out of that country. The hook is that you have to give information like your bank account number and send cash before you get anything. Once your money is sent, you never hear from them again. Beware, phony investment scams abound on the Internet. 1 2 3 4 5 66 67 68 69 70 71 conclusion resources contact list post quiz answer key evaluation Invest EdTM my money Answer key on page 70. QUIZ ch.iii Circle the letter that best answers the question. Identity theft can affect all of the following except: A Your credit history B Your criminal record C Your transcript D Your welfare benefits The three major credit report companies are: A Equicare, ExpoNet and TransCredit B Equalcom, Experian and TransCom C Equifax, Expert and TransUnion D Equifax, Experian and TransUnion The scam named for a person is: A Ponzi B Penny C Affinity D Pyramid Which group is most likely to be targeted for affinity fraud? A Unions B Republican Party C Shriners D First Christian Church Which investment does not exist? A Risk-free B Slight risk C Moderate risk D High risk 64 c h a p t e r i i i q u i z handbook 66 c o n c l u s i o n By now, you have gone through a crash course in money basics from that first paycheck to learning how to protect yourself (and your money) from an investment scam artist. Hopefully you know a little bit more about the importance of treating money wisely, so you can get a lot more out of it, both today and in all your tomorrows. We have discussed spending vs. saving, how to budget your money, the differ-ent types of banks, investment options, credit, investment scams and protecting your identity and earnings. While you might not encounter all of these down the road, each piece gives you the knowledge to make smart, careful deci-sions about your income. We know money is not easy to come by, but now that you have completed this workbook-cd, it will be much easier to make it work for you. And just knowing that is priceless. This handbook is yours to keep and use anytime you need it. Remember to investigate before you invest in any financial product. conclusion: it was all about the benjamins Whew! That was not so hard, was it? resources The following resources were used to create your Money Handbook. 67 r e s o u r c e s handbook: American Association of Retired Persons, “ID Theft: What’s It All About?,” Federal Trade Commission: 2003 Ansell, Dorothy I., The New Making It on Your Own, Vir-ginia Commonwealth University School of Social Work: 1995 CNMoney.com, “How Fast Will My Savings Grow?,” http://cgi. money.cnn.com/tools/saving-scalc/ savingscalc.html: 2006 Identity Theft Resource Center, “Fact Sheet 120: Identity Theft and Children,” http://www. idtheftcenter.org/artman2/ publish/v_fact_sheets/Fact_ Sheet_120.shtml Identity Theft Resource Center, “Fact Sheet 120: To Order a Credit Report for a Child,” http://www.idtheftcenter.org/ artman2/publish/v_fact_sheets/ Fact_Sheet_120_A-.shtml Identity Theft Resource Center, “Fact Sheet 120b: A Guide for Parents Regarding Child Iden-tity Theft Indicators,” http://www.idtheftcenter.org/ artman2/publish/v_fact_sheets/ Fact_Sheet_120b_A_Guide_for_ Parents_-_Child_Identity_Theft_ Indicators.shtml Latzko, Marian, B., I Can Do It!: A Micropedia of Living on Your Own, Microlife: 1996 Mannix, Darlene, Life Skills Activities for Secondary Stu-dents with Special Needs, John Wiley & Sons, Inc.: 1995 Oklahoma Department of Securities, “Personal Finance for the Economics Classroom: A Teaching Guide for Econ Instructors,” http://www.fl2010.org/ U.S. Census Bureau, “Three- Year Average Median House-hold Income by State: 2002 - 2004,” http://www.census.gov/ hhes/www/income/income04/ statemhi.html: 2005 additional resources: National Resource Center for Youth Services University of Oklahoma On-line Catalog www.nrcys.ou.edu/catalog National Resource Center for Youth Services University of Oklahoma Schusterman Center 4502 E. 41st Street, Bldg. 4W Tulsa, OK 74135 Tel: (918) 660-3700 Fax: (918) 660-3737 www.nrcys.ou.edu Jesus Salas University of Oklahoma Mr. Salas reviewed all sections except “Investing Products”, “Investing Risk”, and “Protect-ing Your Money”. 2008 Investor Protec-tion Trust (IPT) Suite 300 919 Eighteen Street, NW Washington, DC 20006-5517 www.investorprotection.org Invest Edtm Investor Educa-tion Programs Partnership: Oklahoma Securities Commission l University of Oklahoma Outreach Suite 860, First National Center 120 N Robinson OKC, OK 73102 Tel: (405) 280-7700 Fax: (405) 280-7742 www.investedok.org/links Financial Industry Regula-tory Authority (FINRA) (301) 590-6500 l www.finra.org North American Securities Administration Association (202) 737-0900 www.nasaa.org U.S. Securities and Exchange Commission (202) 551-6551 l www.sec.gov contacts CALL NOW! OPERATORS ARE STANDING BY! In case you missed them the first time, here - on one handy page - is a list of organizations you may find helpful... pop quiz, hot shot Remember that quiz from the front of the book? Well here it is again and something tells us that when you take it this time, it is going to be a breeze!! Well done!! 1 Which of the following is NOT a deduction on a paycheck? A. Social Security tax B. Medicaid tax C. State income tax D. Medicare tax 2 Which investment product has the potential for higher returns as well as greater risk? A. Savings bonds B. Stocks C. Treasury bills D. Certificates of deposit 3 What does APR stand for? A. Annual Percentage Rate B. Approximate Percentage Rate C. Applicable Payment Rate D. Annual Payment Ratio 4 When will having bad credit affect you most? A. When cashing in credit card rewards points B. When applying for a loan C. When applying for a job D. When renewing your driver’s license 5 Which one is not considered an investment tool? A. Treasury bill B. Savings bond C. CD D. Checking account 6 You have been asked to pay cash to get in on a money making opportunity. You will get money by getting others to pay cash to get in on it, too. This scam is an example of: A. Penny stock fraud B. A commission C. Affinity fraud D. A pyramid scheme 7 When someone uses your personal information to obtain a credit card, it’s called: A. Declined card B. Mail fraud C. Identity theft D. Credit crisis y e s , aga in! 68 c o n c l u s i o n 69 c o n t a c t s + q u i z Independent Living Program Alumni: Yes I Can 1-800-397-2945 If you need a copy of your birth certificate or your Social Security card: Oklahoma State Department of Health - Vital Records Service (405) 271-4040 www.health.state.ok.us/program/vital/ brec.html Social Security 1-800-772-1213 www.ssa.gov/dallas Better Investing 1-877-275-6242 www.betterinvesting.org Oklahoma Department of Human Services (405) 521-3778 If you need to request or discuss a credit report: AnnualCreditReport.com www.annualcreditreport.com Equifax 1-800-685-1111 www.equifax.com Experian 1-888-EXPERIAN (397-3742) www.experian.com TransUnion 1-800-916-8800 www.transunion.com If you need to report a con artist: Oklahoma Securities Commission (405) 280-7700 www.securities.ok.gov U.S. Securities and Exchange Commission (202) 551-6551 www.sec.gov evaluation Wh at did you think? Pl e a s e he l p us out b y c omp l e t ing thi s e va luat i on. answer key 70 c o n c l u s i o n 71 a n s w e r s + e v a l 1 D id you find the workbook helpful? o Yes o No Why / why not?____________________________ ___________________________________________ 2 W hat did you like most and least about the workbook? ___________________________________________ ___________________________________________ 3 W hat did you like most and least about the CD ? ___________________________________________ ___________________________________________ 4 D id you find the workbook easy to read and follow? o Yes o No Why / why not?____________________________ ___________________________________________ 5 W hich elements of My Money Handbook did you use? o Workbook o CD o Workbook + CD Why / why not?____________________________ ___________________________________________ 6 W hich elements of My Money Hand-book did you find most helpful for learning? o Workbook o CD o Workbook + CD Why / why not?____________________________ ___________________________________________ 7 W ere the instructions clear? o Yes o No ___________________________________________ ___________________________________________ 8 W ill you use My Money Handbook in the future? o Yes o No Why / why not?____________________________ ___________________________________________ 9 W hat topics would you like to see added? ___________________________________________ ___________________________________________ 10 W hat topics would like to see taken out? ___________________________________________ ___________________________________________ 11 How would you change the handbook? ___________________________________________ ___________________________________________ 12 A ny other comments about the handbook you would like to share? ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ PRE-QUIZ/ POST QUIZ 1. B 2. B 3. A 4. B 5. D 6. D 7. C CHAPTER I: money management Paycheck Exercise (pg. 8) 1. $1,560.00 2. $234.99 3. 40 4. $6.50 5. $22.62 Chapter I Quiz 1. B 2. C 3. A 4. D 5. C CHAPTER II: banking basics Banks: Overview (pg. 22) 1. Credit union 2. Commercial bank 3. Savings and loan Savings Products: Crossword Puzzle (pg. 40) Credit Card Bill (pg. 51) 1. 04/05 2. $24.12 3. $66.27 4. $20.00 5. 05/06/06 6. 19.8% 7. $500.00 8. $120.34 9. $120.34 Chapter II Quiz 1. C 2. D 3. B 4. A 5. B CHAPTER III: protection Protecting your money: Truth or Lines? (pg. 63) 1. D 2. A 3. C 4. B Chapter III Quiz 1. C 2. D 3. A 4. D 5. A www.investedok.org v i s i t u s o n l i n e ! |
Date created | 2011-11-21 |
Date modified | 2013-06-28 |
OCLC number | 813293301 |
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