Intro Financial Literacy

(1) DONT BORROW WHAT YOU CAN'T REPAY - Borrowing and lending are based upon trust between the lender and the borrower.

(2) BUDGET YOUR MONEY - Make a plan for sensible spending and saving.

(3) STAY INSURED - People buy insurance to protect against loss in the event of illness or accident.

(4) START SAVING YOUNG - Define short-term and long-term goals, decide how to save to achieve these goals. Saving means that income is not spent today so that it can be used for the future.

(5) YOUR CREDIT PAST IS YOUR CREDIT FUTURE - Establishing good credit is based upon the borrower's history of repaying debt. A good credit rating allows the borrow to be approved on future loan applications and receive a reasonable interest rate (or cost) of using credit.

(6) MONEY DOUBLES BY THE “RULE OF 72” - money grows by three factors: amount deposited, rate, and time. The formula for the Rule of 72 is to divide 72 by the interest rate. This tells the number of years it takes to double an investment earning that interest rate. For example, at 10% interest, money doubles in about 7.2 years (72 divided by 10 = 7.2); at 6% interest, money doubles in about 12 years (72 divided by 6 = 12).

(7) PAY YOURSELF FIRST - The idea to “Pay Yourself First” is a good plan but one that many people find difficult to do. It means that savings should have a high priority and be one of the first items in a budget. Learn to save and the advantages of saving early and often. Even on a minimum wage, putting away as little as $5-10 per week will have a significant long-term affect. For as little as $25, you can buy a share of a stock in a quality company that pays a dividend. If you allow the dividend to be reinvested, it will grow in value over time - time is your best friend when it comes to investing your savings.

(8) COMPARE INTEREST RATES - banks are businesses that seek to make a profit. One of the ways they do this is by charging a higher rate of interest to borrowers than that paid to savers.

(9) ANALYZE YOUR PAY STUB - Understand the difference between gross pay, net pay, and any company deductions.

(10) HIGH RETURNS EQUAL HIGH RISKS - Risk is inherent in all investments. Investors try to control risk as much as possible by developing a risk-reward ratio they can live with. The “rule of thumb” is the greater the potential reward, the higher the risk.

(11) DON'T EXPECT SOMETHING FOR NOTHING - The concept that “there is no such thing as a free lunch,” means that there is a cost to every decision, whether monetary or intrinsic. Good decisions require a clear understanding of alternatives. Learn to make choices among alternatives in order to use your income or resources wisely.

(12) MAP OUT YOUR FINANCIAL FUTURE - Clarify how you feel about your short-term and long-term goals and understand how this contributes to the success of your personal financial planning.

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