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Transcript of Financial Literacy
By Sam Rock, Angel Rodriguez, and Tamir Ortiz
-Financial Literacy is the ability to understand how money works in the world
Financial literacy includes the following
Renting and Owning
Insurance and Taxes
Saving and Banking
This includes being able to develop a budget plan and start saving as well as maintaining a stable budget.
Budget- Estimated income and expenditures for a period of time. This is used to save you money and to stop you from spending to much money.
Simple Interest- The amount of money the bank owes you for using your money. This usually compounds yearly and is the slowest form of interest.
Compound Interest- This is a type of interest where you earn interest on the simple interest you already have earned.
Rule of 72- A formula to calculate how long it will take for your money to double. You do this by dividing 72 by your interest rate.
Savings Vehicles- These are ways to save money such as: savings accounts, certificate of deposits, or money market accounts.
Compounding Frequency- How often your interest is calculated and added back into your account.
Credit Unions- Banks owned their members and are usually non-profit.
Online Banks- Banks that are online and only are accessible by electronics. These usually only offer basic banking features.
Retail Banks- This is a traditional bank with physical locations and offer savings and checking accounts, mortgages, personal loans, and credit and debit cards.
Payment Types and Credit Scores
- This is knowing the different ways to pay for things and the consequences of borrowing.
Debit Cards- A type of payment that comes directly from your account.
Credit Cards- This is a short term loan to pay for your charge and is payed for at the end of the month.
Loans- A thing that is borrowed, especially a sum of money that is expected to be paid back with interest.
Credit Score- A number assigned to a person that indicates to lenders their capacity to repay a loan based on where they stand financially.
These are ways to find and validate your credit score.
Equifax Inc.- A consumer credit reporting agency in the US including Experian, Trans Union.
- Education beyond the high school level.
FAFSA Form- The application used by nearly all colleges and universities to determine eligibility for federal, state, an college-sponsored financial aid, including grants, educational loans, and work-study programs.
Types of federal loans- The four types of federal loans are Stafford Loans, PLUS Loans, Perkins Loans, and Consolidated Loans.
Educational ROI- What you should expect to get after graduating from college.
Renting Vs. Owning
-Knowing when it is the right decision to own or rent
Renting- This is to pay someone for the use of an item
Owning-This is to own an item and have complete control over it.
Allowed mileage- The amount of miles the lease allows the the lessee to drive a rented car.
Depreciation- The reduction in value of an asset over time.
Mortgage-The charging of real or personal property by a debtor to a creditor as security for a debt.
Lessee- The person who has possession of a leased item.
Lessor- The owner of a leased item.
Buying vs Leasing
When you buy an item you have full control over that item where as when you lease it you must abide to the agreed terms.
Renting has more flexibility because you can explore an option before you buy it and are tied to the item.
When you rent most of the maintenance is covered by the lessor.
Also you can rent if you have less than perfect credit where as when you buy you must have a good credit score.
Insurance and taxes
- Insurance is the coverage you can get from making monthly payments to an insurance company.
1040EZ form- This is offers a faster and easier way to file taxes.
W4 Tax form- A form completed by an employee to indicate his or her tax situation.
Local Tax- A tax assessed and levied by a local authority.
State Tax- These are taxes that are imposed by a state government.
Federal Tax-These are taxes that are levied by a federal agency usually the IRS.
Policy Terms- The period of coverage provided by am insurance policy.
Deductible- The amount of money the person that is insured must pay before a claim.
Premium- The amount you pay to be covered by an insurance policy.
Copay-A form of deductible for a medical expense.
Consumer Protection and Investing
-This is the putting aside money and letting it grow for future use.
Stocks-This is a type of investment that gives investors a share or part ownership in a company.
Bonds-This is a type of investment where money is borrowed by a company and is paid back with interest when it matures.
401K- A retirement plan where employers give salary reductions to put away for retirement.
Mutual Funds- A type of investment vehicle where money is pooled between investors to invest in stocks.
403B- A retirement plan for employes of certain schools or tax exempt organizations
Traditional IRA-Individual retirement account in the USA
Roth IRA- The same as a tradition IRA except you cannot deduct contributions.
Simplified employee pension- This allows employers to contribute to traditional IRAs set up for employees.
Ally Wallet Wise