Disadvantages: The interest they pay ____

as much as I’d like.

p.12 , Req. 6: Pretend you have $1,000 to save/invest, and help prepare yourself for the future.

Explain to your merit badge counselor the advantages or disadvantages of saving or investing for each of the following:

(e)(e). Savings account at a bank or credit union:

Advantages:

They pay us _________

Very ____ risk of loss (insured by _____ or _____)low FDIC NCUA

interest

isn’t

• Disadvantages:– Timing risk: I may need my money _____ the CD

matures.

• Advantages:– They pay us ______ (usually ______ rate than savings)– Very _____ risk of loss:(insured by _____ or ______) low FDIC NCUA

interest

p. 12, Requirement 6 (d)

Certificate of Deposit (CD) at a Bank or Credit Union

before

higher

– If the stock market in general goes down, I probably ____ _____

– Timing risk: If I buy when the price is high and sell when it is low, I ____ ______.

– If the company I invested in loses money, I probably ___ _____

– The value of the stock could ___ ___ and I could get _________.

– Compared to bank or cu savings, the risk of loss is ______.

– If I invest in a company that is very profitable and if the stock market does well, I could ____ ____ of money,

p. 12, Req. (6a) Common Stocks. • Advantages:

higher

lose money

lose money

lose money

earn lots

go up

• Disadvantages:

dividends

– Compared to bank or cu savings, the risk of loss is ______.

– If the stocks in the fund do poorly, I am likely to ____ ______

– If the stocks in the fund do well, I am likely to earn ____ _____

– The return on the investment is often ______ than at a bank.

– Compared to stock in a particular company, the risk of loss is supposed to be _____

• Advantages:

p. 12 Req. (6b) Mutual Funds (invest in stocks of _________ companies)

higher

lower

lose money

more money

higher

• Disadvantages:

different

– If the fund mgr blows it or takes off, I ____lose

(but some have lost $ in scandals)

– If the stock market in general goes down, I probably ____ ________

lose money

Invest vs. SaveA particular mutual fund’s performance vs. 5% savings avg.

0

1000

2000

3000

4000

5000

6000

7000

– Some policies invest part of the premium so people don’t have to ___ to get some money.

– Life insurance pays money to my ___________ when I die.

• Advantages:

p. 12 Req. (6c) Life Insurance

beneficiaries

die

– The insurance portion costs ______.

• Disadvantages:money

– The investment portion is not _______ by the US Governmentinsured

p. 13 Req. 7 Explain to your merit badge counselor the following:

Explain what a loan is:

money things

use itA loan is ________ or ________ owned by someone who

allows another person to _____ ___

The amount earned as _____ passes.

p. 13 Req. 7(a) Explain what interest is:

Interest is the amount of money paid to a lender in ________ of what was borrowed.

0

10

20

30

40

50

60

70

80

90

100

110

Amount Borrowed Amount Paid Back

interest

principalexcess

time

p. 13 Req. 7(a) Explain how the Annual Percentage Rate (APR) measures the true cost of a loan.

0

10

20

30

40

50

60

70

80

90

100

110

Amount Borrowed Amount Paid4. It is expressed as a _______ rate.yearly

1. The APR is the ________ ____ established by the U.S. Government

standard rate

2. So we can _______ the cost of borrowing.

compare

3. It includes ______ and _____interest fees

(just as _____ is for highway speed)MPH

p. 13 Req. 7(a) Explain how the Annual Percentage Rate (APR) measures the true cost of a loan.

0

10

20

30

40

50

60

70

80

90

100

110

Amount Borrowed Amount Paid

If you borrow $100, and pay back $110:

What is the cost? $____

What is the APR if you pay back $110 one year later? _____% APR

What is the percentage rate? ____ %

1010

What is the APR if you pay back $110 one month later? _____% APR

What is the APR if you pay back $110 one week later? _____% APR

10

120

520

APR?

What is the cost if you pay $10 interest each week for a year? $_____520

I might be able to borrow from a relative for ____.

p. 13 Req. 7(b) Explain the different ways to borrow money:

free

I can borrow from myself for very ___ ____.low cost

I can borrow from bank or credit un at a ______ ___.higher cost

I can borrow by ________ a ________. (usually higher)financing purchaseI can borrow by charging things using a _____ ____.credit card

If I am really stupid:I can borrow from ultra high-cost lenders at

outrageous interest ____.rates

BEST BORROWING TIPS:

1. Avoid _____________ borrowing!unnecessary

2. Only borrow for things that _________ in value.

increase

3. Pay off loans ______.early

4. If you don’t have the money, _____ ____ _________.

don’t buy

5. When you do borrow, always pay less than _______ APR.13%

anything

TOO EASY LOAN COMPANYTOO EASY LOAN COMPANY

Promissory Note with Security InterestPromissory Note with Security InterestSecurity: 1996 Olds CieraSecurity: 1996 Olds Ciera

Annual Annual PercentagPercentage Ratee RateThe cost of your The cost of your credit as a yearly credit as a yearly rate.rate.

300%300%

Finance Finance ChargeCharge

The dollar amount The dollar amount the credit will cost the credit will cost you.you.

$4,442.8$4,442.800

Amount Amount FinancedFinanced

The amount of The amount of credit provided to credit provided to you or on your you or on your behalf.behalf.

$$2000.02000.000

Total of Total of PaymentsPayments

The amount you will The amount you will have paid after you have paid after you have made all have made all payments as payments as scheduled.scheduled.

$6,442.80$6,442.80 25% per month25% per monthPayment Schedule:Payment Schedule: 12 Payments of 12 Payments of $536.90$536.90. Beginning 2/4/99 and on the 4th of each month . Beginning 2/4/99 and on the 4th of each month thereafter until final payment is made on January 4, 2000.thereafter until final payment is made on January 4, 2000.

Default Charge:Default Charge: If the payment is late 10 days, you will be charged 5% If the payment is late 10 days, you will be charged 5% of the payment amount.of the payment amount.

TV

•$400.00

• cash

TV $400.00Credit Card

• $26.00 per mo.

• 18% A.P.R.

• 18 mo. pmts

• $59.00 interest

•Total Cost $459

TV $400.00Finance Company

• 36% A.P.R.

• 18 mo. Pmts.

• $29.00 per mo.

• $123.00 int.

•Total Cost $523

TV $400.00Rent-to-Own

• $70.00 mo. pmt• 18 months

• Total Cost $1260

• $860.00 (int.)

• (196% APR)

TV $400.00Too Easy Loan (Bad Credit OK)

• 300% A.P.R.• Car Title Pawn• If 18 months• $102.00 payments• $1,433 interest

•Total Cost $1833

TV $400.00Payday Loan

0102030405060708090

100110

10%

x 52

=520%

$174 payments

$2,725 interest

18 months (12 weeks max)

Total Cost $3125

TV $400.00Payday Loan

10% per week

520% APR

0102030405060708090

100110

p.13 Req. 7(c) Explain the differences between:

• A Credit Card

• A Debit Card

• A Charge Card

Credit Cards: Our Friends?

Or Our Foes?

is used to make purchases using the ____ ____ _________ money.

p.13 Req. 7(c)

A CREDIT CARD

• It may be paid off ____ _____ (without interest -most cards),

• or it may be paid ____ ____ (plus interest charges)

credit card company’s each month

over time• Advantages:

– One way to start building a good ______ ______ for free (if you pay it off each month—on time!)

credit rating

– Very ___________convenient!

– Too easy to spend money, especially if its money I _____ _____

p.13 Req. 7(c)

A CREDIT CARD

• Pitfalls:

don’t have

• Costs: – If I don’t payoff each month, I pay ________– Nearly always at a rate _______ than I want to pay.

interesthigher

• A CHARGE CARD is a type of credit card, where a person is using the company’s money, but no periodic interest rate is charged, and the person is usually required to pay the balance ____ ______each month.

p. 13 Req. 7(c)

• Pitfalls: Too easy to spend money, especially money you _____ _____don’t have.

• Costs: ______ fees.annual

p.14 req. #7 (c) cont’d

– Is one way to withdraw money from a person’s ______________ account.

• Advantages:– Using _____ ______ money, so if you don’t

have it, you don’t spend it.

checking

your own

• A DEBIT CARD

p.14 Debit Card req. #7 (c) cont’d

• Pitfalls:

– If somebody else uses your debit card, or a mistake is made, your money may be gone when you _____ _.need it

– Some places (like gas stations & motels) place a _____ on your acct.hold

– Causing returned item ____

p.14 req. #7 (c) cont’d

• Costs:

– If you don’t have enough money in your checking account to cover the withdrawal, your transaction(s) may _______ (get returned – unpaid).bounce

fees

• you’ll probably get ________ _____ fees.

p.14 req. 7(c) Costs of debit cards (checking accounts)

• If you don’t have a backup plan, like an overdraft ____ __ _____ (an empty loan),line of credit

• Some checking accounts have monthly ____ fees

returned item

p. 14 So, the differences between: Requirement 7(c).

Charge Card Debit Card Credit Card

-400

-350

-300

-250

-200

-150

-100

-50

0

Bal

0

50

100

150

200

250

300

350

400

Bal

-400

-350

-300

-250

-200

-150

-100

-50

0

Bal

Borrowed money.No interest charge (Reg. Z 226.2(15))

Must pay off each month.

Borrowed money. May pay off each month (no int)

Money from your checking account.

-400

-350

-300

-250

-200

-150

-100

-50

0

Bal

or pay over time (high interest).

p. 13 Explain the advantages & disadvantages:requirement 7(c).

Charge Card Debit Card Credit Card

-400

-350

-300

-250

-200

-150

-100

-50

0

Bal-400

-350

-300

-250

-200

-150

-100

-50

0

Bal

Borrowing money

Too easy to spend money

Using your own money

Your money gone…

Builds your credit ratingVery convenientProtections

-400

-350

-300

-250

-200

-150

-100

-50

0

Bal

0

50

100

150

200

250

300

350

400

Bal

p. 14 Req. 7(c) Explain why it is unwise to make only the minimum payment on your credit card.

A person who only pays the minimum stays in debt a ____ ____ time.

And pays ___ and ____ of interest.very longlots lots

-5000

-4000

-3000

-2000

-1000

0

1000

At typical terms, it would take about _____ years to pay off a $5,000 balance.

34

Simplified Credit Card Statement

Last Month’s Balance 128.42

Payments received (128.42)

Interest 0

Auto Repair Center 289.94

Joe’s Gas & Goodies 14.32

Babe’s Apparel Store 96.24

Ending balance 400.50

Required (min) Payment Due 20.00 *

Credit Card Summary:

If used well,If used well,

a great tool, a great tool,

if used poorly, if used poorly, financial ruin!financial ruin!

And if he has made his payments ___ _____

Credit Reports or Credit Records:

A credit report is a report of a person’s credit ______ history

Credit reports show what ______ and _____ _____ a person has had.

p. 14 Explain Credit Reports Requirement 7(d).

loans

on time

And it usually includes a credit _____ or credit _____ rating score

If he was late, it shows how late he was and

how _____ _____ he was late. many times

credit cards

Explain Credit Reports (History)Bill S. Preston 529-00-0000 Score 380

Creditor Limit Bal Comments

• Department Store 1000 1050 5>30, 3>60• Credit Card 5000 4999 6>30,3>60,1>90• Dumpy Bikes 500 430 Collection agency• Fast Car Lot 6000 0 Repossession• Credit Card 2000 0 as agreed• Home Mortgage 70000 65000 current• Overdraft Line of Cr 2000 0 as agreed

If I have too much debt, I’ll have a ___ credit rating, or a ____ credit score

I will also be required to pay ____ ____, and next time I borrow I’ll pay interest at a ______ ____.

• And if I don’t borrow too much, I’ll have a good credit ______ or _______

• If I am irresponsible, and pay my bills late:

I’ll have a ____ credit history & ______ or ______

p. 14 Req. 7(d) Explain how your personal responsibility can affect your credit record:• If I pay my bills on time, I will have a good credit ______.history

rating score

bad rating scorelate fees

higher ratebad

low

Is it possible

• To have a good credit history while having

• A bad credit score? ______YES!

***Pay ____ ________ (more $ than required).

p. 14 Req. 7(e). Describe ways to reduce or eliminate debt:

extra principal

• Bal Rate Term Pmt Total Int Pd• (If simple interest)

• 10,000 12% 60 mo 222 13,346 3,346

Example of Paying Extra Principal

• 10,000 12% 57 mo 232 13,167 3,167

• 10,000 12% 47 mo 272 12,582

• 10,000 12% 38 mo 322 12,069 2,069 1,277

Savings

179

2,582 764

***Pay ____ ________ (more $ than required).

p. 14 Req. 7(e). Describe ways to reduce or eliminate debt:

***Pay off highest rate debt _____first

extra principal

Then, when it is paid off, add what you were paying on that debt to the amount you were paying on your next _______ ____ debt.highest rate

After 1 year

New New New

Bal. Pmt. Term

77,554 651 21.9

8,072 250 3.1

4,126 150 2.6

6,253 120 8.5

0 0 0

794 90 .8

Example: of paying highest rate debts first.

Existing Balance Payment RateRemainingObligations (p & i) Term (yrs.)

1st Mort 78,721 651 8.5% 22.9 yrs.

Auto Loan 10,239 250 9.0% 4.1 yrs.

Trailer 5,451 150 9.8% 3.6 yrs.

Credit Card 6,539 120 18.0% 9.5 yrs.

Doctor 400 40 21.0% .9 yrs.

Dentist 1,200 50 19.0% 2.5 yrs.

Totals 102,550 1331

Existing Balance Payment RateRemainingObligations (p & i) Term (yrs.)

1st Mort 78,721 651 8.5% 22.9 yrs.

Auto Loan 10,239 250 9.0% 4.1 yrs.

Trailer 5,451 150 9.8% 3.6 yrs.

Credit Card 6,539 120 18.0% 9.5 yrs.

Doctor 400 40 21.0% .9 yrs.

Dentist 1,200 50 19.0% 2.5 yrs.

Totals 102,550 1331

After .8 year (1.8 yrs total)

New New New

Bal. Pmt. Term

76,547 651 21.1

6,194 250 2.3

2,970 150 1.8

5,984 210 3.1

0 0 0

0 0 0

Reduce or eliminate debt quicker, by paying highest rate debts first.

After 1.8 more (3.7 yrs tot)

New New New

Bal. Pmt. Term

73,863 651 19.2

1,153 250 .4

0 0 0

2,745 360 .7

0 0 0

0 0 0

Reduce or eliminate debt quicker, by paying highest rate debts first.

Existing Balance Payment Rate RemainingObligations (p & i) Term

1st Mort 78,721 651 8.5% 22.9 yrs.

Auto Loan 10,239 250 9.0% 4.1 yrs.

Trailer 5,451 150 9.8% 3.6 yrs.

Credit Card 6,539 120 18.0% 9.5 yrs.

Doctor 400 40 21.0% .9 yrs.

Dentist 1,200 50 19.0% 2.5 yrs.

Totals 102,550 1331

Reduce or eliminate debt quicker, by paying highest rate debts first.

Existing Balance Payment Rate RemainingObligations (p & i) Term

1st Mort 78,721 651 8.5% 22.9 yrs.

Auto Loan 10,239 250 9.0% 4.1 yrs.

Trailer 5,451 150 9.8% 3.6 yrs.

Credit Card 6,539 120 18.0% 9.5 yrs.

Doctor 400 40 21.0% .9 yrs.

Dentist 1,200 50 19.0% 2.5 yrs.

Totals 102,550 1331

After .7 more (4.4 years tot)

New New New

Bal. Pmt. Term

72,760 1,261 6.2

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

Out of debtOut of debt in in 10.610.6 yrs.

***Pay ____ ________ (more $ than required).

p. 14 Req. 7(e). Describe ways to reduce or eliminate debt:

***Pay _____ often than required (if allowed).

***Pay off highest rate debt _____first

extra principal

more

Then, when it is paid off, add what you were paying on that debt to the amount you were paying on your next _______ ____ debt.highest rate

***Bi-weekly payments can be an easy way to make extra principal payments

p.14 Req 7d. Describe ways to eliminate Debt.

Most loans: Monthly payments

Some Loans:Bi-Weekly Payments:(every other week)

By paying ½ paymentevery other week…

1313 full payments full payments

Some:Bi-Weekly Payments:(every other week)

By paying ½ paymentevery other week:

• p. 15, Req 8(a) Write a "to do" list of tasks or activities, such as homework assignments, chores, and personal projects, that must be done in the coming week. List these in order of importance to you.

• TO DO LIST. Things that must be done in the coming week (in order of importance):

1 ________________ 13 ________________

2 ________________ 14 ________________

3 ________________ 15 ________________

4 ________________ 16 ________________

5 ________________ 17 ________________

6 ________________ 18 ________________

7 ________________ 19 ________________

8 ________________ 20 ________________

9 ________________ 21 ________________

EatSleep

School

Church

Scouts

Date

BB

Shower

Scheduled Activity Actual Scheduled Activity Actual

Times   Times Times   Times

      12: PM    

6: AM          

      1: PM    

7: AM          

      2: PM    

8: AM          

      3: PM    

9: AM          

      4: PM    

10: AM          

      5: PM    

11: AM          

      6: PM    

           

      7: PM    

           

      8: PM    

           

      9: PM    

           

      10: PM    

p.15, Req. 8(b) & (c). Make a 7-day calendar or schedule…

Day 1 Day of the week __________ Date________

p.19, Req. 8(d) Review your “to do” list…Discuss it with your merit badge counselor.

Start

Finish

p. 19, Req. 9. Prepare a written project or plan…could include a camping trip…

a. Define the project ___________________What is your goal? ___________________

b. Develop a timeline…

c. Describe your project ________________

p.19 Req. #9(d) & (e) Develop a list of resources… If necessary develop a budget.

(e) budget

(d) Develop a list Identify how these resources Already Est. cost if you

of Resources needed: will help you achieve the goal have it don't already have it

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________

______________ ____________________ ______ ______________• Discuss your completed project plan with your mb counselor.

p. 20, Req. 10. Do the following:

Choose a career you might want to enter… Research the limitations…

p. 20, Req. 10. Do the following:Choose a career you might want to enter… Research the limitations, qualifications.

Career:_______________________________

(b) Research the limitations of your anticipated career:

Limitations Where you learned about it Qualifications

_______________ _____________________________________

_______________ _____________________________________

_______________ _____________________________________

_______________ _____________________________________

Pay average

Bank Examiner

MB Class Instructor College Degree

Sometimes boring “ “ “ Banking Experience

Sometimes conflicts “ “ “ Communicate

Personal Management Merit Badge

$

Lots of effort , but totally worth it!

• More things to finish.

• When you’ve completed ALL the requirements, contact your scoutmaster and/or merit badge counselor. Take the handout with you.

• Discuss the things and be excellent to each other!