Financial Literacy

2.  As a college student, you can do
everything right by getting good grades,
getting involved on campus, and getting
work experience prior to graduation.
BUT
A poor credit history due to irresponsible
use of credit cards can reduce your
chance of being hired after graduation.

3.  Potential employers will check your credit
score as an indicator or predictor of how
responsible you will be as an employee
because of a statistical relationship
between using credit cards responsibly
and being a responsible employee.

5.  Development of the habit of effective
money management begins with
awareness of your cash flow – the
amount of money you have flowing in
and out.

6.  You can track your cash flow by
monitoring:
The amount of money you have coming in
(income) versus going out (expenses or
expenditures); and
The amount of money you have
accumulated and not spent (savings) versus
the amount of money you have borrowed
and haven’t yet paid back (debt).

7.  For college students, income typically
comes from one or more of the following
sources:
 Scholarships or grants, which don’t have to be paid back
 Loans, which must be repaid
 Salary earned from part-time or full-time work
 Personal savings
 Gifts or other forms of monetary support from parents and
others

8.  Your sources of expenses or
expenditures may be classified into three
categories:
1. Basic needs or essential necessities –
expenses that tend to be fixed because you
cannot do without them (e.g., food, housing)
2. Incidentals or extras – expenses that tend to
be flexible because spending money on them
is optional or discretionary (e.g., music,
movies)
3. Emergency expenses – unpredicted,
unforeseen, or unexpected costs (e.g., doctor

9.  Once you’re aware of the amount of
money you have coming in and the
amount of money you’re spending, the
next step is to develop a plan for
managing your cash flow.
 Several financial tools or instruments
can be used to track your cash flow
and manage your money. (Mint)

10.  May be obtained from a bank or credit union
 Typical costs include a deposit to open the
account, a monthly service fee, and small
fees for checks
 Banks usually provide you with an ATM card
that you can use to get cash from the
account.

11.  Whenever you write a check or make an
ATM withdrawal, immediately subtract its
amount from your balance.
 Keep a running balance in your
checkbook.
 Double-check your checkbook balance
with each monthly statement you receive
from the bank.

12.  Carry checks/debit card instead of cash
 Access to cash at almost any time through an
ATM
 Visible track record of income and expenses
in a checkbook
 Can serve as a good credit reference for
future loans and purchases

13.  A credit card is basically
money loaned to you by
the credit card company
that issues you the card,
which you pay back to the
company monthly.
 You can pay the whole bill
or a portion of the bill each
month – as long as some
minimum payment is
made.

14.  Pay attention to the annual percentage
rate – the rate you pay for previously
unpaid monthly balances.
 Credit cards will vary in terms of:
o Annual service fees
o Grace periods
o Credit limits

15.  Helps you track spending habits
 Provides the convenience of making
purchases online
 Allows access to cash whenever and
wherever you need through an ATM
 Enables you to establish a good credit history

17.  Use a credit card only as a
convenience for making
purchases and tracking the
purchases you make; do not use it
as a tool for obtaining a long-term
loan.
 Limit yourself to one card.
 Pay off your balance each month
in full and on time.

18.  Works similar to a credit card in that you
are given a short-term loan for one month;
the difference is that you must pay your
bill in full at the end of each month and
you cannot carry over any debt from one
month to the next
 Less flexibility than a credit card

19.  Looks identical to a credit card but…
o When you use a debit card, money is immediately taken
out or subtracted from your checking account.
o Provides you with the convenience of plastic but unlike a
credit card, it prevents you from spending beyond your
means and accumulating debt

21.  The FAFSA is the application used by the U.S.
Department of Education to determine aid eligibility
for students.
 A formula is used to determine each student’s
estimated family contribution (EFC), which is the
amount of money the government has determined a
family can contribute to the educational costs of the
student.
 Free application that should be completed annually.

22.  Considered to be gift aids and generally
are not required to be repaid.
 Federal Pell Grant is the largest grant
program and provides need-based aid to
low-income undergraduate students.

23.  Student loans are required to be repaid
once a student graduates from college.
 Federal Perkins Loan is a 5% simple-
interest loan awarded to exceptionally
needy students with repayment beginning
9 months after a student is no longer
enrolled at least half time

24.  Federal Subsidized Stafford Loan has a fixed
interest rate that is established annually on
July 1
 Federal government pays the interest on the
loan while the student is enrolled with
repayment beginning 6 months after a student
is no longer enrolled at least half time

25.  Federal Unsubsidized Stafford
Loan has the same interest
rate as the Federal Subsidized
Stafford Loan and is not based
on need
 Student is responsible for
paying the interest on the loan
while in college

28.  An effective money-management plan
should be time sensitive and include the
following financial-planning time frames:
o Short-range financial plan (e.g., weekly)
o Midrange financial plan (e.g., monthly)
o Long-range financial plan (e.g., entire college
experience)
o Extended long-range financial plan (e.g.,
expected income and debt after graduation)

29.  Research shows that obtaining a
student loan and working no more than
15 hours per week is an effective long-
range strategy for student to finance
their college education and meet their
personal expenses.
 Poll
 Video