This document provides an introduction to financial literacy concepts for college-bound students. It includes a quiz testing knowledge of topics like insurance, loans, credit cards, and interest rates. It finds that the average American adult scores only 40% on such quizzes. The document then discusses various types of student loans and factors to consider in loans. It provides facts about the large amount of student debt in the US and increasing tuition costs. It also covers credit scores, interest rates, budgeting, and the importance of savings. The overall message is that students should educate themselves on personal finance topics to avoid debt traps.

1. Financial Literacy
An introduction to financial literacy for the
almost-college student

2. What do you know about
financial literacy?

3. Video
 View here

4. Quiz Time!
This same financial literacy quiz was given
to a sample of 500 American adults. The
average score was 40%. Can you do
better?

5. 1. If you have caused an
accident, which type of
automobile insurance would
cover damage to your own car?
 a) Term
 b) Collision
 c) Comprehensive
 d) Liability

6. 2. Matt and Eric are young men. Each has a good credit history.
They work at the same company and make approximately the
same salary. Matt has borrowed $6,000 to take a foreign vacation.
Eric has borrowed $6,000 to buy a car. Who is likely to pay the
lowest finance charge?
 a) Matt will pay less because people who travel overseas are
better risks.
 b) They will both pay the same because they have almost
identical financial backgrounds.
 c) Eric will pay less because the car is collateral for the loan.
 d) They will both pay the same because the rate is set by law.

7. 3. If you went to college and earned a 4-year
degree, how much more money could you
expect to earn than if you only had a high
school diploma?
 a) A little more; about 20% more.
 b) A lot more; about 70% more.
 c) About 10 times as much.
 d) No more; I would make about the same
either way.

8. 4. Many savings programs are protected by the
Federal government against loss. Which of the
following is not?
 a) A bond issued by one of the 50 States
 b) A U. S. Treasury Bond
 c) A U. S. Savings Bond
 d) A certificate of deposit at the bank

9. 6. Which of the following
instruments is NOT typically
associated with spending?
 a) Cash
 b) Credit card
 c) Debit card
 d) Certificate of deposit

10. 7. Which of the following credit card users is likely to pay the
GREATEST dollar amount in finance charges per year, if they
all charge the same amount per year on their cards?
 a) Vera, who always pays off her credit card bill in full shortly
after she receives it.
 b) Jessica, who only pays the minimum amount each month.
 c) Megan, who pays at least the minimum amount each
month and more, when she has the money.
 d) Erin, who generally pays off her credit card in full but,
occasionally,will pay the minimum when she is short of cash.

11. 8. Which of the following statements is true?
 a) Your bad loan payment record with one bank will not be
considered if you apply to another bank for a loan.
 b) If you missed a payment more than 2 years ago, it cannot
be considered in a loan decision.
 c) Banks and other lenders share the credit history of their
borrowers with each other and are likely to know of any loan
payments that you have missed.
 d) People have so many loans it is very unlikely that one bank
will know your history with another bank.

12. 9. Doug must borrow $12,000 to complete his college
education. Which of the following would NOT be likely to
reduce the finance charge rate?
 a) If his parents took out an additional mortgage on their
house for the loan.
 b) If the loan was insured by the Federal Government.
 c) If he went to a state college rather than a private college.
 d) If his parents cosigned the loan.

13. 10. If you had a savings account at a bank, which
of the following would be correct concerning the
interest that you would earn on this account?
 a) Sales tax may be charged on the interest that you
earn.
 b) You cannot earn interest until you pass your 18th
birthday.
 c) Earnings from savings account interest may not be
taxed.
 d) Income tax may be charged on the interest if your
income is high enough.

14. Answers
 1. b
 2. c
 3. b
 4. a
 5. a
 6. d
 7. b
 8. c
 9. c
 10. d

15. Loans

16. Loans
 Subsidized Federal Loans (Low interest-rate, typically
based on need)
 Unsubsidized Federal Loans (Not based on
need, generally low-interest)
 Federal Plus Loans (Awarded based on credit
history, typically small amounts)
 Federal Perkins Loans (Awarded based on extreme
financial need, very low interest)
 Private Lenders (Variety of loan packages, high
interest-rates, much riskier)

17. What to look for in loans?
 Principal – This is the initial amount you
borrow.
 Interest Rate- This is the amount of extra
money you have to pay per year
 Rules – Some loans stipulate that you
have to pay if you fall below being a full-
time student.
 Penalties
 How long after graduation until you have
to pay back the loans?

18. Loans
College loan officers have absolutely no
incentive to be honest with you. They will tell
you anything as long as they get you into
their school. These are salespeople!
Don’t fall into the trap of easy money, debt is
not worth it.

19. Some facts about finance…

20. Some facts about finance...
 Americans now owe more than $875
billion on student loans, which is more
than the total amount that Americans owe
on their credit cards
 The unemployment rate for college
graduates under the age of 25 is over 9%

21. Some facts about finance...
 Starting salaries for college graduates
across the United States are down in
2011 by 4%.
 According to a recent survey by
Twentysomething Inc., a staggering 85
percent of college seniors planned to
move back home after graduation last
May

22. Some facts about finance...
 Since 1982, the cost of medical care in
the United States has gone up over
200% but that is nothing compared to the
cost of college tuition which has gone up
by more than 400%!!!

23. Loans
 It's important to put your futures into
perspective. If you're going to medical
school, taking out loans to pay for medical
school may not be a bad idea. If you major
in something that doesn't tend to pay well,
ask yourself if it's worth it to take out the
loans in the first place.

24. Credit Cards

25. Credit Cards
 Use a credit card to build credit history,
not to pay for things you can't actually
afford
 Credit history is necessary for things like:
qualifying for apartments, mortgages,
auto loans etc.
 The trick is to use them as a cash
analog, NOT as a substitute.
 Credit card interest rates are huge!!!

26. Some facts about credit cards...
National debt of countries In order of debt:
United States: $10 Trillion
United Kingdom: $8 Trillion
Germany: $4 Trillion
France: $3 Trillion
Italy: $2 Trillion

27. Some facts about credit cards...
Average Household Credit Card Debt is
$8,400.00

28. Credit Score
 Your credit score helps you qualify for
loans, mortgages etc.
 You build credit by paying your bills on
time
 Your credit score dwindles when you miss
payments or do other financially unsound
things

29. Interest Rates
 Interest rates can cost a lot more than you
realize.
 Let's look at a spreadsheet that can
calculate interest rates for you.

30. Budgeting
 Budgets are extremely useful in
keeping track and planning your
spending.
 When used in conjunction with credit
cards, budgets help you stay within
your means!
 Lets take a look at a budget

31. Savings
 Commit yourself to putting away a
certain amount each month.
 If you're saving at least 10%, you're
doing way better than most Americans!

32. But this isn't going to affect me...

33. Any Questions?