Module 2

Report
Asset Development Strategies
for
Persons with Disabilities
Module 2 - Financial Education and
Access to Financial Services
Introduction
Module 2
•
Welcome to our second session of Asset Development
Strategies. Today, we will focus on the importance of
financial education and access to banking.
•
To start us on the right path, I want you to answer two
questions to test your knowledge about managing
money.
Question 1
•
Which of these statements are true about
savings accounts?
They are very risky.
b) They are not very risky.
c) They require a $1000 minimum balance.
d) They are not accessible via ATM withdrawals.
a)
Question 2

You go to a store to purchase an item but don’t
have the cash to pay for it. Which payment
method will likely cost you the least amount of
money?
Purchasing the item with a credit card.
b) Obtaining a bank loan to cover the cost of the item.
c) Relying on overdraft protection to cover the
difference.
d) Saving up for the item by putting money in an interest
bearing savings account.
a)
•
Which of these statements are true about
savings accounts?
They are very risky. (23%)
b) They are not very risky. (30%)
c) They require a $1000 minimum balance. (18%)
d) They are not accessible via ATM withdrawals.
(29%)
a)
•
You go to a store to purchase an item but don’t
have the cash to pay for it. Which payment
method will likely cost you the least amount of
money?
a)
b)
c)
d)
Purchasing the item with a credit card. (47%)
Obtaining a bank loan to cover the cost of the item.
(11%)
Relying on overdraft protection to cover the
difference. (8%)
Saving up for the item by putting money in an
interest bearing savings account. (34%)
Financial Education
•
Financial Education is about making informed
decisions that are in your own best economic
interest. It is about understanding the difference
between paying cash and using a credit card, which
will cost you money in interest payments if you do
not pay your full credit charges each month.
•
It is about creating a budget and setting savings and
asset goals.
Module 2
•
A recent study by the Federal Deposit Insurance Corporation
(FDIC) found that 80 percent of all Americans needed very
basic financial education and only 10 percent needed none.
•
There are costs to not having a savings and/or checking
account. Families with incomes under $20,000 per year
spend an average of $500 per year to get a check cashed or
pay bills. The same services at a bank would cost between
$30 and $60 per year.
•
In 2005-2006, the Internal Revenue Service (IRS) and the
National Disability Institute conducted research which found
that an estimated 30% to 50% of people with disabilities do
not have a savings or checking account.
Homework Review
1.
2.
3.
4.
5.
6.
7.
8.
My Trip to the Bank
Was there a minimum dollar amount to open a checking
account?
What are the costs to you per month to have the account?
Was there a minimum dollar amount to open a savings account?
Are there monthly service costs to you?
Do either the checking or savings account pay you interest on
the money in your account?
Do you have to maintain a minimum balance?
Were you asked to apply for a credit card?
Were you offered an ATM card and were you given information
about service fees?
Asset Development Strategies
for
Persons with Disabilities
Module 2 - Financial Education and
Access to Financial Services
Overview, Purpose, and Expected
Outcomes
Module 2
The training today will focus on financial literacy and
access to mainstream financial services.
•
Financial literacy is the ability to make informed
judgments and effective decisions regarding the
use and management of money.
•
Financial education programs cover a range
topics to help you manage your money, save, and
build assets.
Examples of Financial Education
Topics
• Creating a budget
• Managing money
• Understanding efficient use of credit
• Avoiding high interest rates with credit or a
•
•
loan
Avoiding fraud and protecting your money
Becoming an educated consumer of financial
services
Module 2
•
The session today has three objectives:
1.
Improve understanding of the importance of financial
education, access to financial services that minimize
costs and opportunities to save and build assets;
2. Become more aware of what financial education
programs offer and where to find them; and
3. Better understand the difference between
mainstream financial institutions and check cashing
stores that charge higher fees.
Asset Development Strategies
for
Persons with Disabilities
Module 2 - Financial Education and
Access to Financial Services
Main Presentation
Module 2
•
In today’s world, managing the money you earn
from work is not easy.
•
You have many decisions to make and many
choices as to what to do with the money you
earn.
Module 2
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Financial education, like learning how to read or write,
is about learning important skills you will use every day
to make important, informed decisions about your
personal financial situation.
Module 2
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Financial education programs will help you understand
the management of money you earn.
•
Financial management is about a series of decisions
related to setting
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•
•
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financial goals,
creating a budget and spending plan,
effective use of credit and
continued review and refinement of your goals and strategies to
achieve a better economic future.
Module 2
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A better economic future is not just defined by your
employment status in terms of where you work and
how much you are paid.
•
A better economic future will result from setting
savings and asset building goals that improve your
quality of life, expand choices for you and enhance
opportunities for community participation.
Why do people with disabilities need
financial education?
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If you rely only on public benefits, and live from benefit
check to benefit check each month, it is important to
develop skills to set a budget and have a spending plan.
•
If you are working even part-time, you have decisions to
make about spending within a budget and setting savings
goals.
•
With the right support and education, you can learn more
about managing money, setting goals, and building assets.
What organizations provide
financial education?
• Financial Institutions
Banks
o Credit Unions
o
• Community Colleges
• Consumer Credit Counseling Service
• Other community nonprofit groups
Money Smart
•
In 2001, the Federal Deposit Insurance Corporation
launched a national financial education program called
Money Smart.
•
The purpose of Money Smart is to provide money
management skill-building and create positive
relationships with banks.
•
Money Smart has ten modules that take between one
and two hours to complete.
Money Smart Modules
1.
2.
3.
4.
5.
Bank On It – covers types of insured financial institution,
types of accounts, and the differences between checkcashing businesses and banking institutions.
Borrowing Basics – covers loans and credit.
Check It Out – covers the ins and outs of a checking
account and its features.
Money Matters – covers the benefits and how-to’s of
saving.
Pay Yourself First – covers ways to save money.
Money Smart Modules
6.
7.
8.
9.
10.
Keep It Safe – covers laws that protect banking consumers
and shows how to protect your money.
To Your Credit - covers the ins and outs of credit reports and
repair.
Charge It Right – covers the basics of credit card use.
Loan To Own – covers the types of installment loans and
how to pick the best loan for your needs.
Your Own Home – covers the merits of owning a home over
renting and steps to take to prepare for homeownership.
Money Smart
• Money Smart is available in Braille and larger
•
print.
An online version is available on the FDIC
website: www.fdic.gov/consumers/consumer/moneysmart/
Module 2
•
To change a pattern of spending or cashing your check
from work at a check cashing store is not easy.
•
Changing financial behavior requires thinking about
the consequences of not following a spending plan and
having no savings plan.
Rule Number One: Pay Yourself First!
Module 2
•
What would happen if each month before you paid
your list of bills for food, rent, and other things, you
first paid yourself $12.50 per week or $50 for the
month?
•
If the $12.50 per week were put in a savings account
you would earn additional dollars depending on the
best interest rate you could find for a savings account.
•
Deposit $12.50 per week for 10 years in a piggy bank in
your house and you will accumulate $6,000.
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Deposit $12.50 per week for 10 years in a savings
account in a bank or credit union at 4.5 percent
interest and you will accumulate at least $7,500 or
$1,500 more.
“Pay yourself first” is the secret to
financial independence.
Module 2
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Competition in the financial services industry has
dramatically increased the variety of products offered to
you and other potential customers.
•
There are more non-bank providers of financial services
than ever before. You have choices to make.
What questions do you want to ask of a
financial service provider?
Questions to Ask
1.
Do you charge a fee for each transaction (cashing a check, using an
ATM, writing a check, writing a check with insufficient funds in your
account)?
2.
Do you offer any incentives for savings (match your savings, no fees,
interest rate higher for first six months)?
3.
Do you offer no-fee or low-fee checking accounts (any limits on checks
you can write per month or requirements of a minimum balance)?
4.
Is my money insured so I am protected if the bank has losses or closes
its business?
Use of Credit
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Many individuals and families have difficulty managing
credit.
•
Credit is the use of funds from a financial service
provider. Credit may be extended to you by a loan
with specific terms and conditions to purchase a car, a
house, or a consumer product like a computer.
Use of Credit
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Credit may also be extended to you with a credit card
which allows you to make purchases at most stores.
You will receive a monthly statement that indicates
what you bought and how much you owe.
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The statement will also indicate a minimum amount
due without additional interest payments.
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Without paying monthly, you will incur debt and
additional interest costs at a high rate.
Credit
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An individual’s credit history will have a major impact
on the ability to borrow money at the more reasonable
interest rates or at all.
•
Without a good credit history based on regular on-time
bill payments, it is unlikely you will be able to borrow
money at reasonable rates to build assets (purchase a
home, start a business, or purchase a computer).
What is a Credit Report:
Why is it Important?
•
There are several companies that collect information
from banks, retail stores, tax authorities and landlords.
They use the information to create a credit report which
provides a history of your financial transaction
experiences.
•
Your credit history and credit score will tell potential
lenders and creditors whether you are likely to pay your
bills on time.
Credit Reporting Companies
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There are three national consumer credit reporting
companies:
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Equifax
TransUnion
Experian
These companies have credit history files on almost every
adult in the US. Your credit history shows whether you
make late payments on credit card bills and to other
creditors with whom you have a financial relationship.
Credit History
•
A good credit history will help you get loans, purchase
a car, home, or other larger cost consumer products, or
may even impact whether an employer will hire you.
•
Your credit history and credit score is a financial profile
that will impact your ability to plan and achieve a
better economic future.
Credit Score
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The higher the credit score, the more success you will
have with a potential lender.
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Scores between 720-850 will indicate to a lender that you
have a strong, positive credit history and represent a low risk
of not paying your bills on time.
Scores between 350-619 indicate you have had problems in
managing your bills and debt. You may have great difficulty
securing a credit card or loan.
The better the score, the greater the possibility you
will receive better terms (lower interest rates) on a
loan.
The Three C’s of Credit
• Character – reliable to pay your debts on time?
• Capital – valuable assets to repay debt if
needed?
• Capacity – current job and income production?
Consumer Credit Counseling
•
There are consumer credit counseling agencies that
can help you with debt repayment plans when interest
on debt is causing you to fall further behind on
payments.
•
Your homework assignment was to read about
National Foundation for Credit Counseling.
Credit Card
1.
2.
3.
4.
5.
Do you have a credit card?
Have you ever had problems with paying the
monthly bill?
If yes, what did you do?
Who did you have assist you in reducing your debt?
What did you learn from the experience?
After the break, we are going to hear from two
guest speakers. We will learn more about
services offered from a credit counseling
program and a financial institution.
Asset Development Strategies
for
Persons with Disabilities
Module 2 - Financial Education and
Access to Financial Services
Exercise
Why do people with disabilities need a
bank account?
• Cash checks without service fees
• Pay bills
• Protect resources (security)
• Save and grow assets
Who can help you become a
“saver”?
• Many banks and credit unions offer different
products and services to help you set savings
goals and open a savings account.
• “America Saves” is a national program of the
Consumer Federation of America to help people
get in the habit of saving.
Virginia Saves
Virginia Saves is a part of “America Saves” which is
a national program of the Consumer Federation of
America to help people get in the habit of saving.
www.virginiasaves.org
Activity
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Does anyone have a savings plan or goals?
Do you save a certain amount of money per week or
month?
Do you have a specific asset goal? What is it?
Are your savings in an account with a financial
provider?
Do you earn interest on your savings?
REMEMBER
Rule Number One: Pay Yourself First!

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