Financial Literacy 10 - Final Exam Outline/Review PDF

Financial Literacy 10 - Final Exam Outline/Review 1. Brief History of Money Vocabulary: Money: System of value that enables the exchanges of goods and services. It is simply an idea. Currency: The physical representation of money. (coins, cash, cards) Bartering: The...

Financial Literacy 10 - Final Exam Outline/Review 1. Brief History of Money Vocabulary: Money: System of value that enables the exchanges of goods and services. It is simply an idea. Currency: The physical representation of money. (coins, cash, cards) Bartering: The direct trade of goods and services. Banknotes: Basically paper money aka cash. Originated in China (early 1200s) and later expanded later into Europe. Made for the sake of convenience as they are lighter than coins. Gold Standard: 1870s, countries printed and circulated banknotes that in total would be worth the amount of gold a country kept stored. Electronic payment: Basically payment electronically. In the 1900s and early 2000s, debit cards were used to make this possible. Now we have apple pay and e transfer. No using cash. Virtual Currency: Cryptocurrency, only available electronically and not regulated by banks or govs. Has its own risks. Examples of bartering: Fur trade, etc. This one’s easy dw. Origin and materials of coins: First appeared around 600 B.C. in the kingdom of Lydia. First made from metals like gold, silver and bronze and copper and eventually then mixed with zinc and nickel as well. In Canada: steel and nickel. 2. Personal Values and Money Vocabulary: Personal values: A value that you prioritize most. Different for everyone, also helps guide you make decisions. Money values: Extension of personal values but in relation to money. How do personal values form? Why are they important? What are they shaped by? -​ They are important as they are what guides us in: decisions, personal development, relationships and opinions. They are shaped and formed with the influence of: culture, upbringing and experiences. Know the money personalities - avoider (avoids dealing with finances: ​budgeting, saving, or paying bills), collector (likes to see their money make money), spender (prioritize spending over saving/budgeting/investing), thinker (critical thinker of how they deal with money), miser (extremely against spending) How are money values related to my personal values? -​ Your personal values affect your relationship with money in terms of decision making and prioritization. 3. How Culture Affects Views on Money Vocabulary: Marketers: a person who promotes an organization's products and service. Individualism: self and chosen people over others. Collectivism: community based. What is the traditional view on finance? -​ The assumption that there is a universal way/one way of how you interact with money. How does religion affect how people view money? -​ Religion includes attitudes and practices that directly/indirectly tells a community how to interact with money. What does Islam emphasize? What does Taoism and Confucianism emphasize? -​ Islam emphasizes morality, fairness, justice and being against vices. Taoism and Confucianism both emphasize frugality. Superstitions affecting finances - Friday the 13th, tetraphobia, gold -​ Friday the 13th is considered to be an unlucky day causing an avoidance to financial decisions. Tetraphobia is the fear of the number 4. Gold symbolizes wealth. How did China's One Child Policy affect finances? -​ Less money spent on children, more money spent for retirement. What is the German practice of "Geld Stinkt nicht"? - “Cash doesn’t stink” 4. The Hierarchy of Financial Needs Be able to fill in the levels of the pyramid + Be familiar with the definitions of each of the levels  Be familiar with they key drivers of financial well-being financial behaviours (active saving, avoiding debt, monitoring finances, spending restraint) economic factors (income, home ownership, job stability, regional conditions) psychological factors (financial confidence, attitude towards money, locus of control) social factors (gender, age, support networks) knowledge & experience factors (money management knowledge, awareness of financial products, practical experiences) 5. Credit and Well-Being Be familiar with the various credit sources available -​ Credit Card, Line of Credit, Personal Loans, Auto Loans, Educational Loans, HELOC (home equity line of credit), Payday Loans, Cash Advances, Overdraft Protection Be familiar with the financial pressures credit options offer -​ accumulation of debt: high balances, interest costs -​ monthly payments and cash flow issues: regular payments, minimum payments -​ financial stress and anxiety: pressure to repay, fear of default -​ reduced financial flexibility: limited credit, higher borrowing -​ impact on credit score: credit utilization, late payments -​ potential for debt spiral: chasing losses, increased financial burden -​ long-term financial impact: future financial goals, opportunity costs What are the four steps to overcome financial pressures? -​ Create a budget, Pay more than the minimum, Seek professional advice, Avoid unnecessary debt.  How does stress affect financial well-being? -​ Stress can negatively impact financial well-being by impairing decision-making, increasing impulsive spending, and reducing the ability to manage money effectively. 6. Gambling and Lotteries -​ This is easy no need for notes. 7. Earning an Income (& Paystubs) Vocabulary: income: Money you receive in exchange for your work/products. earning potential: Amount of money you have potential to make/earn. employer: Business/person that pays workers. employee: Worker for business/person to make bank. self-employment: Works for self. (“entrepreneur” - term for business owners) brick and mortar stores: Involves a physical location of a bank. Costly to start up. online stores: Involves a website/platform online. Reduced cost. service-based business: Involves offering services rather than goods. Low cost. contract work: Works for a business/person for a specified time and money. passive income: Income earned with minimal ongoing effort generally through investing. side hustle: Extra income earned outside of a primary income source. gross pay: Total earnings before any deductions (e.g., taxes, benefits). net pay: Total earnings after all deductions are subtracted from gross pay. income tax: A portion of income deducted that goes towards the provincial and federal gov. CPP (Canadian Pension Plan): Amount of money deducted from your pay cheque to be put into a pension on behalf of the Canadian gov. The current rate is 5.95%. EI (Employment Insurance): A deduction for benefits during unemployment or parental leave. group insurance: Employer-provided insurance, such as health or dental coverage. company pension: Contributions towards a retirement savings plan provided by the employer. union fee: Dues paid to a labor union for representation and benefits. minimum wage: The lowest hourly wage an employer is legally required to pay workers.  Be familiar with the pros and cons of various employment situations Employee pros: tends to be the standard, varying degrees of benefits cons: lack of flexibility, employer can be very sucky Self-Employment pros: flexibility, income not relied on hours (potential to earn more) cons: takes longer to have a stable income, potential to never earn income Contract pros: flexibility, freedom to choose your work time, you can earn more for lesser time cons: income only earned after the job is complete, tends to be seasonal meaning less availability/accessibility. Passive Income pros: flexibility, you are rarely directly involved, you can have time to do side hustle cons: requires initial investment which can cost a lot, takes longer to have a stable income, Side Hustle pros: basically just extra money, more money, flexibility cons: requires time and effort, hard to balance with two jobs, tiring Weekly (every week) pros: preferred by employees who are paid hourly, encouraging to work extra hours each week for more money cons: very high processing costs, both in terms of money and time Bi-Weekly (every two weeks) pros: higher frequency (?) good for cashflow and regular expenses like regular expenses cons: high processing costs for employers, both money and time, unexpected expenses may arise Bi-Monthly (twice a month) pros: easy to budget, lower cost to employers for processing as days are consistent cons: no set day of the week to receive pay, unexpected expenses may arise Know how to calculate wages, overtime wages, salary, commission, tips, bonuses + Know how to read a pay stub - Money Matters handout Know the difference between payment frequencies - weekly, bi-weekly, bi-monthly, monthly  Weekly (every week), Bi-Weekly (every two weeks), Bi-Monthly (twice a month),Monthly (once month) 8. SIN and Income Taxes What is a SIN? Why do you need a SIN? Why is it important to protect your SIN? -​ A social insurance number (SIN) is needed to work and/or access gov. program benefits in Canada. It’s important to protect your SIN as it is a key piece of personal information that can be used for identity theft. If someone gains access to your SIN, they could commit fraud, open accounts in your name, or misuse your identity for illegal activities. Know the purposes of income tax In Revenue Generation: to raise money for the government to fund public services like education, healthcare, and infrastructure. In Redistribution of Wealth: reducing economic inequality by having higher earners pay more, with the money used to fund programs that support lower-income people. In Economic Stabilization: slowing down spending can help control inflation and prevent the economy from overheating. In Encouragement of Certain Behaviours: governments use tax incentives to encourage positive tax behaviors as well as to discourage harmful actions. Know progressive vs recessive tax systems - know how to calculate basic calculations Progressive Tax -​ The more you earn, the higher the tax rate. -​ Uses tax brackets to determine rates. Regressive Tax -​ The lower your income, the higher the tax rate. 2 types: 1)​ Proportional Tax: Everyone pays the same percentage. 2)​ Flat Tax: Everyone pays the same amount. Know the benefits of filling in a tax return potential refunds:People often pay too much in taxes during the year, especially if they have deductions or credits. Filing taxes lets them get back the extra money they paid. access to benefits: Filing taxes is needed to qualify for government benefits, like child tax credits, housing help, or student loans. tax compliance: Filing taxes shows you follow tax laws. This is also important for things like getting loans or mortgages in the future.  retirement benefits: Tax returns verify income for retirement savings plans. This can affect eligibility for contributions to accounts like RRSPs in Canada. Tax credits and tax deductions definitions Tax Credit Reduces your tax bill directly, saving you money dollar for dollar. Can be refundable or non-refundable, like GST/HST credits or child care credits. Tax Deduction Reduces your taxable income, lowering the amount you pay in taxes. Common deductions include RRSP contributions and child care expenses. 9. Money Basics (Reading & Questions) Roles of the Bank of Canada -​ It has two roles: to influence interest rates, supply money and inflation control and to produce (printing) paper currency aka cash. Goal of a bank -​ To earn profit for its shareholders. (it operates a business) 10. Financial Institutions (PowerPoint & Notes) Should I have all my products with one financial institution? (pros and cons) ​ pros: convenience, easier to track, offers, discount, benefits, personalized advice from your institution ​ cons: limited opportunities, no access to new/better features, weaker in terms of data breaches Brick & mortar bank vs Virtual bank (pros and cons) Brick & Mortar bank pros: convenience, face to face service and support, access to ATMs, access to financial advisers, easily deposit cash ​ cons: charges higher fees and minimum balances, loans and other services cost may cost more, lower interest on savings account, more effort required Virtual bank pros: charges lower fees or no fees for products and services more interest on savings, less time consuming, more advanced access and options in terms of convenience cons: customer service is less personal, more ATM fees to withdraw on, limited availability of products and services, harder to access without proper internet  Overhead -​ Business costs that are related to day-to-day running of the business. Central banks -​ Doesn’t deal with the public, connected to the government of a country, responsible for the stability of a country’s economy. The "Big Six" (know the list) 1)​ Royal Bank of Canada (RBC) 2)​ Toronto-Dominion Bank (TD) 3)​ The Bank of Scotia Nova (Scotiabank) 4)​ Bank of Montreal (BMO) 5)​ The Canadian Imperial Bank of Commerce (CIBC) 6)​ National Bank of Canada Credit union -​ Controlled by its own members, accessible to only specific places, community oriented, same services as banks, quebec’s is called “caisses populaires”, 3 examples in Saskatchewan: Conexus, Affinity, Innovation Seven cooperative principles -​ Voluntary & Open Membership, Democratic Member Control, Member Economic Participation, Autonomy & Independence, Education, Training, Information, Cooperative among Cooperatives, Concern for Community Trust, Loan & Mortgage Companies (be able to recognize which is which) Trust Company: acts as a trustee, sole purpose is to deal with trusts Loan Company: sole purpose is to lend money, typically charges higher interest than Banks/Credit Unions Mortgage Company: sole purpose to issue its own mortgages FNBC & HCB (what makes them unique?) -​ FNBC is the First Nations Bank of Canada, HCB is the Habib Canadian Bank. FNBC focuses on serving Indigenous communities and Habib Canadian Bank is related to Islamic banking making them different from traditional banks. 11. Managing Your Finances (PowerPoint & Notes) Opening a bank account (ID requirements)  1)​ Provide two documents from a reliable source: -​ one document indicating your name and address and picture -​ another document indicating your name and date of birth. 2)​ Provide any document from a reliable source that indicates your name and date of birth. This way only works if your identity is confirmed by a person in a reliable position. Chequing Accounts (features, transactions, fees) -​ Features of a chequing account include: lower transaction fee, debit cards and ATMs, pre-authorized debits, Interac (e-transfer), cheque writing privileges. With a chequing account, you may earn low to no interest. -​ 2 types of chequing account transactions: a.​ Teller-assisted transaction made with the help of a teller. These include: withdrawals, transfers between accounts and bill payments b.​ Self-serve transaction made without the help of a teller. These include: withdrawals at an ATM, transfer between accounts and bill payments at an ATM by telephone or internet, writing cheques, debit card purchases, deposits at an ATM and pre-authorized debits. -​ Your monthly banking fees will largely depend on your account or package. There are two types of fees: Monthly set fees which are set fees paid each month and Pre-transaction fees which you pay for every transaction you make. Savings Accounts (features, interest rates, fees) -​ The features included in a savings account include: Minimum deposit where you can keep a certain amount of money to earn interest (growing your money), Interest rates to earn on the money in your savings account, and Service fees where you won’t usually have to pay monthly fees to keep your account but you still may pay charges for transactions. -​ To withdraw the money in your savings account, you have to consider if you can do it through a nearby ATM or manage your account during online banking. -​ Interest rates vary depending on your financial institution and the Bank of Canada. Compound interest (definition) -​ A compound interest is interest earned on your interest. Low-cost, no-cost accounts Low-cost accounts cost a maximum of $4 per month in banking fees. No-cost accounts have the same features and services as low-cost but with no monthly fee. To get these types of accounts (low-cost/no-cost), you are probably part of the following groups: youth, seniors, students (getting the Guaranteed Income Supplement or GIS) and Registered Disability Savings Plan (RDSP) beneficiaries. Online banking -​ You can access the accounts and make various transactions via the internet. This makes banking extremely convenient. Direct deposit and void cheques -​ Direct deposit is a fast, secure and convenient way to receive payments. This usually doesn’t have delays and is also reliable time wise. -​ Void cheques are used to verify the accuracy of your info. Be sure to write “VOID” across the front in ink and DON’T sign. -​ A void cheque includes: a 5 digit transit number, 3 digit institution number and an account number. 12. Borrowing Money; Getting and Managing Credit (Readings) Reasons people borrow money -​ Incomes are higher than they used to be. This can often cause people more debt. Major factors affecting the cost of borrowing money -​ The where, when and how you are borrowing money affects the cost of borrowing money as well as interest rates. 3 Cs - Character, Capital, Capacity (know them all) -​ The 3 Cs are used to check your credit worthiness which is simply just how you deal with borrowing money. 1)​ Character is about the qualities that show how dependable, responsible, and trustworthy you are. 2)​ Capital is the valuable things you own, such as money or property that you may sell or use to help repay a loan if needed. 3)​ Capacity is your ability to make payments on a loan — usually determined by your income Credit rating -​ A score or evaluation that shows how trustworthy you are when it comes to borrowing money. This is based on your history with how you dealt with finances. This helps your lender decide if you are worthy of a loan. 13. Credit Cards, Lines of Credit & Loans (PowerPoint & Notes) Parts of a credit card -​ Includes: hologram, card number, expiry date, card brand, magnetic strip and verification. Credit limit -​ The max amount that an individual can borrow at one time. Grace period -​ The 21 days before interest starts to occur. APR -​ Annual Percentage Rate: the annual cost of borrowing money. Minimum monthly payment -​ The least amount of money a borrower can pay and still be in good standing Line of credit (how it works, differences between LoC, Loan, Credit Card) -​ It provides ongoing access to funds to use and reuse as needed. This is ideal for unexpected increases if needed. Line of Credit -​ Set amount of money you can borrow when needed. -​ Lower interest rates compared to credit cards. -​ You only pay interest on the money you use. -​ Often used for larger or long-term expenses. Credit Card -​ A card that allows you to borrow money up to a limit for purchases. -​ Higher interest rates if you don’t pay the full balance on time. -​ Mainly used for everyday or short-term expenses. -​ May offer rewards like points or cashback. Similarities -​ Both allow you to borrow money up to a set limit. -​ Both charge interest if you don’t pay off the balance in full. -​ Both help build your credit score based on responsible use. -​ Both offer flexibility in how and when you pay back. Loan (how it works) -​ Lets you borrow one lump sum of money. This lets you borrow specific amounts of money, it has either a fixed or a variable interest rate, bi-weekly, monthly, etc. repayment, it also includes both long term and short term loans.  Pay day loan (how it works) -​ It is a short term loan with high fees (an expensive way to borrow money). It is also called high-cost loan and high-cost credit. 14. Calculating Simple & Compound Interest (Notes & Worksheets) Know how to calculate both types using formulas 15. Using Credit (PowerPoint & Notes) Advantages and disadvantages of credit ​ advantages: you are able to buy needed items at the moment, you don’t have to carry cash, creates a record of purchases, more convenient than writing cheques, consolidates bills into one payment, good for emergencies ​ disadvantages: interest (higher cost of items), may require additional fees, requires extra caution in terms of tracking expenses, could increase risk of impulse buying Your responsibilities as a person using credit -​ Borrow only what you can repay. -​ Read and understand the credit contract. -​ Pay debts promptly.  -​ Notify your creditor if you cannot meet payments. -​ Report lost or stolen credit cards immediately. -​ Protect your card number. -​ Never leave your credit cards unattended at work. -​ Protect your personal identification number (PIN). -​ Carry your cards with you or make sure they are in a secure location. -​ Sign the back of a new card as soon as you get it. -​ Always check your card when returned to you after a purchase. -​ Make a list of all your cards and their numbers. -​ Always check your monthly statement. The 20-10 guideline (be able to calculate safe debt load) -​ Basically multiply the monthly net income by 10% (0.1), add up all the monthly expenses and subtract the value of what you got from monthly net income x 10% and the value of your monthly expenses. Building a credit history (be able to explain the steps) In order to establish a steady credit history you can: -​ Establish a steady work record. -​ Pay all bills promptly -​ Open a chequing account and don’t bounce cheques (NSF). -​ Open a savings account and make regular deposits. -​ Apply for a local store credit card and make regular monthly payments. -​ Apply for a small loan using your savings account as collateral -​ Get a co-signer on a loan and pay back the loan as agreed. Names of the credit bureaus in Canada -​ Equifax and TransUnion 16. Saving and Investing (Reading & Questions) Why saving money is important  -​ Saving money is important as it helps us to be prepared if unexpected expenses come up, both good and bad. It also gives us peace of mind as we will worry less about financial matters. How to start saving money -​ To start saving money, we can set a savings goal to stay consistent,tracking our expenses will be a big help to track your journey and having a budget will help you organize your money better. Compassion and saving -​ Considering compassion when deciding on what to do with your money is important as how you spend can affect your relationships with others as well as how they perceive you. This can impact our ability to save money in times where we would have to lend money in support of others and other multiple reasons. (u got this just yap away.) 17. Investments Definition of investing (3 part) Investing is what you do with your savings to try and: -​ Protect the value of your savings -​ Increase value of your savings -​ Save enough, earn enough from investments to achieve your goals Risk tolerance, time horizon, desired return -​ Investing comes with a risk that you could lose your money. Your time horizon refers to how long you are planning to hold an investment and your desired return is how much you want your money to grow. Investment Products (be able to define all listed and give a pro/con of each) -​ Investment products include: Guaranteed Income Certificate (GICs): Also called term deposit, the money you put in is guaranteed and certificate grows by set percentage Bonds: Where you lend your money to an institution and they pay your interest while they are using it. These are usually lower risks but may also offer lower return. Stocks: Owning a stock means you own a very small piece of a company. How much of this varies depending on how well the company is doing. The value of stocks can change very quickly. While you can make a lot you could also lose a lot.  Funds: Usually includes lots of different stocks and bonds. This is a good way to keep out of risk aka diversifying. Common funds include: mutual funds and exchange traded funds (ETFs). Investment Plans & Accounts (be able to define and differentiate) Registered Disability Savings Plans (RDSPs): A good choice if you are saving for long-term financial security of a person who is eligible for Disability Tax Credits (DTC). Registered Education Savings Plans (RESPs): Offers government grants while you save and invest for a child’s post-secondary education. Registered Retirement Savings Plans (RRSPs): Gives you a tax break while you are saving. You pay tax money when you start to use it. Tax-Free Savings Accounts (TFSAs): allows you to save and invest a certain amount each year. You have to pay tax on the money that you earn from interest or the gains you make from investing. Getting Advice (know the different sources of advice) -​ You can get advice from: Friends and Family, Your community, Robo Advisors (online platforms) and Financial Advisors. Scams (be familiar with the list of scams and how to deal with them) ​ Your spidey senses should tingle if: -​ Investments that are too good to be true -​ Pressure to buy immediately -​ Investors offering hot tips or insider information -​ Emails, attachments, and messages from senders you don’t know -​ Unregistered advisors and businesses -​ Requests to make immediate payments 18. Budgeting SMART goals -​ Specific, Measurable, Achievable, Relevant, Timely. 4 Ws & H of Budgeting (be familiar with each point) What is a budget?  -​ A way for you to keep track of your money. It is a summer of your income, expenses and savings Who should budget? -​ Budgeting is important for everyone, at some point in their lives as it is useful financially. Why should I budget? -​ To be more financially organized. How to budget? -​ Label values, wants and needs, set your goals and consider your income. Budgeting Methods (be able to explain each) The Envelope System Zero Based Budget Valued-Based Budget Reverse Budget (pay yourself first budget) Cashflow Budget Tips for Reducing Expenses (be familiar with the list) -​ Take care of housing and utilities -​ Reduce grocery expenses -​ Take advantage of promotions -​ Use a shopping list -​ Meal prep -​ Review your cell phone plan and usage -​ Reduce entertainment costs -​ Use public library -​ Check at local community activities -​ Trim a little from many expenses Be able to create a simple budget for a given scenario -​ Uhm idk just review this entire section again