TS: Credit Banking

Budgeting, Credit and Banking What you Need to Know to Leave Home How NOT to go Into Debt PAT TIE BRAGA , COMMUNITY DEVELOPMENT OFFICER VENTURA COUN TY CREDIT UNION

Overview What we’re going to cover: ◦ ◦ ◦ ◦

Banking Basics What is Credit Budgeting PYF/Savings

Why This is Important ◦ ◦ ◦ ◦

Reach goals Create independence Prepare for college and your future Enjoy living responsibly within your means

Money skills are important!

Banking Basics What are the differences between an ATM, debit & a credit card?

Banking Basics Differences between an ATM, debit & a credit card •

ATM Card •

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Debit Card • •

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CASH. Limited account access through ATM only

ATM card but with VISA/Mastercard logo Attached to your checking account – It’s your money

Credit Card • • •

A line of credit – NOT your money Must be 18 years old SAFE and secure

When should you use a PIN and when should you sign for a purchase?

• •

PIN number – Cash back (Possible charges) Signature – No cash back (Usually no fee, more coverage)

Banking Basics Fees •What is “bouncing a check”?

•What fees are normally on checking accounts? Savings accounts?

Investment accounts?

•What is ChexSystems and what fees do they charge?

Banking Basics Bounced Checks/NSF’s/Overdrawn = No money = FEES • • • •

All of these mean the same thing – you don’t have funds in your account Fees range from $2 to $38 dollars FOR EACH Overdraft transfer and bouncing a check How to avoid? Set up automatic transfer

Banking Basics Chex Systems • • •

Reporting system for checking account abuse Good News – you can pay the reported balance and have your record updated quickly TRACK IT!

Checking Accounts •Hub of all financial transactions •Debit card •Check writing ability •Should be free, but some have monthly charges •Should be linked to savings account

Saving Accounts •Should be linked to checking account •No check writing ability •Should be free, but some have monthly charges •Interest earning accounts

Savings Accounts Why Save?

•To reach financial goals • Buy a car, rent an apartment, get Comic‐Con tickets or buy a vacuum.

•Pay Yourself First • From each paycheck/allowance: save first, spend second

•In Case of Emergency • Something you don’t plan for

Emergency Savings Establishing emergency savings allows you to pay bills when the unexpected occurs without relying on credit Savings should be at least 3‐6 months worth of essential living expenses Emergencies happen to everyone

Enveloping •Saving For Specific Goals Emergency, college, moving out, car, travel, large purchases….

•Make saving an automatic process • • •

Automatic transfers Bill payment to yourself Company 401(k) • Deduct out of paycheck before taxes

•

Payroll Deductions/Direct Deposit • Amount placed directly into Savings acct

Credit & Your Credit Report

Credit What is Credit?

What isn’t Credit?

Credit What is Credit?

• • • •

Credit Cards Auto Loans Mortgages Collection Accts

Credit is a trust that a bank of institution gives you where you promise to pay them back.

Credit can be secured or unsecured.

Credit is NOT: • • • •

Cell phones Utilities Medical Bills Rent

All these things can end up on your credit report if they go into collections.

Credit Score It’s helpful to have good credit report and score ◦ Lower interest rate ◦ Less/no down payment ◦ Long term goals

Can improve score over time ◦ ◦ ◦ ◦

Pay on time Pay down debt Avoid additional debt Dispute errors

Starting out and looking to reestablish credit ◦ ◦

Secured credit card Cosigner

Don’t use a credit repair company Free Credit Report – www.annualcreditreport.com

Credit (cont.)

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Don’t open new credit cards just to transfer balances – It sounds like a good idea, but opening new lines of credit hurts your score. (One every 6‐12 months)

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Don’t close old accounts – If you have a good record of payments on these accounts, it will have a positive impact on your score.

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Don’t open new store accounts just to save on a purchase – new accounts can lower your score

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Keep high lines of credit and low balances

•

YOU HAVE THE POWER – Different companies offer different things.

You don’t have to settle. Comparison shop.

Don’t be afraid to use credit!

Millennials and Generation Z Millennials (Generation Y) •Young adults, usually born in the mid‐1980’s to the early 2000’s. (15 to 35 years old) •Grew up when the economy was humming; only minor issues

Generation Z (iGen or Centennials) •Children to young adults, usually born before 1995 (0 to 22 years old) •Grew up with the economy was hitting harder times, large issues

•Rates at an all time low but no •Rates fell and credit availability was availability of credit high •Suffered because of the “Great •Lost money in the “Great Recession” Recession” (Or the watched their (Or they watched their parents lose parents lose money/job) money) •Largest financial gulf between the •Growing financial gulf between the rich and the poor in the US (It got worse) rich and the poor in the US

What You Might Be Feeling •Fearful of credit and they don’t trust banks •Life isn’t fair •They’ll never get ahead •They can’t afford what their parents have •Struggling to get a job/rebuild •Overwhelmed with the idea of student debt •Depressed, overwhelmed, afraid

Good news!

• More conversations with parents/mentors • Eliminates the shame, embarrassment or awkwardness we have in talking about money

• More choices • Brick and Mortar • Banks/Credit Unions • Online only

• Communities are reacting • Educational presentation • Online videos/Anonymous call centers • Local Legislation

• It’s getting better • Federal laws to protect consumers • Economy is picking up • Job growth is up

Budgeting Your Money

Budgeting Your Money

What it actually looks like:

Realistic Budget (now…)

40% in savings (emergency/goals) 10% on housing 25% on debt/bills 20‐25% on “other” ◦ ◦ ◦ ◦ ◦ ◦

Food Utilities Eating out Entertainment Clothes Household supplies

Making a Budget Budgeting is the foundation of financial success ◦ Helps you pay bills on time, save, and avoids/eliminate debt

It’s not set in stone – it’s fluid ◦ If you’re spending more than you earn, make changes

Goals and Your Budget Create a Budget to Meet Your Goals List current income and expenses ◦ Track everything ◦ Income – Job(s), government assistance, interest, gifts ◦ Expenses – Rent, Internet, tuition, car insurance, car payment, gas, food, phone bill, electricity, and entertainment

•Estimate future expenses •Prioritize goals •Set goals • Short‐term (3‐ 12 months) • Medium‐term (1 – 3 years) • Long‐term (3 years or more)

•Make adjustments as needed

PYF (Pay Yourself First) •Moving out •Going to college •Buying a car •Taking a trip/vacation Goals are just dreams until you plan for them.

You are the only person that is going to take care of your wants (and sometimes your needs!).

Questions?

Pattie Braga, Community Development Officer Ventura County Credit Union

Best way to reach me: ◦ Text me at 805‐797‐3985 ◦ PBraga@@VCCUonline.net