, y e n o Your M re! u t u F r You
, y e n o Your M re! u t u F r You
WANT TO BUILD YOUR FINANCIAL FUTURE? Learn about:
- Financial Planning - Budgeting, Saving, Basic Banking - Borrowing & Credit - Protecting our Assets
Personal & Family Financial Management !
An Introduction to Personal and Family Financial Management in Canada www.IWCHamilton.ca
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Contents 1. Basic Banking..............................................................2
Your Money, Your Future! Financial Literacy program is funded by:
2. Budgeting...................................................................4 3. Saving........................................................................7 4. Borrowing...................................................................9 5. Protecting Yourself.....................................................13 6. Notes........................................................................15
www.IWCHamilton.ca HAMILTON CENTRAL 8 Main St E Suite 101 P: 905-529-5209
DOWNTOWN NORTH 182 Rebecca St P: 905-525-9676
EAST MOUNTAIN 1119 Fennell Ave E #236 P: 905-387-1100
HAMILTON EAST 2255 Barton St E P: 905-573-7663
www.IWCHamilton.ca
In Canada you can go to the bank to: • deposit money (put money in) • withdraw money (take money out) • cash a cheque • pay your bills To do this, you need to open a personal bank account. A personal bank account allows you to: • put money in a safe place • withdraw (take) your money out and deposit (put-in) money in the bank • pay your bills • save your money
• Financial Consumer Agency of Canada website: www.fcac-acfc.gc.ca • GetSmarterAboutMoney.ca • Settlement.org • Credit Counselling Canada: www.creditcounsellingcanada.ca
Notes
More Resources
01 Basic Banking
For more information and resources you can visit:
06
How to open up a basic personal account: • Everyone has the right to open a personal account. • You must go to the bank in person. • You must show the bank two pieces of original identification, for example, your Social Insurance Number (SIN) Card, your provincial or territorial Health Card, Canadian Driver’s License or Permanent Resident Card. • You don’t have to have a job to open a bank account.
2 · Basic Banking
Notes· 15
Protecting Yourself Types of Scams
Loans Scams: You may be promised a low-interest loan without a credit check. Remember to borrow only from a place you trust. A bank or financial institution will always check your credit rating and ask about your income. Jobs Scams: Be careful about job offers that require you to pay a fee or buy something before you start or ask you to transfer payments through your bank to someone else’s account. This money might connected to criminal activity. Fake Cheques: If you receive a cheque and you are asked to return part of the money, this cheque is fake. If you are getting paid for something you sold, only accept a cheque for the right amount. Be careful with cheques even certified cheques or money orders can be forged or fake. Whenever possible ask for cash.
If you suspect that you have been a victim to a scam or fraud, contact the police. 14 · Protecting Yourself
Savings account: This is an account to put money in to earn interest. It is limited for use for day-to-day banking. The purpose of this account is to help you save money for the future or an emergency. Interest: A fee you pay to borrow money, OR what you earn on a savings account or investment. Often shows as an annual percentage rate, like 5%. Interest rates are different for different types of loans and credit. Interest rates will also depend on your level of risk and the primeinterest rate (the rate set by the Bank of Canada). • There are many different types of accounts. Be sure that you open the right one for you. • Ask many questions at the bank. • Be sure to know what fees you will be charged. • Make sure you understand all the terms and conditions before you open any bank account. • Check your bank statement every month.
Remember:
Prizes: You get a phone call, e-mail or letter telling you that you have won something, a trip or a cash prize. They will ask you to pay a fee to receive your prize. Never pay money for a prize and never give out your personal information to someone you don’t know.
Chequing account: This account allows you to deposit, withdraw and pay bills. It is the account you can use for regular financial transactions, your day-to-day banking. You can take money out any time. It earns very little or no interest. This account is used for your daily financial needs.
Bank Accounts
Business Scams: You may be asked to invest in a business. Ask for everything to be in writing and check with a lawyer. Make sure that you know what this business is and who you are giving money to.
There are two main categories of bank accounts:
Basic Banking · 3
Basic Banking Low-Cost Accounts Low-Cost Accounts are accounts that cost a maximum of $4 per month. Account features are: • A debit-card • Free transactions (up to a limit). Deposit, withdraw, make purchases, write cheques & pay bills • A monthly balance statement Eight banks offer Low-Cost Accounts, but each is different. Check to see which one is right for you. To learn more about Banking go to the Financial Consumer Agency of Canada.
02
Budgeting
A budget can help you: • if you are having trouble paying your bills • if you owe a lot of money • if you are having trouble saving money Remember: The goal is to spend less than what you make. If you have a plan you will spend less and save more. 4 · Basic Banking · Budgeting
There are many ways to keep your money safe: • Never give out personal information over the phone or internet. • Keep your Social Insurance Number and other personal documents in a safe place. Only give it out to those you know and trust, like in person at your bank or at a government office. • Memorize your Personal Identification Number, don’t write it down or share it with anyone, even family. • Check your monthly bank and credit card statement to make sure they are correct. Don’t be Scammed! A Scam is a plan by one person to trick or cheat another person and take their money. Scammers promise something that is too good to be true.
Scams
A budget is a money management tool that helps you to save money and take control of your spending. For a budget to work you must write down all your expenses (money you must spend) and all your income (money you will earn).
Protecting Yourself 05
Types of Scams Investment Scams: They will promise that you will make a lot of money if you invest with them. If what they promise sounds too good to be true, it probably is. Make sure you only invest with trustworthy investors. Check their credentials, get references and ask for documentation. Good investors are licensed and will tell you about the risks. Protecting Yourself · 13
Remember:
Borrowing • Before you get a credit card ask questions. • Be sure you know what the interest rate is and how it will be charged. • Ask if you have to pay an annual fee and what you get for paying it. • If you get a low-introductory interest rate, ask how long it will last. These rates often are only for a limited period. • Be sure to know if your credit card company will increase your interest rate if you miss a payment. • Use it wisely and you will benefit!
If you have trouble paying back your loans and bills there are places that can help. Contact your local notfor-profit Credit Counselling Agency. For more information about credit cards go to the Financial Consumer Agency of Canada. Tips to avoid bad debt:
TIPS
• Make a budget. • Avoid impulse purchases (buying something you don’t need without considering the consequences). • Pay down your highest interest rate debt first. • Avoid minimum payments on credit cards. This is a very quick way to build up debt because of the interest you pay. • Be careful of ‘buy now’ pay later. You can end up paying a lot more in fees and interest. • Get some professional advice to help you manage your money better. 12 · Borrowing
Budgeting How can you make a budget? • Start by setting goals - ask yourself, what do I want to do with my money? • Write it down. • Know how much income you have (how much money you make or get every month). • Keep track of your money (know exactly how much you spend and on what). • Use a template, like the one provided on the next page
Tips to stick to your budget • Set goals - make a list of everything you want to achieve. • Prioritize your goals – focus on the 3 most important goals. • Make sure your goals are realistic. • Set some dates. • Write it all down. • Check your progress every six months • Identify why you are not sticking to your budget. Often, if you know the cause you can solve the problem. • Live on Cash! Try not use your debit card or credit card if you are having difficulty budgeting. You have a better idea of how much you spend when you use cash. • Get your family involved! If everyone in the family is involved with the planning of the budget, you as family will have better success when budgeting. Budgeting · 5
Borrowing
Sample Budget Worksheet
What is good about credit cards?
C What you spend
• They are easy to use for buying things – you can buy on-line or at any store. • A credit card can help you build good credit history. This is important because your credit history affects your ability to be approved for loans.
Debt: Money you have borrowed. You must pay this money with interest by a set date. What is bad about credit cards?
6 · Budgeting
Miscellaneous
Entertainment
Savings
Emergency Money
Clothing
Medicine
Food
Car & insurance
Gas/water/electricity
Insurance
Rent or mortgage
Expenses
Miscellaneous
Government Assistance
Child tax benefit
Salary
A Last month’s spending
• If you use the credit card to buy things and you don’t have money to pay every month, you can get into debt. Bad debt is when you owe more than what you earn or have. • Credit card interest is higher than other loans. If you don’t pay your bill in full and make only minimum payments (a portion of the total amount that you owe) every month you will be charged a lot of interest. You will pay more money than the actual cost of your purchase.
The Bad
Source of income
B Budget: what you want to spend
• Many credit card companies offer reward programs.
The Good
Amount of income
D Difference between B&C
How can you get a credit card? You have to apply to get a credit card from the bank or a major store. They will look at your credit rating and your income before they approve you and decide how much ‘credit’ to give to you.
• If you don’t pay your minimum payment on time, it will affect your credit rating. Borrowing · 11
Borrowing
What is a credit card? A credit card allows you to buy now and pay later, up to a limit. This means buying on credit. This is money that you must pay back every month. If you don’t pay back the full amount every month you will pay interest on that amount anywhere from 9%-23%. Interest will depend on the type of card that you have. If you pay the full amount you don’t have to pay interest.
How to use a credit card • Be sure that you can always pay your bill in full every month-buy only what you can afford. • Use your credit card to build a good credit rating and for emergencies and NOT to buy what you cannot afford right now. • If you don’t pay in full, the interest will build and you will owe more and more money every month. 10 · Borrowing
Saving
03
Why do you need to save? For an emergency? To buy something like a car or a home? Perhaps for a trip - a vacation or to visit your family. You may want to save for your education, or for your children’s education, or maybe you need to pay off your student loans. Or, thinking to the future, maybe to save for retirement or to renovate your home. Set goals to start saving. It is much easier to save money when you know why you are saving. You will know what you want, and when you accomplish your goals you will feel good. Set short-term goals: things you want to save for in the next year. Set mid-term goals: things you want to save for in the next 3-5 years. Set long-term goals: things you want save for in the next 5 years or more.
Goals
Credit Cards
Before granting you a loan, a lender will check your credit rating. Your credit rating will include your current debt (how much money you owe), your past history of paying bills and paying back any money you borrowed. In addition to this, the lender will look at your income and assets (what you own). Lenders use this information to determine the level of risk for lending their money. They want to be sure that you will pay them back the money they lend you.
Be sure that you have a budget. Learn about your options for saving. Ask for advice – go to your bank and speak to them about your goals. If you don’t understand, ask someone else or go to a different bank.
Remember • Keep all information you collect. • Write down what the financial advisor tells you. • Keep all paper that you are given or sign. Saving · 7
Saving A few saving and investment options are: • A basic savings account • A TFSA (Tax-Free Savings Account) • An RRSP (Registered Retirement Savings Plan) • An RESP (Registered Education Savings Plan) • Savings Bonds • GICs (Guaranteed Investment Certificates) • Mutual Funds • Stocks. Remember: • It is important to pay off high-interest loans before you start saving. • Even if you save a few dollars a day, it can add up over time. Every penny counts! Before you make a financial decision ask for advice from a professional.
Get Advice!
To learn more about these options go to your bank and consult with a financial advisor, visit GetSmarterAboutMoney.ca or Settlement.org 8 · Saving
04
Why do we borrow money? People often borrow money to buy a car or a house (a house loan is called a mortgage). It’s also common to borrow money for school (student loans) or to start a business. What to think about before taking out a loan • Shop around: Look at different lenders and see what they are offering. • Make sure you trust who you borrow from. • Borrow money only from a certified financial institution. • A contract is a legal document, be sure you understand everything in the contract before you sign it. • Ask for advice, take it to someone you trust and be sure you know how much you have to pay back every month. Understand the Interest! • When you borrow money, you will be charged interest (a percentage of your loan amount). Ask how the interest will be calculated and if it will change during your contract. • You will be responsible! Be sure that you can live with what is in the contract. Once you sign it is difficult to get out.
Interest
• Get advice from more than one person. • You can speak to someone at your bank. • Ask many questions and be sure to understand everything before you make any decisions. • If your advisor does not ask you many questions, get a second opinion. A good advisor will ask you about your financial situation, your goals, how much risk you are willing to take and will explain everything and answer all your questions. • If you are not comfortable with the advice you are getting, you are free to go to someone else.
Borrowing
Remember: If you sign a contract with someone else you are both responsible to pay back the loan. Borrowing · 9