Financial Literacy For College and

Beyond!

This is your first question.

TUITION◦Biggest Cost.

OTHER◦room and board, textbooks, and other mysterious “fees.”

WHAT DOES COLLEGE COST?

PUBLIC 2-YEAR $3,131 per yr

PUBLIC 4-YEAR (in state) $8,655 per yr

PUBLIC 4-YEAR (out of state) $21,706 per yr

PRIVATE 4-YEAR $29,056 per yr

TUITION

This is money that is either given or lent to you to pay for college. It may be awarded based upon need, or academic or athletic ability. Most full time college students receive some form of financial aid.

FINANCIAL AID

PUBLISHED PRICE – THE PRICE AN INDIVIDUAL COLLEGE LISTS AS ITS ANNUAL TUITION

NET PRICE – THE PRICE A STUDENT ACTUALLY HAS TO PAY AFTER ALL LOANS, GRANTS, SCHOLARSHIPS AND TAX BENEFITS ARE DEDUCTED. IT SHOULD BE SIGNIFICANTLY LESS!

“PUBLISHED” PRICE V. “NET” PRICE

MOST COLLEGES HAVE A NET PRICE CALCULATOR ON THEIR WEBSITES

THIS IS VERY HELPFUL FOR DETERMINING WHETHER A PARTICULAR COLLEGE IS AFFORDABLE FOR YOU

DON’T AUTOMATICALLY RULE OUT EXPENSIVE COLLEGES – THEY MAY GIVE YOU ENOUGH AID TO MAKE THEM MORE AFFORDABLE THAN LESS EXPENSIVE SCHOOLS!

NET PRICE CALCULATOR

THE DIFFERENCE BETWEEN YOUR EXPECTED FAMILY CONTRIBUTION (EFC) AND THE TOTAL COST OF ATTENDING APARTICULAR COLLEGE

DEMONSTRATED NEED

ALSO CALLED EFC

A MEASURE OF YOUR FAMILIY’S FINANCIAL STRENGTH. GOVERNMENTS AND COLLEGES USE THIS TO CALCULATE YOUR FINANCIAL AID AWARD.

EXPECTED FAMILY CONTRIBUTION

MONEY YOU DO NOT HAVE TO PAY BACK!

ALSO CALLED GIFT AID

GIVEN BY FEDERAL AND STATE GOVERNMENTS, AS WELL AS COLLEGES.

MOST GRANTS ARE NEED BASED (BASED ON YOU OR YOUR FAMILY’S FINANCIAL CIRCUMSTANCES

GRANTS

ALSO CALED GIFT AID

GRANTED BY FEDERAL AND STATE GOVERNMENTS, COLLEGES, AND PRIVATE ORGANIZATIONS

BASED ON ACADEMIC OR ATHLETIC ABILITY, INTEREST IN CERTAIN SUBJECTS, VOLUNTEER WORK

SCHOLARSHIPS

SOME COMPANIES GIVE SCHOLARSHIPS TO CHILDREN OF EMPLOYEES

SOME SCHOLARSHIPS ARE BASED ON MEMBERSHIP INCERTAIN ETHNIC OR RELIGIOUS GROUPS

SCHOLARSHIPS (CONT.)

A PROGRAM THAT ALLOWS YOU TO WORK PART-TIME TO PAY FOR COLLEGE EXPENSES.

WORK-STUDY PROGRAMS ARE PAID FOR BY THE FEDERAL GOVERNMENT

WORK STUDY

THE COLLEGE YOU ATTEND MAY GIVE YOU A JOB TO EARN MONEY TO DEFRAY YOUR COLLEGE EXPENSES.

THIS USUALLY INVOLVES LIGHT ADMINISTRATIVE ASSISTANT WORK.

WORK STUDY (CONT.)

BORROWED MONEY FROM BANKS, FEDERAL OR STATE GOVERNMENTS, COLLEGES OR A PRIVATE LENDER

PRIMARILY NEED BASED

THIS MONEY DOES HAVE TO BE PAID BACK!

LOAN MONEY IS PAID BACK WITH AND EXTRA CHARGE CALLED INTEREST. IT IS VERY IMPORTANT TO KEEP YOUR EYE ON THIS!

LOANS

TEND TO OFFER THE LOWEST INTEREST

THE FEDERAL GOVERNMENT IS THE LARGEST PROVIDER OF STUDENT LOAN AID

THERE ARE BILLIONS OF DOLLARS AVAILABLE

FEDERAL GOVERNMENT LOANS

IF YOU RECEIVE NEED BASED FINANCIAL AID, YOU WILL BE EXPECTED TO REMAIN IN GOOD ACADEMIC STANDING TO RENEW YOUR AID ANNUALLY

ONE CAVEAT….

FREE APPLICATION FOR FEDRAL STUDENT AID

THIS IS A FREE APPLICATION FORM YOU SUBMIT TO APPLY FOR FEDERAL AID.

IT IS REQUIRED FOR ALL STUDENTS SEEKING FEDERAL GRANTS, LOANS AND WORK STUDY OPPORTUNITIES.

FAFSA

AVAILABLE AT MOST COLLEGES

ALSO AVAILABLE ON THE WEB

www.studentaid.ed.gov/PDFfafsa

1-800-4-FED-AID (433-3243)

WHERE DO I FIND A FAFSA?

THE EASIEST WAY TO SUBMIT AND TRACK YOUR APPLICATION ONLINE.

THE ONLINE PROCESS CHECKS YOUR DATA BEFORE IT IS PROCESSED SO THERE IS LESS CHANCE OF ERROR

FAFSA ON THE WEB

COMPLETE YOUR INCOME TAX RETURN

YOU DON’T HAVE TO FILE YOUR RETURN, BUT IT IS A GOOD IDEA TO DO SO SINCE A LOT OF THE INFORMATION IS THE SAME

YOU MAY BE ABLE TO USE THE IRS DATA RETRIEVAL TOOL TO SAME TIME

(THIS WILL TRANSFER DATA DIRECTLY FROM YOUR TAX RETURN TO YOUR FAFSA – BIG TIME SAVER!)

BEFORE FILING YOUR FAFSA

THE US DEPARTMENT OF EDUCATION WILL GIVE YOU A PIN IF YOU FILL OUT A SHORT APPLICATION

www.pin.ed.gov

Getting a PIN

January 1 is the first day you can file your FAFSA

TRY TO FILE YOUR FFSA AS CLOSE TO JANUARY 1 AS POSSIBLE

DO CHECK FOR YOUR COLLEGE’S PRIORITY FINANCIAL AID DEADLINES

Deadlines!

YOU WILL RECEIVE A SAR (STUDENT AID REPORT) CONTAINING THE DATA YOU SUBMITTED ON YOUR FAFSA. BE SURE TO CORRECT ANY ERRORS PROMPLY.

KEEP COPY FOR YOUR RECORDS!

AFTER YOU APPLY

ON FRONT PAGE OF THE SAR WILL BE YOUR EFC

EFC

MANY COLLEGES REQUIRE YOU TO SUBMIT A CSS/Financial Aid PROFILE FORM

OTHER FORMS

AFTER YOU HAVE SUBMITTED YOUR (1) FAFSA, (2) CSS Financial Aid PROFILLE AND (3) NCOLLEGE APPLICATION, YOU WILL RECEIVE A DOCUMENT CALLED AN “AWARD LETTER”

THIS WILL OUTLINE THE TYPES AND AMOUNTS OF FINANCIAL AID OFFERED.

IT WILL HAVE A DEADLINE – KEEP YOU EYE ON IT!

AWARD LETTER

THIS IS A FINANCIAL AID APPLICATION USED BY 400 + COLLEGES AND UNIVERSITIES TO AWARD THEIR FINANCIAL AID FUNDS.

CSS/FINANCIAL AID PROFILE

THERE ARE SOME BASIC FINANCIAL CONCEPTS THAT EVERYONE SHOULD KNOW

TONIGHT WE WILL FOCUS ON TEN BASIC MONEY ESSENTIALS

III. BASIC FINANCIAL LITERACY BEYOND COLLEGE

WHAT ARE YOUR HIGH PRIORITY GOALS?

Narrow your Objectives and focus on goals that matter.

Manage conflicting goals Your retirement versus your child’s educational expenses, for example.

RANK your goals.

Re-examine this list every 5 years – things change!

(1) SETTING PRIOROITES

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

What are Your Priorities?

A NECESSARY EVIL!

THREE STEPS; (1) HOW DO YOU SPEND NOW (2) EVALUATE YOUR SHORT AND LONGTERM GOALS (3) TRACK SPENDING ACCORDINGLY

USE SOFTWARE SUCH AS QUICKEN OR MICROSOFT MONEY

(2) MAKE A BUDGET

1. How I Spend Now _____________________________________________________

_______________________________________________________________________________________________________________________________________________________________

2. Short and Long Term Goals _____________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________________________________________

MY BUDGET

Tracking My Spending to My Goals◦ __________________________________________________

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

My Budget (Continued)

Bank accounts are SAFE. Deposits are federally insured for up to $250,000.

BUT, Banks pay lower rates on deposits than mutual funds companies and brokerage firms.

CDs will pay a higher interest rate, BUT you have to lock your money up for 3 months to 5 years.

(3) BANKING BASICS

Watch out for ATM fees for using an ATM from another banking institution!

Shop for the right bank!◦ How many checks do you write a month?◦ How many accounts do you want to set up?◦ Are you likely to maintain a minimum balance to ATM

fees, etc.?

Note the APY (annual percentage yield)

Consider online banking.

BANKING BASICS (Continued)

Buy cheap checks – shop around! Get overdraft protection Consider getting “cash back” with POS

transactions to avoid ATM fees. Banks do not usually charge for this service.

Link your accounts so that you can maintain a minimum balance AND earn maximum interest on your money. CD plus checking, for example.

Banking Basics (Continued)

Alternatives to Traditional Banking

1. Credit Unions Operate like banks but tend to give higher yields and

lower fees.

Deposits insured up to $250,000.

BUT credit unions may offer fewer serv ices than traditional banks

Banking Basics (Continued)

2. Money Market Mutual Funds Although banks offer money market deposit accounts

that offer higher rates than traditional checking and savings accounts, mutual fund companies offer accounts that offer an even higher yield

But, those deposits are not federally insured.

A minimum deposit of $500-$5,000 is usually required.

Banking Basics (Continued)

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

MY BANKING

STOCKS

BONDS

MUTUAL FUNDS

(4) INVESTING BASICS

Historically they outperform all other investment products – close to 10% over the long term

Over the short term, stocks can be hazardous

Risky investments pay more

Stock prices are determined by company earnings

STOCKS

Essentially a bond is a fancy IOU

Not as profitable than stocks, but safer. In 2008 stocks fell 37%. In 2009, the worst year on record for bonds, bonds fell only 9%.

If you are looking to invest money you may need in a year or two, bonds may be a bettr option.

BONDS

What IS a Bond?◦ Essentially it represents a loan from you to a

corporation of a government entity, that is paid back to you with interest over a fixed period

◦ The interest rate on a bond will be tied to the riskiness of it. A Treasury Bond is the safest, and therefore lowest interest bearing, type of bond.

◦ Bond rates are also tied to interest rates. If interest rates rise, bond prices fall. If interest rates fal, bond prices rise.

Bonds (Continued)

You pool your money with other investors to start with a larger “pot”

A professional investment manager invests that sum over a variety of investment types to minimize the risk of a huge loss.

The mutual fund is essentially a corporation whose sole business is to invest your money.

MUTUAL FUNDS

Stocks, Bonds and Mutual Funds are all different, and each has its advantages and disadvantages.

Let’s review each investment type in finer detail - HANDOUTS

Let’s Review

Are you ready to stay put? If not, do NOT BUY. High costs of the transaction may make home ownership too costly if you plan to move son.

Shore up your credit. Get copies of your credit report and fix any fixable problems.

Your home should not cost more than 2.5 times your annual salary.

(5) BUYING A HOUSE

If you cannot put down 20%, you may qualify for PMI (this will add .5% to the total loan)

Buy in a district with good schools!

Consider using a buyer’s agent

Mortgage: Points versus Rate

Get Pre-Approved

Buying a House (Continued)

Choose your lender carefully – this is a 30+ year relationship! National Banks such as Bank of America versus local community banks and credit unions

Choose your real estate agent carefully as well!

Location Location Location!!!!

Buying a Home (Continued)

Condos and Co-Ops◦ Condos are a collection of individuals who own a

unit in a collection of units. Owners pay a monthly fee to deal with things like common areas, parking lots, pools, etc. The major risk is that the Board will vote to impose an assessment to cover a major facility expense.

◦ Co-Ops are rarer. This is a complex run by a corporation where each owner is a shareholder. Each owner is a partner in the complex, not an owner of an individual unit.

Buying a Home (Continued)

Good debt:◦ Home Loans - Low interest rates and you can

deduct first $1,000,000 of the loan◦ Education Loans – your kids will have an

opportunity to make enough money to repay them. Your retirement account should be off limits. Also, retirement assets are not counted in calculating family contribution.

◦

(6) PERSONAL DEBT

Bad Debt:

◦ Credit Card Loans (especially those with high interest rates)

◦ Avoid falling into the minimum payment trap!

Personal Debt (Continued)

MANAGE Your Own Debt!

Check your FICO score

Experian, Equifax, TransUnion

www.annualcreditreport.com www.MyFICO.com

Personal Debt (Continued)

Save as much as you can as early as you can

Set realistic goals A 401(k) is easiest and best retirement tool An IRA has tax advantages also

◦ Traditional – you pay taxes only when you withdraw and that may be tax deductible

◦ Roth IRA – tax free when you withdraw

(7) RETIREMENT PLANNING

Choose carefully between stocks and bonds

Working part-time in retirement is becoming common

Rule of thumb: You will need 70% of what you earn annually upon retirement

Remember: your health care expenses may go up

Retirement Planning

HEALTH INSURANCE

LIFE INSURANCE

HOME INSURANCE

CAR INSURANCE

(8) INSURANCE

Insurance costs a lot but not having it is no longer an option

If your employer offers it, take it!

Lowest premium is not always the cheapest plan

Good coverage can have loopholes

HEALTH INSURANCE

Indemnity Plans and Managed Care

Indemnity Plans – “fee-for-service”◦ Freedom and Flexibility (generally covers illness

or accidents only – no preventive care)

Health Insurance (Continued)

Managed Care (HMOs)

Flips Indemnity insurance on its head

Smaller deductibles and fixed lower co-pays

Less flexibility – you must choose doctors approved by the plan and can only receive covered services

Health Insurance

Avoid Whole Life Policies! You can invest your money in safer ways.

Stick with Term Life Insurance

Make sure your term matches the number of years your dependents depend on you, or the number of years until you retire.

Buy when you are HEALTHY!

LIFE INSURANCE

This will be required by any lender as a condition to your mortgage

It will cover you against catastrophic events such as fire or theft

When you make a claim, you will have to pay a deductible and you premium will likely increase

HOME INSURANCE

Required by law in Massachusetts

CAR INSURANCE

Assess the value of your old car New or Used? Leasing or Buying? Set a target price and stick to it! As a rule

of thumb you should spend no more than 10-15% of your total monthly budget on car expenses

Arrange for your financing before you car shop

(9) BUYING A CAR

New cars = higher insurance

Federal crash test results can be found at www.safercar.gov

Negotiate the purchase wisely – you are dealing with savvy sales personnel

Buying a Car (Continued)

What is your tax bracket (marginal tax rate)?

FICA

Who Pays estimated taxes?

Avoid Extra IRS charges by paying on time!

(10) TAXES

W-2 – reports how much $ you made from an employer and how much tax you paid

1099-G – unemployment comp or state ta refunds

1099-R – retirement plan income

1099- MISC – income if you are an independent contractor, collected rent or received royalties

Taxes (Continued)

The more exemptions and deductions you take, the lower your taxable income

You may take a personal exemption for yourself, your spouse and your dependents

Everyone is given a standard deduction

Tax credits are better than deductions and exemptions

Taxes (Continued)

This work is licensed under a Creative Commons 3.0 License http://creativecommons.org/licenses/by/3.0

This workforce solution is 100% funded by a grant awarded by the U.S. Department of Labor, Employment and Training Administration, TAACCCT grant agreement # TC-22505-11-60-A-25.The solution was created by the grantee and does not necessarily reflect the official position of the U.S. Department of Labor. The Department of Labor makes no guarantees, warranties, or assurances of any kind, express or implied, with respect to such information, including any information on linked sites and including, but not limited to, accuracy of the information or its completeness, timeliness, usefulness, adequacy, continued availability, or ownership. Massachusetts Community Colleges are equal opportunity employers. Adaptive equipment available upon request for persons with disabilities.