4
To the Student
Objectives are correlated to
the main chapter headings
to define your goals for
learning the content.
Dolla rs and $ense highlights tips for
being financially savvy and how to
relate these topics to your everyday life.
FYI
Web
Connect
FYIs provide financial
facts to enhance what
you have learned.
Terms
Terms are highlighted in the chapter
to help build your business vocabulary.
Web Connect leads you
to the Internet to develop
your research skills.
Your Financial IQ opens each
chapter to evaluate what you
already know about the financial
topic to be presented.
There is much to learn about becoming money smart. Financial capability
starts here.
7
Terms
Financial plan
Financial goals
Needs
Wants
Values
Wealth
Net worth
Assets
Liabilities
Investing
Financial independence
Growth
Average rate of return
Interest
Compound interest
Principal
Simple interest
Rule of 72
1
Objectives
When you complete Chapter 1, you will be able to:
● Explain the purpose of a financial plan.
● Define wealth and calculate net worth.
● Define investing and calculate average rate of return and
compound interest.
Planning Your Financial
Future: It Begins Here
8 Becoming Money $mart
Your
Financial IQ
Before you read this chapter, answer the following questions to see how much you
already know about fi nancial planning and investing.
1. What does it mean to save money? What does it mean to invest money?
How are these two things similar, yet different?
2. What does it mean to be fi nancially independent?
3. What does fi nancial planning mean?
4. Are you saving money now? If so, how long have you had a savings account?
What rate of interest are you earning? How often is the interest being compounded?
5. Do you keep track of how much you spend each week and how much you
save? How would this impact your fi nancial goals?
6. What does fi nancial literacy mean to you? Why will this be important in
your goals and plans for the future?
7. What is the best way to build wealth? When should you start?
8. How important is having your own spending money?
9. By tracking how you spend your money, do you think you could spend
your money more wisely?
10. What items could you do without now in order to begin saving more
money for your future?
Before you
1. Visit the websites of at least three different
banks in your area to research their
services and fees. Check to see that each
bank is insured by the FDIC. Complete the
following chart with interest rates and fees
for each type of account.
Bank Name
Checking
Interest/
Fees
Savings
Interest/
Fees
CDs
Interest/
Fees
Money
Market
Interest/
Fees
Online
Banking?
FDIC
Ins.?
Web
Connect
Bank Accounts
Dollars
and $ense
Using Direct Deposit
As you learned earlier, direct
deposit is a transfer of money to your
checking or savings account. Many
employers require you to use direct
deposit. Some government payments,
such as for Social Security, are also
made by direct deposit.
Why Use Direct Deposit?
❑ By using direct deposit,
employers save time and money
by not having to issue individual
paper checks.
❑ Direct deposit speeds up the
process of getting your money
into your account. The money
will be credited to your account
when your employer issues
the deposit, thus allowing you
quicker access to your cash.
❑ If you do not have the paper
check in your hands, you avoid
the risk of losing it or having it
stolen before you get to the bank.
❑ You save time by not having to go
to the bank to deposit your money.
❑ Direct deposit also helps the
environment. No checks are
written; so paper is saved. You do
not have to drive to the bank to
deposit your check; so you save
the cost of gas.
How Do You Set Up Direct Deposit?
The process for setting up direct
deposit is easy. Check with your
employer who will provide you a
form to complete with your banking
information. You will attach a voided
check that will show your account
number and the bank’s routing
number. It’s that easy!
If you pay your
credit card bills
on time, banks
will sometimes
automatically raise
your available credit
limit. If you do not
want them to do this,
you can call the bank
and request that your
limit stay the same.
Your
Financial IQ
Objectives
Dollarsand$ens
e