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Message PERSONALFINANCE 101

Financial literacy is a combination of awareness, knowledge, skill, attitude andbehavior necessary to make sound financial decisions and ultimately achieveindividual financial wellbeingIMPORTANCE OF FINANCIAL LITERACY FOR TEENSInformed Choices: Helps make educated decisions about spending / saving.Budgeting Skills: Teaches effective money management.Debt Awareness: Prevents falling into debt traps.Savings Habits: Encourages goal-setting and building a safety net.Investment Basics: Introduces wealth-building strategies.Financial Independence: Promotes responsible management of finances.Critical Thinking: Enhances problem-solving skills.Long-Term Planning: Prepares for future financial security.How money skills and academic excellence linked– CNNWHAT IS FINANCIAL LITERACY

Earning income is the first step on your path to handling money sensibly and creatinga successful future. Every one of us requires money to survive. As well, there arenumerous ways for us to make money. Here are a few of the ways we can makemoney that are open to us.ACTIVE INCOME VS PASSIVE INCOMEActive Income: Earnings that require ongoing effort and involvement, such assalaries from jobs, freelance payments, or income from self-employment. Thistype of income stops when you stop working.Passive Income: Money earned with little to no effort after initial work, likedividends from investments, rental income, royalties, or profits from businessesthat run independently. This income continues even when you’re not activelyworkingWHAT IS EARN PRINCIPLERead : Five Benefits Of Having Multiple Sources Of Income IF SAVING MONEY IS WRONG, I DON'T WANT TO BE RIGHTWILLIAM SHATNER

The Time Value of Money (TVM) is a financial principle that explains how moneyavailable today is worth more than the same amount in the future. This happensbecause money can grow over time when invested or saved, earning interest orgenerating returns. It’s an essential concept in finance that helps people makeinformed decisions about spending, saving, and investing.Imagine you have $100 today. If you invest it at a 10% interest rate, in one year, it willgrow to $110. On the other hand, if someone offers you $100 a year from now, it’sless valuable because you’ve missed the opportunity to earn that extra $10 ininterest. This is why people prefer to receive money sooner rather than later.TVM also shows the power of compounding, where interest earned also earnsinterest, allowing money to grow faster over time. By understanding this concept,teens can see the importance of starting to save and invest early. Even smallamounts of money saved today can grow significantly in the future, making it apowerful tool for building wealth. WHAT IS TIME VALUE OF MONEYREAD : 10 MUST READ POINTS ABOUT TIME VALUE OF MONEY

The Power of Compounding is a way money grows by earning interest or returns onboth the original amount and the interest already earned. It’s like a snowball rollingdown a hill—it starts small but grows bigger and faster as it keeps rolling. Thisconcept is a powerful tool to build wealth over time.Imagine you invest $100 and earn 10% interest each year. After the first year, youhave $110. In the second year, instead of earning 10% only on the original $100, youearn it on $110, giving you $121. Each year, your money grows faster because you’reearning interest on the interest. Over time, this small increase becomes huge. Forexample, with consistent investing and compounding, $100 could grow to thousandsof dollars over several decades.The earlier you start, the more you benefit from compounding. Even small savingscan grow significantly if given enough time. This teaches the importance of startingearly and staying consistent with saving and investing. Compounding rewardspatience, making it an essential lesson for teens to build financial success in thefuture WHAT IS POWER OF COMPOUNDINGREAD : 10 MUST READ POINTS ON POWER OF COMPOUNDING

Choosing the right insurance is essential to protect yourself and your family fromunexpected financial losses. Insurance works like a safety net—you pay a smallamount regularly (called a premium) to a company, and in return, they help cover bigcosts when something goes wrong, like a medical emergency, car accident, or lossof property.When selecting insurance, start by identifying what you need to protect. Forexample, health insurance is important because medical bills can be very expensive.If you drive, car insurance is necessary to cover damage or accidents. Look forpolicies that offer good coverage at an affordable price. It’s not always about pickingthe cheapest option but the one that covers what’s most important.Before buying, compare different plans, understand the terms, and check what’sincluded or excluded. For example, some health insurance plans may not covercertain treatments. Also, read reviews about the insurance company’s reliability. Bychoosing the right insurance, you’re preparing for unexpected events and ensuringpeace of mind, which is an important life skill for managing future responsibilities.ESSENTIALS OF RIGHT INSURANCE10 MUST READ POINTS ON ESSENTIALS OF RIGHT INSURANCE

An emergency fund is a special savings account set aside to help you duringunexpected situations. Life can be unpredictable—things like sudden medicalexpenses, a broken phone, or an unexpected car repair can happen. Having anemergency fund ensures you’re prepared without needing to borrow money or askothers for help.Building an emergency fund is simple. Start by saving a small amount regularly, likesetting aside part of your allowance or earnings. Over time, this money grows into acushion you can rely on in tough times. Experts suggest saving enough to cover 3-6months of basic expenses, but even a small fund can make a big difference. The goalis to have quick access to money when you really need it.An emergency fund is about peace of mind. It reduces stress because you knowyou’re prepared for life’s surprises. It also teaches financial discipline andresponsibility. Teens who start building an emergency fund early are developing ahabit that will serve them well throughout life, making them more independent andfinancially secure in the future.WHAT IS AN EMERGENCY FUNDSMUST READ POINTSON IMPORTANCE OF EMERGENCY FUNDS

Student loans are a way to borrow money to pay for college or education when youdon’t have enough savings. While they can help you invest in your future, it’simportant to understand how they work and make smart choices to avoid financialstress later.When you take out a student loan, you’re borrowing money from the government or aprivate lender. You’ll need to repay it, usually after finishing school, with addedinterest. Interest is the extra cost for borrowing the money, so the longer you take torepay, the more you’ll pay overall. Before borrowing, calculate how much you reallyneed and consider tuition, books, and living expenses to avoid borrowing more thannecessary.Choosing the right loan is crucial. Federal loans often have lower interest rates andbetter repayment options compared to private loans. Always read the terms carefullyand understand how repayment works. Finally, have a plan to repay your loans. Forexample, choosing a career with a steady income can help you manage payments.Learning about student loans early can help teens borrow responsibly and build astrong financial future.ESSENTIALS OF STUDENT LOANS10 MUST READ POINTS ON ESSENTIALS OF STUDENT LOANS

A credit score is like a report card for how well you handle money. It’s a number thatshows banks and lenders how reliable you are at paying back money you borrow.Having a good credit score is important because it helps you get loans, rentapartments, and even get better deals on things like phone plans or car insurance.Building a good credit score starts with small, responsible actions. For example, ifyou have a credit card, use it wisely by spending only what you can afford to payback. Always pay your bills on time because late payments can hurt your score. Yourcredit score grows as you show that you can manage money over time without takingon too much debt.A strong credit score opens doors to opportunities later in life. It can help you qualifyfor lower interest rates on loans or credit cards, saving you money. It also shows thatyou’re financially responsible, which is useful when applying for jobs or renting ahome. By starting early and being mindful of your spending, you can build a creditscore that helps you succeed financially.WHAT IS CREDIT SCORE10 MUST POINTS READ ON IMPORTANCE OF A CREDIT SCORE

Identity Theft is when someone steals another person’s personal information (suchas their name, Social Security number, or bank details) without permission and usesit for fraudulent or malicious purposes, such as committing fraud, stealing money,or opening accounts in the victim's name.COMMON IDENTITY THEFT TACTICSPhishing: Thieves impersonate financial institutions via phone or email to stealpersonal info.Dumpster Diving: Thieves sift through trash or mail for financial documents withpersonal details.Skimming: Thieves use devices (or steal receipts) to copy credit/debit card info.Telemarketing Scams: Fraudsters claim you've won a prize or offer deals overthe phone to steal personal info or credit card numbers.Social Networking: Scammers mine personal details from social media toappear trustworthy.Spyware: Malicious software steals personal information from your computerWHAT IS IDENTITY THEFTWHAT IS IDENTITY THEFT

A debt spiral happens when someone keeps borrowing money to pay off existingdebts, leading to more debt over time. It’s like a snowball rolling downhill—each newloan adds more weight and makes it harder to stop. This can happen if you’re unableto pay back what you owe and rely on borrowing to cover bills or interest.The impact of a debt spiral can be overwhelming. As debts pile up, the interest ratesincrease, meaning you owe more money than you borrowed. This leaves less moneyfor daily needs and creates stress. For example, using a credit card to pay foranother card’s bill or taking out loans to pay other loans can trap you in a cycle that’shard to escape.For teens, it’s important to understand that debt isn’t always bad—it can help withthings like education or starting a business if managed wisely. However, avoidingunnecessary borrowing and living within your means are key. Learning to budget,save, and only borrow when necessary will help you avoid the stress of a debt spiraland build a strong financial future.WHAT IS DEBT SPIRAL10 MUST READ POINTS ON LEARNING ABOUT DEBT SPIRAL

The Rat Race is a situation where people work tirelessly, often in repetitive orunfulfilling jobs, just to keep up with their expenses and lifestyle. It’s like running on atreadmill—you’re constantly moving but not making real progress toward financialfreedom. Many people fall into this cycle because they spend all their income andrely on debt to maintain their lifestyle, leaving little or no room for savings orinvestments.For teens, the rat race can have a significant impact on their future. Growing upwithout understanding financial management can lead to poor habits, likeoverspending or depending too much on credit. This traps individuals in a cycle ofworking just to cover bills, without achieving bigger goals like owning a home,traveling, or pursuing passions. The stress and exhaustion of always "chasing money"can also affect mental and physical health.To avoid the rat race, teens should focus on building good financial habits early. Thisincludes budgeting, saving, investing, and spending wisely. By setting goals andplanning ahead, they can work toward financial independence instead of being stuckin a constant cycle of work and expenses.WHAT IS THE RAT RACE10 MUST READ POINTS ON LEARNING ABOUT THE RAT RACE

A Debt Repayment Plan is a strategy to pay off money you owe in an organized andmanageable way. It’s important because it helps you take control of your financesand avoid falling into a cycle of stress and more debt. Without a plan, debt can feeloverwhelming, and missing payments can lead to higher interest rates and damageyour credit score.For teens, learning about debt repayment is crucial for building financialresponsibility. If you ever borrow money, like a student loan or credit card balance,having a repayment plan ensures you stay on track. A good plan prioritizes paying offdebts with the highest interest rates first (called the Avalanche Method) or tacklingsmaller debts first for quick wins (called the Snowball Method). This helps youreduce debt efficiently and motivates you to stick with the plan.The importance of a repayment plan goes beyond just paying off debt—it teachesdiscipline and builds good habits for managing money. By handling debt responsibly,you reduce stress, protect your credit score, and create more financial freedom forthe future. Teens who understand this early are better prepared for life’s financialchallenges.DEBT REPAYMENT METHODS5 MUST READ POINTS ON DEBT REPAYMENT METHODS

Saving is a key principle. People who make a habit of saving regularly, even savingsmall amounts, are well on their way to success. It’s important to open a bank orcredit union account so it will be simple and easy for you to save regularly. Then,use your savings to plan for life events and to be ready for unplanned oremergency needs KEY ACTIVITIESStart saving, form a savings habit, and pay yourself first!Open and keep an account at a bank or credit union that meets your needs.Track your savings and investments, and monitor what you ownPlan for short-term and long-term goalsBuild up emergency savings for unexpected eventsConsult with a professional on investments and other key financial mattersSave for retirement, children’s education and other major itemsREAD MORE ON ESSENTIALS OF PERSONAL FINANCE WHAT IS SAVE PRINCPLEWHAT IS SAVE PRINCPLEIF SAVING MONEY IS WRONG, I DON'T WANT TO BE RIGHTWILLIAM SHATNER

Spend principle is a simple idea, but it’s one that can have a huge impact on yourfinances. The core idea behind Spend principle is to give your paycheque a purpose.This can be done by making a budget or a plan for using your money wisely.As they are not only helpful in achieving short and long-term financial goals but alsohelp inculcate financial disciplineFOLLOW BUDGET JAR METHOD50% Needs: Essentialexpenses (housing, groceries,etc.)30% Wants: Discretionaryspending (entertainment,dining, etc.)20% Savings/Debt: Savingsand debt repayment.WHAT IS SPEND PRINCIPLEWHAT IS SPEND PRINCIPLEGREAT LEADERS SEEMONEY AS FUEL, NOT ADESTINATION -READ MORE ON ESSENTIALS OF PERSONAL FINANCE SIMONSINEK

Sometimes it’s necessary to borrow for major purchases like an education , a car,a house, or maybe even to meet unexpected expenses. Your ability to get a loangenerally depends on your credit history, and that depends largely on your trackrecord at repaying what you’ve borrowed in the past and paying your bills on time.So, be careful to keep your credit history strong.KEY ACTIVITIESTrack your borrowing habits.Pay your bills ontime.When you need to borrow, be sure to plan, understand and shop around for aloan with a low Annual Percentage Rate (APR).Learn about credit and how to use it effectively.Pay attention to your credit history, as reflected by your credit score and onyour credit report. WHAT IS BORROW PRINCPLEWHAT IS BORROW PRINCPLEREAD MORE ON ESSENTIALS OF PERSONAL FINANCE

The Protect principle means taking precautions about your financial situation. Itstresses the importance of accumulating savings in case of an emergency, andbuying insurance. Be vigilant about identity theft, and keep aware of your creditrecord and the credit score.ACTIONS YOU CAN TAKEKeep your financial records in order.Watch out for fraud and scams, and protect your identity.Choose insurance to meet your needs, including health care insuranceWHAT IS PROTECT PRINCIPLEWHAT IS PROTECT PRINCIPLE READ MORE ON ESSENTIALS OF PERSONAL FINANCE

budgeting allows you to create a spending plan for your money, it ensures that youwill always have enough money for the things you need and the things that areimportant to you. Following a budget or spending plan will also keep you out of debtor help you work your way out of debt if you are currently in debt.Informed Choices: Helps make educated decisions on spending and saving.Budgeting Skills: Teaches effective money management.Debt Awareness: Prevents falling into debt traps.Savings Habits: Encourages goal-setting and building a safety net.Investment Basics: Introduces wealth-building strategies.Financial Independence: Promotes responsible management of finances.Critical Thinking: Enhances problem-solving skills.Long-Term Planning: Prepares for future financial security.OTHER BENEFITS OF BUDGETING WHY IS BUDGETING SO IMPORTANTWHY IS BUDGETING SO IMPORTANTREAD MORE ON ESSENTIALS OF PERSONAL FINANCE

Insurance plays a critical role in personal finance by offering protection againstunexpected financial risks. It helps individuals and families manage financialuncertainty and safeguard their assets, health, and income from unforeseen events.Insurance provides peace of mind and financial security, ensuring you won’t facedevastating financial losses due to accidents, illness, or other emergencies.NEED FOR INSURANCEIncome Protection: Covers lost income due to accidental death or disability.Medical Coverage: Pays for medical expenses from illness or health issues.Vehicle Protection: Covers vehicle repair or replacement after an accident.Home Protection: Pays for repairs or replacement after fire, flood, or damage.Liability Coverage: Protects against legal costs if you're responsible for third-party injury or damage.INSURANCE IN PERSONAL FINANCEINSURANCE IN PERSONAL FINANCEREAD MORE ON ESSENTIALS OF PERSONAL FINANCE

Credit cards are a convenient way to make purchases, manage expenses, and buildcredit. They offer a revolving line of credit, allowing you to borrow money up to a setlimit and pay it back over time. Used responsibly, they can offer rewards and helpimprove your credit score, but they can also lead to high debt if mismanaged.BENEFITS TYPICAL COSTSInstant Purchases: Buy now, pay later.Cashless: No need for physical money.Expense Tracking: Easy record ofpurchases.Debt Consolidation: Combine multipledebts into one payment.Protection: Fraud and purchaseprotections.High Interest: 25-30% APR onbalances.Late Fees: Charges for missedpayments.Annual Fees: Some cards chargeyearly fees.Over-limit Fees: Fees for exceedingyour credit limit.CREDIT CARDSCREDIT CARDSREAD MORE ON ESSENTIALS OF PERSONAL FINANCE

A credit score is a three-digit number that indicates how likely you are to repayborrowed money. It's generated based on your credit history and financial habits,and it helps lenders assess the risk involved in lending you money.Higher Scores = Lower Risk: A high credit score shows you pay debts ontime, making you a low-risk borrower.Lower Scores = Higher Risk: A low score signals potential payment issues,leading to higher interest rates or denial of credit.LENDERS USE YOUR SCORE TO SET:Interest Rates: Higher scores = lower rates, saving you money.Credit Approval: A high score makes it easier to get approved.Credit Limits: Higher scores often mean higher limits.WHAT IS A CREDIT SCORE?WHAT IS A CREDIT SCORE?READ MORE ON ESSENTIALS OF PERSONAL FINANCE

"Pay yourself first" is a financial strategy where you prioritize saving and investing aportion of your income before paying for expenses or discretionary purchases. Itensures that you build wealth consistently by automatically setting aside moneyfor savings, retirement, or other financial goals before you spend on anything else.5 BENEFITS OF PAYING YOURSELF FIRSTMindful Spending: Ensures you save before spending, helping you avoidoverspending.Build Healthy Habits: Saves consistently, leading to more savings over time.Build a Nest Egg: Gradually creates a fund for big goals, like a home orretirement.Peace of Mind: Provides security knowing you have money set aside foremergencies.Create an Emergency Fund: Protects you from unexpected expenseswithout going into debtWHAT IS PAY YOURSELF FIRSTWHAT IS PAY YOURSELF FIRST

The power of compounding in personal finance refers to the ability of an investmentor savings to grow over time at an increasing rate due to the earning of interest onboth the initial principal and the accumulated interest from previous periods. Thiseffect can significantly magnify the value of an investment as time passes, especiallywhen reinvested earnings are left to growWHAT IS THE POWER OF COMPOUNDINGWHAT IS THE POWER OF COMPOUNDINGHERE’S HOW IT WORKS IN SIMPLE TERMS:Initial Investment (Principal): This is the amount of money you start with.Interest (or Return): Over time, the principal earns interest or returns, and theinterest is added to the total balance.Reinvestment of Earnings: As interest is earned, it's added to the principal, whichmeans that the next interest payment is calculated on a larger amount.Exponential Growth: Over time, this cycle of earning interest on interest leads togrowth that accelerates, compounding at an increasingly rapid paceREAD MORE ON ESSENTIALS OF PERSONAL FINANCE

A combination of awareness, knowledge, skill, attitude and behavior necessary tomake sound financial decisions and ultimately achieve individual financial wellbeingWHAT IS FINANCIAL LITERACYIMPORTANCE OF FINANCIAL LITERACY FOR TEENSInformed Choices: Helps make educated decisions about spending andsaving.Budgeting Skills: Teaches effective money management.Debt Awareness: Prevents falling into debt traps.Savings Habits: Encourages goal-setting and building a safety net.Investment Basics: Introduces wealth-building strategies.Financial Independence: Promotes responsible management of finances.Critical Thinking: Enhances problem-solving skills.Long-Term Planning: Prepares for future financial security.WHAT IS THE POWER OF COMPOUNDINGWHAT IS THE POWER OF COMPOUNDINGREAD MORE ON ESSENTIALS OF PERSONAL FINANCE