Developing Financial Literacy

Avery Longhurst / Block 2-1

1.) Budgeting
The first thing that appealed to me when scanning through the Dave Ramsey website was the
third tip, every month is different. Every month is not the same, so preparing for birthdays or
holidays in advance would really benefit a person’s budget. It’s super smart and a great tool to
start saving money in advance for holidays or special occasions that you know are going to
come up in the future. Saving in advance would definitely help soften the blow of holiday or
Christmas shopping as well.
The second tip that really jumped out at me would be the fourth tip, start with the most important
categories. I disagree that saving and giving should be at the top of the list, I think that the most
important thing that should be at the top of the list would have to be food, housing, utilities, and
basic clothing/transportation needs. Saving should be second on your list because you need
those basic utilities in order to save for the future.

2.) Saving
The tax free savings account is for people who are 18 years or older, and have to have a social
insurance number to qualify for the tax free savings account. To open a tax free savings
account you have to contact your financial provider, then provide your social insurance number
as well as your birth date in order to open up the account. There are three different types of tax
free savings accounts, an arrangement of trust, an annuity contract, and a deposit. I think that
the tax free savings program is a great way to save money because it provides a great way to
save your money for rainy day funds, future goals such as a house or car, and you can do all of
this without being taxed. It rewards you for saving your money, even though you can withdraw
money from the account at any time, making the withdrawals tax free.

3.) Simple & Compound Interest

a.) Simple Interest= (principle)*(rate)*(# of periods)
Simple Interest= ($2000)*(0.03)*(5)
Simple Interest=$300

b.) A= P(1+r/n)^nt
A= 1200(1+0.05/12)^12(3)
A= 1393.76 → Earn about $1400 after three years.

4.) Credit Cards

Pros Cons

-Security, having a credit card is more -High Interest, credit cards have a high
secure than carrying around cash interest premium, so if you can’t pay off
because if you lose the card you can just the money that you spent you’re going to
 cancel it, whereas cash would be gone collect debt from the high interest
forever. premiums.

-Building Credit, using and paying off your
credit card regularly helps with building
your credit score because it shows your
credibility when paying back the money
that was borrowed from the credit card
company. The credit card company will
then report your activity to a credit
reporting agency.
-Having too many, having too many credit
cards can actually worsen your credit
score. They all take into account your
history when it comes to payments, the
amount that is currently owed, and if you
have new credit and the type of credit
being used.

-Rewards, most often credit card
companies will reward you, They might do
this by cash back, points of even points
towards flights (air miles reward miles).
-Easy access, having a credit card means
you have access to funds that are not
necessarily at par with the amount in your
bank account. It is easy to spend the
money from the credit card but not as
easy to pay it all back.

5.) Identity Theft and Fraud

Identity theft is when another person uses your identification, such as your driver's
license, credit or debit cards or another form of identification with your personal
information on it. They use your personal information to gain access to your banking and
personal information, for the purpose of committing fraud.
Ten ways to prevent identity theft:
1.) Memorize your PIN for debit and credit cards, never write it down.
2.) Don’t carry your social insurance card around with you, unless using it to open
banking accounts etc.
3.) Don’t carry around unnecessary cards.
4.) Cancel the cards that you no longer use.
5.) Protect your PIN when entering the code into an ATM or machine, shield it away
from others.
6.) Use a shredder to shred old financial or personal documents.
7.) Be cautious of what you put into the recycle bin.
8.) Install firewall software protection to prevent unauthorized access to your
computer.
9.) If you lose your identification or believe it has been stolen, notify the issuer and
the police.
10.) If you change your address submit a change of address card to the Canada
Post office and notify the company who sends you the billing information.