Dr. Rita Littrell
Bessie B. Moore Center for Economic Education

What can you do with money?
 Spend it
 Save it
 Invest it
 Share it

Cosby Show Economics Lesson http://www.youtube.com/watch?v=nFY0HBk
Um8o

 Make good decisions
 Use a budget
 Research products
 Compare prices
 Consider the opportunity cost
 Keep receipts & warranties
 Return faulty items
 Use credit wisely

A loan – spending money you have not earned
Two types:

Closed End Credit -- Ex: Auto Loans, Mortgage
Loans

Open End Credit -- Ex: Credit Cards
Interest is the cost of credit

 Make Sure You Know All The Terms and Conditions
 Beware of “Store Credit Cards” & Their High Interest
Rates
 Avoid Getting Too Many Credit Cards
 Beware of the Minimum Monthly Payment Trap
 Home Equity Line of Credit

Building Your Credit Rating
 Credit Bureaus – Collect Credit Information About
You
 Three Main Credit Bureaus in U.S.
 Equifax
 Experian
 TransUnion
 Your Credit (FICO) Score

 Fair Isaac Company credit score
 FICO scores:
 Are your credit rating
 Range from 300 – 850, higher is better
 Most lenders base approval on FICO
 Higher scores result in lower interest rates
Free Credit Report: https://www.annualcreditreport.com/cra/index.jsp

FICO scores are based on your rating in:
 Payment history – 35%
 Amount owed – 30%
 Length of credit history – 15%
 New credit – 10%
 Types of credit used – 10% http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

36 month auto loan
FICO score
720-850
690-719
660-689
620-659
590-619
500-589
In Arkansas on
Sept. 26 th , 2008
6.0%
7.07%
8.00%
10.23%
12.95% n/a
APR
For a loan of
$25,000
Monthly payment
$761
$773
$783
$809
$842
$0
Fico Help Center

 If You Are Having A Problem Paying A
Bill, You Can…
1. Contact the Creditor
2. Contact A Nonprofit Financial
3. Counseling Program
 Credit Counseling of Arkansas

 CCOA Is a Local NonProfit Org.
1. Provides Educational Services
2. Debt Counseling Services
3. Supported By Contributions From Banks,
Merchants, etc.
4. Service May Be Free or There May Be a Small
Charge
 Beware of Predatory Counseling Organizations

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Contributions of philanthropic organizations
1. Walton Family Foundation
2. Wal-Mart Foundation
3. Winthrop Rockefeller Foundation
4. Winthrop Rockefeller Trust
5. Walton Family Charitable Support Foundation
6. Charles A. Frueauff Foundation,
7. Arkansas Community Foundation
8. Ross Foundation
9. Harvey and Bernice Jones Center for Families
10. Murphy Foundation
11. Windgate Charitable Foundation

 Between 1997 & 2004, AR ranked among top 7 states in individual charitable contributions while being among the five least wealthy
 National or International nonprofits groups
 Heifer International – LR – eliminate starvation by enabling low-income people to feed themselves on a sustained basis
 Potluck Food Rescue for Arkansas – redirects otherwise wasted food to low-income Arkansans
 AR Foodbank Network & AR Rice Depot – work to relieve hunger and malnutrition

Options for Investing
 Open a Savings Account
 Invest in the Stock Market
 Buy Bonds
 Invest in a Mutual Fund
First step is to determine short and long term financial goals.

Fundamentals of Investing
1. How Much Money Do You Want to Accumulate?
2. How Long Will It Take?
3. How Much Risk Are You Willing to Assume?
4. Are Your Goals Reasonable?
5. Are You Willing to Make the Necessary Sacrifices?
6. What Are the Consequences If You Don’t Reach Your
Goals?

Before Investing
Get Your Financial House In Order
 Make Sure You Have Adequate Insurance
 Start an Emergency Fund
 Balance Your Budget

1. Employer Sponsored Retirement Plans
2. Employer Savings Plans
3. Gifts, Inheritances or Windfalls
Save – Even If It Is a Small Amount!
( www.dinkytown.net
)

 Ownership in a company
 Buy Stock for:
1. Dividends
2. Price Appreciation
 Level of Risk

 Stocks in several companies
 Professionally managed
 Wide variety of funds
 Less risk due to diversification
 But You Can Lose Money Too!!

 Corporate Bonds – not insured by
Federal Government
 US Government Bonds – Treasury Bills,
Bonds & Notes (terms vary)
 Municipal Bonds – issued by state and local governments – Fed tax exemptions & that state
 Bureau of Public Debt - US Dept of Treasury
 For ratings – Moody’s Investor Service -
Standard and Poor’s Corp

Use financial institutions to:
 protect your money
 help you manage your money – checks, debit cards
 savings, checking and other accounts
 to help your money work for you
 for financial advice

 New York Stock Exchange (NYSE)
 American Stock Exchange (AMEX)
 Nasdaq (Nat’l Assn of
Securities Dealers
Automated Quotation)
List of up and coming companies from Fast
Company!

Influences on the Market
• War
• Emotions
• Politics
• Economy
• Natural Disasters

What influences the price of a stock
• Conditions in the Industry
• Changes in Technology
• Competition
• Health of the Company
• Supply and Demand

The Arkansas 20

Reading a Stock Table

What Does it Mean?

Reading a Mutual Fund Table

Understanding the Mutual Fund Table

Reading a Bond Table

Understanding the Bond Table

Three Rules for Building Wealth
1. Start early.
 Give money time to grow.
2. Buy and hold.
 Keep you money invested.
3. Diversify.
 Don’t put your eggs in one basket.

Use the Magic of Compounding
Compound Interest Calculator

Buy & Hold
1. Spend less than you receive.
 Earn more by improving your formal education or job skills.
 Spend less by using a budget to keep track of where your money is going.
2. Become connected to financial institutions?
 Open and maintain accounts at mainstream financial institutions.
3. Manage your credit responsibly?
 Limit the number of credit cards you have.
 Limit the number of purchases to what you can pay off each monthly.
 Apply for loans only when you are confident you can repay with your current income.

Stock-Market Roller Coaster
If you hold long enough, the ups are greater than the downs.

Diversify
Don’t put all your eggs in one basket!

Costs & Benefits of Saving & Investing
• Saving accounts: provide small but steady return
• Certificates of deposit: very safe, but instant access is penalized
• Bonds: lending money to a corporation or government, with a promise of higher returns than those offered by bank savings accounts and CDs
• Stocks: part ownership in a company, offering higher risks and potentially higher returns than some other investments
• Real estate: the risks and benefits of being a landlord