2017DollarWiseSummerYouthContestFinalQuiz
StudyGuide
TheDollarWiseSummerYouthContestFinalExamquestionsaredesignedtotest
yourfullknowledgeoftheinformationprovidedinthecontest.Duringtheexam,
youwillbetestedonyourunderstandingofeachofthe6modulesincludingthe
infographicspresentedattheendofmodules3and6.Byachievingan80%or
greateronthistest,youwillbeawardedanofficialDollarWiseSummerYouth
ContestcertificatethatwilldemonstrateyourcompletionoftheDollarWiseSummer
YouthContest,andtheextentofyourknowledgeofkeyfinancialeducation
concepts.
Thestudyguidebelowshouldprovideyouwithalloftheinformationthatyouneed
tocompletethe6SummerYouthContestmodulesandthefinalexam–soread
carefully!
BetterMoneyHabits
Manyassumethatinordertobegoodwithmoneythatyouhavetohavealotofit,
butthisissimplynotthecase.Beinggoodwithmoneyisn’tabouthowmuchyou
make—it’sabouthowyoumanageandplan.Beingresponsiblewithmoneyrequires
disciplineandeverydaymanagement.
HowtoSetaBudgetandSticktoIt
Settingabudgetisatooltohelpyoustretchyourpaycheckasfarasitwillgo.
Everyoneshoulduseabudgettomanagetheirfinancesregardlessofhowmuchthey
makeorhowmuchmoneytheyhaveinthebank.Whencreatingabudget,thereare
sixstepsthatshouldbefollowed.Thesestepsinclude:
1.Knowing your income
2. Determining basic expenses
3. Determining expenses that vary each month
4. Determining what’s really important
5. Following your spending and reviewing monthly
6. Keeping track of expenses
*Important!YoumustbaseyourbudgetonyourNETincome–themoneythatyou
makeaftertaxes,notbefore.
Whenestablishingabudget,itisparticularlyimportanttounderstandthedifference
betweenfixedandvariableexpenses.Fixedexpensesareexpensesthatdonot
fluctuatesuchasrentormortgagepayments.Variableexpensesareexpenses
fluctuatesuchasgroceries,clothes,orentertainment.
CreditandDebitCards
Thereareafewimportantdifferencesbetweendebitandcreditcardstoconsider
beforeowningeither.
Debitcards
Adebitcardlinksdirectlytoyourpersonalbankaccountandallowsyoutoaccess
fundseitheratyourbankorviaanAutomaticTellerMachine(ATM).Debitcardsare
generallyasecuremethodofmakingpaymentsprimarilyduetothePersonal
IdentificationNumber(PIN)feature,whichallowsonlyyoutouseit.Debitcardsare
convenientbecauseyoucanusethemalmostanywhere.Youalsodon’thavetopay
interestonthecardwhenyouuseit,asyouwouldwithacreditcard.
Infographic1–YourBankAccount:10QuestionstoAsk
Therearealotoffactorstoconsiderwhenopeningabankaccountandobtaininga
debitcard.Afewquestionstoconsideraskingabankmanagerwhendecidingto
openanaccountmightbe:
1. Doesthebankaccountallowforoverdraftprotectionanddoestheoverdraft
protectioncomewithafee?
2. DoIneedtokeepacertainamountofmoneyinmyaccount?
3. Isthereafeetomaintainthebankaccount?
4. DoesthebankwhereIamopeningthisaccounthaveabranchnearwhereI
liveorwork?
Thesequestionswillhelpgetyoustartedinopeninganaccountandallowyouto
picktheonethatmakesthemostsenseforyou!
Creditcards
Itisveryimportantthatyoureadthefineprintofyouragreement,andseekadvice
fromatrustedfriendorfamilymember,whenobtainingacreditcard.Creditcards
allowyouaccesstoapersonallineofcredit–essentiallyprovidingyouwithaloan
thatyouhavetopayback.Creditcardsalmostalwayscarryinterestontheamount
ofcreditthatyoutakeout–moneythatyouhavetopaythecreditcardcompanyfor
usingthecreditcard–soitisimportanttounderstandyourinterestrate,and
recognizethatcreditcardsarenotfreemoney.Creditcardsalsogenerally
requireamonthlypaymentthatyoushouldbesuretoconsider.
Infographic3:YourCreditScore:Howit’sCalculated
Theprimaryreasontoownacreditcardistohelpyoubuildyourcredit.Whenyou
firsttakeoutacreditcard,makepaymentsonacar,ortakeoutamortgageona
house,youreceiveacreditscore,whichcanfluctuatedependingonhowwellyou
manageeachoftheselinesofcredit.Creditscoresgenerallyfallbetween300and
850.Goodcreditgenerallyfallsbetweenascoreof700and749.Afaircreditrating
generallyfallsbetween650and699.TheaverageAmericancreditscorein2014
was692.
Increasingyourcreditscoreallowsyoutohavemoreoptionsinyourabilitytotake
outlargercreditlinestoeventuallymakelargerpurchasesinthefuture,likeacaror
ahome.Whenmanagingyourcredit,it’simportanttorecognizethatthetwolargest
contributorstoyourcreditscorearepaymenthistoryandamountsowed.
Takingoutacreditcardisusuallythefirstexposurethatpeoplehavetocredit.You
canbuildyourcreditwithacreditcardby:payingyourmonthlycreditcardfeeon
time,stayingwithinthelimitofyourcreditcard,andpayingmorethanthemonthly
minimumonyourcreditcard.Infact,itisbesttocompletelypayoffthebalanceof
yourcreditcardbeforeitisduetomaximizeyourcreditscore.
TheTrueCostofRentingaPlace
Rentingaplacetoliveisabigresponsibility.Whenyoudecidetorentyourown
place,therearefewthingsthatyouneedtoconsider.Thefirst,ofcourse,isthe
monthlycostofbeingarenter.Itisimportanttomakesurethatyoucanaffordto
rentyourplacegiventheincomethatyoumakemonthly.Todothis,youshould
createabudgetandallocate30%ofyourgrossincome(incomebeforetaxes)to
yourgeneralhousingexpenses.Thesehousingexpensesshouldincluderent,
utilities,insurance,amenities,andothercostsassociatedwithrentingyourplace.
Asidefromthecostofrentitself,yourmostcostlymonthlyexpenseswillmost
likelybeyourutilities.Youalsomightwanttoconsiderpurchasingrenters
insurancetoprotectyourbelongingsincaseofaburglaryorafire.Infact,many
leaseagreementsrequirethatyoupurchaserentersinsurance.
CreatingaFinancialSafetyNet
Creatingafinancialsafetynetisaverysmartwaytoprotectyourselffromlife’s
unexpectedevents.Often,peoplewithoutanemergencyfundwillborrowmoneyor
gointohigh-interestdebtinordertopayforcostly,unforeseencircumstances–but
youshouldn’thaveto.
Ifyoudon’tcurrentlyhaveafinancialsafetynet,thebestthingtodoistostart
puttingmoneyintoasavingsoramoneymarketaccountwhereitcanaccrue
interest.Youwanttoputyouremergencyfundmoneyintoanaccountthatis
accessibleifyouneedit,butnottooaccessiblethatyou’lluseiteveryday.Thisis
whyasavingsormoneymarketaccountisasolidoption.
Youcanbeginsavingbydepositingalittlebitofmoneyintoyouraccounteach
month,andcontinuingtobuilditovertime.Initially,yoursavingsgoalshouldbe1
month’sworthoffinancialexpensesmultipliedby3.Eventually,youremergency
fundshouldbeabletocoverallofyourlivingexpensesforatleast9months.While
thatmayseemlikealotofmoneytosavenow,you’llbesurprisedhowmuchyou’ll
beableputawaysimplybybeingdiligentaboutsaving.
SavingforCollege
Collegeisexpensivethesedays,butthatshouldn’tkeepyoufromgoing.Acollege
degreeisanimportantmilestoneandcanhelpyouattainbettercareer
opportunitiesandevenhigherpay.Therearemanywaystohelpyoupayforyour
collegetuition.Whilethereareallsortsofgrantsandscholarshipsouttherethatcan
helpyoupayforcollege,themostwidelyusedassistancetuitionassistanceis
federalaid.TheFederalGovernmentoffersgrantsandloanstostudentsinmost
publicandprivateuniversitiesthroughouttheUnitedStates.Whenapplyingfor
college,besuretoaskforhelpfromaschoolcounselorsothatyoucanmakethe
bestdecisionspossiblewhenmovingforwardinthecollegeapplicationprocess.
Infographic4:
CompletingaFreeApplicationforFederalStudentAid(FAFSA)
ThefirststepinapplyingforfederalaidistocompleteaFAFSA.Withhelpfroma
parentorguardian,youcancompleteaFAFSAonlineat:http://www.fafsa.ed.gov.
YoucanalsosendyourFAFSAforminthemail.TocompleteyourFAFSA,youwill
needtoprovideaparent’ssocialsecuritynumber,federaltaxreturns,aswell
asW-2sandincomerecords.CompletingaFAFSAismandatoryinordertobe
eligibleforfederalaid.Afteryoufilloutthisform,theschoolthatyouareplanning
toattendwillsendyouanawardletter,identifyingtheawardsthatyouareeligible
toreceive.Theseawardswillmostlikelyincludegrants,work-studyprogram
opportunities,andvariousfederalloans.
Let’sgooversomeofthedifferenttypesoffederalloans-
Themostcommonformoffederalloansare:
1. DirectSubsidizedloans
2. DirectUnsubsidizedloans
3. PLUSloans
4. Perkinsloans
Directloans
Directloanscaneitherbesubsidizedorunsubsidized.Directsubsidizedloanscarry
interestthatissubsidizedorpaidforbythefederalgovernmentwhileyouarein
school.Theyareonlyofferedtoundergraduatestudents,andgenerallyofferlower
interestrates.DirectUnsubsidizedloanscarryinterestthatyouhavetopayfor
whileyou’reinschool,andgenerallycarryhigherinterestrates.
PLUSloans
TherearetwotypesofPLUSloans.ParentPLUSloanscanbetakenoutbyan
undergraduatestudent’sparenttohelppayfortuition.GraduatePLUSloansarefor
studentsingraduateorprofessionalschool.Therearefewerlimitsfortheamount
thatyoucanreceivefromPLUSloans,andtheygenerallycarryhigherinterestrates.
Whilethereisstillalotmoretoknowaboutstudentfederalaid,thisinformation
shouldprovideahelpfulfirststepinfundingyoureducationandmovingforwardin
yourcareer.
Movingforward
Itisourhopethattheinformationinthisstudyguideprovidesyouwithathorough
understandingofthetopicsthatarecoveredintheDollarWiseSummerYouth
Contest.Wewishyoutheverybestofluckmovingforward,andencourageyouto
usetheinformationthatyou’velearnedtohoneyourpersonalmoneymanagement
skillsandtobecomethemasterofyourfinancialfuture!