BEP2O – Launching and Leading a Business STEAM Academy

Financial Literacy: Budgeting & Banking

Film: ESPN 30 for 30 Broke

For those who cannot access this film, the following is a summary of its content.

The ESPN 30 for 30 documentary titled "Broke" delves into the financial challenges
faced by professional athletes, particularly those in the National Football League (NFL)
and the National Basketball Association (NBA). The documentary explores the
paradoxical phenomenon of athletes earning significant sums of money during their
careers but often ending up financially troubled or bankrupt shortly after retiring. Here's
a summary of the key points and themes covered in "Broke":

Sudden Wealth: Many professional athletes experience a rapid increase in income

when they sign lucrative contracts or endorsement deals. This sudden wealth can lead
to extravagant spending and a lavish lifestyle.

Financial Mismanagement: A significant portion of the documentary focuses on the

mismanagement of money by athletes. They may make poor investment choices,
overspend on luxury items, or trust unscrupulous financial advisors.

Family and Friends: Athletes often face pressure from family members and friends to
share their wealth, leading to significant financial strain. The documentary highlights the
challenges of managing financial requests from loved ones.

Short Careers: The average career span for professional athletes, especially in contact
sports like football and basketball, is relatively short. This limited earning window makes
it essential to plan for post-career financial stability.

Lack of Financial Education: Many athletes lack financial literacy and are not adequately
prepared to manage their newfound wealth. They may not fully understand the long-
term financial implications of their decisions.

Extravagant Spending: "Broke" showcases instances of athletes spending excessively

on luxury cars, homes, jewelry, and other high-end items. This lifestyle can quickly
deplete their earnings.

Legal Issues and Scandals: Some athletes face legal troubles, such as lawsuits,
divorces, or child support disputes, which can further erode their finances.

Post-Retirement Financial Struggles: After retiring from their sports careers, many
athletes face financial difficulties, including bankruptcy. This can be exacerbated by a
lack of transferable skills for other career opportunities.

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Athlete Support Networks: The documentary also highlights instances of athlete support
networks, including financial advisors, agents, and mentors, who have either helped
athletes make wise financial decisions or exploited their wealth for personal gain.

Cautionary Tale: "Broke" serves as a cautionary tale, emphasizing the importance of

financial education, responsible financial management, and seeking advice from
trustworthy professionals.

The documentary features interviews with former athletes who openly share their
personal experiences and struggles with finances, shedding light on the complex
relationship between wealth, fame, and financial security in the world of professional
sports. "Broke" ultimately underscores the need for athletes to make informed and
sustainable financial choices to secure their futures beyond their playing careers.

Support Questions
Income Management Introduction & Vocabulary

Types of Personal Income:

1. ______________________________________________: The total amount of

income earned by a person (before any deductions). Example: $78,500 annual salary
($6,542/month).

2. ______________________________________________: The amount of income

received by a person, after deductions of income tax, Canada Pension Plan (CPP), and
Employment Insurance (EI). Example: $47,500 of ‘take home pay’ ($3,959/month).

3. ______________________________________________: The income that is left

after paying for necessities. It is used to purchase luxury items. Example: $189/month.
(Start with $3,959 of disposable income and pay $3,770 of necessities.)

Practice:

a. Amy has $600 of monthly gross income and pays 16% in income taxes and
deductions. Calculate her disposable income.

b. Keena has $2800 of monthly disposable income, and has $1500 of necessities.
What is her discretionary income?

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c. Last month, Wes spent all of his discretionary income on a new $400 phone. If he
spent $80 on taxes and $300 on necessities, what was his gross income?

d. Grace earns $14/hour at her part time job and pays 10% in taxes. Next month, she
will have to spend $122 on necessities. How many hours does she need to work in
order to have an extra $50 of discretionary income to spend on new shoes?

Support Questions
Budget Exercise
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Sam is a 19 year old part time student who works at Sobeys. His annual gross income
is $27,000. He has the following items planned for his budget. His monthly rent
expense is $1,200 (he shares an apartment with his friends Bobby and Evan), his
monthly car payment is $175, and car insurance is $220 a month. He spends $150 per
month on food, $40 for gas, $50 on clothing, $60 for entertainment, $30 for personal
items, and $90 for cable/internet/phone. Assume average total tax deductions of 30%

1. Prepare a monthly budget for Sam. Be sure to show gross income, disposable
income, and discretionary income.

2. How much does he have leftover at the end of the month?

Here’s how the month actually went:

Sam made $45 extra dollars in overtime pay this month. Rent went up by $225, starting
this month. His monthly car payment was $175 and his car insurance premium, as of
this month, increased to $295. He and his roommates invited Georgia and Grace over
for a dinner party which means they spent $190 on food for the month. He needed an
oil change, so he spent $60 on gas and oil, as well as $34 for parking. He also had to
spend $220 for car repairs. He then bought new running shoes for $80, personal items
for $60, $36 for a birthday present for his mother, and $70 for entertainment. Lastly, he
had to pay $230 for two speeding tickets!

3. Prepare a monthly “income statement” for Sam based on actual results. Be sure
to show gross income, disposable income, and discretionary income.

4. How much does he have leftover at the end of the month to put into savings?

5. Compare the two “income statements” and answer the following questions.
a. What is the difference between his planned and actual spending?
b. In which areas did he overspend?
c. In what areas did he underspend?
d. Suggest ways that Sam can decrease his spending in appropriate areas.

Canadian Income Taxes

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Canadian income taxes are a key source of revenue for the Canadian government and
are used to fund various public services and programs. Here's a short note on Canadian
income taxes:

1. Progressive Tax System: Canada employs a progressive tax system, where

individuals with higher incomes pay a higher percentage of their earnings in taxes. Tax
rates increase as income levels rise.

2. Federal and Provincial Taxes: Canadians pay income taxes at both the federal and
provincial/territorial levels. Each province and territory has its own tax rates and rules, in
addition to the federal tax system.

3. Tax Filing: Canadian residents are required to file annual income tax returns by April
30th of each year. The returns report income, deductions, and credits, which determine
the tax owed or the refund due.

4. Tax Deductions and Credits: The Canadian tax system allows for various deductions
and credits, including those for employment expenses, medical expenses, education,
and charitable donations. These can reduce the amount of taxable income and, in turn,
the tax liability.

5. Goods and Services Tax (GST) and Harmonized Sales Tax (HST): In addition to
income taxes, Canada has a federal value-added tax called the Goods and Services
Tax (GST). Some provinces combine the GST with their provincial sales tax to create a
Harmonized Sales Tax (HST).

6. Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans

(RRSP): Canada encourages saving and investing by offering tax-advantaged accounts
like the TFSA and RRSP, which provide tax benefits for individuals saving for retirement
or other financial goals.

7. Taxation of Investment Income: Income earned from investments, such as dividends

and capital gains, is subject to specific tax rules. Different tax rates and exemptions
apply to different types of investment income.

8. Taxation of Non-Residents: Non-residents of Canada who earn income in Canada

are also subject to Canadian income tax, but the rules may vary depending on the type
of income and tax treaties with other countries.

9. Compliance and Enforcement: The Canada Revenue Agency (CRA) is responsible

for administering and enforcing tax laws in Canada. It conducts audits, investigations,
and reviews to ensure compliance with tax regulations.
10. Filing and Payment Methods: Canadians can file their tax returns electronically or on
paper. Taxes owed can be paid through various methods, including online payments
and pre-authorized debits.

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Banks in Ontario
Banks offer a range of financial services to individuals, businesses, and organizations.

Here are some different banks operating in Ontario:

Royal Bank of Canada (RBC): RBC is one of the largest banks in Canada and has a
significant presence in Ontario. It provides a wide array of banking services, including
personal and business banking, investment services, mortgages, and credit cards.

Toronto-Dominion Bank (TD Bank): TD Bank is another major Canadian bank with
numerous branches in Ontario. It offers banking, wealth management, and investment
services, along with various financial products.

Scotiabank (Bank of Nova Scotia): Scotiabank has a strong presence in Ontario and
provides a range of banking and financial services, including savings and checking
accounts, loans, and investment products.

Canadian Imperial Bank of Commerce (CIBC): CIBC operates branches throughout

Ontario, offering personal and business banking, mortgage services, credit cards, and
wealth management.

Bank of Montreal (BMO): BMO has a significant presence in Ontario and provides
various banking and financial solutions, including banking, investments, mortgages, and
credit cards.

National Bank of Canada: While primarily based in Quebec, National Bank has a
presence in Ontario, offering banking and financial services to customers in the
province.

HSBC Bank Canada: HSBC has branches in Ontario and provides a range of banking
and financial services, including personal and business banking, mortgages, and
international banking.

Tangerine Bank: Tangerine is an online bank that operates in Ontario and offers digital
banking services, including savings accounts, checking accounts, and mortgages.

Simplii Financial: Simplii Financial is another online bank operating in Ontario, offering
banking services such as savings accounts, checking accounts, and personal loans.

Meridian Credit Union: Meridian is a prominent credit union in Ontario, providing

banking and financial services to individuals and businesses, including savings and
checking accounts, loans, and investments.

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Alterna Savings and Credit Union: Alterna is a credit union that offers financial products
and services, including banking, loans, mortgages, and investment options, primarily in
Ontario.

Desjardins Credit Union: Desjardins operates in Ontario and offers a range of banking
and financial services, including personal and business banking, insurance, and wealth
management.

Equitable Bank: Equitable Bank is a Schedule I Canadian bank with operations in

Ontario, specializing in mortgage lending and savings products.

These are some of the different banks and financial institutions that serve the diverse
financial needs of residents and businesses in Ontario. Each of these institutions
provides a range of services and products to cater to various financial requirements,
from basic banking to investment and wealth management.

Support Questions
Other Financial Services

1. Read the textbook excerpt: Other Financial Services.

2. Visit the websites of:

 1 major bank (RBC, BMO, CIBC, Scotia Bank)
 1 online bank (ING Direct, Ally, President’s Choice)
 1 Credit Union

3. Compare these three financial institutions using the chart below.

4. NOTE: choose ONE credit product they ALL offer to compare in the last 3 columns
(e.g. loans, line of credit, credit card)

Institution

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Pros

Cons

Product

Interest Rate

Terms & Conditions

Cost of borrowing
$5000 for 5 years

Credit, Debit and Cash

Credit Cards, Debit Cards, and Cash are three common methods of payment, each with
its advantages and disadvantages. Here's a comparison of these payment methods:

1. CREDIT CARDS
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Payment Mechanism: Credit cards allow you to make purchases on credit, essentially
borrowing money from the issuing bank. You receive a monthly statement and have the
option to pay the balance in full or make a minimum payment.

Advantages

Convenience: Credit cards are widely accepted, both online and in physical stores.

Build Credit: Responsible use of a credit card can help establish and improve your
credit score.

Rewards: Many credit cards offer rewards, such as cashback, points, or miles, for
purchases made with the card.

Purchase Protection: Some credit cards offer protection against fraud and extended
warranties on purchases.

Disadvantages

Interest Charges: If you carry a balance, you'll be charged interest, making purchases
more expensive.

Debt Risk: Credit cards can lead to debt if not used responsibly.

Annual Fees: Some credit cards have annual fees.

Overspending: Easy access to credit can lead to overspending if not managed carefully.

2. DEBIT CARDS

Payment Mechanism: Debit cards are linked to your bank account and allow you to
make purchases using the funds available in your account. Transactions are
immediately deducted from your account.

Advantages

No Debt: Since you're using your own money, there's no risk of accumulating debt.

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Budgeting: Debit cards help you stay within your budget as you can only spend what's
available in your account.

ATM Access: Debit cards can be used to withdraw cash from ATMs.

Disadvantages

Limited Protection: Debit cards may offer limited protection against fraud compared to
credit cards.

No Credit Building: Debit card transactions don't affect your credit score because you're
not borrowing money.

3. CASH
Payment Mechanism: Cash transactions involve using physical currency (bills and
coins) to make purchases.

Advantages

Anonymity: Cash transactions are private and leave no electronic trail.

No Fees: Cash transactions don't involve fees or interest charges.

Accepted Everywhere: Cash is universally accepted.

Disadvantages

Lack of Records: Cash transactions don't provide a record of your spending, which can
make budgeting and tracking expenses challenging.

Security Risk: Carrying large amounts of cash can be risky in terms of loss or theft.

Inconvenience: Counting and handling cash can be less convenient than digital
payment methods.

Credit & Saving

Why do people borrow money?

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People borrow money for a variety of reasons, depending on their individual financial
circumstances and needs.

Here are some common reasons why people borrow money:

Emergency Expenses: Unexpected financial emergencies, such as medical bills, car

repairs, or home repairs, may require individuals to borrow money to cover these
immediate and essential costs.

Home Purchase: Mortgages are a common form of borrowing used to purchase homes.
Since homes are often a significant and long-term investment, most people need to
borrow to afford them.

Higher Education: Many individuals take out student loans to finance their education,
including tuition, books, and living expenses. Education loans are an investment in
future earning potential.

Business Ventures: Entrepreneurs and small business owners often borrow money to
start, expand, or maintain their businesses. Business loans can help with working
capital, equipment purchases, or expansion plans.

Debt Consolidation: Some people borrow money to consolidate multiple high-interest

debts into a single, lower-interest loan. This can simplify debt management and reduce
overall interest payments.

Major Purchases: Borrowing may be necessary for significant purchases like a car,
furniture, or appliances. Auto loans and personal loans are commonly used for these
purposes.

Investments: Individuals may borrow money to invest in opportunities they believe will
yield a higher return than the cost of borrowing. This strategy, known as leveraging, can
be risky but potentially profitable.

Vacations and Travel: Some people choose to finance vacations or travel experiences
through personal loans or credit cards to spread the cost over time.

Weddings: Weddings can be expensive affairs, and couples may borrow money to
cover wedding-related expenses, such as venue rental, catering, and photography.

Home Improvements: Renovations and home improvements can increase the value of a
property. Borrowing for these projects, often through home equity loans or lines of
credit, can be a wise investment.
Medical Expenses: Major medical treatments, surgeries, or dental procedures can be
costly. Borrowing can help cover these expenses when insurance coverage is
insufficient.

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Unforeseen Income Shortages: Sometimes people may borrow temporarily to bridge

gaps in income, especially if they face temporary unemployment or a reduction in work
hours.

Investment in Assets: People may borrow money to invest in income-generating assets,

such as rental properties or dividend-paying stocks, with the expectation of earning
more than the cost of borrowing.

Credit Card Spending: Credit cards are a common source of short-term borrowing for
everyday expenses, but they can lead to high-interest debt if balances are not paid in
full each month.

It's essential to borrow money responsibly and be aware of the terms and conditions of
loans, including interest rates and repayment schedules. Borrowing can be a valuable
financial tool when used wisely to achieve specific goals or manage unexpected
expenses. However, excessive or mismanaged borrowing can lead to financial stress
and debt problems, so it's important to assess one's ability to repay borrowed funds
before taking on debt.

Ways to Borrow
There are several ways to borrow money, each with its own features, terms, and
purposes. The method of borrowing you choose depends on your specific financial
needs and circumstances. Here are some common ways to borrow money:

1. Personal Loans

 Bank Loans: Traditional banks and credit unions offer personal loans with fixed interest
rates and terms. These loans can be used for various purposes, such as debt
consolidation, home improvement, or unexpected expenses.

 Online Lenders: Online lending platforms provide personal loans with varying interest
rates and terms. They often offer a quick and convenient application process.

 Peer-to-Peer (P2P) Lending: P2P lending platforms connect borrowers with individual
investors who fund loans. Borrowers receive funds from multiple investors, and interest
rates may be competitive.

2. Credit Cards

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 Credit Card Purchases: Credit cards allow you to make purchases on credit. You can
choose to pay the balance in full each month or carry a balance, in which case interest
will be charged.

 Cash Advances: Credit cards also provide the option of taking cash advances, which
can be more expensive due to higher interest rates and fees.

3. Mortgages

 Home Purchase Loans: A mortgage is a long-term loan used to purchase a home.

Mortgages typically have lower interest rates compared to other forms of borrowing.

 Home Equity Loans and Lines of Credit: These loans allow homeowners to borrow
against the equity in their homes for purposes like home improvements or debt
consolidation.

4. Auto Loans: Auto loans are used to finance the purchase of vehicles. The vehicle
itself serves as collateral, which can lead to lower interest rates compared to unsecured
loans.

5. Student Loans

 Federal Student Loans: Government-backed student loans are available to finance

higher education expenses. These loans often have lower interest rates and flexible
repayment options.

 Private Student Loans: Private lenders offer student loans for educational expenses.
Interest rates and terms can vary, and eligibility may depend on creditworthiness.

6. Lines of Credit

 Personal Lines of Credit: A personal line of credit is a flexible borrowing option where
you can access funds up to a predetermined limit. Interest is only charged on the
amount borrowed.

 Home Equity Lines of Credit (HELOCs): Similar to personal lines of credit, HELOCs use
your home's equity as collateral. They are often used for home-related expenses and
have variable interest rates.

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7. Payday Loans and Cash Advances: These short-term, high-cost loans provide
quick access to cash but come with steep interest rates and fees. They are typically
used in emergencies and should be approached with caution.

8. Business Loans

 Small Business Loans: Business owners can secure loans to finance business
expansion, purchase inventory, or cover operating expenses.

 Startup Loans: Entrepreneurs seeking to start a new business may obtain startup loans
to fund initial operations and investments.

9. Borrowing from Retirement Accounts: Some retirement accounts, like 401(k)s,

allow participants to borrow against their account balances. This option should be
considered carefully, as it may impact retirement savings.

10. Family and Friends: Borrowing from family members or friends can be an informal
way to obtain funds. It's crucial to establish clear terms and expectations and maintain
open communication.

11. Pawnshops and Collateral Loans: Pawnshops provide loans in exchange for
valuable items, such as jewelry or electronics, which serve as collateral. If the loan is
not repaid, the pawnshop retains the item.

12. Government Loans: Various government programs offer loans for specific
purposes, such as housing, education, and small businesses. These loans may have
favorable terms and lower interest rates.

When considering borrowing, it's essential to assess your financial situation, evaluate
the terms and costs of the loan, and ensure that you can comfortably manage the
repayment. Responsible borrowing involves understanding the terms of the loan,
budgeting for repayments, and using borrowed funds for necessary and beneficial
purposes.

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Calculating Interest

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Support Questions

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Understanding Credit

How to build a good credit score – and what can ruin it

By: Brenda Bouw Published October 2, 2016 Updated May 17, 2018
https://www.theglobeandmail.com/globe-investor/personal-finance/genymoney/how-to-build-a-good-credit-rating/
article32203745/

Sustained low interest rates have Canadians embracing debt like never before. But do they know
someone is tracking how they're managing that borrowed money?

"It takes years to build a really good credit rating and high credit score, and you can blow it in
six months," says Scott Hannah, chief executive of the Credit Counselling Society in Vancouver.
"Then it can take you six or more years to get it back."

A person's credit history begins when they apply for their first credit card or take our their first
loan. A good record is built up over many years, by paying bills on time and making your debt
payments. Each negative incident, such as a call from a collection agency for an unpaid bill, is
noted. According to a recent report, Canadians owe $1.68 for every dollar of their disposable
income. Given that record amount of household debt, it's important for consumers to understand
their credit status.

Why does it matter? More landlords are doing credit checks to ensure potential tenants can pay
their rent, and some employers want a credit report before hiring a new employee. Lenders are
sure to check your credit rating before giving you a mortgage.

Credit report versus credit score – and how to build a good one

A credit report is a summary of a person's borrowing history, including credit cards and loans. It
includes information on when the accounts were opened, how much is owed, if payments are
being made on time and if someone goes over their credit limits. In Canada, there are two credit-
monitoring firms that track this – TransUnion and Equifax.

Credit scores are mathematical formulas based on an individual's credit report. The scores range
from 300 to 900. The higher the number, the better chance a consumer has of getting a loan,
potentially at lower interest rates. TransUnion says a score between 800 to 900 is "very good"
and 750 to 800 is considered "good." People with a score below 650 may have trouble getting
new credit.

Utility bills such as gas, water and hydro aren't part of the credit file. However, if they get sent to
a collection agency, that can hurt your score. When you miss payments on other bills, such
cellphone and credit cards, that can hurt your score, even when it's not sent to a collection
agency.

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What's in a credit score?

There are five main factors that go into generating a credit score, according to Equifax:

 Payment history: How consistently you pay your credit obligations. “If you get a statement
saying your credit card bill is due on Sept. 16 and you’re late, it would impact your payment
history. That could have some changes to your score,” says Arthur Lam, consumer vertical
leader at Equifax.
 Credit mix and credit history: “Lenders want to see a balance of usage on the credit,” Mr.
Lam says. For instance, if you have a car loan, a credit card and a mortgage, that’s considered
a better mix than if you have five credit cards and a couple of unsecured loans.
 Credit utilization: How much credit are you using at one time? An example Mr. Lam uses is
a credit card with a $5,000 limit. If a consumer consistently runs it up to $4,500 or more, that
can weigh on their credit score.
 Public records and judgments: A consumer who files for bankruptcy or has collection
agencies hunting them down will see a huge hit to their credit score. “You definitely don’t
want to get into those situations, because that’s a huge negative,” says Mr. Lam.
 Number of credit accounts you’re seeking at one time: Mr. Lam recommends consumers
only apply for credit they need. For example, if you’re buying a house and applying for a
mortgage, he suggests shopping for rates first before applying for a mortgage. “What really
gets consumers into trouble is when they start having multiple applications at the same time.
It can be a potential ding on their credit profile,” Mr. Lam says.

He recommends consumers check their own credit report regularly not just to see where they stand,
but also to ensure it is accurate and that they haven't been a victim of fraud. To access your own
credit file, contact Transunion.ca or Equifax.ca.

Mr. Lam says more people are checking their reports and scores these days. "As consumers become
more credit-aware, they have a better understanding of how to better leverage their financial products
and manage their own credit profile."

Credit report misconceptions

There's often a misconception that checking your credit score can impact your rating, says Heather
Battison, vice-president of consumer communications at TransUnion. She says there's a difference
between "soft" inquiries, which happen when you check your record, and "hard" inquiries, which
occur when a bank, or other lender makes an inquiry. It's too many "hard" inquiries that can knock a
couple of points off the score, Ms. Battison says. Other misconceptions are around the use of debit
cards, which don't affect a credit score like credit cards do. A person's salary also isn't reflected in a
credit score.

Ms. Battison says many consumers also don't often realize their scores are constantly changing.
There are also many different credit scores in Canada, depending on the lender.

"The most important thing is that consumers have a baseline and monitor their score over time," Ms.
Battison says.

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Building Credit

10 ways to build credit in Canada

By Aaron Broverman Published: January 5, 2018 https://www.creditcards.com/credit-card-news/ways-to-build-credit-
Canada.php

"When looking to build credit, two factors any consumer should focus on are paying bills on
time and managing a low credit utilization ratio," says Ken Chaplin, a senior vice-president at
TransUnion. "In addition, utilizing a credit monitoring tool and regularly monitoring your credit
report can help pave the way to a healthy financial situation."

Here are a few other tips to help you build solid credit from the ground up:

1. Check and understand credit reports and scores.

The two credit reporting companies in Canada are Equifax and TransUnion. Whenever a person
opens any sort of account with a bank or other lending institution, any activity on the accounts is
listed in these reports. Lenders go to these companies to see how big of a risk a person is before
deciding to extend credit. A credit score is a three-digit number given based on the sort of credit
extended by and payments made to lenders. The higher the score, the less of a risk one is
considered to be.

2. Open a bank account.

"The best advice is to go into a bank branch and speak to an advisor," says Shisler. "There's no
commitment or cost to doing so and they'll be able to assess each individual's situation and
advise them on which account is appropriate."

She says there are other ways to assess credit if you have no Canadian credit history, based on
employment and residency status, along with your overall immigration story.

3. Open a regular or high-interest savings account.

If you show a bank or lending institution that you can save money, they may trust you with small
lines of credit or credit cards.

"The Tax-Free Savings Account is a great way to take advantage of some tax-free savings if you
haven't been employed in Canada," says Shisler.

4. Start with an overdraft.

An overdraft is limited permission to spend more than you have in the bank. It's essentially a
small loan when you need extra money; it gets paid back as soon as you make a deposit. You
shouldn't use this excessively, but using it occasionally shows you can be trusted to pay what you
owe.

5. Open a department store credit card account.

These include cards from Hudson's Bay Co., Sears and other major retailers. The interest rates

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are usually on the higher end (about 18-21 per cent) with lower limits, but they seem to be easier
to get.

6. Apply for a secured card.

If you’re building your credit score from scratch, you’ll likely need to start with a secured credit
card. A secured card is backed by a cash deposit you make upfront; the deposit amount is usually
the same as your credit limit.

You’ll use the card like any other credit card: Buy things, make a payment on or before the due
date, incur interest if you don’t pay your balance in full. Your cash deposit is used as collateral if
you fail to make payments.

You’ll receive your deposit back when you close the account.

Secured credit cards aren’t meant to be used forever. The purpose of a secured card is to build
your credit enough to qualify for an unsecured card — a card without a deposit and with better
benefits.

7. Find a co-signer.
This is something Shisler says is an option to consider, but is not always necessary. Although it
is a great way to show you can be trusted with credit, if you default on payments, you aren't the
only one whose credit will suffer -- your co-signer's will, too. Usually, the co-signer must have a
strong credit history. If you don't have any family or close friends, you may not have much luck
with this option. Most people will not enter a joint credit agreement with someone unless they
are very close to that person.

8. Accept offers of credit through banks.

If your bank is promoting its lines of credit, you should try to get a small credit line. If approved,
your line of credit should be used regularly, but carefully, to establish consistency and
trustworthiness.

9. Invest.
"Your best investment vehicle really depends on your end goals. Without knowing those goals,
it's hard to recommend any one specific investment product," Shisler says. "That being said,
there are benefits that exist in Canada that may not exist elsewhere, so make sure your advisor is
educating you on the best ways available to make your money work for you. Asking the
questions around what you can get out of your investments is really important."

Furthermore, according to Bill Christie, a retired financial adviser and personal accountant,
investing not only shows responsibility with money and a seriousness to save, but you're also
investing in the bank through your investment, which looks good from a lender's perspective.

10. Once you have the credit, use it carefully.

The way to be trusted with larger forms of credit such as mortgages or car loans is to show you
can use the credit you've already been given wisely.

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BEP2O – Launching and Leading a Business STEAM Academy

Finally, a few additional points of caution:

 Constantly switching credit card companies or banks also doesn't look good from a
lender's perspective. Such activity stays on your credit history for many months or years
before it is purged.

 Pay more than the minimum payment and try not to put more on credit than what you can
pay off in one or two payments. Try to keep a low credit utilization ratio; that is, the
amount of credit available to you compared to how much you use.

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BEP2O – Launching and Leading a Business STEAM Academy

Saving & Investing Vocabulary

What’s the difference between saving and investing?

Saving should be ___________ and ________________. Its primary goal is

_______________________ ________________________________. Its secondary
goal is to keep pace with ____________________. A good guideline is that your
savings should be enough for you to live off for ______ _____________. Our savings
are usually used (and replaced) within 5 years. Any additional income after savings can
be used for investing. Investing is buying _______________ that you think will generate
a _______________ and _______________________ return over time.

Additional information:
https://handsonbanking.org/financialeducation/military/saving-vs-investing/

Support Questions
Practice:

1. Kaiya has a monthly gross income of $5,000. She pays a total of 28% income
taxes,and is committed to paying $900 of rent, $100 of utilities, $150 on car
insurance, $300 on car payments, and $200 on food every month.

a. Calculate her disposable income

b. Calculate her discretionary income.

c. Calculate her monthly living expenses.

d. Calculate how much she should have in savings at any given time.

e. How long will it take Kaiya to save this much money? What assumption
are you making?

2. Ashley needs to have $600 of savings. What is her monthly cost of living?

3. Lily earns $10/day and is tax-exempt! This month, she has $200 committed to
pay her necessities.
a. What are her gross, disposable, and discretionary incomes?
b. Calculate her required savings.
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BEP2O – Launching and Leading a Business STEAM Academy

4. Ways to invest:
– Guaranteed Investment Certificate (GIC)
– Stock
– Bond
– Mutual Fund
– Ethical Fund
– TFSA
– RESP
– RRSP
– Capital Investment
– Treasury Bill

Select THREE of the “ways to invest” and answer the following questions. You
will have to search online for the answers.

a. What it is / how it works

b. Risk Level (how safe is it?)
c. Return rate (high/low/medium)
d. Liquidity
e. Minimum amount?

Unit 3