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BusyKid Financial Literacy

It’s important for your kids to gain some sense of financial literacy as they gain experience Spending, Sharing, Saving and Investing responsibly. So, we have come up with some basic Financial Terms that will be important for your kids to know as they use this app. These definitions are directed towards your kids on a level that connects with them.

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ABC's OF FINANCE

401K

A 401(k) plan is a savings account for retirement savings offered by your employer. The money that you put into a 401(k) is taken directly from your paycheck, and is intended solely for retirement. You can’t withdraw it until age 59½.

You don’t pay taxes now on money you put into your 401k so this is a great since the money that would have been taken out in taxes is instead allowed to grow your entire working career. Only when you withdraw it in retirement do you pay taxes.

Accounts

Checking Account: This is the “Spend” side of the app. Your checking account will be from which a DEBIT card—or in this case, your BUSYKID VISA® Prepaid spend debit card—will draw money. When your parents write checks, they are withdrawing money from their checking account.

Savings Account: This is the money under “Save” that your parents won’t let you use, and for good reason. A savings account is your safety net, allowing you to hold onto money for good and bad times when what you have in your Checking Account isn’t enough.

Bank

A financial institution that accepts deposits and withdrawals of money. There are two kinds of banks:

Commercial Bank: A traditional bank that provides services such as checking and savings accounts, credit cards, and home and auto loans.

Investment Bank: A bank that specializes in services for companies rather than individuals. An investment bank sells and manages stocks and bonds. It also assists when two companies merge, or join together.

Bonds

This is when you pay a certain amount to the government or a business with the promise of getting that money back in a certain amount of time with interest.

Budget

A budget is plan that you make to keep track of your money and where it is going. All budgets should have income (money paid to you) going into at least two categories - save and spend, and multiple categories for things you need (or want) to buy. A healthy budget is where you save more than you spend.

Charity

A Charity is an organization that collects donations for one cause or another. Under the “Share” section of the app, you will be able to take a percentage of your allowance and donate it to a select number of charities.

Credit

Credit lets you buy something without having to pay for it right away. It’s NOT FREE MONEY, but if you use a credit card to buy a toy, the credit cards company is buying the toy for you. Then they send you a bill and you have to pay them back the $200. If you don't pay them back right away, they will charge you interest. The longer it takes you to pay back, the more money you will owe in the end. While credit cards are necessary to have, especially for travel, they are easy to over use and create large sums of debt.

Credit Score

A credit score is a given by the three credit bureaus - Experian, Equifax and TransUnion. These three calculate your “credit score” based upon how you use your money. The goal is to have a high credit score, and the to do this is to have a long history of paying your bills on time. When you don't pay your bills on time or you have too much debt, your score gets lowered.

It’s important to emphasize that a good credit score will help in the future if you want to borrow money to buy a house or a car. Meanwhile a bad credit score can make it difficult for you to borrow money.

Debt

Money owed, usually as a result of borrowing. If someone borrows $18,000 to buy a new car, they are known to have $18,000 in debt. There are two main kinds of debt:

National Debt: The amount of money a country owes. The U.S. national debt is roughly $21 trillion at the beginning of 2019. Basically this means that every person in the U.S. owes over $67,000.

Personal Debt: The amount of money an individual person owes.

Debit Card

A debit card is different than a credit card since as it takes money directly from your checking account. Debt cards have replaced checks as the standard form of payment in most situations, however, it does require the user to manage money he/she can’t see.

Deposit

A deposit is when you move money from one place to another, be it a checking account, savings account, or investment. When you get paid every Friday, that is a Direct Deposit.

Dividend

This is the word for the money you earn through buying stocks. Normally it would be less than a dollar per share per year, so you won’t get much at first, but the more stock you buy, the more dividends you can potentially make. You can also choose to automatically reinvest your dividends so your portfolio slowly gets bigger and bigger on its own.

Dow Jones Industrial Average

An indicator of how the stock market is performing. It is based on the stocks of 30 well-known companies, including General Motors, McDonalds, Microsoft, and Disney. When the value of these stocks goes up, the "Dow" goes up, too. The Dow Jones Industrial Average goes up or down every day.

FDIC (Federal Deposit Insurance Corporation)

The FDIC is the government agency that insures bank deposits. Let's say a bank has 100 customers who each deposit $3,000. The bank is allowed to use a percentage of those deposits to make loans and conduct everyday business. But if all 100 customers want to withdraw all of their money at once, the bank must be able to produce the cash. What happens if the bank does not have enough money on hand to do that? If the bank is insured by the FDIC, the FDIC will step in and make sure the customers get their money. In order to be insured by the FDIC, a bank must show that it is operating fairly and obeying all banking laws. Right now, the FDIC insures every bank depositor for up to $250,000.

Foreclosure

A process in which homeowners lose their property because they have failed to make mortgage payments. Homeowners often borrow money from a bank to pay for their new home. They are expected to repay part of that money each month. If they fail to make the monthly payment, they might first receive a warning from the bank. However, when they miss many payments and have not worked out an agreement with the bank, the house might go into foreclosure. That means it becomes the property of the bank.

Interest

Interest has two sides: it's either something you pay when someone lends you money or something that you earn when you lend money to someone else. For example, your sister runs out of her allowance but needs money this weekend. You could lend her $20 but charge her $2 in interest, which she will have to pay you back next week.” The more interest charged to the loan, the more money the lender makes when it’s paid back or the more you pay when paying it back.

Interest Rate

The percentage at which interest is charged or paid. For example, imagine that you borrow $100 at an annual interest rate of 4%. At the end of one year, you will owe $104. Sometimes interest is added on every day or every month, but it is basically calculated the same way.

Investment

Investments are when you put money into something with the expectation of not only getting your money’s worth but to also profit off of it. The two biggest investments you will be making are in Stocks and some savings accounts.

Loans

A loan is something that is borrowed, often money, which has to be paid back. If you’ve ever lent something to a friend or sibling and expected to get it back, that’s a loan. While taking out a loan isn’t a bad thing, it's your responsibility to pay it back.

Mortgage

A loan that is used to buy a house. In the past, many home buyers had to work hard to get a mortgage loan. They had to prove to the bank that they earned enough money to pay for the house over time. But over the past few years, getting a mortgage loan became easier and easier. It’s still a great idea to have good credit and enough money for a sensible down payment.

Recession

A drop in economic growth that lasts at least six months. During a recession, businesses sell fewer goods and services. Once a recession becomes severe (with total sales of goods and services down by more than 10% for a long period of time), a recession can be described as a depression.

Stocks

Stocks: This is something that you will get to buy when you use this app. Stocks are tiny pieces of a business whose value either goes up or down depending upon its performance.

Stock Market: This is where you will buy and sell the stocks. You will go to the Stock Market to check the price and trends of stocks.

Stockholder: The name of someone who owns stock in a company. If you were to use your allowance to buy stock, you will then become a Stockholder.

Taxes

When you become an adult and start working, you have to give part of your pay to taxes. This money helps pay for things run by the Government like roads, the military, and National Parks. There are different levels of taxes that you’d have to pay like Federal Taxes, State Taxes, and Property Taxes.

Unemployment

The unemployment rate is the percentage of Americans who are out of work and looking for jobs. High unemployment rates are a sign of a weak economy. Through January 2019, the National Unemployment Rate was 4.0%. That means just 4 out of every 100 workers needed jobs. During the Great Depression of 1929, the unemployment rate reached almost 25%.

Withdrawal

This is what it is called when you take money out of your checking or saving account. You withdraw the money from your account.

 

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