LOAN STAR’ S BUILDING YOUR FINANCIAL FUTURE
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Loan Star’ s
Building Your Financial Future FINANCIAL LESSONS TO HELP TEENS NAVIGATE REAL LIFE
Small Payments Can Mean Big Costs When Borrowing
MONEY TIPS
Spring 2014
by FDIC Consumer Affairs
Here’ s a situation you won’ t encounter for a few years, but it’ s never too early to begin learning how credit (borrowing) works. The main message is this: The longer you take to pay back what you owe on a credit card or loan, the more you’ ll pay the lender in interest charges. In particular, if you use a credit card to make a major purchase and you only pay back a little of what you owe each month, “ it will take you a very long time to pay off the balance, and the interest costs can be shocking,”according to Janet Kincaid, FDIC Senior Consumer Affairs Officer.
The chart below shows what an expensive purchase will really cost you if you charge it and only pay back the minimum amount due each month, which may be something like $20 or $30. In this example, a $500 stereo would end up costing you about $900 when you figure in the total interest you’ d pay, and a $1,000 computer would set you back more than $2,100. If you instead pay back as much as you can each month—the entire balance, if possible— you can really limit interest charges.
Cut Back, Not Out These students discovered they spent $10 a week on soft drinks. They cut back half that, saved some calories and protected their health, and ultimately saved over $200 a year to use for future smart choices. What can you cut back, not out, and save for your future?
You’ re Not Alone!
Affairs Officer.
Don’ t think you’ re the only person with money issues! It’ s likely your friends and even your family worry about money too so try this: Get with your friends and family and talk about planning your financial futures. This collaboration will keep you accountable and on track and learn from each other. See “ Savings Club”article in this issue of Building Your Financial Future.