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Family Studies 238 > Managing Finances > Flashcards

Managing Finances Flashcards

1
Q

how does Canada’s diversity affect finances?

A
  • Creates diversity in how people manage finances
  • Families model financial behaviour
  • Schools influence financial behaviour
  • Fastest-growing population in Canada is over 80 years old (192% increase in Canadians over 100 predicted)
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2
Q

different generations: relationship to money

A
  • Boomers: cash and layaway
  • Gen X: credit and cash machines
  • Gen Y: debit and online banking
  • Gen I: banking apps, tap
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3
Q

different generations: households/relationships to each other

A
  • Boomers: 1 family, 1 household, 1 income
  • Gen X/Y: 1-2 families, 1-2 households, 1-2 incomes
  • Gen I: multi-family, multi-households, multi-family
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4
Q

different generations: savings and debt

A
  • Boomers: “penny saved is a penny earned”
  • Gen X: “don’t pay a dime until 1999”
  • Gen Y: “Buy now, pay later”
  • Gen I: “Pay day loans”
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5
Q

different generations: wealth and net worth investments

A
  • Boomers: “don’t put all eggs in one basket”
  • Gen X: “diversification”
  • Gen Y: “global investments”
  • Gen I: “socially responsible investments”
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6
Q

debt

A
  • Average household debt increasing
  • Debt to disposable income ratio increasing (up 100% from the 80’)
  • Debt at retirement: retirees have significant debt, 17x more likely to become insolvent in 2010 than in 1990
  • 1/3 of surveyed Canadian students expected to graduate in debt
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7
Q

Childcare costs in Vancouver

A
  • $1200/month spent on infant and toddler care

- 29% of income goes towards childcare

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8
Q

divorce in Canada

A
  • 19% of Canadians surveyed reported that their parents had separated or divorced
  • 41% of Canadian marriages estimated to end by the 30th year of marriage
  • “Grey divorce” (divorcing in old age) on the rise
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9
Q

recommended financial management goals

A
  • Savings
  • Financial goals
  • Budget
  • Record-keeping
  • Wise credit card use
  • Insurance
  • Estate planning
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10
Q

obstacles (and things that aren’t obstacles) to financial practices

A
  • obstacles to budgeting: no choices on spending, income and expenses irregular
  • obstacles to rest of practices: no need to do them
  • not given as obstacles: Lack of time, lack of knowledge
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11
Q

payoffs of using recommended behaviours

A
  • Increased satisfaction with finances
  • Improved net worth
  • Adequate emergency fund
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12
Q

credit

A
  • time allowed for payment; an individual owes a certain amount of money for a certain time, and must pay it on time to avoid fees/penalties
  • Was originally associated with gas stations, eating out, department stores, etc.
  • For immigrants, having a credit card was a symbol of being Canadian
  • older people better at managing credit than younger people
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13
Q

ways to develop a credit record

A
  • Open chequing and savings accounts
  • Pay bills, including rent, promptly
  • Open a charge account with a store; pay amount promptly
  • Indicators of credit worthiness: stability of employment and residence, income, home ownership
  • New immigrants: credit record from previous country doesn’t transfer over; can get a secured credit card instead
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14
Q

what doesn’t build credit?

A
  • Visa/debit
  • Pre-paid credit cards
  • Pay-as-you-go cell phone
  • Payday loans
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15
Q

improving your credit

A
  • Make all of your payments on time
  • Pay off your credit card in full every month
  • Consider a secured credit card with a low limit
  • Cell phone contracts can build credit
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16
Q

top factors that lower credit score

A
  • Too many consumer finance company accounts on your credit report
  • Having too much available credit can sometimes harm your credit score
  • A number of credit applications
  • Your account balances are too high – keep your balances below 35% of your available credit limit
  • There is not enough recent revolving account info on your credit report
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17
Q

FICO scores (from most to least impact)

A
  • Bills paid on time
  • Debt to credit limit ratio
  • Length of credit history
  • Credit app and loan variety
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18
Q

top reasons people are in financial trouble

A
  • Excessive use of credit or using credit for living expenses
  • Unemployment/underemployment
  • No budget/lack of financial education
  • Injury/illness
  • Separation/divorce and family expenses
  • High student loan debt/education expenses
  • High housing costs
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19
Q

challenges for students

A
  • Student loans are deposited as lump sums
  • Students are not taught how to manage irregular income
  • Budgeting isn’t exciting and debt is overwhelming with no immediate solution
  • Financial institutions offer “student” products (ie. Student credit card, student line of credit, co-signed loan)
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20
Q

who has the most difficulty repaying loans?

A
  • Larger $ loans
  • Fields of study (income, getting job)
    • Humanities
    • Interdisciplinary studies
    • Fine and applied arts
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21
Q

students are slower at repaying student loans when

A
  • People are continuing their studies
  • Have financial difficulties
  • Can’t find a steady, well-paying job to take advantage of lower interest rates
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22
Q

repayment assistance program

A
  • Borrowers will never be required to make student loan payments above an affordable level
  • Affordable payments are based on the borrower’s family income and size
  • Affordable payments do not exceed 20% of their income
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23
Q

discharging student loans

A

Aren’t eligible to discharge student loan debt until 7 years after terminated studies (before July 08, it was 10 years)

24
Q

options when in debt trouble

A
  • Negotiate with creditors
  • Debt consolidation loan
  • Credit counselling
  • Consumer proposal and bankruptcy
25
Q

the “new face” of bankruptcy

A
  • Well-educated, middle class baby boomers
  • 44% of population, have 59% of personal bankruptcies
  • Ages 40-44 years old
  • Increasingly women (since women are becoming more financial independent)
26
Q

debts that aren’t discharged

A
  • Court fines (ie. Traffic fines)
  • Bail bond
  • Alimony or child support
  • Debts incurred by fraud
  • Student loans if <7 years old
27
Q

youth: financial statements, budgets, and savings

A
  • majority (3/4) review financial statements monthly
  • majority (2/3) have a budget, but only (1/5) stick to it
  • majority (2/3) save money for the future
28
Q

youth: purpose of their savings

A
  • Buy a home
  • Education
  • Future in general or for emergencies
29
Q

debt of young Canadians

A
  • 50% say they have as much or more than they can handle

- Key debts are from credit cards and student loans

30
Q

how young Canadians cope with debt

A
  • Borrowed from family
  • Borrowed from friends
  • Used credit cards
31
Q

young Canadians and finances

A
  • Most young people have sole responsibility for managing their finances
  • Most believe they have at least a fair understanding of personal financial matters
  • Most think they do a good job of managing
  • Only 25% have had personal finance training
32
Q

gender and finances

A
  • Men generally know more about finances than women
  • Men and women approach finances differently (men think about numbers, women think about how finances affect them)
  • Well-educated women are more likely to take financial risks than non-educated women
33
Q

financial management vs. financial security

A
  • Financial management: science or practice of managing money or other assets
  • Financial security: ability to meet day-to-day obligations while planning, saving, and investing to achieve future financial goals (ie. Education, retirement, home ownership, etc.)
34
Q

Financial management model

A
  • Planning: Identify financial goals -> collect info -> analyze resources -> decide
  • Action: Spend, invest, save
  • Post-planning: Evaluate
35
Q

budget

A
  • spending plan or guide
  • Comprised of variable expenses (ie. Money spent on clothes, food, and entertainment) and fixed expenses (ie. Money spent on rent and car payments)
36
Q

business cycle

A
  • Recession: moderate and temporary decline in economy
  • Recovery: hopeful stage when things are looking better - consumer buying is up, employment is up, new homes are being built, etc.
  • Expansion: prosperity, high growth, an active economy, and a high employment rate
37
Q

level of living vs. standard of living

A
  • Level of living: measure of the goods and services affordable by and available to them
  • Standard of living: what an individual or family aspires to
38
Q

gross domestic product

A

total market value of all goods and services produced by a nation during a specified period (usually a year); household production is not included in this

39
Q

income vs. tax vs. income tax

A
  • income: amount of money or its equivalent received during a period of time; main source is salary
  • tax: compulsory levies that are an important source of government revenue
  • income tax: personal tax levied on individuals or families on the basis of income received
40
Q

types of income

A
  • Discretionary income: income regulated by one’s own discretion and judgment
  • Disposable income: the amount of take-home pay left after all deductions are made for benefits, taxes, contributions, and so on
  • Gross income: all income received that is not legally exempt from taxes
  • Psychic income: how one feels about income; the satisfaction derived from income
  • Real income: income measured in prices at a certain time, reflecting the buying power of current dollars
41
Q

where do people spend their money (after taxes; most to least)

A
  • housing
  • transportation
  • food
  • health/personal care
  • recreation, clothing, etc.,
  • this distribution depends on income (ie. Lower-income people spend more on food)
42
Q

net worth

A

subtracting liabilities (what is owed) from assets (what is owned)

43
Q

how to meet monthly expenses

A
  • Make more money (income)
  • Reduce expenses (outflow)
  • Sell something, downsize
  • Combine all of the above
44
Q

emergency fund

A

saving up 3-6 months’ worth of income in case of emergencies

45
Q

annual percentage rate

A

average yearly rate of interest paid over the life of credit or a loan (if in debt, cards with the highest APR should be paid off first)

46
Q

Fair Credit Reporting Act vs. Equal Credit Opportunity Act

A
  • Fair Credit Reporting Act: you have the right to receive a copy of your credit report (includes FICO/credit score)
  • Equal credit opportunity act: prevents a lender from discriminating against a person in any aspect of credit transaction because of race, sex, age, etc.
47
Q

debit

A

using money from the funds you already have rather than borrowing additional money

48
Q

liquidity

A

the speed and ease of retrieving cash or turning another type of investment into cash

49
Q

investment

A
  • commitment of capital to the achievement of long-term goals or objective
  • As you age, you tend to go for less-risky investments, as you don’t have a lot of time to regain any lost money
50
Q

types of investments

A
  • Stocks: represent ownership in a company
  • Bonds: investments in which a person lends money to an organization (such as the government) in exchange for interest or dividends
  • Mutual funds: groups of stocks, bonds, or other securities managed by an investment company – allow for diversification
  • Real estate, retirement plans, collectibles, etc.
51
Q

diversification

A

having a mix of investments as a way to spread risk across several categories

52
Q

insurance

A

financial arrangement where people pay premiums to an insurance company that reimburses them in the event of loss or injury; its purpose is to protect people and financial assets

53
Q

who has highest expenses?

A

People between ages 45-54 have highest median income, but also highest expenses (as they’re often paying for their kid’s college and saving for retirement)

54
Q

7 categories of childrearing expenses (most $ to least)

A
  • Housing (30-40%)
  • Food
  • Transportation
  • Miscellaneous
  • Education/childcare
  • Clothing
  • Healthcare
55
Q

3 main financial styles of college students

A
  • Drifters: least accepting of parents’ styles; exploring, but not committed to a personal style, average in knowledge, worst behaviours (30%)
  • Followers: characterized as most accepting of parents’ styles, most unconcerned about developing personal style, had better knowledge and behaviours than drifters (39%)
  • Pathfinders: Low in accepting parents’ styles, most committed to personal style, and best in knowledge and behaviours (31%)
56
Q

gender gap vs. earnings gap

A
  • gender gap: difference in earnings between men and women employed full-time outside the home (less of a gender gap between younger men and women than older ones)
  • earnings gap: exists because of gender gap and because women tend to work for fewer years than men (usually due to caregiving responsibilities)
57
Q

glass ceiling

A
  • women being unable to move up into high level positions

- Can be due to employers and to women themselves (who have lower expectations before entering job market)

Family Studies 238 (15 decks)

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