PERSONAL FINANCE EDUCATION

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Common Sense Finance offers several personal finance focused education programs primarily through virtual settings. Some topics include:

Credit cards have the power to both be very beneficial for holders and extremely dangerous. People that use credit cards and consistently pay them off each month can receive rewards of 1.5% of purchases or more. People that do not pay credit cards off each month pay sizable late fees and crippling interest on carried balances and new purchases.

For the wealthy, debit cards represent a significant reduction in value compared to the credit cards as they typically do not have the same rewards and do not provide the same level of practical protection. For those who are not disciplined enough to spend only what they have, debit cards can still get users in trouble pretty fast as many cards allow for costly overdrafts that can raise the price of a Starbucks coffee from $4 to $43. Then the true danger kicks in as the large number of debit card transactions can multiply overdraft fees to hundreds or even thousands of dollars in a month. Debit cards also increase the risk that other standard transactions bounce as both the utility payment and the debit card transaction come out of the same bank account.

Short term debt such as pay day loans are necessary evils for some. They can bail someone out of a desperate situation, but also wreak havoc on their short and medium term financial health. Fees on payday loans could be $15 per $100 of borrowings for a two week loan, which amounts to about a 400% effective interest rate. Roll the funds over for another two weeks and pay another $15 fee per $100. It is easy to see how this can quickly cycle into financial ruin. According to the Center for Responsible Learning, 91% of all payday loans are made to borrowers caught in a cycle of repeat borrowing with five or more payday loans per year. 

Long term debt is common and has a valuable use in most people’s lives. Buying a house with cash is mostly reserved for the rich and upper middle class. Paying for college out of savings and through work is doable in some cases, but not necessarily the best use of time and resources for many. This portion of the training will focus on financing options, options to rework student loans to save money, and the value of negotiating or shopping around for the best interest rates. Putting a little extra effort upfront can sometimes save thousands of dollars in the long run.

The stock market is a scary and exciting place to be. One day one can be down hundreds or thousands of dollars and two days later the market has reversed and you are up. Gallup finds 58% of Americans reporting that they own stock, based on its April 2022 Economy and Personal Finance survey. Stock ownership is strongly correlated with household income, formal education, age, and race and is even correlated with gender and political affiliation. Common Sense Finance wants to demystify the stock market to participants, teaching the risks and rewards of the market; the difference between individual stocks, a mutual fund and an exchange traded fund; the role of diversification in a portfolio, how Wall Street makes money from investors and the various types of retirement vehicles. 

Middle and upper class people take banking for granted. Monthly fees are typically zero or small. Paychecks are directly deposited every pay period like clockwork. Checks are deposited via a phone at no cost. ATM fees at their bank are free. Debit card transactions clear without fees. Automated payments are setup for rent, utilities and even credit cards which means the risk of late payments are close to zero.

For many low income people, banking is a challenge. Bank accounts, if one has one, come with high monthly fees. Overdraft fees on debit card transactions and other payments are common and painful. For those without bank accounts, cashing paychecks costs 1%-5% of the check amount. Then they turn around and have to pay money order fees to make payments to the various vendors. Anything put on a prepaid card may carry its own fees. In addition to the direct financial penalties of not having a bank account, all of these transactions come with significant time losses and risk late fees for any payments missed in the process.