Banking, Credit, and Debt
BeginnerBanking, credit, and debt form the backbone of personal financial management in the modern economy. Understanding how banking institutions work -- from checking and savings accounts to certificates of deposit and money market accounts -- is essential for managing money effectively. The FDIC insures deposits up to $250,000 per depositor per bank.
Credit is the ability to borrow money with the understanding that payment will be made later. The FICO credit score (300-850) is calculated from five factors: payment history (35%), amounts owed (30%), length of credit history (15%), new credit inquiries (10%), and credit mix (10%).
Debt management is a critical skill. Not all debt is equal: a mortgage or student loan at a low rate can be strategic, while high-interest credit card debt can spiral. The goal is not to avoid all borrowing but to use credit strategically.
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Learning objectives
- •Compare banking products and evaluate their features
- •Explain how credit scores are calculated and develop strategies for building credit
- •Calculate the true cost of borrowing using APR, compound interest, and amortization
- •Design a debt management strategy that minimizes interest costs
Recommended Resources
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Books
The Total Money Makeover
by Dave Ramsey
I Will Teach You to Be Rich
by Ramit Sethi
Your Score
by Anthony Davenport
The Index Card
by Helaine Olen and Harold Pollack
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