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Financial Literacy
Buying a Car. . .
Finance Options:Savings – Put a regular amount into a Bank Account each month. Expect to receive around 2.75% interest on your money.
Bank Loan – Borrow money from a bank. Expect to pay back over 12 – 60 months at an interest rate of around 7.7% APR.
Credit Card – No need to arrange the loan. Pay back a minimum amount each month. Expect to pay 17% - 22% interest on outstanding balance.
Family – Likely to be generous! May or may not expect you to pay back the loan/gift. Don't count on them for another handout next year – they have to pay bills too!
Important Terms:
APR: Annual Percentage Rate. This is the 'true' interest rate you will pay on money borrowed.
Savings Account: If you save money the bank will pay you interest.
Bank Loan: Borrowing money from a bank. Often 'secured' against the item you purchase.
Timeline Activity:
Summing it up. . . . .
Can you come up with a rule to decide which expenses are best met by saving and which by borrowing?
