Table Of ContentPERSONAL FINANCE
PERSONAL FINANCE
Margaret Magnarelli
A M S C O
Amsco School Publications, Inc.
315 Hudson Street, New York, N.Y. 10013
About the Author
Margaret Magnarelli is a senior editor at Money magazine, where she writes and edits articles
on a wide variety of personal finance topics; she also blogs at Cnnmoney.com. Magnarelli
has previously worked at Good Housekeeping, Budget Living, and Seventeen magazines, and has
written for numerous other publications. She received bachelor’s and master’s degrees from
the Medill School of Journalism at Northwestern University.
Reviewers
Diane Charnov Donna Shepardson
Social Studies Department Chair Business Teacher
The Langley School Columbia High School
McLean, VA East Greenbush, NY
Louis M. DiCesare Lois A. Stoll
Business Teacher Family and Consumer Sciences Teacher,
Irondequoit High School Nationally Board Certified
Rochester, NY Benjamin Logan High School
Bellefontaine, OH
Kelley Gallagher-Vlosich
Instructor Jamie Walker
Economics America Center Business Teacher, Chair
Ashland University Oakwood Senior High School
Cleveland, OH Dayton, OH
Douglas Kramer
Teacher
Herricks High School
New Hyde Park, NY
Cover Design: Meghan Shupe
Cover Image: © Artifacts Images/Cultura/Corbis
Text Design: A Good Thing, Inc.
Composition: Sierra Graphics, Inc.
Line Art: Hadel Studio
Illustrations: Angela Martini
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When ordering this book, please specify:
either R 300 P or PERSONAL FINANCE.
ISBN: 978-1-56765-694-7 / NYC Item 56765-694-6
Copyright © 2011 by Amsco School Publications, Inc.
No part of this book may be reproduced in any form without written
permission from the publisher.
Printed in the United States of America
1 2 3 4 5 6 7 8 9 10 15 14 13 12 11
This book is dedicated to those who will use it—and to my husband, mother,
in-laws, and friends, who supported me while I was writing it.
PREFACE
Until now, you probably haven’t had to take full responsibility for your-
self financially. Most likely, it’s your parents who have worked hard in
order to pay for most of what you own, where you live, and other ex-
penses. If you’re lucky, you haven’t had to contribute much to the house-
hold. Any money you have made has been yours to keep—no bills to
pay, no obligations. A pretty sweet deal.
Unfortunately, that deal is about to expire.
In the next few years, you will take on more and more financial re-
sponsibility. Maybe you will head to college, or perhaps into the work-
force. Either way, you will have to make more financial decisions on
your own, and you will be in charge of your financial life. You may have
to pay for rent, utilities (such as electric, phone service, and Internet),
food, entertainment, transportation, clothes, or anything else you may
want or need. At college, you may pay for textbooks and supplies, your
parents may expect you to help with paying tuition, and you may even
have some loans in your name. No matter what your situation, you will
likely have to manage a checking account and a savings account, and
maybe one or more credit cards. You may find yourself purchasing some
expensive items on your own, like a new TV, a better car, furniture for
your apartment; and you will have to figure out how you’ll pay for them.
Financially speaking, you are becoming an adult. You’re embarking
on a major transition—one that comes with significant responsibility,
but also some liberating rewards.
This book is designed to prepare—and empower—you to deal with
what’s to come. These early years on your own will make a big differ-
ence in your financial future. Pay attention now, and you will be ready
for any money challenges that will come your way later. You’ll have a
better chance at ending up financially secure, and who wouldn’t want
that?
Consider yourself lucky: You’re going to graduate prepared to set off
on the road to financial security and wealth. Personal Finance isn’t just a
class—it is a roadmap for your life.
The Author
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CONTENTS
Chapter One: Financial Planning Basics 1
1.1 The Time Value of Money and Its Advantages 3
1.2 Assessing Your Current Financial Situation 11
1.3 How to Make Decisions and Set Financial Goals 16
Chapter Review 32
Chapter Two: Working and Earning 35
2.1 Factors That Affect Income 36
2.2 Researching and Planning for a Career 48
2.3 Understanding Taxes and Income 63
Chapter Review 73
Chapter Three: Budgeting, Banking, and Money Management 79
3.1 Budgets and Spending Plans 80
3.2 Understanding Banks and Bank Products 94
3.3 Using and Protecting Bank Accounts 102
Chapter Review 115
Chapter Four: Investing for the Future 121
4.1 The Risks and Rewards Investors Face 122
4.2 Where to Save and Where to Invest 133
4.3 How Taxes Affect Investment Returns 147
4.4 Protecting Investments 151
Chapter Review 156
Chapter Five: Using Credit Wisely 161
5.1 The Cost of Credit 162
5.2 Being Creditworthy 172
5.3 Using Credit Cards Wisely 178
5.4 Other Forms of Credit and Loans 189
Chapter Review 197
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x • Contents
Chapter Six: Managing Risk 201
6.1 Using Insurance to Manage Risk 202
6.2 Basic Insurance Needs for Young Adults 209
6.3 Other Types of Insurance 219
Chapter Review 227
Glossary 231
Internet Resources 245
Index 253
Acknowledgements 261
