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Money Smart News - Fall 2005

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Money Smart Guides Families on Saving and Borrowing for Their First Home
Managing personal finances can be challenging for anyone…but especially for people who are just beginning to save and pay for their first home. That’s why the FDIC is reminding educators, bankers and housing counselors about how the Money Smart financial education program can help adults of all ages, especially those from low- or moderate-income families, live a better, safer life in their own homes.

“Financial education programs such as Money Smart can do so much to promote homeownership simply by taking some of the mystery out of saving money and shopping for a loan,” said Lee Bowman, the agency’s National Coordinator for Community Affairs. “For many people, getting a basic financial education is the first step along the path that eventually leads to their own front door.”

Added Tom Stokes, the FDIC’s Community Affairs Officer in Atlanta, “The basics of budgeting, saving and establishing a good credit record are essential to getting your financial house in order, and Money Smart covers those topics in clear and simple terms. Even housing counselors who use another financial education program will comment on how they still use Money Smart handouts on a regular basis.”

Money Smart – both the program designed for the classroom and the interactive computer-based version for use any time and anywhere -- consists of 10 “modules” (training sessions). However, the “Your Own Home” module provides the most information to help people learn about and make decisions involving home buying. It includes:

  • Descriptions of the substantial differences between renting and owning, plus questions to ask to be sure you’re ready to buy a home. “For many people, buying is the right way to go, but for many others renting may be a better choice,” explained Bowman. “Understanding the benefits of both renting and buying are vital to making what will probably be the biggest financial decision of your life.”
  • An overview of programs to help people become homeowners. A good example is the “Individual Development Account” created by Congress in 1998 to encourage low-to-moderate income people to save for homeownership (and other purposes) by allowing matching contributions, typically from a government agency, a non-profit organization or a financial institution. “IDAs are a great way to encourage and help someone save for a downpayment and closing costs, especially with those matching contributions providing more purchasing power,” said Stokes.
  • Guidance for figuring out the size of a mortgage payment someone can afford. For example, the curriculum helps people understand the cost implications of choosing a short or a long mortgage term or a fixed- versus a variable-rate loan. This is useful and timely information, especially given the growth and complexity of the new choices in mortgages, some of which may carry special risks. “We also know from our classroom experience that the topic of how much of a mortgage payment you can afford always brings out serious discussions about how and where to shop for the best deal,” added Bowman.

Other useful Money Smart modules for potential homebuyers include “Pay Yourself First” (how and why to save money) and “To Your Credit” (about the importance of maintaining a good credit history).

The FDIC is pleased to hear from partners in the private- and public-sector that Money Smart is making a difference in their education efforts for first-time home owners. Want examples? See the success stories published elsewhere in this issue of Money Smart News.

Last Updated 10/25/2005

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