Don't Break the Bank: A Student's Guide to Managing Money (7 page)

You may have heard the expression “not keeping up with inflation.” People often say this when talking about how their pay has not risen enough to keep up with the increased cost of living due to inflation.

A good tool to see what kind of “buying power” a certain amount of money in a given year would have today is the CPI (Consumer Price Index) Inflation calculator at
http://data.bls.gov/cgi-bin/cpicalc.pl

Money Around the World

If you travel outside of the United States, you most likely will not be able to use American money. One solution is to buy traveler’s checks. You can buy them here and then use them in other countries. The good thing about traveler’s checks is they can be replaced if they are lost or stolen.

Another option, and one that is becoming increasingly popular these days, is a Prepaid Travel Card. This works just like an ATM/check card, but it offers the protection of traveler’s checks. You can purchase a Visa or MasterCard® travel card before you leave the United States and then use it at merchants or ATMs just like an ATM/check card. The beauty of such cards is that they are prepaid—so you know exactly how much money you have to spend—and they generally offer the security of replacement if stolen.

Another option is to exchange your U.S. currency for the local currency of the place where you will be traveling. You can do this by locating a monetary exchange center at the airport when you arrive. You may also be able to exchange U.S. currency at a large U.S. bank or monetary exchange center in the airport before your flight departs.

While overseas, you should be able to get cash from an ATM machine. If you use a large bank that has an office/bank in the country you’re visiting, you should have no problems getting cash in the right currency from the ATM. Otherwise, keep in mind that when you withdraw cash from an ATM, you’ll probably be charged a service fee. Also, be sure to alert your U.S. bank BEFORE you travel, and let them know which countries you will be visiting. That way, if you do need to use an ATM, you won’t be denied access to your account—without notification, there’s a good chance your bank might think someone has stolen your card and is using it in another country.

You can find the current exchange rate for different locations worldwide at XE.com:
http://www.xe.com/ucc/
. Here are some of the major units of currency used around the world:

•
Euro:
(symbol:
; code: EUR)

•
British Pound:
(symbol:
£
; code: GBP)

•
Mexican Peso:
(symbol:
$
; code: MXN)

•
Japanese Yen:
(symbol:
or
, en; sign:
¥
; code: JPY)

•
Chinese Yuan Renminbi (RNB):
sign:
¥
; code: CNY; also CN
¥
,
and CN

Global Money Math Challenges

Let’s practice some global money skills. You are travelling to some popular tourist spots around the world, and you need to figure out if you have enough money to buy the souvenir or other item you want. You will need to know the exchange rate—what the currency in one country is worth in the local currency of another country. We’ve provided the exchange rate (current when we wrote this chapter but no doubt different now). You need to determine if you can buy what you want. (
See below for the correct answers!
)

Scenario 1: Your school band is on a trip to Great Britain. Today, you’re touring London.

[Current exchange rate: 1 US Dollar (USD) = 0.63 GBP (British Pounds) or 1 GBP = 1.5635 USD]

After watching the changing of the Royal Guard, you spend some time staking out the neighborhood near Buckingham Palace but are disappointed that you don’t spot a single royal. However, you do see a gold-plated miniature replica of Big Ben in a souvenir shop. It costs 11 British Pounds. You have $20.

Scenario 2: The French Club is on a trip to France, and your first stop is Paris.

[Current exchange rate: 1 USD = 0.748
(Euro) or 1 EUR = 1.3365 USD]

You are strolling around the boulevards in Paris. While gazing at the Eiffel Tower, you nearly walk by a tiny boutique, but a colorful silk scarf in the window catches your eye. The scarf costs 45 Euro. You think about how much you budgeted for this trip, and you realize that after your expensive, but delicious dinner last night, you can only afford to spend a maximum of 50 U.S. dollars. Can you purchase the scarf?

Scenario 3: Your best friend invites you on to go on their family vacation to Cancun, Mexico!

[Current exchange rate: 1 USD = 13.5079 Mexican Pesos (MXN) or 1 MXN = 0.07403 USD]

You’re in Cancun and are browsing the popular open air flea market in the center of town. You want to buy a leather belt that costs 300 pesos. You remember seeing a similar belt for $20 in a store back home. Will this belt cost you less than that one?

ANSWERS
:

Scenario 1: The correct answer is YES, you can buy the souvenir.

11 GBP = 17.1983 U.S. dollars

Cheerio! You have enough money, with a little change to spare.

Scenario 2: The correct answer is NO.

45 Euro = 60.093 US dollars

You will have to say, “Pardon moi.” (“Excuse me” or “I’m sorry.”) You won’t be able to buy the scarf, since you only can spend the equivalent of 37.4427 Euro.

Scenario 3: The correct answer is NO.

300 Pesos = 22.1707 US dollars

The belt costs more money than the one you saw in the store back home. But haggling is commonplace—and usually expected—in flea markets in Mexico, so you should be able to negotiate and get that belt for less than 20 US dollars.

Other Forms of Currency

These days, currency isn’t just limited to the type of money that involves paper bills and coins. Lots of transactions occur with different forms of payment.

Gamer Currency: Currency for a Virtual World

Gamer currency is where you pay real money for items in a game or virtual world. (You may also use it to buy a membership or access to play the game.)

Major gaming console systems use points as currency with which you can buy in-game items or the games themselves. For example, the Wii allows you to use Wii points to buy access to older Nintendo games that you can then play on your Wii.

Microsoft sells Xbox points that you can use to buy things like extra songs for your Rock Band playlist.

Zynga, Inc., which makes several games that are played through Facebook®, sells credits that you can use to buy things like farm equipment in the FarmVille game.