Teaching kids personal finance from a young age

Personal finance isn’t an easy subject. Looking at the amount of debt the average American walks around with, it’s clear that money management is a bit of a struggle for many. Unfortunately, money management isn’t taught in schools. Ironically, it’s one of the most important lessons to learn in life. In this case, it’s important to teach your children the skills and habits of personal finance from a young age. When you teach children while they are young, they’re more likely to carry those habits and effortlessly manage money. Sure, it’s probably not a great idea to begin teaching the differences between stocks and dividends when your child is five, concepts like saving, investing and spending are great to teach.

Spending

Spending money is a natural part of life. As a living member of society, you will spend money. There are monthly expenses to keep the lights on and a roof over your head. There are also expenses like gym memberships, fine dining, and the occasional vacation. Teach children that it’s not a bad thing to spend money once they stay within a budget. A great way to teach the spending concept involves a fun toy they’d like. If your child receives an allowance each month, encourage them to start the month with three goals. One goal involves buying one particular item they’ve always wanted, whether it’s a toy, coloring book or a neat pair of shoes. Pick out the item and encourage them to make sure they have enough money to spend on the item. Make sure they remember to throw in a little extra for tax.

Saving

Within the allowance, there should be one jar that’s set aside for savings. The money that’s kept in savings is not to be spent. It’s important to make sure that whatever money goes into savings always remains there unless there is an absolute emergency. When a child gets into the habit of setting aside money without touching it at a later date, they become more comfortable with the concept of saving. Too many people use their savings as an additional checking account and dip into it whenever they feel like it. As the money grows in their savings jar, help them open an official savings account at a bank and continue to see their money grow. Whether your children use piggy banks, mason jars or official bank accounts, these are great ways to save money at earlier ages.

Investing

Investing is one of the more complex concepts, but it’s totally teachable to the little ones. A creative way to teach your children about investments could involve their favorite companies. Teach them that when a person purchases company stocks, this is an easy way to invest in a company. Whatever the company makes, the investor gets to earn a very small portion. Allow your children to pick out some of their favorite companies like McDonald’s and Disney. Each week, over a meal, you can make it a family practice of looking at the fluctuation of those particular stocks during the week. For many people, the thought of investing seems so complex and intimidating. This simple habit of looking at stocks will help children get the idea of investing in their mind and make investing seem a lot more approachable.

Getting these three habits into the regular routine of your children will make a tremendous difference in their financial experiences. Even if they make financial mistakes down the line, their financial foundation is built on solid ground and will help them get where they’d like to go.

Out of Network ATM Fees Hit All-Time High

According to Bankrate.com, the charge inflicted on banking customers who use out-of-network ATM fees is higher than ever, and continues to rise. The average fee now clocks in at $4.52, 4% higher than 2014’s average and 21% higher than the average out-of-network ATM fee in 2010.

This charge is enough to make consumers think twice about visiting a random yet convenient ATM outside of their banking network, especially when the amount to be withdrawn might only be $20. To access that $20 of your own money, you have to pay a fee of almost 25% – who wants to dish out those funds? Consumers may be tired of having to pay a bank in order to access their own money, but it doesn’t seem like the fees are going to decrease at any point in the future.

Banking Fees on the Rise

While this may come as a surprise to those who believe everything is more expensive in New York, Atlanta’s average fee – $5.15 – is the highest in the nation. New York comes in at a close second at $5.03. Phoenix, Miami and Milwaukee have the next three highest ATM fees reported, at $4.88, $4.84 and $4.78 respectively. San Francisco is the major city with the cheapest ATM fees, at $3.85.

While this is the ninth year in a row that ATM fees have risen, overdraft fees also continue to increase as well, as they have for 17 straight years in a row. Also, when Bankrate.com’s study examined the fees associated with non-interest checking accounts, they found only 37 percent of those accounts studied are actually fee-free. In 2009, 79 percent of these types of checking accounts were free. It’s clear that banks are adding fees left and right, then increasing the cost as time progresses – why?

What’s the Cause of the Price Increases?

After the financial crisis in 2008 and 2009, laws were passed to regulate the charges banks could inflict on consumers, specifically the costs charged to retailers when people pay for products with a debit card. So instead of being able to wring money out of the local businesses, banks pass the discrepancy in profit to the consumer. They might not be able to charge a business for your use of your debit card, so instead they charge you in roundabout ways.

As Usual, Lower Income Areas More Affected Than Others

While you may find it simple to just drive to your local bank and take out money in person or through your in-network ATM, not everyone has it that easy. People in low-income areas sometimes only have access to one or two local ATMs. When they need cash in a pinch, they are more likely to be hit with the high withdrawal fees you do your best to avoid. And unexpected high withdrawal fees charged out of necessity can lead to more overdrafts…putting more money in the bank’s pocket and taking it out of the consumer’s account. Lower income workers who live in an area with limited banking options will most likely continue to be the most affected by the hike in prices which seem to have no end in sight.

Millennial’s Financial Management Tactics Compared To Older Generation

Through a press release, the American Psychological Association stated that one common stress among all generations is financial concerns. They further revealed that while 85% of millennials cite money and job satiability as significant causes of stress, only 71% of the older generation views these factors as sources of stress. As a result, millennials seem to have different financial management factors compared to the older generation, as discussed below.

Technology and Online Platforms Are Important Sources Of Advice

In a report titled, Millennials and Wealth Management Trends and Challenges of the New Clientele, Deloitte stated that the past financial crisis and the volatility of the financial markets have made generation Y very cautions and conservative with regard to financial management. Compared to older generations, this generation ensures that it does adequate research before settling on any financial option.

Millennials heavily rely on technology for financial advice and subsequent decision making. As a matter of fact, the report showed that up to 57% of millennials would trade their bank relationship for better technological solutions- a trend that is not seen with older generations.

Risk-Aversion

The Deloitte report also showed that generation Y makes fewer financial risks compared to older generations. While generation X have deeply invested in stocks, less than 30% of millennials have chosen a similar path.  They mostly prefer physical assets and cash, consequently demanding only clear, simple and straightforward financial solutions.

The older generation have been trusting the government and financial institutions with their retirement benefits, a trend that generation Y finds rather too risky. As a matter of fact, 51% of millennials do not trust the social security systems for their retirement needs and instead look for other tangible options that banks are rolling out. Notably though, they still believe in retirement savings and actually save at least 13 years earlier than baby boomers for their retirement.

They Don’t Make Financial Decisions Alone

The older generation completely trust their financial advisers and act without second thoughts. Millennials on the other hand, seek classical investment advice and greatly consult their peers and the media before implementing their advisers’ recommendations.  Actually, only 10% of them make financial decisions without the input of media and peers.

They Are Self-Directed In their Investments

Generation Y is self-directed, posing to be more of a challenge to deal with than older generations. Millennials assume that they understand the markets and are well conversant with different products and trends. Contrastingly, and rather interestingly, 84% seek investment advice, indicating that they are indeed they in need of world class advice even more than the older generation.

Marrying Late

A Pew Research Center’s study showed that only 26% of millennials are married. This is a lower rate compared to older generations (36% of generation X and 65% of the silent generation)  when they were at a similar age bracket as today’s millennials.

The study suggested that the late marriage trend was a way of millennials managing their finances, since higher education and better careers promise greater financial security in marriage. Therefore, they take longer periods in school securing their future. Millennials with lower levels of education and income strongly stated that they believed that they lacked an essential prerequisite for a strong marriage.

Due to these observable differences, the current investment trends are increasingly turning out to be different compared to the past. As a matter of fact, the entire world has been affected, with current economic forces shifting from the previously dominant factors.

Adding Another Credit Card Help Your Finances

All you hear about is how credit cards are bad. From your mother to your uncle, all adults warn you away from the dangers of credit your entire life. You are indoctrinated. Then, you read personal finance blogs that tell you to always pay cash, for everything, all the time.

But what if credit cards weren’t as bad as you think? At least, not if you use them responsibly. What if applying for a credit card or adding another one could boost your credit score? Here are few instances where doing just that can help you, not hurt you, as long as you follow a strict set of rules.

1. Add Another Card to Increase Your Total Approved Credit

You don’t always have to apply for a credit card in order to buy something specific. You can apply for a card just to have one open. And having another credit card open can help your other accounts. Figure out your credit utilization ratio. If you currently have one credit card with a $5,000 limit, but you’ve charged $3,000 to the card and are only currently paying the minimums, you are using up over half of your available credit – that’s not good for your score. You need to try to reduce your credit utilization ratio to 30% or less. An easy fix is to apply for another card with a $5,000 limit and simply don’t charge anything to the account. All of a sudden, your total utilization ratio falls within the recommended limits, you look like a stronger borrower because you have more available credit, and you didn’t increase your debt load in the least.

2. Establishing a Varied History

By now you know that to raise your credit score, you’ve got to have something on your record. No credit equals bad credit in the eyes of lenders. So maybe you applied for one consumer credit account a long time ago. You’re not helping your case. Lenders look for longevity, but they also look for variance. Have you had success keeping many different types of credit accounts in good standing? Apply for a department store card to add a little variety to your record. You could see an increase in your score as a result.

3. Regular Use

What if you have a credit card, but you never use it? Then your account will go stagnant. With nothing to report to the credit bureau, how can you expect your score to go up just because you have an open card? If you don’t want to use the card you currently have, or you simply don’t think to use it, investigate getting another card that you WILL use. Maybe find a credit card that will give you points on gas purchases. Pay off the balance at the end of the week and you’ll never have interest fees, you’ll gain points that may be redeemable for cash and your credit score will increase. Get a credit card to your favorite clothing store. Use it to make purchases for which you already have the money. Whatever card you add, make sure it’s one you feel comfortable using on a regular basis in order to provide data that can help raise your credit score.

Don’t completely discount credit cards – they have their uses, and some of those uses can help you out in the long-term!

How to Finance Your Home Improvement Project

No matter how old your property happens to be, there’s a good chance that at some point, you’ll be faced with a pretty big home improvement project. Maybe you’ve got a basement waiting to be finished; or perhaps you’re looking to increase your space by building an addition. No matter the task at hand, the biggest impediment often comes down to money. Home improvements can be expensive, and unless you’ve got a wad of cash sitting around, you’ll need to find a way to finance your big endeavor. Here are some popular options for you to consider:

Credit Card

Just as you can charge your groceries and cell phone bill, so too can you use a credit card to finance a home improvement project. You may need to split the project among several cards depending on its cost and your credit limit, but the benefit is that you don’t need to go through a time-consuming application process or worry about getting rejected for a loan. As an added bonus, if your credit card offers rewards points or cash back, you can rack up a ton of those by charging a big project. The downside, however, is that credit cards tend to come with high interest rates. If you think you can pay off your balance fairly quickly, a credit card may be a good bet. But if you’re expecting it to take years to pay off that project, you may want to find a different way—otherwise those interest rates could come back to haunt you.

Home Equity Loan

A home equity loan is one that uses your property as collateral so that you’re borrowing against the value of your home minus the amount left on your mortgage. With a home equity loan, you’ll pay a fixed rate of interest, and whatever interest you pay is tax-deductible, which is a definite plus. On the other hand, you might face closing costs and other fees in obtaining your loan. You also run the risk of foreclosure in the event that you’re unable to make your loan payments as scheduled.

Home Equity Line of Credit

A home equity line of credit works like a home equity loan in that your property is used as collateral, but rather than take out a specific amount up front, you’re given access to a certain amount of money that you can withdraw at various points over time. The interest rate on a home equity line of credit is usually variable, which means it can increase down the line. On the plus side, any interest you pay is tax-deductible.

Refinancing

Another option for funding home improvements is to refinance your mortgage, take out a larger amount than what you need for your home itself, and receive the difference back in cash, which you can then use to pay for your project. You’ll pay closing costs, but if you’re eligible for a good rate, this may be the best way to go. In some cases, you may be able to refinance at a low enough rate that you’re essentially making the same monthly mortgage payment but now have additional cash to cover your project.

Before you start looking into your options for financing a major home improvement project, take the time to crunch some numbers and decide whether you’re better off updating your existing home or buying a new one. If your project is really expensive and complicated, it pays to see whether you can find a home with a slightly higher price tag that better meets your needs and doesn’t require quite as much work.