Five Helpful Tips to Teach Your Children About Money – If you give your child the tools, saving will become a way of life.

Opening a savings account for your children or grandchildren is the perfect introduction to a bright financial future. Not only will they begin to accumulate savings, but they’ll learn lessons in managing their money as well. Parenting website PiedmontParent.com states, “Kids love money and are all ears to find out more about it. But surveys show fewer than one in five parents [is] confident enough to have the ‘money talk’ with their kids.”

Prosperity4Kids.com and PiedmontParent.com have some tips to help teach your children about money.

1. Money meetings matter. Kids are inquisitive and curious, which you can use to your advantage to have financial family meetings once or twice a month. At each meeting, ask your children what they would be interested in discussing or what money questions they might have. Then help answer their questions. Have some basic resources at your fingertips – perhaps a financial book such as Money Sense for Kids by Hollis Page Harman and a computer to do some quick research. These meetings can go a long way to empower your children financially and give them confidence. 

2. Budgets and goals. “Waiting for someday” is never a good plan when it comes to budgeting. For some, it’s always easier to spend hard-earned cash than it is to save it. Therefore, teaching your children how to create a budget can help them understand the importance of financial goals.

Setting up a simple budget can be both rewarding and fun for youngsters. MyBudgetPlanner.com offers inexpensive and colorful budget planners for kids and teens. Have your youngster set goals, such as saving a portion of his or her allowance to purchase a musical instrument and keeping the rest in a savings account.

3. Purchase costs and spending. NannyJobs.org states, “If you don’t buy something you have no idea how much it costs.” When you take the kids clothes shopping, give them a budget. Spend time with your children browsing for clothes and looking at the price tags. Discuss with them that they have $250 for clothes and shoes; if they spend $100 on fashionable shoes, they won’t have much left for clothes. Learning this concept firsthand can be a great wake-up call for your youngsters. 

4. Time is an asset. Your children have time on their side. If they start saving now, it can translate to wealth by the time they retire. Help them understand the importance of compound interest and saving money daily, weekly or monthly. The road to a solid financial future is by saving consistently throughout one’s life.

5. Foster career passion. Do your children have special talents or interests? Guiding and nurturing your children’s gifts at an early age can help them become adults who are passionate about their careers. Help your youngsters explore various interests and plan a career path incorporating their natural talents. Doing so will teach them that saving for their future can be a joy rather than a burden.

Begin teaching your kids about money when they are very young so that the concept of savings becomes second nature. If you have older children, it’s not too late to help them too. Talk to your financial institution about the best savings plan for your children.

The Truth about Advance Fee/Payday Loans: Consider the overwhelming fees and interest rates before you sign

There are weeks and even months when your normal paycheck doesn’t stretch quite far enough to meet all your financial obligations. During these times, you may consider a payday loan. Payday lenders use your last paycheck stub to determine your maximum loan amount; then you write them a personal check for the amount you are borrowing (plus a fee), and they hold that check until your payday.

While the concept of a payday loan might be appealing, the associated fees are definitely not. Bloomberg recently reported that payday loans can have interest rates as high as 521 percent (if the fees were calculated as an annual percentage rate). This shocking fee should be disclosed on your loan documents, as is required by the Federal Trade Commission (FTC).

The Real Problem with Payday Advances

Often, payday advances don’t actually solve the financial challenges faced by those who use them; instead, their exorbitant fees just leave the borrower short the following week, which starts a trend of weekly advances with the attached, unreasonable fees.

In addition, let’s say your paycheck comes through late or some charge you’ve forgotten about clears, and you don’t have enough in your account to cover the advance. Not only will your bank charge you a fee for insufficient funds, but the payday lender also will charge you a fee and penalties for late repayment. This creates a snowball effect of charges that may be almost impossible to cope with in the immediate future.

Ways to Avoid Payday Loans

To help would-be borrowers rather than create a dependency on a high-interest loan, the FTC suggests several alternatives to getting a payday loan, including the following:

• Obtain a small personal loan from your local financial institution that will pay off a debt and reduce your overall monthly bills. Be sure to compare rates and terms first, and check your budget to ensure that you can afford the payments. The goal is not to create more debt, but to allow the responsible creation of debt to help you control your monthly expenses and prevent the need for payday advances.

• Call your creditors and make payment arrangements that your paycheck can support without any advances. After making these arrangements, make sure you stick to them or you may trigger fees and invalidate the arrangement.

• Get credit counseling.

• Adjust your budget to get out of the paycheck-to-paycheck spending cycle. Make more short-term financial sacrifices in order to create a long-term financial situation you can be proud of.

To find out how we can help you get out of the payday loan cycle – or avoid it altogether – give us a call or stop by.

Planning for Retirement in Your Twenties: It’s never too early to start saving

When you’re in your 20s, you have many different financial objectives. Paying off student loans, saving for a home and starting a family may loom large on your financial horizon, while more distant issues, such as retirement, seem like minuscule dots on a completely different plane of existence.

Waiting to start saving for retirement can reduce your ability to live comfortably during your retirement years. And because Labor Department statistics show that 10.5 percent more individuals aged 65 through 69 were working in 2010 than in 1990, this is a lesson that can’t be learned soon enough.

A little now translates to a lot later

One of the distinct advantages of saving for retirement while you are in your 20s is that it takes very little in the way of contributions to make a very large difference in overall savings. Small amounts of money saved for long periods of time are able to accrue compounded interest and grow.

For example, let’s say you are able to save $100 per month between the ages of 20 and 30. Your money, placed in an IRA with a fixed investment like a CD, grows at 2 percent and is compounded (meaning the interest earns interest) monthly. By the end of the 10th year, you will have saved a total of $13,406.84. And even if you never save another dime in that account, and if it continues to earn 2 percent interest, it will grow to $24,551.85 in 30 more years.

Maximizing saving opportunities

Opening a Traditional or Roth IRA allows you some flexible tax-deferral or tax-free distribution options. But IRAs are not the only way to save for retirement. If your employer offers a 401(k) match, then you could effectively give yourself a raise by maximizing the contribution you must make in order to earn the match. And on top of the free money from your employer, both your contributions and your employer’s will grow based on the underlying investments you choose for your account. Making this election when you are in your 20s, when your income is lower than what you can expect to earn in your 30s and beyond, is a great way to help gain a competitive edge in saving for retirement without sacrificing your ability to pay off student loans and start a family.

While you can’t control who administers your employer’s 401(k) accounts, it’s important that you choose the right custodian for your IRA account. The ability to set up automatic deposits and invest in a variety of assets with varying levels of risk is important. Give us a call, and we can walk you through our retirement planning options and help you determine which type of investment is best for you.

Be sure to consult with a tax advisor or accountant about your specific situation, and be sure to contact us today if you have any questions about any other product that could help you meet your financial goals.

The Pros and Cons of Automatic Withdrawal: Things to consider before signing up.

According to a June 2011 report from the United States Department of Labor, Americans typically spend more than two hours per day on household maintenance duties such as cleaning, cooking and financial management. One way to cut down the amount of time you spend on managing your household’s finances is to set up automatic withdrawals for your monthly bill payments and savings contributions. But before you do, consider the pros and cons:

 

Pros

• Less credit card interest: Paying your credit card bills through automatic withdrawals can drastically reduce the amount of interest you pay on your balance if you can break your normal monthly payment down into weekly payments. This technique can also significantly reduce the amount you pay in home mortgage and auto loan interest and may even shorten the terms of your loans.
• Increased savings: When you set up an automatic withdrawal from your checking account to your retirement and other savings accounts, you ensure that the transfer is made and that the money is saved, allowing it to accumulate over the years and ensuring tax deductions for retirement account or health savings contributions. As with the example above, if you make contributions weekly rather than monthly, you can make an even bigger difference in your money’s ability to grow.
• Fewer late fees: If you set up your automatic withdrawals to occur well before your bills are due each month, you can ensure that late fees are not imposed as a result of simply forgetting to make payments. Not only does this protect your wallet, but it also preserves and improves your credit rating.

Cons

• Lost interest: When you pay a bill by check, it takes time for the check to arrive by mail and for the company to cash it. Meanwhile, your money sits in your account earning additional interest. Paying your bills through automatic withdrawal often removes the money immediately.
• Insufficient funds: If you do not have sufficient funds to pay an automatic withdrawal, the company that withdraws the funds may charge you a late fee for insufficient funds.
• Loss of flexibility: When you pay your bills online or by check, you have control over how much you send and when you send it. Automatic withdrawals remove much of this month-to-month flexibility, since, in order to take effect, changes may have to be requested several weeks in advance of a due date.

There is no single method of paying bills that works for all consumers. If you aren’t sure which approach will work best for you, stop by. We will be happy to discuss the options available and work with you to help create a solution to your bill-paying concerns.

7 Effective Strategies for Saving

The following recommendations are designed to help you establish and or grow your personal savings.

1. Pay Yourself First.

When you pay your monthly bills, write a check to yourself, first and put it in your savings account or use direct deposit into savings.

2. Don’t Borrow Additional Money to Pay off Debts or Bills.

3. Cut Expenses.

Get this number by analyzing your budget and determining where reductions can be made (e.g., eating out, buying snacks and lunch at work, going to the movies, etc.). Once you have determined how much you can cut, use this “found” money to pay down the balances on your debts.

4. Optimize Your Monthly Payment.

Pay the maximum amount towards your highest interest rate debts. Pay the minimum amount on all other debts.

5. Ask for Reduced Interest Rates.

Some creditors, especially credit card companies, will reduce your interest rates if you just call and ask. If you receive offers for other credits cards with lower interest rates in the mail, use those offers as leverage when you are re-negotiating your rates with your current creditors.

6. Set Goals and Priorities.

Determine what’s important. When you prepare to buy something ask yourself if this purchase is in line with the priorities you have set and will it help you reach your goal or delay it.

7. Check out the Website: http://www.quicken.com/saving/debt/

This site provides a free Debt Reduction Planner that allows you to determine the amounts you should be paying towards each of your debts and calculates the money you will save by paying your debts in the recommended order. Additionally, the program tells you when each of your debts will be paid off.

Find more money management & budgeting tips on our website.