MONEY TIPS FOR YOUR FIRST JOB

As young people get their first full-time job with a substantial paycheck, their money management activities need to be reconsidered, which include: 

1. Automate your savings. For unexpected expenses and major purchases, set aside a specific percentage or amount of your income from every paycheck. These funds should be directed to one or more dedicated accounts.  

2. Make use of different accounts. This money management strategy can help you plan for different savings goals and can prevent spending money planned for a specific purpose. Consider using a checking account to pay regular expenses, along with one or more savings accounts.

3. Start retirement saving. Start with 3 to 5 percent of your gross income, increasing to 15 percent as soon as you get raises and bonuses. These funds may be in a company-sponsored 401(k) or a personal IRA or Roth IRA.

4. Pay off debt. If you have college debt, create a plan to pay it off, especially credit card debt. Set a goal to become debt free in your 20s.

5. Practice wise spending. Minimize your transportation, housing, and clothing expenses.

For additional information on money tips for your first job, click here.

Teaching Suggestions

  • Have students talk to others to obtain money management suggestions to implement when completing college and starting work.
  • Have students create a personal plan for improved money management.

Discussion Questions 

  1. Why do people start taking on more debt when starting work?
  2. Describe money management actions you might take as you complete college.
Categories: Career, Career_Appendix, Chapter 1, Chapter 2, Financial Planning | Tags: , , | Leave a comment

Cryptocurrency Investments Scams

Consumers reported losing over $1 billion to fraud involving cryptocurrencies from January 2021 through March 2022, according to a new analysis from the Federal Trade Commission. Fraud reports suggest cryptocurrency is quickly becoming the payment of choice for many scammers, with about one out of every four dollars reported lost to fraud paid in cryptocurrency.

People ages 20 to 49 were more than three times as likely as older age groups to have reported losing money to a cryptocurrency scam. Older age groups, however, reported losing more money when they did report a cryptocurrency-related scam.

Some of the red flags consumers should watch out to protect themselves from scammers`:

  • anyone who claims they can guarantee profits or big returns by investing in cryptocurrency;
  • people who require you to buy or pay in cryptocurrency; and
  • a love interest who wants to show you how to invest in cryptocurrency or to send them cryptocurrency.

The FTC’s latest Consumer Protection Data Spotlight finds that most of the cryptocurrency losses consumers reported involved bogus cryptocurrency investment opportunities, which totaled $575 million in reported losses since January 2021. These scams often falsely promise potential investors that they can earn huge returns by investing in their cryptocurrency schemes, but people report losing all the money they “invest.”

After cryptocurrency investment schemes, the next largest losses reported by consumers were on:

  • Romance Scams: These scams often involve a love interest who tries to entice someone into investing in what turns out to be a cryptocurrency scam.
  • Business and Government Impersonation Scams: Reports show these scammers often target consumers by claiming their money is at risk because of fraud or a government investigation and the only way to protect their cash is by converting it to cryptocurrency.

Reports suggest that cryptocurrency-related scams often begin on social media. Nearly half of consumers who reported a cryptocurrency related scam since 2021 said it started with an ad, post or message on a social media platform.

For more information, click here.

Teaching Suggestions

  • Ask students to make a list of the red flags consumers should watch out for to protect themselves from scammers.
  • Ask students if they, their families or friends have become victims of cryptocurrency fraud.  If so, what was the outcome?

Discussion Questions

  1. Why is cryptocurrency quickly becoming payment of choice for many scammers?
  2. Why do most cryptocurrency-related scams often begin on social media?
  3. What might be some reasons that people ages 20 to 49 were more than three times as likely as older age groups to have reported losing money to cryptocurrency scams?
Categories: Chapter 4, Frauds and Scams | Leave a comment

Beware of Credit-Repair Scams

According to the Federal Trade Commission (FTC), Financial Education Services (FES) has bilked people out of more than $213 million with a scheme that combines charging people for worthless credit repair services and recruiting them to sell the same bogus services to others.  FES also does business as United Wealth Services.

FES claims it can boost people’s credit scores by hundreds of points quickly by permanently removing negative information from their credit reports and adding positive information. But the FTC says FES’s services accomplish little or nothing. For example, FES sends clients form letters to send to credit bureaus to dispute negative items, but the letters don’t include supporting documents so they rarely result in removal of the items.

The complaint says FES charges people $99 up front for its services, plus up to $89 each month. It’s illegal for a credit repair company to charge people before fully performing the services it promises. Also, the complaint alleges, FES doesn’t give people important information they’re entitled to by law, including written information about the total cost of its services and its refund and cancellation policies.

According to the complaint, FES also pressures people to become FES “agents,” telling them they can make tens of thousands of dollars a month selling FES services to other consumers and recruiting them to become FES agents themselves. But, the FTC says, FES’s purported business opportunity requires its agents to pay hundreds of dollars to join and advance in the business. And, the FTC alleges, in classic pyramid scheme style, FES incentivizes recruiting new agents over selling credit repair services. The complaint charges that few people, if any, make the income promised, and many lose money as FES agents.

If you want to repair your credit, Fixing Your Credit FAQs has information about building your credit and spotting scams. And, if you’re thinking about investing in a business that requires you to recruit other investors, read this information about spotting a pyramid scheme.

For more information, click here.

Teaching Suggestions

  • Ask students to make a list of the legal steps to take to improve their credit scores.
  • What are the legitimate resources for low-cost or no cost help to repair your credit?

Discussion Questions

  1. Is it possible for you to boost your credit score by hundreds of points quickly by permanently removing negative information from your credit reports and adding positive information?  Explain your answer.
  2. Discuss the statement: “Sometimes doing it yourself is the best way to repair your credit.”
  3. What is one of the most important step you can take to improve your credit score?
Categories: Chapter 5, Credit Scores, Frauds and Scams | Tags: , | Leave a comment

The Future of Social Security

In June 2022, the Social Security Board of Trustees released its annual report on the financial status of the Social Security Trust Funds. The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to become depleted in 2035, one year later than projected last year, with 80 percent of benefits payable at that time.

The OASI Trust Fund is projected to become depleted in 2034, one year later than last year’s estimate, with 77 percent of benefits payable at that time. The DI Trust Fund asset reserves are not projected to become depleted during the 75-year projection period.

In the 2022 Annual Report to Congress, the Trustees announced:

  • The asset reserves of the combined OASI and DI Trust Funds declined by $56 billion in 2021 to a total of $2.852 trillion.
  • The total annual cost of the program is projected to exceed total annual income in 2022 and remain higher throughout the 75-year projection period.

“It is important to strengthen Social Security for future generations. The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually,” said Kilolo Kijakazi, Acting Commissioner of Social Security. “Social Security will continue to be a vital part of the lives of 66 million beneficiaries and 182 million workers and their families during 2022.”

Other highlights of the Trustees Report include:

  • Social Security paid benefits of $1.133 trillion in calendar year 2021. There were about 65 million beneficiaries at the end of the calendar year.
  • During 2021, an estimated 179 million people had earnings covered by Social Security and paid payroll taxes.
  • The cost of $6.5 billion to administer the Social Security program in 2021 was a very low 0.6 percent of total expenditures.
  • The combined trust fund asset reserves earned interest at an effective annual rate of 2.5 percent in 2021.

For more information, click here.

Teaching Suggestions

  • Ask students if they or their family and friends are concerned about the future of Social Security?  If so, what are their concerns?
  • Ask students to make a list of documents they will need to establish their social Security account.

Discussion Questions

  1. What might be some reasons for the asset reserves to decline by $56 billion in 2021?
  2. Do you agree that Social Security will continue to be a vital part of the lives of 66 million beneficiaries and 182 million workers and their families during 2022?  Why or why not?
  3. What percent of individuals age 65 and older would live in poverty without Social Security benefits?
  4. Would it be better for you to start getting benefits early with a smaller amount for more years, or wait for a larger monthly payment over a shorter time period?
Categories: Chapter_14, Retirement Planning | Tags: | Leave a comment

Preparing for Hurricanes

In 2022, the National Oceanic and Atmospheric Administration (NOAA) predicted that 14 to 21 named storms would develop over the Atlantic Ocean during the hurricane season, which runs from June through November. The agency said there could be six to 10 hurricanes including three to six major hurricanes.  Colorado State University experts forecast 20 named storms this year with 10 becoming hurricanes, including five major hurricanes. The good news is that we have time to prepare.

Here are some tips to protect your home and belongings:

  • Consider buying flood insurance. Flood damage isn’t covered by your home insurance. Don’t wait too long: It typically takes 30 days for flood policies to take effect.
  • Write a family disaster plan. Start on the TexasReady.gov website
  • Decide where and how far you’ll go if you evacuate.
  • Build a “go-kit” with food, medicine, clothes, pet food, and other vital supplies.
  • Make a room-by-room home inventory. This could help later if you file a claim with your insurance company.

For more information, click here.

Teaching Suggestions

  • Ask students to search for flood maps at FEMA’s Flood Map Service Center.  Is their area prone to hurricanes and floods?
  • Ask students to use FEMA’s Historical Flood Risk and Cost data to help evaluate the flood risk in their area.
  • Ask students to talk to their home insurance agent about their need for a flood insurance policy from the National Flood Insurance Program.  (If their agent does not sell flood insurance, call 1-800-427-4661.)
  • Ask students if their families are prepared for the hurricane season?  What preparation have they made, if any?

Discussion Questions

  1. Is flood insurance worth its cost?  Who must purchase flood insurance?
  2. Why isn’t flood damage covered by a standard home insurance policy?
  3. Why are flood maps difficult to keep up to date?
  4. What factors determine the cost of a flood insurance policy?
Categories: Chapter 8, Home Insurance | Tags: , | Leave a comment

STUDENT MONEY SURVEY

Limited knowledge of personal finance and weak financial literacy skills are some of the concerns expressed by college students in a survey conducted by WalletHub. Findings in this study included:

  • Nearly all (93 percent) of the students surveyed expressed concern about the economy.
  • After graduation, the two major worries of students are not finding a job (36 percent) and educational loan debt (30 percent).
  • One-fifth of students expressed a belief that a college education is less important since the COVID-19 pandemic.
  • About half (52 percent) of the students responding voiced a concern that they were not learning enough about personal finance in school.
  • As a result of the pandemic, the three major financial lessons learned were: (1) having emergency savings (44 percent); (2) not going into debt (23 percent); and (3) having a steady job (22 percent).

Some suggestions to address these concerns include:

  • Financial anxiety can be reduced with simple personal finance actions: track your spending, cut back on unnecessary items, shop wisely, maintain a workable budget, pay off debts, and increase the amount in your emergency fund. Most importantly, emphasize the enjoyment of your connections and relationships with family and friends rather than on material items. 
  • Various career paths may not require a college degree; consider online courses, certification programs, trade schools, and other educational/training options.
  • Be creative in your savings efforts with: (1) saving $5 a day instead of $150 a month; (2) using “no buy” days to save money; (3) paying for your drinks (or snacks) at home by set­ting aside the “price” in savings; (4) visualizing a savings goal and budget categories with a photo or post-It notes as a reminder; (5) create, or locate onlinea poster that displays savings and debt categories to track your progress; (6) placing your credit card in a bag or container of water and place it in the freezer to avoid impulse purchases, then defrost it under warm water when you need to pay for an emergency.
  • When applying and interviewing, clearly communicate the connection between your skills and experiences with the current and future needs of the job position and company. This requires strong research of the company and industry trends but will allow a person to better connect with their prospective employer. Also, be ready to talk about research projects, team experiences, and creative problem-solving.
  • Although an increased number of personal finance classes are becoming available in schools, also seek out financial literacy education through community-based workshops, church outreach programs, and neighborhood organizations.

This research was the result of a nationally representative online survey of over 250 respondents. Responses were normalized so the sample would reflect U.S. demographics.

For additional information on the student money survey, click here.

Teaching Suggestions

  • Have students talk to others to determine if their opinions are similar to those presented in this article.
  • Have students create a role-playing drama that communicates actions to avoid various personal financial difficulties and career planning mistakes.

Discussion Questions 

  1. Which of the survey results are similar to your current attitudes and experiences?
  2. What additional money and career topics not covered in this survey do you believe are of current concern for students and others?

Categories: Career_Appendix, Chapter 1, Chapter 2, Financial Planning, _Appendix B | Tags: , , | Leave a comment

SECOND CHANCE BANKING

Several groups in our society are unable to open a checking account and access other banking services because of past life circumstances.  To help address this situation, financial service providers are offering second chance banking. This program is designed to provide financial opportunities to unbanked individuals and formerly incarcerated people.

Second chance banking involves a special checking account that doesn’t require a background check of a person’s past banking history. This account has limited features to minimize potential fees and no minimum balance. For those who lack a US ID or Social Security number, a foreign ID or passport is accepted to access this service.

A major goal of second chance accounts is to build banking credibility.  Once reliability is demonstrated over time, a person is then able to open a regular checking account. These accounts have a positive impact in low-income communities, where customers traditionally pay higher bank fees resulting in their account often being closed by the financial institution due to overdrafts.

In addition to making banking available to unbanked and underbanked consumers,

second chance banking also serves as an important step in financial freedom for formerly incarcerated people. A high percentage of these individuals were unbanked prior to their confinement, lack proper identification, or denied banking services due to their criminal history. Some who previously had an account may have had it closed due to inactivity or extensive fees.

The program also involves financial education to help a person build credit, save money, and achieve financial independence. A wide variety of banks, credit unions, community development financial institutions, minority depository institutions, and community-based non-profits are involved in second chance banking.

For additional information on second chance banking, click here.

Teaching Suggestions

  • Have students talk to others to learn about difficulties they may have encountered with banking services.
  • Have students create a visual summary (poster or slide presentation) to communicate how banking services are related to successful money management and financial planning.

Discussion Questions 

  1. What are benefits of second chance banking for individuals, their community, and society?
  2. Describe actions you would recommend to a person in need of obtaining a bank account. 
Categories: Chapter 4, Financial Services | Tags: , | Leave a comment

OVERCOMING INFLATION

With inflation, you will not be able to avoid higher prices. However, there is one action you can take that will not be affected by inflation. As advocated by legendary investor Warren Buffet, one of the strongest protections against inflation is investing in yourself. Obtaining additional career skills and improving existing ones will keep you in demand.

These added skills, unlike a lower value of the dollar, are inflation-proof. Various career abilities will be in demand no matter what the dollar is worth. These competencies can’t be taken away from you, and this investment in yourself is not taxed.

As a business owner or investor, the advice is similar. Offer a top-level product or service that will be in demand even in times of inflation. As noted by Buffet: when inflation is high the best thing you can do is be exceptionally good at something.

For additional information on an inflation strategy, click here.

Teaching Suggestions

  • Have students talk to others to learn about the actions they have taken in their lives to enhance and expand their career skills.
  • Have students research online sources available for free and low-cost classes and certification programs to enhance a person’s career skills.

Discussion Questions 

  1. What actions are you taking to enhance or expand your career skills?
  2. What are examples of exceptional products or services that might be in demand even in times of inflation?
Categories: Career, Chapter 1, Chapter 2, Financial Planning, _Appendix A, _Appendix B | Tags: , , | Leave a comment

MORE HAPPINESS FROM YOUR FINANCES

At some point, most people realize that “money can’t buy happiness.”  However, through wise use of your financial resources, reduced stress and increased joy are possible.

To enhance your personal enjoyment and satisfaction of life, consider these questions and actions:

  • What spending from the past year do you remember with a smile? Which did you regret? Use those memories to guide current spending.
  • When during your life were you happiest? Think about what made you happy, and if money was needed for those times.
  • What household chores do you dislike? Paying others to mow the lawn, clean house, or make dinner can increase happiness.
  • Should you consider spending more time with family and friends?  Most activities and experiences provide greater joy when you do them with others.
  • Do you live near or associate with people who make you feel poor?  Avoid comparing your spending and possession to others. Trying to spend to keep up with others will likely reduce your happiness.
  • Are you grateful for things that don’t cost money?  Emphasize an attitude of gratitude for your family, friends, community activities, and other relationships. Instead of thinking about what you don’t have, stress the opportunities available for your enjoyment of life.

For additional information on happiness and money, click here.

Teaching Suggestions

  • Have students talk to others using the questions above to learn more about the connection between money and happiness.
  • Have students create an audio or video drama to communicate the positive and negative aspects of money trying to buy happiness.

Discussion Questions 

  1. How do enjoyment, satisfaction, and purpose in your life connect to your spending habits?
  2. Describe actions a person might take to better understand the connection between money and happiness.
Categories: Budget, Chapter 1 | Leave a comment

Is a credit freeze or fraud alert right for you?

Credit freezes and fraud alerts can help reduce your risk of identity theft. Both are free and make it harder for identity thieves to open new accounts in your name. One may be right for you.

Credit freezes

A credit freeze is the best way you can protect against an identity thief opening new accounts in your name. When in place, it prevents potential creditors from accessing your credit report. Because creditors usually won’t give you credit if they can’t check your credit report, placing a freeze helps you block identity thieves who might be trying to open accounts in your name.

A freeze also can be helpful if you’ve experienced identity theft or had your information exposed in a data breach. And don’t let the “freeze” part worry you. A credit freeze won’t affect your credit score or your ability to use your existing credit cards, apply for a job, rent an apartment, or buy insurance. If you need to apply for new credit, you can lift the freeze temporarily to let the creditor check your credit. Placing and lifting the freeze is free, but you must contact the national credit bureaus to lift it and put it back in place.

Place a credit freeze by contacting each of the three national credit bureaus, Equifax, Experian, and TransUnion. A freeze lasts until you remove it.

Fraud alerts

A fraud alert doesn’t limit access to your credit report, but tells businesses to check with you before opening a new account in your name. Usually, that means calling you first to make sure the person trying to open a new account is really you.

Place a fraud alert by contacting any one of the three national credit bureaus. That one must notify the other two. A fraud alert lasts one year and you can renew it for free. If you’ve experienced identity theft, you can get an extended fraud alert that lasts for seven years.

Learn more about credit freezes, fraud alerts, and active duty alerts for service members. And, if identity theft happens to you, visit IdentityTheft.gov to report it and get a personal recovery plan.

For More Information, click here.

Teaching Suggestions

  • Ask students if they, their friends or relatives have placed a credit freeze or a fraud alert.  If so, what has been their experience?
  • Ask students to make a list of downsides to a credit freeze and to fraud alerts.

Discussion Questions

  1. What is the difference between a credit freeze and a fraud alert?
  2. Under what circumstance a credit freeze can be helpful?
Categories: Chapter 5, Credit Scores | Tags: | Leave a comment

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