Protecting your credit during the coronavirus pandemic

Your credit reports and scores play an important role in your future financial opportunities. You can use the steps below to manage and protect your credit during the COVID-19 (coronavirus) pandemic.

Get a copy of your credit report

If you haven’t requested your free annual credit reports, you can get copies at AnnualCreditReport.com. Each of the three nationwide credit reporting agencies (also known as credit reporting companies) – Equifax, TransUnion, and Experian – allow you to get your report for free once every twelve months. You can request additional reports for a small fee if you’ve already received your free report. Be sure to check your reports for errors and dispute any inaccurate information.

If you can’t make payments, contact your lenders

Many lenders have announced proactive measures to help borrowers impacted by COVID-19. As with other natural disasters and emergencies, they may be willing to provide forbearance, loan extensions, a reduction in interest rates, and/or other flexibilities for repayment. Some lenders are also saying they will not report late payments to credit reporting agencies or waiving late fees for borrowers in forbearance due to this pandemic. If you feel you cannot make payments, contact your lenders to explain your situation and be sure to get confirmation of any agreements in writing.

Credit reporting under the CARES Act

The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act places special requirements on companies that report your payment information to credit reporting companies. These requirements apply if you are affected by the coronavirus disease pandemic and if your creditor makes an agreement (called an “accommodation” in the Act) with you to defer a payment, make partial payments, forbear a delinquency, modify a loan, or other relief.

How your creditors report your account to credit reporting companies under the CARES Act depends on whether you are current or already delinquent when this agreement is made.

  • If your account is currentand you make an agreement to make a partial payment, skip a payment, or other accommodation, then the creditor is to report to credit reporting companies that you are current on your loan or account.
  • If your account is already delinquentand you make an agreement, then your account will maintain that status during the agreement until you bring the account current.
  • If your account is already delinquent and you make an agreement, and you bring your account current, the creditor must report that you are current on your loan or account.

For more information, go to: click here.

Teaching Suggestions

  • Ask students if they have requested their free credit reports from Equifax, Experian, and Trans Union. If so, did they find any errors?  What did they learn from the credit reports?
  • Encourage students to request their credit reports if they have never obtained one from the credit reporting agencies.

Discussion Questions

  1. Why is it important to contact your creditors as soon as possible if you can’t make payments on time? What are the consequences if you don’t?
  2. What are the special requirements that the CARE Act places on companies that report your payment information to credit reporting agencies? Under what circumstances these special requirements apply?
Categories: Chapter 5, Credit Scores | Tags: | Leave a comment

Should you Pay Off Your Mortgage Early?

Traditional wisdom encourages you to pay off your mortgage faster by taking a 15-year mortgage instead of 30 years, or by paying an additional principal amount each month. However, these actions have risks. If you encounter financial difficulties and don’t have an emergency (reserve) fund, you could face foreclosure. Be sure your emergency fund has enough to cover several months of mortgage payments to avoid losing your home.

Some financial advisors suggest that if your reserve fund earns a rate greater than your mortgage rate (also taking into account tax benefits), you may decide to invest rather than pay down your mortgage. This approach could give more flexibility when encountering an economic downturn, which might include refinancing your mortgage at a lower interest rate.

Also, beware of organizations promising to help you make additional mortgage payments. You can do this on your own, without the fee they will likely charge.

For additional information on paying off your mortgage early, click here.

Teaching Suggestions

  • Have students talk to others about the benefits and drawbacks of paying off a mortgage early.
  • Have students develop a visual to compare paying off a mortgage early with saving and investing additional funds instead.

Discussion Questions 

  1. What are the benefits and drawbacks of paying off a mortgage early?
  2. Describe actions to take when trying to decide if to pay off a mortgage early.
Categories: Chapter 1, Chapter 7, Financial Planning, Home Buying | Tags: , | Leave a comment

Want a retail store credit card?

Retail store cards are credit cards that can be used only in a single store or at an affiliated group of stores. Like other credit cards, a store card will show as a line of credit on your credit report.

The advantage of these cards is that they tend to be easier to get, even if you have a poor or limited credit history. If you’re able to make consistent and on-time payments, a retail store card can be one way to help you build or improve your credit .

The disadvantage is that retail store cards may carry higher interest rates than traditional credit cards.  Also, if the card has a deferred-interest promotion, you could end up paying even more in interest if your balance isn’t fully paid off by the end of the promotional period.

Six rules for using your store credit card wisely 

  1. Watch your overall spending during the holidays
  2. Pay your bill on time
  3. Understand the differences between zero-interest and deferred-interest promotions
  4. Limit the number of cards you apply for
  5. Don’t get close to your credit limit
  6. Act fast if you can’t pay your bills

For more information, go to

https://www.consumerfinance.gov/about-us/blog/six-tips-when-offered-retail-store-credit-card/

Teaching Suggestions:

  • Ask students if they have any retail store credit cards. If so, what has been their experience?  Share the information with classmates.
  • Ask students to make a list of possible advantages or disadvantages of retail store credit cards. Share the list with the class.

Discussion Questions:

  1. If there is a deferred-interest promotion, why is it important to pay off deferred balance in full before the end of the promotion period?
  2. If you already have several other credit cards, will you be able to manage one more card?
  3. What is the difference between zero-interest and deferred-interest promotions?
Categories: Chapter 5, Credit Cards | Tags: | Leave a comment

Virtual Interviews

Lock-downs, sheltering in, and remote working have increased online and virtual interviews.  To prepare for this activity, consider these suggestions from career planning experts.

  • Some things haven’t changed. Maintain a professional appearance. Wear solid colors; stripes and patterns can be distracting.
  • Plan a quiet environment. Keep the door and windows closed; silence your cell phone. Close other sites on your computer to avoid pop-ups and maintain focus. Remove pets and children from the area to prevent distractions.
  • Select an appropriate background. Clutter and other home items should be out of sight. Set up a blank background that doesn’t clash with your clothing color.
  • Use a small chair. Check your lighting to avoid shadows and glares. Natural light is usually best, but beware of direct backlighting, like a window behind you.
  • Choose an appropriate camera angle so the interviewer can clearly see you. Avoid using a phone for a video interview.
  • Test in advance and practice. Try out the software, and install a backup copy on a second device. Do a test run before the interview day to verify that audio, video, and lighting are appropriate. Record your practice session to view how you might improve.
  • Check your time, especially if in a different time zone.
  • Maintain eye contact with the camera. Set notes on the wall behind the screen with reminders of key points and questions to ask.
  • Show energy and enthusiasm. Move around and do light exercises before you start.

LinkedIn has introduced software when preparing for a virtual interview. Artificial intelligence programs give feedback on practice answers for common questions. The critique includes an assessment on pacing, use of filler words, and phrases to avoid.

For additional information on virtual interviews, go to:

Article #1

Article #2

Teaching Suggestions

  • Have students practice their interview skills for a virtual interview.
  • Have students talk to others about methods used to prepare for an interview.

Discussion Questions 

  1. What are the main differences between an in-person and virtual interview?
  2. Describe benefits and drawback that might be present when using artificial intelligence to prepare for a virtual interview.
Categories: Career, _Appendix B | Tags: | Leave a comment

Neobanks

Banking options continue to expand. Neobanks refer to financial services providers that appeal to information-hungry consumers comfortable with technology. Many are FinTech start-ups that offer checking and savings accounts, debit cards, loans, and budgeting guidance through digital channels and mobile apps.

Neobanks typically do not have physical bank locations, although some partner with existing banks or credit unions. Some consider PayPal an early neobank example as a result of being linked to bank accounts and payment cards. More recent examples of neobanks include GoBank (a brand of Green Dot Bank), SoFi Money, Varo Money, Wells Fargo’s Greenhouse, and Chase’s Finn.

Commonly viewed benefits of neobanks are:

  • lower costs than most traditional financial institutions; access to large ATM networks with no fees.
  • attractive to underbanked and unbanked consumers who use prepaid cards, check-cashing services, and consumer credit companies.
  • clear communication of fees and charges; usually no overdraft penalties since you can only spend what is in your account,
  • enhanced technology for basic banking activities as well as algorithms for budgeting, money management, and wise spending.
  • ease of loan approval with technology-based methods for obtaining credit, along with access to loans by smaller enterprises.

Some concerns associated with neobanks include:

  • a lack of physical bank branches.
  • may not be chartered as financial institutions with government regulators, also lacking deposit insurance.
  • no recourse may be available when malfunctions occur with an app or mobile connection.
  • not appropriate for individuals who make cash payments and deposits.

As banking alternatives evolve, neobanks will likely become more numerous expanding into new products and services. At the same time, traditional financial institutions will seek ways to offer FinTech products to serve an expanding technology-oriented customer segment.

For additional information on neobanks:

Link #1

Link #2

Teaching Suggestions

  • Have students propose services that might be offered by neobanks to enhance financial literacy and improve money management skills.
  • Have students create a video or in-class presentation that communicates the positive and negative aspects of neobanks.

Discussion Questions 

  1. What actions would you recommend to others before using a neobank?
  2. Describe possible actions that might be taken by traditional financial institutions to counter the potential loss of customers to neobanks.
Categories: Bank Fees, Chapter 5, Financial Planning | Tags: | Leave a comment

PERSONAL FINANCE KPIs

Most every organization uses metrics to determine success.  Also referred to as key perfor­mance indicators (KPIs), these numeric measurements can be used to assess financial success and progress toward goals. When selecting personal financial KPIs, be sure to: (1) identify what’s important to you for your financial goals; (2) create a system to track your progress, in writing, with a computer file, or an app; (3) involve all household members in the decision process.

Some common KPIs you might consider monitoring include:

  • Credit score, which is affected by missed debt payments and involves your ability to access loans in the future.
  • Savings rate is vital for future major purchases and planning for retirement. Financial advisors recommend saving 10-15 percent of your income.
  • Discretionary spending measures a person’s level of expenses related to meals out, fancy clothes, vacations, and other non-necessities, so money can be saved for more important goals.
  • Net worth (total assets minus total liabilities) measures financial health progress, which can increase by paying off debts and increasing saving and investing.

More creative KPIs are available for advanced personal financial planning. The Financial Health Index combines several financial metrics to provide a measure of overall financial health. The Financial Independence Number indicates the amount of money needed to live off the investment returns of your net worth. Living Within Means Index measures if necessary expenses are covered by a person’s income.

For additional information on KPIs for personal finance, go to:

Article #1

Article #2

Teaching Suggestions

  • Have students create a visual design that might be used to monitor progress for one or more personal finance key performance indicators.
  • Have students talk to others about actions they take to monitor their financial progress.
  • Refer students to the Road Map/Dashboard feature at the end of each chapter of Personal Finance or Focus on Personal Finance to view additional examples of key performance indicators.

Discussion Questions 

  1. What are the benefits and limitations of personal finance KPIs?
  2. What are other KPIs that might be valuable indicators of personal finance success?

 

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

Financial Literacy for Children

A lifetime of skillful financial decisions starts with experiential learning at a young age. To increase financial literacy for the next generation, consider these actions:

  • Give children a payday. Instead of a weekly allowance with simply giving money, create a system of earning these funds. Connect their household chores to earned amounts with a weekly payday. This practice can teach a child that people are paid for work to earn money for their living expenses.
  • Create awareness of opportunity cost. Every financial decision has trade-offs. Once money is spent, that money is not available for other uses. Keeping money in a clear jar allows the young person to visually see what funds are available, and when the money is gone.
  • Allow children to experience borrowing. If a child wants to buy something but does not have the money, set up a signed loan agreement with repayment terms. Also create a plan for the amount owed to be taken from future household earnings. Have the young person physically pay the money to better understand how credit works.
  • Connect them in the budgeting process. Include children in the discussion of family finances and the household budget to help them understand where money is spent. Consider creating a chart with spending amounts, or use slips of paper representing money that are used to pay the bills each month.
  • Teach wants vs. needs. Shoes or a clothing item may be a need but not a high-fashion version. To cover the cost of the higher-priced item, young people should be required to earn the amount for the additional expense.
  • Use money games. These activities can help children understand earning, saving, wise spending and other basics of money management for a financially sound future.

For additional information on financial literacy for children, click here.

Teaching Suggestions

  • Have students conduct online research to locate other actions used by parents to teach their children smart spending and wise money management.
  • Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.

 Discussion Questions 

  1. What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
  2. Describe possible money management learning activities for children that involve creative use of technology.
Categories: Chapter 1, Chapter 2, Chapter 5, Credit Cards, Financial Planning | Tags: , | Leave a comment

20-Year-Old Robinhood Customer Dies by Suicide After Seeing a $730,000 Negative Balance

“On June 12, 2020, Alexander E. Kearns, a 20-year-old student at the University of Nebraska, took his own life after believing he had lost over $730,000 trading options.”

While home from college and living with his parents because of the Coronavirus, Kearns opened an account with Robinhood—an online brokerage firm that uses technology to encourage everyone to begin investing and participate in the U.S. financial system.  As stocks experienced huge price swings during spring 2020, Kearns began experimenting with trading options.

After using a speculative technique that involved put options, Kearns believed that he had lost over $730,000.  In reality, his negative balance may not have represented a negative balance at all, but rather a temporary balance until the stocks underlying his option investments were posted to his account.  And yet, because of a timing and reporting issue, he became despondent and took his own life.

Because of privacy issues, Robinhood won’t provide details of Kearns’ account, but the brokerage firm is making major changes to their trading platform—especially for option trades.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of learning all you can about any investment before you begin an investment program.
  • Review the risks involved in the more short-term speculative techniques of day trading, investments that use margin, selling short, and options.

Discussion Questions

  1. Robinhood, like many financial service firms including E-Trade, TD Ameritrade, Charles Schwab, Fidelity, and Merrill Lynch now allow investors to open an account with no initial investment and offer commission-free trading. Would you be tempted to open an account and begin investing given the current economic environment?
  2. In the note he left, Alexander Kearns asks a simple question, “How was a 20-year old with no income able to get assigned almost a million dollars worth of leverage?” He also admits in his note that he had “no clue” what he was doing.  What mistakes did he make when he began investing?  How could you avoid making the same mistakes?
Categories: Chapter_12, Investments | Tags: , | Leave a comment

Social Security Benefit Suspension Scam

The Inspector General of Social Security,  is warning the Americans about fraudulent letters threatening suspension of Social Security benefits due to COVID-19 or coronavirus-related office closures. The Social Security Administration (SSA) will not suspend or discontinue benefits because their offices are closed.

The Inspector General reports that Social Security beneficiaries have received letters through the U.S. Mail stating their payments will be suspended or discontinued unless they call a phone number referenced in the letter. Scammers may then mislead beneficiaries into providing personal information or payment via retail gift cards, wire transfers, internet currency, or by mailing cash, to maintain regular benefit payments during this period of COVID-19 office closures.

Even though local SSA offices are closed to the public due to COVID-19 concerns, Social Security employees continue to work. Social Security will not suspend or decrease Social Security benefit payments or Supplemental Security Income payments due to the current COVID19 pandemic.

Remember Social Security will never:

  • threaten you with benefit suspension, arrest, or other legal action unless you pay a fine or fee;
  • promise a benefit increase or other assistance in exchange for payment;
  • require payment by retail gift card, cash, wire transfer, internet currency, or prepaid debit card;
  • demand secrecy from you in handling a Social Security-related problem; or
  • send official letters or reports containing personally identifiable information via email.

If you receive a letter, text, call or email that you believe to be suspicious, about an alleged problem with your Social Security number, account, or payments, hang up or do not respond. The Social Security Administration  encourages you to report Social Security scams using their dedicated online form, at https://oig.ssa.gov. For more information, please visit https://oig.ssa.gov/scam. Members of the press may make inquiries to Social Security OIG at oig.dcom@ssa.gov.

For information, click here.

Teaching Suggestions:

  • Ask students if they or their family members have received calls from government imposter scammers. If so, how did you or your family respond to such calls?
  • Ask students to make a list of possible actions that individuals can take to combat Social Security imposters.

Discussion Questions

  1. If you believe you have been a victim of Social Security or an IRS impersonator scam, what actions should you take to prevent such calls in the future?
  2. How do scammers play on emotions like fear or greed to convince people to provide personal information or money in cash, wire transfers, or gift cards?
  3. Why do fraudsters often demand payment via retail gift card, cash, wire transfer, internet currency, such as Bitcoin, or prepaid debit card?
Categories: Chapter_14, Frauds and Scams | Tags: , | Leave a comment

Giving A 6-Year-Old A Debit Card to Teach Wise Spending…Really!!

Kids are no longer using a piggy bank to obtain financial responsibility. Instead, digital tools, such as debit cards and apps, are the basis for learning smart spending and wise money management.  Many of these products are prepaid cards that help kids track their spending, and also include customizable oversight features for parents.  Some available products include:

  • FamZoo (famzoo.com) makes use of parent-paid interest to encourage saving. Common users of the app are preteen and young teenagers, but may also be used for kids from preschool to college.
  • Greenlight (greenlightcard.com) allows parents to control the stores at which the debit card can be used. Greenlight plans to introduce an investing feature to move users to a higher level of financial literacy.
  • gohenry (gohenry.com) is an app for kids (ages 8 to 18), but may be used by younger children. The emphasis is on building money management confidence in a safe setting while learning to spend and save.
  • Current (current.com) is a custodial bank account aimed at teenagers. Parents may also open accounts for younger children.

These products allow parents to channel digital funds to their children to pay weekly allowances. Also, kids may divide their money into accounts for saving, spending, and donating to charity.  Most apps have a monthly fee, ranging from $3 to $5.

When using prepaid debit cards with children, consider the following:

  • Spend time talking about why the kids want to buy various items, and why certain household tasks earn money and others do not. Expand the Connect the discussion to talk about total family finances as well as money attitudes and values.
  • Allow freedom to make spending decisions to give kids experience at managing money, and to make mistakes from which they will learn.
  • Ask older kids to buy household items, even though they might be reimbursed. Buying shampoo, toothpaste, and snacks will prepare them for when they are on their own. Also consider billing them for monthly expenses, such as the cost of their cell phone.

For additional information on prepaid debit cards for kids, click here.

Teaching Suggestions

  • Have students conduct online research to evaluate apps that might be used by parents to teach their children smart spending and wise money management.
  • Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.

Discussion Questions 

  1. What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
  2. Describe some possible money management learning activities for children that do not involve the use of technology.
Categories: Budget, Chapter 1, Chapter 2, Chapter 4, Financial Services | Tags: , , | Leave a comment

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