FINRA Investor Education Foundation Publishes “The State of U.S. Financial Capability”

Did you know that in 2018:

  • 19% of households spent more than their income?
  • 46% of individuals lacked an emergency fund?
  • 35% of credit card holders paid only the minimum on their credit cards?

In September 2019, the FINRA Foundation released data from its latest Financial Capability Study—one of the largest and most comprehensive financial capability studies in the United States. Among the findings, younger Americans, those with lower incomes, African-Americans and those without a college degree face the toughest financial struggles. More than 27,000 respondents participated in the nationwide study. Conducted every three years beginning in 2009, it measures key indicators of financial capability and evaluates how these indicators vary with underlying demographic, behavioral, attitudinal and financial literacy characteristics—both nationwide and state-by-state.

For more information, click here

Teaching Suggestions:

  • Ask students if they spend more than their income in a given year.
  • Ask students if they have a rainy day fund. If not, why?
  • Ask students if they pay in full when the credit card bill arrives. If not, why?

Discussion Questions

  1. What might be some reasons why almost one in five households spends more than their income?
  2. Why is it important to have a rainy day fund? Why almost half of Americans lack such a fund?
  3. Why is it vital to pay credit card bills in full? What are the costs of paying a minimum balance?
Categories: Budget, Credit Cards | Tags: , , | Leave a comment

Meet the “Henrys” (high earners not rich yet)

Many young people making high salaries still say they feel broke. A “Henry,” short for “high earners not rich yet,” is someone who lives an extravagant lifestyle combined with their student loans has very little money left over.  These “working rich” place a strong emphasis on travel, and often limit their spending on food and clothing in order to afford luxury trips.  While many have a desire to get their finances in order, very few take appropriate actions to do so.

Henrys are characterized by a higher-than-average income, little or no savings, and a feeling of low material wealth. Most of their earnings go toward current living expenses rather than building wealth with investments.

For additional information on high earners not rich yet, click here.

Teaching Suggestions

  • Have students conduct online research to determine various financial attitudes and behaviors of people in different age categories and life situations.
  • Have students prepare a video that recommending actions to the people described in the article.

Discussion Questions 

  1. What factors might be influencing the financial activities of the people described in the article?
  2. Describe possible financial concerns associated with these financial attitudes and behaviors, and recommend corrective actions that might be taken.
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

Medicare Supplement Insurance (Medigap) policies

Original Medicare pays for much, but not all, of the cost for covered health care services and supplies. Medicare Supplement Insurance policies, sold by private companies, can help pay some of the remaining health care costs for covered services and supplies, such as copayments, coinsurance, and deductibles. Medicare Supplement Insurance policies are also called Medigap policies.

Some Medigap policies also offer coverage for services that Original Medicare doesn’t cover, such as medical care when you travel outside the U.S. Generally, Medigap policies don’t cover long-term care (such as care in a nursing home), vision or dental care, hearing aids, eyeglasses, or private-duty nursing.

Every Medigap policy must follow federal and state laws designed to protect you, and they must be clearly identified as “Medicare Supplement Insurance.” Insurance companies can sell you only a “standardized” policy identified in most states by letters A through D, F, G, and K through N. All policies offer the same basic benefits, but some offer additional benefits so you can choose which one meets your needs. In Massachusetts, Minnesota, and Wisconsin, Medigap policies are standardized differently.

For more information, click here.

Teaching Suggestions

  • Ask students to read about different types of Medigap policies, what they cover, and which insurance companies sell Medigap policies in their area.
  • Ask students to find and compare drug plans, health plans, and Medigap policies offered in their state.

Discussion Questions

  1. What are the differences between a Medigap policy and a Medicare Advantage Plan?
  2. What types of services are not generally covered by Medigap policies?
Categories: Chapter 9, Retirement Planning | Tags: , , | Leave a comment

Kakeibo: The Japanese art of saving money

Kakeibo, pronounced “kah-keh-boh” and translates as “household financial ledger,” is a method used in Japan for managing personal finances. For over 100 years, this system has helped people make smarter money decisions.

Similar to other budgeting systems, kakeibo is designed to help you understand your relationship with money by recording all financial inflows and outflows. As proven by research, this recordkeeping method emphasizes physically writing your financial activities making you more aware of bad money habits. Kakeibo can help you become completely honest about your spending with the use of four categories: (1) needs, (2) wants, (3) culture, such as books and museum visits, and (4) unexpected – medical expenses or car repairs.

Kakeibo encourages you to ask yourself these questions before buying any non-essential items, or things you buy on impulse:

  • Can I live without this item?
  • Based on my financial situation, can I afford it?
  • Will I actually use it? Do I have the space for it?
  • How did I come across it in the first place? (Did I see it in a magazine? Did I come across it after wandering into a gift shop out of boredom?)
  • What is my emotional state in general today? (Calm? Stressed? Celebratory? Feeling bad?)
  • How do I feel about buying it? (Happy? Excited? Indifferent? And how long will this feeling last?)

In addition, to spend more mindfully, Kakeibo recommends that you:

  1. Leave the item for 24 hours.
  2. Don’t let major “sales” tempt you.
  3. Check your bank balance regularly.
  4. Spend in cash.
  5. Put reminders in your wallet – use a sticker: “Do you REALLY need this?!”
  6. Change the environments that cause you to spend.

For additional information on kakeibo, go to:

Link #1

Link #2

Link #3

Teaching Suggestions

  • Have students conduct a survey to determine reactions to this budgeting system among people in different age categories and life situations.
  • Have students prepare a visual summary of some of the characteristics of the budgeting system.

 Discussion Questions 

  1. What elements of this budgeting system might people find beneficial? What are possible drawbacks?
  2. If you were to implement this system for your life, which actions would you select to do first?
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

Tips for gift card shopping

Gift cards are one quick way to get through your last-minute holiday shopping list. But before you give (and get) gift cards, here are a few things you need to know.

  • Inspect gift cards before you buy. A gift card should have all its protective stickers in place. Report the card to the store if anything looks scratched off or damaged.
  • When you buy, save the receipt. Keeping the gift card receipt can be helpful if you run into problems with the card. 
  • Treat gift cards like cash. Report a lost or stolen gift card to the card’s issuer immediately. Most card issuers have toll-free numbers you can find online to report a lost or stolen card. Depending on the card issuer, you may even be able to get some money back.
  • Buy gift cards from sources you know and trust. Think twice about buying gift cards from online auction sites, to avoid buying fake or stolen cards.
  • Read the gift card’s terms and conditions. Know the deal you’re getting with gift cards. For example, are there fees every time it gets used – or if it sits unused?

And here’s the most important gift card tip of all:

  • Remember that gift cards are for gifts, not payments. Gift cards are a scammer’s favorite way to steal your money. Anyone who demands that you pay them with a gift card, for any reason, is always a scammer. This includes calls from imposters claiming to be a family member with an emergency, calls from the IRS and Social Security, law enforcement, and utility companies. Simply, never pay with a gift card.

Report gift card scams directly with the card issuer, then report it to the Federal Trade Commission at ftc.gov/complaint.

For more information, click here.

Teaching Suggestions

  • Ask students if they have ever given or received a gift card. If so, let them describe their experience.
  • Make a list of differences between a traditional debit-card and gift cards.

Discussion Questions

  1. Why is it important to inspect gift cards before you buy them?
  2. What are some of the disadvantages of gift cards?
  3. What happens to a gift card holder when the retailer/issuer goes bankrupt?
Categories: Chapter 5, Debit Cards | Tags: | Leave a comment

Paying for Long-Term Care

Paying for long-term care (sometimes called “long-term services and supports”) includes non-medical care for people who have a chronic illness or disability. This includes non-skilled personal care assistance, such as like help with everyday activities, including dressing, bathing, using the bathroom, home-delivered meals, adult day health care, and other services. Medicare and most health insurance plans, including Medicare Supplement Insurance (Medigap) policies, don’t pay for this type of care, sometimes called “custodial care.” You may be eligible for this type of care through Medicaid, or you can choose to buy private long-term care insurance.

Long-term care can be provided at home, in the community, in an assisted living facility, or in a nursing home. It’s important to start planning for long-term care now to maintain your independence and to make sure you get the care you may need, in the setting you want, now and in the future.

For more information, click here.

Teaching Suggestions

  • Ask the students if they have Long Term Care insurance since 40 percent of the 13 million people receiving long term care services are between the ages of 18 and 24.
  • Ask students to prepare a list of services that long term care insurance policy may provide.

Discussion Questions

  1. If majority of Americans will be cared for at home by family members and friends, why should anyone purchase a long-term care insurance policy?
  2. Do younger people need long-term care insurance? If so, why?  If not, why?
  3. Why long- term care insurance is very expensive? Should everyone purchase long term care insurance?
Categories: Chapter 9, Health Insurance | Tags: | Leave a comment

Avoiding Personal Finance Nonsense

Many personal finance reports are published with advice that may not provide the best guidance. In an effort to avoid buzzwords and troubling phrases, consider these suggestions:

  • determine who conducted the research; a company may sponsor a study that lacks the rigor of academic or government researchers.
  • be wary of research that reports feelings or predictions rather than actual behaviors and actions of respondents.
  • consider the number of people in the study and how the respondents were selected.
  • avoid generalizations that about a certain age group, such as Millennials, Baby Boomers, or Generation X.

Don’t revise your money management activities based on some survey or research report. If your current actions are working, then you are on the correct path.

For additional information on avoiding personal finance nonsense, click here.

Teaching Suggestions

  • Have students conduct online research to locate a recent personal finance study to evaluate the validity of the advice offered in the report.
  • Have students create a video presentation reporting both valid and nonsense personal finance advice.

Discussion Questions 

  1. What problems could occur if a person uses inappropriate financial advice?
  2. In addition to the suggestions in the article, what actions might a person take to determine the validity of personal finance advice?
Categories: Career, Chapter 1, Chapter 2, Financial Planning, Purchasing Strategies | Tags: , | Leave a comment

Financial Planning for a Career Change

When considering a career change, the following financial suggestions are offered:

  • have an appropriate amount of savings for unexpected expenses during the transition.
  • create a budget to live frugally; cut living costs to be prepared for sudden expenses.
  • reassess your investment portfolio to reduce risk exposure and possibly eliminate fees.
  • seek advice from a financial advisor.
  • determine how a career switch might impact your ability to save.

For additional information on financial advice when changing careers, click here.

Teaching Suggestions

  • Have students talk to a person who recently changed jobs to obtain information about their experiences.
  • Have students create a video presentation with suggested actions when planning to change careers.

Discussion Questions 

  1. What relationship exists between a person’s career choice and money management activities?
  2. Describe additional financial planning actions that might be appropriate when considering a career change.
Categories: Career, Chapter 1, Chapter 2, Financial Planning, _Appendix B | Tags: , | Leave a comment

Anchoring Your Personal Finance Decisions

To spend less and save more, consider an “anchoring” system.  One example of an anchor is the price of an item to determine if that is an appropriate amount of money to spend for the item.

Anchors prevent shoppers from being overwhelmed by the many choices, prices, and features.  You can create your own anchors by:

  • setting the maximum price you are willing to spend for an item.
  • considering the value of an item in relation to the number of hours you have to work to pay for it.
  • comparing the cost in relation to another item. If you buy coffee costing $2.50 a cup and want a sweater costing $50, view the sweater as costing 20 cups of coffee. Your “coffee” anchor will help you determine how valuable the sweater is to you.

When buying a home, you may be encouraged to look at properties outside your price range.  Anchoring yourself at a price limit will avoid overspending, make you feel more in control, and encourage wiser financial decisions.

For additional information on financial anchoring, click here.

Teaching Suggestions

  • Have students talk to several people to obtain information about how they determine the price they are willing to pay for an item.
  • Have students create a video presentation that demonstrates various anchoring methods.

Discussion Questions 

  1. How might anchoring help improve personal financial literacy and money management activities?
  2. Describe anchors people might used to determine the price they would be willing to pay for an item.
Categories: Chapter 1, Chapter 2, Chapter 6, Chapter 7, Financial Planning, Wise Shopping | Tags: , | Leave a comment

Time to Start Preparing for Retirement

Even if you just started working, now is the time to start preparing for retirement. Achieving the dream of a secure, comfortable retirement is much easier with a strong financial plan.

Tip 1: Start Early

Social security Administration’s retirement planning resources are helpful to you at any stage of your career. Their calculators, Benefit Eligibility Screening Tool, and disability resources are all available on our benefit planners website.

Tip 2: Be Informed

What’s the best age to start receiving retirement benefits? The answer is that there’s no single “best age” for everyone and, ultimately, it’s your choice. The most important thing is to make an informed decision, based on your individual and family circumstances.

Tip 3: Estimate the Benefits You Might Get

Knowing the amount of money you could get is pivotal in planning your finances.  With the Retirement Estimator, you can plug in some basic information to get an instant, personalized estimate of your future benefits. Try out different scenarios, such as higher or lower future earnings amounts and various retirement dates to see the various potential effects on your future benefit amounts.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of several retirement planning sources available from various governmental and private organizations.
  • What actions you can take to prepare for retirement right now? Share your list with colleagues, friends, and relatives.

Discussion Questions

  1. Why is it important to start planning for retirement as early as possible?
  2. Why should you save now for retirement? Isn’t Social Security enough during retirement years?
  3. What are some ways to invest to reach your retirement goals and never outlive your savings?
Categories: Chapter_14, Retirement Planning | Tags: , , | Leave a comment

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