Chapter 4

Bank Accounts Everyone Should Have

While a savings account and a checking account provide the foundation for managing finances, several other accounts should be considered.  Since all most people don’t put all their financial documents in one drawer, all your money shouldn’t be in one account. The various recommended accounts include:

  • Emergency savings for funds when you face financial difficulties that cannot be resolved in others ways. An amount equal to 6 to 12 months of living expenses is often recommended.  Consider storing these funds in an “out of sight, out of mind” location, such as with an online bank account.
  • Regular savings for short-term needs, such as home repairs, vacation, auto maintenance, or new furniture. Be sure to have a goal and plan for these funds.
  • Household checking account for paying current bills. All income is deposited in this account with automatic transfers for regular bills and amounts to various savings accounts. Extra funds in this account can go to the regular savings fund.
  • Spouse checking accounts to pay expenses for which each person has responsibility as well as work-related costs.
  • Health savings account (HSA) for tax-free payments of medical-related expenses. HSAs are especially of value with high-deductible insurance plans.
  • The extra fund involves the “fun money” leftover after all bills are paid, savings is under control, and all accounts have a balance at an appropriate level. This money is the reward for spending wisely.

If all your accounts are at the same financial institution, using the online dashboard will allow you monitor your balances.  Or, if you use different banks, websites or apps such as Mint.com can be used to view your overall financial situation.

For additional information on needed bank accounts, click here.

Teaching Suggestions

  • Have students design a personal plan for the various bank accounts they will use to to monitor their spending and saving.
  • Have students talk to others about methods used to monitor spending and to maintain an appropriate level of saving.

Discussion Questions 

  1. What are the benefits and drawbacks of the system discussed in this article?
  2. Describe actions to monitor spending and saving using online banking and apps.

 

Categories: Chapter 1, Chapter 2, Chapter 4, Financial Planning, Savings | Tags: , , | Leave a comment

What is FinTech?

Technology impacts every aspect of personal finance. FinTech (financial technology) involves apps, software, and other innovations for banking and financial activities, which includes PayPal, Venmo, and cryptocurrencies, such as Bitcoin. FinTech companies use online activities, mobile devices, software, apps, and cloud services to for financial transactions. Over 1.5 billion people around the world do not have access to formal banking. FinTech can provide these unbanked people with financial services through easy-to-use technology.

The main categories of FinTech for consumers are:

  • Crowdfunding, such as Kickstarter and GoFundMe, which allows individuals or businesses to go directly to potential investors for funding.
  • Blockchain and cryptocurrency, such as Bitcoin, with improved verification for financial transactions.
  • Mobile payments through a smartphone.
  • Insurance coverages provided by online start-ups.
  • Robo-advising provides portfolio investment recommendations and allocations based on algorithms. For stock-trading, investors buy and sell stocks using apps such as Robinhood and Acorns.
  • Budgeting apps, such as Mint and You Need a Budget (YNAB), monitor and plan spending.

For additional information on FinTech, click here.

Teaching Suggestions

  • Have students talk to several people to obtain information about their experiences with FinTech products.
  • Have students create an app prototype for a proposed FinTech product to help people make better financial decisions.

Discussion Questions 

  1. What might financial literacy and money management activities be improved with FinTech?
  2. Describe concerns that might be associated with expanded used of FinTech.
Categories: Chapter 1, Chapter 4, Financial Planning, Financial Services | Tags: , , | Leave a comment

Avoid Tax Refund Advances

Each year, more than 1.5 million taxpayers obtain refund anticipation loans (RALs).  This year, the number may be higher as a result of the government shutdown.  While, RALs provide faster access to your money, they come with high fees and should only be used as a last resort.  These “cash advances” are a potential for scams; before using these loans, take these actions:

  • Assess the cost. While some national tax chains promote this service as a “free” cash advance, fees may apply for applying for the advance, checking your credit, and transferring the money to you. Costs for your refund advance check range from $29 to $65.  If your refund is on a prepaid debit card, there will likely be additional fees.
  • Beware of loan terms based on timing. Additional charges may occur if your refund is delayed.
  • Compare other options. Seek less expensive, small-dollar, short-term loans from a community bank or credit union, or a zero-percent credit card. A $35 charge to defer a $350 tax preparation fee for two weeks has an APR of 174 percent.
  • To avoid late fees for bills, contact your creditors. Utility companies and medical providers may offer no-cost extensions or no-cost payment plans.

Always be sure you are doing business with a reputable tax preparer. Check credentials and references. Avoid tax preparers who charge fees based your refund amount, or who deposit your refund in their bank account. Another fraudulent activity is filing false information to increase the amount of the refund.

For additional information on tax refund advances, click here.

Teaching Suggestions

  • Have students search online for costs for refund anticipation loans.
  • Have students prepare a video presentation on avoiding refund anticipation loans.

Discussion Questions 

  1. What advice would you give a person planning to obtain a refund anticipation loan?
  2. How might community organizations and government agencies assist people who are considering a refund anticipation loan?
Categories: Chapter 3, Chapter 4, Chapter 6, Financial Services, Frauds and Scams, Taxes | Tags: , , | Leave a comment

Motivation for Saving

While you might think that saving for college, retirement, or buying home are the reasons Americans save, according to a recent survey, travel was reported as the top priority.  In a study of 2,500 adult Americans representing varied demographic, geographic, economic, and social groups, 45 percent of respondents set aside money for traveling.  This was especially true among younger respondents, who prefer travel experiences over savings to buy a home.

After travel, the main priorities for saving by Americans are:

  • for an emergency fund (37 percent)
  • for retirement (30 percent)
  • to buy a house (21 percent)
  • to buy a car, truck or motorcycle (20 percent)

For additional information on saving priorities, check out these two resources:

Article #1

Article #2

Teaching Suggestions

  • Have students conduct a survey among people they know to determine the main reasons for saving.
  • Have students talk to others to obtain ideas for building a person’s savings account.

 Discussion Questions 

  1. What do you believe are reasons people prefer saving for travel over other financial goals?
  2. Describe other actions that might be taken to motivate people to build their savings?
Categories: Chapter 2, Chapter 4, Financing a Home, Savings | Tags: , , | Leave a comment

Protect Your Identity

According to its last Consumer Sentinel report, the Federal Trade Commission received 371,061 identity theft complaints in 2017, down from 399,222 the previous year.  That’s good news, but the 2018 Identity Fraud Study issued by Javelin Strategy & Research tells a darker tale.  Based on random survey of Americans, it revealed that there was an 8 percent increase in identity fraud (the fraudulent use of someone’s personal information) from 2016 to 2017, and losses rose from $16.2 to $16.8 billion.  Javelin also notes that while the chip cards have cut down on fraud terminals or by cloning devices, the drop has been more than offset in online theft and fraud.

For More Information, click here.

Teaching Suggestions

  • Ask students if anyone has his/her identity stolen. If so, what has been their experience?
  • Ask students to prepare and then share a list of steps that they can take to reduce chances of becoming identity theft victims?

Discussion Questions

  1. How can you detect if you are a possible victim of an identity theft?
  2. If you become a victim of identity theft, what steps must you take immediately?
Categories: Chapter 4, Chapter 5, Frauds and Scams, Identity Theft | Tags: , | Leave a comment

Receipt Savings Trick

It’s possible to add $500 or $1,000 to your savings with a simple action. Clark.com suggests using store receipts to save for the future. Many retailers display a “You Saved” amount on a receipt for items on sale and store discounts. By putting this amount in a savings account you can avoid spending the “saved” money on other items.

Collecting receipts in an envelope or box, or scanning them to an app, can also help analyze buying habits to make wiser purchases in the future and not make as many trips to the store. This action can result in an extra amount each month added to your savings. This money can be added to your emergency fund or retirement account.

For additional information on the receipt savings trick, click here.

Teaching Suggestions

  • Have students locate examples of receipts that show “amount saved.”
  • Have students talk to others to obtain ideas for methods for building a person’s savings account.

Discussion Questions 

  1. What do you believe are the benefits and drawbacks of using this system?
  2. Describe other actions that might be taken to motivate you and others to build your savings?
Categories: Chapter 2, Chapter 4, Chapter 6, Purchasing Strategies, Savings | Tags: | Leave a comment

Banking Activities of the Future

As you walk into your bank, you are met by a video teller. These robo-banks allow you to connect with financial specialists based on your needs through a virtual concierge and videoconferencing. These banking staff members are located hundreds and thousands of miles away.  Banks benefit from these actions with fewer branches and fewer employees covering customers in many geographic settings.

Other actions being taken by banks and other financial institutions to better serve customers include:

  • A variety of services to enhance the banking experience, such as offering co-working spaces for customers who work remotely.
  • Payment systems in the athletes’ Olympic pins to complete purchases transactions at the 2018 Winter Games.
  • Customers can pay with a facial recognition scan in some retail settings.
  • Financial services offered through Alexa (Amazon), Siri (Apple), and Google Assistant allowing bank and credit card customers to check their balances, pay bills, and send money.

For additional information on technology banking trends, click here.

Teaching Suggestions

  • Have students talk to two or three others to obtain their ideas about: (a) future banking technology, and (b) the setting and services of the bank branch of the future.
  • Have students create a presentation or video that communicates future banking activities.

Discussion Questions 

  1. What technology services do you desire from a bank for your financial services?
  2. Describe actions banks might take to better serve the needs of customers.
Categories: Chapter 4, Financial Services | Tags: , | Leave a comment

Tax Identity Theft Awareness Week

Are you looking forward to getting your tax refund in the New Year? Tax identity thieves may be looking forward to getting your refund too. That’s why the Federal Trade Commission has designated January 29-February 2, 2018 as Tax Identity Theft Awareness Week.

Tax identity theft happens when someone uses your Social Security number (SSN) to get a tax refund or a job. You might find out it’s happened when you e-file your tax return and discover that a return already has been filed using your SSN. Or, the IRS may send you a letter saying more than one return was filed in your name, or that IRS records show you have wages from an employer you don’t know.

Learn to protect yourself from tax identity theft and IRS imposter scams, and what to do if someone you know becomes a victim. The FTC and partners including the IRS, the Department of Veterans Affairs, and the Treasury Inspector General for Tax Administration will be co-hosting free webinars and Twitter chats during Tax Identity Theft Awareness Week. Visit ftc.gov/taxidtheft for details about the events and how to participate.

For more information, click here.

Teacher Suggestions

  • Ask students if filing early may avoid e-file tax identity theft fraud if someone files before they do.
  • Ask students what steps should they take if their identity is stolen?

Discussion Questions

  1. How can one protect from tax identity theft and IRS imposter scams?
  2. What can you do if you or someone else you know becomes a victim of identity theft?
Categories: Chapter 4, Chapter 5, Frauds and Scams, Identity Theft, Taxes | Tags: , | Leave a comment

Protect Your Social Media Accounts

The Internet has made our lives easier in so many ways. However, you need to know how you can protect your privacy and avoid fraud. Remember, not only can people be defrauded when using the Internet for investing; the fraudsters use information online to send bogus materials, solicit or phish.

Here’s what you can do to protect yourself when using social media:

Privacy Settings: Always check the default privacy settings when opening an account on a social media website.

Biographical Information: Consider customizing your privacy settings to minimize the amount of biographical information others can view on the website.

Account Information: Never give account information, Social Security numbers, bank information or other sensitive financial information on a social media website.

Friends/Contacts:  Decide whether it is appropriate to accept a “friend” or other membership request from a financial service provider, such as a financial adviser or broker-dealer.

Site Features: Familiarize yourself with the functionality of the social media website before broadcasting messages on the site. Who will be able to see your messages — only specified recipients, or all users?

For More Information, click here.

Teaching Suggestions

  • Ask students to make a list of their social media accounts. How do they protect their accounts from fraudsters?
  • Why do many social media websites require biographical information to open an account?

Discussion Questions

  1. Why is it important to limit the information made available to other social media users?
  2. Is there an obligation to accept a “friend” request of a service provider or anyone you don’t know or do not know well?
  3. Why be extra careful before clicking on a link sent to you even if by a friend?
Categories: Chapter 4, Chapter 5, Frauds and Scams, Identity Theft | Tags: , , , | Leave a comment

Instant Pay for Millennials

Can you imagine getting paid each day that you work? That’s the idea behind Instant Financial’s app, which puts cash in the hands of workers on the same day they work. This program attempts to reduce absenteeism and employee turnover for restaurant chains.

At the end of each workday, employees may take 50 per cent of their pay for that day and transfer it to an instant account; the other half is paid at the end of the regular pay period. Funds in the Instant account may be accessed with a debit card or transferred to a bank account.

The app can reduce the use of payday loans, with exorbitant borrowing rates, as workers have access to funds between pay periods. Instant Financial makes money from fees charged employers and merchants when debit cards are used; although employees may pay ATM fees.

A major concern of the app is that it might discourage long-term financial planning. Poor budgeting habits could result in increased use of debt due to a lack of funds at the end of the month. Employees who use the app are encouraged to practice wise money management, including creating and building an emergency fund and other savings.

For additional information on instant pay, click here.

Teaching Suggestions

  • Have students talk with others about the benefits and drawbacks of an instant account.
  • Have students describe two situations: (1) a person who used the instant account wisely, and (2) someone who mismanaged their money as a result of using the instant account.

Discussion Questions 

  1. What factors might be considered when deciding whether or not to use an instant account?
  2. Describe how an instant account might result in improved money management and in weakened money management activities.
Categories: Bank Fees, Chapter 2, Chapter 4, Financial Planning | Tags: , , , | Leave a comment

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