Financial Planning Topics

SHRINKFLATION AND SKIMPFLATION

Posted on August 3, 2024 by Melissa Hart

Over the years, companies have raised prices through shrinkflation, in which the price of an item stays the same while the package size is reduced. A sports drink bottle is now 28 ounces instead of 32 ounces, or the “half gallon” ice cream carton is now 1.5 quarts or smaller. However, the price has stayed the same or perhaps increased. 

Other examples of companies downsizing products without downsizing prices include air-filled chip bags, smaller soup cans, and reduced size detergent packages. This marketing strategy is not new.  One of the first examples was years ago when a coffee company reduced its one-pound can to 13 ounces.

Similarly, skimpflation occurs when lower-quality materials are used in products like paper towels or cheaper ingredients in microwave dinners and restaurant meals, while prices remain unchanged. This also occurs when a hotel reduces the frequency of room cleaning or offers fewer food options for the complimentary breakfast.

While shrinkflation can be measured in government cost-of-living statistics, skimpflation is much harder to compute. If a paper towel roll costs the same with fewer sheets (shrinkflation) that will show up as a unit cost increase (inflation). However, if the paper towel roll is the same size but with inferior material quality (skimpflation), this change is not reflected in inflation statistics.

To get the best value for your money, consumers are encouraged to: (1) continue to use unit pricing to compare package sizes; (2) compare prices at several stores; (3) search online for digital coupons and rebates; and (4) read reviews of other consumers for information on changing product quality.

For additional information on shrinkflation, click here.

Video link: click here.

Teaching Suggestions

  • Have students find examples of shrinkflation and skimpflation for various products and services.
  • Have students create a visual (poster or slide presentation) that compares examples of shrinkflation and skimpflation.

Discussion Questions 

  1. Describe actions a person might take to stay aware of shrinkflation and skimpflation.
  2. How can a person assess changes in product or service quality to continue to make wise consumer choices?
Categories: Chapter 1, Chapter 6, Wise Shopping | Tags: , | Leave a comment

PRICE COMPLEXITY FOR FINANCIAL SERVICES

Posted on July 20, 2024 by Melissa Hart

Many bank accounts, credit cards, mortgages, and auto loans have add-on fees to confuse consumers resulting in higher amounts paid for these services. A recent experiment conducted by the Consumer Financial Protection Bureau (CFPB) was designed to study these fees. The research results suggested that consumers pay more when prices are separated into multiple fees with a complex pricing structure.  

While the study may not exactly reflect real-world transactions, the CFPB study indicated that more complex pricing mostly led to more expensive outcomes. Key findings included: (1) higher total prices with sub-prices than one total price; and (2) difficulty in comparing prices among different financial-service providers.

The fees and charges that consumers may encounter with financial services include:

  • Credit cards are affected by interest rates, late fees, balance transfer fees, annual fees, cash advance fees, and foreign exchange fees. Cards with introductory 0% APR periods are usually followed by much higher APRs. Credit card reward programs often have varied methods for earning points and redemption rules.
  • Checking and savings accounts can have monthly maintenance fees, minimum balance fees, overdraft fees, and wire transfer fees; complex tiered interest rates based on account balances; and “free” checking accounts” may require minimum balances, recurring direct deposits, or other restrictions.
  • Mortgages are available with a wide range of interest rates, fees, and terms affected by loan type, credit score, down payment, and closing costs.
  • Auto loans will have varied interest rates based on a credit score, loan term, down payment, and vehicle type. Lenders may offer promotional rates or cash-back incentives, or add-on products such as extended warranties, gap insurance, and credit life insurance.

To guide wise use of financial services, be sure to: (1) ask for a total cost with clear information of what is included; (2) compare different financial-service providers, including banks, credit unions, and FinTech companies; (3)Bottom of Form search for no- or low-minimum balance checking accounts and no-fee credit cards; (4) use ATMs in your bank’s network; and (5) avoid overdraft charges by linking your checking account to savings.

For additional information on complexity of financial service fees, go to:

Link #1

Link #2

Teaching Suggestions

  • Have students talk to others to learn about their experiences with high fees for various financial services.
  • Have students conduct online research to compare fees and restrictions for various financial services at banks, credit unions, and other financial-service providers.

Discussion Questions 

  1. When selecting a financial service, what factors would you consider when making your final choice?
  2. What actions can a person take to avoid high banking fees?
Categories: Bank Fees, Chapter 4, Chapter 5, Chapter 7, Credit Cards, Financial Services, Financing a Home, Home Buying | Leave a comment

SKILLS FOR FINANCIAL WEALTH

Posted on July 6, 2024 by Melissa Hart

While being rich means different things to different people, certain skills and personal qualities will help you achieve financial success. These competencies include:  

  • Financial Literacy. Ongoing learning of basic money management activities will provide the foundation for wealth building.
  • Leadership and Management Skills. An ability to motivate and guide individuals and teams is required for business leadership and career growth.
  • Decision-making and Problem-Solving. Offering creative and effective solutions, especially in high-stress situations, will always be a valued leadership and career skill.
  • Negotiation Skills. Your bargaining ability will often result in more money in business and career situations.
  • Entrepreneurial Mindset. A vision for identifying and implementing business ideas requires a skillset that can be of value in nearly every life situation. The creativity, curiosity, persistence, and motivation of effective entrepreneurs will result in financial and career success.
  • Self-Discipline and Time Management. Wise time use and consistency in achieving your financial goals are fundamental for long-term money success. Committing saving and investing allows you to build wealth through the compounding effects of time value of money. 
  • Curiosity and Ongoing Learning. Awareness of new trends, technology, and markets provides guidance for both investing and emerging career opportunities.
  • Networking. Connections with others are vital for professional success and personal development. Your network can uncover opportunities and resources. Making friends, especially those in different socio-economic situations can help grow your financial potential. When low-income people interact with those with a higher income, this often results in less-affluent people considering ways to expand their saving and investing.  Bottom of Form

For additional information on skills to build wealth, go to:

Link #1

Link #2

Teaching Suggestions

  • Have students talk to others to obtain suggestions for building wealth.
  • Have students create a visual proposal (poster, slide presentation, or video) to communicate actions that would help people improve skills for building wealth.

Discussion Questions 

  1. Which of these skills are your strongest? Which skills need to be improved?
  2. Describe actions a person might take to improve one or more of these skills.   
Categories: Career, Chapter 1, Chapter 2, Financial Planning | Leave a comment

BEWARE OF FAKE ONLINE STORES

Posted on June 22, 2024 by Melissa Hart

Careless online shopping can result in lost money and identity theft. Many fake companies attempt to attract and scam online customers.

To determine the legitimacy of an online store

  • Examine the URL for spelling errors, strange characters, and confirm you are on the correct website.
  • Look over the website design for poor grammar and low-quality images.
  • Click the padlock icon in the address bar; the dropdown box will tell if the site is secured with a digital certificate.
  • Use a website checker such as UrlVoid.com to inform you of any warning signs for the site.
  • Keep your browser and antivirus software updated to help identify unsafe sites.
  • Read reviews from multiple sources to confirm the credibility of the seller.

Each day, scammers create new ways to trick browsers and shoppers. Following these suggestions can help you reduce the chance that you will be a victim of an online scam.

For additional information on fake online stores, go to:

How To Spot a Fake Online Store in 6 Easy Steps

Video link:

Teaching Suggestions

  • Have students talk with others to learn about any experiences with fraudulent online shopping sites.
  • Have students create a recorded podcast with information on how to avoid fake online sellers.

Discussion Questions 

  1. What features of a shopping website have you observed that might be considered suspicious for a scam?
  2. Of the actions listed, which have you taken to prevent identity theft and online shopping scams?   
Categories: Chapter 6, Frauds and Scams, Wise Shopping | Tags: , | Leave a comment

Making artificial intelligence (AI) work for workers

Posted on June 8, 2024 by Melissa Hart

AI, like other technological advancements, will transform the way that many of us work. It holds enormous potential both to enhance opportunity and prosperity for workers and to exacerbate inequity, bias and job displacement. 

On Oct. 30, 2023 President Biden issued a landmark Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence. This executive order advances the comprehensive strategy for governing the development and use of artificial intelligence safely and responsibly. A key component of that strategy is the commitment to support our nation’s workers. This commitment involves ensuring that workers not only benefit from AI’s opportunities, such as new jobs and improved job quality, but are also protected from its dangers, including job displacement, discrimination, the undermining of workers’ rights and worsening job quality.

The scope of AI use in the workplace, both now and in the future, is expansive and dynamic. AI encompasses machine-based systems capable of learning human-like tasks, such as making predictions, recommendations or decisions. It can track workers, measure and predict their output, set performance goals, and recommend performance-based rewards or sanctions. AI systems can also process job applications, assess qualifications and identify top candidates for an HR professional. Generative AI capable of creating original content can, for example, draft new emails to clients based on previous exchanges, provide enhanced support to customer service agents and write new software code. While these examples demonstrate AI’s potential to increase workers’ productivity and efficiency, this technology also poses risks of deteriorating job quality, embedding bias or replacing workers altogether.

For more information, click here.

Teaching Suggestions

  • Ask the students to make a list of risks that Artificial Intelligence AI) poses to workers.
  • Ask students if state and federal governments should engage with employers, AI developers, unions, worker advocates and researchers in order to develop best practices of the use of AI.

Discussion Questions

  1. Why is the federal government concerned with the use of AI in the workplace?
  2. What are potential benefits of AI in the workplace?
  3. What might be implications of employers using AI to collect data on workers, including issues such as data privacy, ownership and transparency?
Categories: Career, Chapter 2 | Tags: | Leave a comment

Dark Patterns to Trick Consumers

Posted on May 25, 2024 by Melissa Hart

“Click to verify your free trial and subscription.”  Dark patterns are online designs to fool a person into buying items or giving up privacy. These deceptions include disguised ads, hiding junk fees, difficult to cancel subscriptions, pre-checked boxes, hard-to-find disclosures, and tricks to get you to share personal data.

A recent Federal Trade Commission study reported that companies are using more and more sophisticated practices to trick and trap consumers. The study “examined how dark patterns can obscure, subvert, or impair consumer choice and decision-making and may violate the law.”  The report highlighted four digital dark pattern tactics:

  1. Disguised ads to mislead consumers. These deceptive ads include promotional information designed to look like independent, editorial content.  Comparison shopping sites claiming to be neutral, but rank companies based on advertising fees paid. Countdown timers are used to get consumers to believe they only have a limited time to purchase an item.
  • Difficult to cancel subscriptions or charges. Companies attempt to trick consumers into buying items.  A deceptive subscription seller may persist with ongoing charges for an item a person never intended to buy. The company will likely make it very difficult to cancel free trials and subscription plans. Consumers may be required to navigate a confusing and lengthy cancellation website path. As they click through several pages of promotions and links, they may be directed away from the cancellation path. 
  • Hidden key terms, junk fees.  Some dark patterns hide key product limitations among extensive terms of service documents, which may also conceal junk fees. Companies advertise only part of the total price to lure consumers; other mandatory charges are not mentioned until late in the buying process.
  • Personal data sharing trickery.  Presented as a choice for privacy settings or sharing data, a website will steer consumers to an option that gives away personal information. In one situation, a company used default settings to collect and share a person’s viewing activity with third parties; consumers were only provided a brief notice that could easily be missed.

Awareness of these tricks can help consumers avoid being scammed.  Victims of these deceptive tactics may file a complaint with the Federal Trade Commission at ReportFraud.ftc.gov.

For additional information on dark patterns, click here:

Article #1

Article #2

Teaching Suggestions

  • Have students talk to others to learn about their experiences with deceptive online buying.
  • Have students create a visual summary (poster or slide presentation) to warn consumers of dark patterns.

Discussion Questions 

  1. What are possible examples of the tactics discussed in the article that might be used to deceive consumers?
  2. Describe actions a person might take to avoid deceptive online marketing tactics.
Categories: Chapter 6, Frauds and Scams | Tags: | Leave a comment

THE BEST TIME TO BUY A CAR   

Posted on May 11, 2024 by Melissa Hart

Car prices and availability are still being affected by the COVID-19 pandemic. Money management experts continue to recommend keeping your current vehicle. Even if repair costs are higher than what you owe on the vehicle, it may be worth getting it fixed to avoid the high prices.

However, if you plan to buy a car, to get the best deal consider the following:

  • Try to purchase a vehicle early in the week. Sunday has been the best day for a purchase, with an average savings of 10 percent off the manufacturers suggested retail price. In states that restrict auto sales on Sunday, Tuesday is the best day. Research indicates that Thursday is the worst day to buy a car.
  • Buying a vehicle closer to the end of the month may have advantages. Salespeople may be trying to make their monthly quota. View potential purchases between the 16th and the 20th of the month, and then negotiate your purchase the last two or three days of the month.
  • Some holidays that occur earlier in the month (President’s Day, Independence Day, and Labor Day) may result in better deals.
  • Some of the best car deals may be obtained at the end of each quarter of the year (March, June, September, December), especially at year end. Discounts are traditionally highest in December. The last quarter of the year can be the best time to buy a car, both new and used. December 31 can be the day to get the best deals.

Be aware that the calendar will only get you so far when obtaining the best deal. Doing online and in-person research is vital. Seek out incentives for vehicles in which you are interested. Also important, if buying on credit, is being pre-approved for a loan.

For additional information on the best time to buy a car, click here.

Teaching Suggestions

  • Have students talk to others about actions they have taken when buying a car.
  • Have students create and role play a car buying negotiation situation based on their experiences and research.   

Discussion Questions 

  1. How might a person reduce the automobile and transportation costs in their budget?
  2. Describe actions a person might take before meeting with a car salesperson? 
Categories: Chapter 6, Wise Shopping | Tags: | Leave a comment

CFPB Report Finds Many College-Sponsored Financial Products Charge High and Unusual Fees

Posted on April 27, 2024 by Melissa Hart

The Consumer Financial Protection Bureau (CFPB) issued a report in December 2023 highlighting that many college-sponsored financial products have higher fees and worse terms and conditions compared to typical market products. The CFPB report identifies college-sponsored deposit accounts with fees above prevailing market rates, which institutions are required to consider under Department of Education rules designed to protect students’ interests.

Many colleges offer sponsored and co-branded financial products to students and alumni, such as deposit accounts, credit cards, and prepaid cards. Students may be likely to accept their school’s recommendation of a bank account or credit card when they arrive on campus, meaning that colleges and their financial institution partners may not face competitive pressure to lower fees or provide low-cost products. These arrangements can be lucrative for schools, as financial institutions pay tens of millions of dollars every year to colleges and universities, including flat-fee marketing deals and per-signup kickbacks.

In 2022, the CFPB’s College Banking and Credit Card Agreements report described the high fees charged on student banking products endorsed by colleges. The report made clear that financial institutions and colleges may be steering students into expensive financial products. Today’s report found that many colleges continue to employ marketing strategies that may mislead students into accepting products that may not be the best choice for them. Among the student risks identified in today’s report:

  • Colleges’ financial product partners may charge students high or atypical fees: Although most of the largest banks have moved away from charging overdraft and non-sufficient funds (NSF) fees in recent years, some of the sponsored deposit accounts in the report do charge students those fees. Thus, students who follow their school’s advice may be steered into accounts that cost them much more than what they would pay in the open market.
  • Fees paid by students often vary by institution type: The average fee burden varies by the type of institution. The report finds that accountholders at Historically Black Colleges and Universities (HBCUs), for-profit colleges, and Hispanic-servicing institutions (HSIs) all pay higher-than-average fees per account.
  • Students face unexpected fees at graduation: Some financial institutions impose additional fees when a student graduates or reaches a certain age, relying on “sunset” clauses in the products’ terms and conditions. Students who sign up for a product marketed as free may thus end up being charged monthly maintenance fees, or overdraft and NSF fees they did not anticipate.

The report notes that the CFPB will continue to examine these practices and identify possible violations of federal consumer financial protection laws.

For more information, click here.


Teaching Suggestions

  1. Ask students if they use college-sponsored and co-branded credit card (s).  If so, what has been their experience?
  2. Is it ethical for colleges and universities to promote college-sponsored financial products? Make a list of pros and cons.

Discussion Questions

  1. Why do many college-sponsored financial products have higher fees and worse terms and conditions compared to typical market products?
  2. Should colleges take a hard look at the fees and terms of the products they pitch to their students and alumni?  Why or why not?
Categories: Chapter 5, Credit Cards | Tags: , | Leave a comment

BE READY TO ANSWER THESE INTERVIEW QUESTIONS

Posted on April 13, 2024 by Melissa Hart

Several CEOs were asked “If you could only ask one question of a prospective employee, what would that be?” Here are some examples designed to quickly assess the important skills and personality traits desired in a new hire:

  • How would you describe yourself in one word? The best candidates know who they are, and take time to reflect before answering this question.
  • What is the last thing you’ve learned? This question provides insight into a candidate’s curiosity and passion for learning – two highly desired skills for many work situations.
  • What didn’t you get a chance to include on your resume? This question allows the interviewer to dig deeper than what is on a person’s resume. 
  • How long are you willing to fail at this job before you succeed? While this question might disorient a person, a good candidate will express perseverance for success as well as seeking guidance to guide their path. 
  • What’s in the news today? A person’s awareness of current events can reveal how interesting someone is as a person, and how effective they might be at work. 
  • What percentage of your life do you control? This question can determine if a person can force change to happen or allows change to happen to them.
  • Tell me something that’s true, that almost nobody agrees with you on. This question can reveal people who aren’t afraid to speak their minds and possess originality of thinking.   
  • So, what’s your story? This question has no correct answer, but requires a creative response related to their character, imagination, and ability to communicate a feeling.

Being prepared for these and other questions requires knowing yourself, communicating your competencies and experiences, and researching the company and job position.  One other question you might consider: How did you prepare for this interview?

For additional information on interview questions, click here.

Teaching Suggestions

  • Have students practice their interview skills using some of these questions.
  • Have students talk to others to obtain suggestions for preparing for an interview and tips for effective interviewing.

Discussion Questions 

  1. What mistakes might a person make when answering interview questions?
  2. What actions would you recommend for a person to improve their interview skills?
Categories: Career, Chapter 2 | Tags: , | Leave a comment

AVOIDING FINANCIAL ABUSE

Posted on March 30, 2024 by Melissa Hart

According to the Center for Financial Security, nearly every domestic violence Bottom of Formsurvivor also experienced financial abuse. Also referred to as financial exploitation, this domestic mistreatment can result in victims losing access to their financial resources along with having their credit ruined.

A financially abusive relationship may be characterized by:

  • the abuser refusing to share financial information and taking control of the family finances.
  • the abuser uses an intimidation tactic of quickly getting angry when asked about family finances or major purchases.
  • the abuser puts the victim on a very low allowance, which may not even be enough to cover basic needs.
  • the abuser discourages the victim to have a job or harasses the victim at work, which can result in losing their job.
  • the abuser makes late payments or no payments to ruin the victim’s credit. 
  • the abuser forces a power-of-attorney agreement to legally steal money or property from the victim.

Financial abusers attempt to control the relationship by making victims feel powerless and unable to support themselves and their children. To avoid or escape financial abuse while building self-esteem and dignity, take the following actions:

  • Obtain increased financial knowledge, which can allow a person to escape the abusive relationship.
  • Monitor your credit report to determine your current situation and to plan actions to repair your credit.
  • Find a safe place to stay with family, friends, or a shelter to connect to a support network.
  • Clear your browser history, which would not allow the abuser to view your search activity when seeking help.

Financial abuse can occur in marriage and other relationships. Family members and caregivers may steal or misuse the funds of aging relatives.

For additional information on financial abuse, click here.

Teaching Suggestions

  • Have students talk to others to learn about difficult financial relationships they may have encountered.
  • Have students create a visual proposal (poster or slide presentation) with suggestions to avoid becoming a victim of financial abuse.

Discussion Questions 

  1. How might a person become better aware of the signs of a financially abusive situation?
  2. Describe actions you would recommend to a person who faces a difficult financial situation.    
Categories: Chapter 1, Chapter 2, Financial Planning, Financial Services | Tags: , | Leave a comment

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