Financial Planning Topics

14 DIGITAL ASSET RISKS TO REMEMBER

Posted on March 16, 2024 by Melissa Hart

There is no such thing as a risk-free trade or investment. Generally, bigger expected returns come with a greater risk of loss. The more you understand the risks of your investment, the more effectively you can minimize their potential effects. Here are some common risks associated with digital assets:

1. Unsupervised trading. Over-the-counter cash-market trading platforms—where you can buy or sell digital assets for dollars—are not supervised by regulators like other exchanges, banks, or brokers.

 2. Inconsistent customer protections. Some virtual currency platforms may be missing critical system safeguards and customer protections, such as protection against hacks or segregating customer assets. Without adequate safeguards, you may lose some or all of your digital assets.

3. Commingled customer assets. Over-the-counter trading platforms are commonly custodians of your assets. When you trade, you trade against the platform and your funds are held and recorded by the platform on its centralized system—not the blockchain. In these situations, your assets may be mixed with other customers’ assets, or could be used by the platform for operational purposes. If the platform is hacked, goes bankrupt, or disappears, you may not be able to get your money back.

4. Most new projects fail. And, others could be frauds. Take time to research and understand the project, the technology, use-case, demand, competing projects, governance, who’s behind the effort, the developers’ track records, how your money will be used, and when or if you can get it back. Was the code audited by a reliable third party and security tested? Closely review white papers and other documents. If they don’t make sense, or don’t exist, walk away.

5. Hacker attacks. In a digital environment hacking is always a threat. Hackers generally seek out the greatest amount of money and the least resistance. Only keep funds you are ready to spend or trade in wallets connected to the internet. Keep the rest in a cold (offline) wallet.

6. Phishing attacks. If you receive an email or text about your trading account; a transaction; a new product, wallet, or service; or receive an urgent request to contact customer support, do not click any links, open attachments or use QR codes. Phishing attacks often pose as popular brands or companies and the links provided in the emails go to imposter sites that steal your account.

7. Lost or stolen private keys. Your private key is your digital signature. If it is lost or stolen you will no longer have access to your assets. You can recreate a private key, with your digital wallet’s seed phrase—a string of words that when encrypted create the private key. Never give your private key or seed phrase to anyone.

8. New and novel. Compared to other forms of investing, digital assets are relatively new. They don’t have long, historical track records, which makes it harder to predict how they will react in different market conditions.

9. High volatility. Many digital assets are difficult to value. Uncertainty, changes in sentiment, economic conditions, or even a social media comment, can send market values rising or falling sharply.

10. Liquidity risk. It may be hard to sell digital assets that aren’t commonly traded. Lightly traded assets are also easier to manipulate.

11. Run risk. Stablecoins are not insured, and may not actually be supported by all the stabilizing assets they claim. If stablecoin owners lose confidence and rush for the exits, the panic could lock out some customers and leave them with worthless coins. Runs on one stablecoin can also cause ripple effects in other coins or other parts of the digital economy.

12. Counterparty risk. Blockchain transactions were designed to be unchangeable. Once your digital asset is sent to another wallet you cannot get it back. This makes knowing exactly who is on the other side of a transaction critically important. There are no do-overs or charge-backs.

13. Watch out on social media. Most digital asset scams begin on social media or messaging apps. Never make digital asset payments to people you meet online. And don’t rely solely on tips or claims you see on social media platforms.

14. Data can be manipulated. Criminals can hack social media profiles or easily create new aliases. Fraudulent platforms can also control what you see on their websites or trading apps, and can manipulate you to trade or invest more.

For more information, click here.

Click to access DigitalAssetRisks.pdf

Teaching Suggestions:

  • Ask students if they or their families have invested in digital assets.  If so, what has been their experience?
  • Ask students to prepare a list of potential risks of investing in digital assets.

Discussion Questions:

  1. Why is important to work with trading platforms that are registered to do business in the United States and your individual state?
  2. What can digital assets investors do to mitigate hacker and phishing attacks?
Categories: Chapter 4, Investments | Tags: , | Leave a comment

DANGERS OF DEBIT CARD USE

Posted on March 2, 2024 by Melissa Hart

Debit cards do not provide the same protection as credit cards when lost or stolen. As a result, money experts recommend not using a debit card in these situations:

  • When buying airline tickets; if the airline goes out of business, you may have no recourse for a refund.
  • Non-bank ATMs are more likely to have skimmers that steal debit card information.
  • When making a gas station purchase a hold may be put on funds in your bank account, which could result in Bottom of Forman overdrawn balance when trying to make other purchases.
  • Use a credit card for online buying for stronger legal protection to dispute a charge.
  • In restaurants with high turnover, a dishonest employee may get access to your card number; again, a credit card provides more protection.
  • When buying appliances a credit card may give you an extra warranty, which would not be

available with a debit card.

With a debit card you can be responsible for up to $50 of unauthorized transactions if you report a lost or stolen card within two business days. Then, your liability can be as high as $500 for fraudulent charges if you don’t report the situation within 60 days after receiving your statement.  After that, you have the potential of unlimited losses for unauthorized use of your debit card.  In contrast, with a credit card, you are not responsible for unauthorized charges of more than $50.

Consider only using your debit card to withdraw cash to make purchases. Since not everyone will take a cash-only approach to control spending, there is another action to protect yourself. Use a second checking account for your debit card. Fund this second account only with money that you plan to use for debit card activity. Then, in case of a lost card or fraud, you would only lose the smaller amount kept in that second account with your main checking account not at risk. 

For additional information on debit cards, click here.

Teaching Suggestions

  • Have students survey several people to determine common uses of debit cards.
  • Have students create a podcast to warn others of the dangers associated with debit cards.  

Discussion Questions 

  1. Why should consumers become more aware of the potential dangers of debit cards?
  2. What actions do you take to protect your debit and credit cards?
Categories: Chapter 4, Chapter 5, Credit Cards, Debit Cards | Tags: , , | Leave a comment

BETTER CUSTOMER SERVICE

Posted on February 17, 2024 by Melissa Hart

Every purchase experience is enhanced by strong customer service. When unsatisfactory service is encountered, the following actions are suggested:

  • Be brief, clear, and concise about the problem and be reasonable about what actions you would like.
  • Consider posting your concern on the company’s social media site.  Many companies monitor social media for customer dissatisfaction.
  • If your complaint involves a bank, credit card company or other financial service provider, file a complaint with the Consumer Financial Protection Bureau at ConsumerFinance.gov/complaints. For other complaints, especially from local companies, the Better Business Bureau might be of assistance.
  • Elliott Advocacy, a nonprofit organization, provides resources and suggests actions to resolve issues. Their website (www.elliott.org/company-contacts) has the names and contact information for customer service managers of most major companies.
  • Another nonprofit advocacy organization is the Consumer Action Center (https://clark.com/about-consumer-action-center/), which helps with consumer problems for free. Phone number is 636-492-5275.
  • For more extensive problems, especially those related to real estate or motor vehicles, Karens for Hire (www.karensforhire.com) is a paid service usually costing less than $100.

When seeking action, be sure to avoid these behaviors to obtain better customer service:

  • Do not communicate anger or hostility, which can result in you being viewed as the problem rather than your legitimate concern.
  • Do not contact the CEO; instead, consider a manager or vice president at the operational level.
  • Do not threaten with not doing business with the company in the future. Saying that could remove the incentive for the organization to address your complaint.

You may need to use an array of tactics to obtain the satisfaction you desire. Remember, not every action will be effective in every situation. Most important, to improve your chances of success, be kind even when you are frustrated. “Polite persistence” is the key. 

For additional information on obtaining better customer service, click here.

Teaching Suggestions

  • Have students talk to others to learn about actions they have taken to resolve consumer problems.
  • Have students create a video, poster, or slide presentation with recommendations for wise shopping and to avoid consumer problems.

Discussion Questions 

  1. What actions do you believe are most effective for obtaining strong customer service when encountering a consumer problem?
  2. Describe a potential consumer problem situation. What actions would you suggest to resolve this concern?    
Categories: Chapter 6, Consumer Complaints | Tags: , | Leave a comment

Do you need life insurance?

Posted on February 3, 2024 by Melissa Hart

Think about your age, your financial situation, and if you have loved ones who depend on your income. If you do decide to shop for life insurance, here are some things to consider.

  1. How much life insurance do you need?

Life insurance helps your loved ones with financial needs when you die. Consider your mortgage and other debts, how much income would need to be replaced, money to cover a funeral, and college for the kids. Add those up, and you’ll have a good idea of how much insurance you’ll need.

2. Term or permanent?

There are two main categories of life insurance:

Term life insurance is the simplest and least expensive option. It covers you for a set period of time. You might consider term life insurance when you have a family that depends on your financial support or while you have a mortgage. For example, you may want a term life policy that lasts until your children are out of school.

Permanent life insurance provides coverage for your entire life as long as you keep up the payments. Because of the length of coverage, it costs more than term life insurance. These policies may have features that offer a cash value that can be used to invest or pay some of the premiums later in life. Permanent life policies are complicated so it’s best to talk to a financial planner when deciding if one is right for you. If you do buy a permanent life policy, make sure to check with your agent each year to see how the policy is doing and if you need to adjust your payments.

3. How much will it cost?

Insurance companies consider things like your age, health, job, and tobacco and alcohol use when setting prices. It will cost more to purchase life insurance as you get older and if you have health problems. Some companies may require a medical exam before selling you life insurance.

4. Who will benefit?

You can leave money to a spouse, children, other family member, or friend. This is known as the policy’s beneficiary. You can also name an institution as your beneficiary, such as a business or charity. And you can choose more than one beneficiary and specify how the money will be divided.

For more information, click here.

Teaching Suggestions:

  • Have students create situations which point out the different reasons for buying Life Insurance.
  • Have students survey several other people to determine their reasons for buying Life Insurance.

Discussion Questions:

  1. What is the relationship between age and the amount a person pays for life insurance?
  2. What personal, social, and financial factors should influence the amount of life insurance a person might desire?
  3. Why might many insurance agents dissuade you from buying low-cost-term insurance?
Categories: Chapter_10, insurance | Tags: , , | Leave a comment

Money in Retirement

Posted on January 20, 2024 by Melissa Hart

Is your money going to run out in retirement?  If you don’t plan ahead you could face some financial challenges in retirement. The best way to make sure you have money for the long-term to live the life you want to lead in retirement is to get an early start by setting goals and creating a saving and investing plan that will help you achieve those goals. If you’re getting a late start, don’t lose hope. There are ways you can make up some ground.

Start Early

The earlier you start, the less money you’ll need to invest to reach your financial goals. And, there’s a great feature that really helps build wealth. Through the power of compounding, you can earn interest on the money you save and on the interest that money earns. You can watch your money grow over time even if you only put a small amount of money into savings right now.

Set Goals

Consider the lifestyle you want to lead. Here are some important questions to ask yourself as you plan your retirement:

  • Have you thought about major living expenses related to housing, healthcare, food, clothing, and transportation?
  • Do you like to spend money at will or are you the type of person who always lives within a budget?
  •  What types of leisure activities and hobbies do you hope to pursue in retirement?

Make a Plan

Now that you’ve considered your lifestyle and goals, it’s time to make a plan. Investor.gov has free financial planning tools and resources that can help. It’s saving and investing roadmap and Savings Goal Calculator can help guide you as you create a plan that helps you reach your goals. Whenever you’re creating a plan, it’s important to consider your risk tolerance, investment options, fees/costs involved in investing, your debt, and keeping money into an emergency fund.

Contribute to Your Employer’s Retirement Accounts

Contribute to your employer’s retirement accounts, such as a 401(k), 403(b) or 457(b) plan. Most importantly, if your employer contributes to these accounts, take full advantage of these matching funds. Suppose, your employer contributes 50 cents for every dollar you save up to five percent of your salary. If you make $50,000 a year, and contribute at least $2,500 to these accounts, your employer will add an extra $1,250 to that amount. That’s an immediate 50 percent return. Take advantage of the “free money” as no other investment will give you that kind of guaranteed return. Also, start your own Roth or a traditional IRA.

Make Up Ground

If you’re getting a later start, there are ways you can make up some ground. If you’re over 50, you can consider contributing more to your workplace and individual retirement plans. The IRS allows investors to contribute $22,500 per year to a workplace retirement plan, like a 401(k), but will allow you to make an additional $7,500 in “catch-up” contributions if you are over the age of 50. Similarly, you can contribute $6,500 per year to an IRA that you set up yourself, but investors over 50 can contribute an additional $1,000 per year. 

Enough Money

Starting early, setting goals, creating a diversified plan for the long term, making regular contributions to your retirement accounts, and sticking to your plan all adds up to helping to make sure you have enough money in your retirement to live the life you want to lead.

For More Information, click here.

Teaching Suggestions:

  • Have students suggest actions that can be taken at different stages of the adult cycle to have financially successful retirement.
  • Ask students to create a list of non-financial actions that a person can take to plan for a fulfilling retirement.
  • Create a list of factors that influence the spending patterns of retired individuals.

Discussion Questions:

  1. What financial and personal difficulties are associated with inadequate retirement planning?
  2. Why is an IRA still beneficial for retirement planning even for individuals who may not qualify for the contribution deduction?
Categories: Chapter_14, Retirement Planning | Tags: , | Leave a comment

Artificial Intelligence in Forecasting Severe Storms, Hurricanes, Floods, and Wildfires

Posted on January 6, 2024 by Melissa Hart

Government Accounting Office (GAO) found that machine learning, a type of artificial intelligence (AI) that uses algorithms to identify patterns in information, is being applied to forecasting models for natural hazards—such as severe storms, hurricanes, floods, and wildfires—that can lead to natural disasters. A goal is to improve the warning time for severe storms.

 GAO identified potential benefits of applying machine learning to weather forecasting, including:

  • Reducing the time required to make forecasts.
  • Increasing model accuracy.
  • Reducing the uncertainty of model output.

Forecasting natural disasters using machine learning GAO also identified challenges to the use of machine learning. For example:

  1. Data limitations hamper the training of machine learning models and can reduce accuracy
  2. A lack of trust and understanding of the algorithms as well as concerns about bias
  3. Limited coordination and collaboration create challenges for fully developing some machine learning models.
  4. Workforce and resource gaps also create challenges.

For More Information, click here.

Teaching Suggestions:

  • Make a list of potential benefits of machine learning to weather forecasting in relation to insurance costs.
  • Make a list of potential dangers using machine learning in forecasting natural disasters in relation to insurance costs.

Discussion Questions:

  1. Do you believe that insurance premiums should be calculated based upon forecasting models for natural hazards. such as severe storms, hurricanes, floods, and wild fires? 
  2. What are some challenges to the use of machine learning in forecasting natural disasters?
Categories: Chapter 8, insurance | Tags: , | Leave a comment

Global Consumer Protection

Posted on December 23, 2023 by Melissa Hart

In late 2023, the Federal Trade Commission (FTC) signed a cooperation agreement with the consumer protection authorities of the four Latin American countries–Chile, Colombia, Mexico, and Peru– to combat fraud both inside and outside the United States.

The Multilateral Memorandum of Understanding (MMOU) promotes cooperation across Latin America, including information-sharing to further investigations and policy development, as well as other types of assistance on cross-border enforcement matters.

Low-cost online communications allow scammers to target consumers regardless of where they live. The increasingly global nature of commerce—and fraud—poses an enforcement challenge for consumer protection authorities around the world. From 2019 to 2022, fraud reports against companies in Chile, Colombia, Mexico and Peru more than doubled, from 6,103 to 12,869. At the same time, total losses reported by consumers skyrocketed—from $39.4 million in 2019 to $237.9 million in 2022. Reports about online shopping were the top complaint during this same period, with losses increasing from $3.8 million in 2019 to $49.5 million in 2022. Social media was the top contact method consumers cited at 41 percent of reports in 2022. These four countries represent about 225 million people and combined make up the eighth biggest economy in the world.

In signing the MMOU, the FTC and consumer protection authorities in these countries agreed to cooperate in investigations related to violations of consumer protection laws. Specifically, the MMOU encourages participants to:

  • Share complaints submitted by consumers;
  • Provide investigative assistance, with appropriate safeguards, including sharing of information relating to defendants, their assets and/or their deceptive conduct;
  • Coordinate enforcement actions against cross-border violations of law;
  • Provide other practical case assistance, where appropriate, in the enforcement of consumer protection laws, such as gathering evidence;
  • Participate in econsumer.gov, which allows consumers from around the world to report fraud and provides consumer protection agencies around the world with access to important data about potential violations;
  • Cooperate on non-investigatory matters such as exchanging approaches to consumer protection policy issues and participating in staff exchanges, joint training programs and workshops.


For More Information, click here.

Teaching Suggestions:

  • Ask students to debate the issue “Should governmental agencies be involved in protecting consumers”? Why or why not?
  • Ask students to make a list of national and international consumer protection agencies where they can report international and national scams and to learn about other steps they can take to combat fraud.

Discussion Questions:

  1. What actions can consumers take to protect themselves from national and international scams?
  2. How can your complaints help consumer protection agencies around the world to spot trends and work together to prevent international scams?
Categories: Chapter 6, Frauds and Scams | Tags: , , | Leave a comment

Avoid Cryptocurrency Scams

Posted on December 9, 2023 by Melissa Hart

How much do you know about cryptocurrency? If your answer is “not much,” that’s exactly what crypto scammers want to hear. And that’s exactly who Celsius Network, LLC company targeted with its false and misleading claims, according to a lawsuit filed by the Federal Trade Commission (FTC).

According to the FTC, Celsius marketed and sold financial services using YouTube and Twitter, now X, to promote marketing videos that were full of false and misleading claims. For example, Celsius claimed its crypto platform was safer and more stable than a bank. (It wasn’t.) And it told people that depositing crypto onto its platform came with a “no risk” promise that they’d earn high interest on their deposits. (A lie.) Even worse, the FTC claims the company used people’s crypto deposits without permission to spend, trade, invest, or pay business expenses. When Celsius started running out of money, it blocked people’s account access, preventing them from withdrawing their crypto. Now, Celsius is in bankruptcy, and consumers are unlikely to get all their crypto back.

Here’s how to avoid a cryptocurrency-related scam:

  • Don’t trust people who make big promises or guarantees. Only scammers promise “no risk” and guarantee high returns.
  • Research the company or cryptocurrency platform. Search online for the company or crypto platform name, plus “review,” “scam,” or “complaint” to see what people say.
  • Know that cryptocurrency accounts are not backed by a government like traditional FDIC-backed bank accounts.If something happens to your crypto account or funds, the government may not have an obligation to step in and help get your money back.
  • Learn about cryptocurrency and scams. Scammers take advantage of people’s understanding (or not) of cryptocurrency and how it works. Visit ftc.gov/cryptocurrency to learn more.

Using a crypto platform that isn’t living up to its promises or guarantees? Tell the FTC at ReportFraud.ftc.gov.

For more information, click here.

Teaching Suggestions:

  • Ask students to create a list of factors to consider before investing in cryptocurrencies.
  • Have students prepare a short paper describing a portfolio of cryptocurrencies they might consider now or in the future.
  • Have students suggest exceptions to the disadvantages of investing in cryptocurrencies.

Discussion Questions:

  1. Are there any attractive aspects of investing in cryptocurrencies?
  2. What economic and other factors would be the main concerns when investing in cryptocurrencies?
  3. What actions can you take to avoid cryptocurrency scams?
Categories: Chapter_11, Frauds and Scams, Investments | Tags: , | Leave a comment

FINANCIAL SUCCESS FOR CHILDREN   

Posted on November 25, 2023 by Melissa Hart

Money troubles often start as bad habits when young. Since only about half of the U.S. states offer financial literacy education, guidance from parents is vital. To avoid a life of money difficulties, consider these strategies to develop financial competency among young people:

  • Connect money lessons with daily activities. Talk to children about money decisions when shopping and paying bills. Provide hands-on learning activities, such as making a shopping list or creating a family budget. Be a good financial role model by planning ahead, practicing self-control, disciplined spending, and ongoing learning. When shopping, talk about needs and wants, have children pay for low-cost items, and discuss package sizes and brands.
  • Make use of money jars. At every age, three jars labeled SAVE, SPEND, and SHARE can provide a hands-on and fun experience for learning wise money management. Allowances, money gifts, and pay from a job can be divided among the jars.  If some money is kept in a bank account, instead of in the jars, slips of paper with amounts can be put in the jars as tangible proof of available funds for each category.
  • Encourage entrepreneurial activities to earn money. Starting a business or working part-time can teach creative thinking, problem solving, resiliency, and curiosity.
  • Start a savings account. Connect children early to saving for wise money management and to practice delayed gratification. Start with a basic savings account. As they get older, teach them about other savings plans (money market account, certificate of deposit) and other banking services. Connect savings to various goals. Research indicates that young people with a savings account are three times more likely to attend college, and four times more likely to graduate.  

Children with a strong financial foundation will be on a path to avoiding future money stress and obtaining long-term security.

For additional information on the financial success of children, click here.

Teaching Suggestions

  • Have students talk to others to learn about actions people have taken to teach children about wise money management and smart shopping.
  • Have students demonstrate (role play) how to teach wise money management or smart shopping to a young person.

Discussion Questions 

  1. What did you learn about wise money management and smart shopping when you were young?
  2. What actions might be taken with children to help them learn wise money management and smart shopping?  
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

What is the Senior Medicare Patrol (SMP)?

Posted on November 11, 2023 by Melissa Hart

The SMP is a national program to educate Medicare beneficiaries about Medicare fraud, errors, and abuse. Medicare loses an estimated $60 billion each year due to fraud, errors, and abuse, though that number is sometimes impossible to measure. Every day, issues related to these problems affect people across the country, often costing them time, money, and well-being.
Medicare-related errors contribute to this annual loss even though errors can be honest health care billing mistakes. However, repeated errors by a doctor or provider could be considered a red flag of potential fraud or abuse if not corrected.
Some common examples of fraud, errors, or abuse could include:
• Charging for services or supplies that were not provided
• Misrepresenting a diagnosis, a person’s identity, the service provided, or other facts to justify payment
• Prescribing or providing excessive or unnecessary tests and services
How to stop Medicare fraud?
If you are a Medicare beneficiary, start by learning how to read your Medicare statements! Read your Medicare Summary Notice (MSN) or Explanation of Benefits (EOB) in the paper form that is mailed to you, or go online to Medicare.gov and review claims digitally.
Caregivers, help by educating yourself and your clients or loved ones on how to prevent and detect health care fraud, errors, and abuse. Be on the lookout for things like boxes of knee braces (known as durable medical equipment, or DME) lying around the house. This is a common scam and may mean your client or loved one has been a victim. Remind your clients or loved ones to never give out their Medicare number or other personal information over the phone.
Families, help by talking to your loved ones about protecting their Medicare number just as they would a credit card number. Encourage them to check their Medicare statements for fraud, errors, or abuse and never give out their Medicare number over the phone for any reason. Help your loved ones create a Medicare.gov account to access their Medicare claims online or remind them to open and review their statements when they come in the mail every three months.
Partners and professionals, help by sharing SMP information on social media, referring clients and consumers to the SMP, and inviting the SMP to speak during a shared event. Identify ways to collaborate on mission-related topics and information.
Health care providers, help by talking to patients about health care-related scams such as those related to durable medical equipment, genetic testing, or new, plastic, or chipped Medicare cards. Reassure them that your office and their other doctors’ offices are not going to call to offer them services or equipment.
Lastly, as a community, help by looking out for your older neighbors. If you overhear someone talking about Medicare, don’t be afraid to give information about the local SMP and SHIP. Encourage those you know to talk to a trusted source about their Medicare questions and tell your neighbors about the most recent Medicare scams. Consider volunteering with your local SMP!
For more information, go to: https://smpresource.org/medicare-fraud-prevention-week-week
Teaching Suggestions:
• Ask students to make a list of the common examples of Medicare fraud or abuse.
• What are some actions all of us can take to stop Medicare fraud?
Discussion Questions:

  1. What is the Senior Medicare Patrol? How does it help in preventing Medicare fraud?
  2. How can Medicare beneficiaries, caretakers, families, partners, and professionals, healthcare providers, and the community help in preventing Medicare fraud?
Categories: Chapter_14, Frauds and Scams, Retirement Planning | Tags: | Leave a comment

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