Savings

Tapping Your Nest Egg

Posted on May 3, 2025 by Melissa Hart

Consider how and when to take money out of your investment accounts.

Consider whether rolling over a retirement account makes sense for you. For example, it might make sense for you if you want to consolidate multiple retirement accounts for convenience but it might not make sense if you will pay more in fees after rolling over your account. Rolling over money from one retirement account to another is a very specific process. If you don’t follow the rules, you may end up having to pay taxes. Visit the IRS’s website to learn more about rollovers at Rollovers of Retirement Plan and IRA Distributions.

When you need to take money from your account – called decumulation – consider how much you need to take out and when to take it out. This can include any RMDs (required minimum distributions). Be thoughtful regarding which assets you sell. Consider how selling those assets will affect your account’s diversification and whether you will need to rebalance your investments. Also consider any tax consequences, especially when taking money out of a tax-sheltered retirement account.

Never Stop Learning Tip: Create a plan for how and when to take money out of your investment accounts. Revisit and review the plan each year after you prepare your taxes.

For more information, click here.

Teaching Suggestions:

  • Refer students to the Retirement Planning chapter:  Dipping into Your Nest Egg.  Ask students when and how should they draw money from their nest egg?
  • Is dipping into your account wrong?  Why or why not?

Discussion Questions:

  1.  Why is it important to revisit and review your plan each year?
  2. How do you decide which assets to sell?  Why is it an important consideration?
Categories: Chapter_14, Retirement Planning, Savings | Tags: , | Leave a comment

IS AN ADD-ON CD RIGHT FOR YOU?

Posted on March 8, 2025 by Melissa Hart

An add-on CD (certificate of deposit) is a specialty CD that allows you to add more money to the account after the initial deposit. Similar to a standard CD, the additional deposits earn the fixed rate until the CD matures. Add-on CDs are offered by some banks, credit unions, and online financial institutions.

The main benefits of add-on CDs are: (1) a fixed interest rate, especially important if market rates decline; (2) a lower initial deposit may be required than with a traditional CD; (3) additional deposits can be made to grow your long-term savings.

Potential drawbacks are: (1) the fixed rate will be lower if interest rates rise during the term of the CD; (2) a traditional CD may have a higher rate; (3) early withdrawal penalty may apply; (4) add-on CDs may not be available at many financial institutions.

For savings flexibility, consider a CD ladder.  With this plan, instead of buying one large CD, buy several smaller CDs with varied maturity dates. For example, instead of buying a one-year, $4,000 CD, buy four separate $1,000 CDs maturing in three, six, nine, and twelve months. This action provides flexibility to be able to access funds when needed without paying an early withdrawal penalty. Then, you can use the funds as needed or renew the CD. If interest rates are high, you might consider a longer-term CD to lock in the higher rate.

To open an add-on CD, search online for financial institutions that offer this savings plan, which will be especially beneficial if you don’t initially have all the funds necessary for a traditional CD.  CDs are most recommended when interest rates are high, to lock in a good rate for a longer period. Also consider deposit amount requirements and penalties when comparing CDs and other savings plans.

Your emergency fund should be kept in an account with more liquidity than a CD.  Also, once you have an adequate savings amount, be sure to consider higher return investments such as mutual funds and stocks.

For additional information on add-on CDs, go to:

Add-on CD Information
CD calculator

Teaching Suggestions

  • Have students talk to others to learn about actions they take regarding their savings programs.
  • Have students create a visual (poster, video, or slide presentation) that communicates factors to consider when comparing CDs.

Discussion Questions 

  1. What features of a savings account do you consider to be most important in relation to your financial goals?
  2. Describe situations when an add-on CD may be an appropriate savings instrument for a person’s financial goals.   
Categories: Chapter 4, Savings | Tags: | Leave a comment

The Future of Social Security

Posted on October 28, 2023 by Melissa Hart

In the annual Trustees Report, projections are made under three alternative sets of economic, demographic, and programmatic assumptions. Under one of these sets (labeled “Low Cost”) in the 2023 Trustees Report, the combined trust funds would be temporarily depleted before returning to positive levels by the end of the 75 year projection period. Under the other two sets (the “Intermediate” and “High Cost”) in the 2023 Trustees Report, the combined trust fund reserves become depleted within the next 15 years. The intermediate assumptions reflect the Trustees’ best estimate of future experience.

Some benefits could be paid even if the trust fund reserves are depleted. For example, under the intermediate assumptions, annual income to the trust funds is projected to equal about eighty percent of program cost once the trust fund reserves become depleted. If no legislation has been enacted to restore long-term solvency by that time, about three-quarters of scheduled benefits could be paid in each year thereafter.

The Trustees believe that extensive public discussion and analysis of the long-range financing problems of the Social Security program are essential in developing broad support for changes to restore the long-range balance of the program.

For more information, go to: ssa.gov/OACT/ProgData/fundFAQ.html

Teaching Suggestions:

  • Ask students if the Social Security and Medicare programs will continue to face significant financing issues.  How can these issues be addressed now to mitigate future problems?
  • Under current law, how are the Social Security and Medicare programs financed?
  • Research project: Ask students to research how large are the assets reserves currently in the trust funds.

Discussion Questions:

  1. What are the annual income and costs for the Social Security trust funds?
  2. Currently, do the Social Security trust funds have an annual surplus or deficit?
  3. How does 2023 outlook for Social Security compare to last year’s outlook?
Categories: Chapter_14, Retirement Planning, Savings | Tags: | Leave a comment

Planning for Retirement

Posted on October 14, 2023 by Melissa Hart

Do you have a retirement plan? It is never too early or too late to plan for your future. Even if you don’t have a plan in place, taking small steps now can make a big difference for your future retirement. Benefits.gov can help you plan and find retirement benefits. This article will share tips for savings and benefits that may be able to help you through retirement.

What should I do first?

Start saving money. If your employer offers a retirement savings plan, like a 401(k), sign up and contribute what you can. If your employer does not offer a retirement plan, you can put money in an Individual Retirement Arrangement (IRA).

What are Social Security retirement benefits?

The U.S. Social Security Administration (SSA) manages Social Security retirement benefits. The monthly payments are based on how much you earned when you worked. Social Security payments can help in retirement, but it may not be enough to cover all your expenses. SSA’s retirement estimator tool can estimate how much you will get in benefits at different ages.

Am I eligible for Social Security retirement benefits?

When you work and pay Social Security taxes, you earn credits for Social Security benefits. The number of credits you need to get retirement benefits is based on when you were born. If you were born in 1929 or later, you need 40 credits. Usually, this is 10 years of work. If you never worked, you may be able to get spouse’s retirement benefits if you are at least 62 and your spouse gets retirement or disability benefits.

When should I retire?

Choosing when to retire is up to you and will depend on your financial situation. You will receive less in your Social Security benefits if you retire before full retirement age. Find your full retirement age in the retirement age chart.

Are other benefits available?

Supplemental Security Income (SSI) helps people with little or no income and who are 65 or older, blind, or have a disability. SSI benefits are paid monthly. The amount you get is based on your income, living arrangements, and other factors

You may be eligible for benefits from the Federal Employees Retirement System (FERS) if you are a federal employee.

To find out more about retirement benefits you may be eligible for check out the Benefit Finder.

For more information, go to:  Planning for Retirement | Benefits.gov

Teaching Suggestions:

  • Ask students to debate the issue–“It is never too early or too late to plan for your future”.
  • Ask students to outline steps they can take now to secure their retirement?
  • Should you take Social Security benefits before your full retirement? Why or why not?

Discussion Questions:

  1. How can taking small steps now make a big difference for your future retirement?
  2. What steps can you take to save your retirement if your employer does not offer a retirement plan?
  3. Who is eligible for Social Security benefits?
Categories: Chapter_14, Retirement Planning, Savings | Tags: , | Leave a comment

MUSEUM OF SAVING

Posted on September 30, 2023 by Melissa Hart

With an increasing influence of finance, credit, and business on our lives, the Museum of Saving is an innovative, entertaining location. Families, adults, teens, and children are provided with a clear-and-simple approach to saving and investing for improved financial literacy. The museum’s mission is “to contribute to spreading financial education to help people make rational and informed decisions and act in ways to achieve the priorities of their lives.”

Through a combination of education and entertainment, the learning through play approach of the museum uses technology and interactivity to offer:

  • An introduction to economic history that includes the role of money, trade, loans, early banking activities, and major financial crises.
  • An overview of the most common financial instruments. 
  • Themed tours with audio-visual and interactive labs.
  • A multidisciplinary (economics, literature, cinema) view of famous people.
  • Gamification videos and apps to test and reward money management knowledge and skills.

While the Museum of Saving is based in Italy, you can access the exhibits online.

For additional information on the Museum of Saving, click here.

Virtual Tour:  

Teaching Suggestions

  • Have students talk to others to obtain advice on how to best learn about saving and investing.
  • Have students take a virtual tour of the Museum of Saving. What features do students consider to be most interesting and informative?

Discussion Questions 

  1. What actions do you recommend for a person to learn more about successful saving and investing?
  2. Describe factors a person might consider when evaluating different savings and investing alternatives.
Categories: Chapter 1, Chapter 3, Chapter 5, Chapter_11, Chapter_12, Chapter_13, Investments, Savings | Tags: , | Leave a comment

Money Habits of Women and Men

Posted on October 9, 2021 by Melissa Hart

Based on recent research, findings comparing the financial habits of women and men include:

  • Overall, single men outspend women, which may be due to higher average earnings. Men spend more on food and transportation, while women have higher spending for clothing. Both groups have similar spending for entertainment.
  • Women are wiser shoppers, buying items on sale and using coupons more often than men.
  • For debt, including credit cards, student loans, auto loans, personal loans, home equity lines of credit, and mortgages, men have more debt than women.
  • For both groups, the main financial goals were saving for a vacation, paying off credit card debt, and improving their credit score.
  • As they near retirement, men had higher amounts in their retirement funds. However, women are more likely to participate in an employer retirement plan than men, and save a greater percentage from their paychecks.

For additional information on the money habits of women and men, go to:

Source #1

Source #2

Teaching Suggestions

  • Have students create a short survey to compare the spending, saving, and investing activities of women and men.
  • Have students create a visual proposal (poster or slide presentation) to suggest improved money management activities.

Discussion Questions 

  1. What factors might affect differences between the money management activities of women and men?
  2. Describe actions a person might take to improve money management activities. 
Categories: Chapter 1, Chapter 2, Chapter 5, Chapter_11, Credit Cards, Financial Planning, Investments, Savings | Leave a comment

Bizarre Money Habits

Posted on October 24, 2020 by Melissa Hart

During difficult times, as well as in other times, saving money is difficult. While high-tech and app methods may work, traditional actions can result in quickly increasing your wealth. These weird-sounding saving habits suggested by millennials include:

 

  • Save a certain denomination of money. People who get paid in cash or receive change suggest saving every five-dollar bill, for example, in an envelope. This money can be used for fun activities, a special dinner, or to add to your long-term savings.
  • Use a jar to control spending. Put a set amount of cash in a decorated jar for lunches, eating out, or other budget item. Having to actually pull money out of the jar will make you more cautious of your spending habits.
  • Skip buying certain items. Avoid coffee, soft drinks, snacks, or other impulse items, and save that amount. These small amounts can add up to larger sums saved. 
  • Make use of recurring payments. If you are paying each month for a car payment, when the vehicle is paid off, keep sending that amount into a savings account.
  • Save in short sprints. For one month, avoid eating away from home and bring lunch to work. This reduced spending can make you more aware of your spending habits and increase amounts saved.
  • Pay for your drinks (or snacks) at home. Every time you have a soft drink, other drink, or snack, “pay” for it be setting aside the “price,” such as $1 for a soft drink or $2 for a bag of chips. These funds will add up for your savings.
  • Visualize your savings goal. Display a photo or other visual as a reminder of items you plan to buy or when saving for holiday gifts or a vacation.
  • Actually, freeze your credit card. Place your credit card in a bag or container of water and place it in the freezer.  This action can help avoid impulse purchases, and you can easily defrost it under warm water when you need to pay for an emergency.

For additional information on unusual money actions, click here.

Teaching Suggestions

  • Have students talk with others to obtain other ideas that they use to save money.
  • Have students create a video or other visual that might be used to encourage people to spend less and save more.

Discussion Questions 

  1. Why do most people have a difficult time saving money?
  2. Describe personal action that you have used to spend less and save more.
Categories: Chapter 1, Chapter 2, Savings | Tags: | Leave a comment

Financial Regrets

Posted on October 5, 2019 by Melissa Hart

Most people would like to be able to go back and do some things differently related to their personal finances. A study by bankrate.com revealed that 76 percent of those surveyed have at least one financial regret. The largest concern, over half (56 percent), involved not starting to save sooner for retirement, an emergency fund, or their children’s education.  Other financial regrets reported in the study include: living above one’s means; taking on too much credit card debt; and the burden of student loans.

A recommended action to address these financial regrets include breaking down large goals into smaller, easier ones can help put individuals on a path to success. A “save-first” mindset instead of “spend-first” is also suggested. In addition, consider opening an online savings account with higher returns, and set up direct deposits for regular saving.

For additional information on financial regrets, click here.

Teaching Suggestions

  • Have students conduct online research to determine various financial regrets of people in different age categories and life situations.
  • Have students conduct an interview with a person about actions that might be taken to avoid financial regrets.

Discussion Questions 

  1. What factors might create situations that result in a financial regret?
  2. Describe possible financial regrets and corrective actions a person might take.
Categories: Chapter 1, Chapter 2, Financial Planning, Savings | Tags: , , | Leave a comment

Where to Keep Your Emergency Fund

Posted on August 3, 2019 by Melissa Hart

While having an emergency fund is vital, putting this money in a low-yield checking account is not recommended. A certificate of deposit (CD) also may not be appropriate since your funds may be locked-up when the money is needed. For safe storage of your funds along with quick access and a better return, consider these alternatives:

  • High-yield savings account. These financial products are offered by banks to attract new savers. These accounts have high liquidity and are covered by federal deposit insurance; although, interest earned is taxable. Most high-yield savings accounts are available through online banks. Also be aware of fees, minimum balances, or a required minimum length of investment.
  • Money market fund. Usually offered by investment companies, these financial products are similar to high-yield savings accounts but do not have federal deposit insurance. However, they are protected by Securities Investor Protection Corporation (SIPC) insurance, usually covering amounts up to $1 million for investors.
  • Treasury bills and bonds. These debt instruments of the U.S. Treasury have a maturity ranging from 90 days to 30 years. While considered very safe, an investor may lose money if sold before it matures.
  • Ultra-short term bonds. For a higher yield with a bit more risk, consider ultra-short term bond exchange-traded funds (bond ETFs).  These funds invest in corporate bonds, which are not guaranteed.  However, it is possible to find funds that invest only in highly-rated bonds.

In each situation, be sure to consider the tax implications of earnings from these savings and investment products.

For additional information on emergency funds, click here.

Teaching Suggestions

  • Have students create a list of unexpected situations that might require accessing money from a person’s emergency fund.
  • Have students talk to others to determine where they keep money for emergencies.

Discussion Questions 

  1. What factors might a person consider when selecting a savings instrument for storing money for emergencies?
  2. Describe actions a person might take to have more funds available for an emergency fund?
Categories: Chapter 1, Chapter 2, Financial Planning, Savings | Tags: , | Leave a comment

Bank Accounts Everyone Should Have

Posted on July 6, 2019 by Melissa Hart

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

Blog at WordPress.com.