More and more bank customers are using online financial-service providers. Online-only (digital) banks provide traditional financial services in an online format. FinTech companies (neobanks) offer innovative banking services with an emphasis on emerging technology, often through apps.
When deciding which online bank to use, consider these factors:
- FDIC Insurance, Federal Deposit Insurance Corporation (FDIC) covers deposit accounts against bank failure up to $250,000 per depositor and type of ownership category. To determine if a bank is protected by the FDIC, go to https://banks.data.fdic.gov/bankfind-suite/bankfind
- Fee-free ATMs, to avoid costly charges. Many online banks have an extensive network of ATMs, while others do not have ATM access.
- High-yield savings accounts, with lower operating costs many online banks offer savings accounts with higher yields. Be sure to compare the rates, rules, and regulations at various online banks, such as the required minimum deposit and minimum balance.
- Multiple banking products, depending on your goals and needs, you might choose a bank that offers an array of financial services–checking, saving, CDs, debit card, ATMs, credit card, and loans.
- Financial management tools, FinTech apps and online banks offer innovative financial planning tools to help you save money, such as with a round-up savings component, automatic savings deposits, and low-cost investment funds. Other apps include features for achieving goals to pay off debts or save for a vacation, or savings based on your spending patterns.
- Investment guidance, robo-advisors provide portfolio suggestions based on financial goals and risk tolerance with the use of artificial intelligence.
For additional information on selecting an online bank, click here.
- Have students talk to others to learn about factors that were considered when selecting a bank or other financial-service provider.
- Have students create a visual proposal (poster, slide presentation, or other format) to highlight the main factors to consider when selecting an online bank.
- What online banking features could help a person improve their financial position?
- Describe actions a person might take to select an online bank.
Kids are no longer using a piggy bank to obtain financial responsibility. Instead, digital tools, such as debit cards and apps, are the basis for learning smart spending and wise money management. Many of these products are prepaid cards that help kids track their spending, and also include customizable oversight features for parents. Some available products include:
- FamZoo (famzoo.com) makes use of parent-paid interest to encourage saving. Common users of the app are preteen and young teenagers, but may also be used for kids from preschool to college.
- Greenlight (greenlightcard.com) allows parents to control the stores at which the debit card can be used. Greenlight plans to introduce an investing feature to move users to a higher level of financial literacy.
- gohenry (gohenry.com) is an app for kids (ages 8 to 18), but may be used by younger children. The emphasis is on building money management confidence in a safe setting while learning to spend and save.
- Current (current.com) is a custodial bank account aimed at teenagers. Parents may also open accounts for younger children.
These products allow parents to channel digital funds to their children to pay weekly allowances. Also, kids may divide their money into accounts for saving, spending, and donating to charity. Most apps have a monthly fee, ranging from $3 to $5.
When using prepaid debit cards with children, consider the following:
- Spend time talking about why the kids want to buy various items, and why certain household tasks earn money and others do not. Expand the Connect the discussion to talk about total family finances as well as money attitudes and values.
- Allow freedom to make spending decisions to give kids experience at managing money, and to make mistakes from which they will learn.
- Ask older kids to buy household items, even though they might be reimbursed. Buying shampoo, toothpaste, and snacks will prepare them for when they are on their own. Also consider billing them for monthly expenses, such as the cost of their cell phone.
For additional information on prepaid debit cards for kids, click here.
- Have students conduct online research to evaluate apps that might be used by parents to teach their children smart spending and wise money management.
- Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.
- What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
- Describe some possible money management learning activities for children that do not involve the use of technology.
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.
- 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.
- What might financial literacy and money management activities be improved with FinTech?
- Describe concerns that might be associated with expanded used of FinTech.
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.
- 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.
- What technology services do you desire from a bank for your financial services?
- Describe actions banks might take to better serve the needs of customers.
While beneficiary, collateral, and fair market value are familiar to many, these terms can be especially confusing to those with limited English-language skills. In an attempt to assist various people, the Consumer Financial Protection Bureau has created the Newcomer’s Guides to Managing Money to provide recent immigrants with information about basic money decisions. These guides offer brief suggestions to those who are new to the U.S. banking system. The guides also include guidance for submitting and resolving problems with a financial product or service.
The Newcomer Guides include these topics:
- Ways to receive your money, comparing cash, check, direct deposit, and debit cards.
- Checklist for opening an account, to assist with starting a bank or credit union account.
- Ways to pay your bills, providing guidance on whether to pay by check, debit card, credit card, or online.
- Selecting financial products and services, providing assistance on deciding which financial services are right for various household situations.
Print copies of the guides can be ordered or downloaded. These publications are available to English and Spanish with additional languages to be offered in the future.
For additional information on money guides for newcomers:
- Have students ask people to create a list of financial planning terms that people find confusing.
- Have students suggest methods to have people learn about confusing financial planning terms.
- What financial problems might be encountered by people with limited English-language skills?
- What actions might be taken to assist various groups to better understand banking services and money management activities?
Categories: Bank Fees, Budget, Chapter 2, Chapter 4, Credit Cards, Debit Cards, Debt, Financial Services, Savings
Tags: financial services, payments, wise money management
With many investors already making their own trades online, investment companies believe that robo advisors have these additional benefits:
- lower costs for obtaining advice and conducting transactions.
- an ability to adjust the portfolio for tax purposes by selling shares that have declined to offset gains.
- an easier investment approach for younger clients with less-complicated financial lives.
Some will be concerned about automated portfolio management. Human advisors will still be available to address issues about mortgages, insurance, estate planning, retirement income, and other topics that robo-advisers are not yet equipped to answer.
For additional information on robo advice, click on the following articles:
- Have students ask people to describe the process they use to select investments.
- Have students create a framework to analyze when using robo advice might be appropriate for an investor.
- What are benefits and drawbacks of robo advice?
- What factors might be considered when using robo advice for investment decisions?
Categories: Bonds, Chapter_11, Chapter_12, Chapter_13, Financial Services, Investments, Mutual Funds, Stocks
Tags: bonds, financial services, Investing, mutual funds, stocks
While smartphone apps have made banking easier than ever, threats to financial security continue to grow. However, some simple actions can be taken to avoid banking app mistakes.
1. Don’t conduct banking transactions on public Wi-Fi networks since they are vulnerable to hackers. Use a virtual private network (VPN), which provides added security and encryption.
2. Log out after your session to prevent a thief from getting access to your bank account.
3. Select a not-so-obvious username. Create password recovery questions with responses that are difficult to obtain from public records.
4. Update your app when a new version is available to take advantage new security features.
5. Create a strong password with special characters, and it should be at least 12 characters long. Change your password every 90 days.
For additional information on banking app errors, click here.
- Have students talk with others about their experiences using banking apps.
- Have students locate online information about the latest security features fof banking apps.
- What are benefits of costs of banking apps?
- How might banking apps be improved for increased financial security?
“. . . Financial coaching initiatives that target the working poor have sprung up in communities across the country.”
For low-income wage earners, the idea of paying hundreds of dollars for professional financial help can seem about as far-fetched as buying a winning lotto ticket. And yet, help is available in a number of the nation’s larger cities including Chicago and New York. In most cases, the financial coaches volunteer their time and have a background in personal finance or have received financial and investment training. The participants receive specific suggestions geared to their individual situation that are designed to improve their credit score and help them build a sound financial future. According to Richard Cordray, the director of the Consumer Financial Protection Bureau, “Having a trusted, well-informed financial coach can increase your odds of financial success.”
For more information, click here.
Note: There is a short video that accompanies this article.
You may want to use the information in this blog post and the original article to
- Point out that often low wage earners don’t have the money to pay a financial coach to help them manage their finances.
- Describe different situations where the advice from a financial coach could make a difference in someone’s financial future. For example, a coach’s suggestions on how to improve someone’s credit score could lead to obtaining a credit card for emergencies or a short-term loan to bridge the gap between unemployment and employment.
- Assume you are unemployed and have exhausted your emergency fund. You are behind on monthly payments including your rent and utilities. What steps can you take to improve your financial situation?
- In the above situation, what suggestions do you think a financial coach could provide that would help you work through this difficult situation?
Brian Page, a teacher in Reading Ohio, wants his students to understand the drawbacks of check-cashing services, pawnshops, rent-to-own stores, payday loans, and other shadow banking services. As a result, he scheduled a field trip for his students to visit these sources of high-cost financial services in their community, which are used by many unbanked consumers.
At LoanMax, they observed people getting loans with their auto titles serving as collateral. One missed payment could lead to repossession of the vehicle. Next, at CheckSmart, students learned about payday lending and tax refund anticipation loans.
At CashAmerica people were making loan payments on money borrowed, which used jewelry, electronics, and sports memorabilia as collateral. Finally, the visit to the Rent-A-Center store demonstrated the exorbitant costs of furniture, appliances, and electronics when using a rent-to-own payment program.
For additional information on teaching about high-cost financial services, go to:
- Have students talk with someone who has used one of these high-cost financial services. Obtain information about their experiences.
- If appropriate, have students visit a high-cost financial service provider to obtain information about their services and fees.
- Have students create a video presentation with suggestions on how to avoid using costly sources of financial services.
- Why are an increasing number of people using high-cost financial services such as pawnshop loans, payday loans, and rent-to-own programs?
- What alternatives might used by consumers instead of these high-cost financial services?
- What actions might a person take to avoid these high-cost financial services?
Loans with annual interest rates exceeding 400 percent continue to occur in our society. Payday loans are often used to bridge a cash-flow shortage between paychecks. Also known as “cash advances” or “check loans,” they are usually expensive, small-dollar loans, of generally $500 or less. They offer quick and easy access to funds for consumers who may not qualify for other credit.
A recent Consumer Financial Protection Bureau (CFPB) study revealed that four out of five payday loans are rolled over or renewed within 14 days. The majority of payday-loan borrowers renew their loans so many times that they end up paying more in fees than the amount of money they originally borrowed. This study also reported that:
- only 15 percent of borrowers repay all of their payday debts when due without borrowing again within 14 days.
- 20 percent default on a loan at some point, and
- 64 percent renew at least one loan one or more times.
These actions often create exorbitant fees and charges, and keep the consumer in perpetual debt.
For additional information and a complete copy of the payday loan report go to http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf
- Why does the market for payday loans exist?
- What actions might be taken to avoid using payday loans?
- Recommend actions for people who are caught in the trap of payday loans.
- Have students visit a payday loan office or an online payday loan provider to gain additional insight into this high-cost financial service.
- Have students make a short presentation with a summary of actions that might be taken to avoid payday loans.