Do you Know Your Banking Basics?

With all the banks and credit unions as well as a growing number of other banking options to choose from, how do you choose which is best for you?

Type of Bank

Benefits

Disadvantages

 Commercial Bank
  • Full range of services (including online)
  • Many branches with ATMs
  • High fees
  • Less personal service
 Credit Union
  • Low fees
  • You have a say in setting policy
  • Need to meet membership requirements
  • Limited access to ATMs
 Savings and Loan
  • Lower fees than commercial banks
  • Personal service
  • Some weekend hours
  • Fewer branches than commercial banks
  • Limited ATM access
 Virtual Bank
  • Higher interest on deposits
  • Banking at your own convenience
  • No personal contact
  • Mail non electronic deposits
  • Fees to use ATM
 Brokerage Firm, Mutual Fund, or Insurance Company
  • Low cost or free checking
  • May provide loans against investment balances
  • May require high minimum balances
  • High fees

Most of these institutions offer the same basic services; the key things to consider when you make your choice are the costs of banking, the hours and locations most convenient for you, and customer service.

Source: Morris, A Woman’s Guide to Personal Finance

Family saving money in a piggy bank

Have You Had the Money Talk With Your Kids?

Ask any child where money comes from, and the answer you’ll probably get is “From a machine!” Even though children don’t always understand where the money comes from, they understand at a young age that they can use money to purchase things they want. Start teaching your children how to handle it wisely as soon as they show interest in it. The lessons you teach your children about money will provide a solid premise for making their own financial decisions in the future.

There are four lessons that you can teach your children about money: learning to handle an allowance, opening a bank account, setting and saving for financial goals, and becoming a smart consumer.

Lesson 1: Handling an allowance

An allowance is usually a child’s first experience with financial independence. Your child can begin developing the skills to saving and budgeting for the things they want. It’s up to you to decide how much to give your child based on your values and family budget.

*A rule used by many parents is to give a child 50 cents or 1 dollar for every year of age.*

Here are some things to keep in mind when dealing with allowances:

  • Set some boundaries. Talk to your child about the types of purchases you expect, and how much of their money should go towards savings.
  • Stick to a consistent schedule. Your child’s allowance should be given on the same day each week with the same amount.
  • You may also consider giving an allowance “raise” to reward your child if they handle their allowance responsibly.

Lesson 2: Bank Accounts

Taking your child to open an account is an easy way to introduce the notion of saving money.
Many banks have programs that provide activities designed to help children learn financial basics. Here are some other ways you can help your child develop good savings habits:

  • Help your child understand how interest compounds by showing him or her how much “free money” has been earned on deposits.
  • Allow your child to take a few dollars out of the account occasionally.
    • Your child may lose interest in saving if they never see money coming out of their account.

Lesson 3: Financial Goals

Children don’t always see the value of putting money away for the future. How can you get your child excited about setting and saving for financial goals? Here are a few ideas:

  • Let your child set his or her own goals to give some incentive to save.
  • Write down each goal, and the amount that must be saved on a regular basis to reach that goal.
    • This will help your child learn the difference between short-term and long-term goals.
  • Put a picture of the item your child wants to an item that can represent their goals like a piggy bank.

Your child will learn to make the connection between setting a goal and saving for it.
Finally, don’t expect a young child to set long-term goals. Young children may lose interest in goals that take longer than one or two weeks reach. Over time, your child will learn to become more disciplined in their savings.

Lesson 4: Becoming a Smart Consumer

Children are constantly tempted to spend money, but not wisely. Your child needs guidance from you to make smart purchasing decisions.

  • Set aside one day every month to take your child shopping. This will encourage your child to save up for something he or she really wants rather than buying on impulse.
  • Just say no. Teach your child to thoroughly consider purchases by explaining that you will not buy them something every time you go shopping.
  • Show your child how to compare items based on price and quality. Take them grocery shopping and explain why you are purchasing a certain item over another.
  • Let your child make mistakes. Eventually, your child will learn to make good choices even when you’re not there to give advice.
Guiding Parents with Dignity

Your Parents are Aging, What Questions Should You Be Asking Them?

As you age, you may find your parents struggling with illness as they age as well. As their daughter, you may be responsible for their care. The emotional and financial strain can be exhausting and the commitment may compromise your career. It can be difficult know where to start when helping your aging parents. Here are some questions to ask yourself to get started:

  • What institutions hold your assets?
  • Ask your parents for a list of their bank, brokerage, and retirement accounts, including account numbers and online usernames and passwords, if applicable.
  • You should also know where to find their insurance policies (life, home, auto, disability, long-term care), Social Security cards, titles to their house and vehicles, outstanding loan documents, and past tax returns. If your parents have a safe-deposit box or home safe, make sure you can access the key or combination.
  • Do they currently work with any financial, legal, or tax advisors? If so, get a list of names with contact information.
  • Do they have a durable power of attorney? A durable power of attorney is a legal document that allows a named individual (such as an adult child) to manage all aspects of a parent’s financial life if he or she becomes disabled or incompetent.
  • Do they have a will? If so, find out where it’s located and who is named as executor. If it’s more than five years old, your parents may want to review it to make sure their current wishes are represented. Ask if they have any specific personal property disposition requests that they want to discuss now.
  • Are their beneficiary designations up-to-date? Designated beneficiaries on insurance policies, pensions, IRAs, and investments trump any instructions in your parents’ wills.
  • Do they have an overall estate plan? A trust? A living trust can help manage an estate while your parents are still living.

(Questions from 360 degrees of financial literacy)

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Women examining her finances

Your Financial Assets, Defined

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit. Assets have four characteristics:

Maturity: Short-term or Long-term

Short-term assets are available for use within one year. One example of a short-term asset is a cash holding. A long-term asset is a stock, bond or other asset that an investor plans to hold for a long period of time. An example of a long-term asset is a retirement account.

Use: Personal, Investment, or Business

A personal use asset is a type of property that an individual does not use for business purposes or hold as an investment. An investment property is a real estate property that has been purchased with the intention of earning a return on the investment. A business asset is a piece of property or equipment purchased exclusively or primarily for business use.

Tax Treatment: Qualified or Nonqualified

A qualified asset refers to the special tax treatment given to investments held in employer-sponsored or individual retirement plans. Non-qualified holding is an investment that does not qualify for any level of tax-deferred or tax-exempt status. They are taxed on an ongoing basis as they earn income.

Security Type: Fixed Income or Equity

Fixed income assets or bonds are types of investing or budgeting styles. Real return rates or periodic incomes are received at regular intervals and at reasonably predictable levels. Equity is a stock or any other security representing ownership.

Source: Investopedia.com

Financially Savvy Women are educated about investments

3 Simple Steps to Becoming More Confident with Your Money

Women are notorious for putting off making important financial decision or even facing their financial life, why? The most common answer is “I don’t know enough” or “I don’t understand it all.”

As a result they hold off and procrastinate until a crisis forces change (not a great strategy).

So how much do you really have to know in order to make progress with your investment?  It really all starts with three simple steps:

  1. Know how to read your statements: Come to us and we will gladly coach you through these statements so that each month you are crystal clear as to what your money is doing for you.
  1. Know what returns you are trying to achieve:  We have determined a number of factors that can help you achieve financial independence, one of those factors is your “Average rate of return” If you can’t remember this number ask us.  This number should be your guide as to how well you are doing because it’s really all about you achieving your goals.
  1. Know the function of each of your investments: You don’t necessarily have to understand the inner workings of the investment but you should know whether the investment is designed to protect your principle, generate income, grow at a steady pace, reduce risk or provide tax deferred growth.

Are You Prepared For Change?

You love enjoying your financial security; you’ve established your career, you earn a nice income, and you’ve already paid for a home and college tuition’s. However, drastic changes like disability, illness, job loss, divorce, or aging parents can blindside you and your finances. You need to prepare yourself for unexpected changes to protect the financial security you already worked hard for.

Facing Disability, Illness, or Job Loss:

The greatest costs you retain when you become disabled or ill are medical provider charges. These charges include hospital, doctor, and medication bills. It pays to have health insurance especially if you can obtain reduced rates through your employer’s group plan. You may consider disability insurance if it pertains to you. Researching and picking the right insurance for you will provide the coverage that will protect you from paying high medical bills out of pocket.

Losing a job is always a drastic and immediate change. You need to develop some risk management like setting up an emergency fund that will cover all expenses while you are between jobs. Also, think POSITIVE. A job loss can lead to a new career, or a better position in your field of expertise. You may also decide to take some time off to travel, spend time with your family, or try out a new hobby during this time.

(Morris, A Woman’s Guide to Personal Finance)

Mature Woman Executive

Are Women Too Focused on the Short-Term?

Women, Money and The Long-Term

How many short-term financial decisions do you make each week? You probably make more than a few, and they may feel routine. Yet in managing these day-to-day issues, you may be drawn away from making the long-term money decisions that could prove vital to your financial well-being.

How many long-term financial decisions have you made for yourself? How steadily have you saved and planned for retirement? Have you looked into ideas that may help to lower your taxes or preserve more of the money you have accumulated?

In a 2014 Prudential survey of 1,250 American women, 86% of those polled felt that they lacked knowledge when it came to choosing investment or insurance products, yet 95% of the respondents identified themselves as the financial decision-makers in their households.1 Does this describe you? Perhaps it’s time to work toward gaining more confidence and control over your financial picture.

Start by taking inventory. Look at your investments and savings accounts: their balances, their purposes. Then, look at income sources: yours, and those of your spouse or family if applicable. Consider your probable or possible income sources after you retire: Social Security and others.

This is a way to start seeing where you are financially in terms of your progress toward a financially stable retirement and your retirement income. It may also illuminate potential new directions for you:

  • The need to save or invest more (especially since parenting or caregiving may interrupt your career and affect your earnings)
  • The need for greater income (negotiate for a raise!) or additional income sources down the road
  • Risks to income and savings (and the need to plan greater degrees of insulation from them)

Devoting even just an hour of attention to these matters may give you a clear look at your financial potential for tomorrow. Proceed from this step to the next: follow with another hour devoted to a chat with an experienced financial professional.

1 – http://corporate.prudential.com/media/managed/wm/WM-womens-research-summary.html

A young woman executive in a financial meeting

Women, Don’t Retire Without…

A practical financial checklist for the future.

 

When our parents retired, living to 75 amounted to a nice long life and Social Security was often supplemented by a pension. How different things are today!

 

The good news is that life expectancy for women – as measured by the Centers for Disease Control – is now 81.1 years. The Social Security Administration estimates that the average 65- year-old woman today will live to age 86. 1,2

 

Given these projections, it appears that a retirement of 20 years or longer might be in your future.

 

Are you prepared for a 20-year retirement? How about a 30- or 40-year retirement? Don’t laugh, it could happen: the SSA projects that about 25% of today’s 65-year- olds will live past 90, with approximately 10% living to be older than 95. 2

 

How do you begin? How do you draw retirement income off of what you’ve saved, and how could you create other possible income streams? How do you try and protect your retirement savings and other financial assets?

 

Talking with a financial professional – a female financial professional – may give you some good ideas. You want an advisor who walks your walk, who understands the particular challenges that many women face in saving for retirement (time out of the workforce due to childcare or eldercare, maintaining financial equilibrium in the wake of divorce or death of a spouse).

 

As you have that conversation, you can focus on some of the must-haves.

 

You should plan your investing. Many women (and men) retire with a random collection of investments, and no real strategy. Some are big on “chasing the return” – assuming risk they really shouldn’t in pursuit of a double-digit yield. Others are very risk-averse, so fearful of what stocks might do that they stay out of the market entirely – and in the current low interest rate environment, that represents an easy way to fall behind and lose purchasing power to inflation.

 

You need a middle ground. When you are in your fifties, for example, you have less time to make back any big investment losses than you once did. So protecting what you have is a priority. At the same time, the possibility of a 15-, 20-, or even 30- or 40-year retirement means you have to keep a foot, if not both feet, in some kind of growth investing. Your initial retirement nest egg has to keep growing.

 

You should look at long term care coverage. It is an extreme generalization to say that men die sudden deaths and women die lingering ones; however, women often have longer average life expectancies than men and can require weeks, months or years of eldercare. Medicare is no substitute for LTC insurance; it only pays for 100 days of nursing home care, and only if you get skilled care and enter a nursing home right after a hospital stay of 3 or more days. Long term care coverage can provide a huge financial relief if and when the need for LTC arises. 3

 

Claim those Social Security benefits carefully. If your career and health permit, delaying Social Security  is a wise move for single women. If you wait until full retirement age to claim your benefits, you could receive 30-40% larger Social Security payments as a result. For every year you wait to claim Social Security, your monthly payments get about 8% larger. 4

 

Married women can look at spousal claiming strategies such as the “file and suspend” approach and claiming spousal benefits first. This may help to maximize the Social Security benefits you and your spouse receive.

 

Above all, retire with a plan. Have a financial professional who sees retirement through your eyes help you define it on your terms, with a wealth management approach designed for the long term.

 

1 – http://cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf

2 – http://ssa.gov/planners/lifeexpectancy.htm

3 – http://medicare.gov/coverage/skilled-nursing-facility-care.html

4 – http://money.usnews.com/money/retirement/articles/2012/04/02/what-older-workers-dont-know-about-social-security

Why Women Are Prepared for Financial Success?

We have the ability to excel financially; it is a matter of shifting our outlook.

Statistics don’t mean everything. Read enough about women and money online, and you will run across numbers indicating that women finish a distant second to men in saving and investing. Only 42% of women save a specific amount money each month for retirement, the State Farm Center for Women and Financial Services at the American College finds. Aon Hewitt says that the average 401(k) balance for a man at the end of 2012 was about $100,000, while it was only about $59,300 for a woman. And so forth. 1,2

Depressing? Well, consider that you can be the exception. (Maybe you are right now.) You may already have the discipline and patience central to smart investing and saving.

Is making a household work all that different from making your money work for you? You may or may not have to broaden your skill set a bit to save and invest well for retirement; chances are, though, you already have some abilities you can draw on effectively.

The latest edition of Prudential’s “Financial Experience & Behaviors Among Women” study (2010-2011) shows that 54% of women either feel “very knowledgeable” or “somewhat knowledgeable” about financial products. The previous edition of the study noted that 95% of women are financial decision makers within their households, with 84% of the married women surveyed solely or jointly in charge of household finances. 3

Given that level of participation and control over household finances, is it such a stretch to believe many women could become equally financially literate in their understanding of stocks, bonds, commodities, and insurance? It isn’t a stretch, especially when you think about how much good financial knowledge is out there, some of it free of charge.

Most household financial decisions are short-term decisions. They are geared toward this month or this year, and often relate to cash flow management or debt management. The simplest step toward financial freedom for many women – perhaps the most valuable step – may be moving from a short-term financial outlook to a long-term financial outlook.

Think about becoming the “millionaire next door.” In many cases in this country, wealth is grown slowly and steadily. We all dream of a windfall, but usually individuals amass $1 million or more through a variety of factors: ongoing investment according to a consistent financial strategy, the compounding of assets/savings over time, business or professional success, and perhaps even inherited wealth.

When the focus moves from “how do we make it work this month” to “how do we make moves in pursuit of our financial goals”, the whole outlook on the meaning and purpose of money begins to change. What should money do for you? What purpose should it have in your life? What can you do to make it work harder for you, so that you might not have to work as hard in the future?

Women have the wisdom, prudence and patience to make superb investors. Understanding the financial world is ultimately a matter of learning its “language” and precepts, which will quickly seem less arcane with education. Today, do yourself a money favor and ask to talk with a female financial professional who can help you define long-term and lifetime financial goals and direct some of your money in pursuit of them.

1 – http://www.cnbc.com/id/100732440

2 – http://blogs.marketwatch.com/encore/2013/08/14/401k-gender- gap-is- bigger-than- pay-gap/

3 – http://prudential.com/media/managed/Womens_Study_Final.pdf

financially independent woman

It’s All in Your Hands

A Post-Divorce Action Plan

You have just gone through one of the most challenging and difficult periods that a woman can experience in her life – a divorce. While many things may still be in up in the air, one aspect of your life that you should make sure you’re in control is your finances.

Financial planning for divorced women is not that much different than financial planning for married couples. Several basic elements are the same. However, the differences offer both good news and bad news. The good news: you can make plans and decisions based solely on your needs and goals. There won’t be miscommunication or conflicting ideas. The bad news: it’s all in your hands. Any mistakes will be your own and a poor decision can’t be salvaged by the income or assets of a partner.

The following post-divorce action plan offers a few things worth considering:

One way to counter the bad news is to find a trusted professional to seek advice from.

After a divorce, friends are often split between spouses. Financial representatives can be the same way. If you lost yours in the divorce or never had one to begin with, it’s a good time to consider finding a professional who can help you make sound financial decisions for your new life.

To find one, start simply. Ask friends or acquaintances who it was that helped them when they went through a divorce. The attorney who handled your divorce may also be a good source for a referral. It’s important to have someone help you who has previously assisted or – best of all – who specializes in helping divorced women.

Selecting the right financial professional for you is a critical step. After all, this person will be helping you with the important financial decisions you now have to face.

Long-term care insurance may become even more important post-divorce.

Long-term care policies are designed to cover the costs of care if you are unable to care for yourself because of age or if you become ill or disabled. Long-term care is especially important for women because they typically pay more for it than men do. The reason is simple: women typically live longer than men and usually require longer care during those additional years.1

A woman’s retirement is usually more expensive than a man’s.

The reason that women usually need long-term care insurance more than men is the same reason that retirement income planning for women may be more important. Women live – on average – 5 to 10 years longer than men. Eighty-five percent of people over 100 are women.2 This means a woman’s retirement savings must, on average, be stretched out over a larger number of years.

While, in general, retirement planning for a single person is easier in many ways than for a couple, remember … you can no longer rely on a spouse’s financial resources if a mistake is made. It’s important to review your social security estimates, any pensions you have and your retirement assets. You can then compare that to the kind of lifestyle you would like to have during retirement.

Because retirement may be more expensive, you may want to make an employer-sponsored retirement plan a larger deciding factor in any job search. Also, you may decide that you must retire at a later date than you had originally planned.

Update your beneficiaries and consider using a trust to help manage your assets. People often forget to update the beneficiaries of their life insurance and retirement accounts after a divorce. If not changed, your ex-husband may stand to inherit a large portion of your assets. Also, the estate laws give certain breaks to married couples that are not available to a single person. Establishing the proper type of legal trust may be a way to pass along more of your assets to your heirs, rather than to the IRS.

Finally, after you have moved on from your divorce there may come a time when you consider remarriage. It’s important that you understand the financial effects this may have. If you were married longer than 10 years you may be collecting or entitled to 50% of your ex-husband’s social security benefit. If you remarry you will no longer have that right. While you will become entitled to your new husband’s benefit, you must know if your new husband’s benefit will be lower or higher, and how that will affect your retirement.

Remarriage can also lead to blended families, blended assets and blended income. Your new husband may have his own family from a previous relationship. A financial professional can help the two of you prepare for this blending that satisfies the financial needs of each of you, as well as your new family.

While it’s all in your hands, partnering with a financial professional can help you move on to the next phase of your life with a more solid plan for your financial future.

1. http://www.wife.org/long-term-health-care.htm
2. http://www.time.com/time/health/article/0,8599,1827162,00.html