Monday, February 28, 2011

Money Smart Kids Saving Smart

SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.


Saving Smart
Saving money takes discipline. To make it a habit for life, teach your kids about saving as soon as they have a regular income—i.e. an allowance. Help them understand that all the money they receive is not for spending immediately on candy, toys or games. Kids should learn that they have responsibilities—to them­selves, their loved ones, their future and their com­munity. Teach them that they should save money for several reasons, including emergencies, common expenses (such as birthday gifts or lunch money), future purchases, investing and charity.

The 3 Little Piggy Banks
Some experts recommend kids keep their money in at least three piggy banks—one for spending, one for saving and one for charitable giving. Your kids can use envelopes, plastic baggies or any other containers—as long as there are three separate ones clearly marked and explained. Decide what percentage of your kids' allowance and gift money should go into each bank. A common formula is at least 10 percent for savings, 10 percent for charity and the rest for spending. Whatever formula you use, stick to it. Your kids need consistency to learn the routine.

Save Yourself
Model the behavior you want your kids to exhibit. The older they get, the more they'll notice your methods of saving and spending. Let your kids see that you put off immediate gratification to save for bigger goals, pay credit cards on time or set aside money regularly for retirement or investing.

The Magic of Saving
The payoff of saving is watching your money grow. Remind your kids to keep an eye on their savings. When they get enough coins, let your kids trade them in for bills. When they get five $1 bills, give them a $5 bill, and so on. By making regular deposits, they will see that savings add up.

Make It Official
When your kids have enough money saved, take them to open a savings account at your credit union. Tell them their savings will grow faster and be safer in an interest-bearing account. You could explain that the federal government insures people's money in most banks, credit unions and savings and loans associations for up to $250,000 per account.
Saving Options
Visit your credit union with your kids to find out about the kinds of accounts they can open. Ask about:

Passbook or Statement Account
This basic savings account pays your kids interest. They'll receive their own register or book to record their deposits and track their balance. They can withdraw some or all of their money at any time. A minimum deposit may be required.

Money Market Account
Your kids will earn more interest with this account but have more restrictions. They may need a larger opening deposit and have to keep a higher balance. They can withdraw their money any time, however, and may receive a checkbook with the account.

Certificates of Deposit (CDs)
CDs or timed accounts are beneficial if your kids have a lot of money (e.g. $500 or $1,000) they won't need for a while. They'll earn a relatively high interest rate and won’t be able to withdraw the money without paying a penalty.

SVSCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.

You can teach your children how to save money by partnering with SVDCU. Open an account today with a minimum deposit of $10.00. They then become a member of the "Very Important Kid" Club.

Tuesday, February 22, 2011

The Risks Retirees Need to be Aware of


Are we prepared for retirement?   Recent figures from the Employee Benefit Research Institute reveal that 47% of Americans, ages 56-62, would run out of funds necessary to pay for basic retirement expenditures if they retire at age 65.  Six in ten Americans express significant concern about their retirement savings and investments.  So why are people so unprepared?  That is a good question and what do they need to be aware of for the future?
The way retirements are funded is rapidly evolving.
1)      The future of Social Security is in question.  Every day more and more of the 78 million baby boomers approach retirement age.  The Census Bureau estimates that the ratio of people in their retirement years, 65 and older, versus those in their working years, 20 to 64, will rise from 20.6% to over 35% in 2030.  That will put a tremendous strain on the Social Security system.
2)      Pension plans are disappearing.  The traditional employer-sponsored pensions seem to be gone.  The number of defined pension plans being offered to employees has been shrinking steadily since 1980. Defined contribution plans, such as 401(k) s and 403(b) s are the new vehicles for retirement.  The problem with these plans is that these plans leave investors highly vulnerable to market volatility.  The burden of financing retirement is shifting squarely on the shoulders of individuals.  Adding to this burden are financial risks that make retirement today more challenging than ever.
3)      We are living longer.  Life expectancy has increased by more than 10 years and most experts see the trend continuing.  This means retirements could last more than 30 years or more.  Somehow we have to fund these extended years.  We will need an income source that can help maintain the quality of life we enjoy. 
4)      Rising costs are affecting our pocketbook.  Expenses in retirement will tend to keep rising.  We will have to find income to account for these increases. Specifically, there are three key cost related issues that can erode the purchasing power of retirees over time.  The first is inflation.  Most people underestimate the impact inflation can have on their standard of living in retirement.   Inflation can be a significant risk especially for retirees.  Basic necessities such as food, housing, transportation and utilities have risen at between 1% and 13% annually.  The second issue is taxes.  Federal taxes do fluctuate up and down.  According to the Tax Foundation, federal income taxes would need to double in order to close the deficit.  The last issue is healthcare.  Healthcare costs have risen 149% between 2000 and 2009-over four times greater than workers’ incomes.  Healthcare costs will likely continue to rise.
     5)       Market uncertainty is posing a risk to financial security in retirement. Volatility poses one of the biggest threats to retirement savings because a downturn just before or after retirement can be devastating to an unprotected portfolio.  It could take years to recover from losses; precious time that someone entering retirement might not have.  One thing we need to do is to understand the financial challenges we have to face in retirement and address them.

Call Sterling Van Dyke Credit Union at 586.264.1212 for an appointment to discuss ways we can help you plan and enjoy your retirement.

Monday, February 14, 2011

Money Smart Kids Ages 15-18

SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.
Ages 15-18
Your teenagers will likely earn money from a part-time job. This is the time to open a checking account. Be sure they know how to keep records and balance their checkbook. Give your teens more responsi­bility for handling money and making decisions. Older teens can shop for school supplies and clothes—with an expanded allowance from you. Control over spending with a dollar limit.  This will force them to make better decisions. For instance they'll soon realize that buying designer brands means fewer items for their money.
Reality Check
All young adults need to learn the cost of everyday life. Work up a realistic list of the expenses your teens would have if they lived alone. Include the cost of groceries, clothing, rent, utilities; car payments, insurance and gas (or public transportation), taxes, healthcare, entertainment, and miscellaneous (car repairs, household supplies, credit card bills, etc.). Then compare this list to your kids' projected income. They'll see how they'll have to budget and possibly cut back on expenses in order to afford everything.

The Cost of Credit
You may consider letting your teens use your credit card, but there are drawbacks.  You have no control over spending and are responsible for paying the bill. You can teach the cost of credit in another way by charging interest on a small loan you give your teens for a relatively costly item, such as a digital camera. Be firm with your kids paying you back with regular payments on time.  This will help them develop good habits. 

You can teach your children how to save money by partnering with SVDCU. Open an account today with a minimum deposit of $10.00. They then become a member of the "Very Important Kid" Club.

Monday, February 7, 2011

Money Smart Kids Ages 11-14


SVDCU wants to share tips for teaching children good habits about money management. The information was originally published in Smart Parenting - Money Smart Kids.
This is an especially important time for learning about money. Your kids will have more cash now, along with the maturity to begin making decisions about how it's handled. Give them control of the money and the room to make mistakes and learn lessons.

More Money, More Responsibility
Increase the amount of your kids' allowance and add the responsibility of paying for school lunches or other needs. Make the allowance large enough to cover their entertainment expenses. Let them decide how these fun-time dollars will be spent movies, video rentals, snacks, bowling with friends. Provide additional decision- making opportunities by setting a spending limit on purchases and letting your kids shop for birthday gifts for others.

Life Lessons
Use more complicated financial situations as opportunities to teach your preteens and teens about money. Let them see how your major financial purchases involve trade-offs. If your family is buying a new computer or car, for example, ask your kids to help you research which one to buy. If you are refi­nancing your house, show them how small differences in interest rates equal big savings.

Earning and Saving
Continue to stress the value of saving. If your kids want something that costs more than you're willing to spend, suggest ways to earn the differ­ence: odd jobs around the house, baby-sitting or washing the neighbors' cars. Give your kids free reign over their spending money, even if they seem careless. They may blow all their earnings on frivolous buys, but when they realize they're broke, they will learn to be more frugal.

Truth in Advertising
Advertisers spend millions of dollars trying to hook young adults on spending—or influence their parents' spending. To prevent your kids from being lured by glitzy ads and fads, talk with them about the ways advertisers make people want to buy. Discuss the fact that ads are often short on facts but use lots of false promises.   In the case of celebrity endorsements, explain that celebrities are paid to sell products they may not even use or like. By learning how ads use the power of persuasion, your kids are less likely to be influenced.

You can teach your children how to save money by partnering with SVDCU. Open an account today with a minimum deposit of $10.00. They then become a member of the "Very Important Kid" Club.