Teach Your Child About Money In 4 Easy Steps

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“Teach the children, so that it will not be necessary to teach adults.” Abraham Lincoln

Teaching a child takes patience, understanding, and creativity, but it is necessary for their success later in life. Studies show that children can start to learn money concepts as early as 3 years old. By 7 years old, they can grasp the idea of using money to purchase goods.

Step One: Teach them patience

Have you ever heard the saying, ‘Life isn’t fair’? Well, it isn’t. Instill in a child the necessity of patience in life. When your child is a baby, you feed them when they are hungry. When they are thirsty, we give them water. When that child grows up, it’s important for them to know that every want or desire is not received so quickly. Patience is important considering money at any age. It teaches a child in more ways than one.

  • I cannot have everything I want.
  • I cannot have everything I want at the time I want it.
  • When I wait, good things happen to me.
  • I don’t need everything that I want.
  • I should not spend everything I have at once.
  • I have to be disciplined with my money.
  • I have to live within my means
  • I understand what is important in life.
  • I will have money if I am patient.
  • I put off the things I want now in order to have the things I need later.

An easy way to do this:

The next time your child asks for a toy, tell them that you will think about purchasing the toy instead of purchasing it for them right away. Then, if you purchase it later, it is a welcome surprise. Try not to make a habit of always purchasing the toy, but remind them that the toys they currently own, are still working and fun to play with.

Step Two: Teach them to make decisions

Children spend the first few years of their lives believing that their parents make all the decisions. However, around 5 or 6 years old, they begin to realize there are options. This can be overwhelming for a child and cause them to make very slow decisions. Do I want the Superman action-figure or the Iron Man action-figure? The idea is to minimize the number of options and encourage them to choose one.

An easy way to do this:

After your child has saved a little money, take them to the store. They will surely be excited at the idea of buying whatever they want. Allow them to pick out a few items and then remind them of the amount of money they have and encourage them to make a decision on which toy they can afford and which is the most special.

pablo-3Step Three: Teach them that money has value

One of the most important lessons, is to teach your child the time-value of money. If you teach your child that all money takes time to acquire (i.e. patience) then over time, they will see that it does not grow on trees. This lesson will take them far in life, notably when they hit their teenage years and begin to make their own money.

An easy way to do this:

Purchase a clear jar for their savings. The clear jar will show them at all times how much or how little they have to spend. Instead of just telling them how much everything costs, have them take the money out of the jar in order to see how much they have to use and how much will be left if they spend it. This will surely teach them about budgeting.

Step Four: Teach them that saving pays off over time

Kids are notoriously impatient and immediately will want to spend what they have saved. Show them that you are saving and perhaps they will want to do the same. Get two clear jars and make sure they see you add money to it regularly. When they are a little bit older, teach them to deposit money into their bank account, and every month, review their statement with them. These financial lessons will pay off later.

An easy way to do this:

Instead of just giving your child an allowance, give them a pay rate for doing certain chores around the house. Then, give them ‘interest’ payments on their savings. Every week, remind them of how much more they have and encourage them to save it until it gets to a certain amount or until they can make one large purchase.

How are you teaching your child about finances? We would love to hear from you!

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4 Most Common Credit Card Scams

pabloIf you have never been a victim of a credit card scam, you may not know how convincing and sneaky these scammers can be. From fake calls to phishing emails, these fraudsters are stealing money from Americans everyday. Before you give out your credit card information, be on the lookout for any of these 4 tactics.

Fraud Department Calls

These calls involve the fraudsters claiming to be a representative from your bank’s fraud department. They will say that they are calling to confirm your recent charges, but before reviewing any charges they will ask for your full credit card number and CVV (3-digit code) to confirm that you have the card in your possession. Remember, your bank has your verified phone number on file and they already have the credit card number. Your real bank may ask that you confirm the last 4 digits of your card and one of your last purchases, but never the full card number. Do not ever give out your CVV code on an incoming call. Once the fraudster gets this information, they can start to make large purchases, leaving you in a fight to get your money back.

Credit Card Debt Reduction Calls

If you get a debt reduction call, hang up. Unfortunately, these calls are successful because they target Americans with bad credit. The caller promises to work with you to lower your debt by allowing you to pay off your credit cards in one monthly payment. While there are legitimate companies that offer this service, they should never ask you for a large upfront charge to enroll in their service. Before working with a business that claims to reduce your debt, research the company, ask for their company name, phone number, and address. Once you have established that this is not a scam, then you may choose to work with them.

Missed Jury Duty Calls

Fraudsters use this fear tactic in order to get credit card information from consumers. This call will likely start off with them telling you that you failed to report for jury duty and now have a warrant for your arrest. This is simply not true. In most states, there is minimal consequence for failing to appear for jury duty. Additionally, you will likely never get a phone call if you miss jury duty, especially one you never received jury summons for. Once the scammers tell the individual that they have a warrant, it causes fear causing the person to give their credit card information in order to clear their name. Can you guess what happens when they get your credit card information? They start to clear out your bank account quickly from purchases in a city, state, or country that you likely do not live in.

Phishing Emails

You can bet that any email asking for your full credit card number is fraud. The email may say that you are a beneficiary of some unpaid account, you’ve won a prize that you did not enter to win, or you are the sole inheritor of someone’s estate. The best way to protect yourself is to research common email scams, install malware, and avoid downloading attachments from email addresses you do not know. If you get an odd email from a friend with a download that you were not expecting, reach out to them to confirm its authenticity before you download.

If you think you have been a victim of one of these scams, review your account and give your credit card company today.

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7 Tips to Prep Your Finances For the Holidays

pablo-11The holidays will be here before we know it, but it is not too late to prep your finances before the season of giving!

Minimize your monthly bills

Have you considered refinancing your auto loan? Refinancing now may allow you to skip your December monthly payment, and that means more money for the people you love! If you’ve been a safe driver this year, consider shopping around for a better insurance policy!

Don’t forget, you can also use less electricity and pack your lunch for additional savings.

Set a budget

Before running towards the Black Friday deals, be sure you write out a manageable budget. Also, remember there is a difference between needs and wants.  Your teenager may really want a new iPhone 7, but realistically, they probably don’t need it.  Think about how much money you plan to spend on each family member, decide on a budget, and try to stick to it.

Propose a family gift exchange

If you have a large family, buying gifts can be overwhelming. Have you thought about a gift exchange? This is a great way to ensure everyone in the family gets a gift, or two, without breaking the bank. Put the names of all your family members in a hat and have each person draw one name. That family member will anonymously purchase a gift (or more) for that one person. The drawing is also a great excuse to get the family together one more time before the holidays!

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Minimize electricity usage

Now that we are moving into cooler months of the year, you may get a little break on your electricity bill. Depending on the weather in your state, you may opt to turn off the air condition and open the windows. Is it chilly where you live? Perhaps you could utilize your fireplace. Makes for warm bodies and warm memories.

A little extra work

Many retail stores have seasonal positions open around the holidays. The amount earned can be used towards Christmas gifts without having to adjust your yearly budget. Or, perhaps your company is offering overtime to cover employee vacations or increased business. Take advantage and sign up for a few hours when possible.

Get crafty

Looking for a gift for someone who seems to have everything? Get your creative juices flowing by handcrafting a gift for the person you love and appreciate. Check out Pinterest to find endless ideas from handmade candles to DIY sugar scrubs. Your loved one will appreciate the thought and the unique gift.

Cash in reward points

Been saving up your rewards points or cash-back rewards? This may be a good time to cash them in. Trade them in for cash to purchase stocking stuffers or gift cards for your friends. Next year, get started early by using those loyalty cards for everything starting in January. By December, you should be ready for the holidays.

Have you tried any of these tips? Tell us how you are preparing for the holidays this year!

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8 Ways to Minimize Identity Theft

pabloIdentity theft is the fraudulent acquisition and use of a person’s private identifying information, usually for financial gain. According to a 2013 study, over 13 million Americans were victims of identity theft that year alone. In the spirit of Fraud Awareness Week, we would like to share 8 ways to minimize your chances of being a victim.

Review your credit report annually

All Americans are entitled to an annual free credit report from each of the three credit reporting bureaus. Exercise your right by requesting and reviewing your reports each year for accuracy. If you notice a loan or inquiry that you did not make, you should check your records and then contact the credit bureaus to file a dispute if you believe it is fraud.

Report any lost or stolen credit cards ASAP

Not sure if your credit card is in your other wallet or if you dropped it in the grocery store? In this case, it is often better to err on the side of caution by canceling your credit card. Retrace your steps and look around for a few minutes, but if you are sure you lost it, you should report it stolen immediately. Someone could have taken your card and they may be headed out to make a big purchase at your expense!

Keep your credit cards, IDs, and social security cards in a safe place

Unless you have an immediate need for your social security card, it is best kept at home in a safe. Do not keep your social security card in your wallet. This makes identity theft easy, as the fraudster has access to your drivers license, social security number, address, and credit cards all in one place. It is also not wise to keep confidential documents in your car. Car break-ins can easily result in identity theft as well.

Never provide personal information over the phone – unless you made the call

According to the Federal Trade Commission, thousands of Americans lose money by telephone scams. These scams can range from collection calls, IRS calls, or creditor calls. If you did not call a company directly, do not provide your full social, your birthdate, address, or credit card number. Many of these scams target the elderly as they may be more likely to give information over the phone. If you were not expecting a call from a creditor, hang up and call the number listed on your bill before providing private information.

Shred sensitive documents

There are criminals that sift through trash in order to find personal documents. If you receive credit card statements, bank statements, or any other personal information through the mail, you should shred these documents after you review them. Do not throw them in the trash without shredding them first as criminals are looking for anything with a signature, account number, or social security number. It is also important to shred credit and loan offers that are sent to you. Other items to shred include; expired passports and visas, employments records and pay stubs, canceled or voided checks, medical and dental records, tax forms, and utility bills.

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Set alerts on your credit cards

Most credit cards companies will allow you to add alerts to your credit card when charges are made. Consider alerts for purchases over a certain amount, in different states, and perhaps at certain times of the day. This will not necessarily prevent fraud, but it could minimize the amount that can be stolen from you by allowing you to stop it quickly.

Install a firewall on your computer

Generally, individuals feel safer checking their online account balances and entering personal information on their home computers. Unfortunately, cyber criminals know this, and target these computers most. Firewalls, malware, and spyware can help protect you from viruses that could attack your computer and send your information to an online fraudster.

Do not open unsolicited emails

If you receive an email from a sender or a company that you are not affiliated with, asking for personal information, delete it immediately. If you open an email from an unknown source and see that they have sent an attachment, delete it immediately. This could be a virus waiting to be downloaded to your computer. At times, it could be spam, but it is best to not download anything you are unsure of. Instead, reach out to the company or person directly to confirm authenticity first.

Help to keep your identity safe by following these tips. Be sure to share with your family, friends, and coworkers. You can never be too safe!

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Debt-to-Income (DTI): What a High DTI Means

If you’ve ever applied for an auto, home, or personal loan, you may have heard your financial institution mention your debt-to-income ratio. Your debt-to-income (DTI) ratio is the amount of all your monthly debt divided by your gross monthly income. This ratio is used by lenders to determine your ability to manage all of your monthly payments to repay the money you borrow.

Simply add up all of your monthly debt payments. This would include credit cards, auto and mortgage loans, personal loans, and student loans. Divide this number by your gross monthly income and you will accurately calculate your DTI.

So, what is considered a high DTI? Generally speaking, 43% is the maximum DTI a lender will approve for a qualified mortgage loan. A reasonable DTI is considered under 36%, while most consumers feel more financially comfortable around 30%.

Here is an example:

Total monthly debt obligations: $2,070

Total gross monthly income: $5,000

Debt-to-income ratio = 2,070 / 5,000 = 41.14 %

There are many reasons why we should have some debt and a reasonable amount is healthy, providing you with more buying power in the marketplace. However, a high DTI can affect you in more ways than one.

1. You may not get the loans you need

If you have a high DTI, you may be declined for financing even if you have a great credit score. Even with a credit score over 730, you could be declined for a small loan due to your DTI. Creditors want to ensure you are not sinking in monthly payments before they extend credit to you.

2. You may be financially stretched if it’s too high

With a high DTI, you may find yourself living paycheck-to-paycheck. Consider this, if you were to lose part or your full income source, the harder it would be to repay your creditors if you have a high DTI.

3. If you lost your income, you could ruin your credit

Losing your income with high monthly bills, could mean that your credit is negatively affected. The lower your monthly bills, the easier it is for you to survive if the unthinkable were to happen. For this reason, it is very important to have an established emergency fund. Emergency funds are the best way to ensure you have the funds you need when life gets a bit out of control. Be it a medical emergency, or a layoff, be prepared for life by saving each month.

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Looking to lower your DTI?

Lower your DTI by decreasing the amount of credit you use and by paying off your debt as you are able. Student, auto, and mortgage loans are harder to payoff, so refinancing is the best option if these monthly payments seem too high. Focusing on paying off credit cards and personal loans is usually easier and more appropriate as these loans also tend to have higher interest rates.

Have any questions about your debt-to-income ratio? Let us know!

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