Teaching teens about personal finances is one of the most important duties parents have. According to a recent 
Charles Schwab survey titled Teens and Money only 30% of teens believe their parents/guardians are concerned with making sure they are learning the basics of personal finance. 64% of teens reported they would rather learn about money management through experience rather than in the classroom. When parents take the time to teach their teens basic money management skills the education can prevent financial hardship down the road. Side benefit: parents can learn something too!
Teach Value of Money
Weather your teen gets money from a job, or an allowance they should be able to make the connection between work and income. It’s easy for teens to ask parents for money and then spend it thoughtlessly, but when they have earned the dollars through their own efforts they will have a better appreciation of it.
Teach Savings
One of the most valuable lessons to teach teens is how to save a portion of their income. Get your teen into the habit of saving for purchases or investing. This practice will teach discipline and the benefits of delayed gratification.
Teach Budgeting
Helping your teen calculate his expenses now will get him in the habit of tracking his expenses as an adult. Allow your teen to be financially responsible for certain things in his life. For example, gas, cell phone bill, entertainment, and clothing. Only 14% of teens in the survey said they were involved in paying household bills. Allowing teens to be involved in this area helps them see realistically how far money goes.
Teach about Credit and Debit Cards
Learning about the responsible use of a credit and debit cards can help teens build a strong credit history and learn to pay bills on time. The ease of using a credit or debit card can be a financial disconnect for teens. Fees, interest rate hikes, and overdraft charges are traps that teens need to learn how to avoid. Credit card debt has caused financial ruin for many adults, but it does not have to be that way for your teenager.
Teach Investment Strategies
It does not take much money for teens to start investing. If you are unfamiliar with investing strategies this is a great opportunity to learn together. There are many, online and offline resources available to help start your teen with some simple investing that can pay off big later.
Teach Confidence and Discipline
Teaching your teen about personal finances and money management now will build confidence and disciple. Knowing the value of money, saving, budgeting, and investing is sure to put your child ahead of the class.
The time to prepare for retirement is not the year before or 5 years before retirement age. The time to plan is now. A 
401K plan is designed to help employees save for their retirement. There are two separate types of plans; a traditional 401k and a Roth 401k. Both of these have their advantages. The traditional 401k money isn’t taxed when the money is placed in the account, but when it is removed. The Roth plan is the opposite in that, income is taxed before placing it into the account and is removed tax-free upon retirement age. Whichever plan is chosen may rely completely upon what an employer is offering. In order to maximize the amount of money available upon retirement age there are a few simple steps you can follow.
The first essential step is to start contributing money right away. Don’t wait for the ‘right time’. That time never really comes. Start by contributing just 1% of your income to your 401K. This is the first step in creating financial security in your future. Make it a goal to increase that amount on an annual basis. This year 1%, next year 2% and so on and so forth. Contributing now is especially important if your employer matches your contribution. If at all possible, put in the amount that your employer will match. This can be anywhere from 3-8% depending upon the company. Imagine contributing just 1% of $30,000. This is matched by your employer so that by the end of the year you have $600 plus the interest on your investment. Now that you’re in the habit, soon you’re contributing 10% of your income and your employer matches up to 5%. Now you’re at $4500 plus interest. This snowballs into $20,000 then $30,000 and beyond. It takes the first small step to get there.
Determine what you need from your 401K money. This greatly depends upon what stage of your life you’re in. Are you five years from retirement or 15 years from retirement? Do you plan on working after retirement or does this money need to pay for all of your living expenses from the age of 60 to the years beyond? If you have five years or less until retirement then you may want to invest in more stable items such as bonds. For those with 15 years or more until retirement, consider it safe to play with stocks. Yes, the stock market has it’s ups and downs but you have plenty of time to sort that all out. The stock market is a long-term investment. Don’t panic if everything takes a dive, stay the course and keep investing. If you continue to buy stocks in the “bad times” then you are actually getting it much cheaper than before and will double or triple your money when the stock market recovers. History has proven that the stock market always recovers.
Retirement should be a time to sit back, relax and enjoy life without having to worry about making ends meet. You are the only one responsible for your retirement. Don’t rely on others to take care of you. Take the steps needed to secure your financial future today. If you already contribute to your 401K then take a look at your portfolio and find out if you’re making the best investments for your age. If you don’t contribute then start now.
We have all seen the advertisements talking about gold, either the buying or selling of this precious metal. For many
consumers looking to make quick cash or invest in something tangible, the rising price of gold makes this option attractive in a recovering economy.
There following are some factors you should consider prior to buying gold.
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Do you have a safe place to store it?
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Do you want to take possession of it in the first place?
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Do you want to go into the commodities end of trading?
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Can you afford the risk of a sudden drop over an extended time frame?
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Where do you purchase gold?
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Where do you sell it?
For most consumers; beyond a safe deposit box at our bank, there isn’t anywhere that we can reliably store something as valuable as gold. Is that going to be adequate if for some reason you would need the gold during non-banking hours?
Provided you opt to go to one of the myriad commodities or foreign exchange outfits and physically purchase and take physical possession of gold, do you have a way of transporting it?
Generally, the mindset of the novice investor in platinum, gold or silver is one of dire emergency and expectancy of terrible events in the future. This opens the door to further imaginings and scenarios of exactly how you will end up profiting or bartering for things you need. Incremental values of exchange have to be set up to accommodate the fact that one full ounce of gold is probably too valuable for anything you would want to barter for in the event of an emergency.
Thus, you find yourself in a situation of attempting to buy ½ ounce, ¼ ounce or even 1/10 ounce gold pieces – followed immediately by a realization that you probably should have some silver as well. With each increment of precious metals comes a fee to purchase and a fee to sell, which can prove detrimental to your intended savings or profit building.
If you would happen to go into the commodities end and purchase quantity through leverage and possibly even consider risking margin investment as well, you will find yourself in a further quandary. A precipitous drop in market value overnight, since it is a 24/7 bid and ask process, could leave you devastated financially.
The final question you need to consider; what if things do in fact go “south”? What do I do with my precious metal investments? Where do I find someone that agrees with the value?
There is that impression of security, often a false impression which can evaporate in an instant. So, consider this avenue very carefully; before you react foolishly. Evaluate the true history of gold performance, adjusted for inflation, over the past 40 years. Consider the risks before investing your hard earned money.
It is a common misconception that you have to be wealthy to benefit from a financial advisor. People who have more money certainly have a greater need for professional advice, yet everyone at some
point in their life can benefit from a good financial advisor. Events such as the death of a loved one, marriage, divorce, estate planning, saving for college and of course investments have the potential to become complex money events in life. Before you enlist the help of a professional financial advisor you should first consider the following tips to avoid regretting your decision in the future.
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Do your own research- The most common reason people regret working with a financial advisor is due to a bad experience. No one likes to lose money and if you have had a negative experience you more than likely want someone to blame. Unfortunately in some cases (not all) the negative experience could be avoided with some research before you work with a financial advisor. Talk to your employer, co-workers, friends and family for references. Once you have a list of possible candidates, research their work history and experience. Know what is is you need from an advisor to find the right match for your needs.
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Know your rights- When you hire a financial advisor to handle investments you as the investor have certain rights. By becoming familiar with your rights (Investor Bill of Rights) you can recognize when these rights have been violated. If you find your financial advisor has not worked within the scope of your rights, then you may have a case against your financial advisor.
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Understand the fee structure- To avoid confusion or conflict in regards to how much your advisor gets paid, make sure you understand the fee structure before doing business together. Financial advisors are generally paid in one of the following three ways: commission, fee based on assets or flat fees.
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When in doubt follow your instincts- Like other things in life, there are times we all get a certain “feeling” or gut instinct about a person or company. If you have doubts and are not 100% comfortable with the information you have learned about your financial advisor, you would be better off taking the time to find an advisor that you feel comfortable handling your financial affairs. Perhaps the financial advisor is not on the up-and-up or you might simply have a clash in personalities…in any event you should always feel confident that your advisor is working for your best interest.
Finding the right financial advisor can make the difference between having a trusted professional who will work on your behalf or paying someone who is not interested in anything more than making money (for themselves). Once you have found the right advisor make sure you keep the lines of communication open. You may be paying them to guide you on the right path, however in the end your affairs are your responsibility.
In the last couple of years, there has been a new wave of financial services companies have been born that allow individuals to borrow money from individual investors without involving a bank. Companies such as Lending Club and Prosper have pioneered this industry. Is it safe to borrow or invest money through these companies, or is it all a lending club scam?
When these companies first went into business, they were operating without oversight from the SEC. In 2008, the SEC stepped in and filed an injunction preventing Prosper.com from doing business because the Securities and Exchange Commission contended that Prosper.com was illegally selling unregulated securities. Eventually, Prosper.com and the SEC settled and came to an arrangement where Prosper would securitize their offerings with the SEC and become legitimate. Lending Club has always operated within the realm of SEC oversight.
There are a lot of companies online which purport that they have the next big money making secret offering unreal rates of return, but prosper and lending club scam operations? They definitely are not. Both companies are registered corporations that work within the bounds of the United States investing regulatory environment. Many individuals have borrowed money through these companies (at great interest rates) without issue and lenders that have made smart loans have made very good rates of return.
From a borrowing perspective, it’s just like you are borrowing from a bank. You pay the payments to Lending Club and they take that money and distribute it to the lenders that fund your loan. If you don’t pay your loan back, Lending Club will try to collect the debt from you, but the individual investors have waived their right to try to collect the debt, so it won’t be like a loan shark is out to get you.
If you’re an investor, there is money to be made in making loans on Prosper and Lending Club. Some have said that prosper and lending club scams their investors because the default rates have been relatively high, but in the last several months, Lending Club and Prosper.com have taken steps to make sure that they only loan to individuals who are likely to repay their loan.
Many investors have made between 9.00% and 14.00% APR back on their money. Investing through Lending Club or Prosper does take a bit more work than simply investing in a mutual fund, but it does offer some good diversification outside of stocks and bonds.
At the end of the day, Prosper and Lending Club are definitely not a scam. They are both legitimate companies that offer legitimate securities to real investors. There are a few people that have made bad loan decisions that have lost money investing in loans through these companies, but like any investment, there is some risk involved.
You can learn more about investing in Lending Club at LendingClub.com.
We all know the importance of investing in your future. Not only is it necessary to invest money today for the needs of tomorrow, you must also consider how soon “tomorrow” will come. Changing your
investment strategy is not something you should take lightly and in most cases long term investments are just that…long term. As you get older however you need to ensure you are not risking your retirement money at a time when you can least afford to lose it. Most investors have their own strategy based on experience, comfort level and personal preferences, however the following strategies are a good guideline for all investors.
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The 35 and under crowd- Perhaps it is appropriate that at this age we are all more inclined to take risks as this is the time when you can afford to take an aggressive stance with investments. With many years ahead to make up for possible losses, this is the age group that should consider higher risk investments in order to reap the higher returns. This does not mean you should take unreasonable risks, rather understand that if there is period in your life where you can “afford” to take chances in the stock market, that time is now.
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Stabilize in mid-life (36-55)- This age group is not necessarily knocking on retirement home doors, however it is a time when you should consider reining in your investments to create a growing yet less risky portfolio.
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Slow things down after 55- With retirement only a few years away, people in this age group do not want to risk losing their money in risky investments. This is a period of time where your accumulated savings should positioned toward income and growth opportunities.
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You’ve finally made it- A lifetime of hard work and life experience has brought you to the well deserved retirement years. Your money should now be protected to avoid loss as you now rely on your investments to sustain you income needs for the remainder of your life. Your money should now be placed where it is guaranteed to earn interest with no risk of loss.
It is your choice how you choose to invest your money as you age. Like so many things in life, investment results vary from person to person and will certainly play a role in how you choose to invest in the future. This guideline simply shows the recommended course of action that offers most people the opportunity to grow their money while avoiding loss later in life.
One way to improve your financial situation – and your personal life – is to simplify how you live and be more conscious of your purchases and the lifestyle decisions you make. Simplifying your life will lead to greater freedom since you will reduce your dependency and need for “things” to experience happiness.
Here are 5 questions to ask yourself before making each and every purchase:
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How many hours will you have to work to pay for this purchase? In other words – how much of your energy will you need to use in order to make this purchase. Will you have to work three hours? Thirteen hours? Thirty? This is a concept based on the “labor theory of value” written about Adam Smith about 200 years ago. Smith wrote about how the value of any object could be measured by the amount of work an individual would have to exchange in order to obtain it.
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Is this a purchase you really need to make, or do you have superficial reasons – like impressing someone else? Impressing someone else can also take the form of buying something simply because you envy someone else who has these items, even if you don’t necessarily respect that person.
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Will this purchase make your life more satisfying or worthwhile, or make your life easier for at least six months? If it doesn’t have this kind of staying power, you should probably reconsider buying it. Items that give you instant gratification but then get tossed in the garbage or forgotten in your closet soon after are rarely worth the money or time to purchase them.
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How does this purchase affect the environment? Think about how the item you’re considering buying was created, the steps in the manufacturing process and the transport to the location from which you would buy it. Are irreplaceable resources being used up when you make this purchase? Small actions individuals take matter and add up when it comes to protecting and improving our environment.
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Could you use the money required for this purchase in a better way? For example, if you’re saving for a long term goal, investing for your future or the future of your children, perhaps those goals are more important than this particular purchase and the money could be better spent elsewhere. Maybe the money would be better used if you gave it to a charity or someone in need?
It’s always been a big subject of controversy between financial experts. Saving for your retirement and saving for a 
college education. People seem to be split on what’s more important but there is a lot of weight placed up saving for retirement taking precedence over saving for college. It seems that more people are saving for their golden years as the numbers from recent surveys suggest; however, the same survey suggests that only a small portion of people these days are saving at all. So many households are living from paycheck to paycheck and struggling just to pay bills that there is often no room for saving cash, even people with household incomes over $100,000 were having trouble setting aside cash. Experts do agree on one thing for sure, no matter how much money you make, you will need to find a way to put aside at least some cash for your future, even if you can’t afford to save for your children’s academic future.
For parents who have children on the road to college, the best savings plan still seems to be the 529 college savings plans. But there are still a lot of consumers who can’t save for both college and retirement and there are even more people who truly do not understand exactly how a 529 plan works. Once a 529 plan is started, there are a number of options for the money should a child not go to college. For instance, the money in the plan can be changed to another family member who will be attending classes in higher education. Parents can also use the cash if they are planning a career change and need to go back to school, even during their retirement years. If there is no other member of the family that can not use the 529 plan money, the money can be withdrawn albeit with penalties and taxes.
Additional benefits for contributing to a 529 plan for college savings include the income tax break you can get in many states. Even if you can’t afford a lot of money split between savings and retirement, having money in both investments is a wise idea. Budget your money and cut spending to find “extra” money to tuck away for your future. Remember especially that it never too early to start saving but it could be too late. The younger you are when you start a savings plan, the longer you have to add up smaller amounts. You can make savings even easier by visiting your human resource department and signing up to automate a portion of your paycheck each time. As a general rule, money that is out of sight stays out of mind and you stand a better chance of leaving your savings accounts alone.
During times of economic uncertainty, fixed annuities gain popularity. In fact, during the first quarter of 2009, the sale of fixed annuities increase 74%, according to a research association called LIMRA. Fixed annuities give people tax-deferred growth at fixed rates that are typically higher than certificate of deposits now. They also give the owners the ability to turn their fixed annuity into guaranteed income for life. Sounds too good to be true, right? A fixed annuity has a number of advantages – but it may cause you to miss opportunities that would result in earning more money.
Fixed annuities are often called “deferred annuity”. These are different from immediate annuities, in which you give a lump sum of money to an insurer and then begin receiving payments from the immediate annuity within a year’s time. Fixed, or deferred annuities operate more like a certificate of deposit in that you deposit your money under a teaser interest rate that can readjust annually based on the current economic and market conditions, but with a guaranteed minimum rate. People like this because they know their interest rate will not go below this guaranteed minimum rate, and that it could readjust for a higher rate in some cases.
Fixed annuities do not have a set time period that you must leave your money alone, however, you would pay a 7% surrender fee if you withdraw your money before five or seven years in most cases. This makes fixed annuities extremely difficult to back out of – which means if you find a higher interest rate somewhere else, you can’t just pull out your money and re-invest to benefit from the interest rates. Some fixed annuities are more flexible in that they allow you to withdraw up to 10% of the balance once per year without paying a fee.
As many experts predict, we will soon be entering an inflationary period. So locking in your money in a 4% fixed annuity could be financially devastating for you in terms of what you could have gained with other investments.
Where as money saved in a certificate of deposit is subject to taxable income, the money in fixed annuities will grow tax-deferred. Unfortunately, if you withdraw the money before you are 59 you will pay a 10% tax penalty, just as if it was a standard retirement fund. When you withdraw cash from a fixed annuity, you’ll also pay ordinary income tax on the interest you’ve earned.
Most annuities give you the option to “annuitize”, which is to turn the balance of your annuity into lifetime payments sometime after the first year. Many people with annuities choose not to do this though, because they use the annuity to grow their money tax-deferred.
If your goal is to find a safe growth for your money, you might consider putting your money in short or intermediate-term corporate and municipal bonds instead of annuities. They still offer interest rates that are higher than current CD rates, and have fewer restrictions than what fixed annuities offer. If the idea of the guaranteed income for life has tempted you toward a fixed annuity, you might want to look at immediate annuities which gives you pay outs within a year – the payment amounts will be greater than if you annuitize a deferred annuity later.
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