Monthly Archives: February 2009

What’s It Worth? Teaching Your Kids About The Value Of Money

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The following guest post is by John M. Box, Ph.D., Senior Vice President of Education, Junior Achievement (JA) Worldwide.  Information about JA programs follows the article.

If you’re a parent and you’ve stood in line with your kids at the check-out, you know the tiring push and pull you do. Those last minute items your children are desperate for – snacks, toys, candy, drinks.  An attempt at refusal almost inevitably ends in a tantrum of sorts. Parents struggle with the wish to give their children all that they need and the desire to teach them about financial responsibility and the value of money.  Now, more than ever, we all need to teach our children some important lessons that will serve them well for their future.  As we know, this type of education starts at home and is hopefully reinforced with other influencers and educators.

As a way to help them develop a better understanding of money, try the following activities with your children.

  • Keep track of the value of the goods and services that you provide your children such as housing, food, clothing, and entertainment. Share the total dollar amount with your children at the end of the month. Hold a discussion with your children to reinforce this concept and to gauge the degree to which the concept has been understood.
  • The next time you go to the grocery store, provide your children with a list of the items you plan to purchase along with a dollar amount that you plan to spend. Have them make the selection of products from all of the different brands that are available. As they make their choices, explain comparison shopping. Can they select all of the items on the list and still stay at or below the amount they have to spend? Ask your children what they have discovered as a result of this experience.
  • Have your children make a list of all of the things they would like to have, such as clothing, books, video games, toys, music CDs, etc. Add up the total value of these items. Now, ask your children to identify different ways they could obtain the money necessary to purchase these items. How would they prioritize their purchases? Use this activity to provide a perspective on the value of different items and the amount of time it might take to earn the money to purchase them.

You can then use these activities to begin a discussion about working for an allowance or earning money through a part-time job to save for something special. No matter what age, there’s always a lesson to be taught about money to your children. The earlier you start, the sooner they can begin to make wise financial decisions for themselves.

John Box is Senior Vice President of Education at JA Worldwide. Junior Achievement (JA) is the world’s largest organization dedicated to educating young people about business, economics, and free enterprise. JA programs are taught by volunteers in-class and after-school at locations throughout the United States and in 123 countries. To learn more about JA and its programs, or to locate the JA Area Office nearest you, logon to the JA Worldwide website at www.ja.org.

AT&T Universal Card Lost Another Customer

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I’ve been an AT&T Universal Card customer since 2001, starting out with a small classic card and eventually upgrading my way to a Platinum Rewards Mastercard. When I went through my financial turnaround a while back I cut up all but two cards with the idea that when my debt was eliminated I would run utilities through one credit card for convenience (and to earn rewards), and travel/emergencies through another credit card.

AT&T Universal Card survived the plastectomy because I liked their rewards program, it was one of my older accounts, and because I had a very low variable rate (which had floated down to around 6% thanks to rate reductions).  I consolidated my remaining debt to this card because of the low rate and was making monthly payments to reduce the balance.

To my surprise, I received my bill last month and noticed that my stated annual percentage rate (APR) was 24.99%.  What?!  My rate went from 6.3% to 24.99% in one month? I immediately wondered if I had forgotten to pay the bill.  Nope, payment cleared several days ahead of the due date.  I haven’t applied for any new credit, my only other credit card is in good standing, and a recent check of my FICO yielded an above-average score.  Convinced this was some type of mistake, I called customer service for resolution.  I would not have believed the explanation received had I not heard it myself.

“It’s the Economy, Stupid”

Yes, that is essentially the answer I received.  The customer no-service representative answering my call explained that my account had gone through a “change in terms.”  Apparently, I was notified of these changes back in November, but because I had failed to “opt out” the issuer saw it fit to increase my interest rate by 18 percentage points.

I confessed to the representative that “like most customers I don’t read every single statement message, advertisement and piece of credit protection insurance garbage you include in my monthly bill,” but that I did not remember seeing anything indicating my rate would be increased this drastically.  The representative indicated that “opting out” of the change in terms would have meant my account would be closed to future charging and my rate would have remained the same.  Huh?  And the reason for such a brainless move?  “The tough economic conditions.” No joke – that was the explanation.  I asked to speak to a supervisor, and eventually the supervisor’s boss, and they all repeated the same canned response.

Apparently, AT&T Universal Card thinks it is a good idea to chase away customers with good credit, pay on time, occasionally carry a balance and have been customers for eight years.  I could cite statistics showing the increased costs to acquire new customers, or the negative effects of chasing away loyal, profitable customers in a recession, but you don’t have to have an MBA to know this is just plain stupid.  Then again, what would you expect from a credit card issuer?

To their credit, AT&T Universal Card was nice enough to reduce my annual percentage rate back to where it was prior to the change in terms, but only if I would agree to close the account. That wasn’t a hard sell.  I was closing it either way, because I am tired of doing business with people who do not appreciate their customers. After all, there are too many people out there doing it right – too many options for better service, a better product and probably even better terms.  I’ll just keep my one card for now, and maybe one day I’ll even let that one go.  I’m officially tired of playing games with credit card issuers.

Start A Sunny Day Fund

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This article originally appeared April 28 of last year, but because I’ve had a few gloomy days to contend with the last couple weeks, I thought it might be fun to run it it again for some fresh input.  I’m already planning to start a “Sunny Day Fund” or two soon–life is short.

The other day I read an excellent article that provides some ideas for things to do with a tax refund. I enjoyed the list because it was outside of the normal, “pay off debt, start an emergency fund” standard listing of things to do with the upcoming tax rebate checks. One item in particular really caught my eye – “add it to your sunny day fund.” What a refreshing concept. I think way back in the annals of personal finance journalism someone first wrote that we should all save for a “rainy day.” It is one of those timeless axioms that we hear repeated over and over from anyone identifying themselves as a financial expert. But what about saving for sunny days, too?

Starting a “Sunny” Day Fund

If rainy day funds are for negative life experiences, it only makes sense that sunny day funds are for the good times. Maybe you save in a sunny day fund for some tickets to a place you have always wanted to visit, or for that cruise you have been promising to take your family on for years. Maybe it is something small, like saving up to take your kids to the zoo, or to take a pottery class. Whatever it is, the sunny day fund doesn’t have to be limited to just material items.

I’ve been reading The 4-Hour Workweek by Tim Ferriss and in it he advocates taking planned sabbaticals at regular intervals. A sabbatical basically involves walking away from your career for an extended period of time, usually six weeks to three months. At one time it was a growing perk, particularly in highly competitive industries with high burnout rates. The thought was that offering employees a chance to take a break made them less likely to take a permanent one.

It is hard to imagine taking an extended break from work on purpose! Most people who receive a pink slip desperately need to be re-employed because they typically have a stack of bills, and very little in savings. Imagine that same scenario if you had very few bills, and a large amount saved in a sunny day fund. No worries, right? You could live off the severance package, take an extended break to do some traveling, or whatever your heart desires, and take your time finding a new job. It is an exciting concept, but one that most people find unattainable because they continue to live paycheck to paycheck. If this is you, start thinking about ways to reduce your expenses and/or increase your income to fund a “sunny day” account.

So What’s in Our Sunny Day Fund?

I recently wrote about how much I was enjoying my new savings accounts at ING Direct. One of the best features is the ability to create “subaccounts” and give them a nickname. Our current list of subaccounts includes Emergency Fund, Christmas Shopping, Orthodontics, etc, all based on some upcoming expenses that we need to be saving towards. In addition to those accounts we also created a “Sunny Day Fund” where we are currently saving towards a vacation destination that we would like to take the kids next year. I think I’ll take Nickel’s advice, and use some of our upcoming economic stimulus payment to get a head start on the sunny day fund balance.

Ask the Readers: What kinds of things would be in your “sunny day” fund?

Tax Tips To Save Money NEXT Year

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The following guest post is from Trisha Wagner.  Trisha is a freelance writer for DepositAccounts.com, where you can compare rates from dozens of banks in one place.  She writes regularly on the topics of personal finance and saving money.

It happens every year when tax time rolls around people scramble to find ways to make filing their taxes easier and limit the damage to their wallets.  What many people forget is by the time you file your taxes there isn’t anything you can do to change last years information, however you CAN take note and make changes now that will help you save money a year from now.  The following basic tips can help you make the changes needed today and at the end of the upcoming year to take the bite out of your next tax bill.

  • Deductions- Are you claiming all the deductions that you are entitled to?  Many people mistakenly claim the standard deductions without fully investigating what they specifically may qualify for in their personal situation.
  • Keep track of all business relates expenses and receipts- If applicable track all expenses related to a home business.  Get into the habit of doing this systematically, weekly or monthly to ensure you don’t lose receipts or track of what you spent your money on as time goes by.
  • Remember donations to charity- Ideally you should be donating to charities that have a personal meaning to you with the added bonus of being about to lower your taxable income at the end of the year.  Remember to keep receipts for charitable donations.
  • Take all applicable tax credits- Are you getting all the tax credits you are eligible for? If you have children under the age of 17 you may qualify for a $1,000 tax credit.  There are other tax credits for various things such as adopting a child, buying your first home, earned income tax credits, saver’s tax credit, child and dependent care credit and education-related credits.
  • Tax-free investments- If you are looking for a tax friendly investment you might consider tax-free municipal or government bonds or other similar investments.  The returns are not as high as other investments but can be good for a high-income individual.
  • Tax-free gifting- If you are have significant assets you may give up to $12,000 away tax-free for each individual you choose.  Typically this works well for retirees who may want to gift money now instead of bequeathing it to someone in their estate.
  • Review Tax Returns- Specifically Form 1040 for missed tax opportunities from the previous year.  You should pay special attention to the Taxable Interest, Tax-Exempt Income, and Dividend Income lines.  Your tax bracket has critical affects on the effective yield of your investments.
  • Check your work twice- Taxpayers could save millions of dollars each year if they took the time to double-check their work.  Error in tax preparation and on tax returns can be very costly for taxpayers.

It is important to remember that your financial situation, the economy and the tax laws change from year to year so it is important to keep up to date on tax information to ensure you are covering the basics each year and filing your taxes in a way that benefits you the most.


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Recession Sacrifices Only Go So Far

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The February 2009 edition of Money Magazine shares the results of an interesting reader poll recently conducted.  The poll asked readers, “what won’t you sacrifice” in a tough economy?

I touched on this subject briefly when I recently wrote about not giving up my gym membership, even though it could save me about $30 a month, or $360 in 2009.  To me, the benefits of exercising (stress reduction, weight loss, improved health, etc.) far outweigh the annual costs.  Apparently, I am not alone, as the poll revealed gym memberships were the top response for things people were not willing to part with.  Here are the full details of the reader poll:

Not Willing To Give Up

48% Gym Membership
41% Eating Out
35% Extra Car
30% Premium Cable
20% Fine Wine and Spirits

Willing to Give Up

89% New Gadget
87% Sporting Event
83% Big Vacation
80% Expensive Clothes
78% Cultural Events

Source: Money Magazine, February 2009

For me, the amusing thing about this list was that the items people were “willing to give up” are things we gave up a long time ago. We don’t buy expensive clothes; we only have basic cable; we haven’t been on vacation in two years, much less an “expensive” vacation; we don’t attend professional sporting events because the ticket prices are outrageous; we have bought no new gadgets, except for my beloved BlackBerry, which I use at least half the time to manage emails and perform admin tasks for blogging on the road.

Maybe that’s why times feel less tough for frugal people - we already made these sacrifices when times were good.  That is not to say even frugal types are not feeling a strain in this economy, but I would venture to say the strain is a little less on us compared to the person with a house full of goodies and two new cars in the driveway.

What are you not willing to give up in a recession?