Raising Money-Smart Kids

Teaching your child about money is a valuable tool that will serve and empower them throughout their life. Kids look to their parents for money matters, but oftentimes parents are at a loss knowing what to teach their kids or how to go about it. 

Here are some helpful tips that will make saving fun and rewarding for your child.

Communicate with your child your values concerning money – how and why you save, choices you’ve made to make your money grow, and how you spend it wisely. A good example of this is when you’re in the grocery store and you choose items on sale versus regular priced items. Or choosing generic brands instead of the more expensive brands.

Help your child learn the difference between wants and needs – this is really key for teaching your kids good decision making. Needs are those things that support your life (home, electricity, food, etc.) and wants are things we would like to have but can live without (fancy cars and restaurants, the latest in electronic gadgets, etc.)

Set Goals with Your Child – Help your child set goals for things they want or might need. Help them consider something to save for, like a bike or Xbox game, or their own spending money for an upcoming trip. Instill the idea that they always want to leave money in their savings account for other things that come up that they haven’t thought of. When your child asks you to buy something for them, use it as an opportunity to teach them how they can buy it by setting a goal and saving their money.


Consider encouraging your child to save by matching the amount they save, or telling them if they save for the whole amount, you will pay for half so the other half can stay in their savings account. This helps them stay on track and also creates excitement.

Open a Savings Account for Your Child – and be sure to take them with you when you do! It makes them feel important and empowered.

Teach Your Child to Save, Share and Spend – One of the joys of money is that you can share it by donating to charity or causes. By teaching your child to share they will have a balanced view of money and its ability to help others plus they’ll feel good about themself. When you open a BECU Early Saver Savings Account for your child, they will receive a Savertooth Money Box that is ideal for this. It has three compartments: saving, sharing, and spending.

Allowance and Decision Making – If your child receives an allowance, pay it in smaller bills to encourage and make it easier for them to save a portion of the allowance. For example, if the amount is $5, give five $1 bills so some of the money can be set aside for savings. This way your child can easily set aside $1 for savings and have $4 to share and spend. A good rule of thumb is to save at least 10%. That rules applies to adults too!

Spending Decisions – Let your child learn from their spending choices, good or poor. Before spending takes place you can initiate an open discussion of spending pros and cons. One way to do this is to provide your child with alternative choices when they want to buy something. For example, if your child wants to buy a football for $20, you could also point out to them that the same $20 could buy movie tickets and popcorn, or a helmet for their bicycle. This teaches your child to think about choices and how to make decisions.

Keep Good Money Records – Another important skill for kids to learn is to keep track of their money! Teach your child to keep receipts so they can see what they have been able to purchase with their money. Review their savings account statements with them, show them how they are earning interest, and show them how to add deposits and subtract withdrawals in their savings register.

Should you buy or lease your next car?

Most experts would advise that in the long run buying is more economical than leasing. When you lease a car you are essentially paying for depreciation and financing the difference between what the car cost now, and what it is expected to be worth at the end of the lease—you won’t build equity. 

And, when you turn the car in at the end of the lease you may be responsible for wear and tear or excessive mileage charges. You might want to take this in to consideration if you are chauffeuring kids to and from muddy soccer practices. 

Weigh the Difference

Leasing Advantages:

 

  • No or low down payment
  • Lower monthly payments
  • Manufacturer's warranty usually covers lease term

Leasing Disadvantages:

 

  • No end to monthly payments
  • Wear-and-tear charges
  • Mileage limitations
  • You do not build equity

 

 

 

Buying Advantages:

 

  • Pride of ownership
  • No mileage limitations
  • Monthly payments have an end
  • Flexibility to change cars when you want
  • You build equity over time

Buying Disadvantages

 

  • Higher down payment and monthly payment
  • Repair costs once warranty expires

 

 

 

If getting a new car every few years is important to you, leasing may be something to consider, however, be careful and pay attention to the realities of leasing. You don’t want to be surprised when your lease expires.

Have you done a wallet audit?

We all hear the distressing stories of identity theft. Fraudsters are getting cleverer but there are some simple things that you can do to help protect yourself.

What fraud-friendly information are you carrying in your wallet?

One of the most important things that you can do to protect your finances and your identity is to audit your wallet. Here are some key tips to help you keep your personal information safe and out of the hands of fraudsters:

  • If you have your social security card or number in your wallet, remove it immediately. It is just the ticket for identity thieves.
  • Make a list of all the items in your wallet. For debit and credit cards don’t include card numbers, rather just the name and phone number of the financial institution. If you have automatic payments associated with a card make a note of that as well. 
  • Keep the list in a safe place at home. If your wallet or purse gets lost or stolen you now have a list of everything that you need to cancel and replace what was lost.
  • Don’t wait to cancel your lost or stolen card—most financial institutions have a 24-hour phone number just for reporting a lost or stolen card. You definitely want to do this before the fraudsters wipe out your accounts.

Prevent, Detect and Restore

BECU members have access to reliable identity theft services and resources. To learn more, visit www.becu.org/learn-and-plan/articles.aspx and select Security and Fraud.

 

 

Build Credit Responsibly with a Secured Loan

We’ve all heard the importance of good credit—a good credit report can help you get the things you need: a mortgage, a credit card, a loan, better terms on the money you borrow, an apartment, automobile, or even a new job. But, if you are just starting out in life and do not have an established credit history or need to rebuild your credit from financial hard times, building your credit can seem like a daunting task. 

What is a secured loan?

 
A secured loan gives you the opportunity to borrow against your own funds in order to establish a record of making payments on time, which is the most important aspect of establishing a good credit rating. A “secured” credit card is certainly one option, but an installment loan secured by your savings account or a certificate of deposit may be a better option.
 
How does it work?
  1. Find a financial institution that offers secured loans—local financial institutions usually have more flexibility and are more willing to help you obtain your secured loan.
  2. You will most likely be asked to make a deposit to a savings account or CD as collateral for your secured loan. Some financial institutions will have a minimum dollar requirement for a secured loan.
  3. Once you have made a deposit to your savings account or CD, you will be able to borrow an amount equal to the balance in your savings account or CD. 
  4. Make sure to make all of your payments on time and you are well on your way to building good credit.
 

Does Rate Shopping Affect Your Credit Score?

We all know that the better the interest rate you get on a loan, the more you will save over the life of the loan. If you are like me, you like to shop around for the best rate possible and this means that several financial institutions may run your credit in order to determine what rate you’ll qualify for.
 

But, what do multiply credit inquiries mean for your credit score? 

Does it ding you every time another inquiry is done on your credit? 
Does it look bad to potential lenders that you have so many inquiries?
 
Applying for new credit creates what is known as an inquiry on your credit report and multiple credit requests in a short period of time can impact your credit score.
 
BUT there is an exception when it comes to shopping for an auto, home, or student loan.   
For these types of loans, inquiries made in the 30 days prior to scoring are ignored. So, if you find a loan within 30 days, the inquiries won't affect your score while you're shopping for the best rate.
 
Tips for Rate Shopping
  • When searching for a mortgage, auto, or student loan do your homework ahead of time to decide which financial institutions to approach for a quote
  • Don’t be afraid of getting multiple quotes
  • Make sure you do your rate shopping in a reasonably short period of time so your credit score will not be affected
 

Pay for College with a 529 Plan

According to a 2011 report from The College Board® the average tuition and fees for a public in-state university for four years is $33,300 and in 18 years that cost is projected to rise to $95,000. If you have young children or you are thinking about having children, now is the time to start thinking about how you and your child will cover these expenses when they are ready for higher learning.

In the U.S. student loan debt outstanding now exceeds that of credit cards and auto loans.  To help ensure that your child or grandchild is not burdened with excessive student loan debt, consider opening a 529 college savings plan.  

 
What is a 529 Savings Plan?
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
 
There are plenty of misconceptions so let’s address a few of them.
 
  1. You are not limited to 4-year undergraduate colleges; rather, trade, vocational, graduate schools and community colleges are all possibilities.
  2. It is not a use it or lose it proposition.  You can use the money for your own education or pass it on to another beneficiary.  Worst case, if you withdraw the money for non- qualified expenses you would pay income taxes and a 10% penalty on the earnings.
  3. As the 529 plan is considered your asset and not your child’s, it will only have a minor impact if any, on financial aid.
Learn more at savingforcollege.com 
 

Have You Checked Your Social Security Statement?

Social Security benefits are something many of us will rely on for income in our retirement years. It is important to make sure you know exactly where you stand before you reach retirement years and it’s too late. 

The Social Security Administration is only mailing annual paper statements to those who are 60 or older so you may not be getting a statement. The good news is that you can now access your Social Security Statement online. It only takes a few minutes to create an account and you have access anytime.

 
Get Started—visit http://www.ssa.gov/mystatement/ to create your account today!
 
As your future benefit is based upon your earnings, checking the accuracy of your statement is important as it’s much easier to fix problems now than to try and get the full amount of the benefits you are owed once retirements hits.
 
Will you be covered in retirement?
Now that you have access to your statement, take a close look at your estimated benefit. Will this along with your other investments be enough to reach your goals?  Will you have enough income in retirement to live comfortably? If not, it’s important to put a plan in place to fill the gap. For retirement options available to you, visit www.becu.org/investments
 

Will Your Home Pass an Energy Audit?

An energy-efficient home can benefit your wallet and the planet now and for generations to come.

What should you look for?

Does your home often feel cold in the winter or are your utility bills higher than you think they should be?  If so, the summer months are the perfect time for you to perform a home energy audit on your home. Sealing and insulating the "envelope" or "shell" of your home is often the most cost effective way to improve energy efficiency and comfort. This includes the outer walls, ceiling, windows, doors and floors.

If you are looking for someone who can perform the energy audit for you start by asking your local utility if they do audits. If the utility does not offer this service, they may be able to recommend private companies specializing in residential energy audits.

What are the benefits you could wreak from having an energy-efficient home?

  • Lower utility bills
  • Better health
  • Less maintenance and repair
  • Environmental benefits
  • Increased market value
  • Greater comfort

If this is something that you feel you can tackle on your own, visit http://www.energystar.gov/ for tips on conducting your own audit and making the recommended repairs.

Too Many Transactions from Savings Account?

Linking a savings account to your checking account can be an effective way to avoid an overdraft fee; however, there are some pitfalls that we all need to be aware of.

Under Federal Regulation D, we are only permitted up to 6 TOTAL monthly transfers or pre-authorized withdrawals from a savings account. If you exceed the limit you are most likely going to incur unwanted fees.

Here’s a list of transactions limited by Federal Regulation D:
•    Transfers from savings account using Online, Mobile or Telephone Banking
•    Automatic withdrawals from a savings account
•    Overdraft transfers from savings to checking

The good news is that there are transfers from your savings account that that do not count towards Regulation D.

Here’s a list of transactions with no limits:
•    ATM withdrawals and transfers from savings account
•    Transfer requests from savings account made in person
•    Transfer requests from savings account received by mail

Now that you know the types of transactions that are limited and not limited, it is also important to know ways to avoid Regulation D altogether.

Tips to help you manage your accounts and avoid paying a transaction fee:
•    Open a checking account, if you haven’t already, and use it instead of your savings to make transfers and withdrawals
•    Make recurring electronic payments from your checking account instead of your savings
•    Establish a line of credit as overdraft protection—transfers are usually unlimited
•    Perform transfers from your savings or money market at an ATM or in person—these do not count towards Regulation D

To learn more about Regulation D and other Federal Regulations, visit http://www.federalreserve.gov/bankinforeg/reglisting.htm.

Paying for College vs. Paying for Retirement

Since the economy has been so uncertain over the past few years, many parents have had to make tough decisions when it comes to paying for the kids’ college expenses.  Many parents have found it very tempting to tap into their retirement accounts or reduce future retirement contributions to help pay for college. Doing so puts retirement savings at risk. And, it’s important to think about who is going to help you out in retirement?
 

Put Your Oxygen Mask on Before Helping Others
This phrase is very common in the aviation industry and is a great way to think of how you should use your retirement dollars. You will have financial needs in retirement and you most likely will not be able to work to earn more income once you are retired. So, it’s important to make sure you earn your living now. This does not mean that you shouldn’t help your kids once they are of college age if you have the financial means. Remember, they will still need your advice and guidance too.

Still Have Time on Your Side

If you still have time on your side, consider opening a 529 plan for your child.  A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.
 

Get started saving as early as possible and remember to exhaust all grants scholarships and federal student loans before turning to private loans.  

Another great money-saving solution is to have your child consideration starting at a community college and then transferring to a four-year program. Community colleges often cost much less than the four-year college.

Free College Planning Tool
BECU collaborates with Collegiate Funding Solutions to provide a free college planning and funding tool. Invest a few minutes and get a free college planning and funding report at www.becu.org/collegeplan.

What to Ask Before Hiring a Financial Professional

At some point you may turn to a financial advisor for help with your retirement plan. We’ve all heard the horror stories about criminal financial advisors empting unsuspecting client’s accounts. That’s why it’s important to make sure you find a financial advisor who will have your best interest in mind.

The U.S. Security and Exchanges Commission recommend asking the following questions before you consider hiring any financial professional:

•    What experience do you have, especially with people in my circumstances?
•    Where did you go to school? What is your recent employment history?
•    What licenses do you hold? Are you registered with the SEC, a state, or the Financial Industry Regulatory Authority (FINRA)?
•    What products and services do you offer?
•    Can you only recommend a limited number of products or services to me? If so, why?
•    How are you paid for your services? What is your usual hourly rate, flat fee, or commission?
•    Have you ever been disciplined by any government regulator for unethical or improper conduct or been sued by a client who was not happy with the work you did?
•    For registered investment advisers: will you send me a copy of both parts of your Form ADV?

Do a Background Check
Even though you ask the above questions, it’s important to note that you may not always get truthful answers. Make sure to do your due diligence regarding their qualifications and experience. Remember, you can always do a background check at FINRA.org.

This is a long term relationship so take your time and pick the right person.

BECU Investment Services offers investment advice you can trust from BECU employees who believe in the credit union values of service and integrity. To learn more, visit www.becu.org/investments.

Paying for Your Big Purchases

If you own a home, you know that expenses can add up—especially when it comes to making big purchases such as a new roof, furnace or kitchen appliances.

Be Frugal, But Not Cheap
A common mistake many of us make is shopping for price alone and looking for the cheapest item. When you shop frugally, you are getting more for your money. But, when you shop cheaply, you are most likely buying something that will wear out easily and need to be replaced sooner.

Plan Before the Failure
A roof that has already started to leak will not only damage your home but you will also feel preasured to go with the first contractor you speak with which may or may not be the best option. Plan ahead for your major purchases and consider replacing them when they are at the end of their useful life but before they fail. Not only will you dodge a bad experience but you will also be afforded the time to research the products and contractors to ensure you are getting the best value. 

Work in Numbers
For purchases such as a new roof, see if you have other neighbors who also may be interested. If you get together many contractors may consider offering you additional discounts. 
 

Save on Your Car’s Gas Bill

With gas prices consistently over $4.00 a gallon these days, we are all feeling the pain at the pump but what can you do about it?  Taking mass transit, carpooling, or telecommuting are going to give you the biggest savings but having a well-maintained car and how you drive are also important.

Here are a few helpful tips that the U.S. Department of Energy recommend to help you drive more efficiently and save more at the pump.

Drive Sensibly
Aggressive driving such as speeding, rapid acceleration and braking will waste gas.

Observe the Speed Limit
While each vehicle reaches its optimal fuel economy at a different speed (or range of speeds), gas mileage usually decreases rapidly at speeds above 60 mph.

Remove Excess Weight
Avoid keeping unnecessary items in your vehicle, especially heavy ones. An extra 100 pounds in your vehicle could reduce your MPG by up to 2 percent.

Avoid Excessive Idling
Idling can use a quarter to a half gallon of fuel per hour, depending on engine size and air conditioner use.

Use Cruise Control
Using cruise control on the highway helps you maintain a constant speed and, in most cases, will save gas.

Keep Tires Properly Inflated
When checking your tire pressure it is best to do it when the tires are cold to ensure you get the most accurate reading.
 

Enticed by Credit Card Rewards Programs?

If you are like me, you’ve stopped carrying a checkbook altogether. Many of us rely heavily on our credit cards for everyday purchases and for paying bills. 

Given this uptick in credit card use, rewards credit cards are a great way to profit from your expenses. These programs offer convenience and benefits, along with the opportunity to capitalize on free flights, hotels, dining and more.

We are continuously presented with offers for debit or credit cards that promise cash back or other enticing rewards. What may seem like a great deal on the surface could actually end up costing you a lot more in the long run.

Make sure you really understand all the details.
For example, for a debit card, will you pay fees to have the checking account? Are their minimum balance requirements or hidden fees?

For a credit card, make sure the interest you pay isn’t more than cash back reward. Even if you don’t carry a balance on your credit card, be sure to compare what the award will actually get you. And, make sure to look for limitations such as the redemption rates, expiration of the points, and any annual fees.

Here’s an important rule of thumb when choosing a credit card rewards program: Rewards programs can be a great benefit if the reward is something you can truly use and it doesn’t cost you more in fees and hassle in the long run.

BECU offers several free seminars and informative articles on credit and debt. Visit www.becu.org/seminars for more information.