Sage Personal Finance

Many parents aren’t really sure how/when to start giving their kids an allowance. Most experts agree that setting up an allowance will help children to make decisions about saving and spending and can help them to budget money for when they get a “real” job in the future.

If you do feel like giving allowances is the right choice for your family, most experts agree that the time to start is when your child starts to show an interest in money. This usually falls between the ages of 6-8.  Take note of when your child realizes that money can be used to buy things they desire.  That’s usually a good barometer to figure out if they are ready to manage an allowance.

The “going rate” also varies widely. The usual amount paid is anywhere between $5 and $20 per week. This will vary based on age (start small and increase as your child gets older) and number of children and their ages (your 7 year old may not get the same amount as your 15 year old). In addition, a larger family size may mean lower rates all around. For a helpful allowance calculator, go to pediatrics.about.com/od/toolsandcalculators/l/bl_allcalc.htm.
Provide your child with a wallet so that he or she can be responsible for their money.

The general consensus is that you should not pay your children to do specific household chores. This way, they don’t expect payment for every deed performed. There should be a list of chores that you expect your children to perform simply for being a member of the family. This method allows you to give extra incentives for special projects, such as a yearly fall clean-up of the yard. Older siblings might get an extra amount of money if they are expected to babysit for their younger siblings. Also, it is not a good idea to pay for homework or good grades. Instead, taking your child out for ice cream or to a movie might be a good reward for a top notch report card.

Paying your child a set amount of money per week is a good idea. This mirrors adult life, when adults get paid at a set time. It also helps them to budget their money if they are saving for a larger ticket item. Make sure that you stick to your end of the bargain by paying them on time each week (for example, every Sunday). It can be hard for kids to try to budget and save if they are not paid on a consistent basis. Another payment option is to set up a savings account for your child (take them to the bank with you) and set up an automatic transfer from your account to their account each week. If you choose this option, encourage your child to check their account (with your supervision, of course!) so that they can see how their savings are growing.

If you would like to encourage your child to save as well as donate, you might want to set up a save/spend/donate plan.  The arrangement could work something like this:  Assuming they have an allowance of $5/week, tell them that you expect them to save $1, donate $1, and they can spend $3 of that amount.

For most families, parents provide the necessities, and allowance money can be used by the child for the “extras”, non-essential items that they would like to buy (e.g., trips to the candy store, toy store, or deli). When setting up the guidelines for an allowance, let your kids know what they are expected to pay for to alleviate any confusion later on. You should also work out an arrangement for larger ticket items. For example, my son wanted to purchase a 6 month subscription to Disney’s Toontown website for $50. He only had $20 saved up, so we agreed that he would not get his allowance, which is $5 per week, for the next 6 weeks. We marked it on the calendar so that he would have a visual to help him realize the timeframe involved.

Every family is different, and there is no one correct way to do it, but most experts agree that setting up an allowance plan helps with money management skills, budgeting and decision making for the future.

For some helpful website information on allowances, visit: hffo.cuna.org/12433/article/107/html.

-Lory M.

Even though you may just be getting your Halloween costume ready, it’s not too early to think about your Holiday shopping!

Tip #1:  Be sure to start early.  Start making your list now, and be sure to budget an amount that you will spend for each person.  Stick to that number.  Analyze that list, make sure that it is reasonable, and do not spend more than what you have budgeted.

Tip #2:  Do Your Online Research.  There are many sites, such as http://www.amazon.com or http://www.cnet.com that will give expert/customer reviews on many products.  Be sure to do your research, especially before buying high ticket items.  Sites such as Consumer Reports (www.consumerreports.org) charge a nominal fee ($6.95/month or $30/year) for very comprehensive expert advice, recommendations and ratings on thousands of products.

Tip #3:  Look for Bargains!  There are many ways to save.  If you prefer to leave the house to do your holiday shopping, make sure to check out outlet stores and warehouse clubs.  If you prefer to save that gas money and shop online, there are many sites to look at that will help give you the best online pricing.  Among the top sites are pricegrabber.com, pronto.com and dealio.com.

Tip #4:  Use Coupons!  In addition to retail store coupons which may be found in magazines, circulars and newspaper inserts, be sure to look into the many online coupon sites available.  Check out RetailMeNot.com, Shopping-Bargains.com, CouponCabin.com and shopathome.com for some money saving coupons.  For rebates and rewards, a very popular site is Ebates.  Here, you can sign up to receive cash back bonuses each and every time you shop online.

Tip #5:  Give Gift Cards.  Although some people feel that giving gift cards is a bit impersonal, it is actually a great gift idea!  If you know that the person you are shopping for likes a particular store or restaurant, you will be giving a gift that you know will be used.  As an added bonus, it can help you to stay within your budgeted amount.  Try this site to buy gift cards at discounted rates: GiftCardRescue.com.

Tip #6:  Use Smartphone Apps:   If you have an iPhone or Android device, look into Coupon Sherpa (www.couponsherpa.com), Google Shopper (www.google.com/mobile/shopper) and Shop Savvy (www.shopsavvy.com) to learn more about how coupons can be scanned from your smartphone.

Tip #7:  Use Free Shipping!  As you know, shipping costs can add a lot of unplanned dollars to your shopping budget.  If you plan early and allow plenty of time for your items to ship, you will save a lot by using ground transportation.  Check out the following sites to take advantage of free shipping promotions for many retailers:  freeshipping.org  and freeshippingday.com.  In addition, many retailers such as apple.com, barnesandnoble.com and kohls.com offer free shipping, although they may require a minimum order amount.  Before you click ‘Send’ on any order, be sure to double check the shipping charges, as some retailers set the default setting to 2^nd day air.

Happy Holiday Shopping!

-Lory M.

It always helps to be aware of special offers and discounts that can help save you money.  Here are a few I have noticed recently.

-If you have a Costco membership, consider buying gift cards to your favorite restaurants from Costco, as you will usually pay less than face value for them.  (For example, they were recently selling California Pizza Kitchen gift cards: 2 $50 cards for $80.)

-If you are buying services for more than one child, ask the service provider if they have any sibling discounts.  We recently visited the Playroom (an indoor play place) in Sherman Oaks, California, and they have “2-for-1 Mondays” throughout the month of August, so a sibling gets in free.

-Consider signing up for Groupon.com.  It is free, and they email you with discounts that are often quite impressive.  Recently, they were selling WNBA tickets at over 50% off.

-In another month or so, school supplies will be on sale—consider stocking up for next year so you don’t have to pay full price come next summer. 

Happy discount hunting!

-Allison G.

Outstanding college student loan debt is rapidly approaching nearly $1,000,000,000,000 (that’s one trillion dollars) and nearly 20% of adults over the age of 50 may very well go to their graves owing (at last count) $36 billion in student loans according to new research from the Federal Reserve Bank of New York.

The picture is equally bleak for recent college graduates, many of whom leave college deep in debt, only to find zero job prospects due to the sluggish economy. Some discover that the only jobs they are being offered don’t require the educational skills they worked so hard to achieve.

Fast Company senior writer Anya Kamenitz has written a thought-provoking Opinion piece for CNN in which she proposes adding both private and federal student loans to the list of dischargeable debts for individuals seeking bankruptcy relief in the courts.  Kamenitz argues that making loan debt dischargeable in bankruptcy would do two things: 1) Force colleges to start putting the brakes on the skyrocketing cost of college tuition; and 2) compel private lenders to significantly tighten their purse strings, lending only to those who can actually afford to repay their debt.

No matter what you might think about the subject, Kamenitz makes an intriguing argument. What do you think? Is extending bankruptcy protections to include student loan debt a good plan?

-Cindy M.

There isn’t a day that goes by that we here at Sage Personal Finance don’t hear from a student or two singing the praises of our personal financial management course — a nice compliment, to be sure; and for those of you that have taken the time to let us know, we thank you! But what we find particularly interesting is how many students also express some regret that the tools provided in our course were never taught to them during childhood — and that financial literacy should be a mandatory part of every student’s education. 

While we know that filers are not “one-size-fits-all” in terms of their reasons for having filed bankruptcy, it wouldn’t be a stretch to argue that most of us still have a thing or two to learn about managing money wisely — and like learning to ride a bicycle, the best time to start is when you’re young.  But in this era of school cuts and budget constraints, teaching the importance of wise money management, more often than not, sinks to the bottom of the pile.

According to the non-profit financial literacy organization, Jump$tart Coalition, only four states (Virginia, Tennessee, Utah and Missouri) require at least one semester of personal financial education as a prerequisite for a high school diploma. While several state public school systems have developed K-12 integrated program curricula on financial literacy, many districts don’t have the staff, the time, the money or the expertise to teach even the simplest of money management concepts to kids.

Indeed, in February one representative in the state of Marylandrecently filed HB 191, a bill that, if passed, would make successful completion of a financial literacy course prior to graduation mandatory. Sadly, although not surprisingly, even its own state board of education opposes the measure for many of the reasons outlined above.

So, what to do?  The most important suggestion we could offer is for parents to talk about money management with their kids. We often hear that the subject of money is an emotionally-charged taboo for many families.  The National Financial Educator’s Council (a fantastic resource for financial education for all ages) has just released a new PSA campaign called, “The Talk,” a series of ads that tackle head-on the difficulties most adults have discussing finances with their children — and the critical importance of doing so.

So, say you’re a member of one of those families: Where do you start?  Sage offers a number of great financial education resources that can be accessed at any time, free of charge, right on our website. Students taking our online course also have access to both the course and its own set of valuable financial education resources at no charge — for life!

We’ll also do our best to make sure the topics we cover in our blog, on our Facebook Page and our Twitter Feed @SagePF will help link readers to useful content, fueling the discussion among families about saving, budgeting and most important, taking charge of their money. So, have you had “The Talk” with your children? Are you planning to do so — and what resources will you use?

-Cindy M.

We just received word from the Department of Justice that a new settlement has been reached between mortgage lenders and borrowers that will pay out approximately 25 billion dollars to distressed borrowers, the state, and the federal government.  To determine if your loan might be affected by this settlement, please take a look at: http://www.justice.gov/ust/eo/public_affairs/consumer_info/nms/index.htm

This is the largest financial consumer protection settlement in U.S. history, and is attempting to provide some relief to borrowers who experienced abuses related to their mortgage servicing.

Do you know what your credit score is?  Do you know how it might affect your life?  Do you have any ideas about how to improve it?

You may be familiar with the term “FICO” score, which stands for the Fair Isaac and Company score.  These are the credit scores used to determine your credit risk, also known as the credit bureau score and these scores are used to determine interest rates and credit offers.  You will generally get the best rates if your score is 700 or higher.  There are 3 nationwide consumer credit reporting companies: Experian, TransUnion, and Equifax.

The first step to improving your credit score is to check your credit report.  You can request 1 free copy per year.  Make sure to check this report for any errors.  Be sure to note that the amounts owed are correct and that there are no errors on late payments.  After you have verified that the information on your credit report is accurate, there are a few important things to keep in mind:

1. Pay down any existing credit card debt.  Keep good records of what you owe and come up with a plan to repay your debt.  It is best to pay off your cards with higher interest rates first, while continuing to make sure that you make payments (even if they are the minimum payments) on all credit cards.
2. Pay bills on time.  If you do make a late payment, call your credit card company and ask for this to be removed.  Sometimes they will make a “goodwill adjustment”.
3. Understand your outstanding debt.  Many times the amount of debt you have is compared to your credit limits.  So, if you owe amounts close to your credit limit, this can be detrimental.

For more information, go to the Federal Trade Commission’s site – Building a Better Credit Report:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm

Remember, better credit scores lead to better interest rates and decreased insurance rates!

-Lory M.

(Check out our course available at: http://www.sagepf.com)

Of all of the “everyday expenses” we consumers encounter, the grocery bill is probably the most common.

It’s also the area where many of us (and that includes the folks at Sage Personal Finance!) overspend. An interesting new survey from the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association indicates that 22% of us have no idea what we are spending on such common items as housing, entertainment…and groceries.

The good news is that spending on food is one of the areas of an average consumer’s budget that can be brought under control with very little effort, leaving more cash on the table — and in our pocket.

Time Magazine’s Moneyland summarizes a great article from the April edition of Real Simple Magazine outlining several easy ways to save on some of the common items we purchase every day.

So what strategies do you use to stretch your dollar at the supermarket?

-Cindy M. (Sage Personal Finance)

Here are a few more helpful financial calculators we found on the web.

1)      Can I afford to send my child to college?

www.finaid.org/calculators/savingsgrowth.phtml

It’s something that most of us don’t put too much thought into when our children are first born, but before you know it, the kids are in high school and college is right around the corner.  Even if you haven’t started saving for college yet, it’s not too late.  Whether your child is looking into a community college, a public university, or a private college, you will need to plan for this big step. There are 4 factors to consider when planning for college:  risk, return, liquidity and time frame.  Take a look at this calculator to help with your savings plan.

2) Family vacation alternatives

www.fuelcostcalculator.com

With the state of the economy these past several years, many households are not in a financial position to spend money on big family vacations.  There are many alternatives that are worth considering when trying to figure out what to do or where to go if you are able get a week off from your job.  Instead of packing your bags and heading out of the country, consider local venues.  You might want to consider a camping trip at a nearby campsite, or even a water-themed day at a river or beach.  If you live near a big city, try hopping on the train and spend the day in the city, visiting museums, libraries or street fairs.  Use the attached calculator to estimate your fuel costs while planning for your trip. If you find that you have saved enough to get away, consider the many discounted sites such as priceline.com or Kayak to take advantage of last minute bargains.

3) How can I save money on my day to day expenses?

http://www.couponcloset.net/…/free-coupon-savings-calculator-for-2012-stay-on-budget/

There are many advantages to using coupons, especially in today’s economy.  Now more than ever, it is wise to keep track of our expenditures in order to see how we can stay on our budget.  In addition to many free online coupon sites (coupons.com, shopathome.com, dailygrocerycoupon.com, to name a few) there is a coupon calculator which will allow you to enter your shopping trips from up to 4 different stores and provide you with totals to help you keep track of your spending.  Use the link above to start keeping track of your store expenses.

Also, don’t forget to check your newspapers, magazines and mailboxes for retail coupons as well.  In addition, many retail stores will have rewards cards.  They are usually free and the barcode is swiped each time you shop, allowing you to accumulate points to be used for future discounts.  Keep a large envelope in your car, and each time you get a coupon, place it in the envelope so that it is always ready to be used.

Welcome to the first ever blog written by Sage Personal Finance!

We hope to compile some information each month that helps you become (or continue to be) a wise financial planner.  As a person who enjoys working with data and usually needs to be shown actual numbers to be convinced about anything, I thought I would compile a list of some helpful on-line calculators and describe how they might help you make sound financial decisions.

1)      To Buy or Lease a Car?  http://www.bankrate.com/calculators/auto/lease-buy-car.aspx.  Nearly everyone will have to make this decision at some point in their lives.  Often, it comes down to how long you plan on keeping the car that you buy/lease.  If you keep cars for 10+ years before moving on to a newer model, it may be cheaper to buy than to lease.  Also, your lease may or may not include maintenance costs—if it does, that could save you a lot of money if your car needs repairs down the road.  Sales tax rates also vary from state to state and may greatly affect the amount you could pay for a car out-the-door.

2)      How Long Will it Take to Pay Off My Credit Card(s)? http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp  This is a sobering exercise!  The average person has a few thousand dollars in credit card debt.   If you enter in say $3000 in credit card debt, put in $300 as a minimum monthly payment, at 15% interest, it will take you 3 years and 4 months to pay off the bill, and you will wind up paying $367 in interest.

3)      How Large of a House Loan Can I Afford? http://realestate.yahoo.com/calculators/afford.html   Now is a pretty good time to consider buying a house, since housing prices and loan interest rates (30 year-fixed at around 3.9%) are low.  This calculator allows you to input your income and expenses and it will tell you the amount of monthly mortgage payment you can afford.  It suggests not carrying a mortgage over about 30% of your monthly income.

4)      How Long Will I Live? http://www.livingto100.com/calculator/age  If you want to plan for retirement, take this quiz to see how long you will be around.  If you don’t smoke, eat well, and have long-life genes, you might need to save more to ensure the funds are there for you well into your 90’s.