Undoubtedly, your children have seen you use a credit or debit card when you shop and wanted to know about them. Explaining the difference between credit and debit cards and their function will take some time, as well as a few tools to illustrate their use.
Probably the best way to explain what each card is for is to demonstrate by using visual tools. For example, take out a debit card and a credit card. Use a label or scotch tape a piece of paper to each one identifying what they are.
Now you can effectively show your children what they are used for. Make a game of it. Place a few grocery items on the kitchen table. Pretend that you are buying them and paying for them with a debit card. Explain the process to the children in ways they can understand. Repeat the same process with a credit card.
Show the children a credit card bill. If the grocery amount is on the bill, they can easily connect your grocery demonstration and the charge on the bill.
Most likely the children will have many questions for you. Answer as best you can in words they understand.
More importantly, however, is to illustrate to the children what can happen if you use the credit card too often. Use the family budget as a way to teach them that you have set aside so much money to pay for the credit card bill each month. Then show them what would happen if you overcharged; that you wouldn’t have the money in the budget to pay the monthly bill.
You may have to repeat the demonstration a few times before the children truly grasp the significance of what you are trying to relay to them. Eventually, they will come to understand and will probably ask, “Why don’t you just buy things with money?”
That’s a good question and one that will take time and a considerable amount of self-examination to fully explain to their satisfaction.
While experts suggest that you really do not have to explain what credit cards are used for and why, they do recommend that at some point you have to have a discussion about financial responsibility.
This is particularly true when the child becomes a teen and asks for their own credit card. There has been a great deal of discussion as to whether or not teens should be given a credit card at all. Whether you are a proponent of such an idea, early education on the disadvantages of owning a credit card will likely be a topic your family will discuss in the near future.
Find the Right Mortgage for You
In this current economic situation, one problem that is still ongoing is the housing foreclosure crisis. Foreclosures are increasing every month, and experts expect that more and more homeowners will face this eventuality sooner rather than later.
If you currently hold a mortgage and are trying to find ways to reduce the monthly payments, here are some suggestions you may wish to utilize.
One way in which you can save on interest rates is by seller financing. This means that the payments are made directly to the seller and not the lender. The advantage cited is that “you can sometimes arrange a lower interest rate,” especially at this time when the value of homes have decreased and the seller has no other options. In addition, no private mortgage insurance is required.
However, it is very possible that the seller will ask for a shorter payment plan than the more traditional 30-year mortgage.
If you are a homeowner, you have undoubtedly heard of points. In some instances, you can offer to pay more points in order to garner a lower interest rate. Or, you can opt for a 15-year mortgage instead of a 30-year mortgage.
Another way you can save money is to pay off your mortgage sooner. Again, just like any debt, the more you pay the less interest you will owe.
Researching different mortgage lenders is the clearest route to finding the best mortgage for you. Depending upon your credit report and FICO score, you may be suitable for a low-interest fixed rate mortgage.
You will have to begin comparing and contrasting the various lenders, however. While some banks are still withholding money and not resuming their lending practices, there are others who may be willing to offer you a good interest rate based on your credit history.
Remember, too, that the reason banks are not lending is because of the sub-prime mortgage crisis. The money they received from the Treasury is being held in abeyance because the banks know that future foreclosures are on the horizon and they need whatever capital they have to prepare for that eventuality.
It is also important to stay away from any predatory lenders who offer you a mortgage rate that, for all intense and purposes, seems too good to be true. Recent news reports claim that these unscrupulous individuals are back in business and will try to trick you into using their services to obtain a low-cost mortgage.
Whether you purchase a new home or try to scale down your existing mortgage, it is vital that you speak with qualified, certified professionals who can offer you the best advice possible.
How Much Allowance Should I Give My Teenager?
There is no set amount that you should give your teens as an allowance. As a matter of fact, during these difficult economic times many families may not be in a position to hand out a weekly allowance at all.
But if you are considering an allowance for your teens, experts recommend that the allowance should be based on four criteria:
* The child’s age. The older the child is, the more money he or she will receive – based on your family budget, of course.
* The family income plays a large role in determining how much to give teens as an allowance.
* Determine what the allowance is for. For example, will the teen be responsible for buying his or her clothing?
* How much do the Smiths give their children? Although this should have no bearing on the allowance you give your teen, nonetheless, the subject will come up at some point.
Depending upon the above factors, you may consider giving your teen $15.00 a week. If this is not sufficient, you may have to address his or her needs and make the necessary adjustment.
As your teen becomes older and perhaps finds a job after school, you can supplement the money your teen makes with an appropriate amount to cover expenses and other necessities.
When your teen goes off to college, you may have to increase the amount of money significantly.
Conversely, you may not be in a position to offer your teen an allowance during this economic crisis. You will then have to sit down with him or her and explain why you cannot afford an allowance at this time.
If you have involved your children in the family budget process from the outset, then they are probably more likely to understand and appreciate the fact that you cannot afford as much allowance as they need or perhaps none at all.
When we were kids, the allowances we were given were quite small. We were taught early on that if we wanted to buy something we had to save for it. Most of the baby boomer generation worked from an early age, contributed to the household expenses, and were able to buy that which they needed using their own money.
Today, we have to teach our children very early on about the value of money and how easily it can be wasted. And with unemployment rising every day, there are families who are having ongoing discussions with their children about allowances and spending.
These are difficult times, but the upside is that the lessons learned because of this economic crisis will become the basis by which children will learn financial responsibility. The family unit can work together to weather this economic storm.
How to Save Money on Clothes
Fashions change from year to year, but the one thing that doesn’t change is the cost. Clothes are becoming more expensive than ever. But at a time when it is critical that we save money, this is one area in which we can effectively do so – without giving up fashion sense.
Consignment shops offer individuals the opportunity to buy brand-name clothing for less. You can be assured the clothes are good quality because these shops only take new or used (worn one time) clothing. The label on the clothing is also required.
In fact, you can sell your own clothing with these shops and earn a commission. This is another way of saving on clothing costs.
But one of the most intelligent ways of saving money on clothing is an idea that has been around for ages: Buy one or two outfits and add an assortment of accessories to change the look of the outfit. Stick to colors that can be worn year round.
Remember to always have that one basic black outfit! You can accessorize it in a variety of ways and no one would know it’s the same outfit.
For those who have a closet full of clothes, it may not be necessary to buy any new clothes at all if you have maintained the ones you have well. This, in and of itself, can save you quite a bit of money.
Take care of your clothes by changing into sweats when you come home from work, hanging them up as soon as you take them off, taking care of any stains that may occur, and storing winter and summer clothes appropriately. If at all possible, purchase clothing that doesn’t require dry cleaning. That’s a huge chunk of change in savings right there.
You may also wish to swap clothing with your friends. This is becoming quite popular online as well. There is a website where you can swap children’s clothing as they grow out of them. Imagine the savings there!
When you initially buy clothes, look for quality; that is, clothes that will last a long time. Resist impulse buying. Just supplement your clothing with those things you need, not desire.
Looking good doesn’t require that you spend a fortune on clothes. If you are creative and have that confident air about you, people will not be looking at your clothes, but at you.
How to Stay Disciplined with Your Savings
Staying disciplined with your savings is just as important as staying disciplined with your family budget.
When you open a savings account, you are given a passbook. Every time you make a deposit or withdrawal, the amount is recorded in the passbook.
Let’s say, for example, that you have an online business where payments are made to you through PayPal and then transferred to your savings account.
While you may know how much you have deposited into your account utilizing a PayPal printout, it is still important to update the passbook whenever possible. This way, you can be sure that the funds you have deposited are noted in the passbook. You also want to receive the quarterly interest from your bank.
Unlike a family budget where you have to record expenditures and income, the passbook does the work for you. Each time you make a deposit or withdrawal, it is duly recorded.
The discipline needed is in cases when you cash a paycheck and set aside money to deposit into your savings account. Both can be accomplished in one visit to the bank. If you keep deposit slips in the glove compartment of your car or in your purse, you can easily make the two transactions at the same time.
On the other hand, if you merely cash your paycheck at the bank and take the money home, there is no inducement to fill out the deposit slip until another day. Perhaps you decide that you do not want to deposit the amount you initially set aside. Or perhaps you have a deposit slip already made out but decide to rip it up because you need a few extra dollars for something else.
Let’s face it; we have all been guilty of changing those deposit slips – even with the best intentions. But doing so sets a pattern for future deposits. This is where the discipline part of saving can make all the difference.
In these difficult economic times, we cannot afford to change the numbers that can adversely affect our savings. If the household budget calls for depositing a certain amount of money into the savings account, then that is the amount that needs to be deposited. No ifs, ands, or buts.
It’s quite easy to say we will make up the difference the following month, but the odds are that will never happen.
If you have a budget that requires a specific amount of money to be deposited in the bank weekly, bi-monthly, or monthly – try to stick to the budget. That is the true test of discipline and your willingness to abide by your own financial policy.
Internet Banking: Advantages and Disadvantages
In order to determine the advantages and disadvantages of internet banking, one must ask an important question from the get-go. Is online banking safe?
If you visit the FDIC website, there are several pieces of information to be aware of before deciding to bank online.
* “Read key information about the bank posted on its website.
* Protect yourself from fraudulent websites.
* Verify the bank’s insurance status.
* Check the FDIC’s online database of FDIC-insured institutions.
* Be aware that a bank may use a different name for its online and traditional services.”
Having said that, the advantages of internet banking include the following:
* Unlike traditional banks, internet banks are open 24/7.
* You can access your bank from any country.
* Transactions and confirmations are much quicker than traditional banking processes.
* You can utilize a multitude of bank accounts from one banking website.
* Most online banks offer the latest tools and software to make your online banking easier to use.
What are the disadvantages of internet banking?
* If you have been a victim of identity theft, you may think long and hard about giving out personal information online.
* Some banking websites may be difficult to utilize. It may take some time before you understand the ins and outs of internet banking.
* There are instances in which banks change their website structure or add new features which may take time to understand. You may also have to give them your account information all over again when this happens.
* At a time when identity theft is at an all-time high, and banks are closing or merging, it may be wise to visit the bank in question (if they have a physical office) and determine if their online banking services are right for you.
* It may be difficult to get used to an online bank. After all, you are giving them vital information that could be accessed by unscrupulous individuals.
While there are many individuals who swear by online banking, there are others who would rather deal with their banks on a personalized basis. Regardless of whether or not you decide to use the internet, it’s a good idea to read the FDIC website information, talk to the personnel at the bank (if applicable), and then make a decision based upon everything you have learned.
Is a Second Mortgage a Good Idea?
In order to determine the pros and cons of a second mortgage, let’s first explain what it is. A second mortgage on a home is basically the process of taking out a “second” loan. It does not take precedent over the original mortgage, which would have to be paid first.
Under what conditions would a homeowner take out a second mortgage? There are a variety of reasons, including healthcare costs, college, home improvements, consolidating debt, or perhaps to create an equity line of credit.
In today’s market, however, it is going to be quite difficult to obtain a second mortgage. The reason for this is that the value of homes is in decline. On the other hand, in cases where a home has a great deal of equity, there may be the possibility that a second mortgage can be obtained.
Generally, however, a second mortgage may be the only way to pay outstanding debts and/or increase the value of the home by making significant improvements.
Unfortunately, there are disadvantages in taking out a second mortgage. What if you cannot pay back the loan? The consequence is foreclosure, considering that you have the first mortgage pending as well.
Secondly, there are higher rates incurred with second mortgages. In fact, banks view a second mortgage as a higher risk because the homeowner is still paying off the first mortgage. In today’s economy, the chances of defaulting on a second mortgage are much greater.
In addition, there are many fees associated with a second mortgage. This, combined with the initial mortgage, can put a family into dire financial straits if neither mortgage payment can be met.
Given the difficult times we are living in, it is not a good idea to take out a second mortgage on your home unless you can afford to do so. But, even then, the market value of your home can decrease even further; a health crisis may occur, you may be laid off or have other debts that you can no longer pay.
There is no way of knowing how long this current economic crisis is going to last. Are you willing to take the risk of losing your home by taking out a second mortgage? If you are thinking of a second mortgage to consolidate debt, another prudent course of action would be to speak to a financial counselor who can guide you into finding an alternative way to pay down your existing debt.
Think twice about a second mortgage on your home. There are many disadvantages in pursuing this course at this time.
Living on a Tighter Budget!
If one of your New Year’s resolutions was to rein in the cost of spending, now is the time to tighten your budget even further. Here are some tips on how to save money.
* Buy groceries in bulk. Utilize Sunday coupon circulars and in-store circulars to find the lowest prices on items. Buy store brands whenever possible.
* Cancel newspaper subscriptions and/or the purchasing of newspapers and read online newspapers instead.
* Utilize consignment shops as often as necessary. If you have new or used clothing, you can make a commission on the sales through consignment shops. Moreover, you can purchase clothes here as well.
* Shop online to save on tax. If you shop with Amazon, become a Premium member. For $79.00 a year, you will not have to pay shipping costs on purchases of $25.00 or more.
* Take inventory of any new or used items you neither want nor need, and sell them on eBay.
* By making your home energy efficient, you can save quite a bit of money on utility bills. In fact, contact the utility company to see if they can budget the monthly bills so that you pay a smaller amount each month.
* Purchase energy-efficient light bulbs. They last longer and will keep the cost of electricity low.
* If you have cable service, call your local cable or phone company and ask about their bundle package.
* Call the credit card companies and ask to have your interest rate lowered.
* Contact your phone company and eliminate any unnecessary add-ons. If you own a cell phone, you may wish to disconnect your home phone entirely.
* Use the library more often to obtain books, CDs, and DVDs. If you need to buy any of these items, buy them used on Amazon.
* There are several coupon sites that offer discounts on items as well as grocery coupons. Check out ebates.com as well. They offer discounts on most major items in department and electronic stores.
* Save money by paying bills online. You can save quite a bit of money in lieu of buying stamps.
* Eliminate buying coffee in the morning on the way to work. Take lunch instead of eating out.
* Limit dining out in restaurants to once a month.
* Cancel magazine subscriptions. Your local library will most likely carry the issues for free.
These are just some ideas on how to save money. These are uncertain times and, with unemployment at 7%, it is a good idea to put away enough money to cover immediate expenses in case you are laid off or lose your job.