Archive for October, 2009

Money On Their Minds, Part II

As I mentioned last time, New Jersey has revised its high school graduation requirements, mandating the teaching of financial, economic, business and entrepreneurial literacy starting in 2010.  In that post, I talked a bit about Internet-based high-interest checking and savings accounts.  Here are two more suggestions for young folks who may be managing for their own money for the very first time.

2. Free is Good: So you’ve got your high-interest savings and/or checking account, but the bank now expects you to pay for your checks.  “Free checks” is often a carrot banks dangle to get you into a higher tier checking program (e.g., one with a minimum balance or annual fee), but it’s one our students can avoid if they know they can get checks for free or cheap.  VistaPrint is an online service that follows the freemium model of business – provide a basic service for free, and allow customers to pay for upgrades.  Provided we can teach our students to get past the idea that they have to have custom checks with sports team logos or cartoon characters on them, VistaPrint offers six basic check designs for free.  Customers select a design, customize the check with their name, address, & account information, and presto, free checks – all they have to pay for is shipping.  You can, of course, upgrade your checks with monograms, premium designs, etc., but let’s be real: what makes more sense, getting the Looney Tunes on your checks, or getting them for next to nothing?

3. Get Rewarded: Rather than signing up for a credit card at your college’s student center based on the free t-shirt or frisbee you’ll get, let’s teach our students to shop around for credit cards with some kind of reward program.  I’m not sure if these are available to new credit card users or only people with established credit, but if you can find a card like Capital One’s No Hassles Reward Card or a store-branded Visa or Mastercard (e.g., the Visa), you pay no annual fee, and each purchase you make gives you points toward some reward.  In the case of Amazon, every 2500 points is worth a $25 gift certificate to  Capital One has a tiered rewards system, but since I’m not interested in any of the rewards they offer, I just trade my points in for cash toward my bill once I’ve accumulated enough.  It’s important to note that use of these cards should be guided by responsible spending, not just trying to rack up rewards points, but my thought is that if I’m going to have to pay for something anyway (e.g., cell phone bill), why not put it on the credit card and at least get something back for it eventually?

As always the technological component has to be balanced with a human behavioral component – don’t spend more than you can afford, create a monthly budget, beware of compounding interest, pay your balances off each month, etc.  These lessons are most important; I simply offer some supplementary advice here.

What are your top financial tips for young people just learning about managing money?  If, like me, your kids are significantly younger than high school age, how did/do you get them off to an early start with good ideas and attitudes about money from a young age?

Money On Their Minds, Part I

The New Jersey Dept of Ed recently (Ed.: February?  Really?) announced that it has revised the statewide high school graduation requirements.  You can read about all the changes here, but what I’d like to focus on is the new requirement of “2.5 credits in financial, economic, business and entrepreneurial literacy (effective with the 2010-2011 9th grade class)”.

Setting aside the semantic debate over the use of the word “literacy”, I have to say I’m behind this requirement.  While I took 4 years of math classes in high school, not once did we cover credit cards, compounding interest, APR/APY, monthly payments, budgeting, or any “real world” math that I might actually have to use one day (but hey, if you need a hypotenuse calculated, holla at ya boy).  In fact, in my experience, both as a teacher and a student, the “business” or “consumer” math classes have been traditionally reserved for the lower tracks of math, or even exclusively for special education.

In addition to the traditional curriculum these teachers will start covering next school year (you know, like “don’t buy things you can’t afford”) , I’d like to offer three personal finance tips that I hope our more Internet-savvy Business Ed and/or Social Studies teachers will consider including – one now, and two in a following post.

1. Get Paid: In 2009, there is no shortage of high-interest checking and savings accounts that will pay accountholders 3, 4, and 5% interest on their account balances.  This started in the realm of “Internet-only” banks like ING Direct, but even traditional “brick & mortar” banks have started offering high-interest checking and savings accounts.  We opened our first high-yield savings account with Capital One back in 2005 or 2006, when we were pulling in somewhere between 4-5% interest on our balance.  That rate has dropped significantly over the last few years, and it’s now down to somewhere around 1.5% or so – a disappointment for us, but compared to the 0.25% interest rate (or whatever it was; it was a long time ago and it only earned me a few cents every month on a fairly sizeable balance) I had on my old Wachovia savings account, that’s still not too shabby.

We made do with that 1.5% until I read about a local bank that was offering a high-interest checking account at 3% APY.  We made the switch from our traditional (read: 0% interest) checking account to the high-interest account with our new bank.  Of course, in order to receive the high interest rate each month, there’s usually a “catch” of some sort.  In our case, we have to do the following each month:

a) make 10 debit card purchases

b) have at least one ACH withdrawal or direct deposit

c) log into online banking at least once.

We do all these things anyway, so for us, switching from no-interest checking to high-interest was a no-brainer.  Some accounts may require minimum balances or other caveats in order to get the best interest rate, so make sure you read the fine print (another good life lesson for the kiddos).  Shop around for the (FDIC-insured!) deal that’s right for you, and let your money do a little work for you each month.

I’ve got two more up my sleeve, but what economics/personal finance/”entrepreneurial literacy” tips do you teach or think should be taught?