Banking/Checking | Credit/Debt | Income | Savings/Investing | Miscellaneous

Banking/Checking

Can creditors freeze or take money out of a joint checking account?

Yes, it is possible for creditors to both freeze and take money out of a joint checking account to recover money you owe them. However, they must first sue you and get a judgment against you in court. Your account can then be “frozen” by a court order (you can’t make any withdrawals or write any checks). By law, you should be notified by the bank and have the opportunity to have a prompt hearing. Then, depending on the outcome of the hearing, the creditor may or may not get a “turnover order” from a judge to actually take the money out of your account. If you do not follow through with a hearing, your account may be frozen for up to 90 days, and all funds up to the amount you owe can be taken by the creditor. (Note: Debts resulting from tax and child support matters are exceptions to this process.)

There are limits to what creditors can take from you. The following funds CAN NOT be taken from your account: some or all funds from joint depositors who are not named in the court order, Social Security benefits, veteran’s benefits, and certain retirement and disability pension benefits. Proof of the type and amount of ALL exempt funds must be brought to the hearing. The court will use this to decide what part of the account is exempt and must be returned to you.

If my debit card is lost or stolen, how much can I be held responsible for?

The amount you are responsible for will depend on how fast you notify the issuer that a card is lost or stolen. If a card is reported lost/stolen within two days of discovering it missing, you will be liable for a maximum of $50. After two business days and within 60 days from the date your statement is mailed, you are liable for up to $500. If you don’t report a card lost/stolen within 60 days from the date you received a statement containing the first unauthorized use, you will be liable for the entire amount.

I understand cashier’s checks are not honored after 6 months +/-. What “instrument” is there that lasts through the years, something you can put in your drawer for a year or two before cashing?

Actually, the six month rule only applies to checks drawn on regular checking accounts. It does not apply to cashier’s checks. Cashier’s checks are valid for years depending on state laws, although it is recommended by banks that they be cashed within 90 days of issue to avoid being lost, stolen or destroyed.

The issuing bank must honor a cashier’s check for the number of years until state law determines it to be “unclaimed” or “abandoned property,” which is generally between two to seven years. At that time, the cashier’s check will “escheat” or be turned over to the state treasury. Once the check has escheated to the state, the bank no longer has to honor the check. Instead, the check holder will have to make a claim to the state in the amount of the cashier’s check.

The site of the National Association for Unclaimed Property Administrators, http://www.unclaimed.org, will allow you to search for escheat laws and contact information for each state.

Why do banks charge the consumer more than the rates set by the Federal Reserve?

Great question! The interest rate offered by the Federal Reserve is for financial institutions that borrow money from the federal government. Since financial institutions need to make money on their loans, they charge more than the rate they pay the Federal Reserve. Financial institutions set their own rates and fees for loans to consumers, so be sure to check several financial institutions to find the loan and rate that is best for your situation.

I owe money on a few credit cards and a few days ago I opened a checking account. My question is can they take money out of my account?

If you want to, you can set it up with your financial institution to pay bills electronically, or you can set up automatic transfers. If you owe and don’t want to pay, no company can take your money without your permission, unless they sue you in court and win. However, the IRS can seize your account for unpaid taxes.

Can I open an account in a different name than my own?

You must open an account under your name and social security number. You cannot open an account under someone else’s name unless you are added to their account as a joint owner.

What do I need to open a checking account?

Once you have picked your financial institution, it is time to open your account. A bank representative will help you with this easy process. They will help you fill out a signature card, which is the contract between you and the financial institution. When you go to open your account, be sure to bring: a picture ID, social security number, money, and possibly a parent or guardian. Some financial institutions will let you open a checking account with $1 and others will require a minimum opening balance. Find out from your financial institution what their requirements are before you get there. Also, be sure to check on account fees, minimum balances, and other charges associated with the account.

I’m 13, can I get my own money order?

Yes, as long as you have the appropriate amount of money to purchase a money order, anyone can get one. A money order is a type of check that is purchased for the amount desired. You can purchase a money order from places such as the post office, grocery stores, convenience stores, and financial institutions. One of the reasons that money orders are so popular is that, unlike a personal bank check, they are pre-paid and cannot bounce.

I’m 15 years old. Can I open my own checking account?

When it comes to checking accounts for teens, there’s good news and bad news.

First, here’s the bad news. Most banks won’t open a checking account in your own name until you’re 18. But a few banks do open checking accounts for teens when they turn 16. So if you really want to have your own checking account, call several banks near you.

Now, for the good news. Most banks will let you open a joint checking account with your parent or guardian. A joint account means that both people can use the account. So, if you really need a checking account, this might be the way to go.

If a checking account isn’t going to work for you, check out your options for a savings account with an ATM card. Most banks will let you open a savings account in your own name before you turn 18. With an ATM card, you can make deposits and withdrawals as easily as using checks. By having a savings account, you might also save some money on fees as these are usually lower for savings accounts than checking accounts.

I want my savings to be safe, so I’m going to keep my money in a bank. But, which is the best bank for me?

Good for you--keeping your savings in a bank is the safe way to go! To find the best bank for you, you need to do some detective work. Check out at least 3 different banks, credit unions, or savings and loans. You can get a lot of the info you need by calling or visiting webs sites of the banks you’re most interested in. But it’s even better if you go in person. Find out about different types of savings accounts--regular savings accounts, club accounts, CD’s, money market accounts, etc.

Another really important part of savings is earning money. The higher the interest rate, the more money you’ll earn. Be sure to ask about the interest rates; they differ from bank to bank.

You don’t want to use your hard earned money to pay bank fees, so be sure to ask about fees and other charges. Some banks charge if you make too many withdrawals a month, others charge to speak with bank tellers. Most banks charge fees every month if you don’t keep a minimum amount in your savings. If you’re under 18, some banks won’t charge these fees. So, be sure to ask about special deals.

While gathering all this info, note what days and hours the banks are open. After all, you need your bank to be open when you can get there.

One more tip—your parents’ bank may be the easiest one to open your account.

Once you have all the information, compare your findings and select the bank that’s best for you—the one that gives you the best interest rates and lowest fees, has the type of account you want, is easy to get to, and is open when you can get there.

Do you have to have money to start a checking account or can you start one and then put money in it?

As a general rule, financial institutions do require an initial deposit in order to open a checking account. The amount of this initial deposit will vary based on the financial institution and the type or form of checking account you choose. Often times, smaller local banks and credit unions will offer student checking accounts with a lower minimum opening deposit amount than larger banks. Keep in mind that many checking accounts require you to maintain a minimum balance in order to avoid fees. It pays to do your homework!

Most banks maintain websites. Visit their websites to compare the various types of checking accounts, fees, and minimum balances and deposits. No matter what type of checking account you select, be sure that you clearly understand all the requirements and fees to which you are subject.

Is it safe to keep all my money in one bank?

Unless you have just won a gazillion dollars in the lottery, your money should be safe in one bank. Deposits at most financial institutions are federally insured up to $100,000.00. If you have more than this amount you would probably want to explore additional financial institutions to establish additional savings accounts and other investment opportunities. Check with your bank to determine if they are federally insured or have state or private insurance. Historically, federal insurance has been safer.

Credit/Debt

If parents die and leave behind debt, are the children responsible?

No. Debt does not transfer from parent to child unless the child is a joint account holder (e.g. checking account, credit card) with a parent or a co-signer on a loan for the parent.

If my credit card is lost or stolen, how much can I be held responsible for?

Once you have reported your credit card as lost or stolen, you are protected under federal law to be liable for a maximum of $50 per card on any unauthorized charges. However, if you report it lost or stolen within 24 hours you may not be liable for anything.

I am writing to you for guidance on/or referrals facing an unfair consolidation student loan I am repaying. I am currently paying a 14.25% interest rate. Nevertheless, my credit score is 700 and I haven’t had a single late payment on the account in well over six years. I have held the same job for six years. My income has recently spiked as well, and I have no credit card debt. I am African-American. I have attempted to refinance and all the company says they can give me is approximately 14%. Any advice or guidance you could provide will be immensely appreciated. Thank you!

Let me first congratulate you on six years of on-time loan payments, a healthy credit score, and having no credit card debt. These are all things that will contribute to financial success! Given these positive things, I can understand your frustration about being stuck with a 14% interest rate.

While your interest rate is fairly high, I would not characterize your consolidation loan as “unfair”. Rather interest rates vary among lenders just as the price of an identical item will vary depending on the store you buy it at. One store’s “best rate” may be much more than another store’s, even if you have been a great customer. In addition, the Equal Credit Opportunity Act prevents lenders from considering race as a determining factor when issuing credit.

Although you did not specify whether you had a federal or private consolidation student loan, the higher interest rate tells me that it is private. This is good news because private consolidation loans can be refinanced or “reconsolidated” with another lender as often as you want. A federal consolidation loan, on the other hand, while offering a much lower interest rate, can not be reconsolidated to get a lower rate unless there is a new loan to add to it. In addition, a federal consolidation loan can only be obtained through a lender that issued at least one of the original loans that were consolidated.

I would recommend that you carefully shop around for a lender that will offer you a lower rate. The rate a lender will offer on a private student consolidation loan is often the prime rate, which is currently 8.25%, plus a margin determined by the lender. The margin is usually determined partly by your debt to income ratio and credit score. Lenders, such as SallieMae, will offer even better rates or waive fees if you have a co-signer and/or have a history of making payments on time. A great place to begin your search is FinAid at http://www.finaid.org. FinAid is a comprehensive source of student financial aid information. You can find a list of reputable lenders who specialize in both private and federal consolidation loans. Good luck!

What are debt consolidation non-profit agencies and do they hurt your credit report?

Debt management counseling services can assist you in setting up a budget and a debt repayment plan. Non-profit financial counseling agencies usually charge for their services. The amount you will be charged depends on your ability to pay. Using a reputable nonprofit debt consolidation agency will not hurt your credit rating. In fact, it can help your credit rating if you pay your debts as agreed to in your debt repayment plan.

What is a consumer credit counseling service and how does it work?

A consumer credit counseling service helps people with financial problems find ways to pay their bills through budget planning, money management, and debt reduction. These services can be an excellent resource for people who are serious about paying off debt. The staff works with clients to prepare a budget plan for repaying debts and then contacts creditors to ask them to accept the plan. These services are either free of very inexpensive. The offices are listed in yellow pages of phone book under Credit and Debt Counseling Services.

What are credit repair companies and how do they work?

For a fee, credit repair companies will review a credit report and contact creditors to inquire if the “negative” information on the report is accurate. Credit repair companies often advertise that they can remove negative information from credit reports. Beware—credit repair companies CANNOT permanently remove negative information from a credit report if the negative information is true.

Negative information may temporarily be removed from the credit report while it is determined if the information is true. Any negative information that is true will be added back into the credit report. Save money and contact creditors yourself if you think there are errors on your credit report.

Who decides the rates for home, auto, personal, and other types of loans?

Financial institutions set their loan rates based upon the credit score of the individual applying. Rates are often tiered so that someone with a FICO score between 500 and 600 would pay a higher interest rate than someone with a score between 600 and 700.

I am a 17 year old, work full-time, and would like to apply for a credit card. I already have a debit card. What do I need to do?

By beginning now to build your creditworthiness, once you turn 18 years of age, you will have some history of financial responsibility which will make it easier to get credit.

For now, look for ways to show potential credit card companies that you can and will manage your credit card responsibly. Having a debit card and managing it well is an excellent first step to show financial responsibility. Having a regular job is also a good way to show that you have income to pay for charges you would make on a credit card.

While it sounds like you already have a savings or checking account, using it responsibly is another important step to establishing credit. This means always having enough money in your checking account to cover the checks you write and depositing to your savings account on a regular basis to show that you can save money consistently.

Good luck in building your credit worthiness!

Hi. I am 19 years old and would like to know how I can get credit so that when I am 21 I’ll have the credit I need to buy a car.

It’s great that you’re thinking ahead. By beginning now to build your creditworthiness, once you turn 21 years of age, you will have a credit history showing financial responsibility.

When applying for credit, it’s always a good idea to take a look at your current financial situation. Do you have income to pay a credit card bill? If not, a first step might be to get a job that provides regular income. Also, be sure you have a financial history showing good financial responsibility. This could include managing a debit card, checking account, and/or savings account responsibly. If you rent, paying your rent and utilities on time, will help to build credit worthiness.

Since you’re over 18 years of age, you can obtain credit, if a credit company finds you creditworthy. You may want to start by applying for credit with your current financial institution (bank or credit union). You already have a history with them and they might give special consideration to loyal customers. Your financial institution may also offer a “smart card” which is a credit card that allows you to charge against funds in your own savings account. This could be an important first step for building a credit history.

If you’re a student, consider checking with financial institutions on campus that offer credit cards to qualifying students. Another option could be a store credit card. Sometimes it’s easier to get a store credit card than general credit. If you make your major purchases at one or two stores, you may want to inquire about a credit card from one of these stores. If you find that you cannot get credit on your own, you may want to ask a parent or other adult to co-sign for your credit card or loan. That means the other adult will be responsible for the credit debt should you not pay the bill.

Good luck in getting your first credit account. But, remember, any credit comes with a lot of responsibility. Be sure you have the financial means to pay for any money you borrow.

Is it better to get a secured high interest loan to pay off credit card debt or pay off lower interest credit cards one at a time?

It sounds like you are aware of options for paying off your credit card debt. Congratulations for taking the initiative to learn about paying down your credit card bills and for wanting to pay them off.

You’ll probably save money by paying off lower interest credit card debts one at a time rather than securing a new loan with a higher interest rate. A new secured high interest loan can cost you more in interest charges and there may be fees for opening the new loan such as an application fee, credit check fees, appraisal fee, etc. Plus, if you can’t pay the secured loan, whatever item that was used as security for your loan can be repossessed by the loan company.

However, there may be some instances where the secured high interest loan might save you money:

• If you are not able to make the minimum payment on each of your credit cards, you are probably paying extras in late payment fees and your creditworthiness is being damaged. A consolidation loan might save you money in the long run and protect your credit history.
• If interest rates on any of your credit cards are higher than the secured loan, you might save money by using the secured loan to only consolidate the debt from the high interest cards.

Good luck in paying off your credit card bills. Remember, regardless of which method you select to pay off your credit card bills, pay as much of your balance each month as you can so you won’t pay so much interest.

What is a home equity-interest only loan?

First of all, a home equity loan is a type of loan in which the borrower uses the value of their house as a guarantee that the money will be paid back (this is called collateral). An interest only loan is a loan in which for a set period of time the borrower only makes payments on the interest, paying that off, leaving the rest of the loan (the principal) to pay off with no more interest adding up.

So, to answer your question; a home equity-interest only loan is the combination of borrowing money using your house as collateral, and then paying back the loan interest first followed by the principal.

I have a larger, high interest loan, and a smaller, low interest loan. Does it make more sense to make larger payments on the high interest loan, knowing it will take longer to pay off, or should I make larger payments against the low interest loan, paying it off early, then applying that additional money to the high-interest payment?

Congratulations on trying to find the best way to pay off your loans. As a general rule, paying down the high-interest loan first will usually save you more money than paying off the lower-interest loan first. However, to be sure, consider all the on-going costs related to both loans, including how interest is calculated monthly. For some loans, interest is calculated on the average daily balance of the last two months. This method would cost more in interest than a loan for which interest is calculated on the balance of only the last month.

If you’re not sure how interest is calculated on your loans, call the customer service department of your loan company and ask for an explanation of how your interest fees are determined.

Good luck in paying down your credit bills!

Hi. I have two credit card balances, one for $1,900 at 3.9% and one for $3,450 also at 3.9%. How should I pay them down? Should I pay the lesser one off first or split payments for both accounts?

Thanks for writing in to learn more about paying off your credit card bills. If both credit cards have the same interest rate and both use the same method to calculate interest, it would not make a big difference in interest charges if you paid off the small loan first or split payments between both loans. However, to be sure, consider all the on-going costs related to both loans, including how interest is calculated monthly. For some loans, interest is calculated on the average daily balance of the last two months. This method would cost more in interest than a loan for which interest is calculated on the balance of only the last month. If you’re not sure how interest is calculated on your loans, call the customer service department of your loan company and ask for an explanation of how your interest fees are determined.

If you find that both credit cards are equal in how interest is calculated, you may consider either paying off the small loan first or splitting the payments between both credit cards. Choose the one that feels the best for you.

Good luck in paying off your credit card bills. Remember, regardless of which method you select to pay off your credit card bills, each month pay as much of your balance as you can so you won’t pay so much interest.

If I can not afford to continue paying my car loan what can I do?

You may be able to afford your car payment if you can reduce your other expenses. Can you cut-down on food and entertainment costs? If you find that you can’t continue making your car payment try to find a buyer for your car. First find out what the sale value of your car is by consulting the Kelley Blue Book, an auto consumer guide or your car loan company. Then ask your car loan company or bank what the pay-off amount would be. The pay-off is the amount you would have to pay to completely pay-off the loan, including interest on the debt. If the value of your car is more than the pay-off amount then you could sell your car, pay off the car loan and maybe even have money left. Contact your car loan company or bank to find out what the procedure is to pay-off the loan. If you are unable to find a buyer, contact your loan company and explain your situation. They might be able to delay a payment.

If you must default on your loan it is better to be up-front with your loan company. It will save you and them time, money and frustration. Keep in mind that if your car is repossessed you might still be liable for the loan amount that is not covered after the bank sale of your car, plus any of their costs in reclaiming the car such as towing costs. Try to avoid repossession. This will have long-term negative consequences on your credit report, which could prevent you from obtaining credit in the future. Go back and read the MoneyTalks newsletter on car buying on this site. It will give you more information for your next car purchase.

I need to know if I can already have bad credit when I’m still under 18 years old. And how can I find out if I have bad credit already or not?

Until you are 18 you cannot enter into a contractual agreement. In other words, you can’t get credit in your own name. Your parent can get a credit card and give you authorized use of the card, but the credit use is reported to your parent’s credit report, not yours.

Once you are 18 or 19, if you want to find out what your credit report looks like you can order a copy of your report. There are three major credit reporting agencies that maintain these records.

Experian Consumer Assistance
1-888-397-3742
http://www.experian.com

Trans Union Corp.
1-800-888-4213
http://www.transunion.com

Equifax Credit Info. Serv.
1-800-685-1111
http://www.equifax.com

While your report may be slightly different at each agency, since you are young, you can probably get by with just ordering a report from one of the agencies. However, if you find a problem, you will have to correct it with all three agencies. The cost to order a credit report in California is $8. If you live elsewhere, you will have to check on the fee amount for your state.

If I transfer one credit card balance to a lower interest credit card, will this go against my credit?

Great questions, but not one that can be answered by absolutes. If you transfer your credit card balance one time to get a lower interest rate, there’s no problem. Just make sure you will not be charged a fee, by either company for the transfer and that the lower rate is more than just an introductory rate. However, if your credit report shows that you make a habit of transferring balances chasing the lowest rate, you may be looked at unfavorably by some creditors. This means that they may choose not to give you credit or they may charge you a higher interest rate. Remember, the credit reporting agency does not make a judgment about whether you are a good risk or not. They simply provide creditors with a history of your credit transactions. If one creditor turns you down you can always try another. Each creditor has its own criteria for judging consumers.

What will happen if I don’t pay my credit card bill?

Keeping up with your credit card payments is very important. If you don’t your mistake will appear on your credit history for the next seven years, making it hard to obtain credit when you really need it.

If my debit card has a “Visa” logo on it, is it a credit card?

Debit cards, sometimes called ATM cards, look and are used like credit cards – but they aren’t. Instead of drawing on a line of credit, they act like a check, moving the amount of the purchase from your checking or savings account to the merchant.

I was at a college campus the other day and they were giving out free gifts to people who were filling out credit card applications. Is this a good way to get a credit card?

Yes, this is one of the ways to get your first credit card. However, just because a credit card company is handing out free gifts doesn’t mean that the credit offer may be the right one for you. Remember to look into all of the details about the card: interest rate, annual fee, late charges, etc. Sometimes, the free gift just isn’t worth it.

Income

Should I file a tax return even if I only work part-time during the year?

Great Question! Filing a tax return is not dependent on the amount of time a person works. It is based on the income a person makes each year. According to the IRS, a student or unmarried dependent is required to file a tax return if their income for the year is greater than $4,700. However, it may be beneficial to file a tax return although it is not required because the federal government may actually owe the taxpayer money at the end of the year. Many teenagers work part time and make less than $4,700, and still file a tax return because too much money was taken from their paycheck for taxes.

Keep in mind, federal tax laws can change each year and state laws vary from state to state. There are some factors that may require a person to file a tax return even if they earned less than $4,700, such as having unearned income from investments. If there is ever a question in your mind regarding your need to file a tax return refer to your yearly federal income tax book (1040). You can also call 1-800-829-4477 for IRS recorded tax and refund information.

The IRS maintains a website that lists frequently asked questions and answers that can help you with your tax related needs. Their website address is: www.irs.gov/faqs/index.html.

What is a pension?

A pension is simply a retirement plan that is meant to provide income for a retired person to live on during retirement. It is usually not enough to pay all living expenses. Pension plans are arrangements by which an employer (like a corporation, labor union, or a government agency) provides monthly income to its employees after retirement. The amount received is usually calculated based on a combination of years of service, age, and wages earned.

Savings/Investing

What is going to give me the highest rate of return, a CD or a money market account?

CDs usually have the higher pay-off. Money market account rates have recently been in the mid-3% range, while CDs with 6 month to 5 year terms have recently ranged from 4.5% - 5% (generally speaking, the longer the term - the higher the interest rate). However, there may be high-yield money market accounts available at some online banks that have exceptional rates that are competitive with CDs.

I’m 15 years old. I’ve got $2,032 in a regular savings account right now. Is there any different type of account that I could put my money in to see it grow faster?

It is wise of you to want to put your money where you can maximize your earning power! By earning power, I mean getting the highest amount of interest possible and letting the power of compounding (earning interest on your money plus all the interest you have earned) work its magic. It would be a shame to waste the opportunity to let your money earn more for you. However, the best place for your money depends on your financial needs.

As you already know, regular savings accounts pay very little interest (often less than .5%). They are, however, low-risk - FDIC insured up to $100,000; liquid - money can be accessed at any time; and economical - the minimum balance required to open one and avoid monthly fees is low. If you need access to your money at all times and your balance fluctuates a lot, it may make sense to pass up higher interest rates for the convenience and affordability of a regular savings account.

If you plan to maintain a higher balance but still want access to your money, a money market account may be a good choice. Money market accounts are liquid, low-risk and are a more profitable way to save than are regular savings accounts, with interest rates recently in the mid-3% range. Some high-yield money market accounts can be 4.5% or better (often through online banks). However, the minimum balance to open an account and avoid fees are often much higher than on a regular savings account.

If you can afford to lock your money up for a while, putting your $2,000 in a Certificate of Deposit (CD) would be a low risk way to grow your money at a higher interest rate than most money market accounts. Basically, you agree to let a financial institution hold your money for a certain amount of time (called a term), and you are guaranteed your principal (the amount you deposited) plus a fixed amount of interest. Terms come in almost any duration – the most common being 6 months, 1 year, and 5 year. As a general rule, the longer the term, the higher the interest rate will be. However, if you cash out early you’ll lose interest and possibly even principal.

Money market accounts and CDs are available at most banks and credit unions. You can compare rates in your area, as well as at on-line banks, at www.bankrate.com. When you have five or more years to lock away your money, and/or are willing to face a little bit of risk, there are more investment options, such as stocks, bonds, and mutual funds, with potentially higher-payoffs. Good luck!

I am in college and have a new niece and nephew. I work quite a bit and have some extra money that I would like to somehow give to my niece and nephew for their future. I’m not talking big money, it’s something near $2,000. What is the best way to give them a monetary gift?

Your niece and nephew are lucky to have a thoughtful uncle and godfather who is already thinking about their future. It is never too early to begin saving money. In fact, the money you invest for the kids now will have the advantage of time - time to grow through the power of compounding (earning interest on interest).

If you intend the money to be used for education, there are two great options that will allow all earnings to grow tax-free – the Coverdell Education Savings Account and state-sponsored 529 plans. Anyone can contribute money on behalf of the beneficiary and the plans insure that the money is controlled by the account owner, not the child. So should your nephew or niece should opt out or drop out of school, he or she will not have access to the funds. In addition, the minimum investment amount is often much lower than those required by most mutual funds, making these plans more accessible and affordable for someone like you who doesn’t have “big money” to invest.

• The Coverdell Education Savings Account allows a maximum annual contribution of $2,000 per beneficiary. It can be used to pay schooling expenses for K-12 (e.g. private school tuition, text books, a computer used for school) as well as college (including undergraduate and graduate). Funds can pass to a first cousin or closer relative in the event they are not used by the beneficiary.
  
  
• A 529 Plan allows a much higher monetary contribution; however the funds can only be used for college costs. In addition, funds can only pass between siblings.

Ask your niece and nephew’s parents if they have already set up either of these investments for the kids. If so, you can offer to contribute to them with your gift. If they have not already set up accounts, or plan to save the maximum contribution on their own, you can set up you own accounts for them.

If the money you want to give is not necessarily “education specific,” you may want to consider giving it in the form of:

• U.S. Savings Bonds - Series EE or I bond come in denominations of $25, $75, $100, $200, $500, $1,000, $5,000 and $10,000. No tax is paid on the interest until the bond is cashed. The earnings can compound, tax deferred, for up to 30 years. They are available at most banks.
  
  
• Stock - Shares of a kid-popular company, such as Disney, Pepsi, or McDonalds, can be purchased to serve as an investment, as well as a fun financial teaching tool that they can use to learn about stocks and investing when they are older. Many companies offer direct purchase plans that will allow you to buy shares of stock directly from them. Buying stock this way costs less than buying stock from a broker.
  
  
• Mutual Funds - Shares of a mutual fund (a group of different stocks, bonds, and/or money market funds that are managed by a professional) would give the kids a diversified portfolio (a mix of investments). They tend to be less risky than straight stocks and can be bought for a relatively small amount of money. The initial investment amount can vary from $500 to $2,000 or can be even less if you plan to have a set amount deducted from your bank account each month to buy additional shares.

What are the benefits of starting to save from a young age?

Starting to save money at a young age has many benefits. The best way to save and to keep your money safe is to open a savings account. Many savings accounts collect interest over time, so the earlier you start saving, the more money you will have in the long run. Learning to save your money from a young age teaches you financial responsibility and provides you with a sense of accomplishment. Learning smart money management young, will help you throughout your whole life.

I have always wanted to know if banks only insure money up to $100,000 what happens to people who are millionaires and have more than $100,000. Where do they keep their money to be insured?

My guess is that most millionaires have their money in a number of different investment vehicles, such as stocks, bonds, and real estate. Since most investments are not insured, most of their money is probably not insured. A wealthy person could put $100,000 in several different insured financial institutions or if they wanted to deposit more than $100,000 at one financial institution, then they would need to be aware of the different ownership categories of accounts.

They may qualify for more than $100,000 in coverage at one insured bank if they own deposit accounts in different ownership categories, such as a single account, a self-directed retirement account, joint accounts, or a revocable trust account. For example, they could have a single account in their name only for $100,000, a joint account with their spouse for $100,000, and a joint account with their child for $100,000 and be insured for a total of $300,000. For more information on the various deposit options available visit the FDIC’s web site at: www.fdic.gov/deposit. Most credit unions also offer insurance on accounts up to $100,000 through the National Credit Union Administration.

How do money market accounts differ from regular savings accounts?

Good question! Money market accounts differ from regular savings accounts in a couple of ways. Money market accounts usually pay a higher interest rate compared to a regular savings account and offer some check writing privileges. Things to think about before saving money in this type of account is that usually you will be required to have a minimum deposit to start the account and you must keep an average balance in the account. If the balance on the account does not stay the same then the account goes back to earning the rate of a regular savings account.

Why does the way your bank calculates interest affect how fast your savings grows?

The amount of interest paid on a savings account depends on a number of things: the length of time your savings is in an account, the annual rate of interest and the method used to calculate interest. Banks can use a variety of methods to calculate interest, such as simple interest, add-on interest, bank discount, and compound interest calculations. These different types of calculations affect when, how, and on what balance interest is paid. They also can significantly affect the amount of interest paid. Savers need to ask their bank about the different calculations they use and choose the type of savings account that best meets their needs.

What are the key elements of a successful savings plan?

A good starting point for a successful savings plan is having a goal. Knowing how much money you want to save and what you are saving for will help you reach your goal. Sometimes the stage that you are at in life will affect the kind of items that you are saving for. If you are in junior high you may start thinking about saving money for a cell phone or a laptop computer. If you are in high school, you may start thinking about saving money for a car or a college education.

Once you have a goal in mind, write it down. Make sure you know how much things cost because that can affect your short-term and long-term goals. If you don’t have a physical item that you want to save for that’s ok too. You can still have a goal to save a certain amount of money for a certain amount of time. After you have written down your goals you should then look into the different type of savings accounts where you can save your money.

I have decided to move my 401k investments to a money market fund for a while to see where the market is headed. My financial advisor suggested I move it to either a short-term Ford Motor Company 18-month bond with a yield of 7%, or a 3.5% fixed rate annuity with a 36-month term. I could just leave it where it is in a 1.5% money market fund that is totally liquid. I kind of like it in the 1.5% money market fund because I am not tying up my money in case the stock market rebounds. What do you think?

Wow, for a teen, you are definitely thinking ahead if you have 401k investments. If you are not a teen, great job too, thinking of your retirement well being is good.

In terms of your question, it really is up to you. In the current unpredictable market, anything can go. You may benefit by going for higher yields, but you have to lock your funds in. The Ford Motor Company bond mentioned above is a good example. What really matters is what is more important to you, based on your research of the current market, being able to have your funds liquid or earning at a higher yield.

Hope that helps.

I have all of my money in a savings account and I won’t be needing quite a bit of it for a few years. Should I put some of it into a CD so that I can earn more interest from it?

Congratulations on thinking of your financial future!

To answer your question, CD's are a safe, easy, and smart way of making your current savings work for you, especially when you do not think you will need to use your money right away. But make sure this is the case, because if you withdraw your money early on a CD account, you will have to pay penalties.

To help you find out more information and get started, below is a link for Bank of America. Look under CD's, checkout CD laddering and investment CDs to figure out how the length of time and amount deposited can affect the interest your money earns: http://www.bankofamerica.com/

Most major financial institutions have informational web sites, so shop around.

Why should people save money?

There are several reasons to save money. One major reason is to protect you against possible future financial difficulties due to unexpected expenses. For example, your car may be running smoothly today, but tomorrow you may not be able to start it. If it needs major repairs it could cost you hundreds of dollars, which you may not have in your pocket. Another good reason to save is to accumulate enough money to pay for something you may want to buy in the future, like college tuition, a computer, a DVD player, or a vacation. Or you may want to save money to invest. Go back and read the Money Talks newsletter on Savings Savvy if you would like more information on saving.

I have a desire to invest some money into a CD. In checking around, I found that Intervest National Bank in New York has the best current rates. Would you recommend the bank? Is it a stable, safe, and secure place to put my money?

You are smart to be cautious before investing your money. One good way to judge a bank’s safety is to find out if money you deposit will be FDIC insured. The FDIC (Federal Deposit Insurance Corporation) was created by congress to supervise financial institutions and insure deposits up to $100,000. To check on a financial institution, visit the FDIC’s web site at www.fdic.gov. Select “Consumers” under the “Quick Links by User” section. Under “Deposit Insurance” you will find the question “Is my bank insured?” By clicking here and entering the information about a bank you can find out if your money would be insured. Good luck!

I am 14 and I have made some money over the summer and I am looking for somewhere to invest it. What is the best place you think I should invest it? What is the best for short term? Long term? I don’t want to tie up my money for too long seeing that I am turning 16 soon.

Congratulations on planning ahead. You have several choices. Since you want to use the money when you turn 16, you should probably stay away from the stock market. Over the long term stocks out perform other investments, but due to market fluctuations, they are not always the best choice for short-term goals. Bonds also are better for long-term investments. Mutual funds pool funds from several people to buy into a particular type of investment, such as stocks. While mutual funds provide more diversification than investing in a particular stock, you are still subject to market fluctuations.

Interest rates are really low right now, but are on the increase. You could shop around for a good rate on a CD. The interest rate will vary based on how long you agree to keep your money on deposit, but the interest rate on CDs is usually better than that on a regular savings account. Call around to look for the best rate for the term you are interested in. Money market accounts work like checking accounts, but pay a higher interest rate than a regular savings account. Unlike a CD, you can take your money out when you want. Compare rates before you decide where to put your money.

You have to decide what the best savings/investment option is for your current situation and goals. If you want to take some risk, you may decide to invest in stocks or a mutual fund. However, if you want to be conservative, a CD or money market account is probably better for you. You may want to visit the High School Financial Planning Program Portal www.nefe.org/hsfppportal for additional information on saving and investing. Good luck!

What is a CD and is it a good place to put my money?

There are many factors to consider when purchasing a CD (Certificate of Deposit). A CD is an interest earning savings instrument offered by a depository institution that accepts deposits for a fixed amount of time. CD time periods can range from 7 days to 8 years. You can purchase a CD for $100 - $100,000. Some things to remember when purchasing a CD are that if interest rates fall, you will benefit from the return locked in rate assigned to the CD; however, if interest rates rise, you can miss out on greater earnings. Interest on a CD is paid at the end of the designated time period in which you purchased the CD. Take into consideration that if money is withdrawn from a CD before the end of a specified time period, there will be penalties. Before purchasing a CD, be confident that it is ok for you to tie up your funds in this way.

Also, shop around for a financial institution that pays the highest percentage rates. For example, an extra 1% amounts to $20 on a $2,000 CD every year. CDs are a safe way to invest because the federal government insures your money, however, you have to remember that you are letting the bank have your money for a designated period of time.

Are callable CDs a good investment?

Good question, many people are wondering the same thing because they are purchasing CDs instead of investing in the stock market because of the market’s recent unpredictability. Lets define what a callable CD is, for those of you who didn’t know that there were “other” types of CDs out there. A callable CD is when an issuing institution can call (pay off) the CD before the stated maturity date. With callable CDs, banks sell CDs to brokerage firms and the brokerage firms in return, sell CDs to you for a designated time period. However, the bank that issues the CD to the brokerage firm can pay you off after a specified period of time, usually one year.

So why purchase a callable CD? Many people like callable CDs because the interest rate assigned to them is considerably higher than a regular CD (for example, 3.10% vs. 2.0%). Be cautious, many times brokerage firms do not disclose all information to the buyer of the callable CD (maturity date, fractional ownership, insurable limits, fraudulence, etc.). If the bank does not “call” the CD after the first year, you cannot withdraw your money without paying a penalty. With regular CDs, the bank and you are locked into the agreement, and with callable CDs the bank can skip out early (pay you the high interest rate for one year, and your CD can be assigned a new interest rate; usually a lower rate. If you think interest rates are going to go up in a year, do not purchase a callable CD; it would be better to invest in a short term CD.

Hi, I'm 17 and getting ready to go to college. I don't have a bank account yet, but I do have money that I want to start investing or putting into CDs that will give me the greatest returns. I have been doing some research and think I want an IRA, but I don't have a steady income, however I was wondering if I put some money into bonds (EE or HH which ever send interest earned to an account like every 6 months) if that money could be funneled into the IRA account? Or am I heading in the wrong direction? My parents are of little help and I want to try to keep them out of the process as much as possible. I turn 18 at the end of August and have around $5000 or a little more to work with. Please if you could help, I am lost in the financial world and want to start saving for my future.

Getting a college education is one of the most important steps you can take in building a secure financial future. College graduates earn almost twice as much, on average, than those with only a high school diploma. Developing the habit of savings regularly is another important step. Right now you have a chunk of money to work with. So, how do you decide where to put your money? That depends on several factors, such as what you need the money for, how soon you will need the money, and whether you will have other income.

A general rule of thumb is that you should have 3 – 6 months income in an emergency savings account before you start investing. (Your situation may be different if you are receiving financial assistance from your parents.) But there are a number of different savings vehicles available. Rutgers Cooperative Extension offers an on-line publication called “So Where Do I Put That $2,000?” that I think you would find useful. You can download the publication by going to: www.rce.rutgers.edu/pubs/subcategory.asp?cat=7&sub=56

Many colleges have a credit union associated with the campus. Check to see if your school does. This is a good place to start asking questions. However, be sure you compare interest rates and fees from other local financial institutions before you deposit your money anywhere. The credit union will be able to provide you information on IRA’s. If you are working, you can put up to $2,000/year in an IRA. You can do this at any financial institution or brokerage firm. You must remember that this money will be locked up until you are 59 ½. There are some exceptions to this—you may be able to use the money to pay for college expenses or to buy your first home. Before you put your money in an IRA, be sure you understand the rules and limitations.

I hope this helps you to feel a little more comfortable with the financial world. Start saving now and build a strong financial foundation. You are on the right track!

Miscellaneous

How long should I keep paid bill stubs?

As a general rule of thumb, unless you need it for tax purposes, you can dispose of all paid bill stubs after one year. Due to privacy concerns, you might want to shred these records before you throw them away.

Where is money made?

United States currency is made at a few different places. All coin engraving and cutting is done at either the Philadelphia Mint or the Denver Mint. The Philadelphia Mint is the oldest operating mint and has been operating since 1793. The Denver Mint has only been around since 1902. Not only do the mints make all the coins, but they also hold large amounts of gold and silver.

The Bureau of Engraving and Printing is located in Washington D.C. and is responsible for the plate engraving and printing of all paper currency. All three places give tours, so next time you are in Philadelphia, Denver, or D.C. check it out!