Jill Russo Foster

3 Things You Should Teach Your Child About Money

What do your children learn about money from watching you? I recently saw the movie Confessions of a Shopaholic. It starts off with a young girl in a shoe store, unhappy with her new, practical, sale-priced, boring, brown shoes. She remembers looking into other stores and seeing “A world where grown-up girls got what they wanted…They didn’t even need any money, they had magic cards.” The magic cards are credit cards, and when she grows up, she fulfills her dream by getting 12 of them. She soon finds out the cards aren’t so magical when she maxes them out and has to deal with the consequences.

Do your children think credit cards are the magic solution to their wants? If this is the message that is received, then they are on the path to being a slave to financial debt. There are three things that I believe children need to learn about money and credit at an early age.

1. Children need to learn how to spend less than they earn. In simple terms, a person making $100 a week needs to spend less than $100 per week. You can teach your children with their allowance or chore money and by using age-appropriate money lessons. Discuss the cost of an item in relation to their income, not yours. Talk about all the purchase options: buying full-price, waiting for a sale, buying used, borrowing, or renting from the library.

2. Children need to learn how to save for their wants. They need to learn how to plan and wait for the items they want. A great habit to get them into is taking a percentage of their money and saving it.

a. Talk about where to store their saved money. When they are small, use separate containers for saving and spending so they can see their money grow or disappear as they save and spend. When they are older, have them open a bank account to earn interest.

b. Use age-related items to start the savings conversations. Think about all the things they ask you for: iPods, game systems, their first car, or their career dreams (i.e. college). Don’t forget to discuss all the extras that go with their purchases. iPods need songs. Game systems need games. Cars need insurance, gas and maintenance. College expenses involve more than tuition. Instilling the habit of saving and planning will benefit them for a lifetime.

3. Children need to understand credit. Not just what credit is, but how it affects all their finances. You know that credit plays a major part in everyone’s lives, from employment to buying a car, from the credit terms you are offered to whether or not you will need a security deposit for your utilities. But, how do you explain that to a child?

a. Show him something he wants and ask, “Would you rather have it right now and pay $20 for it? Or would you rather wait 2 months, pay only $5 for it, and have more money to spend on other things you want.” Tell him that is what it’s like when you use credit. Credit always costs more. You get what you want right now, but you end up spending more and having less money.

b.You can also explain that when someone buys too many things with a credit card (and doesn’t have the money to pay it back), other people think less of that person and won’t give him a job or a place to live. Those are the consequences of bad credit in the simplest terms possible.

Don’t let your children learn the hard way. Being in tremendous debt is a terrible inheritance to pass on. Teach your children now so they can make proactive, informed choices throughout their lives. If you don’t know where to begin, get your copy of Cash, Credit and Your Finances: The Teen Years and read it along with your child.

What is the difference between a secured credit card and a pre-paid credit card?

Secured versus pre-paid credit – do you know what you’re getting? When I am giving a talk, I can see that many people don’t know the difference between them. Let me tell you the facts:

Secured Credit

With Secured Credit, the bank has placed a set amount of your own money in a special savings account that it controls. If you default on your debt, the bank can use the savings account to recover its losses. Your credit limit is always equal to the amount in the special savings account. Just like a traditional credit card, you will pay interest and receive a monthly bill.

A secured credit card is for someone who can’t get a traditional credit card. If you have bad credit or no credit at all, secured cards are a great way to establish your history. If you still don’t understand what a secured card is, think of it as a security deposit on a rental. The landlord holds that deposit and can keep it if you don’t pay.

As with any financial transaction, read the fine print before moving forward and make sure that the lender reports your information to the credit reporting agencies. Watch out for fees and make sure you understand them fully.

Pre-Paid Cards

With pre-paid credit cards, you simply load the card with money and use the card to make purchases. There are no bills or interest rates on purchases. The spending limit is always the current deposit balance on the card. In that sense, it works like a debit card, yet it has all the consumer protections of a credit card.

Pre-paid cards are often used as gifts and by people who want to avoid spending beyond their budget. You might use one on your next vacation or as a gift for your favorite college student. The consumer protections and the built-in spending limit make this card ideal for those two scenarios.

The fees can be expensive! Credit card companies make their money with the fees – activation fees, monthly fees, reload fees, etc. You might want to consider other alternatives for every day use.

Now you know the difference between them. Make sure you understand them and pick the right choice for you.

Cut spending: know what you have and what you don’t need

Do you want to cut your spending? Organize your belongings and stop to think before you buy. How does that help? Read below

Organize your belongings

Have you ever made a purchase only to find out you have the exact same thing at home? If you are organized – knowing what you have and where to find it – you will save time and money. Buying duplicates of things you already own is a waste of money. I am talking about the items in your clothing closet, your food pantry, your linen closet, and your garage.

Stop to think: Do you really need it?

A great price doesn’t necessarily mean a great buy. Check your supplies at home before you buy. The same is true for coupons – don’t buy just because you have a coupon: make sure you need it, want it, and will use it in the immediate future.

Don’t panic about missing a great price. Chances are it will go on sale again in the future.

Be careful in warehouse clubs. If you only need 1 of something, then just buy the one, and not the 12-pack. If you aren’t going to use all 12 right away, you will have to find a spot to store the extras. Will you know where you stored them in a year, or will you be at the store buying another 12?

Stop to think: Are you buying for “someday” or for right now?

Be careful about buying for future fantasies. If you have a dream of doing craft projects with your children, don’t buy the items now when you don’t have kids. This someday-buying will make you spend more and cause you to have items that need to stored. Buy things only when you need them. Even buying too far ahead for the holidays can be an issue.

Simply put, know what you have in your home and where to find it when you need it. Don’t buy more than you need right now, regardless of the great price. Living with less will mean more cash in your wallet.

Put Your Identity on Ice with a Credit Freeze

I am diligent about protecting my identity. I monitor my accounts, pay bills from my account online, shred paperwork, opt-out of mailings, and so much more. But even that may not be enough.

As a customer, I have been receiving notices that my personal information may have been compromised. I thought my identity was safe because I mostly purchase from, and use, well-known companies. But, they have not protected the databases they use to store everything they know about me. You know the companies I am talking about – Epsilon and Sony to name a few. You’ve probably been getting these warning notices yourself via email and postal mail, and you’ve probably heard more than enough from the media.

What can you do to protect yourself? You can follow my list of things to do to protect you from identity theft. If you need a refresher, visit www.jillrussofoster.com and look at past newsletter articles.

Put Your ID on Ice

If you are not planning on applying for new credit anytime soon, then the best advice is to put a credit freeze on each of your three credit reports. This will stop everyone (including you) from accessing your credit report for the purpose of obtaining new credit. Yes, there is a fee for this service, but it can be well worth it.

What if you need to apply for a loan or a new credit card within the next month? I assume you have a specific need, like a new car, home, or school loans. In that case, you should not use a credit freeze until your loan is complete. When you apply for credit, the creditor should be able to access your credit without you unfreezing your credit because you will have to pay a fee for that. However, do use a credit freeze if you’re just planning on shopping early summer sales. The freeze will not only protect your identity, it will prevent you from opening unnecessary store credit accounts at the mall.

Credit freezes are great and can prevent identity theft. They can prevent identity theft even if someone steals your wallet right out of your hands. But think before you leap, freezing and unfreezing your credit can be costly.

The Importance of Paperwork in a Life or Death Emergency

Are you prepared to handle anything life throws at you? This can include anything from an immediate crisis to a major life hurdle. Take a good look at your life and think about some of the situations I am talking about, and think about what you would need to do in your life to be prepared.

If we have to evacuate or run for cover, take this folder…

If you had to leave your home within a short amount of time (storm approaching, fire, flooding etc.) would you know what important papers to take with you? Could you gather all of them in 30 minutes or less? This should be a goal of yours, to have your papers organized and ready so you only have to grab one container (a hard drive, a file box, or a folder) – and go. In addition, what about those personal items that are irreplaceable? Could you grab those, too?

If something happens to me, you know what to do…

What if the person who handles the finances passes away? Would anyone else know where all the financial records are? Do you know where all your assets are? Do you know what liabilities you are responsible for? In many families, one person handles everything. Both people should know what is going on – just in case. That’s especially true for the paperless households who do everything online. More than one person must be able to access all of the accounts because there won’t be a file cabinet to sort through.

If you are prepared and organized ahead of time, it will make life much easier for you. Start to think about this today and make a plan that works for your situation. Being ready and knowing what you should do will save you so much time and effort if you find yourself in a bad situation.

You can vacation and still save money

Does the high price of gas have you thinking about whether or not to take your summer vacation this year? This doesn’t have to be the year of the staycation if you don’t want it to be. Here are some tips for taking your vacation and saving money too:

Look for the lowest price of gas. You can do this with many phone apps or with a little planning before you go.

Make sure your car is running in good condition.

proper tire pressure
remove any unnecessary weight / objects from your car that aren’t needed
stay at or under speed limits
avoid traffic jams (at other times than rush hours)

Comparison shop for more than the price of a night at a hotel. What else does the hotel offer?

Some will offer a shuttle service (you can forgo the rental car).
Some will offer you gas reimbursement.
Pick a central location so you can walk, take public transportation, or bicycle.

Rent your car away from the airport. This can save you money on taxes and fees. Compare the costs of an airport pick up versus another location. Even with the cab fee, it could be cheaper to rent your car away from the airport.

Remember your membership benefits. Many memberships, including AAA, AARP and more, offer discounts. All these savings can add up. Check online before you go for discount admissions to places.

A little planning can add up to taking a vacation instead of staying home.

How to Prepare for a Weather Disaster

The first four months of this year have provided all sorts of weather challenges all over the country. We started the year off with record breaking snow storms, in April, there were major tornadoes (over 300 in one day), and now flooding. What is going on with this weather?

Are you prepared for whatever weather disaster comes next? Read and find out!

There is more to worry about than the actual storm. You could experience long term affects like power outages, flooding, wind damage, and more. Don’t assume that you won’t experience a weather disaster just because it has never happened in your area before.

These tips will prepare you for any kind of disaster, so read on.

Do you have proper insurance coverage? When was the last time you discussed your policies or updated them with your insurance company or agent? It could be well worth your time to do this in the next couple of weeks. While you’re there, you should also ask about umbrella coverage if you don’t have it already. As the name implies, this is a general purpose policy which provides additional protection above and beyond your existing policies. It is a relatively low cost insurance that can make a huge difference if you have to file a claim.

Do you have a well thought-out evacuation plan? You can’t use a general plan created by someone else. Personalize yours to fit your needs. Here are some things to consider:

Exit Strategy: Make sure everyone knows the quickest way to get out of the house in case of fire or other natural disaster. Seconds really do count!
Meeting Place: Have an agreed-upon meeting place. The quicker you can do a headcount, the quicker you can move to locate anyone who didn’t make it out. Have 2 meeting place locations. One right outside your home (sidewalk or driveway) and the other off your property (friend’s house, library, or school).
Contact Person: Specify one person to be the call receiver. If your family gets separated, and cannot get to one of those locations, the separated parties should text or call the main contact. This will save confusion and missed calls. Make sure everyone knows the contact person’s phone number or has it stored in their cell phones!

Do You Know How to Prepare for a Storm? Here are a few other general tips for you to think about. If a storm is forecast, make sure you:

Have a full tank of gas. Gas stations can’t pump gas if the power is out.
Secure your outdoor items so that they will not become airborne and injure you or someone else.
Stock your disaster supply kit. In a serious storm, this could be well worth the effort. Include drinking water (at least one gallon of drinking water per person per day), food (canned, dry and other non-perishables which don’t require cooking, water, or special preparation – don’t forget a manual can opener), prescriptions and medications (three day supply recommended), first aid kit, flashlights, battery-powered lanterns, and AM/FM radio plus extra batteries.
Prepare a pet supplies bag. Don’t forget your pets! They’ll need food, water, medications, and leashes.

This way you will be ready for whatever weather comes next. Is there something else that you do that I didn’t include? Tell me in the comments section.

Pack Rat Day!

clutter On Tuesday, May 17, let’s celebrate all those people who have stacks and piles of stuff!

Anita Taylor, Professional Organizer & Speaker, has the following advice for those of us who tend to let things accumulate, especially our important paperwork:

The best way to tackle a stack is to…

set a timer for 15 minutes
sort from the top
use the 3 D Method
Do it, Dump it or Delegate it!

Still not done? Read on…

Sort by category: When sorting materials that all belong in the same category designate a “home” for that category for filing or storing later. This is meant to be a quick sort so you can destroy the stack.

Attack from different angles: The next time you attack that stack, start from the bottom, set the timer and GO! Next time, top; after that the bottom; and, if there’s anything left on the 5th try, cut the stack like a deck of cards and work from the middle!

Don’t forget: Set the Timer and STOP when the buzzer rings!

Once you’ve gotten this accomplished, be sure to write and let me know how it went.

The legend of the no-limit credit card

Question: Which financial institution created a credit card based on an urban legend?

(The answer to our trivia question is at the bottom. But first, let’s talk about your credit cards.)

Are your credit cards right for you? If you’re not sure, here are some key points you can compare to determine which product is right for you.

Is the interest rate fixed or variable?
If you carry a credit card balance, you will want a fixed rate. If you pay in full each month, the rates won’t matter.

Will you use the card for purchases, balance transfers, or cash advances?
Your credit card company will apply a different rate for each transaction, so pick the right card with the right rates for your financial plans.

Is there an annual fee just to have the account?
You may not want an annual fee. However, if the annual fee covers your membership to a discount service or store (like a big box store), you may find that it’s worth it.

Ask about any other costs or fees.
Look for late fees, membership fees, over limit fees, returned payment fees, etc).

How is the billing cycle calculated?
Does the due date suit your monthly budget? If the card is due on the same date as your mortgage, that could cause trouble.

Your credit cards should work with the way you spend money and pay bills. Don’t let your cards cause you more trouble than convenience.

Trivia Question Answer:
The (virtually) no-limit credit card, the Centurion, was created by American Express for no other reason than the persistent rumors that it actually existed. This card is obviously meant for the rich and famous. For those of us with bigger dreams than budgets, a no-limit card would be a disaster. Fortunately, the Centurion is issued by invitation only.

Quick Tips: Vacation Safely

If you’re going away on vacation, you need to take some steps to protect yourself and your belongings. But, most of us aren’t covering all the bases. Here’s what I suggest you do:

Stop the mail, newspaper, and any other automatic delivery
Make arrangements for pets and plants
Call your credit card companies to let them know where you will be so that they can approve any charges you make and contact you if needed.
Make sure you have paid all your bills ahead of time so that you don’t have a late payment (remember: late payments are the biggest factor of your credit score).
Adjust your thermostat accordingly and unplug any unnecessary electronics. It’s also a good idea to set timers for any lights or electronics you want turned on and off in your absence
Have someone either housesit or check on your house frequently
Clean out your wallet. Remove all items that you won’t be using. This includes local items (like library cards), rewards cards, and any credit cards you won’t need on vacation. You should only carry what you will be using. If you are traveling with a spouse, make sure you travel with different credit cards. If one of you loses a wallet, then the other will still have credit cards that are usable.
If you will be travelling with a passport, make sure to make two copies of the information page, and don’t keep the copy with your passport. Keep one with you in case you lose it and give one to someone you trust who isn’t traveling with you.

What do you do before you go? Let me know your tips.