Thursday, February 25, 2010

“Thursday's Personal Finance stories - Marketwatch” plus 3 more

“Thursday's Personal Finance stories - Marketwatch” plus 3 more

Thursday's Personal Finance stories - Marketwatch

Posted: 25 Feb 2010 10:04 AM PST

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By MarketWatch

Don't miss these top stories:

Florida and Arizona have a host of competitors now when it comes to preferred retirement destinations. Sure, those two rather warm states remain popular spots to relocate but they no longer hold an exclusive on the senior set.

That's why you see more towns in North Carolina, South Carolina, Tennessee -- even Delaware and Maine -- popping up in Top Places to Retire lists. Those spots may not be as toasty as the Sunshine State but they are relatively mild and usually boast much lower costs of living than you're likely to find in other retirement paradises -- a key consideration in these days of depleted nest eggs.

The vast majority of retirees don't worry about relocating once they wrap up their primary careers, though, because they stay put. It's called aging in place, but what it really is is a desire to remain close to friends, family, institutions and activities that are familiar.

A lot of those folks may click wistfully on Web pages of more exotic locales as they research their retirements and they may be intrigued -- but they won't be moved.

-- Steve Kerch, assistant managing editor

RETIREMENT LIVING

The top 10 places to retire

Where do you want to live in retirement? Most folks age in place. But there are those who spend their golden years in dreamy locales. Where are those places?
See Robert Powell.

INVESTING

Bond ETF buyers, beware

Investors seeking safety have been pouring cash into bond funds -- but when it comes to exchange-traded funds they run the risk of limiting gains or magnifying losses.
See Fund Watch.

Bracing for higher interest rates

Higher interest rates are coming. And that has significant implications for investors, since markets anticipate events. Assuming we are in the very early stages of a credit-tightening cycle, investors need a whole new strategy for a world of rising interest rates. Here are some of the implications investors need to address now and over the next several months:
See Smart Money.

Emerging markets hit speed bump

Financial troubles in Southern Europe and unrest in Turkey threaten investors in developing markets, says David Riedel, president of emerging-market analysts Riedel Research. Jonathan Burton reports.
Watch Video Report.

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Personal Finance: CARD Act Impact - Washington Post

Posted: 25 Feb 2010 07:34 AM PST

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In my Sunday column and today's column, I talk about the loopholes in the law and answer questions I've received from readers.

Given the magnitude of the CARD Act, for the next several weeks, I'll be highlighting various aspects of the new law in this e-letter, taking on one provision at a time. Up this week is the change to the industry practice called "universal default." In the past, credit card issuers reserved the right to hike your interest rate if you were late or overextended on another credit account. It didn't matter if you were a stellar customer with their card, if you messed up elsewhere, you could be dinged badly with a higher interest rate.

That practice is no more. Now issuers cannot raise your rates because you miss a payment or fall behind on a different account.

I never thought universal default was fair. What business was it of theirs if you were having trouble with another creditor? They should be worried about their own account with you. Penalizing you for behavior with another company? Totally unfair.

Here is a rundown of the new rules.

CARD Act: Provisions that are in effect now

-- Companies must notify you 45 days before raising your interest rates.

-- You can cancel your card and pay off the existing balance at the original rate.

-- You get 21 days to make a payment after a bill is delivered instead of 14 days.

-- Credit cards cannot raise rates on any existing balances. If your rate increases, it will only apply to new charges.

-- Payments will be applied to the balance with the highest interest rate first.

-- Penalty rates on existing balances can only be applied if your payment is 60 days late. If you then remain in good standing, your rate must go back down after six months.

-- Promotional rates must last at least six months.

CARD Act: Provisions that go into effect Aug. 22

-- Any penalty fees or rates must be "reasonable and proportional," as defined by the Federal Reserve.

-- Card issuers must periodically review your account and potentially reduce your rates.

I want to hear from you about all these new regulations. How are the credit card changes affecting you? Send your comments to colorofmoney@washpost.com and put "CARD Act Impact" in the subject line. If you have questions about the new law, send those too.

Here are more details on the CARD Act.

Closing charge

Ah, there is justice.

Capital One has agreed to pay $750,000 to several thousand of its credit card customers for charging them for annual fees after they closed accounts. Oh, and in the category of "they've got gall," in some cases, the company compounded the problem by charging interest and penalty fees on the unpaid annual fees.

The charges occurred from 2004 to 2006 on accounts whose annuals fees were due during the account-closing waiting period, reports Post writer Binyamin Applebaum in Capital One to repay fees to customers who sought to close credit accounts. (Feb. 19)

Read more about how this slap on the wrist to Capital One is part of a larger effort to crack down on credit card companies.

Breakfast Savings

Losing your job can force you to trim your budget, and in turn, put breakfast on the back burner. Recent research shows that as unemployment hit 10 percent, breakfast sales at fast-food restaurants took a dive, reports the Post's Ylan Q. Mui.

Prior to the recession, breakfast sales accounted for as much as a quarter of sales at some fast-food chains. And in the five years before the recession hit, breakfast sales grew 64 percent, according to NPD Group, a consumer behavior research firm.

Before losing his job, Lonnell Buford, 38, of Montgomery County, Md. used to purchase a steak, egg and cheese bagel, orange juice and coffee from McDonald's each day, but now visits the fast-food chain only twice a week and orders from the dollar menu.

"I am on a budget," he told Mui. "I need to hold on to the little bit I have."

I've always said one of the biggest busters of people's budgets is eating out. Even when the recession ends, my hope is that people continue to be frugal and eat more meals at home.

Tax Tip

The Internal Revenue Service has released guidelines for borrowers claiming the new homebuyer tax credit.

The program, which provides homebuyers with either a $8,000 or $6,500 tax credit, requires purchasers to submit documentation, such as a completed IRS Form 5045 and the settlement statement or Form HUD-1, in order to combat fraud.

Read more about this in Kenneth R. Harney's column IRS clarifies documentation needed for tax credits. (Feb. 20)

If you took advantage of the homebuyer tax credit to purchase a home, don't forget to notify the IRS of your change of address using Form 8822. The IRS provides some helpful tips on this topic.

Let's talk

Please join me next week, March 4th at noon ET, when I'll host a live chat with Thomas J. Stanley, the author of one of my favorite books, "The Millionaire Next Door." Stanley's latest book, "Stop Acting Rich . . . and Start Living Like a Real Millionaire," was my February Color of Money Book Club selection. Submit a question now or during the chat.

Upcoming events

Lots of people have been asking where they can hear me speak. If you live in the Washington, D.C. metro area, it's still not too late to get tickets to The Washington Post's Black History Month event "Reflections On The Experience: A Conversation With Washington Post Authors."

The event will be held tonight from 6 p.m. to 7:30 p.m. Doors open at 5:30 p.m. Tickets are $10 per person. Featured Post writers include DeNeen Brown, Michael Fletcher, Lisa Frazier, Kevin Merida, Lonnae O'Neal Parker, Robert Pierre and of course, yours truly.

It will take place at The Washington Post, 1150 15th Street NW Washington, D.C. 20071. For more information, call 202-334-7969 or go to the Post's Contests and Events page.

If you miss the Post event, then come by the University of Maryland, College Park, where I will be talking about my journalism career and my new book, The Power to Prosper: 21 Days to Financial Freedom.

I'll be at Maryland on Monday, March 1 at 7 p.m. at the Samuel Riggs IV Alumni Center.

On March 2 at 7 p.m., I'll be starting a three-part bible study based on "The Power to Prosper" at the First Baptist Church of Glenarden, 600 Watkins Park Drive, Upper Marlboro, Md. 20774. Call 301-773-3600 for more details. I'll be teaching from the book for three Tuesdays -- March 2, 9, and 16 -- at 7 p.m. at FBCG.

If you've been trying to find a partner with whom to start the financial fast, come on by. We will be starting the 21-day financial fast challenge together. You can also watch the bible study live online at www.fbcglenarden.org.

Tia Lewis contributed to this e-letter.

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

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Teaching kids financial skills now sets them up for a lifetime of ... - Edmonton Journal

Posted: 25 Feb 2010 10:18 AM PST

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Most of us heard it from our parents: "money doesn't grow on trees," but was that where our financial education at home ended?

All too often, that's the case, according to Stacy DeBroff, a parenting author from Boston who recently wrote A Parent's Guide to Raising Fiscally Responsible Children (Simon & Schuster, $12).

Despite their good intentions, parents are setting their kids up for a life of financial failure by sheltering their children from hard financial realities.

"We have felt enormous pressure to have our kids succeed and to do the best that they can academically, in sports and their outside pursuits. And as a result we have shielded them from discussions about family budgets, about larger issues when it comes to spending, credit and debt, mortgages," she says.

In previous generations, children were expected to earn their spending money through part-time jobs. But in recent years, the bubble-wrap trend in parenting culture has pushed parents to give their children a leg up in an uber-competitive world by absorbing all of their children's costs, DeBroff says.

She figures all of these changes have led young people to believe they're entitled to all the latest gadgets and fashions.

"There's this immediate gratification: 'I really, really want this great pair of jeans,' not 'I can't afford this pair of jeans,'" she explains.

This disconnect from the need to budget sets teens up for a shock when they leave home. Suddenly, they face the harsh reality of paying bills for rent, food and often tuition at a post-secondary school. At the same time, their introduction to the joys of magic money — credit cards that only require you to pay off a minimal amount of your debt — can turn minor cash flow problems into long-term debt that sometimes leads to personal bankruptcy.

"They often find themselves digging themselves out of a personal finance hole in their 20s," DeBroff says.

Parents may think that their children are learning personal finance skills at school, but Darren Weeks, a personal finance guru from Edmonton, didn't mince words when asked if schools are doing enough to educate teens.

"Not even close," said the founder of the Fast Track To Cash Flow.

"The schools are often seen as a catch-all for education, but parents are the primary educators of their kids when it comes to personal finance," says Janet Sutherland, a spokeswoman for the Calgary Catholic School District. "It's up to parents to reinforce what the kids learn at the schools."

Weeks and DeBroff agree that parents are ultimately responsible — young people are much more likely to learn personal finance lessons when they are taught at home, they say.

"Oftentimes what you do with money is deeply tied into values," DeBroff explains.

So what can parents do to set their children up for a lifetime of good financial decision-making? Start teaching financial lessons as early as possible, say DeBroff and Weeks.

DeBroff recommends easing a child into the world of personal finance at age five with an allowance, which can be connected to chores done, so the child learns how much work is valued.

This introduces a child to budgeting, usually in the form of setting up a savings account and spending less on immediate wants (candy) in exchange for greater long-term happiness (a new bike). They also learn that bad behaviour or shoddy work (backtalk and clothes on their bedroom floor) can result in the loss of income.

Weeks has his own children — Ava, 4, and Connor, 6 — split every dollar they earn from chores into three categories: one-third for long-term savings, one-third for spending and one-third for charity. He also recommends parents encourage their children to play games that revolve around money. These include the classic Monopoly, along with The Money Savvy Pig piggy bank, which has four chambers: Save, Spend, Donate and Invest (msgen.com, $16.99) and The Allowance Game (Lakeshore Learning, $21.99).

It's around age 13, however, that finance education needs to ramp up, DeBroff says. How do teens manage money from their part-time job, for example, or those cheques they get every Christmas from Uncle Bob? At this age, it's important to impart a clear sense of what a child's spending habits require them to give up in terms of hours worked and future opportunities lost.

More complex personal finance ideas, such as building a credit rating and investing, can also be better understood by teens. Options such as parent-supervised debit and credit cards, and secured or prepaid credit cards, can ease teens into the perilous world of plastic by helping them track and manage their spending. Some even allow parents to set daily, weekly and monthly limits.

Even if your child makes some financial mistakes, such as losing all their savings in high-risk investment schemes, it's better they learn their hard lessons before they leave home.

"Just like investing, an earlier start leads to a higher finish," Weeks says.

Sure, money doesn't grow on trees. But it pays to start early if you want to grow a money tree with deep roots.

Making your kid money-wise

Here are a few ideas from parenting author Stacy DeBroff to help parents raise children that are financially responsible:

- Use the news: Use newspaper headlines to jump-start dinner table conversations about how a lot of people are out of work now and what world leaders are doing to help people find new jobs. These conversations can grow more sophisticated when discussing the economy with tweens and teens.

- Tie allowance to chores: This teaches the value of a dollar. Make clear what you expect from your child to earn allowance, what items you expect allowance to cover (movies, treats, online games), and what your child can do to earn extra allowance (special help needed around the house or garden).

- Set a savings goal: No matter the amount, nothing speaks to kids more than their very own savings account.

- Start young: Let kids know early on that a trip to the store doesn't always mean a treat for them. Explain that you go to the store together each week to buy food for the family, and you can't afford to buy a new toy each time you shop.

- Separate necessities from luxuries: Help kids understand the difference between needs (think: food, water and shelter) and wants (think: new fashions and electronics).

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Alumni create web service to teach kids personal finance - Daily Princetonian

Posted: 24 Feb 2010 11:13 PM PST

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Raising five children has taught Bill Dwight '84 that lecturing kids about money is futile. So the computer science concentrator from Palo Alto, Calif. decided to devise a more interactive approach. He is now the CEO FamZoo, a money management and education website that he launched as a subscription based service last month after having worked on it since 2005.

FamZoo offers personalized methods for teaching money management to children from 4-years-olds to teenages. The website allows parents to schedule chores, set up allowance plans and create virtual accounts for their children to track their savings and expenses. None of these approaches is new, of course, but putting them together in an easy-to-use web portal is.

Dwight said that FamZoo's features will "help busy parents teach children critical skills that they're not learning in the classroom," such as being realistic about costs and learning to live within one's means.

After years of fine-tuning the website through feedback from test families, FamZoo opened to the general public last month with a monthly subscription charge of $5.99 per family.

Dwight explained that he came up with the idea for the website 10 years ago, out of frustration with the increased commercialism on display in his Silicon Valley neighborhood.

"During the Internet boom, there was a tremendous focus on selfish consumption habits, and we were looking for ways to battle that and imbue some strong habits in our kids," Dwight said.

In founding the website Dwight said he fulfilled a long held wish of building a company alongside his college roommate, Chris Beaufort '84. Beaufort, who was also a computer science concentrator, is now Famzoo's Vice President of Operations.

"We had always wanted to do something on our own," Dwight said, "But we never really found just the right idea ... and finally with FamZoo we found something that we were both passionate about."

Beaufort said that leaving his job at Hewlett-Packard to join the upstart was an easy decision.

"My internal job clock told me that it was time to do something entrepreneurial again," Beaufort noted, "and the way the economy was going, it was probably better to join a smaller company."

FamZoo is a modern version of the strategies families once used to teach their children about saving money, Beaufort explained.

"A family might have three jars: a savings jar, a spending jar and maybe a charitable giving jar," he said. "FamZoo is taking that age-old concept of managing these different jars and putting a technical spin on it, which we think appeals to kids nowadays who are exposed [since] grade-school ... to computers."

And, unlike the jar method from a simpler time, the website holds parents accountable as well.

"One of the things the kids like is that they don't have to nag for their allowance," he said. "The site solidifies any agreements, and the parents need to be consistent, so ... it goes both ways."

"It's really a virtual version of a real bank," Dwight explained. He added that, as children get older, they can take advantage of more sophisticated site features, such as handling mock loans and savings accounts and setting aside money for charitable giving.

Dwight noted that the principles taught by FamZoo may have political implications as well.

If children learned about money management early on, he said, legislation such as the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act would be unnecessary. Part of the CARD Act imposes restrictions on credit card marketing geared at youth under the age of 21.

"Part of me says, 'That's fantastic. Why should these companies be preying on these kids?' " Dwight said. "But then the other half of me says, 'Why are these kids so unprepared to deal with that reality?' "

Beaufort also expressed hope that better financial education earlier in life can pay dividends when young adults get their first credit card.

"You hope that after four or five years of [using FamZoo], these lessons will be solidified in their brains," he said. "And when they go out there and get their first credit card, for instance, they won't go hog-wild and get themselves into the trouble that a lot of folks get into when it comes to personal debt."

Dwight said that feedback from both parents and children has been positive.

"Kids love the concept of independence from their parents, and parents find that kids actually end up spending less money" because it is their own money they are spending, he said.

"When they see the candy on the checkout line, it doesn't become an argument anymore because the parent asks if they have the money in their account for that pack of gum, and the kid can decide if it's worth it — it's their choice," Dwight explained.

At the same time that he strives to help families budget money, Beaufort said working for FamZoo has helped him with budget his time.

"I can actually go to my son's basketball game at 3 p.m., or see my daughter's soccer team at 4:30," he said. "And then I can always come back, have dinner at home, and work for two hours later, so that aspect has been wonderful."

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