Teaching Your Teen About Money

Teaching Your Teen about Money
Presented by Jared Daniel of Wealth Guardian Group

Your teen is becoming more independent, but still needs plenty of advice from you. With more money to spend and more opportunities to spend it, your teen can easily get into financial trouble. So before money burns a hole in your child's pocket, teach him or her a few financial lessons. With your help, your teen will soon develop the self-confidence and skills he or she needs to successfully manage money in the real world.

Lesson 1: Handling earnings from a job

Teens often have more expenses than younger children, and your child may be coming to you for money more often. But with you holding the purse strings, your teen may have difficulty making independent financial decisions.

One solution? Encourage your teen to get a part-time job that will enable him or her to earn money for expenses. Here are some things you might want to discuss with your teen when he or she begins working:

·         Agree on what your child's pay should be used for. Now that your teen is working, will he or she need to help out with car insurance or clothing expenses, or do you want your teen to earmark a portion of each paycheck for college?

·         Talk to your teen about taxes. Show your child how FICA taxes and regular income taxes can take a bite out of his or her take-home pay.

·         Introduce your teen to the concept of paying yourself first. Encourage your teen to deposit a portion of every paycheck in a savings account before spending any of it.

A teen who is too young to get a job outside the home can make extra cash by babysitting or doing odd jobs for you, neighbors, or relatives. This money can supplement any allowance you choose to hand out, enabling your young teen to get a taste of financial independence.

Lesson 2: Developing a budget

Developing a written spending plan or budget can help your teen learn to be accountable for his or her finances. Your ultimate goal is to teach your teen how to achieve a balance between money coming in and money going out. To develop a spending plan, have your teen start by listing out all sources of regular income (e.g., an allowance or earnings from a part-time job). Next, have your teen brainstorm a list of regular expenses (don't include anything you normally pay for). Finally, subtract your teen's expenses from his or her income. If the result shows that your teen won't have enough income to meet his or her expenses, you'll need to help your teen come up with a plan for making up the shortfall.

Here are some ways you can help your teen learn about budgeting:

·         Consider giving out a monthly, rather than weekly, allowance. Tell your teen that the money must last for the whole month, and encourage him or her to keep track of what's been spent.

·         Encourage your teen to think spending decisions through rather than buying items right away. Show your teen how comparing prices or waiting for an item to go on sale can save him or her money.

·         Suggest ways your teen can earn more money or cut back on expenses (e.g., rent a DVD to watch with friends rather than go to the movies) to resolve a budget shortfall.

·         Show your teen how to modify a budget by categorizing expenses as needs (expenses that are unavoidable) and wants (expenses that could be cut if necessary).

·         Resist the temptation to bail your teen out. If your teen can depend on you to come up with extra cash, he or she will never learn to manage money wisely. But don't be judgmental--your teen will inevitably make some spending mistakes along the way. Your child should know that he or she can always come to you for information, support, and advice.

Lesson 3: Saving for the future

As a youngster, your child saved up for a short-term goal such as buying a favorite toy. But now that your child is a teen, he or she is ready to focus on saving for larger goals such as a new computer or a car and longer-term goals such as college. Here are some ways you can encourage your teen to save for the future:

·         Have your teen put savings goals in writing to make them more concrete.

·         Encourage your child to set goals that are based on his or her values, not on keeping up with what other teens have or want.

·         Motivate your child by offering to match what he or she saves towards a long-term goal. For instance, for every dollar your child sets aside for college, you might contribute 50 cents or 1 dollar.

·         Consider increasing your teen's allowance if he or she is too young to get a part-time job.

·         Praise your teen for showing responsibility when he or she reaches a financial goal. Teens still look for, and count on, their parent's approval.

·         Open up a savings account for your child if you haven't already done so.

·         Introduce your teen to the basics of investing by opening an investment account for your teen (if your teen is a minor, this will be a custodial account). Look for an account that can be opened with only a low initial contribution at an institution that supplies educational materials introducing teens to basic investment terms and concepts.

Lesson 4: Using credit wisely

You can take some comfort in the fact that credit card companies require an adult to cosign a credit card agreement before they will issue a card to someone under the age of 21 (unless that person can prove that he or she has the financial resources to repay the credit card debt), but you can't ignore the credit card issue altogether. Many teens today use credit cards, and it probably won't be long until your teen asks for one too.

If you decide to cosign a credit card application for your teen, ask the credit card company to assign a low credit limit (e.g., $300). This can help your child learn to manage credit without getting into serious debt.

Here are some things to discuss with your teen before he or she uses a credit card:

·         Set limits on what the card can be used for (e.g., emergencies, clothing).

·         Review the credit card agreement, and make sure your child understands how much interest will accrue on the unpaid balance, what grace period applies, and what fees will be charged.

·         Agree on how the bill will be paid, and what will happen if your child can't pay the bill.

·         Make sure your child understands how long it will take to pay off a credit card balance if he or she only makes minimum payments. You can demonstrate this using an online calculator or by reviewing the estimate provided on each month's credit card statement.

If putting a credit card in your teen's hands is a scary thought, you may want to start off with a prepaid spending card. A prepaid spending card looks like a credit card, but works more like a prepaid phone card. You load the card with the dollar amount you choose and your teen can generally use it anywhere a credit card is accepted. Your teen's purchases are deducted from the card balance, and you can transfer more money to the card if necessary. Although there may be some fees associated with the card, no interest or debt accrues.

One thing you may especially like about prepaid spending cards is that they allow your teen to gradually get the hang of using credit responsibly. Because you can access account information online or over the phone, you can monitor your teen's spending habits, then sit down and talk with your teen about money management issues.

Jared Daniel may be reached at www.wealthguardiangroup.com or our Facebook page.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Understanding Your Credit Report

Understanding Your Credit Report
Presented by Jared Daniel of Wealth Guardian Group

Your credit report contains information about your past and present credit transactions. It's used primarily by potential lenders to evaluate your creditworthiness. So if you're about to apply for credit, especially for something significant like a mortgage, you'll want to get and review a copy of your credit report.

You can see what they see: getting a copy of your credit report

Every consumer is entitled to a free credit report every 12 months from each of the three credit bureaus: Experian,TransUnion, and Equifax. Besides the annual report, you are also entitled to a free report under the following circumstances:

·         A company has taken adverse action against you, such as denying you credit, insurance, or employment (you must request a copy within 60 days of the adverse action)

·         You're unemployed and plan to look for a job within the next 60 days

·         You're on welfare

·         Your report is inaccurate because of fraud, including identity theft

Visit www.annualcreditreport.com for more information.

What's it all about?

Your credit report usually starts off with your personal information: your name, address, Social Security number, telephone number, employer, past address and past employer, and (if applicable) your spouse's name. Check this information for accuracy; if any of it is wrong, correct it with the credit bureau that issued the report.

The bulk of the information in your credit report is account information. For each creditor, you'll find the lender's name, account number, and type of account; the opening date, high balance, present balance, loan terms, and your payment history; and the current status of the account. You'll also see status indicators that provide information about your payment performance over the past 12 to 24 months. They'll show whether the account is or has been past due, and if past due, they'll show how far (e.g., 30 days, 60 days). They'll also indicate charge-offs or repossessions. Because credit bureaus collect information from courthouse and registry records, you may find notations of bankruptcies, tax liens, judgments, or even criminal proceedings in your file.

At the end of your credit report, you'll find notations on who has requested your information in the past 24 months. When you apply for credit, the lender requests your credit report--that will show up as an inquiry. Other inquiries indicate that your name has been included in a creditor's prescreen program. If so, you'll probably get a credit card offer in the mail.

You may be surprised at how many accounts show up on your report. If you find inactive accounts (e.g., a retailer you no longer do business with), you should contact the credit card company, close the account, and ask for a letter confirming that the account was closed at the customer's request.

Basing the future on the past

What all this information means in terms of your creditworthiness depends on the lender's criteria. Generally speaking, a lender feels safer assuming that you can be trusted to make timely monthly payments against your debts in the future if you have always done so in the past. A history of late payments or bad debts will hurt you. Based on your track record, a new lender is likely to turn you down for credit or extend it to you at a higher interest rate if your credit report indicates that you are a poor risk.

Too many inquiries on your credit report in a short time can also make lenders suspicious. Loan officers may assume that you're being turned down repeatedly for credit or that you're up to something--going on a shopping spree, financing a bad habit, or borrowing to pay off other debts. Either way, the lenders may not want to take a chance on you.

Your credit report may also indicate that you have good credit, but not enough of it. For instance, if you're applying for a car loan, the lender may be reviewing your credit report to determine if you're capable of handling monthly payments over a period of years. The lender sees that you've always paid your charge cards on time, but your total balances due and monthly payments have been small. Because the lender can't predict from this information whether you'll be able to handle a regular car payment, your loan is approved only on the condition that you supply an acceptable cosigner.

Correcting errors on your credit report

Under federal and some state laws, you have a right to dispute incorrect or misleading information on your credit report. Typically, you'll receive with your report either a form to complete or a telephone number to call about the information that you wish to dispute. Once the credit bureau receives your request, it generally has 30 days to complete a reinvestigation by checking any item you dispute with the party that submitted it. One of four things should then happen:

·         The credit bureau reinvestigates, the party submitting the information agrees it's incorrect, and the information is corrected

·         The credit bureau reinvestigates, the party submitting the information maintains it's correct, and your credit report goes unchanged

·         The credit bureau doesn't reinvestigate, and so the disputed information must be removed from your report

·         The credit bureau reinvestigates, but the party submitting the information doesn't respond, and so the disputed information must be removed from your report

You should be provided with a report on the reinvestigation within five days of its conclusion. If the reinvestigation resulted in a change to your credit report, you should also get an updated copy.

You have the right to add to your credit report a statement of 100 words or less that explains your side of the story with respect to any disputed but unchanged information. A summary of your statement will go out with every copy of your credit report in the future, and you can have the statement sent to anyone who has gotten your credit report in the past six months. Unfortunately, though, this may not help you much--creditors often ignore or dismiss these statements.

Jared Daniel may be reached at www.wealthguardiangroup.com or our Facebook page.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Evaluating Rebates, Incentives, and Low-Cost Financing

Evaluating Rebates, Incentives, and Low-Cost Financing
Presented by Jared Daniel of Wealth Guardian Group

Why are rebates and incentives offered on certain models?

Rebates and incentives are generally either cash awards or price reductions offered to increase car sales during slow periods. Manufacturers' rebates are typically offered directly to the consumer, while dealer incentives are awards paid from the manufacturer to the dealer for selling the car. Although these incentives are intended for the dealer, you may be able to get a lower price on a car if there's a dealer incentive involved. Rebates and incentives are often available on less popular models, overstocks, and year-end closeouts. Most rebate and incentive programs expire after about three months, although some are extended beyond that time.

How do you find out about rebates and incentives on the cars you're considering?

Manufacturers' rebates are generally well publicized; the Sunday paper is usually full of these offers. Information on dealer incentives is a bit harder to find, but several publications and Internet tools are available to help. Among these are Car Deals and Automotive News. Each issue of Car Deals contains a price break list, which is updated every two weeks. Automotive News is a weekly publication that also contains continuously updated information on rebates and dealer incentives.

Do you have to pay taxes on manufacturers' rebates?

According to IRS guidelines, a manufacturer's rebate is considered a tax-free reduction in the purchase price of the car. Thus, rebates paid to buy or lease a new car aren't included in your gross income.

However, a manufacturer's rebate is generally included in the sale price of the car for state sales tax purposes, if applicable.

Is it better to take a rebate or low-cost financing?

You may be given a choice between a rebate and special low-cost financing. In order to determine which is the better deal, you must calculate whether you will save more money by taking the rebate in conjunction with a market-rate loan or by accepting the special dealer financing. Here is an example of this calculation for a car priced at $20,000:

Option:	Choose low-cost financing	Choose rebate
Amount financed	$20,000	$18,000 ($20,000 - $2,000 rebate)
Interest rate	4%	8%
Loan term	48 months	48 months
Monthly payment	$451	$439
Total out-of-pocket cost	$21,648	$21,072

In this example, choosing to take the rebate would result in a lower total out-of-pocket cost than choosing the low-cost financing.

Jared Daniel may be reached at www.wealthguardiangroup.com or our Facebook page.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Going Back to School as an Adult

Going Back to School as an Adult
Presented by Jared Daniel of Wealth Guardian Group

You've decided that college or graduate school is your ticket to a better career or the path to advancement in your current job. Or maybe you just want to take a few classes to upgrade your skills. Either way, returning to school as an adult has its challenges. You've probably heard the expression "time is money." Well, you'll need plenty of both.

Where will you find the money?

Returning to school often involves financial sacrifices, but there are ways to lessen the bite. Personal savings, financial aid, private loans, and employer-funded tuition may be available to you, and education tax credits and deductions can help you out at tax time.

The first thing to do is calculate how much your education will cost. Make sure to add in collateral expenses that won't show up on the college bill (e.g., day-care and commuting expenses). And if you're giving up your job, factor in the time you'll be without a paycheck, and the time it might take you to find a job in your new profession. Then, if you can't afford to pay your education expenses out-of-pocket, go look for the money.

Ask your employer

Unless you're leaving your job to attend school, ask your employer about tuition reimbursement. There may be strings attached, though (e.g., you may need to certify that you're not retraining for a new career, or promise to work at the company for a number of years after you graduate). The good news is that up to $5,250 of employer-provided educational assistance is tax free, even if it's for classes that are unrelated to your current position. For more information, see IRS Publication 508, Tax Benefits for Work-Related Education.

Learn about financial aid--your first academic experience

The maze of student financial aid programs can seem like another obstacle in your quest to return to school, but the process is understandable if you do some research and ask questions. Start at your school's financial aid office.

To qualify for federal aid, you'll need to submit the federal government's application, the FAFSA, as soon as possible after January 1st in the year you plan to start school. The FAFSA calculates your expected family contribution (EFC), and lets you know if you're eligible for financial aid. You'll be classified as an independent student, which means that if you're married, both your income and assets and your spouse's will count in this calculation.

There are different types of federal financial aid:

·         Loans--The three main federal student loans are the Stafford Loan, the Perkins Loan, and the PLUS Loan. Stafford Loans can be either subsidized or unsubsidized (for subsidized loans, the federal government pays the interest that accrues during school, the grace period after graduation, and loan deferment periods). Undergraduate students are eligible for both types of Stafford Loans and the Perkins Loan. Graduate students are eligible for the unsubsidized Stafford Loan, the Perkins Loan, and the PLUS Loan. Both Stafford and Perkins Loans have annual and cumulative borrowing limits. The drawback of student loans is that you'll need to repay them at a later date. With the grad PLUS Loan, graduate and professional students are eligible to borrow the full cost of their education (minus any financial aid received).

·         Grants--The two main federal grants are the Pell Grant and the Supplemental Educational Opportunity Grant (SEOG). They're available only to undergraduate students.

·         Work-study--The federal work-study program subsidizes jobs for both undergraduate and graduate students.

·         Military aid--The federal government offers educational benefits for veterans and their dependents. Contact your local veteran's office or your school's financial aid office.

If you don't qualify for federal financial aid (and you should always apply, even if you don't think you'll qualify), you may still be eligible for institutional aid from your school--specifically grants, scholarships, and work-study programs. Inquire at the financial aid office and do your best to meet all application deadlines, because institutional aid is typically administered on a first-come, first-served basis. Finally, don't forget to search for outside scholarships. Thousands of private organizations offer them, and some are based solely on achievement. An easy way to search for scholarships is on the Internet, but don't pay anyone to do it for you--searching is free.

Keep in mind that the federal government and colleges base your aid eligibility on last year's tax records. If you plan to reduce your hours or stop working to attend school, your income will obviously be less when school starts. Make sure to bring this to the attention of your school's financial aid director, who's authorized to take special circumstances into account, and where appropriate, rebalance aid awards.

Take a trip to the bank

If you don't qualify for financial aid or you need to borrow more than the federal student loan limits, private loans from commercial lenders are an option. However, the rates on private loans are typically one or two percentage points higher than on federal student loans.

Use personal assets

Do you have savings that could cover a portion of your expenses? Or maybe you could sell some assets. Just remember that tapping your retirement funds should be a last resort--money you withdraw will reduce your nest egg and miss out on the potential for tax-deferred growth. And, depending on the type of retirement account you tap, you may also face tax consequences and penalties for withdrawing money before age 59½.

Investigate education tax credits and deductions

In addition to the tax break noted above for employer-provided educational assistance, there are several other tax incentives that can help ease the financial burden of returning to school:

·         American Opportunity credit--This credit is worth up to $2,500 in 2014 for tuition and related expenses for the first four years of undergraduate education, provided you're enrolled at least half-time. To take the full credit, your modified adjusted gross income (MAGI) must be below $80,000 (single) or $160,000 (married filing jointly). A partial credit is available to single filers with a MAGI between $80,000 and $90,000 and joint filers with a MAGI between $160,000 and $180,000.

·         Lifetime Learning credit--This credit is worth up to $2,000 in 2014 to cover the tuition and fees for higher education courses taken throughout your lifetime, whether to acquire or improve job skills. To take the full credit, your MAGI must be below $54,000 (single) or $108,000 (married filing jointly). A partial credit is available to single filers with a MAGI between $54,000 and $64,000 and joint filers with a MAGI between $108,000 and $128,000. Unfortunately, the American Opportunity credit and Lifetime Learning credit can't be claimed in the same year for the same student--it's one or the other.

·         Student loan interest deduction--If you graduate with student loans, you may be able to deduct up to $2,500 of the interest you pay on student loans each year. To take the full deduction in 2014, your modified adjusted gross income (MAGI) must be below $65,000 (single) or $130,000 (married filing jointly). A partial deduction is available to single filers with a MAGI between $65,000 and $80,000 and joint filers with a MAGI between $130,000 and $160,000.

For assistance or more information, consult a tax professional or IRS Publication 970, Tax Benefits for Education.

Finally, how will you balance school, career, and life?

You've found the money--now you need to find the time. Balancing school demands with the rest of your adult responsibilities will be challenging, though not impossible. Here are some tips:

·         Map out your life goals (again) to confirm that returning to school will help you achieve them.

·         Establish a family/friend support network before classes start, and make sure your family supports your decision to return to school.

·         If you have older children, explain your new routine and how they can help out. If you have younger children, arrange day care if necessary--check to see if your school offers it.

·         Look for programs designed for adult students (e.g., support groups, tutoring programs, specially trained academic advisors and counselors).

·         Consider going to school part-time, taking night classes, or signing up for online classes. Each option can save you time and money.

·         Always keep in mind the financial and personal rewards that will come after your education is complete.

Jared Daniel may be reached at www.wealthguardiangroup.com or our Facebook page.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.