Monthly Archives: October 2014

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Question of the Day: What Is The Cost Of Having Bad Credit?

Yesterday, I tackled the issue of how long negative items remain on your credit report.  Today, courtesy of Credit.com, we have an answer to the question of how much bad credit will cost you over a lifetime.  We know that a poor credit history (which translates into a low credit score) will make it difficult to borrow as many lenders will deny applicants if they don’t meet their standards.  For those with poor credit, who are able to borrow, there is a premium that they pay which is a higher interest rate and also perhaps higher fees.

So, over a lifetime, how much  more will someone with a lower credit score pay….drumroll please?

About $160,000.  So not paying that traffic ticket or not paying your bills on time has a real consequence!

“According to Credit.com, somebody with top-notch credit would pay $209,590 in interest, while people with bad credit would be on the hook for $369,054, on average.”

By |October 31st, 2014|Credit Scores, Personal Finance, Question of the Day|

What Are Your Lemonade Stand Lessons?

This BBC article got me thinking about the important lessons we learn about money and work before we ever get to high school.  I found myself nodding my head in agreement over and over again as I worked my way though the article and reflected on my own childhood experiences as a dog-walker, paper boy and snow shoveler.  I thought it would be interesting to ask students to reflect on their own experiences.

Here were three principles that I learned early and are incredibly important to develop at a young age:

  • Create a link between work and money:

Peggy Rosser’s granddaughter, Hannah, has been receiving dimes for housework since she was three.

“Hannah learned that work results in money, which results in the ability to purchase something,” said Rosser, who is an adviser at the Angelo State University Small Business Development Center in San Angelo Texas in the US.

After Hannah, now age 5, fed 15 dimes into a soda machine to buy a cold drink, Hannah and her mother discussed another point — instant gratification versus the importance of saving. Even at young ages, children can understand these ideas, Rosser said.

  • Have a plan of what to do once
By |October 30th, 2014|Budgeting, Lesson Idea, Savings|

What Advice Does the NBA Provide To Its Well-Paid Rookies?

I thought this article might appeal to those students who idolize the NBA and their stars.  This interview with the NBA’s SVP of Player Development provides a behind the scenes look at the financial planning advice that the NBA provides their rookies.  Ask your students what lessons they can take away from this interview (other than NBA players are very well paid!):

Here are a few nuggets:

  • Importance of budgeting:  “We know it’s critical to have a budget so one of the essential tips [we give] when the players join the league is to get a sense of their understanding of financial issues and how to manage money. What we find is that players just haven’t taken the time to develop a budget, know how to follow a budget and so we climb into that very, very seriously.”

  • Use medium and long-term goals as motivator:  “You can enjoy your wealth, but we’re saying spend in moderation. Be clear on what your future goals and outlook is. Where do you want to be 10 years from now? As you come into
By |October 30th, 2014|Budgeting, Current Events, Personal Finance, Savings|

Question of the Day: How Long Do Negative Items Stay on Your Credit Report?

Credit reports can be a challenging concept to present to high school students since it may not seem relevant to many of them who have thin or non-existent credit files today.  I like the idea of the “permanent record” that Mrs. McLaughlin would scare us about in 2nd grade.  Whenever we misbehaved (OK, I did get in a little trouble), she would warn us that our poor conduct would be “going on our permanent record.”  It took us until about 4th or 5th grade to realize that future employers or colleges probably wouldn’t dig into our elementary school conduct grades and we all breathed a deep sigh of relief.

Credit reports come pretty close to “permanent records” and have extremely long memories so the intent of this question is to prime students to the concept that mistakes they make with their money now (not paying parking tickets, paying bills late or having a late bill sent to collections) can have a long-term impact.

So, back to the original question:  How long do negative items stay on your credit report?   

From John Ulzheimer of Credit Sesame:

  • Up to 7 years: “The vast majority of derogatory information can remain on your credit files
By |October 30th, 2014|Credit Scores, Question of the Day, Research|

NGPF Featured Lesson: Your Health: Insurance & Other Costs

From Jessica Endlich Winkler:

We did it — we undertook the task of designing a budgeting lesson around the costs of maintaining your health. In some ways, it’s a pretty straightforward — will students choose to join a gym or will they find a way to workout for free? But you can’t do a health budget without talking insurance, and the Affordable Care Act is still so new, fluid, and misunderstood that finding good web resources for this lesson was a real challenge. Here are some of my favorites from 6.5 Your Health: Insurance & Other Costs

  • Discussion Prompts – We start every lesson with discussion prompts, and this one poses the quandary of which is more important: buy health insurance or save for retirement?

  • Rutgers University connects health and wealth — Students take an online quiz assessing their physical and financial health and then read about the very real costs of an unhealthy lifestyle. Rutgers raises interesting points from direct connections (smoking is risky and expensive) to the less obvious (plus sized clothing is frequently more expensive) to perhaps unexpected correlations (statistically, thinner women earn more than their heavier counterparts).
By |October 29th, 2014|Budgeting, Current Events, Insurance, Lesson Idea|

Question of the Day: What Financial Fears Do Adults Have?

This can be an instructive discussion as it helps students think about their futures and behaviors/habits that they can develop today to lessen the probability that they will have the same fears as adults.

From National Foundation for Credit Counseling eighth-annual Financial Literacy Survey; question asked “Which of the following areas of personal finance currently worries you most?”:  

#1 (a tie at 16%):  Not enough rainy day savings for an emergency AND Retiring without enough money set aside

#2:  Losing my job (7%)

#3:  Not being able to find a good-paying job (6%)

#4:  Not being able to pay my credit card debt (4%)

#5:  Not being able to repay my student debt (2%)

————–

Idea:  Ask students to develop strategies they can utilize to avoid having these worries as adults.

By |October 29th, 2014|Credit Cards, Financial Literacy, Question of the Day, Research, Savings|

Chart of the Week: What Happens When the Federal Reserve Keeps Interest Rates Low?

This chart goes well with an earlier post about how interest rates impact the economy.  The Federal Reserve announced today that they will be ending their Quantitative Easing program(technical term for the Federal Reserve keeping interest rates low by purchasing bonds) after almost five years of intervention.  One major beneficiary of this policy:  the stock market!

A few ideas to engage your students:  

  • Have them calculate the increase in the S&P500 (see chart below) since QE began in late 2009 by estimating start and end points on the graph.
  • Have them discuss why they think the stock market benefited from this low interest rate policy.  See how many of these they come up with:
    • Low interest rates on savings accounts cause investors to seek higher returns in alternative places, such as the stock market.
    • Low interest rates make it easier for companies to borrow money to expand their businesses (new plants, etc.).  Many companies used these lower rates to buy back their own stock too.
    • Low interest rates boost economic activity (see earlier post) which often translates into higher sales and earnings for companies which boosts stock prices.
    • Knowing that the Federal Reserve will intervene whenever economic growth appears to be slowing (as they

Checking Account Trends

Here’s what new in the last week:

  • Bank accounts tend to be sticky.  According to JD Power and Associates only 5% of customers changed banks in the last 12 months (Money)
  • Money’s 2014 Best Banks survey finds midsize and online banks offer most compelling checking products (Money)
    • Their Bank Matchmaker Tool provides useful way to engage students and have them think critically about the factors that matter in selecting a bank
  • The Consumer Financial Protection Board concerned about banks/credit unions blacklisting consumers and denying them access to checking accounts (Lexology):

Checking accounts are one of the most widely used financial products, with 200 million Americans receiving their wages and paying their bills using their accounts. Consumers who open a new account are screened for various risks, Cordray explained, such as fraudulent or illegal conduct (such as money laundering) as well as credit risks, typically used to gauge how likely a consumer will incur overdrafts and pay them back.

Credit reporting agencies and specialty consumer reporting agencies – with data on a consumer’s history with regard to medical payments, tenancy, employment, or insurance claims – can “greatly affect how consumers are treated,” Cordray said, causing the CFPB concern in three

By |October 29th, 2014|Checking Accounts, Current Events, Debit Cards, Personal Finance|