Teach Teenagers Good Personal Finance Habits

Getting Saving Habits Since Teenagers


Upon graduating high school and leaving home, many young adults acquire excessive debts and poor money management skills. In many cases, they weren't taught how to budget and use credit responsibly. Early mistakes make it hard for young adults to buy a home or car. Thus, it is important for parents to teach them good personal finance habits.

1.
Give them an allowance. Children and teenagers constantly beg for money. Rather than oblige every requests, give your child a weekly allowance. Allowances are typically based on completion of household chores and age. Once the child or teenager exceeds their weekly or bi-weekly allowance, they will have to wait until their next payday. This will prepare children for the "real world."

2.
Get a part-time job. Some teenagers do not realize how hard it is to earn a buck. Once the child hits 16 or 17-years-old, require them to get a part-time job. The money earned can be used to pay for their clothes, shoes, and entertainment. After working hard for little pay, they'll be more inclined to appreciate the real value of a dollar.

3.
Teach them how to budget. Once your child finds a part-time job, show them how to budget their money. Do they have a car payment or transportation costs? Teach them how to create a weekly or monthly budget. Failure to budget properly can result in spending too much money, in which there is little leftover for bills.

4.
Give them a credit card. Some young adults get their first credit card in college. In turn, they use credit without considering the consequences. Before your child leaves home, allow them to get a low-limit credit card - perhaps $200. Monitor the credit card, and make sure that your child pays the monthly bill and spends wisely. This way, once the child leaves home and acquires his or her own credit, they are less likely to abuse credit.

5.
Show them your monthly bills. Without divulging too much of your personal finances, show your children the monthly household expenses such as the mortgage, power bill, gas bill, car payments, automobile insurance and health insurance. Some teenagers live in a fantasy land, and they do not realize the costs of running a household. As a result, once these young adults move into their own apartment, they suffer from reality shock.

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Malaysia Interest Rate

Zeti says Malaysia's interest rate at appropriate level


The Star, Oct 19,2009

KUALA LUMPUR: Malaysia's interest rates are supportive of the country's economic recovery and remain at an appropriate level, Bank Negara Malaysia Governor, Tan Sri Dr Zeti Akhtar Aziz said on Monday.

She said any decision on the rates would only be announced after another Monetary Policy Meeting later this month.

"We see the interest rates now as supporting borrowings and it has not been a constraint to it. The factor affecting borrowing is actually the demand conditions, both external and domestic," she explained.

She was speaking to reporters on the sidelines of the ADB-BNM-EC Joint Conference themed, "Beyond The Global Crisis: A New Asian Growth Model?", here.

Zeti also said that the private sector would be the main driver of growth in the country once the government stimulus is gradually withdrawn.

Asked if the ringgit should not be allowed to appreciate too much as economic growth could be affected, she said the current level of the currency actually reflected the country's economic fundamentals.

"I want to emphasise that our export sector has been resilient despite the appreciation of the ringgit," she said.

She said the ringgit's exchange rate had previously appreciated by much more than the current level, touching even 3.13 in 2008.

The ringgit depreciated against the US dollar at its opening Monday morning to 3.3850/3890 from 3.3690/3730 on Friday. - BERNAMA

Protect Your Identity

As the giving season approaches, you don’t want to give identity thieves your information. Even if some obese chuckler in a red suit knows if you’ve been bad or good, only those you’ve acknowledged should know how you’ve been spending your money.

Every year an estimated 9 million Americans lose out to identity theft, according to the Federal Trade Commission. Experts say identity theft increases during the winter holiday season, which makes sense: all those credit card swipes and gift cards make plenty of noise to mask mischief.

So while you’re bustling around in holiday hoopla, slow down enough to watch your data. You’ll be gladder in the new year if you follow these tips.

Protect yourself in cyberspace. If you don’t recognize the sender of a holiday eCard, if some stranger wants you to download an “executable program” or if you get an email without your address, delete it. Fred Touchette, senior security analyst with AppRiver, also warns against following links that are provided for you in an email, especially if you are unsure of the sender. A ffake eBay or PayPal log-in page can usually indicate a rat. If you’re not sure of a link’s authenticity, just paste the URL into your browser.

Along similar lines, don’t debit your online purchases. Debit cards can remove funds immediately from your bank account, letting thieves bypass the check a credit card company makes when an unusual purchase appears. You might even dedicate one credit card for online shopping only, so you can easily scan a single statement for fraudulent purchases.

When shopping, look for a “lock” icon in your browser, and log off completely when finished with online transactions. Closing or minimizing your browser or typing a new Web address may not be enough to prevent others from accessing your online transaction. Instead, click “log off” to terminate your online session. In addition, don’t allow your browser to “remember” your username and password information, says Joe Reynolds, Identity Fraud Product Manager with the massive insurance concern Travelers.

When shopping traditionally, adds Reynolds, think about how much information a thief would obtain if your wallet or purse was stolen. Avoid carrying Social Security cards and passports and credit cards you don’t plan to use.

Keep your secrets secret (always bear in mind)

Making a list? Checking it twice? Here are a few items to add. Keep all your credit card and bank information stored in a secure place, along with telephone number or email address for the customer service and fraud departments, so that you can use them immediately if needed. (Of course, my colleague Fred Bernstein will tell you that customer service can sometimes cost you some peace of mind.)

Create unique passwords whenever possible. Use an alphanumeric system (a combination of numbers and letters) to ensure your password is impossible to guess and difficult to crack, suggests Charley Moore, CEO of RocketLawyer.com. Do not give out personal information over the telephone, by mail or the Internet unless you are dealing with someone you have an established relationship with, advises financial advisor Tony Keena.

And know that identity thieves see no shame in rummaging through the garbage. “Be careful what you throw away,” says Mark LaPenta, chief technology officer at MetLife Bank. Shred all documents and mail that contains personal information before tossing.

Security software can help, as can common sense. There’s no need to be paranoid, but plenty of security in being proactive. Says LaPenta,”It can take months - or possibly years to get your life back in order, and clear your name.”

Now do your patriotic duty and start shopping!

What is personal finance?

Here's my view about the fundamentals of Personal Finance

Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might include checking and saving accounts, credit cards and consumer loans, investments in the stock markets, retirements plan, social security benefits, insurance policies, and income tax management.

Personal financial planning

A key component of personal finance is financial planning, a dynamic process that requires regular monitoring and reevaluation. In general, it has five steps:

1. Assessment: One's personal financial situation can be assessed by compiling simplified versions of financial balance sheets and income statements. A personal balance sheet lists the values of personal assets (e.g., car, house, clothes, stocks, bank account), along with personal liabilities (e.g., credit card debt, bank loan, mortgage). A personal income statement lists your personal income and expenses.
2. Setting goals: Two examples are "retire at age 65 with a personal net worth of $1,000,000" and "buy a house in 3 years paying a monthly mortgage servicing cost that is no more than 25% of my gross income". It is not uncommon to have several goals, some short term and some long term. Setting financial goals helps direct financial planning.
3. Creating a plan: The financial plan details how to accomplish your goals. It could include, for example, reducing unnecessary expenses, increasing one's employment income, or investing in the stock market.
4. Execution: Execution of one's personal financial plan often requires discipline and perseverance. Many people obtain assistance from professionals such as accountants, financial planners, investment advisers, and lawyers.
5. Monitoring and reassessment: As time passes, one's personal financial plan must be monitored for possible adjustments or reassessments.

Typical goals most adults have are paying off credit card and or student loan debt, retirement, college costs for children, medical expenses, and estate planning.

The six key areas of personal financial planning, as suggested by the Financial Planning Standards Board, are:

1 - Financial Position: this area is concerned with understanding the personal resources available by examining net worth and household cash flow. Net worth is a person's balance sheet, calculated by adding up all assets under that person's control, minus all liabilities of the household, at one point in time. Household cash flow totals up all the expected sources of income within a year, minus all expected expenses within the same year. From this analysis, the financial planner can determine to what degree and in what time the personal goals can be accomplished.

2 - Adequate Protection: the analysis of how to protect a household from unforeseen risks. These risks can be divided into liability, property, death, disability, health and long term care. Some of these risks may be self-insurable, while most will require the purchase of an insurance contract. Determining how much insurance to get, at the most cost effective terms requires knowledge of the market for personal insurance. Business owners, professionals, athletes and entertainers require specialized insurance professionals to adequately protect themselves. Since insurance also enjoys some tax benefits, utilizing insurance investment products may be a critical piece of the overall investment planning.

3 - Tax Planning: typically the income tax is the single largest expense in a household. Managing taxes is not a question of if you will pay taxes, but when and how much. Government gives many incentives in the form of tax deductions and credits, which can be used to reduce the lifetime tax burden. Most modern governments use a progressive tax. Typically, as your income grows, you pay a higher marginal rate of tax. Understanding how to take advantage of the myriad tax breaks when planning your personal finances can make a significant impact upon your success.

4 - Investment and Accumulation Goals: planning how to accumulate enough money to acquire items with a high price is what most people consider to be financial planning. The major reasons to accumulate assets is for the following: a - purchasing a house b - purchasing a car c - starting a business d - paying for education expenses e - accumulating money for retirement, to generate a stream of income to cover lifestyle expenses.

Achieving these goals requires projecting what they will cost, and when you need to withdraw funds. A major risk to the household in achieving their accumulation goal is the rate of price increases over time, or inflation. Using net present value calculators, the financial planner will suggest a combination of asset earmarking and regular savings to be invested in a variety of investments. In order to overcome the rate of inflation, the investment portfolio has to get a higher rate of return, which typically will subject the portfolio to a number of risks. Managing these portfolio risks is most often accomplished using asset allocation, which seeks to diversify investment risk and opportunity. This asset allocation will prescribe a percentage allocation to be invested in stocks, bonds, cash and alternative investments. The allocation should also take into consideration the personal risk profile of every investor, since risk attitudes vary from person to person.

5 - Retirement Planning: retirement planning is the process of understanding how much it costs to live at retirement, and coming up with a plan to distribute assets to meet any income shortfall.

6 - Estate Planning: involves planning for the disposition of your asset when you die. Typically, there is a tax due to the state or federal government at your death. Avoiding these taxes means that more of your assets will be distributed to your heirs. You can leave your assets to family, friends or charitable groups.