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Tuesday, October 9, 2012

Grocery Shopping: Short & Organized = Sanity & Savings

Who doesn't want to stay sane AND save money while shopping?
Photo credit: ACEI Ch
With toddlers in tow, grocery shopping can be a challenge, if not a nightmare. While they love riding in those cars attached to the grocery cart, I never know when the window will close. Will they last all the way to the dairy aisle? Or will the meltdown begin by the bananas?

What I didn't realize, is what I learned from all this. My grocery shopping trips have become very efficient. First, I need my list to be in order of the store so I am not racing all over the place. Second, if I have coupons that I  may need to refer to while shopping, those must also be in order of the store.  Third,  I tend to only buy what is on the list, since that is all I have time to grab (and sometimes not even that).

When I do have the chance to go by myself, not surprisingly, I tend to spend more time in the store... and buy more as well. While I may have more time to price compare, I also have more time to take advantage of the all-too-frequent impulse buy.

While going to the grocery store with my kids is not my favorite thing, I am actually saving money because I have no other choice but to be quick and organized.

Simple but True: Short & Cheap

1. Make a list as you run out of things- keep it in your kitchen
2. Make a menu- add what you need to your list (you can base your menu on your coupons or whats on sale**)
3. Order that list based on your store. For example, produce, cans, breakfast, snacks, frozen, dairy, bakery- or however your store is laid out.
4. If you are a coupon clipper, keep them in order so you can grab and go while making your list. Then order your coupons based on your list.
5. Stick to your list (unless its truly something you forgot) and get out of the store promptly!

Oh! And don't go when you (or your kids) are hungry!

Don't get the paper? Online coupons are awesome: Coupons.com; Smartsource.com 

 **Check out FoodOnTheTable.com for menus based on what's on sale at the grocery stores you frequent. They give you recipes to choose from based on your preferences and then you can print out a grocery list as well!

Wednesday, September 12, 2012

High Interest Checking Accounts

Many financial institutions advertise interest bearing checking accounts (yippee!), but wait... they are as widespread on the interest spectrum as there are theories on how to raise your kids!

According to Bankrate,com, as of May 2012, high-yield checking accounts averaged over 2% while interest on traditional interest-bearing checking accounts was a whopping 0.06%. So you could be making 33 times more money if you just do your research (or read this!).

So of course you want the high-yield account... what's the catch? You will likely have to meet certain monthly requirements, and of course, you have to move your checking account (which can be a hassle with all the automatic bill payments these days). Read the fine print for the reqs before you sign up to make sure you can meet them (i.e. direct deposit, certain number of debit transactions, minimum balance etc.)

A great place to start:
  • Check out the results of Bankrate.com's survey on interest bearing checking accounts for both banks and credit unions.
  • Play around on DepositAccount.com's interest rate finder for checking accounts (both online/ national and those in your area). While Bankrate is very helpful, DepositAccount.com is a bit less biased by advertisers.

Friday, August 24, 2012

Islamic Banking and Saving for College

Graphic from thomaswhite.com
 There are special requirements in Islamic Law when it comes to finance. I find it very intriguing. Maybe our country would not have gotten into such a financial mess if we took advice from our ancestors and global neighbors!
 I met a woman this weekend who would like to start saving for college for her 1 year old. The problem is, she cannot have an account that accrues interest because of her religion, Islam. We were talking about two different 529 plans (a prepaid trust and a college investment plan). She was asking if either of these accounts accrue interest, because if they did, she could not take advantage of them.

To take a step back, a lot of folks intertwine the meaning of income (interest) that you earn on a savings account at your local bank/ credit union and income (interest) that you earn on an investment. The primary difference is the risk you are taking and the potential reward/ loss that you may receive.

The income that you earn on your savings account is determined by a set rate and is insured by either the FDIC (banks) or NCUA (credit unions). The income you earn on an investment is determined by how the company's stock or your portfolio fares in the market. It is not insured, so you can potentially lose your investment, however the reward can also be significantly higher.

So I had to determine if this woman was talking about any form of interest (including investments) or if it was just tied to one or the other. This led me to do some research on the topic of the Islamic view of money and saving to determine specifically if this woman can use a 529 plan to save for her child's education.

What I found:
First of all, Sharia is the moral code/ religious law of Islam; Islamic banking adheres to this code. Sharia prohibits the payment or acceptance of interest and/ or fees (known as riba) for monetary loans. The reasoning behind it, is that money is merely a medium of exchange, has no value in and of itself, and is purely a way to define a common value between things; therefore, 'money' should not be used to make more money on itself through interest (whether in a bank account, or lent to someone).

One can invest in a business or property however, as long as the business/ real estate venture does not provide products or services that go against Sharia.
(http://www.islamic-banking.com/prohibition_of_interest.aspx)

So, can you save for your kid's college education in a 529 plan if you are Islamic? 
Yes. However, since a person is not allowed to invest in businesses that go against Sharia, this may be a difficult thing to successfully accomplish. Technically, a person could have a prepaid trust or investment plan (as neither are providing mere interest on money) if they make sure that each investment in the portfolio complies with the Islamic law. This is one of the few if only options this person would have; they would not be able to save money in a Coverdell account or any other account tied to a traditional banking institution since that would be earning money, on just.. well, money.

If anyone runs across this post and has more information, please let us know!


An interesting find:
It appears as though the nation of Islam are not the only ones who feel this way (at least historically):

  • “Very much disliked also is the practice of charging interest: and the dislike is fully justified for interest is a yield arising out of money itself, not a product of that for which money was provided. Money was intended to be a means of exchange; interest represents an increase in the money itself. Hence of all ways of getting wealth, this is the most contrary to nature." Aristotle

  • “Do not charge your brother interest, whether on money or food or anything else that may earn interest.” (Deuteronomy 23:19)
  • “If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest.” The Holy Bible (American Standard Bible)
  • [Jesus said], “If you have money, do not lend it at interest, but give [it] to one from whom you will not get it back.” Gospel St Thomas, V95

Monday, June 4, 2012

Tax refunds: when bigger might be better

Theoretically, you want to minimize your tax refund by claiming the correct withholding on your W4 so you can invest that money throughout the year instead of letting Uncle Sam keep it interest free. However, there are times when it makes sense to keep getting that large refund and not claim all your allowances to help reach your financial goals.

First things first: I am a huge proponent of claiming the correct withholding on your W4 so that you can make your money work for you instead of getting an interest free refund every year.

But I also want to get real. I was reading an article on Identity Theft where thieves were filing tax returns and then getting the refunds. Many of the victims are people that count on their tax refund every year. While the ID theft story was interesting (and frightening), the realization for me was that these folks are getting thousands of dollars back and this is truly a great saving vehicle for (some of) them.

For those of us that claim the correct allowance on our tax withholding and are diligent about saving that extra money, that's great, and the financially proper thing to do. On the other hand, there are folks that are not claiming the correct allowance, getting huge refunds, and then blowing it at the casino or on something that they can't afford. Then, there are the people that just can't seem to save monthly for whatever reason, so they purposely claim a low allowance to ensure the largest refund possible, and they use that as a savings vehicle. While it doesn't make as much financial sense to save your money this way. its the only way some people will save at all. So while they may not be receiving interest throughout the year, once they actually get the money, they might throw it in a CD or pay down their mortgage which is financially smart.

The Takeaway
You will get the most bang for your buck if you claim the correct withholding on your W4 (see this post for more info) and then invest your extra cash monthly in some sort of savings vehicle. If you blow your refund habitually- minimize the refund; your personality style would be better suited to getting more in each paycheck and setting up a automatic savings plan. However, if you know yourself and your habits, and you know that you just can't seem to stick with a consistent savings plan month to month... by all means, wait for that large refund, as long as you are smart with it. In this scenario, if you fail, don't  keep try, trying, again year to year and lose out on valuable time to save some green. Just do what works.

Sunday, June 3, 2012

Fun Savings: "Love" money, "Play" money

Saving money is always more productive when you have dedicated savings accounts for different goals. This is a given when it comes to retirement, education, and emergency funds, but what about the other stuff?

Many of us lump our savings into one place for use on.. well, whatever comes up. It's important that we have some fun too! If your savings are all bunched together, sometimes it's hard to justify taking some out for fun without feeling guilty.

Make it Fun
A great way to have fun with savings is to have a physical place for your extra cash (assuming you can find some). Think coffee can, spaghetti sauce jar, or just about anything that will hold currency (I prefer transparency so I can see how we are doing). Then pop a colorful label that states clearly what this fun money is dedicated to (whether its words or a picture your kids draw). You and your signot (significant other) can have "love" money for hitting the town and your kids can have "play" money to contribute for whatever they decide. If you don't have the energy to clean out a dirty jar, you can find some fun ones at The Find!

Guilt-free and a Teachable moment
This is a great way for you and your partner to rid the guilt of going out when you are on a tight budget and a great way for your kids to learn to save and to learn delayed gratification. Of course, you can do this in an official savings account as well, but let's be honest, its fun to see that money grow on your counter too.

Some other ideas:


Love this concept: see what your cost-cutting measures have saved you. Another idea: when you go to the grocery store with all those coupons, get a subtotal before the coupons and then throw the cash in your jar with whatever those savings were!



The Takeaway
The next time you save some cash with coupons, clean out the couch, or find extra change in your pockets or purse- throw it in a fun (and visible) place and watch it grow!


Saturday, June 2, 2012

Can you claim a loss on your taxes for real estate?

Is your family outgrowing your house? Are your offspring expanding while your walls seem to be closing in? Do you and your signot (significant other) just want to get out of dodge? What do you do with your house now that you can't sell it (at least not without a loss)?


First off, I am not a tax expert. However, I have done some research whether or not you can claim a real estate loss on your taxes. You may know (or not) that you cannot claim a loss on your primary residence. If you sell below your cost basis (what you bought it for plus improvements) you are out of luck. Many of us are in a situation where our homes are worth less than when we purchased them so this would be nice, but not true. So I was thinking... what if you converted your home into a rental property, and then sold it?

This could work, but only under certain circumstances. First, the property must be a rental property for at least one year. Second, (and this is the kicker) the cost basis that you use in determining whether you have a loss is the fair market value of your home when you convert it to a rental. So if you bought your house for $250,000 and now it's worth $175,000 (and this is when you convert to a rental), the cost basis you use when you sell your home will be that lower number. So if you sell it at $200,000 a year later, you will actually have a gain of $25,000. Now if you switched your property to a rental several years ago (before this whole mess), you may be in business to claim a loss on your taxes.

There are a lot of other tax issues to consider when renting your home. So if you are thinking about renting your primary residence-do your research! If you are willing to read long, boring jargon, the IRS website has an abundance of information on the topic (of course). Here's a good article to get you started. If you are more comfortable with just a Google search, just be aware of the source of the information; you do not want to make a decision based on a 13 year old "expert" posting on some random website or fall into a sales scheme of some kind! Happy hunting!

Thursday, May 24, 2012

Time is Money

Whether its cutting coupons or physically going shopping, our time can be eaten up in a heartbeat. We cut coupons to save money; we go to the store so we can use those coupons. When is it no longer worth it financially?

If you are familiar with the term opportunity cost, its the "cost of an alternative that must be forgone in order to pursue another action". In other words, when it comes to shopping, its time that we are giving up to cut all those coupons and then physically go to the store (possibly with little ones in tow), pick out our goods, wait in line, pay, carry everything out to the car, and finally bring it in the house. So what is that time worth to you?

I am extremely fond of online shopping, particularly when it comes to purchasing the necessities for day to day living (i.e. toilet paper, diapers, food staples). Many times I am able to get free (and fast) shipping and I will always do a quick Internet search of that store's promo codes as well (which many times will include a free shipping code). Most of the time you are unable to use physical coupons when doing online shopping (a few that will let you send them in- see below); however, most of the sites I reviewed offer e-coupons and special online-only deals that will compensate for your inability to use your Sunday paper clippings.

A few of my favorites:

Diapers.com
What to buy? Diapers, wipes, baby food
Good prices, e-coupons, SUPER fast shipping (there have been several times I placed an order one day and it was at my house by 11AM the next day), free shipping for purchases $50 and over, accept manufacturers coupons

Soap.com
What to buy? Laundry Detergent, shampoo, personal care products, toilet paper, paper towels
Good prices, e-coupons, SUPER fast shipping, free shipping for purchases $40 and over

Diapers.com and Soap.com (the ones I have tried) are part of one parent site that has a total of 5 sister sites. The other 3 are: wag.com (pet supplies); yoyo.com (toys); and casa.com (things for the home- furniture, organizers etc. )You can order across all the sites and combine them into one cart. If you order across more than one site your minimum for free shipping is $40. ALL the sites accept manufacturer's coupons.

Safeway.com (check out grocery store delivery in your area)
What to buy? Food staples, bulk items, meats, frozen food, anything but produce (usually everything comes overly ripe, and then proceeds to spoil very quickly; however, you can specify to your personal shopper that you want 'green bananas' or 'firm tomatoes' if you choose). One negative is that they are frequently out of at least something I order, and you don't find out until they are delivered.
Good sale prices, online only deals, use your Safeway club card, select your own delivery window, free shipping offers (otherwise shipping charges vary, $3.95-12.95, with the time window you select); does not accept manufacturer coupons unless they are digital and can be uploaded onto your Safeway Club Card.

CVS.com
What to buy? Personal Care, snacks, vitamins, OTC drugs, prescriptions, CVS brand items
Good sale prices, online sales, free shipping $50+ otherwise $5.49-12.95(expedited). Especially nice if you get the 20-25% off coupons in the mail. Do not accept manufacturer coupons for online orders. Check here for weekly CVS online deals.

Wine.com
What to buy? Wine.Especially if it's a staple in your house!
Decent prices, find wine that you can't in your local store, shipping varies by location and order.
*Affiliate site wineshopper.com does the whole Groupon thing- wine style- if you are willing to submit your email.

Amazon.com
I don't have to say much about Amazon- because I think most of us know that you can order just about anything from the variety guru. However, I try to make sure it is fulfilled by Amazon as opposed to another business just using the site as a marketing tool. This way, you can utilize the free shipping on your purchase over $25 (assuming they are qualified items) and take advantage of Amazon's mammoth customer service if you need to.

Click.  Buy. Delivered. Done.

Monday, April 30, 2012

Should you buy life insurance for your kids?

Is it financially smart to buy life insurance for your child, and if you do, should you buy the type with a savings vehicle?

If you have kids, or are expecting, you have most likely received ads in the mail for life insurance for your child (i.e. Gerber Life Grow-up or Life College plan). Many of these plans tout a savings vehicle in addition to the life insurance. This is a big selling point for these plans as they push the savings piece as an added benefit, a "how can you go wrong?" type of product. Does your child need life insurance? Is it giving them a head start in life? Is the savings piece worth it?

Why would you even consider life insurance for your child?
Here's the sell: "Give your child (particularly your newborn) a financial head start in life! The premiums are cheap and you are guaranteeing your kid's future insurability to boot! You have enough to worry  about as a new parent, so give yourself some peace of mind. Now your baby can be covered regardless of an unfortunate illness and in the worse case scenario you will have the cash to cover final expenses. The best part? If you buy a whole life policy, and your child grows to be a strapping healthy lad or dame, they will have access to the cash value in the future! How can you go wrong?"


How you can go wrong.
First, the purpose of life insurance is generally a salary replacement tool to provide security for one's dependents. So unless you have the Gerber baby itself, whom is providing income for your entire family, baby life insurance doesn't fit that definition. The Consumer Federation of America (a consumer advocacy and education group), along with many financial planners in the industry, believe that its almost never a smart financial move to purchase life insurance for your kids. I don't even recommend life insurance to adults unless they have dependents; so I definitely would not recommend life insurance for those dependents, especially if you are not meeting other important financial goals.

Second, the amount of these kid policies are usually quite low (typically $5,000-$10,000). This amount will not be enough as a salary replacement in the future, and many times you can't increase this amount as they get older if they do indeed have a chronic illness.As of today, the maximum you can purchase under the Gerber life plan is still only $50,000 which will not be much especially in 20+ years. They state that the coverage automatically doubles once your child turns 18, but once again, even $100,000 of coverage in 18 years will not be much when you take inflation into account.

Finally, what about the savings piece? In general, insurance policies are not good savings vehicles regardless of who is the insured. These policies not only have steep hidden costs, but they also provide you with minimal return on your investment. If you are going to invest money for your child's future (education for example), do it in a 529 account, not an insurance policy.

The Takeaway
If you have dependents, obtain life insurance policies (preferably term) for you and your spouse (particularly the breadwinner), contribute 10% of your gross income to your retirement accounts, 6-9 months of expenses in an emergency fund, and then do what you can in a 529 for your kids' education. The key is to make sure you are protecting your kids in case something happens to you, but also protecting your future so your kids don't spend money taking you in down the road!

Once all this is taken care of and you still want to open a policy for your kids, do your research, look into your employer's benefit package (many times you can supplement your own policy with juvenile insurance for pennies a month) and do not opt for a insurance/ savings vehicle combo.





Wednesday, April 25, 2012

Can you afford to workout?

Really, we can't afford not to work out. Not only is it good for our physical well being but it plays a big part in our mental health as well.

Furthermore, if you have kids, staying fit will help all of us stay a little more sane, not only because we will have more energy to play with our lovely offspring, but it keeps us from having emotional breakdowns (at least reduces the chances) to boot.

So, when it comes to finances, can we afford that gym membership? The fees can go from one extreme to the other. Some places may have relatively inexpensive monthly dues, but they require you to pay an enrollment fee and sign a lengthy contract. Furthermore, once you do sign up, do you ever go?

So take your pick and try at least one of these suggestions!
  • Take out your old workout DVDs and have at it. Free.
  • If you have Netflix, there are a variety of workout videos you can watch instantly (some videos I like are Cardio Sculpt-30 min. and 10 minute yoga series-50 minutes broken down into 10 minute sections). 7.99 a month for online instant access. Update 9/13/12: recently I noticed there are no longer workout videos on streaming Netflix! I complained, hopefully enough people will- it was a great deal!
  • Walk with a purpose. Walk your kids to the park. Walk to the grocery store. Walk your dog. If you are accomplishing something else while exercising, its easier to find the time. Free.
  • Clean your house. Set a timer for 20 minutes and do the hard-core cleaning tasks that take some energy like scrubbing bathtubs or floors, sweeping, vacuuming etc. Free.
  • Be a guest at a friends gym. Free.
  • Pay for individual workout classes. There are many fitness clubs and community organizations that allow you to pay for one class at a time. Usually between $5 and $15. 
  • If you want to stick with an official gym membership that's fine too... just make sure you go (and it fits into your budget)! If you sign up for a new membership, ask to see if you can have a no-commitment month trial and then you can see if it will work into your lifestyle.
The key to keeping up with staying fit is to do exercises that you enjoy (or don't even notice you are doing) and to mix it up. So maybe you do a video one day, take a walk the next, and then go to a class once a week- whatever will keep you motivated!

Monday, April 16, 2012

The steps to changing your name after marriage

OK, so I waited over 3 years to complete this whole list, which prompted me to communicate the steps so it doesn't feel so daunting to anyone who is approaching the process with trepidation.

1. Change your name with the social security administration. Go to your local SSA office with your marriage certificate (or a certified copy) and old SS card and done. This actually went very quickly.
2. Change your name on your license. Go to a DMV or MVA office (Express ones will do this as well) with your new SS card, marriage certificate, and old license (along with information regarding a current address if you moved). This also went very quickly- I went to a MVA express.
3. Tackle the financial institutions. This includes your checking and savings accounts along with credit cards, car loans, mortgage, and anything else you can tie to a bank or credit union. The easiest way (and fastest) is to waltz into a nearby branch. However, if you don't live near a branch, or just don't like live interaction, you may be able to do this via email/ mail (I did have to go into my credit union branch in person however). Shoot an email to the customer rep department and they will give you the steps that are required at their financial institution. This will include signing a new signature card (with your new name of course), you may need it notarized, and then send a copy of your marriage certificate.
4. Any website that has your financial information (credit card number) tied to your old name:  this can be changed on an as needed basis. Once your name is officially changed with your financial institution, the next time you make an online purchase, just type in your new name!

Monday, April 2, 2012

Restaurant coupons: are you really saving money?

I have become a bit of a coupon junkie especially when it comes to going out to eat. You can save loads of cash if you know where to go and when to take advantage of special deals.

Websites such as Restaurant.com and super daily deals like Groupon and Living Social can give you deep discounts on eateries in your area. However, you are not really saving money unless you already have plans to go out. Many of us jump at the opportunity to buy a $100 gift certificate for half the price, but its not worth it if you buy something that you wouldn't have used without the coupon (the same is true for any coupon).

So if you have plans to go out (think birthdays, date nights etc.), hop on to one of the above sites and see what you can find. If you sign up for email updates on Restaurant.com you will be notified when they have even deeper discounts like purchasing a $50 certificate for $4. However, make sure you read the fine print as you will still have to spend a minimum (i.e. $100 minimum purchase for most $50 gift certificates) and sometimes it excludes alcohol and weekends.

Happy Dining!

Sunday, April 1, 2012

Don't be a Fool! Your 'Signot' and the checkbook

Who manages the money in your household? Many of our significant others (signot) think of, and deal with, money in different way than ourselves. It's no cliche' when I say that the most important thing when it comes to couples and money is that you have the same (or at least very similar) financial goals. It's how we reach those goals that may become ammunition for squabbles.

Here are a few rules not to break (and some ideas to help) when it comes to sharing the checkbook and bills:
  • Talk about your financial goals and how you plan to save for them... write them down
  • Have a budget
  • Share that budget with your signot so they know what's up (or down) with the cash
  • Designate who's responsible for which bills, make sure someone is accountable for each bill even if its just one of you
  • Set up automatic bill pay so you don't forget!
  • If you share a checking account, set a spending limit (i.e. $50) that neither you or your signot can exceed in any one purchase without consulting the other one first. 
  • Consider setting up a second checking account just for your variable expenses (this way you know you're not spending your fixed expense money... like your mortgage)
  • Use cash allowances for both parties; this way, once the money is gone, its gone
  • Communicate throughout the month (i.e. "we only have $40 left to spend on entertainment this month... do we want to blow $30 tonight at the movies?")

Wednesday, February 29, 2012

Your W4 and Extra Cash

When you go from being single to being married and having kids a lot changes. One thing we may forget to change is how many withholding allowances we are claiming on our W4s. Quick Note: W4- is what you fill out when you start a job; W2 is what your employer reports as your wages for the year.

Folks love getting a tax return, but if you get a return, Uncle Sam is just holding your money and not paying you interest. If you are used to getting a hefty return, its time to make a change.

In my opinion, you want to pay enough taxes every paycheck so that you do not owe any money on April 15. However, you want to use your allowances wisely so you can minimize your tax return as much as possible so you can start making that extra cash work for you. Basically, you want to break even- or close to it.

So what do you claim?
My best advice is to use the calculator on the IRS website. You will need to have access to your most recent pay stub (which should have most of the information you need right on it) that includes: total federal income tax paid to date along with what was taken out of your most recent paycheck. You will also estimate the amount of bonuses or non-wage income you anticipate earning throughout the year. Have your child care expenses handy along with any student loan interest you may still be paying as well.

Even if you plan to claim more than the standard deduction with your itemized deductions (frequently the case if you own a home and/ or are paying off student loans), I would recommend still using the standard deduction in the calculator to play it safe (remember, we don't want to owe taxes!).

The calculator will tell you what the recommended withholding allowance is for your situation- placing you as close to breaking even on your taxes (assuming the information you entered is accurate). You can run with that number, or if you are not sure you entered everything 100% accurately, you can always reduce it. Not very mathematical, I know... but we would all rather be safe than sorry. If you are married, with one person employed, and 2 dependent kids- the calculator may tell you to claim 8, but maybe you claim a 5 or 6. That's still a big difference from the 1 or 2 (or even 0) you were claiming before!

So you know that your should take that extra money and make it work for your family. If you cannot make that commitment, and you use it for frivolous expenses... it may well be in your best interest to claim 1 or 2 again-assuming that you were using that tax refund for something productive. However, many people tend to use the bulk tax refund for something fun... instead of throwing it into savings. Its usually easier to save and not blow it if you are doing it throughout the year rather than getting a lump sum once a year. Sound familiar? "Oh, I can use just a little of that to buy that new tv... and I will save the rest!"

What can you do with that extra monthly income? If you were living with all your necessities before, there is no reason to blow this extra cash... make it work for you!

  • Increase your retirement contribution- we should be aiming to save 10% pre-tax in retirement. Maybe open that Roth IRA you have been procrastinating on!
  • Reduce high interest debt (credit cards etc.).
  • Open a 529 college savings plan for your kid(s). Many plans allow you to start with a mere $25 a month. Check and compare all the states that have a college savings plan at College Savings Plans Network.
  • Add to (or start) your emergency fund. Aim for 6 months of expenses.
The key here is to set up an automatic payment plan for whatever it is you decide, whether its saving or paying down debt. Do not let it sit in your checking account long (or at all) and risk it being spent on things you don't need!


Wednesday, February 22, 2012

Is someone stealing your kid's identity?

A study released at the 2011 FTC forum on Child Identity Theft confirmed that every year, approximately 140,000 kids have their identities stolen. Kids are prime targets for thieves looking to bank in on stealing someone's identity due to their clean records. Furthermore, kids are targeted over 50 times more than adults (www.news.consumerreports.org).

Once someone obtains your child's social security number they can use it to open credit cards, get a car loan and even a mortgage. They can also use it for things people don't always associate with identity theft such as getting a job and applying for medical and government benefits (typically something an illegal immigrant might use it for). A scary reality of this all is that the theft can go undetected for many years since no one is checking their credit, since kids don't use credit. So, it might not be until they are 18 or older that you find out.

Why does it matter? If you child's credit is ruined they may not be able to get a job, financial aid, insurance  an apartment or home, credit card, car loan, and possibly not even a bank account.

Who's stealing your child's identity? According to the Identity Theft Resource Center, the majority of thefts are occurring through organized crime operations. However, more and more relatives and close friends that may have access to your child's social security number have been found guilty of using a minor's information fraudulently. Many times they have no intention of harming the child (if they have no credit and need to open an account with a utility company for example), but then if they can't (or don't) pay, it harms the child.

What can you do?

  • Do not share your child's social security information freely; never respond to an email asking for this information; ask questions, and when in doubt- don't provide the information until you know more.
  • Shred any documents that hold their personal information.
  • Keep social security cards in a locked place in your home (not in your wallet please!)
  • Read this information from  the FTC on protecting your child's personal information at school

What can the credit bureaus or our legislators do?

In Utah, Transunion (one of the 3 primary credit bureaus) is working with the state's Child Identity Protection program to hopefully reduce fraud. TU places the kids' SSNs (who are enrolled in the program) into a database; then if someone attempts to apply for credit using that SSN, the creditor will receive a warning that this may be a fraudulent situation. I think this is a step toward helping our kids. I can't believe there are not more states doing this... the other two credit bureaus should follow suit as well.

Maryland is currently reviewing legislation that would make it the first state to officially protect a minor's credit. This legislation would allow parents to create a credit report for their child and then immediately freeze it. When a report is frozen, a creditor is unable to access the report and will hence greatly reduce the chances that a thief will be able to open a line of credit using that SSN. This is a good first step, however, the success of this bill would depend entirely on whether parents actually create the report and freeze it.

Considering the fact that many adults don't freeze their own reports (even though its a good thing to do if you are worried about ID theft), what percentage would do it for their kids? I don't know. This is why I think the credit bureaus need to work together with the states to flag all minor's social security numbers so that they cannot be used until they are 18 or at the very least provide a warning to the creditor that the SSN that is being used belongs to a child.