Money-Smart Kids – It’s always possible!

Welcome back.  If one of your New Year’s resolutions is to be smarter about money, why not include teaching your children good money management habits as well. 

You can probably tell from the photo beside this blog, my children are grown and off making their own way in the world.  They – and their families – are facing the same challenges many of you face every day.  And, I hope my wife and I had the wisdom to provide them both direct lessons and examples of good financial habits.

In any event, you can’t start too young, and it’s never too late to begin learning about money and ways to get the most out of your money.  For example, February is the perfect time to open a youth savings account at your FI* – especially if the little ones in your house received holiday gift money. It’s easy to open an account for your children and doing so helps teach the value of saving at least part of the money they receive – we call it “Pay Yourself First.”

At Ent, for example, our Money Space^® youth program features special accounts for kids and teens – Star Savers^® (ages 12 and under) and Galaxy^SM (ages 13-17). Both include incentives for saving as well as fun activities and seminars… and the opportunity to open a special Money Space Youth Certificate just for kids with longer-term savings goals. Teens can also have a Galaxy Checking Account (eligibility requirements apply) with space-themed checks and a Galaxy Visa^® Debit Card.

It’s likely that your own FI has something similar – accounts tailored to the needs of younger clients or members.  You may also find fun educational resources through your FI’s web site or from any number of Internet resources – materials for your children and you to use in learning about better money management.

Now’s the time to teach your children money lessons that will last for life and start them on the road to financial independence. Then, when you have your own blog, you can have a “satisfied” picture alongside your words because you have helped your children navigate the financial management landscape.

Now it’s your turn:  What are you doing to help your family learn about good money management?   

JM

*FI = Financial Institution (bank, credit union)

Check 21 is Here… What happens to my paper checks?

Welcome back.  It isn’t in the headlines, but the Check Clearing for the 21^st Century Act is affecting financial transaction processing at a FI* near you.

            Better known as “Check 21”, the act is a step toward full electronic processing of financial transactions.  The law requires FIs to process checks through the Federal Reserve System electronically.  That’s how most checks written today are processed. 

            It means when you make a payment or a deposit by check, the paper check is converted to a digital form at the local FI branch and transmitted electronically to the appropriate Federal Reserve Bank.  At the Federal Reserve Bank, it is sorted electronically and submitted to the proper FI for debiting of the appropriate account.

            Check 21 is prompted in part by the significant decline in consumer use of paper checks.  More and more we’re using plastic – credit cards or debit cards – for purchases and paying bills.  That reduction in check volume has resulted in increased costs for processing each individual check.

            Also, developments after the events of September 11, 2001, revealed the shortcomings of a national system that depended on transporting paper checks.  A number of steps in the physical process of transporting checks (for example, airline flights) were temporarily halted, slowing down the process to recognize the payments and debit and credit funds appropriately.

Well, that was interesting.  So what?  How does Check 21 affect me?

First, if you have received your cancelled checks in the mail in the past, you won’t any more.  Your check has been transformed into something electronic and if you need a copy you can get it in digital image form or as a special “substitute check” from your FI in case you need to resolve a payment or other legal dispute.

Second, checks will process faster than in the past.  Regulations on hold times have changed to allow for an extended hold up to seven business days on checking deposits so when you deposit a check, while it may move through the clearing system much faster, your FI may still not make funds available sooner. But, the payment for the check out of your account will be quicker, and that could mean a quick “bounce” if you don’t have enough funds on deposit.

Third, you will hear about a new financial product called “remote deposit.”  Check 21’s electronic processing opens the door to individuals and businesses depositing checks without going to their FI.  A scanner in your home or office could transmit the required images to your own FI.  The data on the check is then transformed into the required digital image and processed; you never bring the paper document in to your local bank or credit union. Stay tuned for developments at your local FI.

You as a consumer have certain legal rights and obligations under the new law.  Talk with the experts at your own FI, or look online for information at your FI’s website about Check 21 and availability of funds.  Oh yes, and always make sure you have enough money before you write that check!

Now it’s your turn:  How much do you depend on, or avoid, the use of paper checks today?     

JM

*FI = Financial Institution (bank, credit union)

Online Banking – When did it become essential?

Welcome back.  Sometime in the last ten years, the ways we access and manage our finances changed dramatically. 

Remember when the only way you could get your money was in person, from a teller?  Even when you could call the credit union or bank, you still had to work with a real person to transfer funds (to cover that check you just wrote).  Well for many of us (yes, including me) those days are almost entirely gone.

One reason was the shift to ATMs to get your cash.  Today you can make deposits, transfer funds, and perform other actions using ATMs, sometimes even when you’re getting gas and coffee.  But ATMs have been with us for decades.  So what’s happened since 2000?

Start with the Internet and add virtually all the capabilities your friendly teller could perform and you have…online banking.  Today, banking online is becoming a dominant means of transacting financial business for many – typically younger people, but not exclusively (see the “including me” above).

Online banking has shifted the ability to manage your credit union or bank accounts from the branch to when and wherever you’d like.  It’s like having a branch office at home, at your desk, or wherever you may be.  For example, Ent has members around the world, including many of our uniformed service men and women in Iraq and Afghanistan.  Whenever they want, they can check the status of their accounts (Did my pay get deposited correctly?), transfer funds between accounts, or even open new accounts.

For some, online banking got turbocharged when financial institutions added online bill payment.  This is another of those anytime-anywhere services.  So when you wake up in the middle of the night remembering that bill sitting on your desk that is due the day after tomorrow, you can log on and pay it, and then sleep like a baby the rest of the night.

At Ent, we “dabbled” in Internet Banking services in the 1990s, but really got serious about it with the new century.  Today, more than 97,000 of our members (about 45%) use one or more of our electronic banking services (including eStatements, Bill Pay, etc.).  When I meet members around the community, just about everyone I talk with mentions how important the online services have become for them.

Online banking has become an important tool in personal financial management toolkits; and you and I, as consumers of those services, tend to like those tools available and working the way we expect when we need them.

At Ent, we’re working on an upgrade to our own Online Banking service later this year.  There have been many changes and new features developed since we brought our current version to our members.  But we’re approaching the process with emphasis on early and continuing communication as well as self-help tools and demos.  And we’re preparing for a lot of questions.

Online banking has become a fact of life for financial services in the early 21^st Century.  Who knows what lies ahead in the next decade?  We might expect to do all these same services on our cell phone – including making purchases and opening accounts.  But that kind of truly mobile service – still in its infancy – is for another entry.  Until then…

Now it’s your turn:  How do you use online banking?  What features would you like to see in an upgrade version?

JM

Thinking about Haiti

Welcome back.  Excuse me while I depart from our regular consideration of things financial and look briefly at events that put some of our day-to-day concerns into context.

Haiti, and the tragic earthquake in that country, dominates the news.  Today, reports estimate the total number of dead in the hundreds of thousands; it is impossible to estimate the number of injured or the scope of the property damage.

Anyone aware of the history of Haiti knows it is starkly poor and essentially unable to develop a self-sustaining economy.  That fact magnifies the tragedy:  for those with little to begin with, virtually all is lost.

Over the weekend, the Wall Street Journal considered the track record for cities that have suffered the extensive damage as has Port-au-Prince.  Places like San Francisco and Chicago – in our country – have truly risen from the ashes to become thriving sites of economic and cultural leadership.  Others point to post-World War II Europe and Japan as examples of countries that emerged out of great physical and emotional damage to be strong factors on the world stage.

Can it happen in Haiti?  Possibly.  That troubled nation certainly deserves a break.

Many individuals and organizations – including U.S. and International credit union organizations – have responded to the tragedy with outpourings of money and material.  The Haitian infrastructure to receive and distribute relief supplies is being restored, with international assistance.

If you’re thinking about contributing to relief in Haiti, here are some agencies and websites to consider:

The United States Government Relief effort – www.whitehouse.gov

Worldwide Foundation for Credit Unions – www.woccu.org

National Credit Union Foundation’s CUAid system – www.CUAid.coop.

Red Cross -http://www.redcross.org

Salvation Army – http://www.salvationarmyusa.org

This is a marathon, not a sprint.  Many who contribute today may forget in the weeks and months to come – times when the victims of the earthquake and its aftermath will still need assistance for basic needs.  Let’s not forget, even when Haiti drops out of the headlines and TV news.  Maybe we can look to hearing about the people and nation of Haiti building out of this tragedy for a better future for all Haitians.  That would be news, indeed. 

Now it’s your turn:  What are you (and your friends or company) doing to help our international neighbor in their time of dire need?

JM

The impact of bankruptcy on a credit score. Plus, is “strategic foreclosure” an oxymoron?

Welcome back.  It should come as no surprise, but bankruptcy filings in 2009 hit 1.41 million, up 32% over 2008, according to a recent report by the Credit Union National Association, a credit union trade organization.  That trend, plus potential for some more filings in 2010, has many credit unions concerned about people paying later on loans or causing the credit union to charge off some amount of the loan because the member filed for bankruptcy.

            I’m old enough to remember when filing for bankruptcy protection was considered a social no-no.  In recent years, however, it seems to have become a financial management tool for many people who have gotten themselves deep in debt. But there is a link between bankruptcy – or how your handle your current debt, whether mortgage, car loan, or credit card – and whether you will have access to the credit you need in the future.  That link is represented by your credit score.  For help, I turned to experts in Ent’s Lending Division.

            They tell me (so I can share with you) that your credit score is part of what lenders look at to predict how you will pay on any new debt. It reflects both how you manage paying your debts and how your debt is structured. And it influences both the loan decision and determines the interest rate you will be charged.

            For example, canceling an older credit card may not be smart because it reduces your available credit which is one factor affecting your score.  Similarly, running at or near your credit limit on one or more cards can produce a reduced score.  Smart debt management means keeping the credit you use under 50% of the credit you have available.  And using some of those older cards occasionally for a tank of gas or a lunch out helps keep them open and showing as actively (and well) managed.

            Now about this bankruptcy business.  While some people can’t avoid the process because of a lost job or a sudden, significant medical expense, there is a longer term price for choosing the bankruptcy option.  A bankruptcy stays on your credit report, and influences your credit score, for seven years (10 years for a Chapter 7 filing).  Most lenders do not consider a bankruptcy as a convenient way to manage debt.  And that means your future requests for credit – whether for a car or other needs – will be affected.  At worst, you could be denied; at best, you’ll pay a higher interest rate for the loan.

            And speaking of convenience, I was reminded that an increasing number of people are having a negative effect on their financial future by walking away from their mortgage, even when they can afford to make the payments.  Such so-called “strategic foreclosures” are the result of home values falling and home-owners finding that they owe more today than their home is worth.  Often this means they are still paying on their credit cards or other loans; the belief is that a single bad debt on their credit report will have less impact on their credit score.

            Not so fast.  In fact, lenders, especially mortgage lenders, are much less likely today to make low interest mortgage loans to someone with a foreclosure mark on their credit history.  Our Chief Lending Officer says “the sub-prime mortgage market is dead” and is not likely to return for more than ten years, if at all.  Like a bankruptcy, a strategic foreclosure follows a borrower for years and influences their credit score, as well as the evaluation a future lender makes about their ability to repay any future loan.

            So there you are – something to chew on in a new year when we expect continuing challenges to our national economy and personal financial situations. In a future post, I’ll talk about what you can do when you review your credit report, but for now that’s thoughts for today. 

Now it’s your turn:  What are your thoughts about bankruptcy and strategic foreclosures?  How have you managed credit to improve your credit score?

JM

Should your friends and neighbors make the move to a credit union in 2010?

            Welcome back.  OK.  So we’ve turned the page on 2009 and have to practice writing 2010 for the next three months.  How shall we approach this new year?

            First, my past three entries should tell you I’m not big on Resolutions (with a capital “R”).  It’s a function of my own inability to keep them.  But I also think New Year’s Resolutions are a little artificial.  January 1 is one time to start new (and presumably better) practices, but why not May 1, or October 1, or any other day?  It’s just a matter of getting started.

            Most of us start January a little in the financial hole because of the year-end holiday splurge.  We want to begin following a more stringent budget, or add to our personal retirement assets, or any of dozens of other “new leaves” in our “financial book of life.”  For many of our friends and neighbors – they might want to consider a new financial service partner.

            If they’re unhappy with their current financial institution, this may be a time to think about changing.  Maybe it’s time for them to consider a credit union.  Why?

            First, credit unions are not owned by stockholders but by their members.  When you’re in line with a teller, meeting with an investment advisor, or talking to a call center service agent, you’re in good company. You’re surrounded – physically or electronically – by other members who are owners, just like you.

            That’s important because the whole focus of the activities of the credit union is to meet their member/owner needs and return any excess revenue to members in the form of expanded services or better loan and deposit rates. It also means the credit union is governed by other members who volunteer to serve at no pay on the Board of Directors and other committees.

            Next, in the current economic turmoil, credit unions as a whole have been a steady hand.  Credit unions have attracted record numbers of new members (and deposits) and are making loans without taxpayer support.  That’s right, there’s no TARP or other money outside of credit union-supported programs involved in supporting any troubled credit unions across the country.

            Finally, at a time when consumer confidence remains near historic lows, credit unions are a source of objective advice and individual financial education.  That means you have access to tools to help you become a better consumer of financial service, in better control of your own financial future. And that should help restore confidence in your own position.

            For information about credit unions in your area, and their member eligibility criteria, link up through the Credit Union National Association (www.cuna.org) or the National Association of Federal Credit Unions (www.nafcu.org) – or try your favorite search engine.  And get them to do it today – whether it’s the 1^st, 5^th, or any date.  Now is the time to get started!

It’s your turn:  If you’re a credit union member, what do you tell your friends about the benefits of being a member?  If you’re not a credit union member, why not?

JM

End of Year Resolutions – Part Three – “My Resolutions”

Welcome back.  All this talk about estate planning and long-term care insurance has me thinking about my real resolutions for the New Year.  If 2010 is anything like the last few years, most of the specific resolutions won’t survive the clean-up from New Year’s Eve.  But here are three for consideration.

            Be Prepared.   I’m not talking Boy Scouts and camping here. I need to think about the potential issues in my life and what I can control.  For example, after I get all those estate papers and insurance up to date, I need to make sure (1) I have provided details on what I have and where the documents are and (2) that the documents are in a safe but accessible place.

            I had to help settle a family estate once where various accounts were titled in a variety of ways.  Some were in one name only, others were joint owners with rights of survivorship, and still others were tenants in common. Clearing that up was almost painful – so making sure there is some consistency in our family accounts is part of the plan as well.

            Smell the roses (or the scent of your choice):  This time of year is more hectic than most, but in today’s society we’re pulled in a lot of different directions all the time. I mean to stop and look around once in a while; to appreciate what I have.  Because I live in Colorado, I am surrounded by absolutely spectacular scenery and a multitude of opportunities to enjoy it, either from a distance or right in the middle of forests and mountains.

            I am also fortunate to work for a credit union dedicated to the financial well-being of our members, with colleagues equally dedicated to that mission.  I need to take time to pause and recognize those parts of my life that aren’t sources of stress. Don’t we all?

            Say “Thank you” to someone every day:  So much of our routine involves people who contribute in small ways to our daily lives.  It may be the clerk at the corner store or a server at the cafeteria or restaurant where you have lunch.  How hard is it to express a sincere “Thank you” to them for what they contribute every day?

            Every day I am more and more aware of how much I depend on others to get everything done.  I can’t thank them enough.

            And  I can’t thank you enough for joining us during 2009 in this inaugural outing of EntTalk.  Have a happy, healthy, and prosperous New Year.  See you in 2010.

It’s your turn:  What resolutions are on your list for 2010.  What are you doing to make sure you follow up on them?

JM

End of Year Resolutions – Part Two: Long Term Care

Welcome back.  Continuing end-of-year thoughts on financial planning resolutions, I’m thinking about the challenge of long-term care. Depending on how young (and relatively immortal) you are, Long Term Care (or LTC for faster keying) may not have crossed your mind.  But here’s some food for thought, with help from the specialists in Ent’s Insurance Group.

To start, LTC refers to a wide range of medical, personal, and social services that may be needed because of a prolonged illness or disability.  Most people who need LTC are over age 65, but many working adults (18-64 years of age) receive such care and so do a small number of children.

LTC insurance to help pay the costs of care either at home or in a skilled care facility is not inexpensive.  It may, however, be a valuable investment if (1) you don’t have enough assets to pay the care costs on your own, (2) you want to preserve some of your assets for your estate, or (3) you have too many assets to qualify for state Medicaid support of the care.

Ent’s insurance specialists reminded me there is no real one-size-fits-all LTC policy.  Your specific needs, intentions, and situation will help determine what coverage you need.  For example, you might select a policy that provides for only nursing home care, only home care, or a combination.  You may want to provide coverage for up to three years, or maybe longer.  You may want to try to cover all of the costs or simply a part of your anticipated expenses.

Premiums can be higher as you get older.  The best time to buy a policy may be middle age – say 50-60.  The younger you are when you buy the policy the lower the premiums.  Of course, that means you’ll likely be paying premiums longer.

I suppose it’s like most insurance – you get it as part of responsible financial planning, and hope you never need to draw on it.  But when you need it, you’ll be glad you have it.

Before you buy a policy, be sure you understand all of its terms.  A qualified agent (like one of Ent’s experts) can guide you through the process.  Or you can start with the Ent podcast “Understanding Long Term Care Insurance” at www.ent.com/podcasts for a more detailed overview.

It’s your turn:  What do you think about the value of LTC insurance?  What would you tell others about it?

JM

End of Year Resolutions – Part One: My Estate Plan

Welcome back.  Last week’s discussion about retirement got me thinking about other aspects of financial planning, especially planning for transferring funds to the next generation.  It’s called “estate planning” and you don’t have to have a wad of money to take some steps to make things run smoothly.

            With the help of Ent’s Trust Services Department, here are a few thoughts.

            First, you need a will.  A will is a formal document that tells the court and your designated representative how to dispose of your assets – including real estate, cars, business holdings, money, and personal property.  If you die without a will, the court will appoint someone to serve as the representative. And the court-appointed representative will not likely have your wishes in mind. 

            Also, remember a will is a living document.  It needs to be revised whenever there is a major change in your life – marriage, children, grandchildren, retirement, etc.

            Next, a durable financial power of attorney is a simple, inexpensive and reliable way to arrange for someone (your “agent”) to handle your finances in case you are unable to do so.  You could become incapacitated by illness, an auto accident, or other event.

            A medical durable power of attorney lets you name a “health agent” to make medical care decisions consistent with your wishes, in case you cannot express those wishes directly to your doctor or family.  Usually, the document lets your agent have access to medical records and other information otherwise protected by the Health Information Portability and Accountability Act (HIPAA). 

            A living will complements the medical durable power of attorney by stating your specific wishes to refuse treatments that artificially prolong life.  This is also known as a medical care directive and usually directs your wishes about the use of feeding or hydration care as well as ventilators among other equipment.

            For more details, check out Ent’s podcast “Estate Planning 101: Four Important Documents Everyone Needs”, available at www.ent.com/podcasts. And be sure to contact a lawyer for these documents, which often depend on specific requirements established by your state to be valid. You may also find your FI* has a trust department (as Ent does) to help develop some of the documents or recommend a good resource.

As for me, one of my first resolutions for 2010 is to make sure I have these documents – and that they are up to date.  It’s just smart planning, and part of my responsibility to provide for my family.

It’s your turn:  What are you doing to help provide for a smooth transition of your estate, whatever its size?

JM

*FI – Financial Institution

The “R” Word – Retirement; Thoughts on life after work.

            Welcome back.  Recently, a member asked us to talk about “retirement” in EntTalk.  Wow!  Since whole books, and some consulting careers, have been built around the subject, the request is a bit daunting. 

Then I saw a newspaper cartoon titled “The Best Senior Moment.”  In the cartoon, a man stands in his doorway, entering his house carrying a briefcase, with his overcoat on.  His wife has paused in her housework as he says, “I went to work this morning, but couldn’t remember why, so I retired.”¹

If the decision is that easy, how hard can it be to at least reflect on the issue?  After all, I did retire once, from the US Air Force some years ago.  However (here come the disclaimers) I am not a licensed or credentialed retirement representative or investment specialist.  So keeping that in mind, a few thoughts.

1. It is never too early to begin thinking about retirement. The evidence suggests that all of us will depend increasingly on what we have saved – through regular savings, investments, and individual retirement accounts (IRAs) or 401k programs at work – for income in retirement.  Even if you’re 20-something, start today.  Chances are, your FI* has resources to help determine future needs or begin an automatic savings program pointed to that day, maybe still over a distant horizon.

 

1. Will you be retiring from something or retiring to something?  According to several experts, the distinction is important. It determines whether you regret leaving your work situation or you are eager in anticipation of a new phase in life.  One of my favorite resources for examining opportunities in retirement is the retirement specific edition of the “What Color is Your Parachute?” book series.

 

1. Will I have enough money to live on?  Here you need to talk to a professional.  While many FIs (including Ent) and investment companies have online calculators to help you determine your income needs against your resources, nothing substitutes for professional insight.  And to complement the online resources, some of those FIs (again, including Ent) have staff trained to provide you the advice you may need to be successful in both building for and living in retirement.

 

1. Have I provided enough for my family?  Now we’re in the area of true professional advice.  Estate planning, including wills, powers of attorney, and trust documents demand special knowledge if all of the papers are to meet the legal requirements of your particular state.  But these documents – properly executed and safely stored – will be a source of some peace of mind as you live in retirement.

I suppose the bottom line is to look at your own individual needs and resources as you consider questions about retiring from full-time employment.  There may be some hard work ahead just planning, budgeting, and thinking through the process.  Good luck.

It’s your turn:  What are your thoughts on retirement?  And if you’re retired, what advice would you offer?

JM

¹ NON SEQUITUR by Wiley, 2/18/2008, © Wiley Ink, Inc, 2008

*FI – Financial Institution