Wednesday, April 16, 2014

Utilize Direct Deposits

Americans have a tough time saving. Nearly a third of Americans have zero savings, and around half have less than three months of emergency savings. Equally daunting is how little Americans contribute to 401(k)’s. Dr. Hensley of the National Foundation for Financial Education pointed out in this alarming video that only 11 percent of individuals with a 401(k) are putting enough money away to meet their retirement needs.

The goal of this article is to provide the content and behavioral tips necessary to save.

Understand yourself and how to overcome your own savings obstacles
Saving can be exhausting if you allow it to be. As John Tierney points out in Decision Fatigue, we draw from a chemical in our brain to feed our willpower each time we make a choice. The more frequently we surround ourselves with things we really want and choices we have to make, the more we draw from this chemical. Do not make saving another draining choice you have to make, make saving automatic.

The Marshmallow study best illustrated the challenges we innately face to delay gratification, and the latest Marshmallow study is digging into the particular challenges people face who have had previous experiences that punished them for waiting, complicating the problem even further. We have seen how hard it is for people to pass the test. Do not put yourself through the torture of delaying gratification, make saving automatic.

Become a member of a Bank, Credit Union, or Matched-Savings Program
Find a bank or credit union that offers the lowest fees, or better yet prize-linked savings programs. Do not concern yourself with the interest you are going to earn on your savings account. Rates are low and are likely to stay that way for a while. So, your interest won't add up to much if you do not have a lot of money. What can add up are fees - - so comparison-shop for financial institutions that offer the lowest possible fees.

Another option is matched savings programs such as Earn, who also provide additional support services designed to help low-wage families.

Make saving automatic with a Direct Deposit
A Direct Deposit electronically deposits funds directly into a bank account as a form of payment. This past Bankrate article explains how Direct Deposits work, and dives into further advantages. To be clear, only establishing a direct deposit into your checking account isn’t going to help you much. Work with your HR manager and your financial institution to setup a second and a third direct deposit into your savings account and retirement account. This is sometimes referred to as “split deposits”. Make sure there is no additional fee for setting up or using a Direct Deposit service.

In this research Mindy Hernandez of Innovation@cfed provides behavioral insight on the decision making process“…often the decision we make is not about the ‘optimal choice’ but the one that requires the least amount of effort – the one on the path of least resistance. Defaults are the option you get if you do nothing at all, and they are extremely ‘sticky,’ meaning you are not likely to change the decision (or lack thereof) once it is done…” In other words, by saving first with a direct deposit it would be harder not to save.

The positive results of setting a savings goal and reaching it by making saving automatic is confirmed with research over and over again. According to research reported here by the Electronic Payments Association, 93 percent of employed adults who use split deposit contribute to their savings every month. Conversely, of employed adults who do not use split deposit, 23 percent contribute nothing to their savings.

Make investing automatic with a Direct Deposit
This quality resource on the Department of Labor website empowers employees with useful information about retirement plans, and the power of compound interest. Here is the example the DOL used to illustrate the importance of beginning to invest for retirement at a young age:
“A 20 year old who saves $1,000 a year for 11 years in a row, then stops but leaves it there to earn 7% interest, will have $168,514 at age 65.

However, a 30 year old who starts saving $1,000 a year for 35 years, also earning 7% will have only $147,913 at age 65. Even though the 30 year old has put in more money for more years, it has less time to earn that compound interest.”

In other words, fully match your employer’s 401(k) or 403(b) contribution and do so electronically with a split deposit as soon as you get a job. Make sure there is no additional fee for setting up or using a Direct Deposit service.

America Saves Week is February 25-March 2nd. Now is a great time to pledge or repledge to save. By pledging to save you will commit to a simple savings plan and goal. Research tells us that regardless of income you are more likely to spend less than you earn, save for emergencies, and save for retirement if you have a savings plan.

Set a savings goal, take the pledge, and remember that Direct Deposits matter.

Note - this post was originally written and posted on the America Saves website. 

Tuesday, April 15, 2014

H&R Block Student Contest: How Big is a Billion?

Americans leave more than $1 billion on the table every year by doing their own taxes. So H&R Block asked teachers to turn the idea of illustrating the $1 billion as a math assignment and submitting real-life examples to illustrate the concept. 

Here are just a couple of examples...

...did you know you can wrap $1 billion in dollars around the world 4 times!

Classroom grants of $3,000, $2,000 and $1,000 were awarded across three grade tiers: grades 4th-6th, 7th-9th and 10th-12th. So although the previous examples were very good, they were not the winning entries. You can see the winners of the FaceBook contest here.

Encouraging teens to complete their taxes is of particular importance. A new finding by H&R Block found that teens stress about money, and one of the main causes is the complexity of tax forms. A matter of fact, only 3 out of 100 teens reported filling out an income tax form.

Note - this is a sponsored post I agreed to write because of my support for the content area, the reputation of H&R Block, and the nature of the contest held by H&R Block.

Sunday, March 30, 2014

New Finding: Teens stressed about money

Teens are stressed about money, according to a recent H&R Block survey.


1. The cost of college
"...nearly all (97 percent) of survey respondents still plan on attending college, viewing it as a necessary step for future employment. In fact, 86 percent of teens believe it is more important than ever to choose a major that leads to a well-paying job. But, a vast majority of teens – 78 percent – worry about borrowing too much in student loans, fearing crippling debt after leaving college."

Since 1980, the cost of college has skyrocketed nearly 500% when adjusted for inflation. This trend cannot continue; something needs to change.

For now, most students can find an affordable path to earn a college degree. There are tools available to help students make an informed student debt choice. 
2. Teenage households continue to face financial distress
"Median household income, as reported by the U.S. Census Bureau, fell for the fifth straight year in 2012. The current level of $51,017 is far below the $55,500 when the recession began and is the lowest mark, adjusted for inflation, since 1995 – before all but today’s oldest teenagers were even born.

Perhaps not surprisingly, 58 percent of teens now believe they will be less financially sound than their parents."

One of the most important lessons we can teach our students is the value of saving and investing at an early age. Both habits can cushion the blow of eroding wages everyday Americans are facing if they begin to save and invest when they're young.

We can help students by teaching them to take advantage of the power of compound interest, and introduce them to resources that nudge them into the habit of saving when they're younger and it's easier.

3. Taxes are too complicated
"Taxes remain a duty for adulthood, as teens are either disengaged or uninformed – only three of every 100 have filled out an income tax form, while 26 percent feel the forms are too complex."

Most students will qualify for tax refunds. Yet with only 3% of teenagers filing, most will never see any of it. There are plenty of resources available to help students understand how to file and collect their refunds.
4. Teenagers are turning to their parents
"75 percent of teens still say their parents are their most important source of financial information. In fact, 62 percent of teens view their parents as good money management role models."

Unfortunately, research has found that on the aggregate, American parents are not financially literate. Our education system must train our teachers to provide students with a financial education. But in the mean time, there is an ideal resource to help parents teach their own children about money.
5. Teenagers are making adult financial choices now
“Our survey shows 57 percent of teens use their own money on purchases, yet they often lack fundamental money management skills. The good news is, the research clearly illustrates a desire to learn, to grow and to become financially savvy..."

99% of U.S. adults support personal finance teaching in high schools. Yet, only 4 states require a semester long class be devoted entirely to teaching personal finance to graduate. This is a far cry from the CFPB’s recommendations of how personal finance should be taught in our schools. 

Most high school students are making financial choices now. Many shop; have jobs; pay bills; pay taxes, are eligible for refunds if they file; have accounts at financial institutions; make car payments; pay car insurance; and most importantly -- are preparing to make a student debt choice. So as our students shuffle from one class to the next learning lessons for their future, they’re missing out on the lessons that will help them manage the stresses they're facing right now.

Wednesday, February 26, 2014

#StudentsSave - A student Twitter chat to help create the habit of saving

This is America Saves Week, an opportunity to promote good savings behavior. Savings protects us from using high interest credit when we face emergencies. Setting a goal to save and spend money on experiences and things we value allow us to enjoy life without experiencing the consequences of paying for it later.

Friday's Twitter chat is an opportunity for students to learn and share resources to help them develop the habit of saving. Many of our students have jobs or an allowance; have financial responsibilities such as a cell phone payment; they are deciding what car to buy; and are looking forward to prom. Most importantly, many of our students can open a savings account at a local bank or credit union and start the habit of saving today.

Now is the time to begin to teach the habit of saving, and what better way then through a day long Twitter chat?

Have your students follow #StudentsSave throughout the day on Friday, 2/28/14. Have them share savings resources and tips they've learned in class or on Twitter. The chat is open-ended from 8-5 EST, giving you and your students the flexibility to participate.

For savings ideas, visit America Saves.

Many thanks to the following organizations and leaders for participating:

Thursday, December 5, 2013

Why Rank Teachers?

In the private sector, employees may earn promotions from evaluations. That is generally not the case in education. Administration is a specialization of education, not necessarily a promotion for educators. Further, do we really want to create a system that incentivizes our "best" teachers to leave the classroom?

In the private sector, employees are often paid bonuses based on their reviews. Despite recent education reform efforts, that is not the case for most educators. Besides, historian Diane Ravitch explains through historical context in her book "Reign of Error" that merit pay has been tried, and has repeatedly failed.

Removing "ineffective" educators does not have to be done by ranking them against their peers. Such a decision can be determined by observation criteria and a process designed to give educators the opportunity to improve first.

Students do not get better because their teacher has a ranking.

Most people, regardless of their profession, do not enjoy being ranked. It leads to counterproductive tension, stress, and justified debate.

So what is the benefit of ranking teachers "Accomplished"; "Skillful"; "Developing"; "Ineffective"?

What if we turned back time. What if every penny and hour that has been poured into ranking teachers was poured into making us better?

What if for every minute teachers had to spend...
  • ...proctoring standardized tests; we led project based learning assignments.
  • ...discussing standardized tests; we discussed new instructional strategies.
  • ...completing performance evaluation paperwork; we explored applicable game-based learning tools.
  • ...completing pre and post conference observation paperwork; we observed fellow colleagues and collaborated with one another.
  • ...reviewing performance paperwork with our administrators; we discussed new ways to integrate technology into their classroom with our administrators.
  • ...reviewing test taking techniques; we created additional opportunities for student led projects. 
Most teachers love to learn. The explosion of Twitter chats and educational Pinterest posts are tangible anecdotes of our passion to improve - - even outside of school hours. We want to get better and we enjoy learning how to be better for our students. 

What I don't understand is how turning teachers into numbers and then sharing our numbers with the rest of the world is making us any better.

So... what is the benefit of ranking teachers, and what is the cost?

P.S. For any readers or legislators who may believe I'm "whining", my past "results" and upcoming "ranking" will be evidence that I'm not, but rather questioning purpose. 

New Game Based Learning Tool to Teach Disability Insurance is an excellent game based learning learning tool for teaching disability insurance.

They even have an app!

If you are 30 years old or younger, you have a 1 in 3 chance of needing long-term disability care, with an average coverage length of 32 months. What is particularly relevant for high school students to understand is they are not immediately eligible for full Social Security disability benefits early in their careers; and even if they were the coverage is inadequate.

This previous post is dedicated to exhibiting a broader range of insurance education resources.

Friday, November 29, 2013

Black Friday and Budgets

Budgets are hard to manage. Cars break down, kids get sick, roofs need replacing. These are life events that never fit neatly into a budget. So here is how I recommend you establish a budget.

Begin with...

  • Fully contributing to your retirement programs at work with a direct deposit.
  • Contributing to an emergency savings account with a direct deposit.
  • Contributing to your children's college education with a direct deposit.
  • Review your insurance information semi-annually to make sure you are adequately covered (life, health, disability, property, etc.)
  • Predict your tax obligations and pay them along the way to ensure you do not owe at the end of the year.
Obviously, if you are not investing for retirement now, retirement will never come later. Save. Savings covers the "messy" events that blow up monthly budgets. In my opinion, everything else is much less important, and that is a great place to trim costs. So with the remaining money, prioritize and spend. 

A budget should reflect what you value the most. So during the hustle and bustle of Black Friday be sure to prioritize spending on what really matters most to you first, and use Black Friday as an opportunity to trim costs on the plastic products that don't really make us happier