While a savings account and a checking account provide the foundation for managing finances, several other accounts should be considered. Since all most people don’t put all their financial documents in one drawer, all your money shouldn’t be in one account. The various recommended accounts include:
- Emergency savings for funds when you face financial difficulties that cannot be resolved in others ways. An amount equal to 6 to 12 months of living expenses is often recommended. Consider storing these funds in an “out of sight, out of mind” location, such as with an online bank account.
- Regular savings for short-term needs, such as home repairs, vacation, auto maintenance, or new furniture. Be sure to have a goal and plan for these funds.
- Household checking account for paying current bills. All income is deposited in this account with automatic transfers for regular bills and amounts to various savings accounts. Extra funds in this account can go to the regular savings fund.
- Spouse checking accounts to pay expenses for which each person has responsibility as well as work-related costs.
- Health savings account (HSA) for tax-free payments of medical-related expenses. HSAs are especially of value with high-deductible insurance plans.
- The extra fund involves the “fun money” leftover after all bills are paid, savings is under control, and all accounts have a balance at an appropriate level. This money is the reward for spending wisely.
If all your accounts are at the same financial institution, using the online dashboard will allow you monitor your balances. Or, if you use different banks, websites or apps such as Mint.com can be used to view your overall financial situation.
For additional information on needed bank accounts, click here.
- Have students design a personal plan for the various bank accounts they will use to to monitor their spending and saving.
- Have students talk to others about methods used to monitor spending and to maintain an appropriate level of saving.
- What are the benefits and drawbacks of the system discussed in this article?
- Describe actions to monitor spending and saving using online banking and apps.
While many savings, investment, and retirement plans are available to achieve financial goals, other actions are possible to achieve personal ambitions. Financial advisors and counselors also recommend these actions:
- Learn a new skill, which can result in time away from shopping or expanding your career and income potential.
- Invest in friendships that does not involve a major monetary requirement as many free and low-cost activities are available.
- Participate in a reading challenge at your local library or through a community organization.
- Create art by getting involved with writing, photography, drawing, or sculpture through a community-based group.
Many activities are available to invest your time and energy without spending much money.
For additional information on non-financial goals, click here.
- Have students list free and low-cost activities that can enhance personal and career development.
- Have students talk to others for additional suggestions for free and cost-cost personal and career development activities.
- What factors might a person consider when selecting an activity to enhance personal and career development?
- Describe personal development activities that could result in enhanced career and income potential.
Technology impacts every aspect of personal finance. FinTech (financial technology) involves apps, software, and other innovations for banking and financial activities, which includes PayPal, Venmo, and cryptocurrencies, such as Bitcoin. FinTech companies use online activities, mobile devices, software, apps, and cloud services to for financial transactions. Over 1.5 billion people around the world do not have access to formal banking. FinTech can provide these unbanked people with financial services through easy-to-use technology.
The main categories of FinTech for consumers are:
- Crowdfunding, such as Kickstarter and GoFundMe, which allows individuals or businesses to go directly to potential investors for funding.
- Blockchain and cryptocurrency, such as Bitcoin, with improved verification for financial transactions.
- Mobile payments through a smartphone.
- Insurance coverages provided by online start-ups.
- Robo-advising provides portfolio investment recommendations and allocations based on algorithms. For stock-trading, investors buy and sell stocks using apps such as Robinhood and Acorns.
- Budgeting apps, such as Mint and You Need a Budget (YNAB), monitor and plan spending.
For additional information on FinTech, click here.
- Have students talk to several people to obtain information about their experiences with FinTech products.
- Have students create an app prototype for a proposed FinTech product to help people make better financial decisions.
- What might financial literacy and money management activities be improved with FinTech?
- Describe concerns that might be associated with expanded used of FinTech.
Hacks – skills and shortcuts – are used in many life settings. For personal finance, here are some tips that can help stop money leakages:
- Only use credit cards with financial advantages, such as cashback; always pay off credit card balances on time.
- Making weekly payments, instead of monthly, helps to save interest and reduces the amount owed faster.
- Pay off loans/debts with the highest interest rates first.
- You might consider paying off a debt with another loan if the new loan has a much lower interest rate.
- When shopping online, leave the item in the cart for several days or weeks; the price may be lower or you may decide you don’t really need the item.
- Consider bulk purchases with friends to qualify for free shipping.
- Take advantage of seasonal sales.
- Unsubscribe from email offers.
- Avoid household clutter to save time and money.
- Cook your own meals; online videos and recipes offer fast, easy meals.
- Talk to others for investment advice.
For additional information on personal finance hacks, click here.
- Have students tell their personal experience with tech, travel, or personal finance hacks.
- Have students create a video to dramatize various personal finance hacks.
- How would you decide if a personal hack will be of value to you?
- Describe actions that might be used to communicate personal finance hacks to others.
Despite a strong economy, millions of Americans face financial struggles. These difficulties include lower household net worth, increased loan defaults, and high levels of credit card debt. These are the findings in the recent report, U.S. Financial Health Pulse, published by the Center for Financial Services Innovation (CFSI), in partnership with Omidyar Network, the Metlife Foundation, and AARP.
The report assesses various financial health indicators that include income, bill payment, spending, saving, debt load, insurance, retirement planning and credit scores. When combined, these factors provide a composite view of the spending, saving, borrowing, and financial planning activities of Americans.
Some of the findings of the 2018 baseline report include:
- 17 percent of American are viewed as financially vulnerable, 55 percent financially coping, and 28 percent financially healthy.
- 47 percent of respondents reported spending that equals or exceeds their income.
- 36 percent are unable to pay all of their bills on time.
- 30 percent say they have more debt than is manageable.
U.S. Financial Health Pulse is intended to guide financial institutions, government agencies, and community organization in developing educational programs and financial products to better serve the needs of Americans. This study will be conducted each year to determine changes in America’s financial health.
For additional information on U.S. Financial Health Pulse and to view the report, click here.
- Have students talk to friends to determine which of the financial health indicators they believe to be most important.
- Have students create a survey instrument to measure various financial health indicators.
- What are the benefits of measuring financial health in our society?
- Describe actions that might be taken by business, government, and community organizations to address the financial difficulties faced by people.
As more and more people work as freelancers, independent contractors, and sharing economy workers, concerns grow regarding retirement for this group. A recent study revealed that very few full-time gig economy workers have an adequate retirement plan. Relying on Social Security is probably not enough since those funds will not likely cover retirement living expenses.
Most gig economy workers are one-person businesses, many with limited financial literacy. As a result, they do not properly plan for retirement savings. Self-employed individuals also face the challenge of volatile income streams. And, they lack employer-provided benefits, such as health and disability insurance, unemployment benefits, and paid time off. In addition, these gig economy workers are responsible for paying 100 percent of their Social Security and Medicare taxes through self-employment tax.
Some advantages of gig economy workers are:
- deducting most business-related expenses, reducing their taxable income.
- access to Simplified Employee Pensions (SEPs) that allow self-employed people to contribute to a tax-deferred retirement fund.
- the ability to supplement their retirement income as they may continue to work part-time with customers and clients in their later years.
While gig workers face several financial challenges, programs are surfacing to help the self-employed save for retirement and achieve better long-term financial security. These include:
- Open Multiple Employer Plans (MEPs) or Pooled Employer Plans (PEPs) that let employers combine resources for independent workers to purchase group health and disability insurance.
- A proposed Portable Benefits for Independent Workers Pilot Program Act to establish a fund through the U.S. Department of Labor.
- Several states are creating automatic-enrollment IRAs involving government-facilitated programs administered by private financial firms.
For additional information on retirement planning in the gig economy, go to:
- Have students talk to a freelancer or independent contractor to obtain information about their financial planning activities.
- Have students create a financial plan with recommendations for a freelancer or independent contractor.
- What do you believe are the benefits and drawbacks for gig economy workers?
- Describe actions you would recommend to self-employed individuals for improved personal financial security.
While every person and every generation has something to learn, we all also have ideas and information that can benefit others. Those skillful in asking questions have an advantage for planning and implementing financial activities. Asking questions usually results in useful knowledge before taking action and being less intimidated about unknown topics.
Other actions with strong benefits for better money decisions include:
- Joining groups through social media and online communities resulting in connections and information to support financial concerns and decisions.
- Not being overly confident, but researching a topic carefully before making a financial decision to take action.
- Maintaining a minimal competitive nature; instead identify actions and investments that best meet your financial goals.
- Manage spending and saving with the use of debit cards, instead of credit cards, and automating your savings with online deposits or an app.
For additional information on successful financial planning actions, click here.
- Have students survey friends to determine which of the actions in this article are commonly used.
- Have students create role playing situations or a video to communicate the benefits of the actions discussed in this article.
- What do you believe are the benefits and drawbacks of these suggested actions?
- Describe other actions that might be taken for successful financial planning.
According to a recent study, the financial activities of today’s young adults (ages 23-37) include the following:
- One in four millennials are concerned about not having enough money saved.
- Over 70 percent of these young people believe their generation overspends, and 64 percent believe that their generation is bad at managing money.
- Over 60 percent of millennials are saving, and 67 percent are consistent in working toward a savings goal.
These money attitudes and behaviors are reported in the fifth edition of our Better Money Habits Millennial Report, with these additional findings:
- A reported 73 of millennials who have a budget, stay within their budget every month or most months.
- Nearly half (47 percent) of millennials have $15,000 or more in savings.
- While 16 percent millennials have $100,000 or more in savings.
Millennial parents are sensitive to child-raising costs. While older generations report that finances weren’t a main factor in the decision to have children, millennial parents believe the opposite. While many are paying off their own student loans, nearly a quarter of older millennials are saving for their children’s education.
For additional information on money habits of millennials, click here.
- Have students talk to friends to obtain information about their budgeting and saving habits.
- Have students locate and report on an app that would help guide their spending and saving activities.
- What attitudes and behaviors did you learn when you were young that influence your spending and saving habits today?
- Based on these research results, what money management suggestions would you offer to others?
Quite often, when a person receives a raise or promotion with an increased salary, overspending is the result. In those situations, financial experts recommend maintaining frugal spending patterns. This path will allow a person to avoid becoming a victim of “lifestyle inflation.” Many households earning hundreds of thousands of dollars have trouble avoiding debt and saving for the future. To prevent this situation, the following actions are recommended:
- Maintain your lifestyle and spending habits as you receive raises. Instead of a bigger house or new car, the increased income can be used to stabilize your financial situation and increase saving for future needs.
- Keep your average daily spending low.To avoid lifestyle creep, simply keep your typical day spending at a frugal level.
- Increase your automatic savings amounts. Consider saving an amount from each paycheck equal to the amount of your raise. This will allow you to put aside money for major financial goals and long-term financial security.
- Keep housing costs low. Instead of upgrading, maintain and improve your current home. Housing is a major cause of lifestyle creep when a more expensive home results in higher property taxes, maintenance costs, insurance, association fees and other expenses.
- Remember and review often your financial goals.Do not take your focus off long-term money goals. Short-term desires and impulsive spending can easily undermine your financial future. Create a way to remind yourself of those goals each day.
For additional information on lifestyle inflation, go to:
- Have students ask another person of what actions might be taken when a salary increase is received.
- Have students create a video contrasting wise and unwise actions when receiving a salary increase.
- What factors influence “lifestyle inflation” in our society?
- In addition to the suggestions in the article, what actions might be taken to avoid lifestyle creep?
Whether you start at the beginning of the year or you start today, some actions to keep your financial plans on track include:
- Set a money objective. Simplify your approach for financial goals by selecting a word or short phrase to give your direction. This theme might be “future needs” (for retirement planning), “spend mindfully” (for controlling spending), or “kid’s college.”
- Use automation. Using automatic transfers will allow you to save for a house down payment, an emergency fund, a vacation, or retirement.
- Challenge yourself. Cut unnecessary expenses to allow you to have money left over each month for financial goals.
- Change your environment. Modifying your financial habits can occur with visible reminders, such as photos, sticky notes, or note cards placed on your credit card, desk, bathroom mirror, refrigerator, car dashboard, or computer screen. Also consider keeping a financial diary or journal.
- Obtain needed support. Instead of going it alone, work with a friend, roommate, spouse, or group to achieve your money objective and stay accountable.
For additional information on becoming financially disciplined, click on the following links:
Financially disciplined #1
Financially disciplined #2
- Have students talk to others to obtain ideas for achieving financial goals.
- Have students create visuals that might be used to remind them about financial goals and actions.
- What are the main reasons people who not achieve financial goals?
- Describe methods that might be used to help you and others achieve financial goals.