With growing numbers of video streaming services and product box programs, these subscriptions are becoming the newest budget buster. These seemingly small monthly charges add up, lowering a person’s ability to save along with a potential for increased debt. These ongoing financial commitments leave people with a lower percentage of free cash flow, or unencumbered income.
Subscription service spending is often overlooked especially when the payments are on auto pilot. A $4 or $8 monthly fee may not seem like much. However, research indicates that subscription services are an increasing financial burden as most people underestimate the amount. In one study, 84 percent of respondents estimated monthly spending on these services at about $80; the actual amount was over $110. In addition to video steaming services, people sign up for automatic monthly shipments of beer, wine, contact lenses, cosmetics, meal kits, pet food, razors, vitamins, and other products.
For additional information on subscription services, click here.
Have students survey several people to determine the types and amounts of subscription services being used.
Have students create a financial analysis for amounts saved over several years by reducing or eliminating subscription services.
What factors influence a person’s decision to use a subscription service?
Describe suggested actions that a person might take to reduce or eliminate subscription services.
To spend less and save more, consider an “anchoring” system. One example of an anchor is the price of an item to determine if that is an appropriate amount of money to spend for the item.
Anchors prevent shoppers from being overwhelmed by the many choices, prices, and features. You can create your own anchors by:
setting the maximum price you are willing to spend for an item.
considering the value of an item in relation to the number of hours you have to work to pay for it.
comparing the cost in relation to another item. If you buy coffee costing $2.50 a cup and want a sweater costing $50, view the sweater as costing 20 cups of coffee. Your “coffee” anchor will help you determine how valuable the sweater is to you.
When buying a home, you may be encouraged to look at properties outside your price range. Anchoring yourself at a price limit will avoid overspending, make you feel more in control, and encourage wiser financial decisions.
For additional information on financial anchoring, click here.
Have students talk to several people to obtain information about how they determine the price they are willing to pay for an item.
Have students create a video presentation that demonstrates various anchoring methods.
How might anchoring help improve personal financial literacy and money management activities?
Describe anchors people might used to determine the price they would be willing to pay for an item.
Each year, more than 1.5 million taxpayers obtain refund anticipation loans (RALs). This year, the number may be higher as a result of the government shutdown. While, RALs provide faster access to your money, they come with high fees and should only be used as a last resort. These “cash advances” are a potential for scams; before using these loans, take these actions:
Assess the cost. While some national tax chains promote this service as a “free” cash advance, fees may apply for applying for the advance, checking your credit, and transferring the money to you. Costs for your refund advance check range from $29 to $65. If your refund is on a prepaid debit card, there will likely be additional fees.
Beware of loan terms based on timing. Additional charges may occur if your refund is delayed.
Compare other options. Seek less expensive, small-dollar, short-term loans from a community bank or credit union, or a zero-percent credit card. A $35 charge to defer a $350 tax preparation fee for two weeks has an APR of 174 percent.
To avoid late fees for bills, contact your creditors. Utility companies and medical providers may offer no-cost extensions or no-cost payment plans.
Always be sure you are doing business with a reputable tax preparer. Check credentials and references. Avoid tax preparers who charge fees based your refund amount, or who deposit your refund in their bank account. Another fraudulent activity is filing false information to increase the amount of the refund.
For additional information on tax refund advances,click here.
Have students search online for costs for refund anticipation loans.
Have students prepare a video presentation on avoiding refund anticipation loans.
What advice would you give a person planning to obtain a refund anticipation loan?
How might community organizations and government agencies assist people who are considering a refund anticipation loan?
While car ownership has been a cultural milestone in our society, this tradition is diminishing with a trend toward renting or borrowing rather than owning. This situation is partially related to fewer teenagers opting to obtain a driver’s license. Also, fewer young people are buying homes, giving preference to the flexibility of renting.
The owning of “stuff” is shifting toward “decluttering” and choosing instead to rent items as needed. A strong belief that overconsumption is putting our planet at risk is driving the rise of the sharing economy. In addition, there is a growing trust to value exchanging items with “real people” rather than buying from major companies.
In addition to Zipcar, which rents vehicles by the hour, other rental business models include:
Ann Taylor’s Infinite Style service that allows a person, for a $95 monthly fee, to rent up to three garments at a time.
SnapGoods rents cameras, power tools and home appliances, such as blenders.
Frankfurt airport has a service that allows travelers to store winter coats when flying to warmer climates. Other businesses are considering a service to rent cold weather clothing to travelers arriving from tropical areas.
Since about one-third of new vehicles are leased, Cadillac created the “Book By Cadillac” program allowing a person to exchange up to 18 vehicles a year.
The many empty stores in malls create opportunities for “swap meets” and “rental fairs” for various products, using these spaces to also build connections in the local community.
For additional information on renting instead of buying, click here.
Have students locate examples of sharing economy businesses and rental companies in your community and online.
Have students talk to others to obtain ideas for new types of rental businesses.
What do you believe are the benefits and drawbacks of renting instead of owning?
Describe actions that might be taken to determine needs and ideas for rental businesses in a community.
The joy of the holiday season can be overpowered with shopping stress and financial difficulties. To avoid this situation, consider this approach:
In mid-to-late November, create a spreadsheet to manage your holiday spending. Categories might include gifts for family and friends, donations to charity, holiday meals along with other items such as shipping, wrapping paper, decorations, parties, and travel.
Enter realistic amounts that you are able to spend for the various people on your gift list and for the other categories.
Monitor your actual spending, attempting to stay within your budget.
Based on this year’s experiences, adjust categories and amounts for the 2019 holiday season.
The spreadsheet might include columns for name/item, budgeted amount, actual amount, difference, and notes for future reference. Starting earlier in the year, consider setting aside holiday money to avoid taking away funds from your normal budget. You might also consider using credit card and other reward points for gifts.
For additional information on a holiday spending spreadsheet, click here.
Have students create a spreadsheet that might be used to monitor holiday spending.
Have students talk to others to obtain ideas for not overspending during the holiday season.
How would you make use of a spreadsheet for holiday spending?
Describe actions that might be taken to monitor and control holiday spending.
It’s possible to add $500 or $1,000 to your savings with a simple action. Clark.com suggests using store receipts to save for the future. Many retailers display a “You Saved” amount on a receipt for items on sale and store discounts. By putting this amount in a savings account you can avoid spending the “saved” money on other items.
Collecting receipts in an envelope or box, or scanning them to an app, can also help analyze buying habits to make wiser purchases in the future and not make as many trips to the store. This action can result in an extra amount each month added to your savings. This money can be added to your emergency fund or retirement account.
For additional information on the receipt savings trick, click here.
Have students locate examples of receipts that show “amount saved.”
Have students talk to others to obtain ideas for methods for building a person’s savings account.
What do you believe are the benefits and drawbacks of using this system?
Describe other actions that might be taken to motivate you and others to build your savings?
What are some signs that a romance scam could be taking place?
a new love living far away requests money or use of your credit card number
being asked to sign a document giving a new romantic interest control of your finances
a new sweetheart wants you to open a joint bank account with them
While romance scammers usually focus on single, older people, anyone seeking a new relationship is a possible target. These scams can happen in person, but more often through social media, dating websites, smartphone apps. These scams happen when a new love pretends to be interested in you as a way to get your money. In fact, they may not even be who they say they are.
Beware of Cupid’s arrow striking your wallet instead of your heart! To protect you, friends, and family from romance and other scams, consider these actions:
Avoid giving a new friend access to credit cards, bank accounts, or other financial assets.
Report crimes or financial exploitation to local law enforcement agencies or to Adult Protective Services (APS); information available at gov.
Contact your state attorney general and the Federal Trade Commission to report cases of financial abuse.
For additional information on romance scams, click here.
Have students create and present possible scam situations to create awareness among various potential victims.
Have students create a visual presentation (using computer software or a poster) to communicate actions to avoid scams.
What are common warning signs that may indicate that a possible scam is taking place?
Describe actions that might be taken to avoid various scams and frauds.
The Internet has made our lives easier in so many ways. However, you need to know how you can protect your privacy and avoid fraud. Remember, not only can people be defrauded when using the Internet for investing; the fraudsters use information online to send bogus materials, solicit or phish.
Here’s what you can do to protect yourself when using social media:
Privacy Settings: Always check the default privacy settings when opening an account on a social media website.
Biographical Information: Consider customizing your privacy settings to minimize the amount of biographical information others can view on the website.
Account Information: Never give account information, Social Security numbers, bank information or other sensitive financial information on a social media website.
Friends/Contacts: Decide whether it is appropriate to accept a “friend” or other membership request from a financial service provider, such as a financial adviser or broker-dealer.
Site Features: Familiarize yourself with the functionality of the social media website before broadcasting messages on the site. Who will be able to see your messages — only specified recipients, or all users?
Youngsters learn money management attitudes and behaviors by watching family members and others. To help guide their financial literacy development, involve children in the shopping process using these steps:
Have children help in the creation of the shopping list. Sit down together with paper or an app to list what you need. Talk through your list with your kids noting items that are low on in the household as well as things bought regularly. Have children check cabinets and refrigerator to determine things they use.
While making your list, talk about a budget. Explain the need to keep track of how much is spent on groceries so there is enough money for household expenses. Make clear that a grocery list helps make sure you don’t overspend.
Talk while shopping to explain brands you prefer and how sale prices or coupons might affect purchases. Also communicate why you choose certain stores for your shopping. As you select items explain why you’re buying that one instead of a similar item. Older children can be asked to comparison shop among different brands.
While shopping, refer back to your budget. This will help you decide to buy an item now or wait until a later time.
Provide explanations of buying choices. To avoid surprises, estimate your total before going to the cash register. Also explain different payment methods, such as a debit card, which subtracts money from your bank account right away.
Discussion of various decision-making elements will help kids learn shopping and money management skills they will need. Thinking out loud can clarify what you’re doing and why when in the store, paying bills, or shopping online.
For additional information on teaching money skills to children, go to:
Every day American consumers report tens of thousands of illegal robocalls to the Federal Trade Commission, and now the FTC is helping put that information to work boosting industry efforts to stop unwanted calls before they reach consumers.
Unwanted and illegal robocalls are the FTC’s number-one complaint category, with more than 1.9 million complaints filed in the first five months of 2017 alone. By reporting illegal robocalls, consumers help law enforcement efforts to stop the violators behind these calls. In addition, under the initiative announced today, the FTC is now taking steps to provide more data, more often to help power the industry solutions that block illegal calls.