While beneficiary, collateral, and fair market value are familiar to many, these terms can be especially confusing to those with limited English-language skills. In an attempt to assist various people, the Consumer Financial Protection Bureau has created the Newcomer’s Guides to Managing Money to provide recent immigrants with information about basic money decisions. These guides offer brief suggestions to those who are new to the U.S. banking system. The guides also include guidance for submitting and resolving problems with a financial product or service.
The Newcomer Guides include these topics:
Ways to receive your money, comparing cash, check, direct deposit, and debit cards.
Checklist for opening an account, to assist with starting a bank or credit union account.
Ways to pay your bills, providing guidance on whether to pay by check, debit card, credit card, or online.
Selecting financial products and services, providing assistance on deciding which financial services are right for various household situations.
Print copies of the guides can be ordered or downloaded. These publications are available to English and Spanish with additional languages to be offered in the future.
For additional information on money guides for newcomers:
SBLOCs are loans that are often marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the assets in your investment portfolio without having to liquidate these securities. They do, however, carry a number of risks, among them potential unintended tax consequences and the possibility that you may, in fact have to sell your holdings, which could have a significant impact on your long-term investment goals.
Set up as a revolving line of credit, an SBLOC allows you to borrow money using securities held in your investment accounts as collateral. You can continue to trade and buy and sell securities in your pledged accounts. An SBLOC requires you to make monthly interest-only payments, and the loan remains outstanding until you repay it. You can repay some (or all) of the outstanding principal at any time, then borrow again later. Some investors like the flexibility of an SBLOC as compared to a term loan, which has a stated maturity date and a fixed repayment schedule. In some ways, SBLOC are reminiscent of home equity lines of credit, except of course that, among other things, they involve the use of your securities rather than your home as collateral.
The Financial Industry Regulatory Authority (FINRA) and the SEC’s Office of Investor Education and Advocacy (OIEA) have issued an investor alert to provide information about the basics of SBLOC, how they may be marketed to you, and what risks you should consider before posting your investment portfolio as collateral. SBLOCs may seem like an attractive way to access extra capital when markets are producing positive returns, but market volatility can magnify you potential losses, placing your financial future at greater risks.
The most popular reverse mortgage program is the Home Equity Conversion Mortgage (HECM), which is insured by Housing and Urban Development (HUD).
New rules from HUD add protections for certain surviving spouses after the death of a reverse mortgage borrower. Until recently, if the non-borrower spouse was not on the loan, he or she was not entitled to remain in the property following the death of the borrower. But under HUD’s new rules, non-borrowing, surviving spouse can remain in the home if specific conditions are met. These changes apply to reverse mortgage loans in which the borrowing spouse applied for a reverse mortgage before August 2014. In addition, the couple must have resided in the property as their principal residence throughout the duration of the HECM, and taxes, property insurance and any other special assessments that may be required by local or state law must have been paid.
The concern regarding non-borrowing spouses has been a source of many reverse mortgage issues. Here’s why: The amount of money a reverse mortgage borrower can draw is based in part on the age of the youngest borrower—and unless all borrowers are 62 or over, they would not qualify for a reverse mortgage.
Ask students to comment on the statement: “While a reverse mortgage can be used to supplement monthly income, some borrowers may face unintended obstacles and consequences”. What might be those consequences?
Are the new rules from HUD effective in protecting senior citizens? Why or why not?
Why should you talk to a qualified professional before deciding to get a reverse mortgage?
Where can you find HUD-approved HECM Counseling Agencies near you?
Every day, approximately 10,000 people in the United States turn age 62, according to the Census Bureau. And if they are homeowners, they may be eligible to borrow against a portion of the equity in their house by using a loan called a “reverse mortgage.”
The Consumer Financial Protection Bureau (CFPB) is warning consumers about potentially misleading reverse mortgage advertising. In June 2015, the CFPB issued a consumer advisory stating that many television, radio, print and Internet advertisements for reverse mortgages had “incomplete and inaccurate statements used to describe the loans”. In addition, most of the important loan requirements were often buried in fine print if they were even mentioned at all. These advertisements may leave older homeowners with the false impression that reverse mortgage loans are a risk-free solution to financial gaps in retirement.” For example, the CFPB said, “After looking at a variety of ads, many homeowners we spoke to didn’t realize reverse mortgage loans need to be repaid.”
Visit the website of the American Association of Retired Person (AARP) at aarp.org. Locate the AARP Home Equity Information Center, which presents facts about reverse mortgages. Then prepare a report on how reverse mortgages work.
Ask students to visit Fannie Mae’s website at fanniemae.com/homebuyer to find out who is eligible for reverse mortgages, and what other choices are available to borrowers.
Why should you consult a qualified professional before you decide to get a reverse mortgage?
Where can you find Housing and Urban Development-approved Home Equity Conversion Mortgage counseling agencies near you?
“If a bull market must continually climb a wall of worry, then the current bull, which started more than six years ago, should be on the brink of exhaustion.”
As a preamble to Kiplinger’s 2015 Mutual Fund Rankings, this article describes the concerns that investors have about interest rates, corporate earnings, the economy, political upheaval, and other factors that could impact not only mutual fund investments, but all investments and the U.S. and the world economy.
In addition the article also provides links to Kiplinger’s Mutual Fund Finder tool and specific information about the top-performing mutual funds including large-company stock funds, midsize-company stock funds, small-company stock funds, hybrid funds, large-company foreign stock funds, small- and midsize foreign stock funds, global stock funds, diversified emerging-market funds, regional and single-country funds, sector funds, and alternative funds.
You may want to use the information in this blog post and the original article to
Remind students that there are many factors that can affect mutual fund investments.
Show students how to use the link to the Kiplinger Mutual Fund Finder tool that is described in the article.
Stress the importance of a long-term investment program–especially when planning for retirement.
Assuming you believe there is a strong possibility the value of your mutual funds will decrease over the next 12 months, would you sell your funds or would you hold them? Explain your answer.
Depending on your answer to the above question, what factors did you consider to help make your decision?
Pick one fund you believe could help obtain your investment goals. Then use the Kiplinger Mutual Fund Finder to research the fund. Based on the information, would you still want to invest in this fund.
A few decades ago, Americans had a pretty solid three-legged retirement stool. Social Security and personal savings combined with traditional pensions led to good middle-class retirements for millions. But today’s stool is a little too wobbly to support that lifestyle for coming generations of workers and retirees. The Great Recession shows all of us just how vulnerable 401(k) type plans and IRAs can be, and with the savings rates dangerously low, the need to strengthen the system is clear. Today, workers are largely responsible for their own retirement investments. The days of a defined benefit pension that you couldn’t outlive are a thing of the past. Today, we have to take greater ownership for starting our savings, managing and then figuring out how much to draw in retirement.
Most workers need advice on how to invest their 401(k) and IRA savings. Too often, that advice is not delivered in the customer’s best interest. The Labor Department is working with the financial services industry, consumer groups and Members of Congress to come up with a plan that protects retirement savings from financial conflicts of interest.
About three in ten Americans have no emergency savings, according to a study conducted by Bankrate.com. This number has increased in recent years, mainly due to the lack of growth in household income. Without an emergency fund, people tend to encounter even greater financial difficulties. A person will often use high-interest debt to cover unexpected expenses. In addition to the 29 percent with no savings, another 21 percent have less than three months worth of expenses saved.
For additional information on emergency savings, click here.
Have students ask several people who their might cope with a financial emergency.
Have students create a plan for creating a emergency savings fund.
What are methods that might be used to cope with a financial emergency?
How might a person be encouraged to create an emergency fund?
To avoid financial disaster, several measurements are available for assessing a person’s personal financial stress:
The Debt-to-Income Ratio is obtained by dividing your debts by pretax earnings. Generally this number should be less than 28 percent, without your mortgage, or 36 percent, including your mortgage payment.
Discretionary Expenses involve spending for items other than fixed obligations and variable nondiscretionary items, such as food and utilities. Purely discretionary expenses may involve recreation and vacations. An analysis of these categories will allow you to delay, reduce, or eliminate various expenses to avoid financial difficulties.
Emergency Savings should be able to cover three to nine months of living expenses. These funds should be readily available in savings or other easily liquidated accounts. Greater financial greater obligations will require a larger emergency fund.
Additional Income involving wages or tips from a part-time job or selling personal possessions can provide a cushion in times of financial difficulty.
Total Assets, both liquid and non-liquid, will reduce your vulnerability to financial turmoil.
For additional information on the personal finance stress test, click here.
Have students calculate one or more of these measurements for their life situation.
Have students prepare a short creative video with a summary of these measurements.
Why is liquidity important for reduced financial stress?
What actions would you recommend to for a person to reduce their personal financial stress?
Each year, America Saves (www.americasaves.org) conducts a survey or its program participants to determine the attitudes and behaviors of savers. The most recent study reports that:
People save mainly for their emergency fund, retirement, or repaying debt.
People in formal savings programs, such as America Saves, report saving larger amounts.
Married respondents saved much more than single respondents.
Females and males have different saving purposes; females favored saving for an emergency fund, males favored retirement saving.
Savers involved in America Saves are saving more, are more confident in their ability to manage their money, and are managing their debt better while feeling more optimistic about their financial situation.
The complete Savers Survey report is available here.
Have students talk to others about their savings habits and goals.
Have students prepare a graph to monitor their savings activities.
What actions can help encourage a person to have more effective savings habits?
Why does being involved in an organized savings program result in more savings and better money management activities?
Many devices are used for effective money management. One is called “the financial flowerpot system,” with each imaginary pot representing an account where you “plant” the funds for achieving a financial goal. When you direct money into this account, it’s like watering and feeding your goal.
To fill up the “financial flowerpots,” start a regular saving and investing plan with the money automatically withdrawn from your paycheck or bank account. This automatic savings plan may be viewed as an automatic watering system for an actual flowerpot.
Three main flowerpots are recommended:
1. The Solutions Flowerpot is the emergency fund. These funds are available to solve problems and have a financial cushion, giving you financial peace of mind.
2. The Retirement Flowerpot is to save for your future financial independence.
3. The College Flowerpot is for those who are saving for their children’s education or for their own advanced studies in the future.
Smaller flowerpots may be used for other financial goals. For each flowerpot, set aside a savings amount each month that will grow to your desired goal in the timeframe you set.
For additional information on financial flowerpots, click here.
Have students obtain information from others about the methods used to achieve financial goals.
Have students propose a method they might use to achieve a financial goal.
1. What are the benefits of thinking of savings goals as financial flowerpots?
2. What are other potential savings goals for various household situations?