Jul 22 2023

Saving for Retirement

Retirement requires a lot of planning and consideration. In addition to finances, you need to think about when and where you’ll retire. Experts advise that you may need as much as 80 percent of your pre-retirement income to continue your current standard of living. The exact amount will depend on your individual needs. 

Questions To Ask Yourself before Retiring

As you plan retirement, consider these important questions:

  • At what age do you plan to retire?
  • Can you participate in an employer’s retirement savings plan? This includes 401(k) plans and traditional pension plans. 
  • If you have a spouse or partner, will they retire when you do?
  • Where do you plan to live when you retire? Will you downsize, rent, or own your home?
  • Do you expect to work part-time?
  • Will you have the same medical insurance you had while working? Will your insurance coverage change?
  • Do you want to travel or pursue a costly, new hobby?

Tools to Help You Prepare for Retirement

To begin planning for your retirement:

For more information. Click here.

Teaching Suggestions

  • Ask students if they have considered saving for retirement yet? If not, encourage them to start saving at least 20 percent of their income towards retirement.
  • Do you know what sources of income will be when you retire? How much to expect from each source, and when?

Discussion Questions

  1. Why is it important to start planning for retirement while you are still in college?
  2. What are the easiest ways to boost your retirement savings?
Jul 8 2023

CHAT GPT FOR MONEY MANAGEMENT

You may ask if artificial intelligence (AI), such as ChatGPT, can be beneficial to guide your money management activities and financial decisions. AI is assisting students and others with everything from identifying research topics and preparing reading summaries to creating recipes and translating foreign languages.

ChatGPT and similar platforms are designed to understand and respond to questions and creative inquiries. When asked a question or given a prompt, a reply is generated based on the previous learning of the AI program.

Using ChatGPT for personal finance can provide a person with easy-to-understand information as well as suggested money actions related to budgeting, saving, and investing.  However, beware not to depend completely on AI advice since:

  • responses may contain fictionalized information or a biased point of view.
  • results can produce grammatically correct text but with flawed logic or facts.
  • up-to-date tax information and current financial data may be lacking.
  • citations may not be correct and may include made-up sources.
  • calculations may lack accuracy due to limited math algorithms.

ChatGPT and similar AI programs can be useful in your personal financial planning with:

  1. Understanding basic financial concepts.  As a starting point, ask how to improve financial literacy and inquire about fundamental personal finance topics related to budgeting, debt, insurance, and investing.  If a response is too complex for your current level of understanding, ask for a simplified explanation. Or, if a response is too general, resubmit your inquiry with more specific parameters.
    Sample ChatGPT prompt: What advice from financial planners might be the basis of wise money management?

2. Tracking spending and budgeting. Controlling your finances and knowing where your money is going are the foundation of financial success. Creating a budget (spending plan) allows you to tell your money where it needs to go. ChatGPT can suggest appropriate budget categories and amounts as well as possible adjustments when needed. Other AI uses may include use of the 50/30/20 budget rule and guidelines for using the envelope method or budgeting apps.
Sample ChatGPT prompt: What budget categories and allocated amounts are recommended for a household of four people with an income of $67,000?

    One person’s experience with creating a budget using Chat GPT may be viewed at:  https://www.youtube.com/watch?v=hl6pOtaSMR4

    3. Monitoring and improving your credit score.  Your credit score can influence many aspects of your financial life. ChatGPT is available to suggest actions for improving a credit score. Also of value would be information on how to dispute errors in a credit report.
    Sample ChatGPT prompt: Propose a plan to pay off $6,400 of credit card debt.

    4. Achieving savings goals. Long-term financial success is dependent on saving money.  ChatGPT can recommend financial goals based on your life situation and finances. In addition, ask for an explanation of compound interest and how it applies to your savings plan.
    Sample ChatGPT prompt: Recommend a step-by-step action plan to create an emergency fund of $8,000 within the next two years.

    5. Investment advice and retirement planning.  The array of investment vehicles overwhelms most people. ChatGPT can explain stocks, bonds, exchange-traded funds, cryptocurrencies, derivatives, and others in simple terms.  For long-term investing, retirement planning options and estimated future living needs can be the basis for suggested savings amounts.
    Sample ChatGPT prompt: Propose a diversified investment portfolio for a 30-year-old person with plans to retire in 35 years.

    6. Preparing for filing your taxes. To overcome the intimidation associated with taxes, ChatGPT is available to remind you of deductions, tax credits, and needed documents for your financial situation. AI can also guide you with the best sources for filing your taxes. 
    Sample ChatGPT prompt: What is the difference between tax-deferred income and tax-exempt income?

    7. Wise spending and shopping suggestions. Guidance for buying can range from meal planning and shopping location to coupon sources and travel schedules. The suggestions offered can prevent overspending through carefully planned buying.
    Sample ChatGPT prompt: Create a one-week grocery shopping list of nutritious foods for three people with a weekly food budget of $160.

    For the Personal Finance classroom, consider using ChatGPT to:

    • Obtain creative in-class activities and field research projects.
    • Generate discussion prompts and questions.
    • Develop rubrics to evaluate assignments.
    • Create assessments and quizzes.
    • Implement state and national curriculum standards.
    • Construct trivia questions and classroom games.
    • Suggest ideas for skits or role-play scenarios.
    • Create personalized writing prompts based on student interests and abilities.
    • Use as a personal tutor to explain complex concepts or calculations

    Will AI create wiser consumers and more effective money managers?  Yes, but only if a person follows the advice offered after carefully considering the validity of the suggestions.

    For additional information on ChatGPT for money management, go to:

    Link #1

    Link #2

    Teaching Suggestions

    • Have students talk to others about how they might use ChatGPT and other AI platforms to increase their financial literacy.
    • Have students research alternatives to ChatGPT and obtain reviews to determine other AI platforms they might consider.

    Discussion Questions 

    1. What benefits and concerns are associated with ChatGPT and other AI platforms?
    2. Describe actions that might be taken to verify the responses received when using AI.
    Jun 24 2023

    Stop the Robocalls

    Tired of getting endless robocalls? Robocalls aren’t just a pain to get, they’re often pushing scams for bogus services such as fake extended auto warranties and debt relief. But robocallers can’t do it alone. That’s why the Federal Trade Commission is taking action against Stratics Networks, a company that supplied the technology for telemarketers to make tens of millions of robocalls. But that’s not all — the FTC is also suing the debt relief companies that hired Stratics to make robocalls for their illegal debt relief services.

    According to the FTC,  Stratics delivered illegal robocalls for telemarketers promoting offers for credit card and student debt relief, home buying, health insurance, and cable TV discounts. Many robocalls were “ringless voicemails” — where your phone doesn’t ring but you get a voicemail with a robocall message.

    Here’s what to know: a robocall trying to sell you something is illegal unless the company has your written permission to call you. Scammers use robocalls to get your money or your personal information so they can steal your identity. They might try to convince you the call is from the government, tech support, or your auto warranty company. Don’t buy it. Even if the name or number on the caller ID looks real, it could’ve been faked.

    If you get an illegal robocall:

    For more information, click here.

    Teaching Suggestions

    • Make a list of common scams that target personal information and discuss how to detect and stop illegal robocalls.
    • Ask students what they do when they receive unwanted calls, emails, and text messages that are annoying, might be illegal, and are probably scams?

    Discussion Questions

    1. Why should one think twice before buying an extended auto warranty from a robocaller? Or, a debt relief service?
    2. What actions can you take to minimize the number of robocalls you receive from scammers? How can you fight back and lower your risk of being a victim?
    Jun 10 2023

    BUDGETING AND SAVING WITH “CASH STUFFING”

    Before credit cards, debit cards, and apps, people used budget envelopes to see where their money was going. Today, a variation called cash stuffing is being used by many, especially young people who became familiar with the system through online videos. This system is helping people cope with inflation and other financial difficulties by controlling their spending.

    The main benefits of cash stuffing are: (1) increased spending awareness; (2) reduced credit card use to prevent debt; (3) controlled spending – once cash is gone for a budget item, you can’t spend any more – which can result in higher amounts for saving; (4) improved budgeting for holiday spending, birthday gifts, and children’s school activities; and (5) decreased stress with a greater sense of financial control.

    Possible drawbacks of cash stuffing include: (1) the danger of lost or stolen cash; (2) the time needed to withdraw, sort, and organize cash into envelopes; (3) the temptation to overspend by moving cash to other budget items; and (4) lost interest by not having the money in a bank account.

    When using cash stuffing, consider these steps:

    1. Allocate your income, based on recent spending patterns, into budget categories, including fixed expenses, variable expenses, debt repayment, and savings.  

    2. Label envelopes, folders, or a pocket portfolio with your spending categories.

    3. Each payday, obtain cash to place into each category.

    4. As you spend money for each category, be sure the envelope doesn’t become empty before the end of the month.

    5. Repeat this process each month; adjust amounts as your needs and spending changes.

    Paying cash for everything is often not practical, such as online payments for rent, utilities, or other items. Instead, consider a hybrid or blended method, in which you use cash stuffing for only some spending areas. This would allow you to make online payments and earn interest on money on deposit while controlling spending for some budget categories. Also consider budgeting apps that simulate envelopes so you can visually see how your money is being spent.

    Other items to note when using cash stuffing:

    • Consider starting small, using the system for three or four budget items for which you would like to better control.
    • Be safe in keeping and carrying large amounts of cash. You might use slips of paper or play money (that you can buy online) in your budget envelopes, which will still give a tangible experience.
    • Search for “cash stuffing” online videos. These often feature colorful, personalized cash binders with compartments labeled for different categories — such as rent, food, savings and sinking funds. 
    • Make a commitment. Cash stuffing will not stop you from overspending. You must commit to only spending the amount you set. Use the system you create to be able to trust yourself.

    For additional information on cash stuffing,

    Link #1

    Link #2

    Teaching Suggestions

    • Have students talk to two or three others to learn about the budgeting systems they use to control their spending.
    • Have students create a visual (poster, slide presentation, or video) with suggestions for effective budgeting.

    Discussion Questions 

    1. What benefits and difficulties are associated with cash stuffing (budget envelopes)?
    2. Describe actions a person might take to effectively use cash stuffing. 
    May 27 2023

    “Buy Now, Pay Later” Users

    The Consumer Financial Protection Bureau (www.consumerfinance.gov) recently conducted a study of Buy Now, Pay Later (BNPL) users.  While many of the respondents did not encounter significant financial stress, BNPL users were much more likely to:

    • be highly indebted; have lower credit scores.
    • have high credit card utilization rates and revolve the balance on their credit cards.
    • have delinquencies with traditional credit products.
    • use high-interest financial services such as payday, pawn, and overdraft compared to non-BNPL borrowers.

    BNPL borrowers generally have access to traditional forms of credit, using credit and retail cards, personal loans, student debt, and auto loans. The report estimates that a majority of BNPL borrowers would encounter annual credit card interest rates between 19 and 23 percent.

    BNPL users tend to be younger. About 22 percent of consumers under age 35 borrowed using BNPL, while approximately 10 percent of those over the age of 65 used the service. Renters (22 percent) were more likely to be a BNPL user compared to homeowners (15 percent).

    BNPL borrowing is viewed as less costly than other credit sources, such as credit cards or payday loans. However, consumers need to be aware of the potential concerns. While advertised as “no interest,” late or missed payments can trigger high fees, which can result in paying more than the original cost. BNPL will not improve your credit score, but it could damage it due to missed or late payments. BNPL can be a doorway to financial difficulties, especially if you use it for more than one purchase at a time.  

    For additional information on buy now, pay later, click here.

    Teaching Suggestions

    • Have students talk to someone who has used BNPL to learn about the person’s experience with this credit source.
    • Have students create an audio file or podcast with a summary of the benefits and drawbacks of BNPL borrowing.

    Discussion Questions 

    1. What features of BNPL services are most attractive to consumers?
    2. What advice would you give a person who is considering using BNPL?
    May 13 2023

    Consumers Lost Nearly $8.8 Billion to Scams in 2022

    Newly released Federal Trade Commission data show that consumers reported losing nearly $8.8 billion to fraud in 2022, an increase of more than 30 percent over the previous year.

    Consumers reported losing more money to investment scams—more than $3.8 billion—than any other category in 2022. That amount more than doubled the amount reported lost in 2021. The second highest reported loss amount came from imposter scams, with losses of $2.6 billion reported, up from $2.4 billion in 2021.

    The FTC received fraud reports from 2.4 million consumers last year, with the most commonly reported being imposter scams, followed by online shopping scams. Prizes, sweepstakes, and lotteries; investment related reports; and business and job opportunities rounded out the top five fraud categories.

    The FTC’s Consumer Sentinel Network is a database that receives reports directly from consumers, as well as from federal, state, and local law enforcement agencies, the Better Business Bureau, industry members, and non-profit organizations. Sentinel received more than 5.1 million reports in 2022.

    The FTC uses the reports it receives through the Sentinel network as the starting point for many of its law enforcement investigations, and the agency also shares these reports with approximately 2,800 federal, state, local, and international law enforcement professionals.

    For more information, click here.

    Teaching Suggestions

    • Ask students what actions they have taken to keep their security software, internet browser, and operating system up to date.
    • Suggest that students use multi-factors authentication for extra security when they log into their accounts.

    Discussion Questions

    1. What is the purpose of Consumer Sentinel Network  and why does it provide free data to any federal, state or local law enforcement agencies?
    2. Do you know how to lock down your smart phones, network, and information? 
    Apr 29 2023

    ARE YOU BEING TRICKED INTO BUYING?

    Retailing and marketing strategies are designed to encourage you to spend more than you plan. You can avoid these tactics by being aware of the tricks used to make you buy.

    • “5 for $5” implies that you must buy five to get the deal. However, you most likely can buy one for $1.
    • Taller, narrower packages are often viewed as holding more product. Be sure to check the actual weight. Also beware of smaller packages for the same price as before, or even higher.
    • “Up to 50% off” usually means many items in the store are being sold for a discount of less than 50 percent.
    • “A small $5 fee,” instead of “A $5 fee,” may influence you into thinking that is more reasonable than it really is. Also beware of prices that exclude shipping and taxes.
    • Rebates attract customers, but not everyone submits the needed paperwork to receive the refund.
    • Many prices end in 9 to create the impression of a lower price.
    • Beware of promotions that emphasize low payment; be sure to calculate the total price.

    Remember: items may not always be “on sale,” but they are always “for sale.”

    For additional information on avoiding marketing tricks, click here.

    Teaching Suggestions

    • Have students talk to others to obtain suggestions for wise buying.
    • Have students create a visual summary (slide presentation or video) with tips for wise buying.

    Discussion Questions 

    1. What actions can a person take to prevent spending money unwisely?
    2. Describe actions you use to make wise buying decisions.    
    Apr 15 2023

    BEING A SUCCESSFUL SAVER

    If you desire to create/expand your emergency fund or to save for a financial goal, consider these actions:

    1. Identify a specific goal. You should have both a why and a what for your savings goal. A specific amount should be determined. Too general of a goal often results in failing to follow through.

    2. Track your progress. Start by budgeting an amount each month (or week) for your savings goal. This will help you move forward. Next, use a chart or a graph (or a money jar for young people) to see your progress.

    3. Visualize the result.  Photos or other visuals showing your vacation location, new furniture, or other item can help keep you focused. Or write down the importance of an emergency fund, and read it out loud each day.

    4. Obtain help from others. Sharing your goals with a family member or friend can help you stay accountable. Talk about the excitement when you reach your goal.  Others can offer encouragement, savings tips, or information on buying an item at a discount.

    For additional information on successful saving, click here.

    Teaching Suggestions

    • Have students talk to others to obtain suggestions for identifying and achieving a savings goal.
    • Have students create a visual that might be used to monitor progress toward a savings goal.

    Discussion Questions 

    1. Which actions in this article would be most beneficial to you for achieving your savings goals.
    2. Describe your experiences related to achieving a savings goal.   
    Apr 1 2023

    How you drive could save you money on car insurance

    Many auto insurance companies offer policies that adjust what you pay based on how much you drive or how well you drive. Here are some things to know when deciding if this type of policy is right for you.

    1.    Pay-by-the-mile policies

    These policies charge you a base amount plus a fee for the number of miles you drive each month. Most companies measure this through a device attached to your car’s computer. If you have an older car without a connection, ask your company if you can take a picture of the car’s odometer instead.

    Pay-by-the-mile policies might be good for people who work from home. Some companies offer a cap on the number of miles you drive each day so you don’t get charged too much for the occasional road trip.

    2.    Usage-based policies

    Usage-based insurance policies also use a device plugged into the car’s computer or a phone app to monitor how you drive. They look at where and when you drive, how fast you go, and your braking and acceleration habits, among other things.

    Your insurance company uses that information along with other factors – such as your age, type of car, and driving record – to set your cost.

    3.    Is it a good deal?

    These types of policies could lower your premium cost if you drive safely or don’t drive a lot. Be sure to get an estimate and compare it to the cost and coverage of your current policy.

    • The National Association of Insurance Commissioners Drive Check tool can help you figure out if a usage-based policy could save you money.
      • The Federal Highway Administration says the average car is driven 13,476 miles a year, or 1,123 miles each month. If you usually drive less than that, a pay-by-the-mile policy might be a good choice.

    4.    What about my privacy?

    Here are some questions to ask when considering these types of policies:

    • What device will my insurer use to track my driving? What exactly will be monitored?
      • Do I want my company to have information about my driving?
      • Am I a good driver? Do I think my driving style will help lower my premium cost?
      • How much could I save?
      • Could that information be used after an accident?

    For more information, click here.

    Teaching Suggestions:

    • Ask students if they would consider pay-by-the-mile auto insurance policy. Why or why not?
    • Ask students to talk to friends or relatives who might have pay-by-mile insurance policy.  What can you learn from their experience?

    Discussion Questions:

    1. What type of drivers should consider pay-by-the-mile auto policy?
    2. Under what circumstances pay-by-the-mile auto insurance policy could lower your premium?
    Mar 18 2023

    Annuity or Lump Sum?

    Many people with a retirement plan are asked to choose between receiving lifetime income (also called an annuity) and a lump-sum payment to pay for their day-to-day life after they stop working. An annuity provides a lifetime steady stream of income while a lump sum is a one-time payment.

    Deciding which option works best for you takes careful consideration because there are many factors to think about, such as your health, cost of living, assets and savings, and any other income you may have.

    Why is this important?

    Your employer may ask you to choose between an annuity and lump sum. For example, your employer may ask you to make this choice (1) if you change jobs, (2) when you stop working, or (3) even after you have begun to receive monthly annuity payments.

    When making this decision, explore the benefits and risks because whichever option you choose will affect your financial future.

    What are the benefits and risks?

     AnnuityLump Sum
    BenefitsYou will receive a steady income for the rest of your life, like keeping a part of your paycheck for life You may be able to provide a lifetime income to your spouse or to another beneficiaryYou can use the money to pay off large debts If you don’t spend all of the lump sum, you can pass it on as an inheritance
    RisksAnnuities may give you less financial flexibility and may not pay benefits to your survivors If you are in poor health, an annuity may not provide enough money to cover medical billsYou may outlive your retirement funds It’s your responsibility to manage the money to provide you with future income

    Factors you should consider:

    • Your health (and your spouse’s)
    • Your investment skills (and your spouse’s), and how they may change as you age
    • Your living expenses (now and future)
    • Your savings (and your spouse’s)
    • Other steady income (Social Security, pensions from other employers)
    • Debt (mortgage, car, credit cards, student loans, child support payments)
    • Taxes on the annuity or lump sum
    •  

    Are there online tools that can help me calculate my lifetime income?

    Yes. The Department of Labor has a lifetime income calculator that allows you to estimate the amount of monthly income you will receive when you stop working and start receiving monthly payments.

    The results shown are estimates, not guarantees, of the level of the account balance or of the lifetime income streams of payments.

    For more information, click here.

    Teaching Suggestions:

    • Ask students to make a list of benefits that an annuity may provide.
    • Ask students to interview their parents or relatives if they had to make a choice between an annuity or a lump sum option.  If so, which option did they choose and why?

    Discussion Questions:

    1. What are the benefits and risks of choosing an annuity or a lump sum payment?
    2. What sources are available if you need assistance in making a decision to choose annuity or lump sum option?
    3. Why is it important to discuss all of the possible options with a financial advisor or an insurance agent?