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PromBlog

Tips for Cutting Back on Prom Expenses

There are regular ol’ school dances and then there’s prom.

For almost every teenager on the planet, prom is a culmination of all the high school experiences rolled up into one event. Oh, and don’t forget the dinner beforehand and the party afterwards and, for some, a whole weekend of prom-related festivities.

You may be sensing a theme here: prom is not cheap. How not cheap is it? One study found the average teen spent an average of $919 on the special event in 2015.

We’ve compiled a list of the most creative ways to save money on prom. Follow these prom hacks, and you can make those memories without putting a dent in your wallet:

Reconsider the “promposal”

Asking a date to the prom is where the whole journey begins, and as such, many teens have taken the process to new heights. These elaborate “promposals” set teens back an average of $324 in 2015. But the amount you care for someone should not directly correlate to the amount you spend. In fact, a true heartfelt “promposal” should be personalized and thoughtful. Think about writing a poem or incorporating the ask into an activity the two of you like to share before you go and hire an airplane to profess your love in the sky for all to witness.

Limo? More like lim-no

The limo is one of those prom traditions some teens simply are not willing to forego. If that is the case, start doing some research early to find the best deal. Also, be sure to squeeze as many people as possible (and safely) into that sucker. Sure, it may be nice to have a whole limo for you and your date, but splitting the cost with friends makes more sense. If you’re not dead set on the limo idea but still want to travel with friends, look into bus or van rentals.

Secondhand but first class

The outfit you wear to prom will most likely never be worn again, especially if it’s a super fancy set of threads. Go cruise the thrift stores or consignment shops and find something that shows your style. Don’t you want to stand out a bit? Even consider widening the net (literally) with a deeper search online during off-seasons. Many retailers offer discounted dresses during low seasons – never hurts to take a peek!

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Financial Literacy Tips & Tricks from Money Management Superstar Rachel Fox

As Financial Literacy Month comes to a close, now is the time to start thinking about how you can take what you’ve learned and apply it to your  life. Not sure how to do that? Check out some tips and tricks to help ensure you’re making the most of your money from teen personal finance guru Rachel Fox of Fox on Stocks.

Saving is KEY

Establish killer credit as soon as possible

Build your budget

Feed your 401K early and often

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Tips for the Tax Filing Procrastinator

Here’s some good news for all you tax filing procrastinators out there: Tax Day has been pushed back three days this year.

No joke—because Emancipation Day is being observed on Friday, April 15 this year, Tax Day has been moved to the following Monday, April 18.

So what will you do with these three extra days? That depends on your level of procrastination, of course. Here are the three most important things to consider if you’re filing your taxes at the eleventh hour:

  1. Do you owe money to the IRS or does the IRS owe you a refund?

If you don’t owe any money to the state or Federal government, then the April 18 deadline doesn’t apply to you. Yes, you heard that right. You will not incur a late filing penalty on your taxes if you’re owed a refund, so take a deep breath and stop stressing out. BUT (and this is important for people prone to procrastination) the longer you wait to file your taxes, the longer it will take to receive your refund. On top of that, you run the risk of becoming a victim of tax fraud the longer you wait to file, which is why we suggest filing as soon as you can. (If you file your taxes early, a fraudster can’t do it before you.)

  1. File an extension / Ask for payment installment plan

If you do owe the IRS money, you will incur late filing penalties on that amount unless you file for an extension. Even if you file for an extension, you will incur late payment penalties unless you pay at least 90 percent of your tax liability by April 18. Luckily, the process is fairly easy—fill out Form 4868 online or by mail and your new deadline will automatically be extended to October 17. Also, if you file on time but don’t think you’ll be able to pay the owed balance by the original deadline, you can request a short-term extension to pay the balance due or request an installment payment plan. This process requires a request be made by the deadline (check to see if your state requires a separate extension), but will give you time to get your finances in order.

  1. Don’t rush

The worst thing to do is try to beat the deadline without filing for an extension. Chances are you’ll overlook critical deductions and credits that may lower the amount you owe or increase your refund. There are a slew of life events that can affect your tax situation (e.g., marriage, divorce, starting a business, having a baby, etc.) and it would be a shame to ignore them, especially when it means more money coming out of your pocket.

For more info on how to avoid penalties that come along with missed tax deadlines, visit our Block Talk blog. In order to prevent winning the two-time tax procrastinator award, check out this handy infographic to find out what forms you’ll need, along with a tax prep checklist for next year’s prompt filing.

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If the Easter Bunny Were an Accountant: The Importance of a Nest Egg

When you were a small child, did you ever stumble upon the grand prize during an Easter egg hunt? While all the other children were frantically searching for eggs with a couple of measly jelly beans inside, you had found the winner—the egg with the best candy bar, a toy or even some sweet, sweet Easter cash.

Let’s say you found the egg that was stuffed with dollar bills. Did you go out and spend it immediately or did you put it toward your savings? If you wisely put it in the piggy bank, then that Easter egg was actually the start of your nest egg. Let’s talk about the importance of this kind of egg.

What’s a nest egg?

A nest egg is a term that refers to a sum of saved money that is earmarked for larger investments in the future (think: car, education, house). Although this may seem like more of an adult concern, the sooner you begin to save, the better off you’ll be. The adult you will thank the teenage you.

Why is this nest egg so important?

A recent report claims that 63% of Americans don’t even have $1,000 set aside in emergency savings. Yikes! That means in the event of an emergency over half of the country will go into debt in the aftermath. Moreover, the Federal Reserve reports that the median balance of retirement accounts held by Americans who are saving for retirement totals less than $60,000. Retirement accounts are in essence the ultimate nest egg, and the average American only has about one year of salary (according to nationwide averages) to last them all the years after they retire.

When should this nest egg hatch?

Our recommendation is to build up your nest egg so there’s at least $1,000 in it at all times. That means even if you’ve just spent $1,000 on an emergency, there should be an additional $1,000 in case of the dreaded back-to-back emergency situation. As a teen, you can start with just one nest egg and then divvy it up into a retirement fund when the time comes. It’s helpful to know that the average person retiring at age 65 with $103,000 in retirement savings would only be able to withdraw $343 per month. That’s hardly enough to live on.

If you’re interested in how much you should save in order to have the retirement nest egg you’d like, use this retirement calculator to quickly crunch some numbers and get a basic picture. But for now, enjoy those jellybeans and happy Easter egg hunting!

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5 Things to Avoid Buying with a Credit Card

As much as you try to reinforce to your teens that credit cards are an adult responsibility that should only be used with proper planning and budgeting, it’s hard to deny the magical aspect of using a plastic card to buy things you need or want without having to fork over cash at the time of purchase.

The concept that you will be paying for this later, and sometimes paying more if you cannot make monthly payments and incur high interest rates, can be a difficult concept to grasp for even seasoned credit card users. Make sure your teen knows what NOT to pay for with credit cards to ensure they don’t fall into a pit of debt as soon as they head off on their own after graduation. It’s easier than cataloguing the numerous items they can buy with credit, and will at least safeguard them from buying expensive items they will never be able to realistically afford.

Here are five items your teens should never pay for with a credit card:

  1. Tuition: 

Yes, a college education is important, if not a requirement for success these days. Trouble is, the cost of college tuition is perpetually on the rise and college students are still as broke as they always have been. Due to the exorbitant costs of education, most teens receive financial help either from their parents or through scholarships and loans. But if your teen is responsible for even a portion of their tuition, they should not use a credit card to pay the bill. Many schools will add a convenience fee (roughly 2-3%) for paying with a credit card. On top of that, the amounts are so large your teen wouldn’t be able to pay off the credit card before having to start paying interest on it. If your teen is having trouble paying tuition on time, talk to the school and find out about the types of low-interest student loans, grants or work-study programs that are available to offset the cost.

  1. Vehicle:

Not every auto dealer will accept credit card payment, but the ones that do will likely charge a transaction fee of 1-2%. When you’re buying an expensive item like a car, 1-2% can add up to several hundred dollars. Also, the chances your teen has a credit card with a high enough limit to handle the initial down payment on a car are slim. More than likely, your teen would max out their cards, negatively affecting their credit score. Instead, consider borrowing from a bank or credit union. Interest rates would be around 3-4%, compared to 15% rates your teens would endure on the average credit card. Another benefit of receiving an auto loan is adding it to your credit report, which helps the health of your credit score.

  1. Medical bills:

The cost of healthcare is not cheap and paying for it with a credit card will add high interest rates to the overall bill. Your teen could wind up digging an early debt hole that could affect their future finances if they go down this road. Contact a hospital’s financial department to help your teen set up a payment plan. This result in smaller or no interest charges and give them a clear road to paying off the balance completely.

  1. Taxes:

If your teen needs to file taxes and ends up owing money to the IRS, they should not use a credit card even though it is an option. Like vehicles, taxes can end up being a large dollar amount and tax preparers will charge a convenience fee for using a credit card. The 2-3 percent fee could tack on a good amount of added money if the initial amount owed in taxes is high to begin with. Plus, interest rates on credit cards are other higher than what the IRS charges through its range of payment plans. Speak with the tax preparer to figure out the best way your teen can pay taxes or contact the IRS ahead of time to work out a payment plan.

  1. Business startup:

So your teen is using their education to begin a business. Excellent! But they use a personal credit card to expense their venture to get it off the ground. Not so excellent. This tactic is risky because it generally takes a few years for business to become profitable. In that time, your teen will pay high interest rates on those costs, effectively negating any profit from the business. Small business loans are more suitable in these situations.

Matt Tetreau

Meet H&R Block Budget Challenge Scholarship Winner: Matt Tetreau

Hard work and long-term planning pay off when taking the H&R Block Budget Challenge. Don’t believe us? Just ask Matt Tetreau from St. Clair High School in Michigan who won a $20,000 scholarship. We spoke with him to learn more about how he was so successful!

Growing up, did you see a need for financial literacy and education among your classmates?

I really think that it’s valuable information, especially since next year many of us will have student loans. Many kids my age don’t really know too much about student loans or living on their own. That’s what inspired me to take Mrs. Volz’s class where we took the Budget Challenge.

Where did your previous financial education come from? Did you take any classes prior to Mrs. Volz’s?

No I didn’t. I didn’t ever really talk to my parents about money either. I’m not much of a spender. During the simulation, I learned almost everything I know though through the class or on my own.

Do you think that the simulation taught you the real world money skills that you need to be successful?

Absolutely. I feel like I can budget on my own now, whereas before I don’t know if I would have been able to manage.

What do you think was the recipe to your success that helped you win the scholarship?

I checked the Budget Challenge every day and made sure that my budget was balanced. I tried a bunch of different strategies and tried to find the strategy that would save me the most money on my budget.

How often did you tweak your budget throughout the simulation?

In the beginning, I planned it all out by how I thought it’d work out — but that didn’t work because unexpected things came up in the Budget Challenge where I had to make refinements. We had one unexpected event to deal with, and our credit card expenses were pretty unpredictable at times. We didn’t know how much we’d get charged for the event, so we had to account for that as well.

Did you work together with your classmates through the simulation?

I actually did work with some. It was really valuable working together and bouncing ideas off each other. Some of my classmates proposed strategies that I didn’t initially think of — and I came up with ways to play that helped others. I think that sharing of ideas among a few of my classmates was part of my success.

What did your parents think when you told them you were taking the H&R Block Budget Challenge?

I told them about the simulation, and they were pretty into it as well. They were asking me what was going on and how I was doing.

How has winning this scholarship changed your post-graduation plans?

I always planned on going to college, but I didn’t plan how I would pay for it. So the scholarship definitely helps.

Where do you plan on going to college and using your scholarship?

I plan on going to Michigan or Grand Valley State and studying computer science. I want to probably be a computer programmer or similar type of job.

Would you recommend this simulation to other students? Why?

Going into this, I didn’t know much at all about budgeting. I learned so much information that will help me throughout my life. I honestly think that every high school student should participate in something like that or at least take a class related to it.

Learning financial literacy is fun with the H&R Block Budget Challenge. To find out more about how your teenagers or students can learn real-world money management skills without the real-world consequences, encourage teachers to register here for the next H&R Block Budget Challenge simulation.

How Important is Money to Teens? [INFOGRAPHIC]

How important is saving, spending and investing to teens? Here’s what we found out.HRBDS January-0204-02-01

Thanks to the Budget Challenge, these teens gained confidence in their financial literacy skills and ability to save. Maybe they can keep their smartphones after all!

Learning financial literacy is fun with the H&R Block Budget Challenge. To find out more about how your teenagers or students can learn real-world money management skills without the real-world consequences, encourage teachers to register here for the next H&R Block Budget Challenge simulation.

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Does My Teen Have to File a Tax Return?

With the deadline to file tax returns three months out, and what accountants refer to as “busy season” more than a month away, you may be wondering why we chose now to discuss tax returns.

No, it’s not to stress you out. In fact, it’s quite the opposite.

A little preparation now will go a long way in making your life easier come busy season — especially if your teenager recently entered the workforce in 2015 with a summer or part-time job.

There are several somewhat confusing rules that will determine whether or not your teen needs to file a tax return, so let’s start with the basics.

Is your teen a dependent?

Your child is your dependent if the child lived with you for more than half the year, did not provide more than half of their own support, and they were under 19 years old on Dec. 31. A child under 24 years old who isa full-time student or a child of any age who is permanently disabled may also be a dependent. In most cases, if your teen is a dependent they will not be required to file a tax return. But there are exceptions.

How much did your teen earn this past year?

Even as a dependent, your teen may have to file taxes depending on their yearly earnings. For instance, if their earned income is more than the standard deduction, then they must file. Standard deduction amounts can fluctuate from year to year, so check with the IRS for the most accurate figure.

Alternatively, if your teen has unearned income from dividends, investment gains, or interest that totals more than $1,050, they will be required to file a tax return. (Again, consult the IRS for accurate figures)

Lastly, your teen will need to file a return if the combined values from earned and unearned income for the year totals more than the larger of $1,050 or if their earned income exceeds $5,950 plus $350.

This last part is by no means simple to understand, so it may be best to let a tax professional do the math if your teen has both earned and unearned income for the year. A tax professional can also determine if your teen was hired as a contractor rather than a “regular” W-2 employee and what that means in terms of either owing or receiving money from the government.

Learning financial literacy is fun with the H&R Block Budget Challenge. To find out more about how your teenagers or students can learn real-world money management skills without the real-world consequences, encourage teachers to register here for the next H&R Block Budget Challenge simulation.

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What Did South Lyon High School Students Learn from the H&R Block Budget Challenge?

Students from two classes at South Lyon High School in South Lyon, Mich., are part of the newest batch of money management masters thanks to the H&R Block Budget Challenge. Here are the top 5 things that each team learned by participating in the simulation!

Top 5 Things that the Lucid Lyons Team learned:

  1. That you must be very organized and have a strategy in order to properly manage your money. –Justin
  2. How important it is to keep extra money for unexpected expenditures and how big of an impact they can have on your budget. -Maia
  3. How to manage a budget in order to make sure I have enough money for bills and other expenses. –Kayla
  4. That it is very important to stay up-to-date on all of your bills because if you don’t, it’s very difficult to catch up. –Tony
  5. That I will probably go into debt when I’m older, and I need to focus on knowing when to pay my bills. –Aidan

Top 5 Things that the Liberated Lyons Team learned:

  1. Preparing me for the real world. I now know how to pay bills properly. -Charlie
  2. How important it is to manage my money, so I’ll be prepared for the real world. –Karissa
  3. When I get older, I will try not to have as much frivolous spending, like going out to dinner three times a week. –Spencer
  4. The importance of saving early for retirement. It’s never too early to start. –Brooke
  5. Creating and balancing my very own budget from money I earn. –Steve

 Learning financial literacy is fun with the H&R Block Budget Challenge. To find out more about how your teenagers or students can learn real-world money management skills without the real-world consequences, encourage teachers to register here for the next H&R Block Budget Challenge simulation.

(Photo provided by Noah Westrick)

Meet H&R Block Budget Challenge Scholarship Winner: Noah Westrick

St. Clair (Mich.) High School senior Noah Westrick is a personal finance whiz and now has a $20,000 scholarship to show for it through his participation in the H&R Block Budget Challenge! We spoke with him to learn more about what financial skills have made him real-world ready and how the scholarship changed his life.

Would you say your St. Clair classmates are financially savvy?

In many states, financial classes aren’t required, and I think they absolutely should be. I’ve learned so much, and I’m not even halfway through the year. I’d like to see education like this happen around the world. There are no negatives to it.

Did you have any prior financial education before taking the H&R Block Budget Challenge?

I had nothing, pretty much. All I knew was anything that my family told me and anything I found out on my own. I went into this class where we took the H&R Block Budget Challenge to learn as much as I could about finances,and so far that’s helped me. 

When you were introduced to the H&R Block Budget Challenge, how interested were you in participating?

To be honest, at the beginning, I was ready to do it and thought it’d be a great way to learn. But I wasn’t as excited as I was halfway through when I saw my rank rose from 965 to 57 in one day. Then I started to really enjoy the simulation. Every day I’d wake up, and the first thing I’d do is check and see how I was doing. Near the end, it would be multiple times a day I’d log in to see if anything happened.

Did you talk to your family about what you learned throughout the simulation?

I remember at the beginning when I did the vendor selection I didn’t know what a deductible was, and I had to ask my dad about that.

How did you and your classmates encourage each other to participate?

Two of my best friends, who also won scholarships, all three of us talked all the time about the Budget Challenge and tried to make a strategy together. We did things like that throughout the entire simulation.

Did you enjoy participating in the H&R Block Budget Challenge?

Yes! The H&R Block Budget Challenge taught me a lot, like how to use credit cards properly, what a 401K was, and how to write a check.

Do you think the H&R Block Budget Challenge has helped you become real-world ready?

Yes, I do. I feel like this has improved my real-world skills so much. I feel like this has taken years of hardship of me. I’ve learned so much about finances through the simulation. I loved it.

Where will you be continuing your education after high school graduation?

For my first two years I’m going to go to St. Clair Community College, then I’m going to transfer to probably Western Michigan University, and that’s when I’ll use my $20,000 scholarship.

Is it cool to be financially savvy as a teen?

I think yes, especially in St. Clair, because the winners have been congratulated by everyone. Now everyone wants to take the H&R Block Budget Challenge and win $20,000 too.

Learning financial literacy is fun with the H&R Block Budget Challenge. To find out more about how your teenagers or students can learn real-world money management skills without the real-world consequences, encourage your teachers to register here for the next H&R Block Budget Challenge simulation.