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5.26-blog

Your Teen Wants You to Cosign a Loan—Now What?

Let’s paint a quick picture of the college landscape: there is $1.2 trillion in outstanding student loan debt, and, if the current system remains, every graduating class from this point forward will become the most indebted class in history.

That may seem dreary, but it’s important not to paint college affordability with a broad stroke because a picture may still be worth 1,000 words, but a solid financial college plan is worth way more than $1,000.

Part of that plan may include student loans. Before you sign on the dotted line as a cosigner for your teen and send them on their merry way, consider these important facts:

  1. Consider ALL options

Federal loans never need a cosigner and have more favorable terms for students to pay back the money in a fair and timely manner. Look into these types of loans first, along with any and all scholarship or grant opportunities. Only then should you look into private loans, which require a cosigner.

  1. Know the implications of becoming a cosigner

If you’re thinking about making a big purchase like a car or a house, you may want to reconsider your choice to cosign a student loan. Becoming a cosigner makes it more difficult to take out other loans or credit cards. Plus, if you miss any payments, your credit score will suffer. And if you want to get out of the pact, think again. It’s next to impossible to relinquish your responsibility once your teen is 21 years old and your name is still on that paper. In extreme cases, cosigners sometimes remain responsible for payments even if the person who is receiving the loan passes away. That is why many experts recommend a life insurance policy in conjunction with a private student loan.

  1. Be sure your teen is on board with the plan

Every parent will differ in their approach to their teen’s financial contribution. If you expect your teen to contribute, ensure that they can do so responsibly. You can get your teen accustomed to this responsibility by setting up a chores-for-allowance system. A more extreme option is to have your teen sign a document that stipulates they will repay any missed payment and/or fees you cover over the life of the loan. In an ideal world, this will mostly serve as a real-life reminder of the loan and not a first step toward a date in daytime television family court.

  1. Be realistic with the loan

One of five things all students should know about loans is to only take out the amount of money they truly need. The general rule of thumb is to estimate the salary your teen could earn upon graduation and stay below that number. If you learn better through hard figures, The Wall Street Journal reported that between Oct. 1 and Dec. 31, 2015, private debt collection companies hired by the Department of Education garnished more than $176 million in wages from defaulted student loan borrowers in order to pay back their debts. You don’t want that for your teen, do you?

After poring over the reality of the situation, you may find it in the best interest of both you and your teen not to cosign a student loan. You may get a cold shoulder or two because of it, but you will be able to say, “I told you so,” when they graduated debt-free.

Spending Your First Bit of Hard-Earned Cash [VIDEO]

Do you remember your first job? Of course you do! But do you remember how you used the money you earned? H&R Block Dollars & Sense asked parents and teens about how much they earned, and if they made smart financial decisions with their earnings. How does your experience compare? Watch the video to hear what people had to say.

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Money Savvy Tips for Planning the Ultimate Vacation

How do we love thee, summer? Let us count the ways: warm weather, no school, no homework and vacations!

But before you pack up a suitcase with bathing suits, sandals and sunscreen, consider this: the average vacation expense per person in the United States is $1,145. Sorry to rain on your seasonably warm and sunny parade.

With Memorial Day right around the corner, this is no reason to stay cooped up at home in front of the AC; just an excuse to get creative and frugal with your vacation plans. Follow these savvy tips to plan the ultimate vacation this summer without breaking the bank:

Create an overall vacation budget

A budget is kind of like the Clarendon filter of money management — that is to say it works every time. Check out how much money you have saved and then determine how much of that you are willing to spend. This should without a doubt be your first step, as it will dictate where you can go and for how long.

Create a food budget and stick to it

Yes, another budget. It’s important to consider this separately because it sometimes gets overlooked — and also because food is sort of essential to keep on living. Meals can be the activities in and of themselves when on vacation, and they can also simply be fuel for a larger activity. Decide how many times you want to eat out so you can afford it. The other meals you can pack up and eat while you explore your new surroundings.

Look for alternative accommodations

Hotels aren’t the only place to lay your head at night. See if a distant relative or long-lost friend lives in area you’re visiting. Hostels and rooms on Airbnb also provide much cheaper options. And last but certainly not least, consider the old tent and sleeping bag. Camping out is a fun way to spend a vacation — and it will make your vacation seem like an adventure!

Keep an eye out for deals

If you’re flying, make sure you use all the tools at your disposal to find the cheapest flight. It’s also possible to find package deals or guided tours that combine all the possible expenses of a trip into one fee. It may seem like a large amount of money up front, but it usually ends up being cheaper than paying for everything separately. Plus, it helps you stick to your budget.

Off-the-grid “staycation”

As much as you may want to travel to a distant land or tropical locale, remember that vacations serve as a great way to spend quality time with family and friends. Exploring a new area that’s close by will still be fun with the right people, and it won’t send you into debt until next summer. Take it a step further and go “off the grid,” and try not to check your social media notifications or check email.

So get out there and make your summer frugal and fun! Before you know it, it’ll be fall, and we’ll be packing our backpacks to heading back to school.

5.19 blog

What Do I Need to Know About Credit Reports?

Credit scores, credit reports, credit bureaus — you hear these terms thrown around on TV commercials, but what do they really mean for you?

Think of it like this: your credit score is kind of like a quick snapshot that shows lenders your financial reliability. It affects your ability to get a loan and determines how much you will have to pay to borrow money.

The most reliable and widely used credit score is the FICO® score. It is used by 90 percent of lenders, so this is the credit score you should always look to pull. FICO scores range from 300-850 — the higher the score the better.

Where can you find your credit score?

That’s where the credit report comes in. The Federal Trade Commission allows every person in the United States one free copy of their credit report every 12 months. That includes one report from each of the three nationwide credit reporting agencies — also called credit bureaus — which are Experian, TransUnion and Equifax.

What’s the difference between the three bureaus?

Each bureau serves the same function (to keep information about your credit history) but they remain independent of each other, sort of as a way to keep the whole process honest. They generally all have the same info on you but not always. That’s why the individual credit scores can differ from one another. You can pull all three reports at once to get the clearest picture of your overall credit health, or you can stagger them over the course of the year to see how your credit score has fluctuated and keep an eye on accuracy.

Where should I pull my credit report?

The only authorized website where you can obtain your free credit report is annualcreditreport.com. Since you will be providing personal data like your social security number, it’s imperative that you use a trusted site for this service and this resource is recommended straight by the US government.

Keep in mind that you can only pull your credit report if you have accumulated enough information. That means you must have at least one account that’s been opened for a minimum of six months and at least one account that has reported to a credit bureau within that timeframe.

5.5blog

4 Things Teens Absolutely Must Know Before Taking Out a Student Loan

A college degree today is equivalent to a high school diploma 50 years ago. That is to say it’s an expected, if not necessary, level of education needed in order to secure a job in a number of professional fields.

The one major difference between high school and college is, of course, price. But given the importance placed on higher education, many families will do whatever it takes financially to ensure their child can earn that degree.

For most, that means taking out student loans. Before you and your teen go down that road, you should both be aware of the implications going forward.

These are four things you and your teens absolutely must know before taking out a student loan:

  1. Almost 71 percent of bachelor’s degree recipients will graduate with a student loan.

As a parent, you might think loans aren’t necessary since they weren’t when you were looking into college. According to a 2015 Wall Street Journal article, your memory doesn’t deceive you — less than half of students graduated with student loans two decades ago and about 64 percent did 10 years ago. These days, however, roughly 3 out of 4 students will need to borrow money to graduate.

  1. The average 2015 college graduate with student loan debt will have to pay back a little more that $35,000.

If your teen is one of those three students who will take out a loan, they can expect to be saddled with $35,000 upon graduating. That amount is more than double what borrowers had to pay back two decades ago, even after adjusting for inflation. So not only are more students taking out loans, they’re also paying more in loans.

  1. Only borrow what you need.

It’s generally thought the biggest loan you can get is the best. This is not true. A loan should strictly serve to cover the cost of college — this includes spending costs in addition to the basic costs of education, room and board. When taking out a loan, look at what the averages are and then apply yourself and your situation against those. This is one of several tips you should consider during the process.

  1. Know what types of loans are out there

When applying for financial aid, loans are normally included in the school’s offer. Some student loans are made through the federal government, while others come from private sources like banks for financial institutions. Generally speaking, federal loans offer borrowers more ways to pay the money back along with a lower interest rate.

Make sure your teen has a basic idea of what they’d like to study and what they hope to achieve while in college. They can figure it out while already there, but that’s a costly deliberation period. Getting some real world experience first either through a job, volunteering, or even traveling can help hone their interests and formulate a plan for a worthwhile college experience.

Remember to remind your teen to speak to someone in his or her desired college’s financial aid office. They’re there as resources to help you!

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

4.26-blog

5 Ways to Use Your Tax Refund Wisely

Tax season gets a bum rap.

While tax day is often associated with having to pay the government, most people actually will receive a check compensating for money they’ve overpaid in taxes throughout the previous year. In 2015, the average refund was $2,893.

Adults usually direct this tax refund toward boring stuff like bills, but teens are free to spend this lump sum of money as they please, right? This is a free country, so technically, yes; but we suggest applying a bit of wisdom when it comes to your refund check.

But before you can start planning what you’ll do with your sweet, sweet cash, you should first know if filing a tax return is even necessary. Once you’ve got that straightened out, follow these five suggestions on how to use your tax refund wisely:

  1. Save for college

Nearly 70 percent of students are taking out loans to pay for college, and on average those loans amount to $33,000 per student. When you account for the interest, many people continue paying off student loans well into their thirties. By starting your own savings now, you could avoid or diminish the realities of this inconvenient, postgraduate truth. 

  1. Pay down debt

The average U.S. household carries $15,762 in credit card debt. While you shouldn’t have nearly that much as a teen, you’d be surprised how quickly it can pile up. If you have a credit card with even a small amount of debt, using your refund check to pay it off is a smart move. Not only does it help you prevent the dreaded black hole of debt, it also improves your credit score — win-win.

  1. Start an emergency fund

The definition of an emergency is a serious, unexpected situation, which is why you ought to plan for one ahead of time. If you don’t have money saved, the effects of a serious emergency (e.g., a medical emergency) can be compounded. Only 51 percent of Americans have enough cash in their emergency accounts to clear themselves of credit card debt. Be like the other 49 percent.

  1. Buy something useful

This may come as a shock, but when you move out of your parents’ house you lose the use of all their things. From food to paper towels, these are things you’ll need to budget for as an adult. Even more pressing is the fact that items you need like cars and computers tend to need repairs and you’ll have to cover the costs. Use your refund check now to upgrade any item you simply will be lost without.

  1. Invest

What’s the only thing better than having money? Making more money with it! Investing is no doubt complicated, but there are very safe ways to invest money. Not only will it boost your bank account, it will also prevent you from spending it frivolously.

For more info on jumpstarting a better tomorrow with your refund check, read this post from H&R Block Talk.

4.19-blog

Can You Pass This Financial Literacy Quiz?

Think you know everything about how to manage money successfully? For example, do you know the difference between different types of bank accounts? What about the fees associated with a credit card? Take this financial literacy quiz and prove it!

Q1: Uh oh, you forget to pay your cell phone bill and get a late notice. What kind of repercussions can you likely expect?

  • A. Your phone will be shut off
  • B. You’ll be charged a late fee
  • C. Your next bill will be double the price

Q2: Which type of account allows you to make an unlimited number of withdrawals without a fee?

  • A. Certificate of deposit
  • B. Checking account
  • C. Savings account

Q3: Your auto insurance plan has a $600 deductible. Driving home from work, you get into an accident and cause $800 worth of damage to your car and $1,500 to the other person’s car. How much of the cost do you have to cover?

  • A. $200
  • B. $1,700
  • C. $600

Q4: Which of the following is incorrect about using an ATM?

  • A. ATMs are usually open 24 hours a day.
  • B. You can get information about your account at an ATM machine.
  • C. You can get cash anywhere in the world without a fee.

Q5: What does APR stand for?

  • A. Annual Perpetual Rate
  • B. Annual Percentage Rate
  • C. Annuity Per Refund

Q6: How much should be in your emergency fund?

  • A. $1,000
  • B. Two months worth of rent or mortgage payments
  • C. Six months worth of living expenses

Q7: What is the recommended max percentage of your take-home income you should spend on monthly housing expenses?

  • A. 30 percent
  • B. 45 percent
  • C. 50 percent

Q8: You earn $8 an hour at your job at the mall and worked 11 hours this pay period. When you get your check, you notice it’s less than the $88 you expected. Why is that?

  • A. Your employer has the right to withhold money from your paycheck at will.
  • B. The store you work at is allowed to take money out at will.
  • C. State and federal taxes have been taken out of your paycheck.

Q9: Student loan borrowing is at an all-time high, and so is the default rate on making student loan payments. What kind of relief should you expect on your student loans if you file for bankruptcy?

  • A. Significant relief—all debts are wiped clean so you can have a fresh start.
  • B. Moderate relief—usually payments and amount owed are adjusted to match your ability to pay.
  • C. No relief—it’s extremely rare to get any relief for student loans from bankruptcy

Q10: What does a FICO score determine?

  • A. Your credit rating
  • B. Your interest rate
  • C. The fee you will be charged when taking out a loan

Check your answers below! How’d you do? Do you need to brush up on your financial literacy knowledge or do you have what it takes to have a successful financial future? Let us know in the comments section.

 

 

 

Answers:

  1. B
  2. B
  3. C
  4. C
  5. B
  6. C
  7. A
  8. C
  9. C
  10. A