child saving some money

Raising Financially Responsible Children

Raising a Financially Responsible Child

Most parents understand that they need to teach their children how to deal with money at some point in their life. Knowing exactly when can be challenging and confusing.

 

Thankfully, the Consumer Financial Protection Bureau (CFPB) released a guide to help families raise money-smart kids. Here are a few important takeaways from the guide that you should consider implementing in your child’s life.

 

Ages 3-5: Introduce basic savings and spending concepts

 

As many of us know, children around this age want everything in sight. They don’t quite grasp the concept that money isn’t an infinite resource for many. According to the guide, parents should introduce the concept of saving and spending.

 

A great way to illustrate this to your child is to give a limited number of coins and talk to them about using them to purchase things or saving them to purchase something more significant in the future. Initially, your child might choose instant gratification over saving for something bigger, but the more you do this exercise the more willing they will be to save.

 

Ages 6-12: Set savings goals

 

When kids enter this range, it’s important that they start to grasp the concept of planning. Savings goals during this period are important and will help with the rest of their financial development down the line.

An exercise that you can do with your kid is to have them write down what they would like in the short, mid, and long-term. This is a great way for them to layout their financial future and then associate a price for each goal. To take it even further, you can attach a budget to show how much they would have to save monthly to reach each of those goals.

 

Ages 13-21: Boost financial confidence

 

Building confidence is so important for teens and young adults. As a parent or a guardian, you can empower your child by ensuring they follow through with their financial plans. If they tell you a goal, continuously check-in and see how they are doing. If you notice them slipping, offer some guidance to get them back on track.

 

The CFPB says that children this age are able to identify trusted sources of financial information. Having the knowledge and confidence to say “No” to financial scams is a valuable skill. For more information, visit https://www.balancepro.org/resources/newsletters/how-to-make-your-child-financially-capable-may-2018/

 

by Spencer Hall

happy young girl photo

Spring into Some Extra Cash

Spring Cleaning is Upon Us

It’s that time of year again when everyone goes through their closets, garages, and storage units, trying to eliminate unwanted items. Before you throw it all away, consider making some money off of it! What you deem as garbage could be an item someone is willing to buy. Here are some helpful tips to keep in mind as you spring into action.

 

Hold a Yard Sale

Yard sales are a great way of getting rid of random items you have around the house. Put them on display in your yard and watch as people line up to take a look. Even with social distancing protocols, you can have a successful sale. Consider teaming up with people around your block to gain more attraction from people passing by.

 

Sell on Facebook Market or Offer Up

Virtually list your items on a social media platform to gain attraction from members of your community. This is one of the easiest ways to get rid of unwanted items. Once you list your item, people will direct message you, either accepting your price or giving you a counteroffer. This is an excellent option if you have a lot of things and want to list them quickly. It takes about 5 minutes for each item to post, and once published, you can sit back and relax.

 

Learn to Earn

Online marketplaces like eBay, Facebook, and Offer Up are all excellent sources of knowledge. If you’re trying to sell something, you can look at these sites to see what people offer for comparable items. Rarely will you be able to sell an item above the market price, so doing your research before you list an item will save you a lot of time and effort.

 

Ditch the Storage Unit

Why are you paying for a place to store stuff you rarely use? This could save you hundreds of dollars a year and give you some extra cash when you sell the unnecessary things within it. Think about items that you may use once every couple of years and ask yourself if it would be cheaper to rebuy that or keep paying to store them. You might surprise yourself with what you can get rid of.

 

Don’t be Emotional!

Emotional connections to “things” are only temporary! Don’t keep items just because you might feel bad 5 minutes after selling them. Declutter your space and get some cash for those unused items. Not only will your bank account thank you, but you’ll breathe a sigh of relief once your living space is more organized.

 

https://www.balancepro.org/resources/newsletters/quick-tips-march-2014/

by Spencer Hall

The Consequences of Debt

What happens if you don't pay your debt?

Debt is an obligation that requires the debtor to satisfy the financial needs of the creditor. Unpaid debt carries many harmful consequences. It's essential to educate yourself with the burdens of debt - here's what you can expect:

  • Unpaid debt will be sent to a collection agency
  • Your credit history and score will be affected
  • Debt takes a hefty amount of time to disappear
  • Contact from debt collectors

 

 

Collection Agency

 

"Under the federal law an original creditor can send your account to a collection agency once it's 31 days past due, though some creditors may try to collect the payment on their own for up to 180 days," according to Christina Lucey, director of product and financial advocate at the personal finance website CreditKarma.com. If you default on a credit card, loan, or monthly utility payments, you run the risk of having your account sent to a third-party collection agency in which you are still liable to pay off the debt.

 

 

Credit Score

 

Debt consumes an outstanding 30% of your credit score. Payment history, credit utilization, age of accounts, and recent inquiries can all negatively impact your credit score if you are dealing with debt. Quickly paying off your balances helps raise your credit score by lowering your credit utilization. If you lose control of your debt and are forced to choose debt settlement or bankruptcy, it will severely damage your credit score in which it takes several months, even years, to recover.

 

 

Impact of Debt

 

Unpaid debt reported to creditors takes an excessive seven years to disappear from your credit report. Creditors reference credit scores as a factor in their decision to offer credit cards, loans, or even approval for housing or vehicles. Debt also contributes to stress and depression, which can lead to more extensive mental health issues.

 

 

Financial Advisor

 

Bad news? You're in debt. Good news? BrightStar Credit Union offers its members free advisors to help with consolidating debt, surviving rough financial patches, and many more financial questions you may have. Advisors at BrightStar use their knowledge and expertise to construct personalized financial plans to achieve their clients' financial goals. Our advisors check in with their clients regularly to re-evaluate current situations/future goals and plan accordingly for continued success.

by Spencer Hall

Zero Percent Auto Loans: The Catch

Is it really zero percent?

Dealerships and manufacturers love to offer zero-percent financing as a way to attract customers. This sounds like a tempting offer, but less than 10% of applicants actually qualify for this special financing. Not only do most people not qualify for this type of loan, but they are also packed with hidden fees and charges. If you are considering a loan option like this, read the fine print very carefully before proceeding with the loan. The last thing you want to do is get stuck with an expensive loan.

Hidden Fees

If a business were offering a truly zero percent financing loan, they would quickly go out of business. Many manufactures and dealerships who provide zero percent financing have hidden fees in the fine print that they might not tell you outright. Typical fees include annual membership fees that range from a few dollars to several hundred and can often make the cheap loan rate very expensive in the long run. Another common term is that the borrower will receive penalties for early repayment, which can include retroactive interest or additional charges.

Credit Trick

A common trick with zero-percent financing deals is to give you a credit limit that is barely above the loan amount. If you exceed that credit limit in the slightest, the creditor may be able to increase your interest rates. These rate increases many times can exceed 20% or more. If you do receive 0% APR and this is contingent on a specific credit limit, be sure you NEVER exceed that limit.

Time Limits

Many loans promising 0% financing require you to pay the loan back in full by a particular time. If this deadline isn't met, large interest amounts may be added based on the original loan amount, not just the remainder. If applied, these rates typically exceed 20% and can turn what seems like a great deal into a complete nightmare. When applying for a loan like this, make sure you're realistic about what you can afford and how fast you can repay the loan amount. If there is any question on whether you'll make the payments on time, find a different loan option.

Built-in Costs

If you're getting a zero percent financing car deal, you might have difficulty haggling to get the car price lowered or any other incentives. This allows the automaker to pocket a nice profit on the car's sale despite offering the 0% financing. These inflated prices can make the 0% financing deal a complete waste of money when. You need to compare the difference in cost to a zero percent financing deal and a low-interest rate with the ability to negotiate on the price.

 

More often than not, 0% financing is not what it's made out to be. There are many hidden fees, time limits, and credit restrictions. When making a large purchase such as a car, it's essential not to get tricked into thinking you're genuinely getting 0% financing. With BrightStar's FREE Auto Advisors, they will negotiate the lowest price possible, and you will receive a 0.25% rate reduction on your BrightStar auto loan.

by Spencer Hall

Understanding Credit in a Changing World

Your Credit Matters!

Understanding your credit is an incredibly vital thing to grasp. It’s what employers, lenders, and even insurance agencies can look at to determine if they will provide you with a service. Especially in today’s world, credit can be a huge lifesaver when needing a little extra help.

What is a credit score?

Your credit score can range from 300-850. Ratings 720 and above will usually give the borrower the best rates available unless it is a thin file (minimal trade lines and history) also known as a false Beacon. The following are the roles of credit scores:

  • One element of the credit decision-making process.
  • Often the key to better rates. Higher scores equal a better rate.
  • Not a money-management tool. This is purely an indicator of how risky you are to a lender.
  • Discovering fraud or credit reporting errors is essential. You want to check your credit score periodically to ensure your personal information hasn’t been compromised.

How Scores are determined

Many different factors determine your credit score. No one knows precisely how much each category is worth, but they are all significant in determining your final number. Below are the different categories with an estimated percentage of how important each is.

  • Types of Credit (10%)
  • New Credit (10%)
  • Length of Credit History (15%)
  • Amounts Owed (30%)
  • Payment History (35%)

There are many mistakes that you can make when it comes to your credit. Each error will adversely affect your credit score. Typically, if you max out your card, it will decrease your score by 10-45 points. Late payments will reduce your score by 60-110 points. A foreclosure will affect your score by 45-125 points, and bankruptcy will decrease it by 130-240 points. Make sure you are responsible with credit to avoid penalties.

How to improve your credit score

It can take time to repair your credit score, but it’s essential to do. The following are ways that you can improve your score:

  • Pay on time, every time. Even if it’s just the minimum, pay it.
  • Pay collection accounts.
  • Keep your old accounts. Don’t cancel old credit cards that aren’t costing you money. The length of your credit is important when determining your score.
  • Avoid maxing out accounts.
  • Limit balance transfers.
  • Avoid excess credit applications. Generally, you only need 3-5 credit cards.

Beware of credit repair companies. They cannot legally do anything that you cannot do yourself for free. Take steps yourself to dispute incorrect or outdated information. Members of BrightStar Credit Union can speak with a financial advisor for FREE to sort out their credit issues and develop a plan to improve their score. Our Balance Financial Advisors will also help build a household budget, understand your credit report, buy a home, protect your identity, rebuild your credit rating, and more.

COVID-19 and your credit score

While employment status isn’t included in your credit report, job loss can still affect your credit. The reason job loss can affect your credit is that you might not stay current on your payments resulting in penalties. Unemployment itself does not prevent you from applying for new credit. The likelihood of a loan denial is much higher with a loss of steady income. Hopefully, during these hard times, you have taken the right steps to ensure your credit score remains healthy.

by Spencer Hall

credit cards

What to Look for When Applying for Credit Cards

credit cards

What to Look at When Applying for Credit Cards

There are many different reasons to apply for a credit card. You could be a student looking to build credit, a new parent looking to spread out payments on baby gear, or a smart shopper wanting to receive cash back. It’s very important that you don’t go overboard with charging everything to your credit card. You need to remember that you eventually have to pay the money back.

There are many things to consider when picking the perfect credit card to apply for.

 

Top 4 Things to Know About Your Credit Card

  1. Annual Percentage Rate (APR) is the cost of borrowing on the card. This comes into effect if you don’t pay the full balance each month. Each card has a different APR and is calculated by your credit worthiness and other factors. Having a low APR will allow you to pay less in interest if you’re planning on keeping a balance. We recommend paying off your card in full each month so you don’t waste money on these interest payments.
  2. The minimum payment is the lowest amount that you need to pay each month to avoid a fee. If you plan on not paying off your balance each month, it’s important to understand the minimum payment amount that you are required to pay. You will need to make sure you can afford the minimum payment each month so you can budget accordingly.
  3. Rewards can come in the form of discounts, vouchers or merchandise depending on bank. These points add up after each qualifying purchase until you have enough to cash out on the reward. One important thing to look at is to make sure the card you are applying for has qualifying stores that you use. Otherwise, this rewards system isn’t very useful since you won’t be shopping where you have the potential of earning rewards.
  4. Cash back is an important thing to look at because who doesn’t like saving money? Typical card will offer around 1.5% on qualifying purchases. Again, you need to look at where you will earn cash back. Steer clear of cards that only offer cash back at certain stores. There are plenty of credit cards out there that will give you cash back on ALL purchases.

Now that you know the basic components of a credit card, you’re ready to start applying! It’s so important to start building your credit history when you’re young because it allows you to get lower rates on auto loans, mortgages, etc.

by Spencer Hall

Rear View Of Loving Couple Walking Towards House

What to Expect When Purchasing a Home

Rear View Of Loving Couple Walking Towards House

Mortgages & Home Buying 101

Owning a home is a dream for many people. It’s something they hope to accomplish at some point in their lives. Sure, it is a hard task that requires a lot of work, but with proper budgeting anyone can do it! Mortgages and home buying can be very confusing and scary but researching the steps will relieve some stress. Provided below are common questions and answers people have.

It takes how many years to save for a down payment on a home?

Unfortunately, saving for a down payment on a home can take a lot of hard work and planning. Using the following example, we can illustrate the process you can take to figure out how long you will need to budget for.

Assume you make $56,000 and save around 15% of your income each month. That’s around $8,400 a year. It would take about 5 years to build a 20% down payment for a $216,000 home.

Buying insurance on your loan will allow you to have a smaller down payment but might be offset with greater monthly payments. With proper planning and a bulletproof budget, owning a home can be easy and a great goal to look forward to!

What Should I Expect at Closing?

Once you’ve taken all of the steps in saving, getting a mortgage, and finding your dream home, it’s time to close! There are few things you should be prepared for.

  • Your lender will send you a closing disclosure that outlines the terms of your loan, final closing costs, and outstanding charges or fees.
  • Do a final walk-through of the property to make sure everything is as it should be. For example, make sure any repairs that were made are as expected and that you are happy with your future home.

What to Bring to Closing

  • You will sign many legal documents between you and your lender.
  • Pay attention to all of the costs and escrow items. A majority of the time, the buyer is required to bring funds in the form of a cashier’s check made out to the escrow company.

Present Parties

  • Closing agent
  • Attorney
  • Title company representative
  • Home seller and their real estate agent

Closing Documents

  • Loan estimate and Closing disclosure
  • Initial escrow statement
  • Mortgage note and Deed of Trust
  • Certificate of occupancy

by alex

How to Use a Student Credit Card

When it comes to credit cards it’s very important to know key factors on how to use them correctly, especially as a student. If you don’t know how to properly use them, you could end up with a bad credit score or worse: end up in debt. To help prevent those scenarios, here are some tips you should know as a student.

You Choose Your Credit Card, not the Other Way Around

It’s important to not just apply for a credit card because you want a “free” new item, like a shirt or phone case. It’s important to research the company and see if the card you want is actually a good offer. Make sure to check for fees, interest rates and of course, compare it to other companies to see which offer is better and benefits you the most. Like stated in thebalance.com, the best credit cards for students to look for have no annual fees, low interest rates, and a low credit limit.

One Credit Card is Enough

As a student, you have a lot to pay for, especially when you think about your future. College includes having to pay for textbooks, food, rent, parking, and membership fees. Having just one credit card can help limit your spending. This will help you to not build up a ton of credit card debt. With one credit card, you can pay for most of those expenses and only focus on one card to pay off.

Control Your Spending

Don’t go over your credit limit! As a student, you might not focus on how much you spend, but it is very important to understand that getting too close to your credit limit makes it more difficult to pay it back in full at the end of each month. Also, know that credit bureaus do not like when you use more than 30% of your credit limit. To avoid overspending, keep track of the items you purchase and record them so you know if you are getting close to your limit.

Your Card, Your Money

Don’t let someone else use your card! When you apply for a credit card it’s for you to use, not anyone else. It’s your credit card, so it’s your responsibility. Allowing a friend or even a family member to borrow your credit card, even if they pay you back, is risky. Also, lending your credit card can cause you to get close to your credit limit because you don’t know how much they are planning to spend.

A Credit Card is Credit, not Debit

Credit cards and debit cards are two different things. Understanding that a credit card is not a debit card is important; don’t take cash out. This is known as a cash advance; credit card companies can charge from 2-5% cash advance fees and other fees due to the withdrawl. It’s important to stay away from cash advances and to read over the terms that go along with cash advances from your credit card company.

Credit cards have many uses, but it’s important to use them correctly. Keep these tips in mind once you receive your first credit card.

by Spencer Hall

5 Money Saving Tricks for this Holiday Season

The Holiday season is upon us and this could either mean you are overly excited about the celebrations or you’re overly stressed out about money. Granted, you can also be both, excited and stressed out. This is normal during this time and we are here to offer you some guidance.

How can you save your money and spend wisely this holiday season?

Make a Budget

It should be no surprise to you that a budget is the smartest way to keep track of your money. You should keep one year-round but you should also have a separate one during the holiday season.

When you create your holiday budget, be smart and avoid setting yourself up for failure. Do not set a budget that is unrealistically low or one that is way too high. Also, think about cutting back in other areas. Can you avoid brunch Sundays with your friends for a month? Or even little things like buying coffee every morning?

Make a list of gifts that you absolutely need to get and another list of gifts you can make yourself. Getting a beautiful printed picture in a cute affordable frame can be just as nice as a $50 bottle of wine. After all, it is the thought that counts.

Make a Potluck

Getting your friends and family together to celebrate is always a beautiful tradition. However, if you are the host, it can be a very expensive one too. Deviate from the all-or-nothing thinking and ask your friends to help you with side dishes and dessert for your celebration. Not only will a potluck save you money, it will also save you precious needed time.

Get Flying Deals and Discounts

If you’re planning on taking a nice trip out of town, search for discounts. Gone are the days where travel agents had the only good flight packages. Now you have a million ways to get discounted fly tickets, car rentals and hotels. In fact, you can even get some travel benefits with your BSCU credit card.

Here is a trick: When you search for flights online, make sure to check at different times of the day. Believe it or not, some flights can get very cheap when you purchase them at odd hours like 2:00am.

Have Will-Power and Know When You Need to Stop

When your list is finished and you’ve checked it twice, it’s time to stop shopping. Know when you’re finished, and avoid stopping by the mall “just to see what they have” – this can lead to making poorly planned purchases and blowing your budget.

Most people get the itch to shop a few days before Christmas, if this is you, then leave some shopping you NEED for the last days. This way, you will still feel like you are getting something but you are not just “checking things out.”

Time to Use Coupons.

If this isn’t typically you, that is okay but during this time you’ll be wise to utilize coupons. You can get coupons online, via email, through a newspaper and you can even buy a cheap coupon book at the mall. The point is you have choices. Do not buy that $25 dress when you can get it for $15. Be smart because every dollar adds up.

Finally, remember to enjoy this time with your family and if you have to spend, spend wisely. We hope this helps.

 

by Spencer Hall

3 Ways to Help Your Teens Build Good Credit

When your teen finally takes the big leap and moves out of the house, they’re going to need a solid credit score for a lot of life steps: renting an apartment, getting a loan or finding a good deal on insurance.

For that reason, it’s important that teens build up their credit scores before they move out. There are a few ways you can prepare them for this in the years leading up to graduation.

  1. Make sure they have a checking account and debit card to go along with it
    Getting your teen started with their own bank account is a significant step in building their credit score without ditching their safety net. A teenager under 18 years old can still sign up for a debit card; they just need a co-signer. Since you are co-signing on the card, your personal account will be linked to your teen’s in case of an overdraft. With this checking account and debit card, you should also teach your teens the importance of managing money well.
  1. Teach them the credit card basics
    Credit cards are a bit more complex than debit cards, so it’s important to sit down your teen and help them understand the basics. Signing them up for their own credit card is a bigger step than signing up for a debit card, but it’s an additional step that will help boost their credit score — assuming they pay the bills on time and in full. U.S. News & World Report contributor Amelia Granger says that the most critical skill a teen can learn is to pay their bills in full, even if that means starting with a smaller credit limit. Make sure you are monitoring your teen’s bills to confirm they’re not damaging their credit score rather than building a good foundation for the years ahead.

 

  1. Help them open a Secured Credit Card
    A Secured Credit Card is the perfect card to teach your teen how to properly manage money. It does this by not allowing them to use the money they don’t have, instead locking in a minimum amount of $500 they must use as if it were borrowed money from the bank. This card will help them improve their credit score and after a year they will be able to apply to a regular credit card.

Responsible money management is tough to practice if you learn it late in life. Your kids will be much better off by teaching them good financial practices.

by Spencer Hall