Consumer brief

YONKERS, N.Y. (8/30/07)--Americans lost billions of dollars to online threats in the past two years, according to Consumer Reports' "State of the Net" survey, and much of that loss could have been prevented. The survey revealed that 33% of respondents don't use software to block or remove spyware, 3.7 million U.S. households with broadband don't have a firewall for protection, and 8% admit to handing over personal information in conventional phishing e-mails over the past two years. The best advice: Invest in good security software, stay up to date on new threats and viruses, and never open suspicious e-mails. Check software ratings at http://www.download.com (Consumer Reports Sept. 2007) ...

Health insurance shortfalls more prevalent

NEW YORK (8/29/07)--To paraphrase a popular movie released in 1970, health insurance does not mean never having to pay for another medical bill. Three out of 10 Americans with health insurance aren't sufficiently covered (CBSNews.com Aug. 17).

In a survey published in the September issue of Consumer Reports, 16% of respondents said they have no health insurance. And some said that to pay their medical bills, they ran up large debts, dipped into savings and put off home expenses.

Consumer's Union offers tips to make the most of your health plan:

• Know your plan. Study your Summary Plan Description or ask your employer for a list of features covered. Make sure you have good hospitalization coverage—the priciest health care most people use.
• Double-check everything. Even if your operation is covered by your health insurance, make sure that all the attending physicians, such as anesthesiologist and radiologist, are covered as well. To find out if a physician is in your plan's network, check with the insurance company and the doctor's billing staff.
• Exercise your rights. You have the right to appeal health-plan decisions you think are wrong. Look for a guide to state laws and procedures when dealing with health plan disputes.

For more information, read "Will Insurance Consumers Benefit from Modernization?" in Home & Family Finance Resource Center.

courtesy of cuna.org

Avoid the latest scholarship scam

ORANGE, Texas (8/28/07)--For some families, the start of a new school year means having to scrape together funds to pay for tuition; some of these families unwittingly fall prey to student loan scams (OrangeCountyNews.com August 15).

Following a considerable increase in complaints in scholarship, loan, and grant services in 2006, the Better Business Bureau (BBB) warns students and parents to watch for financial aid scams and scholarship scams.

Fraudsters often charge a fee ranging from $700 to $900 in exchange for a "guaranteed" scholarship award. One company, College Money Matters, based in Utah, charged the fee for "insider tips" and promised to get grants and help with the entire financial aid process. The company then issued grants in the form of a check and instructed recipients to deposit the check and wire the "processing fee" back to the company. When it was discovered that the check was counterfeit, the victim was forced to pay the financial institution for the money withdrawn as well as for the processing fee. By this time, the company had disconnected its phone lines and website.

The BBB offers tips on how to determine the legitimacy of a scholarship, loan, or grant service:

• Non one can ever guarantee a scholarship or grant, so if you pay money you will not always get it back.
• You easily can access scholarship information via the Internet, so don't believe promises that you won't find the information anywhere else.
• Parents and students--not a company--are the only ones who can complete federal financial aid information.
• It is never a requirement for a scholarship offer to ask for your credit card or checking account number to hold the scholarship.
• Scholarships never cost any money to receive--they are always free.

For more information, read "Make Up for College Savings Shortfalls" in Home & Family Finance Resource Center.

courtesy of cuna.org

Mortgage mess is spawning ground for fraud

NEW YORK (8/27/07)--A new wave of mortgage fraud--spawned by the recent spike in foreclosures--is affecting thousands of vulnerable homeowners and causing federal and state prosecutors to beef up investigations (The Wall Street Journal Online Aug. 18).

Crooks are taking advantage of financially strapped homeowners by offering so-called foreclosure-rescue deals. A recent FBI report confirms different variations on the foreclosure-rescue theme, but generally, rescue companies offer victims a temporary refinancing or sale. In return for being able to remain in the home, the homeowner agrees to make monthly payments until personal finances improve, although new payments often are higher than the original mortgage payment. As a result, the homeowner still cannot make payments, sinks deeper into debt, and is forced to move or be evicted. The new owner then sells the home and pockets the equity.

The U.S. Department of Housing and Urban Development (HUD) offers tips if you're unable to make your mortgage payment:

• Don't ignore the problem. If you don't take action immediately, you'll fall further behind and likely will lose your home.
• Contact your lender sooner rather than later. Ask about options to help you through tough times.
• Open--and respond to--mail from your lender. Failure to open mail cannot be used as an excuse in foreclosure court.
• Understand your rights. Find and read your loan documents; they state what your lender may do if you can't make your payments. Learn about foreclosure laws and timeframes at your state government Housing Office--each state may have different laws. And go to fha.gov/foreclosure/index.cfm for information about foreclosure prevention.
• Set spending priorities. Can you cut certain expenses to help you make your mortgage payment? Consider cutting back on cable TV, entertainment, memberships, vacations and special clothing. If necessary, delay or reduce payments on unsecured debt--such as credit cards--until you've paid your mortgage.
• Turn assets into cash. Do you have a second car, jewelry or even a whole life insurance policy you can sell to help reinstate your home loan? What about taking on a second, temporary job? Every effort you make to beef up finances tells the lender you're willing to make sacrifices to keep your home.
• Don't pay for foreclosure-prevention help. Expect for-profit companies to offer their services--for a fee. They promise help negotiating with your lender, but the fee may cost as much as two or three mortgage payments. Don't bite. Seek free help from a HUD-approved housing counselor.
• Don't become a victim of a foreclosure-recovery scam. If someone claims to be able to stop the foreclosure process if you sign a document appointing them to act on your behalf, that's a red flag. If you sign, you're probably signing over the title to your home to a complete stranger, and you'll be a renter in your own home. Read and understand the terms of all legal documents; get help from a trusted real estate professional, attorney, or HUD-approved housing counselor.

The Federal Reserve has pulled together several web links for anyone facing foreclosure. Go to federalreserveeducation.org/pfed/foreclosure/ for a list of federal and organizational resources. Go to federalreserve.gov/pubs/foreclosure/default.htm for a list of federal-agency-only resources. And for more guidance, read "Lenders, Counselors Help Homeowners Avoid Foreclosure" in Home & Family Finance Resource Center.

courtesy of cuna.org

Consumer brief

WASHINGTON (8/23/07)--A federal law--the Family Educational Rights and Privacy Act (FERPA)--protects the privacy of your child's student education records. FERPA applies to schools that receive funds under an applicable program of the U.S. Department of Education. Parents' rights include the ability to inspect and review the student's records, to request that a school correct any records believed to be inaccurate or misleading, and to give written permission before information from the student's education record is released (there are exceptions). Schools may, however, disclose directory information--such as name, address, phone number, date and place of birth, honors and awards, and dates of attendance--without consent. If you don't want directory information disclosed, notify the school in writing. Schools must notify parents annually of their rights under FERPA. For more information, call 202-260-3887 (http://www.ed.gov) ...

courtesy of cuna.org

Turning 50 is turning point for preretirees

WASHINGTON (8/22/07)--Baby boomers, listen up: Your 50th birthday is not only a personal milestone, it's the perfect time to take stock of your finances for your countdown to retirement, regardless of whether it's five or 15 years away (Kiplinger's September).

What's so special about age 50? For starters, it's the age at which you can begin to make catch-up contributions to key accounts. This year, if you're 50 or older by the end of the year, you can contribute an extra $5,000--for a total of $20,500--to a 401(k) account, and you can contribute an additional $1,000--for a total of $5,000--to an individual retirement account, even if you contribute to your employer's plan.

If you're five to 10 years from retirement, it pays to diversify--perhaps with 50% to 85% invested in stocks, depending on your risk tolerance. However, run the numbers and determine how much money you'll need in retirement. Once you've accumulated enough principal to generate an adequate stream of income in retirement, reduce your risk and switch some of those investment dollars from stocks to bonds. By managing your risk in your later working years, you're in a better position to survive a market turndown or the kind of market volatility the economy has experienced recently.

Running the numbers, though, could reveal that you're going to fall short. In that case, put time on your side. Consider working a few more years and delay the day you start taking withdrawals. You're not alone—AARP estimates that more than three-fourths of boomers expect to work full-time or part-time during retirement. That trend may continue as more companies do away with traditional pension plans, says the Employee Benefit Research Institute (EBRI) (August). In addition, EBRI notes that many workers stay on the job to maintain affordable employment-based health insurance.

What else should you do as you approach your golden years?

• Think ahead. How do you want to spend your time, and how much will your dream cost? Don't assume you'll have the same expenses in retirement as you do now. They may be more; they may be less. It depends on your dream: your hobbies, your travel plans, where you wish to live, and whether you'll spend time with--or taking care of--grandchildren.
• Pay off debts. High-interest credit-card debt could take a big bite of your retirement savings at a time when you're supposed to be enjoying your new freedom.
• Cut housing costs. Will your mortgage be paid off? Do you plan to sell the house and downsize to something less expensive? Or are you considering a reverse mortgage to take advantage of the equity in your home?
• Attend a seminar. Retirement-transition seminars are making the rounds in corporate America, particularly as 401(k) plans supplant traditional pensions. Ask questions about the best withdrawal strategy to make your savings last as long as possible.
• Find an adviser. Even if you think you've got a handle on your retirement and investment strategy, seek advice from a reputable professional. Ask for referrals from family and friends.

Your student ID is more than just a library card

NEW YORK (8/21/07)--Whether you're an incoming freshman or a seasoned senior, all college students want to know how to get the most for their money. Follow these tips and your pocketbook will stay a little fatter (SmartMoney.com Aug. 13).

You're not only going to need a computer for checking your Facebook and MySpace pages, but it also will come in handy for writing those last-minute papers. So Google these three websites to get the best student discount.

• Apple Store for Education. Apple offers 5% to 10% off desktop and laptop computers, as well as software. This discount applies to iPods, too.
• Dell Higher Education. The discount depends on which type of system you purchase, but you can save 2% to 7% off your desktop and laptop computer. And if you've been known to spill things, you might want to buy the protection plan, which would save an additional 8% to 10%.
• HP Academic Purchase. You can save around 6% if you're a student when buying a computer, depending on the model. Also, save up to 50% on select printers and cameras if you shop here.

Make sure, too, to ask if your college offers student discounts on computer hardware and software.

Save money on transportation when Thanksgiving and winter break roll around. If you join the International Student Travel Confederation for $22.50 a year, you'll receive discounts for airlines, trains, buses and ferries. The best part: You can buy your ticket with little or no advance purchase restrictions, giving you some flexibility.

And finally, check out your campus student life and alumni affairs office for discounts at local restaurants and stores. For example, students at the University of Wisconsin-Madison can pick up a Bucky Book that contains hundreds of two-for-one savings and 50%-off purchases.

For more information, read "College Costs Update" in the Home & Family Finance Resource Center.

courtesy of cuna.org

To build or not to build? For some, the time is now

WASHINGTON (8/20/07)--The number of people building homes fell to its lowest level in more than a decade thanks to the worst housing slump since 1991 (USA Today Aug. 15)

Many would-be home buyers--or builders--have taken a wait-and-see attitude about their housing plans, mainly because of the subprime loan fiasco and high-building costs. Some builders are responding by discounting building costs and offering nonprice incentives as well (National Association of Home Builders Aug. 15).

Although the headlines might make it sound like the time couldn't be worse to build, for some individuals, the timing still may be perfect. Owning your own home offers many advantages such as tax benefits and the equity you'll build.

Here's what to consider:

• How much you can afford. One common guideline is that your mortgage payments--which include principal, interest, property taxes, and property insurance--should amount to no more than 33% of your monthly gross income (income before taxes, Social Security, and other deductions). Also, your total long-term debt (such as car payments, college loans and installment payments) should not exceed 38% of your gross income.
• Upfront costs. Buying or building a house means more than monthly payments. Upfront costs include your down payment and closing costs.
• Your budget. Remember, you don't want to put all your surplus into housing. You'll need savings for other big-ticket items such as college expenses, emergencies, and so on.
• Type of mortgage. Mortgages fall into two broad categories: fixed rate and adjustable rate. With a fixed-rate mortgage the interest remains the same throughout the length of your loan. An adjustable-rate mortgage (ARM) has an interest rate that varies over the term of the loan. With an ARM, the starting interest rate is lower than the going market rate, but can increase or decrease a certain amount at specific intervals such as once a year (or every six months, three years, or five years).

If you're thinking of building a house, talk to the people at your credit union. They can look at your financial situation and help determine what you can afford.

And, for more information, read "Construction and Bridge Loans Match Special Needs" in Home & Family Finance Resource Center.

courtesy of cuna.org

Consumer brief

MADISON, Wis. (8/16/07)--New passport rules have created a backlog of passport applications. When you finally receive yours, check it for accuracy. Elaine Grenzow, tour coordinator at Burkhalter Travel, Madison, Wis., says to immediately check the spelling of your name, your birth date, and whether the photo shown is actually yours. If you find an error, take it back to the post office or court house where you applied and ask to have it sent back to the U.S. Passport Office. You also can contact the Passport Office directly (http://travel.state.gov). If you're going to travel in the very near future, a local representative or state senator may be able to expedite your request (Burkhalter Travel Aug. 9) ...

courtesy of cuna.org

College budgets overlook $20 billion line item

WATERTOWN, Mass. (8/15/07)--Many college students overlook a $20 billion expense when they tally their budgets: travel.

A survey from StudentUniverse.com indicates that the 17 million students heading to school, including three million freshmen, expect to spend that much traveling to and from school this year, while two-thirds admit they don't factor the cost into their spending plans. And even among students who account for travel, 10% report spending more than they budgeted.

"Students are true frequent travelers, traveling eight times per year on average and representing the most active segment of leisure travelers," says Anand Rajaratnam, head of research and marketing for StudentUniverse.com. "With that much travel, the costs can quickly add up. The good news is there are student-specific discounts they can take advantage of," he says.

According to the survey, conducted by telephone and Internet of 896 students nationwide, students spend an average of $1,200 per year on travel. The most popular travel reasons cited:

• Going home or to school (56%)
• Spring break (47%)
• Thanksgiving break (40%)
• "Other" unspecified travel reasons (57%).
  

Student discounts and services catering to students can help save money. In the travel field, for example, survey sponsor StudentUniverse.com claims to save students an average of 13% on airfares available elsewhere on the Web. Student rates are available on everything from museum and movie tickets, to eateries, haircuts, dry cleaners, apparel, and ski passes.

Students can mind their spending plans with these ideas:

• Share the ride. Carpool with other students traveling to and from your home town.
• Make debit a habit. Only spend money you have and you'll never be in a credit crunch.
• Go for the old. New textbooks cost about 25% more than used. Unless it's a book you know you'll keep or it's only available new, stick with used.
• Anticipate expenses. A lot of expenses come at the beginning of the semester or school year. You might be expected to pay first and last months' rent and a security deposit at the beginning of your lease, for example.
• Sack your lunch. You can manage your spending and your eating habits at the same time by packing lunch--and save an average $3 a day, or $60 a month.
• Choose the right financial institution. Members of not-for profit credit unions will save you money on fees, lower loan rates, and higher savings rates.

For more information, read "Credit/Debit Cards, Checking Accounts, Teach Teenagers to Handle Money" in the Home & Family Finance Resource Center.

courtesy of cuna.org

Flying? Why not upgrade?

NEW YORK (8/13/07)--If you're itching to get that upgrade to first class on your next flight, consider purchasing a Y-UP fare. It's a full, unrestricted fare in coach, but potentially can upgrade you to first class for free (The Wall Street Journal.com July 31).

The cost of a Y-UP fare is different, depending on the competition in certain markets. You may find one as cheap as $240 round-trip. Don't be disappointed if the price isn't as cheap as you'd expect. Try using farecompare.com, which has a search option exclusively for Y-UP fares.

Airlines have a difficult time selling first-class seats on domestic flights, so offering upgrades for sale has been profitable. A few years ago it used to be nearly impossible to get an upgrade if you weren't elite or willing to pay dearly.

But most important, ask for the Y-UP fare when booking your flight, because agents won't present it as an option. And remember, you'll only receive an upgrade if there is extra room in first class.

These factors increase your chance of an upgrade, according to MSNBC.com:

• The airline overbooked economy seats, but room is still available in business or first class;
• You're traveling without kids;
• You're dressed in business attire;
• You're simply being courteous and kind;
• You get there early before there is a line full of passengers.
  

For more information, read "Ten Ways to Avoid Airline Flight Delays" in Home & Family Finance Resource Center.

courtesy of cuna.org

Credit card costs burden the underprivileged

WASHINGTON, D.C. (8/14/07)--A new study by Demos, a non-partisan research center, says that the effects of credit card deregulation over the past few decades has forced a disproportionate amount of low-income people to pay extremely high fees and interest rates (demos.org).

The federal government began deregulating the credit card industry in the late 1970s and deregulated more in the mid-1990s. The effect on consumers is plain: The highest reported annual percentage rate (APR) was 22% in 1990 and skyrocketed to 41% in 2004.

Promotions such as low APRs, rewards programs and cash-back incentives are created to attract customers, but someone has to pay for those rewards. Often, the burden falls on those who already are in a financial bind by way of high interest rates, excessive fees and hidden traps.

Key findings from the Demos study:

• One-third of cardholders have interest rates more than 20%.
• People who have a household income below $25,000 and a credit card balance are more than twice as likely as households earning $50,000, and more than five times more likely as those earning $100,000, to pay interest rates of more than 20%.
• Of cardholders, 15% of African-Americans, 13% of Hispanics, 11% of single women, 7% of whites, and 6% of single men pay interest rates of more than 20%.

Penn State University offers these suggestions to reduce the cost of credit cards.

• Understand fees before you begin charging. Your card may seem like a good deal from the get-go, but even one small mishap--say, a late payment--could change your interest rate and fees for the worse.
• Go to your credit union for a credit card. Experts agree that credit unions are one of the best places to get a credit card because they charge lower fees and have lower interest rates.
• Scrutinize your bill each month for tricky fees. No, it's not fun, but credit card companies may slip in unfair fees that are hard to catch. If you find a fee that you think is unfair, call the customer service line and request that it be taken off.

courtesy of cuna.org

Summer fun on a shoestring

WASHINGTON (8/8/07)--If you're planning to squeeze in a last-minute, low-cost summer vacation before school starts, it pays to know how to score discounted or free admission to your favorite concerts, plays, museums or amusement parks (Kiplinger.com July 26).

Plan ahead to stick to your budget:

• Put it off. Don't buy your theater tickets in advance. Check to see if the theater sells discounted "rush" tickets, and wait until just a few hours before the show is scheduled to buy your tickets. However, be prepared for popular shows to sell out quickly. Be flexible.
• Go to the little guy. Consider the venue when buying tickets to a concert or play. The more well-known a venue is, the more you'll pay for tickets.
• Volunteer. Whether for concerts, sporting events or plays, most venues are more than happy to have volunteers. In exchange for doing some work such as handing out programs, you can catch part of the action--for free.
• Do discount days. Zoos and parks usually designate days when you can get in for free, such as the first of every month. Museums and galleries often offer free admission on Friday evenings.
• Ask about student discounts. Don't forget to bring your student ID. If you're not a student, ask if your credit union offers discounted tickets.
• Do lunch. Anxious to check out that new restaurant? Go for lunch instead of dinner. The prices usually are cheaper, and the entrées probably are the same as they would be for dinner. The same goes for movie matinees vs. evening shows.

If you're looking to take a weekend getaway, SmarterTravel.com recommends going to these websites for a discounted package:

• Bedandbreakfast.com. You can search by geographic location or by genre, such as romance or culinary.
• Lastminute.com. For procrastinators, this website specializes in travel within a two-week period. You also have the option of customizing your package.
• Hilton.com. If you prefer something more recognized than a local bed and breakfast, this is the site to visit. Hilton hotels put together promotions offered around the world.

For more information, read "Research, Plan, and Budget for That Special Vacation" in Home & Family Finance Resource Center.

courtesy of cuna.org

Online auctioned gift cards possibly a scam

McLEAN, Va. (8/7/07)--If you're a frequent visitor to eBay and other online auction sites, you've probably seen an increase in gift cards for sale. Before you throw one of these enticing discounted cards into your "shopping cart," realize it could be part of a new cyberscam (USATODAY.com July 23).

Security experts are calling it cyber money laundering, or e-fencing--yet another way thieves are converting stolen data into cash.

Here's how it works: A thief steals someone's credit card number and purchases a gift card online. The thief then turns around and sells it to the highest bidder on an online auction website or for a discount at a so-called gift card exchange website.

Though it's tempting to take advantage of this so-called bargain, your best bet, according to the Federal Trade Commission (FTC), is to purchase gift cards from sources you know and trust, and to avoid buying cards from online auction sites.

Tower Group, a market research firm headquartered in Needham, Mass., predicts that financial institutions and retailers will issue a record $97 billion in gift cards this year, up from $82 billion last year.

Whether you're purchasing a gift card for someone else or you've received one, the Office of Thrift Supervision and the FTC offer these tips:

• Card use. Check terms and conditions. There may be limitations on where you can use the card. Must it be used at the physical store or can you use it online as well? Check to see if you can use it internationally.
• Expiration date. Does the card have one? Some cards expire as soon as six months from the date of purchase; some won't expire at all.
• Fees. The most common fee for gift cards, and probably the most aggravating, is a fee for not using the card. Go figure. After a period of time, say one year, you might be charged something like $2 a month if you haven't used the card. It's best to use the card soon after receiving it.
• Replacement. Check to see if the card can be replaced if lost or stolen. If you can get a replacement card, most issuers will make you provide the identification number of the card--write it down and keep it at home.
• Balance inquiry. Find out if there's a way to check the remaining balance by phone or Internet.
• Add value. Can you reload or add more money to the card? If you can, check to see if there is a fee for doing this.

courtesy of cuna.org

Credit line decreases can hurt your score

NEW YORK (8/6/07)--In the past, credit line increases have given consumers a headache, but now credit line decreases are causing just as much frustration (smartmoney.com July 26).

When lenders reduce credit limits, your total debt utilization ratio--the ratio of credit in use to total credit available--increases, which causes your credit score to drop. And, if your credit limit drops before you realize it and you try to make a purchase, you could be slapped with an overdraft fee or denied credit.

There isn't a clear reason for the sudden surge in credit line decreases. If creditors perceive that you're at higher risk of default--that is, when you're close to (or in) debt trouble--they're more likely to decrease your credit line. The actual triggers for reducing credit lines, however, are unknown.

Here are some tips from Smartmoney.com to help you avoid the pitfalls of a decreased credit limit:

• Check accounts online regularly. You will notice credit limit decreases much faster if you monitor card activity online. Creditors must notify you by mail whenever your credit card terms change, but it can take time for notification to reach you.
• Keep a card or two with low or no balances. That way, if your limit is decreased on one card, your debt utilization ratio doesn't skyrocket.
• Stay out of credit card debt trouble. Credit card companies are most likely to reduce the credit limits of higher-risk customers. Avoid making late payments or applying for too much credit. As a general rule, anything that could drop your credit score could also make you vulnerable to a credit limit decrease.

For more information, read "Online Banking Makes Money Management Simple and Safe" in Home & Family Finance Resource Center.

courtesy of cuna.org

Market News

MADISON, Wis. (8/3/07)

• Vehicle sales geared down last month and domestic automakers' market share fell below 50% for the first time in history. Vehicles sold at a seasonally-adjusted annual pace of 15.54 million units in July--down from 15.6 million in June and 17.2 million in July 2006. Sales had averaged about 16.7 million during the first half of this year. The housing slump has dampened demand for new vehicles because consumers are having a harder time extracting equity from their homes. The domestic brand share of the vehicle market declined to 48.9% in July. At the same time, the combined market share of the Big Three Japanese automakers rose to 34.6%--from 33% in June and 32.1% a year earlier. Despite a slight decline in sales for July, Toyota Motor topped Ford as the nation's 2nd-largest automaker (Economy.com and Reuters Aug. 2) ...
• Both domestic and foreign automakers ramped up their incentive spending in July, according to Edmunds.com. The average new-vehicle incentive was $2,524 last month--4% higher than a year earlier. U.S. automakers offered the biggest incentives--led by Chrysler at $4,082. Japanese automakers also boosted their incentive spending. Toyota increased its average incentive 28% from a year ago to $1,492 per vehicle. Honda boosted its average incentive by 28% to $1,146. Incentive spending helped accelerate sales of light trucks in July, despite high gasoline prices. Light truck sales rose to 8.2 million from 8 million, while auto sales declined to 7.4 million from 7.6 million (Economy.com and Reuters Aug. 2) ...
• Mortgage rates eased for a second consecutive week, according to Freddie Mac. The average 30-year, fixed-rate mortgage (FRM) edged down 1 basis point to 6.68% this week, while the 15-year FRM fell 5 basis points to 6.32%, and the one-year, adjustable-rate mortgage (ARM) dropped 10 basis points to 5.59%. "Market investors seeking safety from the subprime fallout bought Treasury securities, pushing bond yields down and allowing mortgage rates to drift a bit lower," said Freddie Mac Chief Economist Frank Nothaft. He noted that home sales and prices continue to weaken, but said there are some tentative signs "that the market is stabilizing." A year ago, the average 30-year FRM stood at 6.63%, while the 15-year FRM was at 6.27%, and the one-year ARM averaged 5.69% (CNNMoney.com Aug. 2) ...
• First-time claims for unemployment insurance increased by 4,000 during the week ending July 28 to 307,000, the Labor Department reported Thursday. The four-week moving average, which smoothes out weekly volatility, declined by 3,500 to 309,000. In another hopeful sign, continuing claims (the number of people still on the benefit rolls after an initial week of aid) fell by 16,000 during the week ended July 21 to 2.525 million. So far this year, weekly unemployment claims have averaged 318,600--about steady with last year's 313,000 average. Analysts say the job market has helped sustain consumer spending even as the housing recession has made it tougher for consumers to obtain extra cash by borrowing against the value of their homes (Bloomberg.com Aug. 2) ...
• More older Americans are staying in the workforce today because they are concerned about having affordable health insurance and adequate retirement savings, according to a report by the Employee Benefit Research Institute. The percentage of people aged 55 and older who are in the labor force surged to 45% in 2006--from 38% in 1993. Increased participation in the labor force occurred among both men and women and for all race and ethnicity groups. The study also found that the percentage of people aged 65 to 69 who are in the workforce jumped to 29% last year, from 18% in 1985. The study said participation rates have increased for older Americans because employers are phasing out or ending their retiree health-insurance plans and because employers are shifting to defined-contribution retirement plans from defined-benefit plans (The Kansas City Star via Yahoo! News Aug. 2) ...
• The average account balance of U.S. workers who held 401(k) accounts from 1999 through 2006 saw an average 8.7% annual increase in their balance--to $121,202 at the end of last year, according to a study by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute. The median account balance rose at an annual rate of 15.1%, to $66,650. "The most telling numbers are the consistent participants because that gives you a picture of what happens if a person stays in a plan," said EBRI President Dallas Salisbury. In other findings, most 401(k) assets are in stock. And last year, 18% of 401(k) participants who are eligible for loans had taken one against their accounts (The Wall Street Journal Online and American Banker Aug. 1) ...

courtesy of cuna.org

Consumer brief

NEW YORK (8/2/07)--You have to have nerves of steel these days to stomach a roller-coaster ride on the stock market. Recent volatility is a good reminder that saving is for the short term and investing is for the long term. What should you do when the market takes a dive? Go back to the basics. Contribute as much as you can to your 401(k); take advantage of the company match so you're in a good position to regain any losses once the market recovers. Keep your portfolio well diversified with a mix of stocks and bonds that match your risk tolerance and that help you ride out market highs and lows. Use dollar-cost averaging: Invest the same amount of money each month to lower your average costs over time (Money.CNN.com July 26) ...

courtesy of cuna.org

Children are listening. Parents, are you ready to talk?

McLEAN, Va. (8/1/07)--Parents who lament the fact that their kids don't listen to them might be overlooking a golden opportunity to communicate (PRNewswire-FirstCall July 29).

According to Capital One Financial Corporation's third annual back-to-school survey, 87% of college students say they rely on their parents for financial information. But less than 30% say their parents have advised them about spending wisely on the nearly $700 on average of school supplies they'll buy this fall.

Young people have high expectations for parental guidance in money matters. High school students are even more likely (90%) than their college-age siblings to look to their parents for tips. But even so, youth and young adults rate good old trial and error as high or higher than their parents as the source of financial wisdom. Although 90% of high school students say they learned about money management from personal experience, a whopping 98% of college students rely on the school of hard knocks.

"Despite looking to their families for general money management advice, most young adults 'learn as they go' when it comes to handling personal finances," said Diana Don, Capital One's director of financial education. "Without ongoing parental guidance and check-ins about money matters, young adults are setting themselves up for missteps that can lead to bad financial habits."

Part of the problem with parents' reluctance to talk about money with their children stems from the difficulty many adults have making ends meet. One of two parents who responded to a 2003 Northwestern Mutual survey said that they don't set a good example in managing money and are not capable of properly teaching their children to do so.

"That's why parents should start talking about money with their preschoolers," says Philip Heckman, director of youth programs at the Credit Union National Association (CUNA). "The earlier you begin the conversation, the easier it is. You can improve your own money habits by beginning to teach your kids the basics of smart spending and saving before they even start school."

For free lessons to teach basic money concepts to preschoolers, go to creditunion.coop and download teaching activities and other resources such as Thrive by 5 from CUNA.

For information and materials to teach older children about money, visit jumpstart.org and search the online Jumpstart Coalition for Personal Financial Literacy Clearinghouse.

courtesy of cuna.org