Have "The Talk" Before Your Students Leave For College

If you know some college students heading back to the dorms this month, do them a favor: Tell them now what they probably will wish they'd known when they left home. Make sure they understand how to track their spending and manage their finances before setting foot on campus, say Credit Union National Association Center for Personal Finance editors.

College life comes with many extra expenses - books, tuition, room and board, bills, groceries, parking, and entertainment costs - and some students turn to credit cards as a way to spend now and pay later. According to Sallie Mae's 2009 National Study of Usage Rates and Trends, college students are swiping credit cards more than ever before. Consider these statistics:

• Undergraduates carry an average of $3,173 in credit card debt;
• Eighty-four percent of students had at least one credit card, and half had four or more; and
• Ninety-two percent of students charged textbooks, school supplies, or other education expenses; 84% charged food; and 70% charged clothing.

Although data suggest that many students spend outside their means, there is good news: A large majority of those surveyed expressed interest in more financial literacy education either before or during college.

"The biggest surprise was how fast expenses add up in college," says Hannah Gaskins, a student at the University of Wisconsin-Madison. "I never had to worry about money before getting to college. Learning how to balance a checkbook, use credit, or manage spending would all have been useful skills to know."

Use these tips to help returning students put personal finances in order:

• Make a spending plan. After accounting for all the big expenses--such as tuition, books, and room and board--you will find the small daily purchases can add up quickly. If you buy a $4 latte before class five days a week, that's $80 a month. Then there's dining out with friends, going out on the weekends and other entertainment expenses. Know your income stream each month and align that with your spending. If lattes are important to you, plan for them in your budget.
• Go easy on credit. While credit cards are an important financial tool, they are best saved for emergencies or big-ticket items, not groceries or clothing. If you must use one, try to pay off the balance at the end of the month. Credit union cards typically carry the best rates--don't give in to campus credit card solicitors.
• Keep credit healthy. You need good credit to get car loans, a mortgage, the lowest interest rates--and a job. Roughly 50% of employers now check the credit of possible hires, according to the Society for Human Resource Management (MarketWatch July 30). To keep a good score while in college, pay all bills on time, keep low balances on credit cards, regularly check accounts for unusual activity, and pay parking tickets and library fines. Also, order a free credit report from annualcreditreport.com to track your credit history and check for errors.
• Visit your credit union. The professionals there are available to help you set up accounts or offer personal finance advice, so stop by with any questions.

Tax-Free Weekend

Don't forget that the Tennessee Sales Tax Holiday is this weekend, August 7 - 9. Click here for all the details!

Looking For Work After 50

Many older workers are struggling to land on their feet after a layoff and having to settle for entry-level jobs. Some are starting their own business. If you're older than age 50, and looking for work for the first time in several years, know where to go for help because the job search process has changed (CNNMoney.com July 22).

Compounding the problem is a growing pool of older workers. According to AARP, one of six workers older than 65 is in the work force, compared with one of 10 in 1985.

If you're older than 50 and looking for work, be prepared to use new technology, social networking sites, virtual career fairs, advice blogs and more. Check out these resources:

• LinkedIn. Currently more than 40 million professionals use this site to network, get advice, and connect with recruiters.
• Careerbuilder.com. Look for local jobs, post your résumé, and get tips and advice about staying focused, organized, and flexible.
• Retirementjobs.com, yourencore.com (for scientists and engineers) and retiredbrains.com contain listings and databases for job seekers older than 50. Some of these sites may charge a fee.
• The Five O'Clock Club. For a $49 membership fee, you receive outplacement and career counseling. Visit fiveoclockclub.com for details.
• SCORE. More than 10,000 experienced volunteers help train and counsel small-business operators. Visit sba.gov for details.
• Entrepreneur.com. This site contains information for starting and growing your own business.
• aarp.org/money/personal/real_relief_aarp/. Find information about how to make ends meet while you're unemployed, how to find a job, and where to go for help with medicare and Social Security programs.

One upside to the down economy: More Americans are volunteering. Career counselors stress the benefits, such as broadening your résumé, filling unemployed hours with meaningful work, and making contacts in the community which may lead to full-time, paid positions.

Hybrid Vehicles: Benefits Beyond Gas Savings

As gasoline prices have plunged, so have sales of once hot high-mileage hybrid vehicles. Buyers concluded that the gas savings on hybrids would not recoup their premium prices. But if you have a secure job and think you might buy a car now, a combination of federal and state tax credits can make a hybrid choice more attractive. In addition, in many places hybrids get other perks such as using car-pool lanes and free or reduced-cost parking.

If you're interested in purchasing a hybrid, consider these factors:

* Some states offer their own tax credits, allow car-pool lane use with only one passenger, and provide free or reduced-rate parking for hybrids with stickers.

* Along with their sales volume, the selling prices of hybrids have fallen as well.

* Check out the trade-offs including tax breaks. For instance, you no longer can get federal tax credits for Honda or Toyota vehicles, but some other companies' hybrids still command credits. Depending on what vehicle you choose and where you live, the cost comparisons may vary. To check out the situation in your state go to go.ucsusa.org/hybridcenter/incentives.cfm, maintained by the Union of Concerned Scientists. Web sites of your state motor vehicles, energy, or tax departments also may list such incentives.

* Check for possible insurance savings. Insurance companies Travelers, Farmers, and GEICO are offering 5% to 10% discounts on auto insurance for owners of gas-electric hybrid vehicles.

* Don't assume gas will stay this cheap forever. After plunging from its $4-plus per gallon level to around less than $2 on average nationally, gas prices headed up again in January 2009. The government's Energy Information Administration, Washington, D.C., projects that gasoline will average about $2 a gallon over all of 2009. As gas prices rise, so do the weekly savings from high-mileage hybrids.

If you're lucky enough to afford the hybrid premium, you might want to buy one to help cut energy consumption and spew out less climate-changing gases. Then while feeling you are helping the planet, you also can enjoy stopping less often at the gas station. Visit the professionals at LifeWay Credit Union for all your auto financing needs. Stop by or call us today at 615-251-2089.

Disturbing Trend on the 401(k) Front

While the numbers indicate that workers still are stashing cash in their employer-sponsored 401(k)s, the news is not all good and requires many workers to take action now to catch up (Money August 2009).

A recent survey of 2.7 million eligible employees by Hewitt Associates revealed that 401(k) participation rates have increased from 67.2% in 2005 to 74.2% in 2008, thanks in part to auto-enrollment programs. And 15.4% of 401(k) participants increased their contributions in 2008. But that's the end of the good news.

Here's the bad news:

• Almost 15% of 401(k) participants decreased their contributions in 2008;
• Workers who cut their contributions did so by an average 6.3 percentage points; and
• About 5% of workers stopped saving money altogether in their 401(k) plan in 2008, compared with 3.6% on average each year from 2003 to 2007.

If you've voluntarily cut back on saving, or if you've experienced a reduction or loss in workplace retirement benefits due to stock market losses or company cutbacks, take action and start to play catch-up as quickly as possible:

• Boost your 401(k) contributions. Losing the company match doesn't mean you should stop contributing. Research from Hewitt Associates revealed that the average employee could bridge the gap caused by a 401(k) match suspension by increasing contributions just three percentage points a year.
• Redirect spending leaks to personal savings. Start--or beef up--an emergency fund. This is particularly important if your job is in jeopardy. Ideally, you want three to six months' living expenses handy in a liquid, interest-bearing account in case you need cash quickly. After you've built up a solid emergency fund and you're maxing out your 401(k), then consider an IRA (individual retirement account).
• Resist the urge to cash out. If you're in the 25% federal tax bracket, a $50,000 withdrawal before age 59 1/2 will cost you $12,500 in federal taxes, $3,500 in state taxes (assuming a 7% state tax rate), and $5,000 because of a 10% early withdrawal penalty, according to Fidelity. That means your $50,000 withdrawal from retirement savings shrinks to $29,000.
• Take another look at your retirement plans. As painful as it may be, rerun the numbers in light of lower balances and economic uncertainties. Use several retirement calculators to figure out how much more you need to save to reach your goals. Check out Choosetosave.org/ballpark/ and Bankrate.com (click the Retirement tab then scroll to Calculators).
• Know when you're vested. If your employer terminates your 401(k) plan because of bankruptcy, merger or acquisition, remember that any pre-tax contributions you made, plus earnings, are yours to keep. The company's vesting schedule, though, determines whether you're entitled to the employer contribution portion. If you're not sure when you're vested, contact your company's human resources department.

Do You Need to Purchase Travel Insurance?

With summer travel season in full swing, more vacationers are considering buying travel insurance as a way to relieve stress and gain some peace of mind. But ask questions first to know whether travel insurance is right for you.

A recent survey from staffing firm Randstad U.S. reveals that more than 40% of respondents feel stressed when preparing to be away from work for vacation (suburbanchicagonews.com June 29). And following 9/11, more travelers worry about whether travel plans will go off without a hitch.

Do your homework before purchasing travel insurance:

• Avoid redundancy. Check insurance policies, credit card agreements, automobile clubs, and other memberships for existing coverage. These may already provide adequate coverage for the trip.
• Double check. Review reservations and purchase agreements to see what contingencies are already in place. Airlines, for example, must reimburse travelers up to $3,300 per passenger for lost baggage on domestic flights (airconsumer.dot.gov/publications/flyrights.htm).
• Shop around. Look for coverage differences in competing policies. Read the fine print to understand exactly what is covered and how. For example, some emergency medical assistance policies provide for evacuation to a hospital of the policy holder's discretion, while other policies provide for evacuation to the nearest hospital.

To compare travel insurance plans and coverage options, and obtain pricing, visit insuremytrip.com.

Peer-to-Peer Lending? Credit Unions Do It Better

Lending Club, an online business that operates like a dating service to pair individuals who want to borrow money with people willing to lend it, reports more than 5,000 successful "marriages" worth more than $43 million since its launch two years ago. Credit Union National Association's (CUNA's) Center for Personal Finance reminds borrowers that credit unions remain a better option.

Peer-to-peer lending networks bypass the traditional lending industry by allowing consumers to appeal directly to other consumers for a loan. Peer lenders often can earn more interest lending their money to strangers than they'd earn on conventional investments such as certificates of deposit. Peer borrowers often can get loans at rates lower than banks offer.

Appeals found on peer-to-peer lending networks tend to be personal and emotional, often including photos of kids and pets in an attempt to make their requests for money more persuasive.

Peer lenders respond by offering amounts and interest rates based on their assessments of individuals' personal stories and credit report data that the networks provide. Peer borrowers who appear to be good risks get all the money they want at favorable interest rates. People with less attractive stories and credit histories might have to settle for high rates or no offers at all.

Overall, peer-to-peer networks have about $1.5 billion in loans on the books, a tiny fraction of outstanding bank consumer loans. Should you consider participating in peer-to-peer lending?

"If you have a credit union auto loan, credit card, or mortgage, you already take advantage of the best peer-to-peer network out there," said James A. Hanson, vice president of the CUNA's Center for Personal Finance.

"Ordinary consumers created credit unions more than 100 years ago by pooling their money to make loans to each other," Hanson explained. "Their motive was not profit, but the desire to lend to their peers at better rates than loan sharks and even banks provide."

Credit unions were the first peer-to-peer lenders. If you don't belong to one, you should, Hanson advises, for the significant advantages and safeguards they give members:

• Deposit insurance. Credit union members' savings, from which loans are made, are insured up to $250,000 per individual per account by the National Credit Union Administration, an agency of the federal government. Peer-to-peer lenders have no such insurance protection if a network goes out of business.
• Help to improve creditworthiness. Credit unions, which exist to serve members, go out of their way to help members with poor or new credit histories improve their credit scores and become eligible for better interest rates. Peer-to-peer borrowers are at the mercy of peer lenders' opinions, with no help to improve their chances of getting a loan.
• Professional oversight and other services. Credit union staff are trained to assess loan applications and approve them quickly and efficiently. Loan interest income funds other member services, such as revolving credit (credit cards and home equity lines of credit), checking accounts, debit cards and bill payment services. Peer-to-peer networks are strictly in the closed-end loan business.