How To Prepare Children To Be Financially Responsible

Over the past six months Americans have watched the plummet of the stock market, the failure of some of the largest investment banks and financial institutions, the collapse of the real estate market, soaring foreclosure filings, and a record number of individual and corporate bankruptcy filings.

We desperately search for answers as to how the greatest nation in the world and the most powerful democratic government could end up so financially upside down in such a short period of time and apparently without warning, it would seem.

As difficult as these questions are to answer, one question keeps coming to mind, in all of this turmoil: what message are we sending our children. How, as parents, and role models, are we supposed to teach our children the basic fundamentals of finance, economics, and the principles of money, when we have obviously not learned (or perhaps, simply not practiced) what has been taught to us?

As much as we would like to shift the blame to any and every one who could or should have been looking out for our best interest, we must spend some time reflecting and searching within to locate the responsibility that is necessary to ensure that future generations do not face this same fate or, worse yet, that they suffer a fate far worse which would be to never enjoy the financial fruit of our, or our past generations. We can - and must - resume (or begin, depending on your perspective) preparing our children with the rudimentary skills to navigate the rough waters ahead.

With the internet, television, and other media outlets, our children have so many more tools available to them than we ever did. Despite the educational resources, we continue to believe that someone more qualified should be teaching them about financial responsibility. Surely such things are taught to them in school. The truth is it is the responsibility of society - and parents in particular - to teach such nuts and bolts of money management to our children.

While we may very well be learning it with our children, we must seek out programs that offer a model for responsible financial behavior. These programs or resources need to provide parents with age-appropriate techniques on how to teach kids about the value and responsible use of money. In addition, we need to participate in a program that creates an environment for education and learning but is not necessarily product specific. Those are hard to find, or so we tend to think.

Keeping that in mind, how can one go about locating such a program?

There are various non-profit organizations that offer resources to assist such as Junior Achievement (http://www.ja.org/), The Financial Literacy Education Commission (http://www.mymoney/. gov), The Jump Start Coalition for Financial Literacy (http://www.jumpstartcoalition.org/), and the Institute for Financial Literacy (http://www.financiallit.org/);

Speaking with your trusted financial advisors, such as your accountant, attorney, or financial planner who can guide and direct you to materials that you can use to educate yourself and your children that will be appropriate to build on what knowledge you already possess.

originally published: theadvertiser.com

One Way Not To Cut Back On Your Spending

With financial circumstances being what they are all across the country, most people are looking for ways to reduce costs while hoping against hope that income doesn’t plummet through the floor.

Now don’t turn your nose up, sensing this is another old guy’s sob story about how tough things are trying to make ends meet on a fixed income. There are enough horror stories filling the pages of our newspapers and emanating from our radios and television sets. Another one here is not in order.

The economic situation is dire and seemingly gets worse day-by-day as the stock market sinks ever further and the value of whatever nest egg might have been fades away.

I am not totally convinced that President Obama’s blueprint for snatching our bacon from the fire is totally on target, but if it takes a bit of pork to put an end to the malaise that is threatening to toast our banks, mortgage companies and sprawling financial investment system, then it’s worth a try.

Just a week or so ago, I was considering ways to do my share to shore up the lagging retail and service sectors when I made a troublesome discovery: The validity my primary plastics was expiring, and quickly. One was set to become victim of a cease-and-desist order at the end of February, the other at the end of March. Needless to say, I had not given either a thought until I got a new issue in the mail -- from the company whose card had the later expiration date.

That got me to wondering. Why is Company C ahead of Company A when it comes to providing replacements? Was I being told, politely, that I was no longer worthy of an account with American Express? Me, a valued member since 1973? Gosh, I may have had a couple of months since then when I didn’t pay the whole balance, but I always got caught up quick.

Was the credit market really so tight that AmEx could no longer cover me for a few bucks a month? Naw. No way! Call ’em.

The polite gentleman who took my call was very professional and, after I revealed a good portion of my personal history (Is it really important what my first pet’s name was?), he confidently advised me that my replacement card had been “posted” (maybe a bit of a giveaway, there?) on Jan. 15.

“Well, I don’t have it. Where do you suppose it might be?” I wondered aloud.
“You should have received it. It was sent to 58 Faustiana Place, in Maryville, 64468.”

Ooops!

“But my address is 5B Faustiana Place,” I said, already beginning to sense trouble.

“No problem, sir. We’ll get a new card right out to you. Is there anything else I can do to help you today?”

He obviously did not share my concern about the possible whereabouts of the card that was perhaps — well, who knows where — and assured me my concerns were totally unfounded. He said I would receive my new card promptly.

Sure enough, in a week, a plain white envelope with a rather innocuous return address appeared in my mailbox. There was only a card and a brief message inside, telling me to call a certain number to activate my replacement, or that I could do it online. Being the old-fashioned kind of guy that I am, I went with the phone option, and was promptly speaking with a lady with a very sweet voice, and an Omaha accent.

After only a couple of minutes, and the revelation of my mother’s maiden name, I was assured that I was good to go. Just like W after 9/11: “Go shopping.”

So I promptly set about rendering the old card, which had by then become invalid anyway, even more useless. Scissors in hand, I began to disarm that old, worn out number.

I first clipped the holograms from either end of the magnetic strip on the back, and then dissected the remainder of that code-carrier that undoubtedly reveals more about me than I care to even think about. The next target was the row of 15 raised numbers that set me apart from the remainder of the creditors in the world.

My stomach knotted up before I was even through the five-digit sequence at the end of the string.

“Oh ‘shucks’ (or something like that), I’m cutting up my new card! You idiot!”

Another call to American Express resulted in the same question, “What can I do for you?”

I said I’d tell her only if she swore to never tell anyone else, and then confessed to my stupidity.

“Oh, that’s okay. We get five or six of those calls a day. Can you tell me the make of your first automobile?”

At this writing, I am awaiting the delivery of New Card II; confident I won’t foul up again. I mean, how can I when I’ve already shredded the old card, and the old new card?

On second thought ….

originally published: wickedlocal.com

Fed Chairman Suggests Tighter Grip On Big Firms

The chairman of the Federal Reserve, Ben S. Bernanke, called on Tuesday for a broad overhaul of financial regulation that would include a powerful new regulator to keep a much tighter grip on institutions considered “too big to fail.”

At the same time, Mr. Bernanke stoked a new controversy by endorsing more flexible accounting rules that would not force banks to book as many losses during an economic downturn as current rules require.

In so doing, the Fed chairman came closer than other top officials to supporting a policy known as “regulatory forbearance,” a phrase that became an epithet among policy makers after the savings and loan crisis of the early 1990s.

Although the Fed chairman did not use that phrase, he called for reducing the “pro-cyclical” aspects of current regulation — the tendency of accounting rules and capital requirements to aggravate both financial retrenchment during a slowdown and financial excesses during a boom.
Investors and supporters of the banking industry cheered. The battered shares of Citigroup and other banks rose more than 20 percent, though part of that was in response to a statement by Citigroup’s chief executive that the bank turned a profit in the first two months of this year.
But some regulatory experts denounced Mr. Bernanke’s proposals, saying they would merely give banks new ways to hide their true losses.

“If Bernanke thinks he can regulate the cyclicality out of banking, then he’s a fool,” said Lynn Turner, a former chief accountant at the Securities and Exchange Commission. “If you’re regulating banks and you’re doing a good job, you’re making sure that the banks are building their capital reserves during good times. The problem in this country has been that the regulators became captives of the banks and didn’t require them to build up enough capital.”
Speaking to the Council on Foreign Relations, Mr. Bernanke said rigid capital requirements for banks may be encouraging them to cut back even further on lending during a recession than they would if they had more flexible requirements. That could slow down economic activity and add to the banks’ problems.

“We should review capital regulations to ensure that they are appropriately forward-looking, and that capital is allowed to serve its intended role as a buffer — one built up during good times and drawn down during bad times,” he said.

The Fed chairman also said regulators should consider relaxing so-called mark-to-market accounting rules that require financial institutions to value securities in their portfolio on the basis of their current market price. Banks and Wall Street firms, which are holding vast quantities of mortgage-backed securities for which there is no market and hence no market price, have been lobbying intensely for months for relief from mark-to-market rules and other forms of flexibility.

But many accounting and regulatory experts vehemently argue that such changes would make it easier for banks to hide their losses, thus increasing the overall level of uncertainty.
The Fed chairman made it clear he sympathized with the banks, saying that the current rules might be aggravating the ups and downs of the financial system by forcing the banks to write down their investments more than necessary because the market for them had dried up.
“Determining appropriate valuation methods for illiquid or idiosyncratic assets can be very difficult, to put it mildly,” Mr. Bernanke said, adding that “further review” of the current rules “would be useful.”

Responding to questions after his speech, Mr. Bernanke said he strongly supported the general principle that assets should be valued at current market prices. But, he added, the current rules did not lead to accurate valuations in times like these.

“Even the strongest proponents of mark to market acknowledge that in periods like this, when some markets don’t even exist or are highly illiquid, that the numbers that come out can be misleading,” he said.

In Congress, lawmakers are already beginning to draft legislation to overhaul the entire system of financial regulation, which experts say played a central role in the explosive growth of reckless mortgages and risk-taking by financial institutions during the housing bubble.

The House Financial Services Committee has scheduled four hearings on the issue for later this month, and one of its subcommittees will hold a hearing on mark-to-market rules Thursday.
Mr. Bernanke also took aim at the problem of very large institutions, like Citigroup and American International Group, that had become so big that their failures would have jeopardized the entire financial system.

Though he defended the government’s decision to bail out such companies, he warned that the expectation of additional bailouts encouraged companies to take bigger risks and grow big enough to get protection.

“The belief of market participants that a particular firm is considered too big to fail has many undesirable effects,” the Fed chairman said. “Indeed, in the present crisis, the too-big-to-fail issue has emerged as an enormous problem.”

Echoing proposals by some lawmakers, Mr. Bernanke called on Congress to create a superregulator that would oversee risks and risk-management practices across the financial system and have authority over companies regardless of whether they were banks, brokerage firms, insurance companies or hedge funds.

Stopping short of saying the Fed should become the superregulator as some have proposed, he said “a good case” could be made for putting the Fed in charge.

originally published: nytimes.com

Primer On Obama, Earmarks, Omnibus

With the omnibus coming to a Senate vote as early as tomorrow, here are some points and figures to keep in mind:


-- The FY'09 omnibus appropriations bill contains 8,570 known earmarks totaling $7.7 billion. That amount represents less than 2% of the $410 billion legislation. (Taxpayers for Common Sense)

-- The total amount in earmarks for FY'09 is $500 million less than it was in FY'08

"When you add the $6.6 billion in disclosed earmarks that were in the three FY09 spending bills that passed in the fall (Defense, DHS, MilCon/VA) you end up with $14.3 billion worth of disclosed earmarks in FY09. The apples-to-apples comparison from 2008 yielded $14.8 billion, so there was a $500 million reduction in disclosed earmarks between FY08 and FY09." (Taxpayers for Common Sense)

-- During the campaign, Obama promised to reform the earmarks process -- "go line by line to make sure that we are not spending money unwisely" -- but he never said he'd eliminate earmarks

"Well, Senator McCain is absolutely right that the earmarks process has been abused, which is why I suspended any requests for my home state, whether it was for senior centers or what have you, until we cleaned it up… But let's go back to the original point. John, nobody is denying that $18 billion is important. And, absolutely, we need earmark reform. And when I'm president, I will go line by line to make sure that we are not spending money unwisely. (First Obama-McCain debate)

-- However, Obama did tout that his stimulus didn't contain a single earmark

"What it does not contain, however, is a single pet project, not a single earmark, and it has been stripped of the projects members of both parties found most objectionable." (Presidential news conference, 2/9/09)

-- White House: Obama doesn't "control everything that happened before he became president"

MR. GIBBS: Well, I think you saw remarks this weekend by the chief of staff and the budget director about the legislation. Obviously the President is concerned, despite the progress that has been made in this town, about the size and the scope of earmarks that we've seen over the past few years. I think even the most cynical among us would have to at least acknowledge that the number of overall earmarks has been cut.

I think it's important to recognize that a piece of legislation probably twice the size of the piece of legislation that you're asking me about was passed through Congress at the President's direction without earmarks. This is the finishing up of last year's appropriations legislation.

And I think what's most important and what the President would tell you is important here is that though he doesn't control everything that happened before he became President of the United States, that dozens and dozens and dozens of appropriations bills will go through Congress and come to his desk over the course of the next four years. (Gibbs press briefing, 3/2/09)

-- Still, Obama will -- in the future -- outline a process moving forward on earmarks

MR. GIBBS: The President you will see and hear outline a process of dealing with this problem in a different way, and that the rules of the road going forward for those many appropriations bills that will go through Congress and come to his desk will be done differently.
Q So he'll have a new standard that he's going to lay out for the appropriations bills that will come to his desk that are actually written while he's President?
MR. GIBBS: Yes, sir.
Q And when is this?
MR. GIBBS: Soon. Yes, sir. (Gibbs press briefing, 3/2/09)

originally published: msnbc.com

A Woman's Guide To Investing Wisely

If Carrie Bradshaw (played by Sarah Jessica Parker, in the popular HBO television series, Sex And The City), is your idol, this is just what you need to read.

Like her, you are young, footloose and fancy-free, making enough money to have a great life and are thoroughly enjoying your independence.

Perhaps, you will think about helping your family later. But, right now, if you are doing any investing, it is only because of taxes.

You are not interested in building wealth and creating assets. This is, no doubt, a financially lucrative phase made all the more enticing due to lack of commitments and complete freedom to spend your money the way you wish.

But you cannot possibly spend it all because, remember, your financial resources are your strength. They will help you be independent.

So don't swipe that card at your whim, or you will feel your financial strength ebbing away.
What does a modern day woman do to handle her financial life? How and where do you invest your money?

Here are a few tips:

-Put 90 per cent of your earnings into wealth generating instruments such as shares and equity mutual funds. Since women are not traders by nature and have the patience to see the fruits of investments, they can make most of this avenue. But understand a bit about risk management first.

-Place about 10 per cent of your proposed savings into bank deposits or similar. Unlike single men, a woman should never be broke.

-Invest in life insurance prudently, and only if you have dependents on your income.

-Stay away from fixed investments such as Fixed Deposits, Public Provident Fund, National Savings Certificates, etc. Your goal is to build wealth, say, by the time you are married, which may be about three to 10 years away. These instruments will not serve your medium term purpose.

-If you are looking to get married, do ask questions to gauge how your prospective partner manages money and, more important, how he saves.

-Women are born with a softer streak so excessive gifting/helping is second nature. But avoid going overboard here.

-Beware of women-oriented offers/products such as credit cards, insurance and the like. They may be expensive or regular products repackaged.

originally published: ibnlive.in.com