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Save for Education

College Education Financial Aid 529 Plans
Written by Katie Bryan · 25 October 2013

Saving for education is the second most popular goal (after saving for emergencies) savers select when they pledge to save with America Saves. There are many different things to factor in when saving and paying for college. The information and resources below can help you plan for this large expense.

Cost of College

According to the College Board, the average cost of tuition and fees for the 2015–2016 school year was $32,405 at private colleges, $23,893 for out-of-state residents attending public universities, and $9,410 for state residents at public colleges. The average cost of room and board in 2015–2016 ranged from $10,138 at four-year public schools to $11,516 at private schools.

Minimizing the Cost of College

Find Free Money

·       Grants and scholarships are often called “gift aid” because they are free money—financial aid that doesn't have to be repaid. Grants are often need-based, while scholarships are usually merit-based. Learn more at StudentAid.ed.gov 

Consider Community College

·       According to the College Board, the average community college costs $3,435 and the average student received enough grants and tax breaks to cover the typical tuition and all but $10 of the average $1,230 bill for textbooks and school supplies. Attending this type of college for your first two years can save you thousands of dollars.

Work While in School

·       Earning money while you attend school is one way to help keep costs down – especially if you don’t have enough saved to pay for college in full. Any money you earn is money you don’t need to borrow.

Federal Work-Study 

·       Provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses. The program encourages community service work and work related to the student’s course of study. Learn more at StudentAid.ed.gov

Ways to Save for College

        529 Plans

·       A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

·       Learn more about these types of plans, the fees associated with them, how they impact financial aid eligibility, and if they are right for you at SEC.gov

       Savings Bonds

·       The Education Savings Bond Program permits qualified taxpayers to exclude from their gross income all or a portion of the interest earned on the redemption of eligible Series EE and Series I bonds issued after 1989.

·       For more on bonds visit TreasuryDirect.gov 

Taking Out Loans

·       If you need to borrow money to pay for college or career school, start with federal student loans. Learn more at StudentAid.ed.gov

Importance of Credit History

Credit History Credit Score
Written by Katie Bryan · 23 October 2013

Good credit plays an important role in your financial life. Not only is it essential for obvious things like qualifying for a loan or getting a credit card, but also for less obvious things like getting cellular telephone service, renting a car, and perhaps even getting a job. Click here to download the Importance of Credit History and Successful Savings Packet or read below.


 

WHAT IS A CREDIT REPORT AND SCORE?

A credit score is a three-digit number that measures how likely you are to repay a loan on time. It uses information from your credit report to predict the risk of you not paying that loan back 24 months after scoring.

A credit report is an explanation of your credit history. It states when and where you applied for credit, whom you borrowed money from, and whom you still owe. Your credit report also tells you if you’ve paid off a debt and if you make monthly payments on time.

How can I get a copy of my credit report and score?

The three nationwide consumer reporting companies- Equifax, Experian, and TransUnion are required by The Fair Credit Reporting Act (FCRA) to provide you, at your request, with a free copy of your credit report once every 12 months. (Available at www.annualcreditreport.com)

How much does it cost?

You will have to pay around $14 to receive an addition credit report within 12 month of when you received your free report. To receive a copy of your credit score, you will have to pay one of the three nationwide consumer reporting companies around $14.

Who do I get help from if I find something wrong?

You are responsible for correcting inaccurate or incomplete information in your report. There are two things you should do if you find an inaccuracy. First, tell the consumer reporting company (where you got the report from), in writing, what information you think is inaccurate. Consumer reporting companies are required to investigate anything in question and must forward all relevant data to the organization that provided the information. Second, tell the creditor or other information provider in writing that you dispute an item.

Who has access to my credit report?

The FCRA specifies who can access your credit report. Those who have access to your credit report include creditors, insurers, employers, and other businesses that use the information in your report to evaluate your applications for credit, insurance, em­ployment, or renting a home.

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WHY IS SAVING SO IMPORTANT TO CREDIT?

It is important for all Americans to have savings. Having a savings account allows people to pay for emergencies, gives people financial freedom, and can contribute to a higher credit score. A high credit score can make it easier to rent an apartment, get utility services, and even get a job.

Paying for Emergencies

Having a savings account allows people to pay for emergencies on their own instead of turning to high-interest credit cards or payday loans. Not being able to pay off these types of loans can severely affect your credit score.

Higher Credit Score

Having savings allows you to pay your bills on time. Paying your bills on time can lead to a higher credit score.

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HOW DO I START SAVING?

When it comes to saving money, the sooner you start the better. It's not an act that's accomplished overnight, but a process that happens gradually and grows over time. Just remember, slow and steady wins the race.

Making ends meet can be a challenge. And you may wonder how it's possible to spare anything. But any amount saved - a quarter, a dollar - is progress. Those quarters and dollars add up. As you get into the habit of routinely "paying into your savings" you'll see the money you're setting aside grow.

The first thing you have to do to start saving is take a look at your finances and make sure that you are spending less than you earn.

·         Make a budget

·         Find ways to cut back on spending

·         Set up automatic savings 

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WHY IS GOOD CREDIT MANAGEMENT SO IMPORTANT?

Good credit plays an important role in your financial life. Not only is it essential for obvious things like qualifying for a loan or getting a credit card, but also for less obvious things like getting cellular telephone service, renting a car, and perhaps even getting a job.

Managing your credit will also help you save for a rainy day. A strong credit history, reflected in good credit scores, will let you qualify for lower interest rates and fees, freeing up additional money to set aside for emergencies, retirement, and other smaller unexpected expenses. Decreasing debt and increasing savings reduces stress and leads to greater financial freedom.

The good news is that having good credit is not difficult. Simply follow these five fundamentals of good credit management and you will build and maintain a credit history that will enable you to get the credit you need, when you need it.

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5 TIPS FOR BUILDING GOOD CREDIT

  1. Establish a credit report

To establish a credit report you must have an open, active credit account. To get your first credit account talk to your bank or credit union.

  1. Always pay as agreed

Make at least the minimum payment due each month and never be late. Delinquent payments and payments that don’t meet at least the minimum contractual amount will have the most immediate, negative impact on your credit report and credit scores.

  1. Keep your balances low

Keeping your balances low as compared to your available credit limits is a sign of good credit management and shows lenders you are a good credit risk. Your utilization rate, also called your balance-to-limit ratio is a key component to credit scores.

  1. Apply for credit wisely

Do not apply for multiple accounts in a short period of time. Taking on large amounts of debt in a short time is a sign of high credit risk. Apply for credit when you need it, and only in the amount you need. Just because credit is offered, doesn’t mean you have to accept it.

  1. Demonstrate good credit habits over long periods of time

In order to have good credit scores you must demonstrate a habit of good credit management over a long period of time.

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IS CREDIT REPAIR A GOOD IDEA?

Every day, companies target consumers who have poor credit histories with promises to clean up their credit report so they can get a car loan, a home mortgage, insurance, or even a job once they pay them a fee for the service. The truth is, these companies can’t deliver an improved credit report for you using the tactics they promote. It’s illegal: No one can remove accurate negative information from your credit report.

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WHAT IS LOAN CONSOLIDATION?

A Direct Consolidation Loan allows a borrower to consolidate (combine) multiple federal student loans into one loan. The result is a single monthly payment instead of multiple payments. Use a loan consolidation calculator to find out if this is a good option for you.

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WHAT IS A DEBT MANAGEMENT PLAN?

Organizations that advertise credit counseling often arrange for consumers to pay debts through a debt management plan (DMP). In a DMP, you deposit money each month with a credit counseling organization. The organization uses these deposits to pay your credit card bills, student loans, medical bills, or other unsecured debts according to a payment schedule they’ve worked out with you and your creditors. Creditors may agree to lower interest rates or waive certain fees if you are repaying through a DMP. Some organizations that offer DMPs have deceived and defrauded consumers. If you are paying through a DMP, contact your creditors and confirm that they have accepted the proposed plan before you send any payments to the organization handling your DMP.

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WHERE CAN I GET HELP WITH DEBTS I CANT AFFORD TO PAY?

In most communities, there are agencies that can help you manage your debts. The most helpful and most widely available are non-profit Consumer Credit Counseling Services (CCCS). CCCS counselors can work with you privately to help you develop a budget, figure out your options, and negotiate with creditors to repay your debts. Call 1-800-388-2227 to locate the office nearest you.

If your debts are too large, you may want to consider bankruptcy. Bankruptcy can give you a fresh start, but it is a serious step that can make it harder to get credit for years after you declare bankruptcy. Call your local Legal Aid or Legal Services office for advice. If you don’t qualify for their services, ask them for a referral to a bankruptcy attorney 

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FDIC MODEL SAFE ACCOUNTS TEMPLATE

The FDIC Model Safe Accounts Template provides insured institutions with guidelines for offering cost-effective accounts that are safe and affordable for consumers. The accounts reflect the following guiding principles: transparent and reasonable rates and fees and access to banking services that are FDIC insured.


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FREQUENTLY ASKED CREDIT QUESTIONS

Do Missed Payments Affect My Score?

How many payments you miss, if you don’t pay the debt at all, and how long ago late payments occurred are all important. The further in the past a late payment occurred, the less impact it will have on credit scores and lending decisions. That is why it is important to catch up on your payments if you have fallen behind.

How Can I Get Credit if I Can’t Open a Credit Account?

If you cannot get a credit account through a bank or credit union, you may need a friend or family member to cosign for you or add you as an authorized user on an existing account.

Will Closing Accounts Raise My Credit Score?

Be cautious about closing accounts. Doing so will reduce your available credit limits and will increase your overall utilization rate, making it appear as if you have suddenly taken on more debt. The result is a temporary negative impact on your credit scores.

Will Applying for New Accounts Raise My Credit Score?

Each time you apply for credit an inquiry is added to your credit report. Inquiries are a record that a lender has reviewed your credit report in response to your application for credit. They indicate that you may have new debt that is not yet shown as an account in your credit report, and so represent an unknown risk to lenders. For that reason, recent inquiries can have a small but meaningful impact on credit scores. However, that impact is temporary.

How does Shopping for a Car or Home Affect My Score?

Inquiries for auto purchases and mortgage loans are unique. Because lenders recognize you will shop for the best auto and mortgage loan rates, inquiries for those types of loans in a short period are counted as a single inquiry by credit scoring systems. Doing so enables you to find the best rates with little or no impact on your credit scores.

What is the First Step to Rebuild My Credit Score?

The first step in rebuilding strong credit scores after having credit problems is to bring your accounts current by paying any remaining past-due payments. Before your credit scores will improve significantly, however, you must show that you have regained control of your credit by making on-time payments over time. The more serious your past credit difficulties, the longer it will take to rebuild a positive credit history and strong credit scores.

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ADDITIONAL RESOURCES

Industry Resources:

Consumer Federation of America’s Vantage Credit Score Website
http://www.creditscorequiz.org 

http://www.creditscorequiz.org/espanol

Financial Industry Regulatory Authority (FINRA) website
http://www.finra.org/

My Fico, About Credit Scores
http://www.myfico.com/crediteducation/creditscores.aspx

Money Under 30, Understanding “Your Number”
http://www.moneyunder30.com/what-is-a-credit-score

Bankrate, Credit Scores Explained
http://www.bankrate.com/brm/news/cc/20010223a.asp

Government Resources:

U.S. General Services Administration, Federal Citizen Information Center and Fair Isaac Corporation (2008)
http://publications.usa.gov/USAPubs.php?PubID=3379

Federal Trade Commission’s, Facts for Consumers (2011)
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm

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Saving Outside of Work Through an Individual Retirement Account (IRA)

Retirement
Written by Super User · 23 October 2013

Even if your employer doesn’t offer a retirement plan, you can still save for retirement, and get some tax benefits in the process, by putting money in an Individual Retirement Account (IRA).

Who qualifies to make IRA contributions?

Anyone who earns income (or receives alimony) can put money in an IRA. Couples can also put money in an IRA for a non-working spouse.

Each person can put up to $5,500 in an IRA if you are age 49 or below and up to $6,500 if you are age 50 or above for the 2014 and 2015 tax years, so long as your contributions do not exceed your earned income. Each year, you have until the April 15 tax filing deadline to make your IRA payment for the previous tax year.

There are two main types of IRA – traditional IRAs and Roth IRAs. In addition, those who are self-employed can put money in a SEP-IRA. Each has its own set of rules and offers different tax benefits. This article will deal with traditional and Roth IRAs.

Traditional IRAs are open to anyone up to the age of 70 1/2. Money in a traditional IRA grows tax-deferred. In other words, you won’t have to pay taxes on any earnings until you take the money out. That allows your money to grow faster than it would if you had to pay income tax each year on those earnings.

Get more answers to your FAQs about IRAs.

Traditional IRAs Offer Tax Deductable Contributions

Your contributions to a traditional IRA may also be tax deductible, which is an attractive feature for many people. That’s because you get a portion of your IRA payment “back” immediately in the form of a lower tax bill.

If you are not eligible for an employer sponsored retirement plan, you can make tax-deductible contributions to a traditional IRA. You can also do so if your income falls below certain levels, regardless of your retirement plan status.

For tax year 2011, couples filing a joint tax return who report adjusted gross income of up to $90,000, or singles with income up to $56,000, are eligible to make fully deductible contributions to a traditional IRA. In addition, taxpayers with incomes slightly above those limits – $90,000 - $110,000 for couples and $56,000 - $66,000 for singles – can make partially deductible contributions.

When you put money in a traditional IRA, you can’t get it out before you reach age 59 1/2 without paying a penalty, although there are exceptions. Some people consider this a disadvantage of traditional IRAs, but it can help keep your retirement savings on track.

Once you start taking money out of a traditional IRA in retirement, you will have to pay ordinary income tax on any earnings and on your tax-deductible contributions, but no federal taxes on withdrawals of non-deductible contributions. Depending on where you live, you may have to pay state taxes on those withdrawals.

Get more answers to your FAQs about IRAs.

ROTH IRAs Offer Tax-Free Withdrawals

The benefits of Roth IRAs are almost exactly opposite those of traditional IRAs.

You can’t make tax-deductible contributions to a Roth IRA. On the other hand, the money you put in a Roth IRA grows not just tax-deferred, but tax-free. In other words, you won’t have to pay any federal taxes, or state taxes in most states, on your earnings when you take money out, provided you meet certain requirements. You are also less likely to have to pay a tax penalty if you withdraw money early from a Roth IRA.

There are no age limits for contributions to a Roth IRA, so long as you have earned income. On the other hand, there are income limits. However, those limits are quite high.  Singles who report adjusted gross incomes of up to $107,000 in 2011 and couples with incomes up to $169,000 qualify for a full contribution. Taxpayers with slightly higher incomes – $107,000 - $122,000 for singles and $169,000 - $179,000 for couples filing jointly – can make partial contributions.

Get more answers to your FAQs about IRAs.

Where Can You Open an IRA?

 

Virtually all major financial services companies – such as banks, brokers, insurance, and mutual fund companies – offer IRAs and make it easy to open an account.

A reputable mutual fund company that offers a wide selection of funds, low costs, and reasonable minimum investment requirements, is a particularly good option for many. Many of the top companies also offer excellent educational materials to help you pick the best funds for you.

Regardless of where you decide to open an account, your retirement savings will get a real boost if you commit yourself to making annual contributions to an IRA.

For additional information, see the American Savings Education Council Web site at www.asec.org.

Learn More:

Saving at Work Through a 401K Plan

Retirement
Written by Katie Bryan · 23 October 2013

1. Participate in Workplace Retirement Plans

Find out if your employer offers a 401(k) plan or other such defined contribution retirement plan. If you aren’t already enrolled, do so immediately.

If you are just getting started in your career, don’t make the mistake of thinking you’ll have plenty of time later to fund your retirement. Starting early is one of the best things you can do to ensure that you set aside enough to fund a comfortable retirement.

Consider this example: an employee who starts setting aside just $100 a month when they are 21 will have over $191,000 saved when they retire at age 65, assuming they earn five percent a year on their investments. In contrast, a worker who waits until age 40 to begin would have to save nearly $350 a month to achieve the same result.

Don’t let the prospect of having to decide how to invest your retirement money scare you off. Just participating is more important than selecting the perfect investments. Also, many plans today include “lifestyle” mutual funds, with investment styles designed to match the age and expected retirement date of participants. This is a simple option you can use if you don’t feel up to the job of designing your own portfolio.

2. Take Advantage of Any Matching Contributions

Many employers offer to match employee contributions, up to a certain percentage of the employee’s salary. If your company matches contributions, and you can afford to take advantage of the full match, do so. Life doesn’t offer many opportunities to get a guaranteed 100 percent return on your investment, but this is one of them.

3. Gradually Increase Your Contributions

Remember, when you are getting started, no contribution is too small. Even if you only set aside one percent of your salary in a retirement plan, that’s an important start. But over the long term, you’ll almost certainly need to do more.

One way to build your savings is to increase the amount of your salary that you save each year by one percentage point. If you can time the increase to coincide with an annual raise, you probably won’t even notice the change.

Some plans let you choose to make automatic annual increases in your contributions, up to a certain percentage set by you. If your plan offers this option, consider taking advantage of it. That way, you won’t have to remember to make the change each year.

4. Rebalance Your Investments

When you enroll in a retirement plan, you choose how much of your money will go into different asset classes, such as stock mutual funds, bond funds, and cash accounts. Different investments will perform well in different years, however, throwing the asset allocation of your account out of balance over time. It is important to go back periodically and move money between funds to restore your original asset allocation (assuming that allocation is still right for you). Some plans offer the option of automatic rebalancing, which saves you the hassle.

5. Don’t Bail Out Too Soon

Along with starting early, sticking with it is key to retirement saving success. One of the mistakes many people make is to cash out of their retirement accounts when they change jobs. Research by the Employee Benefit Research Institute shows that it typically takes 13 years or more of contributions to an account before you begin to reach a level of savings that is enough to fund a number of years of retirement as a supplement to Social Security. So be sure to roll over your account if you change jobs. And don’t under-estimate the amount you need to retire. Take the earlier example. Most experts would not consider even the $191,000 saved through 44 years of regular $100 monthly contributions to be enough to retire on in comfort.

If you are approaching your planned retirement age and your savings fall short of what you need, keep working. After all, it is better to keep working than to run out of money in mid-retirement. Besides, every added year you work is one more year of saving and one less year of living off your savings – a double bonus. For additional information, see the American Savings Education Council Web site at www.asec.org.

Saving at Work PowerPoint Presentation

You can download this presentation by clicking here and selecting "Save" above the PowerPoint.

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Debt and Credit

Debt Credit History Credit Score
Written by Katie Bryan · 22 October 2013

Get out of Debt

  • Getting out of debt is the #3 goal Savers select when they pledge to save. With planning, discipline, patience, and maybe some outside help, almost anyone can reduce their debts and start to accumulate wealth. 

Importance of Credit History

  • Good credit plays an important role in your financial life. Not only is it essential for obvious things like qualifying for a loan or getting a credit card, but also for less obvious things like getting cellular telephone service, renting a car, and perhaps even getting a job.

Tip of the Day

  • Written by Administrator2 | January 15, 2014

    Are you looking for an effective way to establish a budget? Beginning on the first day of a new month, get a receipt for everything you purchase. Stack and review receipts at the end of the month, and you will clearly be able to see where your money is going. http://ow.ly/sj972

Saver Stories View all »

Starting Over

Written by Katie Bryan | October 28, 2013

Until last summer, Michael Lindman spent money freely. “I was a union truck driver for 35 years and had a good income,” said Lindman. “I owned my own home, saved a little, and tried to live within my own budget. You always think there’s going to be that much coming in, but things can change in a split second.”

Read more...

Transforming “I Can’t Save” to “I Will Save”

Written by Guest Blogger | January 13, 2016

You will not believe what it took to completely change my life. About three years ago, the HR Administrator of the corporation where I worked (as a temp with no benefits) forwarded an email to me. Fifteen seconds. One small act of kindness. That's it - that's all it took!

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Another Dream Realized

Written by Tammy G. Bruzon | November 7, 2014

Mary Brown was already a disciplined individual when she came to Wisconsin Saves coordinator Wisconsin Women’s Business Initiative Corporation (WWBIC) in last summer. She had successfully completed her bachelor’s degree with the assistance of her husband and son, and was now ready to tackle her next big dream – homeownership.

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