Archive for Financial Education

Getting the Most Out of Your 705 Youth Accounts

Learn more about all the 705 mini member benefits!705 Youth Accounts 

Managing money is a foundational life skill. There are so many factors involved and so many open-ended questions at play. How much should you be saving? When is it worth spending more? How do you keep spare change from burning a hole in your pocket? It takes years of discipline and training to perfect this skill, and ongoing self-control to maintain it.

That’s why it’s best to give your kids a head start on money management and saving. As a parent or guardian, remember that the lessons you plant today will take root and blossom, enriching your child’s life for years to come.

Section 705 is proud to offer specialized youth savings accounts that are designed just for kids. We know that different ages and stages have different needs. That’s why we offer Youth Accounts for children aged 0-17, as well as Teen Club Accounts for teens aged 13-17.

Our youth savings accounts offer (no annual fees and quarterly dividends) to help you teach your child that saving money always pays. Another perk that comes with having a 705 savings for your child is our Learn 2 Earn program. Bring your child’s report card to the credit union when they make honor roll or have perfect attendance. They get to choose a gift card to places like Barnes N Noble, The Grand, iTunes, Target, and Toys R Us! Plus, their name gets entered into a drawing to win $150 at the end of the school year.  

Ready to open an account for your child? Does your child already have one? Read on for three steps to take for ensuring your child gets the most out of a new or existing account:

1.) Set a goal

Now that your child’s money will be sitting in an account instead of a piggy bank, let her use this opportunity to save up for something big. Sit down with her and discuss what she’d like to save for. You can create a long-term goal, like saving up for college or for a first car. Also establish a short-term goal, like a new gaming console.

Set a date for your goals, and then set up a savings calendar for illustrating how much money needs to be saved each month to reach the intended target by the designated date. Discuss ways to add to the savings, being sure to include money from birthday gifts, summer jobs, allowances and chores.

2.) Bank together

Whether your child is a first-grader or a lanky teenager, if this is their first time owning an account, they’ll need you to show them the ropes.

Always bring your young child along with you when you stop by the credit union to deposit his savings. Show him how it works and let him see the account balance growing. If your child asks you to withdraw money from his account, make sure he sees how this translates into a dip for his savings.

For teens, you’ll need to walk them through that first deposit and withdrawal. When they’ve probably got the hang of it, it’s time to take a step back and let them be on their own. They’ll feel like a million dollars managing their account independently.

However, share with your teen that every swipe of their debit card also means a dent in their account balance. Also be sure to warn kids of all ages about security. They should know to never share their account information with anyone, and to keep their debit card in a safe place.

3.) Monitor your child’s activity

Don’t aim to be a helicopter parent, but do keep an eye on your child’s account. If he’s depositing a lot less than planned, ask him where his money is going. If your teen is maximizing his daily ATM allowance, speak to him about money management and impulse purchases.

Your teen’s daily withdrawal limit may need occasional adjustment, so keep a careful watch on spending to see if any modifications are needed.

Remember: Every financial lesson you teach your child today equips them with money management skills for a lifetime.

See what other benefits come with being a mini-member!

SOURCES:

https://www.redwoodcu.org/personal/savings/youth-accounts
https://www.cefcu.com/personal/save-and-spend/youth-accounts.html
https://www.americafirst.com/accounts/savings-accounts/youth-accounts.cfm
http://www.bankrate.com/banking/checking/teen-checking-account-5-smart-moves/nts.cfm

Credit Scores Explained in (Exactly) 250 Words

Credit Score Factors: On-time payments, capacity used, length of credit history, types of credit used, and past credit applications

Photo Credit: http://ow.ly/4vjh30bM8LB

What credit scores are: Three-digit numbers expressing the likelihood you’ll repay someone who lets you use their money (like a loan or credit card).

Who has a credit score: People who have been listed on an account that was reported to any of the three credit bureaus: Equifax, Experian and TransUnion. An account can be a student loan, car loan, credit card, credit-builder loan or maybe rent. It represents something you are obligated to pay.

Where the number comes from: Data is collected by the credit bureaus, which get the information from lenders, credit card issuers and public records. Then it is weighted to produce a score, typically on a 300 to 850 range. Higher is better. There are hundreds of scoring models, so most consumers have many credit scores.

How do I get started?

  • If someone with good credit makes you an authorized user on an account that’s reported, that can help.
  • Student loans and sometimes car loans can be relatively easy to qualify for.
  • Credit-builder loans and secured credit cards are made for people building credit or re-establishing credit.

What should I do to boost my credit?

  • Pay all bills on time, every time.
  • Use your credit cards lightly — that is, don’t use more than 30% of your credit limit on any card.
  • Keep old accounts open unless you have a good reason to close them (like high fees).
  • Apply for credit sparingly.
  • Consider having both installment (level monthly payments for a set period) and credit cards.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

The article Credit Scores Explained in (Exactly) 250 Words originally appeared on NerdWallet.

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The Two Kinds of Interest: Earning V Paying

Two Kinds of Interest: Earning V Paying Interest

Interest Rate 101!

Albert Einstein once claimed the most powerful force in the universe was compound interest.  That’s pretty impressive praise from the person whose work helped create nuclear power and atomic bombs.  While interest can be powerful, it can also be confusing, because when people talk about it on the news, they mostly talk about it in terms of vague forces and odd numbers.  Here’s a quick rundown on what interest is, as well as how it affects your life today and in the future.
 
When someone borrows money, they pay back more than they borrow.  Whatever extra money they pay back is called interest, and that’s one way that financial institutions and credit card companies make money. That money is basically paying the lender for the risk they take, since there is a chance some of the money wouldn’t get paid back. So interest rates can go up or down depending on how likely the money is to be paid back.  Credit unions like 705 Federal Credit Union work in a lot of the same ways, except that the money they make from interest is shared with credit union members, like you and your family.
 
So, a high interest rate must be bad, because that means people have to pay more money back, right? Well, it’s not really that simple. If it were that easy to understand, then interest rates wouldn’t be on the news all the time.  There’s another kind of interest, which is what you earn on your money.  At a credit union interest on savings accounts is referred to as “dividend” because it is what you are paid for your share of the cooperative.
 
When you deposit money into your savings account, it’s like we’re borrowing money from you.  After all, we’re holding onto your money, so we pay you dividends.  The more money you put into your account, the more we pay you.  So, when you save money, you want a higher dividend rate, which allows you to make more money as your savings account balance increases.
 
That’s the confusing part about interest: Some people want a high rate and others want a low rate.  Unfortunately, those rates are part of everything around you:  If you own your home, you’ll want a low interest rate.  If you’re saving money for college, you’ll want a high dividend rate.  Just about any business that wants to open new locations or get new equipment is going to need a loan, so they’ll want low interest rates.  Retired people who have money saved are wise to seek out the highest dividend rates so their retirement savings will last.
 
Trying to balance all of these people is difficult, which is why the government created a central bank, known as the Federal Reserve (or the Fed) to manage all of this.  It can raise or lower the rates for everyone, but it can’t do both at the same time.  The Fed spends a lot of time figuring out what’s best for the country, and it tries to keep its work secret until it’s ready to reveal whether it’s going to raise or lower rates.  It sends out secret shoppers to check the prices on thousands of goods around the country, and uses all that information to figure out what to do.
 
Hopefully, the next time you’re watching the news, it’ll be more interesting when they talk about interest rates.  It might sound like boring business talk and math, but really it’s a report on secret government shopping spies who are working to figure out whether we need businesses to open up new locations or your college fund to grow.
 
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