Entrust Federal Credit Union

Teach Them Now

Want to teach your kids how to control their spending?

If your child treats money like it grows on trees, or magically falls from they sky, let us be your resource for teaching them the true meaning of money.

Whether he's age 12 or she's 22 and off at college, with a little help from you they can develop the self-confidence and personal skills needed to successfully manage their money (and yours).

Educating By Age

12-15 years
16-18 years
19-22 years

12-15 years

Saving Money

16-18 years

Saving Money

19-22 years

College Students & Credit

Fraud Protection

Teaching Investing

Saving Money

Budgeting Basics
Good budgeting is key to your teen effectively managing their own personal finances. The sooner they start keeping one, the better. Encouraging your teen to develop a budget helps them become more accountable for their own finances. Because as a parent, your goal is to teach your teen to achieve a healthy balance between Money In & Money Out.

Here are 10 Tips for helping your teen learn about basic budgeting ...

Show Me The Money! First, your teen should spend 1-2 months keeping a money diary - writing down every purchase, even the smallest expense. With their expenses down on paper, they can see where their money is going, and what spending habits need to change. Record-keeping must be as specific as possible.

After the Tracking. After keeping their money diary, help your teen make a list of potential cutbacks - areas where they can get by with spending less. Help them make adjustments each month as they discover what works, and what doesn't.

Monthly over Weekly. Consider providing them a monthly allowance, rather than weekly. Require they make the money last an entire month, and encourage him or her to accurately record what's been spent and where it was spent. Here's a suggestion: consider giving them a Prepaid Student Card and each month add their allowance to the card. A spending record will be available for them (and you) to review. They will feel very adult-like with a plastic card of their own and you have a great tool to help them manage their money. When the money is gone, don't add any more until the beginning of the next month.

Making The Wish List. After devising a budget (click here for a Spending Record Spreadsheet), they should create a "Wish List" of things they'd like, or need, but can't afford right now. A lot of teens can achieve their Wish List once they stick to a budget. Help them make it a goal to purchase at least one Wish List item.

Addressing Shortfalls. To help address budget shortfalls, suggest ways your teen can earn more money, or cut back on expenses, such as renting a DVD to watch with friends rather than go to the movies; or maybe car pooling through the week to save on gas for the weekend.

Needs vs. Wants. Show your teen how to modify a budget by categorizing expenses as needs (expenses that are unavoidable) and wants (expenses that could be cut if necessary).

Control Impulse Buying. Encourage your teen to think spending decisions through, rather than impulsively buying items right away. Show your teen how comparing prices or waiting for an item to go on sale can save money.

Responsibilities and Age. As spending responsibilities are shifted to your child, she'll have to budget for them accordingly. For example, if she's the one to pay for weekend activities, she'll need to effectively manage her money by putting these items into a spending plan. Also, let them know spending responsibilities will typically increase with their age. But they can also increase if your teen starts to exceed your ability to provide. For example, if junior wants a car and you're not going to buy him one, he'll have to adjust the budget to expand his savings so he can purchase the car on his own.

No Bail Outs. It's very important to resist being your teen's financial savior. If he or she can depend on you to come up with all the extra cash, they may never fully learn to manage money wisely. But at the same time, don't be preachy and judgmentalno doubt he or she will make spending mistakes along the way. Your teen needs to know they can always come to you for information, support, and advice.

Some rapid-fire, quick tips - advise your teen to:

Resist impulse buys

Don't go shopping with friends who spend a lot

Tote their lunch to school (or work) as much as possible

Stay away from vending machines and convenience stores

Only visit an ATM once a week (plan ahead for needed cash)

Entertain at home

These simple budgeting lessons can last a lifetime. Never stop working with him or her on how to use money. Your teen will be much better prepared to function in the real world.

Buying Online
Internet-savvy teens are turning their computers into personal shopping centers. Since most Internet purchases are made with a credit card, planning is of the utmost importance. If your teen is to join the more than 36 million U.S. households shopping online, here are some "virtual" tips for getting the most for their "real" money.

Dare to Compare. Be sure your teen takes full advantage of their ability to quickly and easily comparison shop products and prices. If they plan to participate in online auctions, have them start early so they aren't tempted to over-bid at the last minute. Have them watch for sales and other perks, such as free shipping.

Shop With A List. Always. Instruct your teen to make a comprehensive list of all their needs. Use the list when they shop online and buy only those items on their list.

Plan Ahead For Pay-Off. Before they make any purchase on a credit card, they should know how they'll pay for it. Keep in mind that a $1,000 charge can take more than 12 years to pay-off if the interest rate is 17 percent, and they make only the 2 percent minimum monthly payment.

Read The Fine Print. Be sure your teen investigates return policies, shipping charges and taxes. You will also want to check delivery dates and review warranties.

Practice Safe Cybershopping. So why should you worry about identity theft on your children? Although every child is born with perfect credit, a growing number of victims of Identity Theft are under the age of 18 -- some 5% of the total and more than half are under the age of 6. While your child is just starting school a criminal may have just started using their identity. Pretty sobering and scary statistics. So, where you can turn for help? Identity Theft solutions can help you protect your children's identity so that they can start an adult life with the nice clean slate they were born with. Identity Theft solutions assist you in pulling credit reports, scanning databases for your child's personal information and providing Recovery Advocates in situations where identity theft has been identified. For more information on preventing identify theft visit the Identity Theft Resource Center at www.idtheftcenter.com.

Payment Choices. According to the Federal Trade Commission, if you pay by credit or charge card online, the transaction will be protected by the Fair Credit Billing Act. Under this law, consumers have the right to dispute charges under certain circumstances. In the event of unauthorized use of your credit or charge card, you are generally held liable only for the first $50 in charges. A prepaid reloadable card is another option. If you provide your teen an allowance on this type of card they can use it to make purchases online. Gift cards and debit cards are also online payment options.

Oh, The Temptation. Finally, inform your teen to avoid impulse purchases, and to carefully consider before responding to pop-up ads and email advertisements. Surfing the web may be a form of entertainment to your teen, but shopping should never be considered a recreational sport.

Courtesy of Money Management International

Charitable Giving
More than past generations, today's teens are more inclined to give back to their communities. So, with more than 500,000 federally recognized charities soliciting contributions, chances are someday soon your teen will be approached for a donation. Here are some tips from the Federal Trade Commission to help ensure your son or daughter gives wisely.

Team Up. Involving your children in the selection of and contribution to a charity teaches valuable lessons not only about the value of money.

Ask A Lot Of Questions. Your teen should request identification from the solicitor and read written information provided. They must be certain that the organization has a clear mission and identifiable goals.

Be Wary Of High Pressure Appeals. For example, they should be skeptical if someone thanks them for a pledge they don't remember making. Legitimate charities should not intimidate your teen into making an on-the-spot donation.

Do The Homework. Before making a donation, they should call the charity to find out if the organization is aware of the solicitation, and has authorized the use of its name.

Never Ever Give Cash. For security and tax record purposes, your teen should pay by check - write the official name of the charity on their check and ask for a receipt.

The Tax Man. Most charitable gifts are tax-deductible if made to a qualified organization. But be sure your teen's organization meets IRS guidelines, as there may be different tax breaks when they donate certain types of assets to charity.

Who's Legit. According to IRS Publication 526, Charitable Contributions, charities listed at www.irs.gov are all qualified organizations.

For additional help selecting a charitable organization, your teen can visit the Better Business Bureau's Wise Giving Alliance at www.give.org. Finally, if their budget doesn't allow for a monetary contribution, they can consider donating time or unused household items.

Courtesy of Money Management International

Spending Plan
It's important to help your son or daughter create their own personal Spending & Savings plan. What's a Spending & Savings Plan? Basically, it's a budget ... but a "spending plan" sounds better to teens. Remember, most teens prefer spending, not budgeting or saving.

Once junior has all the components in his budget, simply have him put things in writing - that way things feel more "official" to everyone. But remember, a Spending & Savings plan isn't carved in stone - it should be adjusted as the situation dictates. In fact, the budget should be completely made over at certain times, such as when their income increases, or if they get a bigger allowance, or start working part-time. Having more money means more money for which to spend and plan.

Here is a sample Spending & Savings plan for beginning their personal budget. We've started you off with some common teen budget items:

Note ... it's best if the savings portion is treated as a payment to your teen (list it like any other expense). Don't let him or her get into the bad habit of putting into savings only what's left over at the end of the budget period. In this case, there's typically nothing left over.

Saving for a Car
Of the big "life purchases" a person makes, very few compare to that first car. Many teens begin saving for that first car as early as age 12, especially boys. Most teens choose to buy a used car since they're typically less expensive. So, as the parent you must be careful your teen isn't buying someone else's lemon. The key is to do the homework.

The following are tips for helping your teen purchase that first new or used car:

Shiny and New.If your teen is going with a new car, before shopping he should check out Consumer Reports "Best and Worst Used Cars" reports. These can be found online at consumerreports.com (fee) or hard copies are at most public libraries for reference.

It's Certifiable. Your teen should consider a "manufacturer certified" used car, even if they are a little more expensive. These used cars come with a guarantee they've been thoroughly inspected. Some even have warranties. Also, look for a make and model that will retain its value over time.

How High's Too High. Your teen should review their Spending & Savings Plan to determine how much car they can afford. Remind them not to forget the price of gas, insurance, registration and maintenance.

Knowing Worth. There are countless resources to help teens determine a car's worth. For example, they can research used car values at Kelley Blue Book's website - www.kbb.com or the National Automobile Dealers Association - www.nadaguides.com.

The Facts, Ma'am. Always know why the seller is selling. So, request all records from maintenance or repair work, and for peace of mind, be sure to order a full report on the vehicle's history. To do this, write down the Vehicle Identification Number (VIN) and use the services of an information provider, such as CARFAX.

Have the vehicle inspected. The most important consideration when buying a used car is its mechanical condition. You may want to have a mechanic you trust take a look at any car you're seriously thinking of buying. If the seller won't let a mechanic of your choice inspect it, they're probably trying to hide something, so you may want to look elsewhere.

Don't Be Jumpy. Your teen should never jump at the first car she sees. Be on the lookout for bank repossession sales or auctions. She should take her time, making sure the car is in good condition, for the lowest possible price.

A Little Privacy, Please. If junior is going to buy a car from a private owner, he may want to have it checked by an independent mechanic. If the seller won't let them have the car checked, keep shopping. Automobile clubs such as AAA offer inspections.

Knowing The History. Before your son or daughter buys that fist car, be sure to check the vehicle identification number (VIN) at Carfax. For about $20 he or she can check as many VINs as they want. It's important to find out as much as possible about the history of the car. If they're shopping at dealerships, request they run a VIN report.

Saving Money
As a younger child, "Junior" probably saved up for shorter-term goals, such as buying a hot, must-have new toy. Now a teenager, the world has changed and he's ready for bigger financial goals - be that a new car, or even college. While you may feel he never listens to you, the opposite is actually true when it comes to money matters. Today's teens appreciate parents' input regarding their finances.

While over the past few years, teens have earned billions with part-time and summer jobs, many have spent most of it. Here are some ways to help your teen save for the future:

Be Her Best Example. Teens are watching. She will most assuredly be observing how you spend money. And if she sees you budgeting a certain amount for household needs, she'll eventually do the same.

A Spending & Savings Plan. Teens cringe at the word 'budget'. To them, the thought of restricting spending is bad. Instead, you and your son or daughter should develop a Spending & Savings Plan. This they'll like. To teens, saving is always better if it includes some spending, too. Some families require 10% of teens earnings go to charitable contributions ... 40% goes into a savings account ... the remaining 50% is used at the teen's discretion. (click here for a Spending Record Spreadsheet).

Get it in Writing. As part of the Spending & Savings Plan, have your teen put savings goals in writing. It makes everything more concrete.

Values-Based Saving. Encourage your child to set goals that are based on his or her values, not on keeping up with what other teens have or want.

A Perfect Match. Motivate your child by offering to match what he or she saves towards a long-term goal. For instance, for every dollar your child sets aside for college, you might contribute 50 cents or 1 dollar.

Be 'Accountable'. Help him or her open up a savings account, if you haven't already done so. Establishing a savings account under their name provides for immediate financial responsibility. Then help them manage the account. Many credit unions have incentive programs for opening and adding to savings accounts.

The Basics. Introduce your teen to the basics of investing by possibly opening an investment account (if your teen is a minor, this will be a custodial account). Look for an account he or she can open with a low initial contribution at an institution that supplies educational materials that introduces teens to the basics of investment terms and concepts.

Investing In Her. Possibly help her with a fun mock investment exercise. Just casually introduce her to the business/investment section part of your daily newspapers. Together do mock investments for companies that manufacture products she likes. Monitor the stocks together.

First Credit Card
You can probably recall about the time your son or daughter turned 18 the credit card companies all came knocking. By now, your son or daughter is probably being overwhelmed with offers, and choosing just the right card isn't all that simple. So, your child must always be mindful of a card's interest rate, annual fees, late charges, etc. You and your young adult should consider the following when choosing a credit card:

Types of Cards. You may decide to help your young adult obtain their first credit card. You can co-sign a card for them and enable them to build a credit history. After a period of time, assuming a good payment record has been achieved, the card issuer will then issue a card in their name only. Another option is a secured card - an amount equal to the credit limit is placed in a deposit account at the financial institution until a good payment record is achieved. Then the card can be changed over to an unsecured basis. Or, you can name them an authorized user on your credit card (this does not help them build a credit history of their own like the other two options).

Credit unions almost always charge lower rates and have fewer fees than the major banks.

Playing The Percentage. The APR measures the cost of credit on an annual basis and may be the easiest way to compare costs among credit cards. Usually, the lower the APR, the less they will be charged for credit.

Annual Fees. Some credit cards charge annual fees, regardless of how much or little the card is used. If your young adult intends to pay off their credit card bill in full each month, they won't have to pay monthly finance charges - so cards with low or no annual fees will be more important than low APR.

Paying With Grace. A "grace period" allows your young adult to avoid finance charges if they pay the balance due before the due date. Some cards have no grace period and begin imposing charges on the day of the transaction. A grace period can be anywhere from 21 to 30 days.

Transaction Fees. Many credit card companies assess fees when cards are used in certain ways. Transaction fees are common for cash advances and wire transfers, and some cards even charge for purchasing theater tickets over the phone, or buying lottery tickets, etc.

Never Ever Be Late. If your young adult makes a late payment, most card issuers will charge a fee --, the higher the balance, the higher the fee. Since these fees are high, there are several strategies you can suggest: automatic bill payment, an alert can be sent to their cell phone, or they can sign-up to receive the bill via email.

Knowing The Limits. Counsel them to always pay attention to their balance - fees for charging over their limit typically range from $15 - $40. If they must charge past their current limit, they should call the card issuer and request a higher limit.

Not For Everyone. Remember to inform your young adult that not everyone qualifies for every card, even if they received a "preapproved" offer in the mail. Those preapproved offers are still contingent on them meeting the creditor's qualifications.

College Students & Credit
As a parent, you may know that college students are the largest segment of first-time customers for credit card issuers. When used properly, credit can be a tremendous asset. However, when handled improperly, the resulting debt can become a terrible liability.

For example, if a student racks up a $1,000 credit card bill his freshman year, and pays the low minimum payment each month, he will finish his bachelor's degree, complete his master's program, finally begin earning a living and still have three and one-half years to go to pay off that spending spree. In addition, if a student ruins their credit in college, it can affect their chances of obtaining future credit and impact job opportunities as most employers check credit histories before they make an offer of employment.

Here are some quick tips for helping students avoid credit problems:

Spending & Savings Plan. Before seeking any credit, prepare a spending plan, or budget. How much of their monthly income will go toward paying credit card bills? Monthly debt payments should not exceed 20 percent of their monthly take-home pay or monthly allowance.

Investing Time, Too. Counsel them to invest time when shopping for credit and know the options. Look for cards with low interest rates, little or no annual fee, and a reasonable "grace period" to allow "free time" before finance charges begin.

The Credit Shop. Since different types of credit have different interest rates and terms, use the same amount of time and research shopping for credit as you would a new car or other major purchase. Also, consider the risks involved. What would happen if they default on a loan?

Credit Is Like Driving. A Privilege, Not A Right. Counsel your young adult that credit is a privilege, not a right. Once blemished, a good credit record is difficult to rebuild.

Courtesy of Money Management International.

Fraud Protection
While it may be obvious to your teen to steer clear of get-rich-quick schemes and phony contests, some types of fraud are not so easily detected. Unfortunately, thieves adapt as consumers become educated - fraud has seeped its way into more trustworthy covers including charities, credit repair, loans, travel, online auctions and work-from-home offers. Following are some ways to help your teen to avoid fraud:

Practice Due Diligence. Before making any purchase, they should find out if any complaints have been registered with the Better Business Bureau or the Attorney General's office. While a clean complaint record is not a guarantee, it is a step in the right direction. A good first step is always the Better Business Bureau (http://welcome.bbb.org).

Be Wary Of High Pressure Appeals. Counsel them to be skeptical if someone thanks them for a pledge they don't remember making. Legitimate companies should not intimidate your son or daughter into making an on-the-spot donation or purchase.

Be Skeptical. If someone promises them an easy way to make fast cash, they should be wary. As the old saying goes, "if it's too good to be true, it probably is."

Remember The Budget. Even if a solicitation proves to be legitimate, they should ask themselves if it's really something they want to do.

Head Them Off At The Pass. Your young adult should put their landline and cell phone on the "do not call" list at www.donotcall.gov. Under federal law, telemarketers are required to comply. If telemarketers continue to call, they can be sued in small claims court for $500. For information on how to stop unsolicited email spam, review your state's laws at www.spamlaws.com.

Health Insurance Fraud. Your young adult should never sign blank insurance claim forms or give broad authorization to anyone to bill for services. Keep detailed records of all health care appointments and make sure they are aware of any equipment ordered for them by a physician.

Counterfeit Prescription Drugs. They can talk with their pharmacist or doctor if their prescription medicine looks suspicious. They should never purchase medications from Web sites that don't require a prescription.

If your young adult suspects a scam, call the National Fraud Information Center at 800-876-7060. You can help them to be informed - they can get more information about money scams by visiting www.idtheftcenter.com or www.consumer.gov.

Courtesy of Money Management International.

Teaching Investing
Teaching young adults about money (and investing money) may well be one of the most important gifts they will ever receive. These are lessons that will stay with them for the rest of their lives, helping secure their financial futures. Teaching about investing develops important skills that will benefit him or her throughout their life.

Here's how to get started.

Start From Square One. Long before getting into margin calls and P/E ratios, help them understand the fundamentals, such as explaining that saving is for short-term goals and investing is a strategy that will help them meet longer-term goals.

Risk Versus Reward. They need to know that investments that offer higher returns often come with higher risks, and investments with lower risks may deliver lower returns.

Diversity Rules. Diversification is an important concept for any aspiring investor. While stocks may be more attractive to them, there may be a place in their portfolio for other investment options. Examples include bonds, which are funds that an investor lends to a company as an interest-bearing loan, and mutual funds that bring together money from many people and invest it in stocks, bonds or other assets.

Practice, Practice and More Practice. Help your young adult experiment before actually putting real money on the line. Have your son or daughter choose several stocks and follow their performance (they enjoy investing in companies that they are familiar with, such as a clothing, computer, or soft drink manufacturer).

Follow The Tracks. Teach them how to track the company's stock price in the newspaper's financial listings or online. Be on the alert for articles on companies your young adult is familiar with, and talk about how news can impact stock performance.

Make It Fun. There are hordes of fun and engaging stock investing games on the Internet.

Real World Investing. Eventually your young adult may want to move on to "real investing". But until he or she is age 18 - 21 (depending on your state), they can only open a custodial account, which is controlled by an adult for a minor.

To learn more about teaching your kids about money, visit www.giveme20.com.