Are you surprised to know the same holds true about the “money” talk? Yep, lots of parents try to avoid the subject like the plague.

And that’s no good. Between the mortgage crisis, mounting consumer debt and the overarching failure to make saving for retirement a priority, our epic financial foibles have proven that now more than ever, teaching financial literacy to kids is crucial – lest the little ones repeat the mistakes of their elders.

And that’s where the President and his merry band of financial advisors come in. Back in 2010, on the heels of ‘08’s massive meltdown, the President created an Advisory Council on Financial Capability – a group tasked with helping Americans make wise decisions about money. No small feat, indeed. A subcommittee was also created to concentrate on figuring out how to teach kids the basic concepts of money as early as possible. And where should the teaching begin? No surprise, it’s right at home.

So what’s the best way to empower the kids in your life? One of the committee’s first steps was to create “Money Milestones: 20 things kids need to know to live financially smart lives,” a simplified work-in-progress guideline to kids and money. Culled from thousands of pages of research from tons of independent sources, they broke the milestones down by age group. Here’s what they think kids should know: 

• Age 3-5:
• You need money to buy things
• You earn money by working
• You may have to wait before you can buy what you want
• There’s a difference between what you want and what you need
• Age 6-10
• You must make choices about how to spend your money
• You should shop around for the best deal
• It’s dangerous and costly to share too much information online
• Put your money in a bank account to protect it and earn interes
• Age 11-13
• It’s smart to save 10% of what you earn
• Entering credit card or Social Security numbers online puts you at risk of identity theft
• The earlier you save, the more you’ll have in the long run
• A credit card is a loan and you’ll owe more than you spent if you don’t pay your bill in full each month.
• Age 14-18
• College is expensive and you should choose a school and student loans based in part on your career expectations
• You should avoid using credit cards for things you cannot afford in cash
• You pay taxes on your income and should budget for take-home pay, not gross pay
• A great place to save and invest is a Roth IR
• 18+
• You should never be without health insurance
• You should use a credit card only if you can pay off the balance every month
• You should always diversify your investments and pay attention to the costs associated with various investment products

The big take away from this is that teaching kids about money doesn’t have to be dauntingly complicated. Just teaching them the fundamental blocks of knowledge (at the appropriate age) is enough to get kids comfortable with the notion of money – and to make sure that they grow up into fiscally responsible adults. And that’s a whole lot easier than explaining to them where babies come from.

What do you think Saver? How soon is too soon when it comes to kids and money? Is there even such a thing?

Try telling a group of people decades away from retirement that they need to defer spending today so they won’t end up surviving purely on Social Security benefits come 2050, and bets are, you’ll get a whole lotta resistance (and probably some eye-rolling, too). But if these Gen-Y’ers and Millennials don’t get a move on, the end result may be a generation seriously ill-equipped for retirement. And with two out of three early baby boomers missing the resources needed to maintain their lifestyle once they retire, this is a cycle that needs to be broken, pronto.

So what’s the best way to shake them out of their I’ll-never-get-old mentality? How about showing them pictures of what they’ll look like when they’re card-carrying members of the senior citizen set?

Sounds crazy, but researchers have found that when consumers identify with their future/older selves on a tangible level (as opposed to some hazy notion of themselves at 65), they’re far more likely to start saving. The researchers conducted a study using current-day photos of subjects, which were turned into virtual reality avatars. For half of the group, the face was digitally aged – adding a dash of grey here, a few wrinkles there – and the other half remained unchanged. Both groups then stared at the pictures of themselves for a minute, and were then asked the following question:

If you received an unexpected gift of $1,000, would you:

a) buy a gift
b) invest in a retirement fund
c) plan a fun occasion or
d) put it into a checking account?

Participants who looked at the aged version of themselves allocated more than double the amount of money to their retirement than the wrinkle-free group. That’s a pretty big shift in behavior resulting from just one small picture.

So why the dramatic change? One of the lead researchers believes it’s because we see our older selves as a stranger, someone with whom we can’t relate. But by seeing an actual aged version of ourselves, we develop greater empathy for who we’ll become in the future. The last thing we want is to be the one responsible for making life financially difficult for this older person – who just happens to be you. Plus, coming face-to-face with our older selves makes us face the fact that yes, everyone ages, and the sooner you start saving for your golden years, the better off you’ll be.

What do you think, Saver? Would seeing a 65-year-old version of yourself help you save for retirement, or would it just make you reach for the sunscreen?

Despite some good economic news over the last couple months – particularly the drop in the national unemployment rate – many average American families are still staring down tough financial straits.

One of the biggest reasons many people have trouble improving their finances is that they’ve fallen victim to a fundamental misunderstanding of how wealth works. Too often, prosperity is seen as the result of a single major windfall – the new job, the big raise, an inheritance, winning the lottery, etc.

And while landing a large lump of cash is nice, wealth isn’t really about big wins – think of all those stories about lottery winners that wind up declaring bankruptcy. What’s really important for building a strong nest egg are habits – those daily, unsexy micro-decisions you make with your money.

ING DIRECT Investing just wrapped up an online “Gettin’ Things Done” contest, in which we asked average savers and investors from across the country to tell us what habits they’ve adopted to shore up their finances.

The best submissions all revolved around three simple words: automate, automate, automate. We’d all like to have the self-discipline to make responsible savings decisions. But once that paycheck clears and you’re, say, out at the bar or shopping with friends, it’s tough to stick to long-term financial goals – even for the most committed. It’s much easier to just splurge and promise ourselves we’ll save better in the future.

Automating saving and investing helps – a lot. All it takes is a little bit of paperwork and you can have a preset slice of your paycheck automatically diverted to your savings account and investment vehicles, like an IRA or 401(k). That way, no matter what else you do with the rest of your salary, you’ll have “paid yourself first.”

One of our contest winners, Renee Marx, recounted how when she and her husband got married in 1985, they started a savings plan and at “the beginning of every year we decide how much to put away each month and set it up automatically. As long as our savings goal is met he doesn’t care how many purses I buy and he sleeps without worry.” The plan worked great. Renee and her husband are on strong financial footing. And they recently “celebrated 25 years of wedded bliss.”

Another big theme among contest winners is incorporating small cost-savings measures into daily routines. Those small savings might not seem like much at the time. But after a year – or ten years – they can add up to a huge chunk of change.

One of the more straight forward recommendations comes from Joshua Mustacchio, who told us that “every time I break a dollar I put the change into a piggy bank.” Likewise, Sherree Flowers keeps “loose change and either on a weekly basis or a monthly basis total[s] the savings and add[s] the savings to grow [her] penny investment account.”

Winner Angel Ho makes a point of “exchanging service with [her] friends or neighbors,” like “exchanging gardening service for baby-sitting.” She also recommends that if you like cooking, “Cook your roommate a dinner in exchange for cleaning up the dishes or vacuuming the carpet.”

Smart, commonsensical cost-cutting techniques like these can reap big financial rewards over the long term. And they don’t require you to radically readjust your behavior. Strong finances are enabled by good habits. These suggestions from everyday people can easily be incorporated into your financial life – one small decision at a time.

Tell us Savers, do you have any cost-savings measures to share?

More than 111 million people watched the big game last year, and it’s safe to say that the vast majority of them weren’t watching from the sidelines. They were watching from the comfiness of their well-worn recliners or wedged in between friends on leather sectionals and lumpy futons. And guess what they were doing while rooting on their favorite team? One hint: they weren’t engaging in intellectual conversation about world peace. Nope, they were eating and drinking. A lot. So much in fact that the National Retail Foundation estimates that the total consumer spending for this year’s big game is expected to reach an unprecedented $11 billion, while another survey shows that the average host will spend $118.80 on party necessities. That’s a whole lotta clamdip and chips.

But there are ways to keep the party bill low and the fun-factor high. Here are some 1^st-and-goal ways to keep your budget in the end zone come opening kickoff:

• Just say no to buying prepared foods. It might take a little more effort in the kitchen, but buying pre-made food trays will undoubtedly cost significantly more than if you buy the ingredients yourself a la carte. You can even head to the dollar store, buy a large tray and place the food on it yourself. No one would know the difference.
• Make it BYOB or BYOF. Decide whether you’d rather supply the drink or the food, and then ask your guests to bring the remainder. Whether they show up with a 6-pack or a pot-luck tray of wings and celery sticks, you’ll be saved from footing the entire bill yourself. 
• Shop smart. If you’re going to buy pretzels, chips or any of their salty friends, only buy products that are on sale – even if it’s not your usual go-to brand. Trust us, no one’s really going to be critiquing the flavor and texture. And consider buying generic brands, too. Shake the snacks out of the bag and into a big bowl pre-game and none of your guests will be the wiser.

See? With a little legwork, it’s super easy to throw a super bash that isn’t super expensive.

What about you, Saver? Are you watching the big game or ignoring the craziness and settling in for an old movie? What are you planning to spend? Any trick plays to keep party costs down?

You need checking fees like you need ____________.

We’ll go first. We need checking fees like we need a financial wedgie.

How about you? Leave a comment and let us know how you really feel about fees.

Back in 2010, the Federal Reserve issued a rule that banks need express permission from their customers to provide overdraft protection (which basically covers charges that exceed the account balance – for a fee). Previously, banks could automatically enroll their customers in the service without their knowledge, but now customers now had to actively “opt-in” to the program. So in theory, it sounds like the consumer gained some increased protection against being bilked by their bank. But in reality, not much has changed – except the letter of the law. Well, that and the cost of overdraft fees.

In the recent span of just 5 months, overdraft fees shot up $2.50 to an average of $35 – a rate of increase that a respected economist says is unprecedented in the 30 years since this type of data’s been collected. In fact, in 2011 banks raked in almost $30 billion in overdraft penalties. Why the crazy uptick? When asked, banks admitted that it’s to compensate for the loss of profits that overdraft regulation has cost them. Yep, the very same regulation that was created to protect the consumer from overdraft fees in the first place has “forced” the banks to charge higher overdraft fees to compensate. Talk about a vicious cycle.

So if people now have the chance to opt out of pricy overdraft protection, why do a full third of all Americans choose to stay in the program?

A survey by the Center for Responsible Lending shows that customers have been cajoled into opting in because of misleading marketing. 60% of consumers who opted in said that a big reason they did so was so that they wouldn’t get charged a fee if their debit card was declined. Guess what? A declined debit card never costs a fee. And 64% consumers said they opted in to avoid bouncing paper checks. The truth? Opt-in rules only cover debit card and ATM transactions – non-sufficient funds are still going to make those paper checks bounce. Through full-court press campaigns, banks have basically convinced their customers that by opting-in to overdraft protection, they’re making a fiscally responsible choice. In reality, it’s costing them boatloads of bucks.

But there are viable alternatives that can help you say goodbye to overdraft protection (while minimizing your exposure to embarrassing NSF card declines at the grocery store). Here are a few:

• Get a checking account that provides an overdraft line of credit at a low interest rate instead of an exorbitant fee. For a 10-day $5 overdraft balance you would pay $30+ in traditional overdraft fees, but only pennies with this type of line of credit.
• Don’t rely strictly on your “available balance.” Transactions that come in after the close of the business day often aren’t recognized until the next day – which could result in the appearance that you have more available than you really do.
• Trick yourself and pad your checking account. When budgeting, add in a fake expense of $50 or $100. That money won’t actually come out, but the surplus will be there in case you go over.

So take the time to think about whether opting in is worth it, and if it’s not, go and opt out. A little bit of budgeting and keeping track of what’s in your checking account may take some effort, but that sure beats paying your bank a silly amount of cash in ridiculous fees any day.

What are your thoughts on this Saver? Do you like having the just-in-case security of overdraft protection (even if it costs you major bucks) or do you think no amount of protection is worth paying an exorbitant fee.

Sources:
Federal Reserve
Time
Center for Responsible Lending

Sounds like a lot of boring names and acronyms, right? But it’s really not that complicated. All it means is that there’s a powerful agency now looking out for us consumers and helping protect our financial well-being. We’re all for it and think it’s about time.

When the CFPB was created this summer, it set out to regulate activities by banks, but only those that fall in the traditional realm – large banks, thrifts and credit unions with assets over $10 billion. But in efforts to further protect consumers, the CFPB just expanded its reach to nonbanks, which it defines as any “company that offers or provides consumer financial products or services but does not have a bank, thrift, or credit union charter.” This includes thousands of businesses such as payday loan companies (you may have seen one in your local strip mall), mortgage companies (including foreclosure relief services) and private education lenders. And with 20 million consumers using payday loan services and 14% of all consumers having debt collectors on their tail, this expanded reach is profound.

So does this affect our day to day? Not really. But it does add some significant safeguards against people getting in over their heads financially or being bilked by unscrupulous businesses. Certain parts of the financial sector began resembling the Wild West (after all, a good part of the housing bubble was caused by subprime loans made through nonbank mortgage brokers), so having an agency that monitors the activities of a broader swath of finance-related businesses can only further help consumers make financially sound decisions.

What are your thoughts about this, Saver? Do you feel more confident knowing that there’s now more regulation over the financial sector, or do you think the government should step back and let consumers decide what’s best for themselves?

Sources:

Consumer Financial Protection Bureau

Time

Since its introduction 30 years ago, the 401(k) has evolved in a lot of smart and innovative ways. Starting as a basic savings tool in 1981, today’s 401(k) offers a range of features including Roth and penalty-free loan options, increased contribution limits and catch-up options, auto-enrollment, tax credits for those with less than 100 employees that start a plan and the list goes on. 

And while the 401(k) industry has made several steps forward, it faces some big challenges as we head into 2012 including: the fact that only 20 percent of all US businesses with less than 50 employees have any kind of retirement plan; one-third of the employees at businesses that do have a plan, don’t bother to enroll; and a less than certain stock market that makes picking investments for retirement harder than in previous decades.

So what can be done to resolve these issues? The following are three innovative ideas that could dramatically improve the power of the 401(k) to help more Americans reach financial freedom by retirement age:

1. Double the incentives that help small businesses get a 401(k) started

Uncle Sam currently offers a solid incentive for business owners with less than 100 employees to start a 401(k) plan. However, to create a splash in awareness and encourage more small businesses to move forward with a 401(k), the federal government can do more. 

Currently, the IRS provides an annual $0.50 per dollar tax credit up to $500 per year during the first three years of a new 401(k) plan to help offset the setup and administrative costs; the value of this credit over three years equals up to $1,500. A company with 25 or less employees can reasonably expect to pay between $1,000 to $2,000 a year in administrative fees. Other related expenses such as matching contributions are also tax deductible for the business. 

To create a step change in helping businesses start a plan, the government would be wise to double the incentive by providing a dollar for dollar credit for up to $1,000 for the first three years but only if the company starts a plan by 2013. After that, the credit would expire back to its previous lower level.  Deadlines like this help create serious consideration of employers without a plan. This could be communicated by the IRS via the news media and directly in their regular tax communications with employers. And while not every small business would jump at the opportunity, it could create significant movement for those who have put it off and have always wanted to provide the benefit for their employees (and themselves).

2. Require a minimum 7% contribution within auto enrollment programs

Auto enrollment is a relatively new option for 401(k) plans that automatically enrolls employees in a 401(k) plan to contribute at a preset level of their salary. While auto enrollment has made a positive impact in getting employees on board, the common employee contribution level most employers select of three percent of salary is too small. Most experts suggest that contributing ten to fifteen percent of salary over a lifetime of employment will help most any employee reach his or her retirement goals.  The average American that participates tends to put in about seven percent of his or her salary. With auto enrollment, employees still have the freedom to opt out, put in more or less, but 7% is a good starting place for most and will help employees be in the ballpark come retirement. Another benefit is that at this level it helps ensure employees capture any match an employer provides.

3. Require new or unsophisticated investors to be placed in an appropriate portfolio

For many employees, 401(k) enrollment is the first time they’ve ever invested in the market. Many have no understanding of asset allocation strategies or what to select. Not only does this hurt participation in 401(k) plans, it also means that many employees are selecting funds that are not right for their situation and goals. By defaulting those into a model portfolio, or possibly a target date fund that is professionally managed until they qualify as a sophisticated investor, would help a lot of employees get off on the right step for long-term investing success.  A standardized online questionnaire could be established to qualify an employee as sophisticated.  Those that qualify as sophisticated investors can of course select from their 401(k) plan’s full investment roster just like today.

There are a lot of other smaller initiatives and details that can make each of these even better, but these are the big three for helping more Americans gain access to a plan and save the right amount in the right way to give many more Americans a real likelihood of achieving financial freedom by age 65. 

The 401(k) has come a long way over the last 30 years. A few more steps can make a big difference in our society and in having the means to pursue more of our dreams.

Does this mean that we have to dummy down our goals, striving only for the simplest of resolutions? Not at all – but it does mean that we should recognize our limitations and make reasonable goals that fit within our lifestyle. And for inspiration, we can look no further than the Oracle of Omaha himself, Warren Buffett.

OK, so what does one of the world’s richest men know about simple goals? Wouldn’t the guy who’s currently #3 on the Forbes Billionaires list have bigger aspirations than most (more along the lines of, say, buying a small country, than saving on a grocery bill)? According to a recent Forbes article, not really.

It’s well known that Buffett has always counted every penny and that he’s a firm believer that thriftiness isn’t just for the financially struggling – it’s for anyone who wants to amass wealth, one nickel at a time. So as an ode to the beloved Berkshire Hathaway Chairman, Forbes compiled a list of 40 relatively easy ways to be “fabulously frugal” in the coming year. Here’s just a few of their little nuggets of advice:

• Have wine or cocktails at home before you eat out, rather than ordering them with a meal. Or try a BYOB restaurant.
• Until children reach age 12, buy clothing on sale at the end of the season and put it away for the following year.
• Plant most of your garden with perennials. It reduces the need to fill in with costly annuals.
• Hire painters and contractors during the winter. They’re  hungry for business then and likely to offer you a better price than if you ask for estimates during the busy summer months.
• Find the swankiest hotel in town, and look for a cheaper place next door. (That way, you can enjoy the same desirable location, without paying top dollar for it.)

See? Sticking to resolutions doesn’t have to be hard. And just making small changes in your financial lifestyle can really add up. After all, Mr. Buffett does it – and he hasn’t done so bad for himself.

Tell us Savers, what financial resolutions did you make and are you sticking to them?