Celebrating Your Financial Freedom

Independence Day or “the Fourth of July” is a federal holiday in the United States commemorating the adoption of the Declaration of Independence in 1776, which declared freedom from what is now known as the United Kingdom.  This day is commonly full of celebrations including fireworks, parades, barbecues, carnivals, fairs, picnics, concerts, baseball games, family reunions, and more.

 

In honor of Independence Day and our logo, “Money is freedom. Freedom is fun,” we would like to recognize a few of the many characteristics of being financially free.  If you find that you meet these characteristics or are continuously striving toward them, then you should have even more reason to celebrate this year!

• You are happy with what you have and you are grateful for your blessings.
• You have financial goals and you are continuously moving forward toward them.
• You are patient and work for what you want.
• You are prepared with an emergency fund and an extra savings fund for life's little "what if's".
• You understand that financial wealth takes time and effort.
• You are responsible with your money and properly handle your debts.
• You manage your spending and always have money left after your paycheck.
• You invest in a long term strategy that builds wealth surely and steadily over time.

On this year's holiday, we wish you lots of love and laughter, and as always we hope you have happy and safe celebrations!  Happy Independence Day from the entire FIC family!

MoneyRate.com Survey: Best Savings Accounts 2014

 

Reference to any specific commercial product, process, or service, or the use of any trade, firm or corporation name is for the information and convenience of the public, and does not constitute endorsement, recommendation, or favoring by Family Investment Center.

 

Earlier this year, MoneyRates.com Senior Financial Analyst Richard Barrington, CFA, published an online article analyzing a survey that MoneyRates.com performed to find the Best Savings accounts for 2014.

 

"The study indicates that the yields on the nation's best savings accounts have offered more than four times the interest of the survey's average rates, and that the top accounts have been consistently at the front of the pack quarter after quarter,” according to Barrington.

 

Barrington’s article points out the importance of finding savings accounts with consistently high rates. Barrington states, “It is smart to compare savings account rates before choosing a bank, but it is even smarter if you look at a bank's interest rates over a span of time rather than on any one day. Some banks temporarily raise rates in an attempt to draw some quick attention, but the more consistently a bank has featured leading rates in the past, the more likely it is that this is a long-term strategy that will continue in the future.”

 

But where can this information be found, and why is comparing it so significant? “Every quarter MoneyRates.com lists the top savings accounts, based on their average rates throughout the quarter, in its America's Best Rates articles. Then, once a year, MoneyRates.com [calculates] which savings accounts had the best rates over the course of the prior year,” says Barrington. “Identifying the banks that offer the best interest rates is important [because] if you chose the wrong bank to open a savings account a year ago, you would have earned less than a quarter of the interest you could have at one of the higher-paying institutions. At a time when bank rates are generally low, shopping for that kind of edge is more important than ever.”

 

Based on the mentioned survey, MoneyRates.com created this list of the top rate performers of the past year (2013). According to Barrington’s article, “Their strong performance over the last four quarters places these institutions as the current favorites to offer the best savings accounts in 2014”:

 

1) Ally Bank. “With its user-friendly web site and welcoming policies, such as free ATM use anywhere in the country, Ally has become something of a model for how online banking should be done,” says Barrington. “Ally also delivers some substance to back up its customer-centric style, in the form of the highest average savings account rates over the past year.” While savings account rates at the banks MoneyRates surveyed throughout the past year averaged just 0.186 percent, Ally's average was 0.883 percent. According to Barrington, “Whether it is the style or the substance, whatever Ally Bank is doing, it is attracting customers.” The most recent FDIC figures available show Ally Bank's total deposits up 15 percent year-over-year.

 

2) American Express Bank. With savings account rates that averaged 0.869 percent over the past year, Barrington claims American Express Bank to be “a strong runner-up to Ally Bank.” Barrington continues to state that the savings account rates at American Express Bank “edged out those at Ally Bank during the two most recent quarterly surveys, so this could be a fun competition to watch over the next year.” Like Ally Bank, American Express Bank demonstrates that offering competitive rates helps attract business, with its deposits up 22 percent year-over-year.

 

3) Sallie Mae Bank. Sallie Mae Bank's savings account rates averaged 0.867 percent over the past year, putting it behind American Express Bank by a miniscule margin, just two one-thousandths of 1 percent. “Though considerably smaller than Ally and American Express, Sallie Mae Bank is coming on strong,” claims Barrington.  Its deposits were up by 48 percent year-over-year.

 

4) Discover Bank. Discover Bank's savings account rates averaged 0.800 percent over the past year, and “it showed true consistency by having the same average rate through each of the last four quarters,” states Barrington.

 

5) EverBank. Savings account rates at EverBank averaged 0.717 percent over the past year. Barrington says, “This is another bank whose high interest rates are helping it attract customers, [since] its deposit base grew by 27 percent year-over-year.”

 

6) Capital One Bank. Capital One kept its savings account rates above the 0.500 percent mark all year, averaging 0.508 percent. Also, Capital One Bank's new online arm, Capital One 360, has been offering even higher rates “and might be a competitor to watch,” claims Barrington.

 

7) Zions Bank. Zions Bank's savings account rates averaged 0.495 over the past year. “Zions Bank is a bit of a throwback compared to most of the institutions on this list, in that it still has a fairly extensive branch network, albeit one that is limited to Idaho and Utah. For consumers in those states who want decent rates and traditional, branch-based banking, this might be an option worth looking into,” according to Barrington.

 

Barrington also includes his list of Honorable Mentions:

 

“It should be noted that besides the consistently strong performers listed above, a number of banks that were added to the MoneyRates.com survey during the course of the year made the top 10 in their first two quarters.” These banks included Barclays, GE Capital Bank, FNBO Direct and CIT Bank. “With these banks having shaken up the leader board so quickly, it will be interesting to watch if they can continue their strong rate performance in 2014,” writes Barrington.

 

Barrington summarizes: “Given the recent strengthening of the economy, it seems likely that bank rates will move upward in 2014. Though rates may change, it is reasonable to think that banks that offered the best rates at the bottom of the interest rate cycle are likely to lead the next upward phase of that cycle as well.”

 

Barrington finishes his analysis and recommends, “Looking for even higher deposit rates? Check out the CD offerings from GE Capital Bank, Barclays and Ally.”

Generation X Beware

CNN Money reports about a surprising study on the financial stability of Generation X-ers. This study shows that they may be worse off than the Baby Boomers after the recession. "'Unless this path is altered, younger Baby Boomers and Gen Xers may face a real possibility of downward mobility in their Golden Years,' said Diana Elliott, research manager for Pew's economic mobility project." To read more about the surprising finds click here.

No retirement for lazy savers

In the recent Wall Street Journal article "Workers Saving Too Little to Retire", Kelly Greene and Vipal Monga present survey results predicting retirement crisis for both U.S. workers and employers. 

A few facts from the article:

• Fifty-seven percent of U.S. workers surveyed reported less than $25,000 in total household savings and investments excluding their homes.
• 28% of Americans have no confidence they will have enough money to retire comfortably.
• While Americans are living longer, the extended life spans will make it tougher for workers trying to stretch retirement savings and put additional strains on pension plans.
• The percentage of workers who have saved for retirement plunged to 66% from 75% in 2009.
• Many people are struggling to make sure they don't run out of money in retirement, said Jack VanDerhei, research director at EBRI, a nonprofit in Washington, D.C.

Put simply, we suggest that if you want to live more freely and enjoy more in retirement, spend less and save more now while you still have the opportunity. 

Wealth-building for Gen Y-ers

Money Magazine's 101 Ways to Build Wealth offers valuable financial tips for each stage of your life.  Listed below are their bits of advice for 25- to 34-year-olds.  To read the full article for more details, click here.   

1)  Start saving for retirement now.

2)  Favor cash-rich stocks.

3)  Add microcap stocks for growth.

4)  Build your career.

5)  Play the numbers.

6)  Get smarter about your money.

7)  Get with the program.

8)  Watch what you buy.

9)  Build your credit score.

10) Slash your student loans.



Talk to your kids about money

Not sure how to talk to your kids about money?  Here are some helpful tips from Chuck Bentley's article, "How to talk with your kids about the 'M' word -- Money":

1)  Practice Delayed Gratification

2)  Teach Your Kids About Simple Allocation

3)  Teach Personal Responsibility

4)  Talk About Earning and Spending Money

Click here to read the full article.

Financial fitness plan 2012

"Most couch potatoes will never compete in a triathlon. But they don't need to. Just a few minutes of exercise a day can help the formerly inert shed pounds, boost their energy levels and live longer. If you're already getting a little exercise, a little more can get you truly fit.

The same is true with money. You probably won't transform yourself from a train wreck into a billionaire. With some effort, though, you can pay down debt, build up savings and look forward to a more comfortable financial future."

- Liz Weston in her MSN Money article, "Get financially fit in 2012"

Weston lists five things you can do to help reduce debt, boost savings, and cut expenses:

1) Get your priorities straight.

2) Implement a plan to deal with your debt.

3) Review your expenses.

4) Create your survival plan.

5) Protect what you've got.

Read the full article to find out how.

Generation Y, start saving!

Think you'll have enough money saved for retirement? A recent article by Emily Brandon of U.S. News & World Report writes, "Twenty-somethings will need to save much more than their parents did for retirement. To do that, they'll need an early start -- and a game plan."

Read the full article on MSN Money.

The Single Life: 3 Ways to Retire Well on Your Own

Being single definitely poses some financial challenges. A recent Wall Street Journal article explores three things that can help single people retire well.

Click here to read the full article.

Why you need to invest

Dan Danford, Founder and Chief Executive Officer of Family Investment Center, takes a "back to basics" financial advice approach with this week's episode of Money Made Easy.

Dan is frequently approached by people wanting to know the difference between savings and investing. In this video, he explains three reasons to invest and why savings alone will not allow you to meet your financial objectives.

8 things to consider before retiring

Here's a great article from MSN Money that provides a general checklist of items to review before making the move. These include:

1) Work-retirement tradeoff
2) Longevity and retirement
3) International investments
4) The U.S. dollar
5) Volatility
6) Glide path
7) Higher medical expenses
8) Income spigots

Click here to read the full article.

How to save money when in debt

Dan Danford, Founder and Chief Executive Officer of Family Investment Center, takes a "back to basics" financial advice approach with this week's episode of Money Made Easy.

Danford said he is frequently approached with questions about savings from people faced with a mountain of debt or divorced dads looking for financial advice on divorce.

A common question he hears is:

"Why even bother to save at all? It seems like I’ll never be able to get ahead anyway, so why should I even try?"

Danford says that saving and spending habits have more to do with personal discipline than level of income. He explains different ways you can save, how to use the "Dan Danford eBay test", and more importantly, why you need to save money.

Charities Boost Investment Returns Without Speculation

Dan Danford, MBA, CRSP®
Family Investment Center

For sake of discussion, let’s say your favorite charitable organization has an endowment of $10 million. You’ve likely got a Finance Committee and a paid manager (or two) for the portfolio. In most cases, your performance is probably okay, and you don’t harbor any strong dissatisfaction with the current arrangement.

Still, there is an ongoing duty to invest wisely and safely, and to exercise proper supervision over the funds. Also, the current economic climate demands maximum effectiveness for every resource used by the organization.

The matter’s crux is this: every one percent of investment return brings $100,000 to your bottom line. Boost the returns and you boost the organization’s mission. More money for scholarships, or services, or other client support.

I’m going to mention the most obvious solution. The investment manager(s) needs to do a better job. If they’d choose better stocks or bonds, or mutual funds of stocks and bonds, resulting performance would create the desired new funds. If they can’t do that, maybe it’s time for a change.

That’s uber-obvious, and it’s where most boards go. And, for the record, it’s also where many investment professionals go, too. Banks, advisors, brokers, they all make claims and they all support those claims with believable documentation. Most will send out a team of sparkling professionals who are charming, articulate, and knowledgeable.

But it’s problematic, too. They all look good. And they all sound convincing. But – this is the serious flaw that most investors won’t touch – no one (and I mean absolutely no one) knows exactly what the future will hold. All those groups with all their expertise are merely guessing about the future. From this standpoint, the notion of adding an extra one percent through better investing is highly speculative.

There is another way, though, and it offers an almost-certain performance boost. If you take the existing portfolio and slash fees for trading, mutual funds, or portfolio management, those reductions flow directly to the bottom line. Want to boost portfolio returns by $50,000? Simple. Find a safe and insured custodian who won’t charge high fees to hold investments and send verified pricing and reports.

Need another $25,000? Find a way to shift some portion of the portfolio to index- or institutional-share managers. Either choice can reduce overall portfolio management costs by an easy quarter- or half-percent.

And there is no need to sacrifice performance. First, many existing managers will discount costs when pushed, but even if they won’t, there are hundreds of qualified companies who will. Here’s just one example: we can show you how to hire the widely acknowledged “nation’s most prominent bond investor” (New York Times, 2001) for a microscopic .46 percent per year. The best in the U.S. For your endowment portfolio. For less than one-half percent per year.

No firm you interview can offer that kind of quality for close to that price. And that’s just one example of one portfolio segment. We can show you similar savings though stocks, international investments, real estate, and other diversification realms. Virtually no reduction in quality; a serious and non-speculative reduction in fees. Instant boost to your bottom line.

One more thing. The returns from slashing fees are permanent. Unlike chasing investment performance, they bring increased returns to the bottom line in each and every subsequent year.

Why haven’t you heard this discussion before? That’s a great question, and one I’m pleased to answer. The simplest response is that fees are easily obscured when times are good. Rising markets and general prosperity hide a lot of sloppy practices. No one worries about an extra half-percent when investment returns run ten percent a year.

But the queasy combination of low returns and economic crisis has changed all that. Throw in greater industry transparency and we’re seeing a lot of things not discussed before.

There’s another point worth making. The rise of independent investment advisors is creating a lot of competition and pricing innovation. Firms like Family Investment Center have been around for decades, but technology and information are transforming them into investment powerhouses. Today, registered investment advisory firms are the fastest growing segment in the investment industry.

There’s no magic bullet for higher performance. And there’s no crystal ball about likely investment returns for 2011, 2012, or 2013. But there is a safe, reliable, and convenient way to boost portfolio returns and mission success. We’ve been doing it with top charitable groups in this region since 1998.

Living in the suburbs may not work for retirees

We spotted a great piece by Steve Vernon on CBS Moneywatch.com that offers a fresh perspective on where to live during retirement. He contends that most people buy a house in the suburbs while they're raising their family, and never really consider whether or not it's appropriate to stay in as they age. (Our thanks toRetirement Revised for pointing out the article.)

Vernon says it's not - mainly because most people don't need as much space, and the suburbs can put them far away from amenities they need, such as doctors, grocery stores, restaurants, etc. Seniors would be wise to be near public transportation, too, as they age so they can use the bus or train when they give up driving. It's an interesting idea, and almost the exact opposite of what most people do. Here's his list of what to look for:

The answer? Move out — while you still can. Here’s what I’d look for:

A smaller place with reduced bills for utilities, insurance, property taxes, and ongoing maintenance
The ability to walk, bike, or take public transportation to most, if not all, of your regular activities. This would include shopping, errands, medical needs, hobbies, and entertainment.
A location that makes it easy for you to get out and exercise, and includes nearby walking or bike paths
Close-by group social activities, such as church, community centers, theaters, and adult education schools

You can read his full take on it below:

http://moneywatch.bnet.com/retirement-planning/blog/money-life/retirement-planning-outside-the-box-move-out-of-the-suburbs/1887/

Dad's Divorce: emergency savings

In this week's edition of Money Made Easy on Dad's Divorce.com, host Dan Danford answers this financial question from a viewer: How many months worth of emergency savings do I need? What about if I am approaching retirement and will have a very stable income of my pension and social security benefits?

Dan Danford, MBA, CRSP of Family Investment Center, debunks the general rule of thumb for emergency funds and offers financial advice on how to prepare for retirement.

Listen to the podcast for all your personal financial help.

Debt levels trending down

American Express recently surveyed young couples about their financial lives in their mid-year Spending & Saving Tracker. The Yahoo! Finance business story goes into detail talking about the part of the survey that has to do with how couples manage their money. You can read that story here:

http://finance.yahoo.com/family-home/article/110075/keeping-finances-separate-can-be-costly

But there's also a part of the survey that reports on the level of saving that people are doing. Apparently, 75 percent of those responding to the survey say their level of debt didn't increase during the first six months of 2010. In fact, 38 percent say that their debt actually decreased. This is great news - and exactly where we all need to be headed.

You can read the actual press release here:

http://home3.americanexpress.com/corp/pc/2010/axp_tracker2.asp

Teach your kids responsible money habits early

By Dr. Jason White
Director of Investments
Family Investment Center

Every parent faces challenges in trying to educate their children about the basic principles of financial responsibility. Children and young adults are thirsty for personal financial education. Granted, their interest generally focuses on topics like how to earn a million dollars by age 23 and spend happily ever after, but we as parents and educators can use this materialist instinct to teach basic personal financial responsibility.

Benevolent employers figured out a long time ago that employees are much more likely to participate in savings programs, such as 401(k) plans, if the employer agreed to match employees’ contributions. You can apply the same logic with your kids. If Johnny manages to save $2 from his weekly allowance, match it with a dollar of your own.

Every child should have a savings account at a local bank. Teach them to deposit their savings, rather than keep idle cash in a piggy bank. After the first few interest payments are credited to their savings account, they will begin to understand and become excited about saving money.

Once the child has accumulated a few hundred dollars in that savings account, open a brokerage account for them. I’m serious! Use an online brokerage company to maximize the child’s connectivity and interactive education. Encourage them to invest in companies that they “do business with” like McDonalds, Disney or Microsoft.

Involve your children, to the extent that you are comfortable, in family financial decisions. Even young children can begin to comprehend the amount of money it takes to pay the mortgage, and the electric bill, and the groceries, etc. Once they realize the constraints of the family budget, you may find fewer temper tantrums in the checkout line when you say no regarding a “must-have” candy bar request.

Parents can also teach children wise shopping and spending habits. Let them look for bargains and coupons in the Sunday paper for products they know and use. Teach them to comparison shop and to determine relative prices. For example, should I buy the jumbo bottle of hair gel, or is the smaller size cheaper by the ounce? I am amazed how many college students, and adults for that matter, don’t seem to have the ability to do this.

Finally, teach your child about the pitfalls of debt, particularly credit card debt. The earlier they learn the expense of using other people’s money, the better. If you loan your children money to buy a toy or video game, charge them interest. They will quickly discover what they thought they couldn’t live without, maybe they could have. You will be teaching patience, frugality and personal responsibility – a set of qualities we could use more of among today’s youth!

As your child gets older, encourage him/her to read a daily newspaper and watch the evening news. Staying plugged in to events and changes in the world help to round out an individual in more than just a financial sense.

Remember – lead by example. Believe it or not, your children really do look to you for guidance!

Dad's Divorce: Saving for retirement

Dan Danford regularly provides a podcast for Dad's Divorce.com, a web site for men going through the divorce process. Here's his latest podcast, which answers a question from a listener: I have never had a job with a 401(k) or much money left over for savings. I'm worried about having enough money to live off of when I retire. What suggestions do you have for planning for retirement?

Saving money when you don't make much

Dan Danford regularly records podcasts for Dad's Divorce.com, a web site that helps men going through the divorce process. Here's his latest, which is advice on saving for those who don't make a lot.

Saving goals and financial recovery

Every week, Dad's Divorce, a web site for men going through the divorce process, posts a podcast with Dan Danford of the Family Investment Center. It's a great platform for delivering information in a succinct, simple way and we feel it helps many people. Of course, the information doesn't just pertain to men. It's great advice for anyone. This week, we tackle a subject that has been on many minds: saving goals and financial recovery. We'd love your feedback.