The report found that over half of U.S. households now own a traditional savings account, that the incidence has increased in this century, and that deposit levels have grown as well. Between 2004 and 2019:

• The proportion of households with traditional savings accounts rose 10.6 percent – from 47.1 percent to 52.1 percent – and the increase in this period was continuous.
• The median level of deposits of households with savings accounts rose by two-thirds – from $3,000 to $5,000 in nominal dollars (the CPI increased by only about one-third in this period).

“The traditional savings account at a bank or credit union is not dying out but is becoming more widely used by consumers,” noted Stephen Brobeck, a CFA senior fellow and the report’s author.

The report used unpublished data on savings accounts that was collected by the Federal Reserve Board as part of its tri-annual Survey of Consumer Finances (SCF).  University of Utah economist Jessie X. Fan analyzed the most recent SCF data-set, which was collected in 2019 and made available in the fall of 2020.  Fan and earlier, another economist had also disaggregated SCF data on savings accounts from 2004, 2007, 2010, and 2016 for CFA. The Fed’s published data does not distinguish between checking accounts, traditional savings accounts, and money market deposit accounts, combining them into a broad “transaction account” category.

The Greatest Growth in Savings Accounts Was Among Americans Who Have Moderate Incomes and Those Who Are Under 35 Years of Age

Moderate–income households – those in the second income quintile – $26,268-$45,818 – experienced especially large increases in their use of traditional savings accounts.  From 2004 to 2019, the proportion of these households with savings accounts rose 12.4 percent – from 39.5 percent to 44.4 percent, and the median amount of those with these accounts rose 138.9 percent – from $900 to $2,150.

“As a group, all low- and moderate-income households increased their account ownership and their account levels, yet these remain at relatively low levels,” noted CFA’s Brobeck.  Less than one-third (30.2%) of households in the lowest income quintile – those with incomes below $26,268 – held a savings account in 2019, and the median amount for these households was only $1,010.

Between 2004 and 2019, households in the top tenth income group ($192,712 and over) experienced a significant decline in account ownership – 59.7 percent to 54.4 percent – but a huge increase in median deposits – from $12,600 to $31,900.  These figures can be explained in part by substantial increases in their incomes and also by their increased use of money market deposit accounts (MMDAs), which pay higher interest rates than traditional savings but impose stiff fees for not meeting high minimum balance requirements.  In 2019, two-fifths (40.1%) of top tenth households held an MMDA.

Households headed by someone under 35 years of age also experienced especially large increases in ownership and levels of traditional savings.  Between 2004 and 2019, ownership levels rose 12.7 percent – from 48.1 percent to 54.2 percent, while the median amount of those with these accounts rose 150.1 percent – from $1,000 to $2,501.

At an ownership rate of 48.1 percent, those 65 years and over were less likely to own a traditional savings account in 2019 than were other age groups.  However, from 2004 to 2019, this account ownership grew 18.5 percent – from 40.6 percent to 48.1 percent – and deposit levels for those with accounts increased by 90.0 percent – from $5,000 to $9,500.

Why the Relatively High and Growing Popularity of Savings Accounts?

Why do more than half of U.S. households hold a traditional savings account while nearly three-fifths (58.0%) own a savings account and/or an MMDA?  CFA commissioned IPSOS to undertake a survey of 2,011 representative Americans to try to better understand why.  All 2,011 were first asked whether they held a savings account or an MMDA.  The 1,591 respondents who indicated they owned at least one of these accounts were then asked four related questions about why they held an account.

the responses revealed that “easy access to money” and “not paying fees” were very important to large majorities:  Access was “important” to 96 percent and “of great importance” to 72 percent.  Not paying fees was important to 93 percent and of great importance to 75 percent.  While only 43 percent said that maintaining an account as a rainy-day fund was of great importance, 86 percent said it was important.  More than two-fifths (44%) also said that keeping a savings account was of great importance in making them “less likely to spend than if in a checking account,” with 79 percent saying this was important.

“Our survey suggests that most savers want an easily accessible and free way to maintain a rainy-day fund that will be more difficult for them to spend than if the dollars were in a checking account,” said CFA’s Brobeck.  Certainly the fact that the Federal government guarantees funds in these accounts is also a factor.

According to George Barany, director of America Saves at CFA: “Having easy access to a no-fee savings account with a low opening balance has been very important to the many lower income families seeking to establish an emergency fund, who have participated in the America Saves program.”

But why then did traditional savings account ownership and levels grow?  The report suggests three factors, two of which are related.  “The Great Recession is likely to have convinced some families that they should open a savings account or increase the amount in an existing account,” said CFA’s Brobeck.

Yet, institutional changes are also likely to have had an impact.  There has been a national savings movement, largely directed at young adults and lower-income households, much of its funded by the Ford Foundation, that began in the nineties and continues to this day.  CFA itself has initiated local savings campaigns, which use social marketing and behavioral economics principles, in dozens of cities and coordinates national efforts as well. America Saves Director George Barany noted a recent example of one such effort: “During America Saves Week 2021, more than 300,000 people deposited over $400 million into new and existing accounts in 16 participating financial institutions.”

A key goal of this savings movement has been to persuade banks to offer and promote free savings accounts that were bolstered by regular, automatic transfers from checking (or an income source) to savings (autosaves).  Today, all but one of the 13 largest banks (by number of branches) offers a savings account that waives monthly minimum balance fees for those with a checking account at that institution or those using autosaves.  Moreover, over half of these banks promote savings on their websites.  Credit unions have always required that customers open a savings account in order to qualify for membership.

“The future of savings accounts depends largely on the willingness of banks to maintain and promote no-fee accounts,” said CFA’s Brobeck.  “If banks do so more energetically, we can expect continued growth in the popularity and levels of savings accounts,” he added.

“Consumers would also save more if banks paid higher rates,” noted CFA’s Brobeck.  “The gap between savings interest rates and consumer loan rates is substantial and growing, as a future CFA study will document,” he added.

Contact: Stephen Brobeck, sbrobeck@consumerfed.org

The post New Research Reveals that Traditional Savings Accounts Have Grown More Popular in This Century and Why appeared first on Consumer Federation of America.

• A significant majority of those surveyed by America Saves (59%) expressed concern about their financial future.
• One reason for this worry may be lack of adequate savings. According to the Federal Reserve’s SCF, well under half of Black households (42%) have a savings account and/or money market deposit account at a bank or credit union, and many with an account said they were not saving enough to meet emergency expenditures.
• A large majority of the respondents do not make “regular and automatic” deposits in savings or money market deposit accounts.
• A large majority of those without savings accounts, in the America Saves survey, would “seriously” or “probably” consider opening an account if their bank or credit union encouraged them to do so and charged no monthly fees.

“Our research shows clearly that most Black Americans do not have savings accounts and worry about their financial future,” said George Barany, Director of America Saves.  “We call on banks and credit unions to reach out to all low- and moderate-income households to offer them no-fee savings accounts and assistance in establishing automatic saving,” he added.  Given recent job and economic reports, America Saves believes that the challenge of creating a savings cushion will grow.

[i] The omnibus survey questions were written by CFA and administered by ENGINE Insights on November 12-17, 2020, to 1,003 Black adult respondents online.

Contact: George Barany, gbarany@consumerfed.org

The post New Research Shows that Most Black Americans Worry About Their Financial Futures and Also Lack a Personal Savings Account appeared first on Consumer Federation of America.

The post Black American Finances and Savings in a COVID Era appeared first on Consumer Federation of America.

Our nation’s comprehensive COVID-19 response must include a strong paid sick leave policy and protecting consumers by ensuring affordable access to communications services, preventing utility shutoffs, mortgage foreclosures, student loan defaults, negative credit reporting effects, overpriced insurance, and making sure that airline and hotel customers’ rights are protected in any financial bailout of these industries.

The Consumer Federation of America has identified critical consumer protection issues that must be addressed as part of a comprehensive response to this crisis. Many of these items are focused on protecting those hardest hit by the economic fallout. Doing so is not just a matter of economic justice; it is the best way to stabilize the economy.

CFA and it’s over 250 national, state and local organizations are committed to working with policymakers at all levels to implement a “Comprehensive Consumer Agenda to Address the COVID-19 Crisis”.  For the details behind the following agenda, please see our LINK March 20, 2020 letter to the President and Congress.

A Comprehensive Consumer Agenda to Address COVID-19

1. Create a comprehensive national paid sick leave policy to reduce the spread of the disease. Lack of paid sick leave encourages tens of millions of workers to continue working when they are sick, which can nullify the critically important benefits of social distancing.

2. Protect those hardest hit from economic hardship by:

• Providing forbearance to economically distressed mortgage borrowers. Any homeowner experiencing economic hardship because of the virus must have access to 180 days of forbearance on mortgage payments.
• Halting evictions and foreclosures. There must be a 180 day moratorium on evictions of tenants experiencing economic hardship because of the virus, with support provided to property owners who suffer rental income losses.
• Canceling student loan payments for the duration of the crisis. It is not enough to pause monthly payments, the government must make tax free payments on holder’s behalf so millions of Americans can continue to make progress reducing their student debt as the economy struggles.
• Suspending debt collection. Debt collection activities, including legal proceedings, garnishments, repossessions, and debt selling, must be prohibited during the state of emergency.
• Curtailing high-cost lending schemes: A rate cap of 36% must apply to high-cost credit, such as payday loans, refund anticipation loans, and car title pawns to ensure that vulnerable consumers aren’t trapped by overpriced debt.
• Placing a moratorium on negative credit reporting. To protect consumers’ credit records during the pandemic, there must be, at least, a four month moratorium on negative credit reporting.
• Maintaining consumers’ access to affordable communications services. As remote communications become critically important, service providers must abandon pricing practices that maximize revenues, suspend overcharges for “excess” data usage, terminate service cut-offs, and increase network availability to the public.
• Requiring big data platforms to promote the public interest. Big data platforms must remove misleading information. Their big microphones must promote the public interest, not the corporate bottom lines. Non-commercial pandemic information from public health, safety and governmental entities must be given a prime location on all screens.
• Preventing misleading advertising and price-gouging. Advertisers, and the media carrying ads, must ensure that claims related to the coronavirus are completely accurate. Online marketplaces must reject products and services making misleading claims or that offer basic necessities at unfairly inflated prices.

3. Ensure that consumers’ interests are protected as industries seek federal financial support by:

• Mandating fairness in the skies. Airlines must waive cancelation and change fees for all consumers during the federal state of emergency. As a condition of an airline bailout, Congress must require price transparency, make future fees for cancelations, changing flights, and checking bags proportionate to actual costs, lift state preemption, and provide consumers with private rights of action.
• Accommodate hotel customers. As organizations and individuals heed requests to limit non-essential travel and cancel events, some hotels have continued to charge consumers and organizations. As a condition of a hotel bailout, Congress must require hotels to honor requests for room and event cancelations without penalty and to refund deposits until the federal state of emergency is suspended or travel limit recommendations are lifted. Going forward they must provide full price transparency on charges and extra fees.
• Reduce auto insurance premiums to reflect reduced driving. Insurers should be required to offer discounts to people driving less due to COVID-19.  Miles driven, a key factor in claims costs, will drop dramatically as workers are laid off, switch to telework, or self-isolate. This should be a consumer benefit, not an insurer windfall. See CFA’s letter to Insurance Commissioners.

The post Government Must Protect Consumers’ Health And Pocketbooks During COVID-19 Crisis appeared first on Consumer Federation of America.

“If banks made a greater effort to offer and market affordable savings accounts to lower income families, these households would be better able to meet their emergency savings needs,” said Stephen Brobeck, a CFA Senior Fellow and author of the report.

The report emphasizes the importance of savings accounts that are fed by regular, automatic transfers from checking.  “80% of all lower income households [two lowest income quintiles] have checking accounts,” noted Brobeck.  “It would be relatively easy for banks to promote automatic savings to these families,” he added.

The report recognizes that while small savings accounts may not be profitable for banks, they will eventually permit some customers to save larger sums and take out auto and mortgage loans.  The report points out that banks can maintain these small accounts inexpensively when deposits are made automatically, withdrawals are through ATMs, and monthly statements are emailed.  It also notes that the Community Reinvestment Act requires banks, especially large ones, to meet a service test for making available services, including “low-cost bank accounts.”

CFA’s 21-page report:

• Reviews research on emergency savings needs,
• Explains the importance of bank and credit union savings accounts for meeting these needs,
• Defines criteria for accessible and affordable automatic savings accounts that are promoted on bank websites,
• Uses these criteria to evaluate savings accounts offered by big banks,
• Identifies the banks that offer accounts meeting these criteria,
• Identifies those few banks offering customers financial incentives to save,
• Suggests an expanded role for regulators in encouraging banks to offer and promote accessible and affordable savings accounts,
• Outlines research that would provide important new knowledge about the effectiveness of automatic savings accounts and their marketing, and
• Offers suggestions to consumers about how to most easily build emergency savings.

Consumer Tips on Increasing Savings

 As well as calling on banks to promote affordable savings, the report urges consumers to use existing bank and credit union opportunities to save more effectively.

• For those with an automated savings account, increase (even by a small amount) your monthly deposit.
• For those without an automatic savings account, ask your bank or credit union if you can automate it and, by doing so, avoid monthly fees.
• For those with a checking account but no savings account, ask your bank or credit union if they can create an automatic savings account with no monthly fees.
• For those with no checking or savings account, find a local bank or credit union that offers a savings account with a small opening deposit and no monthly fees. Ten of the 101 largest banks offer such an account, and large credit unions are even more likely to do so.

While the report focused on savings accounts at the 101 largest banks – which maintain over half of all bank branches — it also reviews accounts at the ten largest credit unions (by number of branches).  This review found that six of the ten credit unions offer a savings account with a very low initial deposit and no minimum balance requirement while three others have low minimum balance requirements to avoid fees.

The report also learned that:

• Eighty (79%) of the big banks charge no monthly fees on savings accounts held by those under 17 or 18 years of age.
• Twelve of these banks extend the fee waiver to young adults up to the age of 24 or 25.
• Seven banks waive monthly fees for older persons.

The post Only One-Quarter of Big Banks Promote Accessible and Affordable Savings Accounts to Lower-Income Savers appeared first on Consumer Federation of America.

Sometimes even when people try their best they fall behind on their payments. That’s when the debt collectors start calling. Managing your money and saving even small amounts regularly can help keep you out of debt trouble.

Budget Your Money and Save for the Future

Budgeting may sound hard, but it’s really just using your common sense. You have a certain amount of money coming in from your work, government benefits, or retirement – whatever the sources of your income may be. You have regular bills that must be paid every month. The difference between what you take in and what you must pay out is what you can spend on things like transportation, groceries, clothing, and entertainment. You may also have goals that you want to save for, such as a new car, a better apartment, a down payment on a home, a vacation, or just to have a cushion in case emergencies come up. America Saves, a campaign managed by the nonprofit Consumer Federation of America, provides tips about how to create a budget, keep costs down so you don’t spend more than you can afford, and make a plan to save. Go to their website. Once you have a budget and savings plan, stick to them!

Deal with Payment Problems Promptly

If you find yourself in a tough spot and can’t pay your bills on time, contact the companies that you owe the money to right away to talk about what to do. You may be able to arrange for extensions or for lower payments over a longer period of time. If you can’t work something out, contact a local nonprofit credit counseling service. A trained counselor can give you advice and may be able to work out new payment arrangements with your creditors. The counselor will also know if there are any special programs that you are eligible for to help you. If there is a fee for these services, it will be very small. To find a credit counseling service in your area, contact the National Foundation for Credit Counseling, www.nfcc.org or 800-388-2227 (for Spanish language call 800-682-9832).

Beware of “Help” That Puts You Deeper in Debt

There are many companies that advertise that they can lower people’s interest rates, consolidate their bills, or settle their debts – but they may not be able to live up to their promises and they typically charge much more than a nonprofit credit counseling service. Another thing to avoid is “payday loans” that charge very high interest rates. If you can’t pay the loan off as soon as it’s due, you’ll have to borrow more and will end up going deeper and deeper into debt.

By budgeting and saving you can reduce your debts and manage your money with confidence. Take control of your debt, don’t let debt control you.

This blog is one of a series of articles contributed by state and local consumer agencies in connection with the annual survey about consumer complaints conducted by Consumer Federation of America. The survey report provides “real life” examples of complaints and tips for consumers. Have a consumer problem or question? Find your state or local consumer agency at https://www.usa.gov/state-consumer.

The post A Quick Guide to Managing Your Money and Avoiding Debt Trouble appeared first on Consumer Federation of America.

“Holiday spending is likely to rise by 2.5% to 3% from last year’s level” said CUNA Chief Economist Bill Hampel. “Although positive, that would be a disappointing increase considering the improved financial condition of US households.”

Despite this expression of consumer restraint, the CFA-CUNA survey also revealed signs that the economic recovery continues.  The proportion who reported an improved financial condition, compared to the previous year, continued to increase, as the following table reveals.

Personal Financial Condition Compared to a Year Ago

2011    2012    2013    2014    2015

Better              19%     24%     24%     28%     29%

Worse              37%     33%     29%     24%     24%

In addition, those who said they had sufficient “extra funds” to “pay for an unexpected expense of $1,000” continued to increase from 2012 (the first year the question was asked), as the table below indicates.

Possession of Extra Funds to Pay an Unexpected $1,000 Expense

2012    2013    2014    2015

Yes                  49%     49%     50%     54%

No                   50%     49%     47%     44%

“Despite lingering public dissatisfaction with the slow rates of growth, our survey reveals some improvement in the financial condition of Americans,” noted Stephen Brobeck, Executive Director of the Consumer Federation of America.  “Still, the fact that more than two-fifths of Americans report that they lack sufficient extra funds to cover an unexpected $1,000 expense is cause for concern,” he added.  Also, the surveyed revealed that the proportion who said they are concerned about meeting monthly debt payments remained high and unchanged, from last year, at 43 percent.

Not surprisingly, the variable that explains expected spending and reported financial condition the most is income.  The higher one’s income, the less likely one is to report financial distress and deterioration, as the table below suggests.

Relation of Spending and Financial Condition to Household Income

<$25k       $25-50k           $50k-75k         $75-100k         >$100k

Spend less            47%                 37%                 38%                 30%                 37%

Fin cond worse     34%                27%                 17%                 19%                 17%

No extra funds      79%                52%                 36%                 17%                 12%

Debt concern         57%                52%                 41%                 26%                 23%

Correlating spending plans with financial condition reveals that those reporting a worse financial situation, concern about making debt payments, and lack of extra funds for emergencies are predictive of expecting to spend less money this holiday season.

CUNA/CFA Tips for Shopping Cooperatively During the Holiday Season

If you want to support a different way of doing business this holiday season, here are some ways to patronize cooperatives:

• Join a credit union. Credit unions offer the same services as banks, but because they’re financial cooperatives, they’re not-for-profit and can offer members lower rates and fewer fees. They also strive to educate and empower their members to become financially capable;

• Search for cooperatives in your community. A simple Google search of “cooperative” or “co-op” should turn up nearby examples–grocers, coffee shops, breweries and bakeries are common candidates for a cooperative business model; and

• Look to other name brands. REI, Ace Hardware and True Value are all cooperatives.

With its network of affiliated state credit union leagues, Credit Union National Association (CUNA) serves America’s credit unions, which are owned by more than 100 million members. Credit unions are not-for-profit cooperatives providing affordable financial services to people from all walks of life. For more information about CUNA, visit www.cuna.org or follow @CUNA on Twitter. For more information about credit unions, visitwww.aSmarterChoice.org and follow @asmarterchoice on Twitter. Visit the CUNA Press Room for a full listing of media mentions, press releases and resources to stay informed on current events within the credit union industry.

Contact: Vicki Christner, CUNA, 202-508-6754; Jack Gillis, CFA, 202-737-0766

The Consumer Federation of America is a nonprofit association of more than 250 consumer groups that was established in 1968 to advance the consumer interest through research, advocacy, and education.

The post Consumers Expect to Spend Slightly Less on Holidays This Year appeared first on Consumer Federation of America.

This year, 10 percent said they would spend more while 33 percent said they would spend less.  In 2013, 13 percent said they would spend more while 32 percent said they would spend less.  The proportion who said they would spend less declined steadily from 55 percent in 2008 to 32 percent last year before rising slightly this year.  (Consumers almost always spend more than they plan to spend, so year-to-year comparisons are most meaningful.)

Despite this expression of consumer spending restraint, signs ranging from a lower unemployment rate to higher stock prices indicate that the U.S. economy is stronger this year than last.  Data from the CFA-CUNA survey reveal this economic improvement.  When asked to compare their current income with their income a year ago, 27 percent said it was higher while only 21 percent said it was lower.  When asked to compare their financial situation with that of a year ago, 28 percent said it was better while only 24 percent said it was worse.

When asked about their concern meeting monthly payments on all types of debt, the proportion declined from 49 percent in 2013 to 43 percent in 2014.  When asked whether they have extra funds available to pay an unexpected expense of $1,000, the proportion who said no fell from 49 percent in 2013 to 47 percent this year.

“Top-line results from an economic perspective are encouraging and holiday spending almost certainly will increase this year,” said Mike Schenk, CUNA senior economist. “However, elements of our survey underscore the fact many consumers continue to reflect significant concerns about their personal finances- most especially in the realm of weak income gains. Because of this we expect the increase in holiday spending this season to be modest.”

The annual survey has always been developed by CFA and CUNA and administered to a representative sample of adult Americans by ORC International.  This year, 1009 persons were interviewed by landline or cell phone from October 30 to November 2.  The margin of error is plus or minus three percentage points.

Gap Between Affluent and Poor Continues to Widen

The survey found continuing evidence of the widening gap between high and low income groups.  Over one-third (34%) of those with household incomes under $25,000, compared to only 13 percent of those with incomes over $100,000, said their financial condition was worse now than a year ago.  (Also, one third of the low income group (33%), but only 13 percent of the high income group, said their income was lower than a year ago.)

“The rising economic tide has not raised all boats equally,” noted Stephen Brobeck, CFA’s Executive Director.  “Far fewer households with incomes above $100,000, than those with incomes below $25,000, have fared worse over the past year,” he added.

Factors that may help explain this difference in perceived financial condition are concern about making monthly debt payments, including mortgages, and also a low level of funds available for emergency expenditures.  Over three-fifths (63%) of the low income group, but only about one-fifth (21%) of the high income group, said they were concerned about meeting these debt payments.  In contrast, over four-fifths (83%) of the low income group, but only 13 percent of the high income group, said they did not have extra funds available to pay for an unexpected expense of $1,000.

These responses about debt and savings help explain income differences related to how one would use an unexpected windfall of $5,000.  Over half (51%) of the low income group, but little more than one-quarter (27%) of the high income group, said they would use most of these funds to pay down debt.  In contrast, only about one-third (32%) of the low income group, but over half (56%) of the high income group said they would use most of the funds to add to savings or investments.

These responses also help explain differences in intended holiday spending.  Nearly twice as many of those with low incomes (37%), than of those with high incomes (19%), said they would spend less money this year than last.

CUNA/CFA Tips for Spending Prudently During the Holiday Season

CUNA and CFA suggest the following tips for spending prudently and not taking on too much debt.

• Plan:
  • Make a Budget, and a List: Right now, decide how much you can afford to spend and stay within that budget.  Staying within budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase.  Even if it’s a more general rather than detailed list, it will still help you avoid overspending and impulse buys.
  • Check It Twice: Make sure your list includes not only gift or gift recipients, but also all the projects and activities that make up your holiday.  It’s easy to overlook extra expenses for holiday foods, party clothes, holiday décor and postage.  Examine each item and ask yourself, “Does it earn its place in our celebration?” You might discover how much you’re doing just out of habit or perceived expectation.

• Comparison Shop and use Time Wisely:
  • Compare Prices: You can easily save more than 10 percent on most items, sometimes considerably more, by comparing prices at different stores. The Internet and smart phones have made comparison shopping that much easier.  But when shopping online, shop wisely.  Be sure you are purchasing from a secure site and review emailed statements for accuracy as you receive them.
  • Make Time Your Ally: The reason to start sooner rather than later is that when you delay, you pay.  At last minute, you have to settle for something, and it might cost more than you wanted or planned to pay.  After Christmas is a good time to shop for next year’s presents.  You can find some great bargains right after the holidays.  Then tuck those gifts away until next season (just don’t forget about them!).  Another benefit to starting early:  It gives you more time to find the “right” gift and avoid impulsive decisions, which too often leave you less happy with your purchase.

• Pay Off Debts Quickly:
  • Use a lower-interest credit card (you’ll often find lower rates on credit union cards) and pay off this debt as soon as possible early next year. Don’t borrow more than you can repay in several months. Remember that credit card debt is relatively expensive.  And if you only make the required minimum monthly payment, you may never pay off the debt.

• Start Saving for Next Year:
  • Ask your credit union or bank to automatically transfer funds into a savings of Christmas or Holiday Club account each month. They provide a practical way to save small amounts over time and the discipline of saving reinforces your good budget intentions.  Find credit unions you’re eligible to join at www.aSmarterChoice.org

Contact:

Zan McKelway – CUNA Communications; (202) 508-6701; zmckelway@cuna.coop

Jack Gillis—CFA; 202-737-0766; Jack@ConsumerFed.org

With its network of affiliated state credit union leagues, Credit Union National Association (CUNA) serves America’s credit unions, which are owned by 100 million consumer members. Credit unions are not-for-profit cooperatives providing affordable financial services to people from all walks of life.

The Consumer Federation of America is an association of more than 250 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

The post Despite Signs of Economic Improvement, More Consumers Likely to Rein-In Holiday Spending appeared first on Consumer Federation of America.

Service members have many consumer protections and financial support systems available to them while in the military, but once they separate from service, many no longer have access to critical resources and protections tailored to service members. Most military personnel have both a mortgage and at least one credit card, and are more likely to carry debt than civilians. Reintegrating into civilian life may bring fresh financial challenges, such as finding a job or facing a prolonged period of unemployment. In fact, 60 percent of veterans recently reported that translating their military service to the civilian job market was a significant challenge.

To meet the needs of veterans reentering civilian life, the Veterans Financial Coalition has three key goals: educate veterans and the community organizations that serve them; research and advocate for consumer protections for veterans; and raise awareness for veterans’ financial needs. Coalition members are committing to these shared goals through individual development and delivery of new resources, programs and research.

The coalition is also launching www.VeteransFinancialCoalition.com which will serve as a clearinghouse of important personal finance resources provided by coalition members for veterans. The website will serve as a hub of free resources, ranging from educational games and guides, consumer protection brochures, training program information, and research.

“Visa is deeply committed to increasing the financial literacy and wellbeing of those who have served our nation. We are proud to help launch the Veterans Financial Coalition in order to better provide for the needs of our veterans,” said Nat Sillin, Head of U.S. Financial Education, Visa Inc. “The new educational resources Visa is creating for our veterans is just the first step. We are committed to supporting the financial needs of these heroes.”

“Consumer Action is developing a new train-the-trainer program for community based organizations who serve veterans. There is a critical need to reach and educate veterans who are often preyed on by bad actors and to provide them with the knowledge they need to protect themselves and prosper financially,” said Ken McEldowney, Consumer Action’s Executive Director. “With proper training, education and access to appropriate resources, we believe veterans can make informed decisions about their financial futures.”

Consumer Action will create a comprehensive education module and host a series of training programs for community based organizations in cities with large veteran populations. The first two programs will be held in San Diego, CA and Virginia Beach, VA this September.

“CFA’s Military Saves campaign has already reached over 180,000 veterans since 2007 to motivate them to save money, reduce debt, and create a firm financial foundation, and we are pleased to be part of this initiative,” said James Lander, Military Saves Director.

“Whether it’s expanding opportunities to build assets or protecting assets through safeguards like the Military Lending Act, we are excited to bring our research and education efforts to this important effort,” said Tom Feltner, Director of Financial Services for Consumer Federation of America.

“The Association for Financial Counseling and Planning Education is thrilled to continue our commitment to the military through this new coalition,” said AFCPE Executive Director, Rebecca Wiggins. “For the past three decades, we have been dedicated to educating, training and certifying financial counselors and educators, including professionals working with service members and their families. We look forward to expanding our efforts through this important partnership.”

About AFCPE
AFCPE, established in 1983, is a non-profit, international, professional membership organization dedicated to improving personal financial management education, training, and certification of financial counselors, educators, and other related practitioners. As the leading authority in the field of personal financial counseling and education, AFCPE exists to support the field of financial counseling and education by integrating perspectives, knowledge and skills from our diverse membership and certification pool including: private practitioners, University educators and Extension Agents, researchers and military financial counselors. Rooted in extensive field research, AFCPE certification programs uniquely offer comprehensive financial counseling training programs, including coursework on personal finance competencies in addition to credit and debt management. AFCPE ‘s programs train professionals and guide clients through life-cycle financial education framework. Please visit AFCPE’s website, www.afcpe.org, to learn more about the organization.

About Consumer Action

Consumer Action has been a champion of underrepresented consumers nationwide since 1971. A non-profit 501(c)(3) organization, Consumer Action focuses on consumer education that empowers low- and moderate-income and limited-English-speaking consumers to financially prosper. It also advocates for consumers in the media and before lawmakers to advance consumer rights and promote industry-wide change. By providing consumer education materials in multiple languages, a free national hotline, a comprehensive website (www.consumer-action.org) and annual surveys of financial and consumer services, Consumer Action helps consumers assert their rights in the marketplace and make financially savvy choices. Nearly 7,500 community and grassroots organizations benefit annually from its extensive outreach programs, training materials and support.

About The Consumer Federation of America

The Consumer Federation of America is an association of non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 250 of these groups participate in the federation and govern it through their representatives on the organization’s Board of Directors. CFA is a research, advocacy, education, and service organization and convenes Military Saves.

About Visa

Visa is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world’s most advanced processing networks — VisaNet — that is capable of handling more than 47,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit usa.visa.com/about-visa, visacorporate.tumblr.com and @VisaNews.

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Washington, D.C. – More consumers plan to spend more than last year, and fewer consumers less than last year, according to the 14^th annual holiday spending survey conducted by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA).  Since 2012, the percentage who said they would spend more than the previous year rose from 12 to 13, while the percentage who said they would spend less declined from 38 to 32. These changes continue the trend from 2011, when only 8 percent said they would spend more while 41 percent said they would spend less. (Consumers almost always spend more than they say they plan to spend, so year-to-year comparisons are most meaningful.)

The annual survey has always been developed by CFA and CUNA and administered to a representative sample of adult Americans by ORC International.  This year, 1002 persons were interviewed by landline or cell phone during November 7-10.  The margin of error is plus or minus three percentage points.

“The survey suggests that holiday spending will increase at least as fast as last year.  It is also encouraging that fewer Americans see their economic status as worsening, despite on-going federal budget issues in Washington,” said Bill Hampel, Chief Economist for the Credit Union National Association.

The intention of consumers to increase holiday spending from last year is consistent with, and may well reflect, perceived improvement in their financial situation.  The five percentage point gap between those who said their financial situation was better (24%) and those who said it was worse (29%) was the smallest since CFA and CUNA began asking the question in 2009.  In 2011, this gap was 18 percentage points (19% better, 37% worse).

Federal Budget Controversies Act to Restrain Spending

Survey respondents were asked if “recent controversies over federal government spending and borrowing” had affected their holiday spending plans.  About one-half (51%) said that they had, with 18 percent saying “very much,” 16 percent “somewhat,” and 16 percent “a little.”

Lower-income families were more likely to be affected by federal budget problems than high-income families.  Nearly three-fifths (59%) of those in households with incomes under $50,000, but less than two-fifths (37%) of those in households with incomes above $100,000, said they were affected.

“Lower-income households are more dependent on federal jobs and expenditures than high-income households,” noted Stephen Brobeck, CFA’s Executive Director.  “While Food Stamp expenditures are being cut, stock prices have soared,” he added.

Gap Between Affluent and Poor Continues to Widen

The survey found continuing evidence of the widening gap between the affluent and the poor.  Over one-third (35%) of those with household incomes under $50,000, but less than one-fifth (17%) of those with incomes above $100,000, said their financial position was worse than a year ago.

One reason for this difference may be concern about making monthly debt payments, including mortgages.  Nearly two-thirds (65%) of those with incomes under $25,000, and over half (56%) of those with incomes between $25,000 and $50,000, yet less than one-quarter (23%) of those with incomes over $100,000, said they were concerned about making these debt payments.

This concern about paying down debt is reflected by responses to a question about use of a financial windfall.  When asked how they would use an unexpected windfall of $5,000, over half (51%) of those with incomes below $25,000, but less than one-third (32%) of those with incomes above $100,000, said they would use most of it to pay down debt.

CUNA/CFA Tips for Spending and Borrowing Prudently

CUNA and CFA suggest the following tips for spending prudently and not taking on too much debt.

• Plan:  Make a list of what you want to purchase and how much this should cost.
• Comparison Shop:  Compare prices on-line and in stores.
• Pay Off Debts Quickly:  Carrying credit card debt is fairly expensive.
• Start Saving for Next Year:  Ask your credit union or bank to automatically transfer funds into a savings or Christmas Club account each month.

With its network of affiliated state credit union leagues, Credit Union National Association (CUNA) serves America’s 6,900 state and federally chartered credit unions, which are owned by more than 96 million consumer members. Credit unions are not-for-profit cooperatives providing affordable financial services to people from all walks of life. For more information about CUNA, visit www.cuna.org or follow @CUNA on Twitter. For more information about credit unions, visit www.aSmarterChoice.org and follow @asmarterchoiceon Twitter.

The Consumer Federation of America is an association of nearly 300 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

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The post New Research Shows Most American Households Do Financial Planning, But the Extent of This Planning Varies Greatly appeared first on Consumer Federation of America.

The research shows that only one in five household decision-makers (19%) are comprehensive planners, who take a methodical approach to financial planning, while one in ten (10%) do virtually no financial planning at all. The research further identifies nearly two-fifths of households (38%) as basic planners and one-third of households (33%) as limited planners.

One of the most compelling findings is that the more extensively households plan, the better prepared they are financially in terms of their likelihood of saving, investing, and managing credit card debt; the higher the effectiveness of this saving, investing, and debt management; and the higher their confidence in managing their finances. While higher income households are more likely than lower income households to plan, more than half (54%) of comprehensive planners have annual incomes below $100,000.

“Those families with the lowest incomes are the ones who would benefit the most from financial planning,” noted Stephen Brobeck, CFA’s Executive Director.  “Households with the fewest financial resources benefit the most from carefully planning spending, saving, and debt management,” he said, though he also added that “marshalling limited financial resources to meet essential needs represents a huge challenge for these households.”

CFA and CFP Board undertook the research with assistance from Princeton Survey Research Associates International (PSRAI), which surveyed a representative sample of 1,002 financial decision makers nationwide from April 12 to 24, 2013.  The survey included more than 60 questions and has a margin of error of plus or minus three percentage points. This press release includes additional data from cross-tabulations and calculations that are not included in the published report.

“This research reaffirms the value of financial planning for all households and also the value of receiving assistance from a financial professional who always puts the clients’ best interest first and abides by a fiduciary standard of care,” said CFP Board CEO Kevin R. Keller, CAE.

Research Identifies Four Distinct Household Financial Planning Profiles

The analysis identified four distinct financial planning profiles that include all American households.  Specific planning characteristics associated with each profile are found in the table below and in the accompanying infographic.

• Comprehensive Planners (19%): All members of this group have a comprehensive financial plan that goes beyond a simple household budget to cover things like retirement savings and insurance.  Two-thirds (67%) of comprehensive planners used a financial professional with fiduciary accountability, specifically a Certified Financial Planner professional or a Registered Investment Advisor, to help prepare such a plan.  These households have specific savings goals as well, with 88 percent having a specific plan for retirement and 80 percent having a plan for emergency savings.

• Basic Planners (38%): The large majority of basic planners (80%) have a plan for one or more specific savings goals, though only 35 percent have a comprehensive plan that organizes these plans, with another 31 percent saying they are likely to make a plan in the coming year.  While two-thirds (66%) say they have a household budget, fewer than half (41%) say that budget is written down or stored in electronic format.

• Limited Planners (33%): A large majority of limited planners (69%) either have a household budget or a plan to address at least one individual savings goal – typically for retirement savings – but not both.  And very few limited planners (11%) think they will make a comprehensive plan in the next year.  But most (91%) either have no credit card debt or have a plan to pay off this debt.

• Non-Planners (10%): This group does virtually no financial planning. Nine in ten (92%) say they have no plan for any specific savings goal, and virtually none (99%) think they will create a comprehensive financial plan in the next year.  They also are the group with the most difficulty managing credit card debt.  Four in ten have credit card debt that needs to be paid off and fewer than half with this debt have a plan to pay it down.

The More Extensive the Financial Planning, the Better the Financial Preparedness

The more extensively households plan financially, the better prepared they are to meet goals ranging from dealing with financial emergencies to living well in retirement.

Financial planning is strongly associated with confidence in managing finances.  Nearly all comprehensive planners (94%), about four-fifths of basic planners (81%), less than three-quarters of limited planners (70%), and only about half of non-planners (53%) have this confidence.

Financial planning is also highly correlated with saving for financial goals

• A large majority of comprehensive planners (91%), fewer than three-quarters of basic planners (73%), about two-fifths of limited planners (39%), and only one-fifth of non-planners (20%) save for emergencies.
• A large majority of comprehensive planners (91%), only 70 percent of basic planners, two-fifths of limited planners (40%), and only about one-third of non-planners (32%) save for current or future retirement.

And financial planning is strongly associated with actual financial preparedness in terms of current savings, level of saving, and sufficient property and life insurance

• A large majority of comprehensive planners (85%), less than three-fifths of basic planners (58%), little more than one-quarter of limited planners (27%), and only 15 percent of non-planners have at least three months saved for emergency expenses.
• About three-fifths of comprehensive planners (61%), fewer than two-fifths of basic planners (36%), and small minorities of limited planners (13%) and non-planners (6%) save 10 percent or more of their annual income.
• Nearly three-quarters of comprehensive planners (72%), about two-fifths of basic planners (41%), less than one-third of limited planners (29%), and only about one-fifth of non-planners (19%) say they have sufficient property and life insurance.

Income and Education Correlate with Financial Planning But Far From Perfectly

Predictably, the higher one’s household income and level of education, the more likely one is to engage in financial planning. Among comprehensive planners, close to half (46%) report annual household incomes of at least $100,000 and about half (49%) have a four-year college degree.  By comparison, among non-planners, over half (53%) have incomes under $25,000 while more than two-thirds (69%) have a high school education or less.

But these correlations are far from perfect.  The majority of comprehensive planners are middle class. In fact, a majority (54%) have incomes under $100,000, including a quarter (24%) who have incomes below $50,000. Furthermore, limited planners and non-planners have very similar demographic profiles in terms of income and education.

Survey Items included in the Household Financial Planning Index
		Total		Comprehensive Planners		Basic Planners		Limited Planners		Non-Planners
COMPREHENSIVE FINANCIAL PLANNING BEHAVIORS
Have a comprehensive financial plan		32%		100%		35%		1%		0%
Likely to get a comprehensive financial plan in next 12 months		16%		0%		31%		11%		1%
Have updated/will update plan in previous/next 12 months		23%		84%		18%		0%		0%
Plan is written down or in computer/electronic file		26%		95%		22%		0%		0%
Spent 2 hours or more preparing or reviewing plan		21%		77%		18%		1%		0%
Had any professional help or used computer/online tool in creating plan		28%		91%		30%		0%		0%
Had a financial professional with fiduciary responsibility create plan, specifically Certified Financial Planner professional or Registered Investment Advisor		19%		67%		17%		0%		0%
Current plan has 5 or more key planning elements, or future plan will have 5 or more key planning elements[1]		43%		96%		58%		7%		0%
BASIC FINANCIAL PLANNING BEHAVIORS
Have a household budget		57%		88%		66%		44%		6%
Household budget is written down		32%		63%		41%		15%		0%
Planning for current or future retirement[2]		52%		88%		64%		31%		8%
Planning for emergencies		32%		80%		38%		7%		1%
Planning for any other financial goal (e.g. child’s college, down payment on house, major purchase, parent’s medical expenses)		26%		60%		33%		7%		0%
	CREDIT CARD DEBT MANAGEMENT BEHAVIORS
	No credit card or pay off bill in full each month		47%		62%		53%		45%		0%
			(N=1002)		(n=226)		(n=386)		(n=298)		(n=92)

Contact:

Dan Drummond, CFP Board, 202-379-2252 ddrummond@CFPBoard.org;

Jack Gillis, CFA, 202-737-0766 jack@consumerfed.org

About the Consumer Federation of America

The Consumer Federation of America is a non-profit association of nearly 300 national, state, and local pro-consumer organizations founded in 1968 to promote the consumer interest through research, education and advocacy. www.consumerfed.org

About CFP Board

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP^® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP^® professionals and other stakeholders. CFP Board owns the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER, CFP^® (with plaque design) and CFP^® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. CFP Board currently authorizes nearly 69,000 individuals to use these marks in the U.S. www.cfp.net.

[1] Planning elements include nine areas of financial planning: identifying financial goals, analyzing spending, budgeting, reviewing investments, debt management, saving for emergencies and retirement, insurance coverage, setting up wills or trusts.

[2] Retirement in this table includes both those planning for future retirement among those not yet retired and those currently retired who were asked if they have ever calculated how much money they can withdraw each year from savings and investments and still have enough to last the rest of their lifetime.

The post New Research Shows Most American Households Do Financial Planning, But the Extent of This Planning Varies Greatly appeared first on Consumer Federation of America.

• Spend only what you can afford. It’s not how expensive gifts are that matters – it’s the thought that counts. Don’t borrow money for your holiday spending (borrowing includes putting charges on our credit card that you can’t pay in full when you get the next bill). Make a budget and stick to it.
• Map it out. Avoid wasting gas on multiple trips by planning your shopping as efficiently as possible. If you can park and walk to several shops in the same area, you’ll save money and get exercise as an added benefit.
• Take advantage of shopping by phone and online. You’ll save gas and you may find some good deals. But it’s wise to comparison shop, and pay attention to shipping costs, which can eat into your savings. Look for free shipping.
• Don’t lose your money to scams. If you see a popular item advertised for much less than the regular price, be suspicious—it could be a danger sign of fraud. Do business with companies you know and trust. If you’re gift shopping on online auction sites, be sure that they provide buyer protection in case you don’t get what you paid for. And steer clear of offers by email or through social networking sites from unfamiliar sellers – they could be scammers who just want to take your money and run.
• Make it or bake it. Are you renowned for your cookies, cakes or pies, or for the spaghetti sauce that you make from your grandmother’s recipe? Do you know how to build a birdhouse, knit a warm hat, or make marmalade? Handmade gifts may save you money and mean more to the recipients. Preserves or food items that can be frozen for later use may be especially welcome given the glut of food that is usually around during the holidays.
• Give gifts that save people money. How about a gift certificate for the hairdresser or barber that the person goes to? The grocery store where the person shops? The local gas station? You can’t go wrong with gifts that help defray people’s every day expenses.
• Buy “pre-owned.” Used appliances, furniture, books and records, and clothing can save you money and be just as good as new. But before you buy used appliances or children’s items, check for recalls with the U.S. Consumer Product Safety Commission. Go to www.saferproducts.gov or call 800-638-2772, TTY 301-595-7054. And be aware that used goods may not be returnable; check the seller’s return policy.
• Give gifts that help other people. What to give to the person who has everything? Make a gift in the person’s name to a worthy charity. Consider groups in the person’s area that help to feed the hungry or provide shelter, or that serve people around the country in times of disaster, or organizations that are dedicated to a cause that the person supports. Information about specific charities is available from the Better Business Bureau’s Wise Giving Alliance, www.bbb.org/us/charity or 703-276-0100.

Contact: Jack Gillis (202) 737-0766

The Consumer Federation of America is an association of nearly 300 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

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Washington, D.C. – More consumers plan to spend more than last year, and fewer consumers less than last year, according to the 13th annual holiday spending survey conducted by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA).  In the past year, the percentage who said they would spend more than last year rose from 8 to 12, and the percentage who said they would spend less declined from 41 to 38.  These differences are statistically significant.

In both years, the survey questions were developed by CFA and CUNA and were administered to a representative sample of adult Americans by ORC International in early November (9-13 this year).  This year, 660 persons were interviewed by landline and 352 by cell phone.

“Our survey results suggest that holiday spending this year will likely rise by between 3% and 4% compared to last year,” said Bill Hampel, Chief Economist for the Credit Union National Association.  “This represents the fourth year of gradual improvement in holiday spending plans since a sharp decline in such plans in 2008.”

The intention of consumers to increase holiday spending from last year is consistent with, and may well reflect, perceived improvement in their financial situation.  From 2011 to 2012, the percentage who said their financial situation was better rose from 19 to 24, and the percentage who said it was worse fell from 37 to 33.  Again, the change is statistically significant.

Despite the rise of student debt and continued concern about mortgage debt, the percentage of those who said they were concerned about meeting monthly debt payments fell from 45 to 43 percent.  And those who said they were unconcerned rose marginally from 38 to 39 percent.  One factor here might be the increasing percentage — 19 to 24 percent in the past year — who said they did not have any credit card payments.

Yet, things are still financially tight for many families.  When asked if they had extra funds (not including lines of credit) available to pay for an unexpected expense of $1,000, only 49 percent said that they did.  This lack of emergency savings may help explain why an increasing percentage — 38 to 43 over the past year — said that, if they received an unexpected windfall of $5,000, they would use most of it to add to savings or investments.

Gap Between Affluent and Poor Widens

There have been many studies and press reports on huge income and wealth gaps between high- and low-income families.  But there has been little focus on whether these gaps have increased over the past year.  The 2011 and 2012 surveys suggest that they have.

Whether respondents reported they would increase or decrease holiday spending from last year was related to income.   Among those with incomes under $25,000, 11 percent said they would spend more while 44 percent said they would spend less.  Among those with incomes over $100,000, 18 percent said they would spend more while 31 percent would spend less.

These income-related differences in spending plans may well reflect perceptions about one’s financial situation.  Among the low-income group, only 21 percent said this situation was better than last year while 45 percent said it was worse.  Among the upper-income group, 30 percent said their financial situation was better while only 23 percent said it was worse.

The linkage between holiday spending plans and perceived financial situation was made even clearer by correlating the two variables.  Among those who said their situation had improved, 62 percent were planning to spend more than last year while only 11 percent were planning to spend less. But among those who said their situation had worsened, only 5 percent were planning to spend more than last year while 57 percent were planning to spend less.

“It is unfortunate that families with the lowest incomes are more likely than high-income families to think their financial situation has deteriorated over the past year, so are more likely to cut back holiday spending,” said CFA Executive Director Stephen Brobeck.

Even though fewer lower-income than upper-income families carry consumer and mortgage debt, a far higher percentage of the former than the latter expressed concern about this debt — 51 vs. 28 percent.   In part, this may reflect the fact that only 19 percent of the lower-income, but 82 percent of the upper-income, respondents said they had extra funds to cover a $1,000 unexpected expense.

One anomalous survey finding related to political party affiliation.  Respondents calling themselves Democrats were more likely to spend more than those calling themselves Republicans — 58 vs. 28 percent.  This finding is counterintuitive since Republican households have higher incomes than Democratic ones.  It is possible that the results of the 2012 elections buoyed the spirits of the Democrats and made them more likely to plan to increase their holiday spending.

CUNA/CFA Tips For Keeping Holiday Debt Under Control

CUNA and CFA suggest the following tips to avoid getting deep into debt during the holidays.  “With just a little planning, consumers can substantially reduce their holiday spending debt load without sacrificing holiday quality,” Brobeck said.

Make a Budget, and a List: Right now, decide how much you can afford to spend and stay within that budget.  Staying within budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase.   Even if it’s a more general rather than detailed list, it will still help you avoid overspending and impulse buys.

Check It Twice:  Make sure your list includes not only gift or gift recipients, but also all the projects and activities that make up your holiday.  It’s easy to overlook extra expenses for holiday foods, party clothes, holiday décor and postage.  Examine each item and ask yourself, “Does it earn its place in our celebration?” You might discover how much you’re doing just out of habit or perceived expectation.

Comparison Shop: You can easily save more than 10 percent on most items, sometimes considerably more, by comparing prices at different stores. The Internet and smart phones have made comparison shopping that much easier.  But when shopping online, shop wisely.  Be sure you are purchasing from a secure site and review emailed statements for accuracy as you receive them.

Make Time Your Ally.  The reason to start sooner rather than later is that when you delay, you pay.  At last minute, you have to settle for something, and it might cost more than you wanted or planned to pay.  After Christmas is a good time to shop for next year’s presents.  You can find some great bargains right after the holidays.  Then tuck those gifts away until next season (just don’t forget about them!).  Another benefit to starting early:  It gives you more time to find the “right” gift and avoid impulsive decisions, which too often leave you less happy with your purchase.

Pay Off Debts Quickly: You’re less likely to overdo it if you pay in cash.  If you must make holiday purchases using credit, use a lower-interest card (you’ll often find lower rates on credit union cards) and pay off this debt as soon as possible early next year. Don’t borrow more than you can repay in several months. Remember that credit card debt is relatively expensive.  And if you only make the required minimum monthly payment, you may never pay off the debt.

Plan for Next Year by Opening a Christmas Club Account: While these accounts do not pay much, if any, interest, they provide a practical way to save small amounts over time. Ask your credit union or bank to automatically transfer funds from your checking to your Christmas Club account every month. The discipline of saving reinforces your good budget intentions.  Find credit unions you’re eligible to join at www.aSmarterChoice.org

See what’s in your supply drawer: You may have more wrapping paper, ribbons, unused cards and gift boxes stored away from last season than you realize.  Use up those holiday supplies first to trim down the amount you’ll have to buy this season.

Understand how layaway programs work. An old holiday standby—store layaway programs—have re-emerged this holiday season, allowing consumers to put items on hold at the store and pay for them over time.  Before deciding to use layaway, know the payment schedule and read the fine print.  Be realistic about how these payments will fit into your spending plan and what you can really afford. Understand the layaway policy including time between payments and schedule of payments, service fees, late and cancellation fee policies, refund and exchange policies.

Be Smart About Gift Cards: The rules today significantly restricted gift card expiration dates and fees compared to several years ago. But those who give or receive a gift card should still read the fine print. And if you get a gift card, use it sooner rather than later to avoid forgetting about unused balances on the card, or forgetting about the card altogether.  And if you still have gift cards you received from others last year, use them to shop this year. It’s a smart way to reduce your out-of-pocket expenses.

Pay Attention to the Return Policy.  Some stores have tighter policies.  Pay attention to the return policy when you make a purchase; keep receipts and note time limits, restocking fees, and other factors that may affect your recipient.

Find Some Low- or No-Cost Ways to Celebrate.  Adding a few changes can ease the strain on your spending budget.  For example, draw names to limit the number of people for whom you purchase gifts; give homemade items; make your own gift wrap; organize a potluck rather than trying to make, and pay for, the entire holiday meal.

Contact: Mark Wolff, CUNA, (202) 508-6764; Jack Gillis, CFA, (202) 737-0766

Credit Union National Association (CUNA) is the primary national trade association for the country’s 7,300 state and federally chartered credit unions, which are not-for-profit financial cooperatives serving more than 95 million Americans. More at www.cuna.org.  To learn more about or locate credit unions: www.aSmarterChoice.org

The Consumer Federation of America is an association of nearly 300 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

The post Consumers Plan to Spend More This Holiday Season, According to 13th Annual CFA-CUNA Holiday Spending Survey appeared first on Consumer Federation of America.

The information is particularly timely: the six-month transition period that most new college graduates are given before they are required to begin paying down their student loans comes to an end in November and Class of 2012 graduates with student loans will shortly begin to make their first payments.

“This November, many new college graduates will need to factor student loans into their spending and saving plans,” said Nancy Register, director, America Saves. “This may be the first time many students have had to create a budget and savings plan to ensure they can meet both their financial responsibilities and save for their future.”

“By following a few simple guidelines, graduates can take control of their finances and make student loan repayment manageable,” said Martha Holler, senior vice president, Sallie Mae. “Proactively planning and working with your loan servicer now will make for a successful transition to repayment.”

As graduates begin their careers in a challenging economic environment, America Saves and Sallie Mae are pleased to offer the following student loan repayment tips to help graduates successfully pay down their debt:

1. Know how much you owe each month. Keep track of what you spend for one month and create a budget that includes your student loan payment. You may find that you will need to cut out unnecessary items in order to pay down your debt or that you can pay a little extra each month to pay down your debt even faster. Contact your student loan servicer or visit their website to calculate different payment scenarios that best fit your budget and personal situation. Proactively planning payments helps save you time and money!

2. Make payments automatic. Signing up for automatic debit is an easy option that electronically deducts payments from your checking or savings accounts, saving you time, stamps and, most importantly, providing you with peace of mind that you have made your loan repayment on time. Bonus: many servicers may even provide you with a lower interest rate just for signing up!

3. Make payments each and every month. Resist the option of putting off your payments, as deferment or forbearance typically mean you’ll pay more over the life of the loan. It’s empowering to tackle your payments now.

4. If you do fall behind, get help. Call your loan servicer to discuss your options – or if they are calling you, answer the phone. A different payment plan or a temporary postponement of payments may give you the extra time you need. If you need help organizing your finances, a licensed nonprofit consumer credit counseling service can offer free budget counseling.

5. Update your servicer with any changes. If your situation changes, your student loan servicer needs to know about it. Keep your loan servicer updated with any change in mailing address, email and phone numbers. Accurate personal details will help ensure you receive all the information you need about your payment due dates, helping you stay on track no matter what the change in your situation.

6. Beware of scams! Some fraudulent companies might claim to offer you easy ways to erase or lower your loan payments. If you have any doubt about services being offered, get in touch with your student loan provider.

7. Build an emergency fund in case of unpredictable circumstances. Aim to save $500 to $1,000 to meet unexpected financial challenges like paying a parking ticket, repairing the brakes on your car or covering dental expenses. Saving even small amounts each month can add up and give you the peace of mind to know you can weather financial emergencies while continuing to pay down your student loan.

Download the tip sheet.

For more tips on planning for college or student loan repayment, please visit CollegeAnswer.com.

For more tips, advice and resources on how to save money and build personal wealth visit AmericaSaves.org.

Contacts: Alex Slater, alex.slater@clydestrategies.com, 202-679-4550; Patricia Nash Christel, patricia.christel@SallieMae.com, 302-283-4076; Katie Bryan, kbryan@consumerfed.org, 202-939-1018

America Saves, launched in 2001, is an initiative of the Consumer Federation of America involving more than 1,000 non-profit, government, and corporate groups that encourages individuals and families to save money and build personal wealth. For more information visit AmericaSaves.org

Sallie Mae (NASDAQ: SLM) is the nation’s No. 1 financial services company specializing in education. Whether college is a long way off or just around the corner, Sallie Mae turns education dreams into reality for its

25 million customers. With products and services that include 529 college savings plans, Upromise rewards, scholarship search tools, education loans, insurance, and online banking, Sallie Mae offers solutions that help families save, plan, and pay for college. Sallie Mae also provides financial services to hundreds of college campuses as well as to federal and state governments.  Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

The post America Saves and Sallie Mae Offer Tips to Help Graduates as Their Student Loan Repayments Begin appeared first on Consumer Federation of America.

Washington D.C. – In an analysis of two new sources of information about family finances, the Consumer Federation of America and Primerica found that two-thirds of middle class Americans acknowledge having made financial mistakes, often costly ones.

The new report, “The Financial Status and Decision-Making of the American Middle Class,” also concluded that the financial condition of most middle class families is challenging. For example, in 2010 the typical middle class family had financial assets of $27,300 – including retirement savings but not pensions – which was 28 percent less than the $37,800 held in 2007.

The comprehensive analysis includes a national survey of 2015 representative adult Americans by ORC International in July of this year and a statistical examination of the Federal Reserve Board’s 2010 Survey of Consumer Finances, by Professor Catherine Montalto of The Ohio State University.

In the ORC International survey, 843 out of 2015 respondents reported household incomes between $30,000 and $100,000 and were considered to be middle class. Key findings from an analysis of the survey data are:

• Two-thirds of middle class Americans (67%) said that, in the past, they had made at least one “really bad financial decision,” and nearly half of those questioned (47%) acknowledged that they had made more than one bad decision. The typical (median) cost of these bad decisions was $5,000, but the average cost was $23,000.
• Few of these Americans said their main source of information or advice about specific financial decisions would be from the Internet, books, magazines, or TV. And a number said they would not seek information or advice in making these decisions. For example, for “saving and investing,” only 15 percent said they would rely on the Internet, publications, or TV for the information, yet another 17 percent said they “wouldn’t seek any information or advice, and just make a decision.” However, for this kind of decision, 45 percent said they would use information and advice from a financial professional.
• These middle class Americans are much more risk-averse than those with higher incomes. If given $1,000,000 to invest for retirement, only 21 percent of middle class Americans, compared to 48 percent of higher-income persons (incomes $100,000 and over), would invest mainly in “stocks, bonds, and/or mutual funds.” And 19 percent of the middle class group would “invest” most of their funds in a savings account while 25 percent would invest mainly in real estate.
• Yet, large majorities of these Americans believe their ability to make financial decisions is “good” or “excellent” – for example, 81 percent for ability to budget income and 80 percent for ability to manage credit card debt though only 63 percent for ability to save for retirement and 67 percent for their ability to purchase a mortgage loan.

“Considering their past mistakes and the complexity of the financial services marketplace, we were surprised at how highly most middle class Americans rate their ability to make a variety of financial decisions and how infrequently they rely on information from the Internet and publications,” said CFA Executive Director Stephen Brobeck.

The second source of information was the Federal Reserve Board’s 2010 Survey of Consumer Finances, which was released several months ago. Professor Catherine Montalto of The Ohio State University used its database, and that of the Fed’s 2007 survey, to compute financial statistics for the 40 percent of households in the third and fourth income quintiles — incomes between $35,600 and $94,600 in 2010. Analysis of these data revealed that:

• This typical middle class family had financial assets of $27,300, including $3,900 in checking and/or savings accounts. These financial assets were 28 percent less than the $37,800 held in 2007.
• Most of these financial assets represented money in contributory retirement accounts, but only about three-fifths of all families (61%) had such an account (though a number of middle class families did have pensions).
• For middle class families, the typical debt payments to income ratio was 20 percent with only 9 percent having debt payments that were overdue by 60 days or more. But nearly half (49%) still carried credit card debt from month to month, and the typical (median) debt for these families was $2,700.
• The decline in housing prices was the main reason that the net assets of the typical middle income family declined 35 percent, from $145,600 to $94,700.

“Families without a lot of resources are balancing difficult and expensive priorities such as saving enough for college and retirement or paying off a mortgage and consumer debt. When you consider these demands within the context of the last decade’s falling incomes, we are nearing a crisis in this country,” said John Addison, Primerica Co-CEO. “Primerica’s representatives specialize in working with families that earn between $30-$100,000, and trust me, this can be a lonely field to be in. The trend on Wall Street is to work with wealthier and wealthier clients, but this report lays out very clearly the urgent need for more financial services aimed at middle income earners.”

Other findings from the analysis of the Fed data include:

• Only 21 percent of the middle class families had a cash value life insurance policy, 15 percent stocks outside a retirement account, 14 percent certificates of deposit, and 13 percent U.S. Savings Bonds.
• Over half of these families (53%) had installment debt whose typical amount was $13,500. Almost all of this debt represented auto loans and student loans.
• These families held consumer and mortgage debt that was, typically, $85,400 in 2007 and $84,400 in 2010.

Other findings from the analysis of the ORCI survey data include:

• More older middle class persons (65 and older) than younger persons (18-34 years) rated their financial decision-making ability as good or excellent, for example, 56 percent vs. 27 percent for budgeting one’s income.
• Two-fifths of middle class persons (40%) said they would not seek information or advice about managing credit card debt, and about one-quarter would not do so for purchasing auto insurance (25%) and life insurance (24%).
• Few said they would use information and advice from a financial professional for managing credit card debt (18%) and purchasing auto insurance (13%).
• The least well-educated middle class persons were the least likely to seek information or advice. For example, 23 percent of those with a high school degree or less, but only 10 percent of those with a college degree, would not seek information about saving and investing.
• A very small percentage would invest the bulk of $10,000 (7%), $100,000 (6%), or $1,000,000 (6%) in gold or precious metals.
• Fewer middle class persons (63%) than those with incomes of $100,000 or higher (76%) rated their decision-making about saving for retirement as good or excellent.
• More middle class persons (67%) than upper income persons (61%) said they had made at least one bad financial decision but the latter group lost more money — $61,000 vs. $23,000 on average, presumably because they had more to lose.

Contact: Jack Gillis, CFA, 202-737-0766, jack@consumerfed.org; Mark L. Supic, Primerica, 770-564-6329, 770-597-6840 mobile, mark.supic@primerica.com

The Consumer Federation of America is a nonprofit association of some 270 consumer groups that was established in 1968 to advance the consumer interest through research, advocacy, and education. While its primary focus is public policy issues, CFA founded and manages the America Saves campaign in which more than 300,000 Americans have enrolled or pledged as Savers.

Primerica, Inc. headquartered in Duluth, GA, is a leading distributor of financial products to middle-income families in North America. Primerica representatives educate their Main Street clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, which we underwrite, and mutual funds, annuities and other financial products, which we distribute primarily on behalf of third parties. In addition, Primerica provides an entrepreneurial full or part-time business opportunity for individuals seeking to earn income by distributing the company’s financial products. We insure more than 4.3 million lives and approximately 2 million clients maintain investment accounts with us. Primerica is a member of the Russell 2000 Stock index and is traded on The New York Stock Exchange under the symbol “PRI”.

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Yet, as noted by numerous scholars and commentators, the American middle class has recently grown weaker as a result of several trends, particularly the stagnation of their incomes and increase in their job insecurity.  Today, middle class households earn less than they did a decade ago, and little more than they earned two decades ago.  The income of the typical American family, in 2010 dollars, was $49,445 in 2010 but $53,164 in 2000 and $48,423 in 1990.   And the doubling of unemployment rates in the recent recession has generated economic insecurity among many more middle class workers than those who lost their jobs or saw them downsized.

This report focuses on the financial status and decision-making of the American middle class.  It is based on two recent sources:

• An analysis of data found in the recently released Federal Reserve Board’s 2010 Survey of Consumer Finances undertaken, for Primerica and the Consumer Federation of America, by Professor Catherine Montalto of The Ohio State University.
• A recent survey commissioned and designed by Primerica and the Consumer Federation of America that was carried out by Opinion Research Corp International (ORCI), which interviewed 2015 representative Americans from all income groups on the weekends of July 12 and 19, 2012.

The American middle class was considered, in analyzing the Fed data, to be those households with incomes between $35,600 and $94,600.  Surprisingly, these households comprise only 40 percent of all households, with far more of them, 40 percent, having incomes below this level than those, 20 percent, having incomes above this level.  In the ORC survey, the middle class was treated as the roughly 50 percent of all households with incomes between $30,000 and $100,000.

This report addresses questions such as the following:  What are the financial assets, non-financial assets, indebtedness, and net assets of the American middle class?   What are the key elements of these assets and debts, and how have they changed over time?  How do middle class Americans rate their financial decision-making?  What are the principal sources of information they use to make different types of financial decisions?  Do these Americans think they have ever made bad financial decisions and, if so, how costly have these decisions been?  Finally, if given $10,000, $100,000, or $1,000,000, how would they invest these funds for their retirement?

Financial Condition In 2010

According to the Fed data, in 2010 a typical middle class family held financial assets of $27,000.   Nearly all of these 2010 families (98%) had a checking or savings account, and the typical (median) amount in these accounts was $3,900.

Only about three-fifths of these families (61%) had money in contributory retirement accounts, and these funds represented the bulk of financial assets for most families.  The typical amount held by families in these accounts was $29,000.

Far fewer middle class families held other financial assets.  In 2010, only 21 percent had a cash value life insurance policy, 15 percent stocks outside a retirement account, 14 percent certificates of deposit, and 13 percent U.S. Savings Bonds.

Not surprisingly, because of homeownership middle class families had far higher nonfinancial assets than financial assets.   Over three-quarters (76%) owned a home whose typical value was $155,000.  But because of mortgage debt, the actual value of these homes was lower.  Nearly three-fifths (59%) of middle class families had mortgage debt whose typical value was $104,000.

The only other nonfinancial asset that was widely held was motor vehicles.  A very large majority (94%) owned a vehicle or vehicles whose typical value was $17,000.  Only a minority of these households had outstanding auto loans.

These auto loans and student loan debt represented nearly all of the installment debt held by over half (53%) of middle class families.   The typical amount per family was $13,500.  Nearly as many families (49%) carried credit card debt, yet the typical amount per family was much lower at $2,700.

Debt was not a significant burden for most middle class families.  The typical debt to assets ratio was 27 percent.  The typical debt payments to income ratio was 20 percent, and only 13 percent had a ratio above 40 percent.  Only 9 percent had debt payments that were at least 60 days due.

Net assets represent the sum of financial and nonfinancial assets minus debts.  In 2010, the typical middle class family held $94,700 in net assets.

Compared to 2007

The previous Fed Survey of Consumer Finances was conducted in 2007.  Comparing data from this survey with those from the 2010 survey helps reveal why many middle class Americans are dissatisfied with their financial condition.

Between 2007 and 2010, the net worth of the typical middle class family declined 35 percent, from $145,600 to $94,700.  In this period, the financial assets of the typical family fell 28 percent, from $37,800 to $27,300, primarily because the amount in typical retirement accounts declined from $38,800 to $29,000.  Also in this period, chiefly because of the decline in home values, nonfinancial assets fell 18 percent, from $199,100 to $163,900.

Yet, debt remained pretty much the same.  Consumer and mortgage debt of the typical middle class family was $85,400 in 2007 and $84,400 in 2010.  And mortgage debt for the typical family with this debt declined only very slightly from $105,800 in 2007 to $104,000 in 2010.

Financial Decision-Making

The ORC International data on financial decision-making provides additional insight into the financial condition of middle class Americans.

Perceived Competence: Most middle class Americans rate their ability as “excellent” or “good” to make decisions on a wide variety of financial issues.  But fewer rate their ability highly on relatively complex financial issues about which they make decisions infrequently.  Over four-fifths said their ability to budget their income (81%), manage credit card debt (80%), and purchase auto insurance (83%) was good or excellent.  But only about two-thirds rated highly their ability to save for retirement (63%), purchase a mortgage loan (67%), or purchase life insurance (66%).

Not surprisingly, many more older persons than younger persons rated their ability as excellent, for example, 56 percent of those 65 and older compared to 27 percent of those 18-34 for budgeting your income, and 48 percent of older persons compared to 33 percent of younger persons for saving enough for emergencies.

Sources of Information: Few middle class Americans said their principal source of information or advice about several specific financial decisions would be “information on the Internet or in books, magazines, or TV.”  And a surprisingly high percentage said they “wouldn’t seek any information or advice, and just make a decision.”

• Two-fifths said they would not seek information or advice in managing credit card debt (40%).  And about one-quarter said they would not do so in purchasing auto insurance (25%) and life insurance (24%).  Lower percentages said they would do so for purchasing life insurance (17%) and saving and investing (17%).
• The proportions who said they would use mainly information on the Internet or in publications were lower for these five decisions – managing credit card debt (16%), purchasing auto insurance (25%), purchasing life insurance (17%), purchasing a mortgage loan (16%), and saving and investing (15%).
• The percentages who said they would use information and advice from a financial professional tended to be higher for the relatively complex decisions about saving and investing (45%) and purchasing a mortgage loan (35%) though lower for purchasing life insurance (24%), managing credit card debt (18%), and purchasing auto insurance (13%).

Somewhat surprisingly, the least well-educated were the least likely to seek information or advice in making these financial decisions.  For example, 28 percent of those with a high school degree or less, but only 17 percent of college grads, would not seek information about purchasing life insurance.  Similarly, 23 percent of the least educated, but only 10 percent of the best educated, would not seek information about saving and investing.

Bad Decisions: Two-thirds of middle class Americans (67%) said that, in the past, they had made at least one “really bad financial decision,” and nearly half of those questioned (47%) acknowledged that they had made more than one of these bad decisions.  When questioned about estimating the dollars lost because of these decisions, there were big differences between the median response ($5,000) and the mean (average) response ($23,000).  That is because some losses were substantial.  Eleven percent said their losses had been at least $50,000, and two percent said these losses had been $200,000 or more.

Investing for Retirement: Those surveyed were asked, if they were given a certain amount to invest for retirement, “what would you do with most of this money?”  The amounts to be invested were $10,000, $100,000, and $1,000,000.  And there were nine “investment” options – gambling on lottery tickets or at a casino or track, purchasing a cash-value life insurance policy, keeping funds in a safe deposit box, purchasing gold or precious metals, purchasing an annuity, purchasing certificates of deposit or U.S. Savings Bonds, purchasing a house or land, putting funds in a savings account, or purchasing stocks, bonds, and/or mutual funds.

For all three amounts, over three-fifths said they would select one of just three options – savings account, stocks/bonds, or house/land.  But the proportions varied depending on the amounts invested.  About a third with $10,000 (30%) or $100,000 (33%) said they would invest mainly in stocks/bonds.  But only about one-fifth of those with $1,000,000 (21%) said they would do so.  On the other hand, the proportion who said they would invest in real estate grew from 9 percent for $10,000 to 25 percent for $1,000,000.  The proportion who said they would keep most of the funds in a savings account varied little among amounts – 23 percent for $10,000, 19 percent for $100,000, and 19 percent for $1,000,000.

Between 20 and 30 percent said they would invest the funds in one of three other options – an annuity, CDs/Savings Bonds, or gold/precious metals.  The “gold bugs” represented only 6 percent ($100,000, $1,000,000) or 7 percent ($10,000) of those surveyed.

Comparison to Higher-Income Americans: There were some significant differences between responses of middle-income and upper-income ($100,00 and above) Americans.  More upper-income respondents than middle-income ones rated highly their decision-making about saving for retirement (76% vs. 63%) and about purchasing a mortgage loan (77% vs. 67%).  And fewer upper-income respondents said they had made a least one bad financial decision (61% vs. 67%), but predictably, because they had more money to spend and invest, their losses tended to be higher — $61,000 vs. $23,000 on average.

One striking difference between the financial decision-making of upper- and middle-income Americans is their confidence in stocks and bonds.  Nearly half of the upper-income group (48%) said they would invest most of $1,000,000 in stocks or bonds while little more than one-fifth of the middle-income group (21%) said they would do so.   While the differences for lesser amounts invested were not as great, they were still significant.

Summary and Conclusions

Most middle class Americans are not financially desperate.  In 2010, after being battered by economic recession, they typically had:

• Sufficient funds in transactions accounts (checking and saving), $3,900, to cover most unexpected expenses.
• Total financial assets of $29,000.
• Manageable debts, with a debt to asset ratio of 27 percent, and only 9 percent with debt that is at least 60 days overdue.

However, in 2010 they were poorer than at the outset of the recession three years earlier.  While their consumer and mortgage debt remained about the same, their financial assets were 28 percent lower and their nonfinancial assets 18 percent lower, and in consequence, their net assets were 35 percent lower.

Most middle class Americans rate their ability to make financial decisions highly.  But more of them had confidence to make decisions on issues such as budgeting their income and managing their debt than on more complex issues such as saving and investing or purchasing a mortgage.  Moreover, two-thirds acknowledged that, in the past, they had made at least one “really bad financial decision.”  This decision had typically cost them $5,000 but for a number of respondents, much larger sums.

Perhaps these mistakes help explain why, on a range of decisions from managing credit card debt to saving and investing, most middle class Americans said they would rely primarily on information or advice from financial professionals, friends or family, or the Internet or publications.  Only a minority said they would not seek information or advice in making these decisions.

Their losses during the recession may also help account for their conservative investment preferences.  Nearly as many (19%) would invest $1,000,000 in a savings account as in stocks and bonds (21%).  And despite their loss of home equity during the recession, an even higher percentage (25%) would invest most of $1,000,000 in real estate.  However, only a very small minority (6%) would invest this amount in gold or precious metals.

The Consumer Federation of America is an association of nearly 300 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

Primerica, Inc., headquartered in Duluth, GA, is a leading distributor of financial products to middle-income families in North America.  Primerica representatives educate their Main Street clients about how to better prepare for a more secure financial future by assessing their needs and providing appropriate solutions through term life insurance, which we underwrite, and mutual funds, annuities and other financial products, which we distribute primarily on behalf of third parties. In addition, Primerica provides an entrepreneurial full or part-time business opportunity for individuals seeking to earn income by distributing the company’s financial products. We insure more than 4.3 million lives and approximately 2 million clients maintain investment accounts with us. Primerica is a member of the Russell 2000 stock index and is traded on The New York Stock Exchange under the symbol “PRI”.

The post The Financial Status and Decision-Making of the American Middle Class appeared first on Consumer Federation of America.

While the economic climate has changed, financial planning remains a critical factor in separating those who are on track to meet their financial goals from those who are falling behind. The new survey finds people who plan feel more confident about their financial decision‐making,manage to save more money, and feel better about their progress to date in saving for financial goals. Planners score higher in financial preparedness than non‐planners across income groups. The benefits are not limited to those who are better off.

The post 2012 Household Financial Planning Survey appeared first on Consumer Federation of America.

The post Household Financial Planning Survey Documents appeared first on Consumer Federation of America.

Nearly two-fifths (38%) of the 1,508 household financial decision-makers surveyed said they live paycheck to paycheck, while less than one-third (30%) indicated they felt comfortable financially and only about one-third (34%) think they can afford to retire by age 65. The survey was conducted by Princeton Survey Research Associates International (PSRAI).

Yet, according to several measures of financial well-being, those with a financial plan report faring better than those without one:

• By a margin of 50 percent to 32 percent, and for all but the lowest income bracket (under $25,000) where few have a comprehensive plan, planners are more likely to feel they are on pace to meet all of their financial goals, such as saving for retirement or for emergencies;
• By an even larger margin of 52 percent to 30 percent, and across all income brackets, planners are more likely to feel “very confident” about managing money, savings and investments;
• By a margin of 48 percent to 22 percent, planners are more likely to describe themselves as living comfortably; in addition, as many planners in the $50,000-$99,999 income bracket say that they live comfortably as non-planners in the $100,000 and above bracket;
• For those in these two highest income brackets, planners report saving a higher percentage of income and having built greater wealth than non-planners. For example, planners with incomes $50,000-$99,999 are more likely to report they save 10 percent or more of their income (57% vs. 39%) and to have accumulated at least $100,000 in investments (37% vs. 19%);
• For those in the two lowest income brackets, planners with credit cards report being much more likely to pay credit card bills in full. That is true both for those in the $25,000-$49,999 income bracket – 46 percent for planners and 26 percent for non-planners – and for those with incomes under $25,000 – 41 percent for planners and 16 percent for non-planners; and
• Only 31 percent of respondents said they had a comprehensive financial plan, while about two-thirds (65%) indicated they follow a plan for at least one of their savings goals.

“Our survey clearly shows that having a personal financial plan helps both rich and poor achieve their financial goals,” said Stephen Brobeck, CFA’s Executive Director. “Having a financial plan increases one’s confidence and effectiveness in managing, borrowing and saving money.”

How Household Financial Conditions and Planning Habits Compare Between 1997 and 2012

The CFA-CFP Board survey utilized a number of questions asked by a 1997 CFA-NationsBank survey also developed with and administered by PSRAI.  This made possible a comparison of consumer attitudes and habits in a year, 1997, when unemployment was lower and consumers were more optimistic, with attitudes and habits in the aftermath of the worst recession since the Great Depression.

• In 1997, only 31 percent said they lived paycheck to paycheck compared to 38 percent this year, while the percentage who indicated they felt comfortable financially has fallen from 38 percent in 1997 to 30 percent in 2012.
• In 1997, only 38 percent felt behind in saving for retirement compared to 51 percent this year.
• In 1997, half (50%) said they thought they could retire by age 65 compared to only 34 percent this year.
• In 1997, more families with college-bound children were saving for higher education (56%) compared to this year (48%).
• However, the proportion of those who say they have a retirement investment plan in place is about the same (51% in 1997 and 49% this year).

The 2012 survey also revealed that slightly more than half of respondents said “it’s hard for me to know who to trust for financial advice” (55%), “to me investing seems complicated” (52%), and “I’m worried about losing my money if I invest it” (55%), a significant increase from the 45 percent who expressed this worry in 1997.  However, these findings are not especially surprising in light of the financial crisis and its aftermath.

Added Kevin R. Keller, CEO of CFP Board: “Consumers understandably are more nervous about investing their money given recent revelations about financial fraud, manipulation and abuse of clients. This doesn’t mean that people shouldn’t create a financial plan and be prepared. We encourage consumers to do their homework and find a financial professional who always puts the clients’ best interests first and abides by a fiduciary standard of care.”

Both CFA and CFP Board recommend that consumers start by assessing their own financial condition and develop a plan. One useful tool is the website LetsMakeaPlan.org, where interested consumers can learn more about preparing a financial plan, including working with a Certified Financial Planner professional.

Contact: Dan Drummond, CFP Board, 202-379-2252; Jack Gillis, CFA, 202-737-0766

About the Survey Methodology

CFA and CFP Board developed the survey instrument with PSRAI, which administered the survey to a representative sample of 1,508 financial decision-makers nationwide via landline or cell phones. Interviews were conducted from May 7-20, 2012 and the margin of sampling error on the total sample at the 95 percent level of confidence is plus or minus three percentage points. Only statistically significant differences at the 95 percent level of confidence are included in the companion report and this release.

The full survey report and detailed results can be found at consumerfed.org or cfp.net.  A summary of the survey results with graphs can be found here. A description of the survey methodology and a questionnaire with complete survey results are included in the report appendix following detailed findings.

About the Consumer Federation of America

The Consumer Federation of America is a non-profit association of some 280 national, state, and local pro-consumer organizations founded in 1968 to promote the consumer interest through research, education and advocacy. www.consumerfed.org

About CFP Board

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® certificants and other stakeholders. CFP Board owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. CFP Board currently authorizes more than 66,000 individuals to use these marks in the United States. www.cfp.net

The post Many Families Struggle to Make Ends Meet, But Those With a Financial Plan Feel and Do Better appeared first on Consumer Federation of America.

In the national survey of 1,011 representative adult Americans conducted November 10-13, a significantly higher percentage (37%) reported that their financial condition was worse this year than a year ago compared to the 30% who responded that way to the same question  in last year’s survey.  On the other hand, this year only 19% reported that their condition was better compared to a year ago, while 23% responded that way last year.

These findings help explain why 41 percent said they were planning to spend less this year than last year compared to only 8 percent who said they planned to spend more.  Those two findings are almost identical to last year’s results, when the same percentage (41%) indicated they planned to spend less, and a slightly greater 10% said they would spend more.

These results are an improvement from the 55% of respondents who said they intended to spend less in 2008’s survey, at the depth of the Great Recession.  But from 2000 to 2007, the percentage who indicated they planned to spend less never exceeded 35 percent and often was 30 percent or lower.  (Since consumers always spend more than they intend, the year-to-year comparisons, not the absolute levels, are what is meaningful for predicting spending.)

“The good news is that spending plans are stronger than they were at the worst stage of the recession in 2008,” said CUNA Chief Economist Bill Hampel “The bad news is spending plans are still considerably below where they were before the recession.”

The survey revealed a direct link between financial condition and spending.  Of those who said they planned to spend more, 33 percent indicated their financial condition was better than a year ago, while only 19 percent said it was worse.  Of those who said they planned to spend less, only 15 percent indicated their financial condition was better while 55 percent said it was worse.

The lingering effects of recession, as well as the consumer and mortgage debt overhang, are also seen in the survey statistics on concern about making monthly debt payments.  Over the past year, those worried about meeting monthly credit card payments rose from 24 percent to 27 percent, and those worried about meeting payments on all types of debts (including mortgage debt) rose from 43 percent to 45 percent.

High-Income Households Report Much Greater Financial Improvement than LowerIncome Households

Comparing responses from different demographic groups reveals interesting, and somewhat troubling, differences.  Most significantly, high-income households are much more likely to report improvement in their financial situation than are low- and moderate- income households over the past year.  Of those households with at least $100,000 in annual incomes, 35 percent said their financial situation was better and only 18 percent said it was worse.

By comparison, of those households with annual incomes below $25,000, 13 percent indicated improvement and 50 percent worsening in the past year.  And of those households with annual incomes of $25,000-$50,000, 24 percent indicated improvement and 39 percent worsening.  (Slightly more than half of all US households have incomes below $50,000.)

Not surprisingly, then, fewer high-income households than lower-income ones reported concern about meeting monthly debt payments.  Despite the fact that far more households with at least $100,000 in income have mortgage loans and credit cards than do lower-income households, only 23 percent are concerned about meeting monthly debt payments compared to 59 percent of households with incomes under $25,000 and 54 percent of households with incomes between $25,000 and $50,000.

“Our survey suggests that, not just the top one percent, but the entire upper-middle and upper classes are doing relatively well,” noted CFA Executive Director Stephen Brobeck.  “While many of these families still worry about their incomes and expenses, they appear to worry much less, and be recovering from the recession more quickly, than are low- and moderate-income households,” he added.

The CFA-CUNA survey was conducted by Opinion Research Corporation.  Its margin of error is plus or minus three percentage points.

Ideas for Keeping Holiday Debt Under Control

CUNA and CFA suggest the following tips to avoid getting deep into debt during the holidays.

“With just a little planning, consumers can substantially reduce their holiday spending debt load without sacrificing holiday quality,” said Brobeck.

Make Budget, and a List: Right now, decide how much you can afford to spend and stay within that budget.  Staying within budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase. It’s easy to overlook extra expenses for holiday foods, party clothes, holiday décor and postage.  Even if it’s a more general rather than detailed list, it will still help you avoid overspending and impulse buys.

Comparison Shop: You can easily save more than 10 percent on most items, sometimes considerably more, by comparing prices at different stores. The easiest way to do this is to use the Internet and compare offers online. But when shopping online, shop wisely.  Be sure you are purchasing from a secure site and review emailed statements for accuracy as you receive them.

Pay Off Debts Quickly: You’re less likely to overdo it if you pay in cash.  If you must make holiday purchases using credit, use a lower-interest card (you’ll often find lower rates on credit union cards) and pay off this debt as soon as possible early next year. Don’t borrow more than you can repay in several months. Remember that credit card debt is relatively expensive.  And if you only make the required minimum monthly payment, you may never pay off the debt.

Plan for Next Year by Opening a Christmas Club Account: While these accounts do not pay much if any interest, they provide a practical way to save small amounts over time. Ask your credit union or bank to automatically transfer funds from your checking to your Christmas Club account every month. The discipline of saving reinforces your good budget intentions.

See what’s in your supply drawer:  You may have more wrapping paper, ribbons, unused cards and gift boxes stored away from last season than you realize.  Use up those holiday supplies first to trim down the amount you’ll have to buy this season.

Shop After Christmas for Next Year’s Presents.  You can find some great sales bargains right after the holidays.  Then tuck those gifts away until next season.

Understand how layaway programs work. An old holiday standby—store layaway programs—have re-emerged this holiday season, allowing consumers to put items on hold at the store and pay for them over time.  Before deciding to use layaway, know the payment schedule and read the fine print.  Be realistic about how these payments will fit into your spending plan and what you can really afford. Understand the layaway policy including time between payments and schedule of payments, service fees, late and cancellation fee policies, refund and exchange policies.

Be Smart About Gift Cards: Rules that took effect last year significantly restricted gift card expiration dates and fees. But those who give or receive a gift card should still read the fine print. And if you get a gift card, use it sooner rather than later to avoid forgetting about unused balances on the card, or forgetting about the card altogether.

Pay Attention to the Return Policy.  Some stores have tighter policies.  Pay attention to the return policy when you make a purchase; keep receipts and note time limits, restocking fees, and other factors that may affect your recipient.

Find Low- or No-Cost Ways to Celebrate.  Adding a few changes can ease the strain on your spending budget.  For example, draw names to limit the number of people for whom you purchase gifts; give homemade items; make your own gift wrap; organize a potluck rather than trying to make, and pay for, the entire holiday meal.

The post According to 12th Annual CFA-CUNA Holiday Spending Survey, Consumers Feeling Worse About Their Finances appeared first on Consumer Federation of America.

More respondents to this recent survey (November 11-14) said their financial situation is better this year (23%) than last (19%), and far fewer said it was worse this year (30%) than last (36%).   This reported improvement may help explain why more respondents said they would increase their holiday spending this year (10%) than last (8%), and fewer said they would decrease their spending this year (41%) than last (43%).

“While these results convince us that holiday spending will increase this year – elements of our survey also underline the fact many consumers continue to harbor significant concerns about the economy and their personal finances,” said Mike Schenk, CUNA senior economist.  “Because of this we expect the increase in holiday spending this season to be modest – roughly half the 5% long-run average increase.”

The CFA/CUNA survey also indicated that consumers are making greater efforts, and having some success, managing their consumer and mortgage debt.  When asked how they would most likely use most of a $5,000 windfall, nearly half (47%) said they would “pay down some debt.”  This percentage is not only six percentage points higher than last year but is also higher than percentages for each of the ten previous years.

Moreover, fewer respondents reported that they are very concerned about meeting monthly credit card payments this year (10%) than last (12%), and far fewer said they were very concerned about meeting monthly payments on all types of debt this year (17%) than last (23%).

“Our survey provides further evidence, along with less borrowing and more saving, that consumers are trying to rebuild their balance sheets and are having some success doing so,” said Stephen Brobeck, CFA’s executive director.

The CFA-CUNA survey was conducted by Opinion Research Corporation, which interviewed by phone more than 1,000 representative adult Americans.  The survey’s margin of error is plus or minus three percentage points.

Middle-Age Americans Report Unusual Degree of Concern

Americans between the ages of 45 and 54 reported an unusual degree of concern about their financial condition, as the data below indicate:

“It is interesting to note that Federal Reserve data separately reveals that households headed by those in this 45 to 54 age group are the most likely to be carrying debt loads,” noted CUNA’s Mike Schenk.  “In all, 87% of those in this group carry debt, and they are much more likely than their peers in other age groups to hold both mortgage debt and to have credit card balances. “

Greater Concerns on Spending, Debt Among Lower-income Families 

Not surprisingly, though, lower-income families (under $25,000) have even greater concerns.  Thirty percent intend to spend much less than last year.  Forty-four percent say their financial condition is worse.  Fifty-six percent say they are concerned about meeting all debt payments.

And when asked how they would pay for an unexpected $5,000 emergency, far more lowerincome families said they would have to borrow it – 39% get a gift or loan from family or friend, 31% take out special loan, 17% put on credit card, 13% add to home equity loan – than taking money out of checking (19%) or savings (33%).  (Respondents were permitted multiple responses on this question.)

Ideas for Keeping Holiday Debt Under Control

With more consumers putting their focus on paying down debt, CUNA and CFA suggest the following tips to avoid reversing course and getting deep into debt during the holidays.  “With just a little planning, consumers can substantially reduce their holiday spending without sacrificing holiday quality,” said Brobeck.

Make Budget, and a List: Right now, decide how much you can afford to spend and stay within that budget.  Staying within budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase. It’s easy to overlook extra expenses for holiday foods, party clothes, holiday décor and postage.  Even if it’s a more general rather than detailed list, it will still help you avoid overspending and impulse buys.

The post Consumers Report Improvement in Financial Condition, Intend to Spend More This Holiday Season appeared first on Consumer Federation of America.

This year 43% of consumers said they intend to cut back their holiday spending, compared to 55%  last year.  But the 43% figure is still much higher than in the previous eight years of 2000 to 2007, a period when the percentage intending to spend less never exceeded 35% and dipped as low as 21% (in 2002).

“Consumers are telling us they will not cut back as much on spending as last year, but more so than in previous years,” said CUNA Chief Economist Bill Hampel. “Moreover, only 8% said they planned to spend more than last year, and this was the lowest percentage we have seen in the past 10 years.”

A key reason for this intended spending restraint is how consumers assess their financial situation compared to last year.  Far more consumers said their situation was worse (36%) than better (19%), though nearly half (44%) said their situation was about the same.

Worry about their financial situation was also reflected in responses to an open-ended survey question asking those intending to spend less for the most important reason for this decision.  Concern about the economy again topped the list of reasons this year (35.6%) as it did last year (36.1%), with more this year saying that unemployment or the prospect of reduced job hours or pay were at the heart of those concerns.

Less Concern About Meeting Monthly Debt Payments

“Many Americans say they remain concerned about their financial condition,” said Steven Brobeck, executive director of the Consumer Federation of America.  “But it is good news that fewer people are concerned about meeting monthly debt payments this year than last.”

Only 24% said they were concerned about meeting monthly credit card payments this year, compared to 28% last year.  And only 42% said they were concerned about meeting all debt payments this year, compared to 48% last year.”

“During these recessionary times more people have been seeking to pay down debt and build up their savings,” added Hampel.  “We certainly have seen that behavior among the nation’s 92 million credit union members.  Our survey indicates the pattern is continuing into the holiday season.”

The CFA-CUNA survey was conducted November 6 – 9 among more than 1,000 representative adult Americans by Opinion Research Corporation.  The survey’s margin of error is plus or minus three percentage points.

Those With Lower Incomes More Concerned About Finances

In the survey’s look at demographic differences, the most striking is between those with less than $50,000 in annual income and those with more than this amount.  The lower-income group is far more likely (51%) than the higher one (38%) to say they will spend less.

More in the lower-income group ((42%) than the higher one (32%) also said their financial situation is worse today than a year ago, and those earning under $50,000 also expressed more concern (58%) than the higher-income group (32%) about meeting their debt payments.

The former also report they are far more likely than the latter to use a $5,000 windfall to pay off debt rather than add to savings, and to rely on borrowing rather than saving to meet an unexpected $5,000 expense.

“There is a clear financial gap between those with incomes above and below $50,000,” noted CFA’s Brobeck.  “Even then, about one-third of the higher-income group report a worsening financial condition, concern about meeting all debt payments, and an intention to spend less.”

Ideas for Keeping Holiday Debt Under Control

CUNA and CFA suggest the following tips to avoid getting deep into debt during the holidays.  “With just a little planning, consumers can substantially reduce their holiday spending without sacrificing holiday quality,” said Brobeck.

Make Budget, and a List: Right now, decide how much you can afford to spend and stay within that budget.  Staying within budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase. It’s easy to overlook extra expenses for holiday foods, party clothes, holiday décor and postage.

Comparison Shop: You can easily save more than 10 percent on most items, sometimes considerably more, by comparing prices at different stores. The easiest way to do this is to identify sellers using the Yellow Pages, and then call several, or use the Internet and compare offers online. But when shopping online, shop wisely.  Be sure you are purchasing from a secure site (look for the “https” in the website address and the locked padlock icon on the toolbar), and review emailed statements for accuracy as you receive them.

Pay Off Debts Quickly: You’re less likely to overdo it if you pay in cash.  If you must make holiday purchases using credit, use a lower-interest card (recent studies suggest you’ll find lower rates on credit union cards) and pay off this debt as soon as possible early next year. Don’t borrow more than you can repay in several months. Remember that credit card debt is relatively expensive.  And if you only make the required minimum monthly payment, you may never pay off the debt.

Plan for Next Year by Opening a Christmas Club Account: While these accounts do not pay much if any interest, they provide a practical way to save small amounts over time. Ask your credit union or bank to automatically transfer funds from your checking to your Christmas Club account every month. The discipline of saving reinforces your good budget intentions.

Shop After Christmas for Next Year’s Presents.  You can find some great sales bargains right after the holidays.  Then tuck those gifts away until next season.

Be Smart About Gift Cards: If you don’t use a gift card promptly, it can lose value in one of several ways:  It can expire and become worthless; monthly maintenance fees can erode its value to zero; the store that issued it can go bankrupt or stop honoring gift cards.  If you give or receive a gift card, read the fine print.

Pay Attention to the Return Policy.  Some stores are tightening their policies.  Pay attention to the return policy when you make a purchase; keep receipts and note time limits, restocking fees, and other factors that may affect your recipient.

Find Low- or No-Cost Ways to Celebrate.  Adding a few changes can ease the strain on your spending budget.  For example, draw names to limit the number of people for whom you purchase gifts; give homemade items; make your own gift wrap; organize a potluck rather than trying to make, and pay for, the entire holiday meal.

The post Consumers Likely to Exercise Less Spending Restraint This Holiday Season appeared first on Consumer Federation of America.

Moreover, nearly three-fifths (59%) of parents surveyed said they would find it useful for them and their children to have available a new free website featuring hard-hitting messages about using checking and credit that were communicated by young adults through short videos.   FoolProofMe.com, a web-driven group of programs uniquely targeted to teach young people about money and financial responsibility, is now making available just such a free website.

New CFA Money Management Survey Focuses on Parents’ Concern

Parents feel responsible for the financial education of their children, but not all feel confident to undertake this education, and even more are not confident their children will leave home knowing how to manage money, credit, and debt.  Nearly all parents surveyed (98%) said they felt very or somewhat responsible for teaching their children how to manage money, credit, and debt, with 86% saying they felt very responsible.  But only 73% said they were “very capable” of providing this instruction.  And little more than half (53%) said they were “very confident” their children will leave home knowing how to manage money, credit, and debt.

“Nearly all parents feel responsible for the financial education of their children, but little more than half are very confident their kids will leave home knowing how to manage money, credit, and debt,” said CFA Executive Director Stephen Brobeck.  “FoolProofMe.com represents an important new financial tool to help parents educate their children,” he added.

The CFA survey was undertaken by Opinion Research Corporation, which identified and surveyed, by phone, 553 representative parents (or guardians) with children under 18 years of age living at home in late August (27-31) 2009.  The survey’s margin of error is plus or minus four percentage points.

FoolProofMe.com:  A Unique Tool for Parents to Teach Their Children About Money Management 

FoolProofMe.com is a unique, independent financial resource tool designed to address the financial needs of today’s young people. “Thousands of high school and college-age young people have told us what they believe about money and finances—and the news is not good,” says Will deHoo, 29, Founder and President of FoolProofMe.com.

As the basis for FoolProofMe.com, DeHoo developed the following list of financial myths held by the thousands of young people who helped test the FoolProofMe.com programs.

Top Ten Financial Myths Held by 14-21 Year-olds

1. I don’t have to worry about credit at my age.
2. Bad credit can’t keep me from getting a job.
3. All loan companies have the same rates.
4. All credit cards are alike.
5. The job of financial advertising is to tell the truth.
6. It’s OK to bounce a few checks.
7. It’s OK to make minimum payments on a credit card.
8. Paying late occasionally can’t hurt my credit.
9. Fine print isn’t important.
10. Young people don’t have credit scores.

FoolProofMe.com Engages the Young American and Many Educators

FoolProofMe.com consists of free online tutorials that provide high school and college-age people separate money management programs in a hip and identifiable format. The programs’ tutorials address the most common misconceptions held by young people—a list of mistaken beliefs deHoo started tabulating six years ago when he began speaking to young Americans about their finances.

For example, speaking to 60 seniors about to graduate from The University of Colorado, deHoo observed:  “They were bright, and engaged—and most of them were already looking for a job. But few knew anything about the practical financial details that, at that moment, were affecting their futures. Only four of the students knew that poor credit could hurt their job opportunities. Many had bounced checks without concern and more were borrowing on one credit card to pay another. Only three out of the 60 even knew their credit score. It was scary.

“Many of the young people we met had some form of financial training,” deHoo said, “but they obviously hadn’t listened.”  DeHoo decided rather than simply not caring, it was the medium for delivering financial education that was the problem.  Young people were exposed to important financial information, but because it wasn’t in their ‘language’ they didn’t engage.  “We discovered that young people did care and would listen, if there was a way to engage them.” And that’s when FoolProofMe.com was born.

“Young people trust their peers.  Young people are immersed in technology.  Young people don’t want to appear foolish.  Those realities defined how FoolProofMe.com would work,” said deHoo, who gathered a team of consumer advocates, teachers, and most importantly young people from seven countries to develop the programs.

After several years of testing, tens of thousands of high school and college kids and hundreds of schools are now using the FoolProofMe.com programs nationally. Texas has approved FoolProofMe.com for high school credit and in Southern Wisconsin, over 60 high schools have integrated FoolProofMe.com’s high school program into the curriculum.  Colleges are also using FoolProofMe.com’s college version in freshman orientations.

“Our programs connect for several reasons: We use edgy, highly interactive videos and lessons, called modules, to present our messages. And those messages are very tough,” said deHoo.  “For example, ‘Only fools blindly accept advertising’ is a reoccurring FoolProofMe.com message and we aren’t afraid of using the word ‘rip-off’ when it comes to many products and services.

“We also take a strong stance on issues like credit cards.  Most financial literacy programs— especially those sponsored by financial institutions—present credit cards as the path to freedom.  We present credit cards as the path to destruction, if you’re not careful.  ‘What do you get with a credit card?  Debt is what you get with a credit card,’ is a message we present continuously.”

Rachel Silverman, 25, knows how quickly personal finances can spiral out of control when a young person doesn’t know the realities of money and debt. Two years ago, Rachel was a NYU music student with hopes for an opera career. She’s now saddled with $130,000 in debt from credit cards and student loans, and is struggling to keep her dreams alive.

“It was terrible,” Rachel says.  “I wasn’t sure what I was getting into.”  Rachel says no one, including her parents and teachers, prepared her for the realities of managing credit and debt. “And I probably wouldn’t have been in this situation if I had simply known the basics about credit cards, student loans, and interest calculations.  In hindsight, I was like a lamb being led to slaughter!” she says.

FoolProofMe.com provides three versions of its programs: 

FoolProof for High Schools provides teachers with two weeks of online classroom instruction.  The program grades tests, allows students to work at their own pace, and allows teachers to assign individual modules as homework. www.FoolProofTeacher.com

FoolProof Solo is designed for college-age young people to use on their own and is offered to colleges and universities for use in freshman orientation programs.    (Watch the “Solo” video introduction at: solo.foolproofonline.info/foolproof).

FoolProof for Parents and Grandparents provides adults with an online program to use with their kids.  “When kids ask parents and grandparents for financial help this program gives adults a tool that requires their kids to first prove they are financially knowledgeable.  For example, a parent can say,   ‘I’ll help you get a credit card, if you pass the credit card module.’ The parent fills out an email form and we contact the kid and take it from there,” says CEO deHoo.  The test results are sent to the adults. (Watch the video introduction at: parents.foolproofonline.info/foolproof).

FoolProofMe.com’s Support

FoolProofMe.com partners with credit unions: Funding for FoolProofMe.com comes primarily from credit unions who license access to the programs. But they have no input on or control over program content.  Furthermore, FoolProofMe.com takes no advertising.

Consumer groups back FoolProofMe.com

In addition to the Consumer Federation of America, two other national groups endorse the FoolProofMe.com programs.

The National Association of Consumer Advocates endorses FoolProofMe.com and offers its programs to all its members.  “At a time when our economy is in crisis, it is essential that consumers learn to protect themselves,” says Ira Rheingold, Executive Director of NACA. “FoolProofMe provides consumers with easy to understand financial information that can help them avoid the tricks and traps that have left us all with too much debt and too little savings.”

CAREprogram.us, an organization of over 19,000 bankruptcy judges, advocates and presenters, has partnered with FoolProofMe.com. “We believe our partnership with FoolProofMe.com offers anyone interested in the prevention of credit abuse an extraordinarily powerful new teaching tool,” says the Hon. Judge John C. Ninfo, II, founder of CARE.

The post New Survey on Parents’ Concerns About Their Children’s Money Management Skills appeared first on Consumer Federation of America.

Each year from 2003 to 2007, between 30 and 35 percent of consumers reported that they were planning to cut back their holiday spending.  This year, 55 percent said they were planning to reduce this spending as least “somewhat”, with 27 percent of all respondents indicating that they planned to spend “much less than last year.”

“Consumers are expressing an unusually strong desire to tighten their belts this holiday spending season,” said CUNA Chief Economist Bill Hampel.  “More say they plan to cut back their spending this year than at any time in the nine years we have been doing this survey.  As a result, we may see an actual decline in holiday spending for the first time in many years.”

While record numbers of all age and income groups said they are planning to reduce holiday expenditures, women and families with children were much more likely than men and households without children, respectively, to indicate they were planning cutbacks.  Sixty-two percent of women, but only 48 percent of men, surveyed said they are planning cutbacks.  Sixtyone percent of households with children, but only 51 percent of households without them, indicated they were planning to reduce spending.

In response to an open-ended survey question asking those intending to spend less for the most important reason for this decision, the vast majority of respondents indicated either constrained finances or financial anxiety about the future.  The most frequent responses were:  the economy and related economic uncertainty (36%), less money (22%), a desire to save or reduce debt (12.5%), higher prices (10.5%), and less income (9%).

“The financial crisis and sustained economic downturn the nation has been experiencing are taking their toll on consumers,” Hampel explained.  “People are worried about their finances, job loss, and what the future will hold. Amid such uncertainty, they are reacting by reining in their spending plans.”

The CFA-CUNA survey was conducted November 6-9 among more than 1,000 representative adult Americans by Opinion Research Corporation.  The survey’s margin of error is plus or minus three percentage points.

Rise in Consumer and Mortgage Debt Fuels Concern

One important factor contributing to financial anxiety is concern about meeting monthly debt payments.  In response to the question — “In general, how concerned or unconcerned would you say you are about meeting your monthly payments on all types of debt?” — a record 48 percent said they were “concerned,” with 23 percent indicating that they were “very concerned.”  In 2007, only 40 percent said they were concerned.

Those most likely to express concern about meeting monthly debt payments are young adults aged 18-24 (66%), African-Americans (70%), and those with modest incomes of $25,000$35,000 (64%).

“The explosive growth in consumer and mortgage debt has fueled financial anxiety,” noted CFA Executive Director Stephen Brobeck.   “That anxiety is most widespread among the young and those with modest incomes,” he added.

Concern about meeting debt payments was also revealed by responses to the question asking what respondents would do if they received an unexpected windfall of $5,000.  Forty-five percent said they would use this windfall to “pay down some debt.”  The percentages of debt payers for those aged 25-34 (63%), African-Americans (61%), and those with incomes of $25,000-$35,000 (60%) were especially high.

Economic fault lines in society were also revealed by responses to a question about how respondents would pay for an unexpected emergency expense of $5,000.  Nearly two-thirds (65%) of those with incomes $50,000 and over, but only 36 percent of those with incomes under $35,000, said they would draw from savings.  In contrast, 45 percent of those with incomes below $25,000 said they would rely on “a gift or loan from a friend or family member.”  And, over one-quarter (26%) of this low-income group said they would “put it on [their] credit card” even though a significant percentage of this group has no credit card.

Ideas for Getting the Biggest Bang from Your Holiday Spending Buck

CUNA and CFA suggest the following tips to avoid getting deep into debt during the holidays.  “With just a little planning, consumers can substantially reduce their holiday spending without sacrificing holiday quality,” said Brobeck.

Make Budget, and a List: Right now, decide how much you can afford to spend and stay within that budget.  Staying within budget will be much easier if you make a price list of all gifts and other holiday items you plan to purchase. It’s easy to overlook extra expenses for holiday foods, party clothes, holiday décor and postage.

Comparison Shop: You can easily save more than 10 percent on most items, sometimes considerably more, by comparing prices at different stores. The easiest way to do this is to identify sellers using the Yellow Pages, and then call several. Or use the Internet and compare offers online. But when shopping online, shop wisely.  Be sure you are purchasing from a secure site (look for the “https” in the website address and the locked padlock icon on the toolbar), and review emailed statements for accuracy as you receive them.

Pay Off Debts Quickly: You’re less likely to overdo it if you pay in cash.  If you must make holiday purchases using credit, use a lower-interest card and pay off this debt as soon as possible early next year. Don’t borrow more than you can repay in several months. Remember that credit card debt is relatively expensive.  And if you only make the required minimum monthly payment, you may never pay off the debt.

Plan for Next Year by Opening a Christmas Club Account: While these accounts do not pay much if any interest, they provide a practical way to save small amounts over time. Ask your credit union or bank to automatically transfer funds from your checking to your Christmas Club account every month. The discipline of saving reinforces your good budget intentions.

Be Smart About Gift Cards: If you don’t use a gift card promptly, it can lose value in one of several ways:  It can expire and become worthless; monthly maintenance fees can erode its value to zero; the store that issued it can go bankrupt or stop honoring gift cards.  If you give or receive a gift card, read the fine print.  And remember, a gift card is handy and convenient, but like cash, if you lose it, it’s gone.

Pay Attention to the Return Policy.  Some stores are tightening their policies.  Pay attention to the return policy when you make a purchase; keep receipts and note time limits, restocking fees, and other factors that may affect your recipient.

Find Low- or No-Cost Ways to Celebrate.  Adding a few changes can ease the strain on your spending budget.  For example, draw names to limit the number of people for whom you purchase gifts; give homemade items; make your own gift wrap; organize a potluck rather than trying to make, and pay for, the entire holiday meal.

The post Consumers Plan to Reduce Holiday Spending This Year appeared first on Consumer Federation of America.