What to Look for in a Teen Checking Account
Learning how to manage money at an early age can help set up children for a financially stable future. Since they will not want to keep their allowance in a shoebox forever, familiarizing themselves with the nuts and bolts of a checking account is an important milestone.
Many financial institutions offer teen checking accounts, which serve as an excellent introduction to the sometimes complicated world of banking. To get you and your child started, here’s an overview of features to look for as well as some insight into ground rules you may want to establish before signing up for an account.
How teen checking accounts work
Although many financial institutions offer checking accounts for customers as young as 13, most require at least one parent or guardian to serve as a joint account holder. Ultimately, this is in everyone’s best interest, as it reduces the risk of financial institutions losing money due to inexperienced customers and helps prevent young customers from mismanaging their funds.
A joint account setup provides both the parent and child access to the account. The adult will be able to transfer money into the account, which will be especially easy if you have accounts at the same financial institution. You may even have the option of setting spending limits or receiving alerts if the balance is running dangerously low or if the spending limit has been exceeded.
Finding the best account for you and your child
Teen checking accounts vary slightly among financial institutions. However, there are a few common factors you ought to look for when shopping for an account:
- It’ll prove handy to open an account that comes with a debit card. Check whether the institution enforces daily ATM cash withdrawal and point of sale limits. That way you won’t lose sleep every time your child goes to the mall.
- Before signing on any dotted lines, check to see whether there’s a minimum amount requirement to open an account. Is there an ongoing minimum balance requirement? It’s also worth avoiding institutions that charge unnecessary fees, such as a monthly maintenance fee.
- Finally, consider the quality of the educational resources that the financial institution offers. These can serve as instrumental tools in helping teens get a better grasp of basic financial concepts, like how and why to build an emergency fund.
Approach the process of finding a teen checking account for your child in the same way you would go about looking for your own account.
Setting ground rules
Once you and your teen have selected an account you’re both happy with, consider reviewing ground rules and financial tips. For example, to highlight the importance of saving money without leading a completely frugal lifestyle, help your child create a monthly budget.
Underline the importance of knowing how much cash is in one’s account to avoid overdrafts. Even if the account comes with overdraft protection, this is a good habit to get in to at an early age, and something teens will be glad they learned.
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Tax Tips to Help New Parents Save Money
Congratulations, new mom or dad! Now take out the checkbook, because your bundle of joy comes with a bundle of new expenses. But all those day care costs and pediatrician bills can bring new tax deductions that can help you ride out the first years of parenthood without going broke.
Here are the major ways your tax situation may change now that you’re a parent.
Child tax credit
This credit is worth up to $1,000, and you can claim it if you have a dependent child living with you who is under age 17. There are income limits that start phasing out this benefit at $110,000 for couples, according to criteria on the Internal Revenue Service website.
Child care credit
If you pay for someone else to look after your child who is under age 13 while you work or look for work, you may qualify for a child care credit of $600 to $1,050 on as much as $3,000 in costs, depending on your taxable income. The care provider can’t be a spouse, and there are other qualifying rules.
Earned income tax credit
You don’t need a kid to get this credit, but when a couple has a child, they can have a much higher income before being disqualified. For example, a married couple’s 2014 taxable income can’t top $20,020 to qualify, but that limit rises to $43,941 when they add a child to the family. The limits increase for families with more children. The credit can be as much as $3,305 for a couple with a child.
Health care expenses
Paying for health care may affect your tax bill in a few ways. First, 2014 was the first year in which taxpayers had to document that they had adequate health insurance for themselves and any dependents or face a penalty. Also, if you added your newborn to your workplace health insurance plan, you may be paying higher premiums than you did before. Since the costs are deducted from your pretax pay, your taxable income may come down. If you pay significant medical expenses out of pocket, they have to exceed 10% of taxable income before they’re deductible — and even then you must itemize your deductions to claim them and cut your taxes.
Parenthood is rewarding — and it may also help you out at tax time. A tax advisor can help you learn more about how parenthood affects what you owe Uncle Sam. The savings may take the sting out of the child-induced increase in your expenses.
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How to Plan and Finance Home Improvements
Once the thrill of becoming a homeowner wears off, reality sets in. Your home is likely to be the biggest single investment you’ll make in your lifetime. If you want to preserve its value over time, that means doing regular maintenance.
Know what to expect
Mortgage finance company Freddie Mac has a useful checklist to help you plan for regular upkeep, and you should also expect periodically to do larger home improvement projects like replacing the roof.
Keep a budget
Predicting maintenance costs is tricky, but some experts suggest setting an annual budget of 1% to 4% of your home’s value for these expenses. Some homeowners divide that number by 12 to figure out how much they need to save each month to prepare for big maintenance bills when they crop up.
Do it yourself
Learning to do basic tasks such as landscaping, painting or fixing a toilet can save a lot of money over time. Some hardware stores and home improvement centers offer classes to boost your skills.
Home equity financing
Although you may be able to pay out of pocket for minor things such as gutter cleaning, perennials for the garden or a new kitchen faucet, you might not have the cash on hand for more costly repairs. It’s only a matter of time before you get hit with something big, such as replacing the furnace, digging a new sewer line or repaving the driveway. If you want to finance repairs or improvements using equity you’ve built up in your home, here are some alternatives for tapping it.
- Cash-out refinancing
Some homeowners have paid for big repair bills by refinancing the mortgage and pulling money out of the property in the process. You may find a lower interest rate while you’re at it, but beware of resetting the clock with a new 30-year loan late in your career. If possible, you want to pay off the mortgage before retirement.
- Home equity line of credit
Widely known as HELOCs, these provide a certain amount of credit secured by your home. Borrowers can withdraw funds when needed and pay interest only on the amount used. HELOCs generally have variable interest rates that can move up and down depending on market conditions. These are good for ongoing projects with unpredictable costs.
- Home equity loan
Unlike a HELOC, a home equity loan typically gives you a lump sum upfront at a fixed interest rate. The loan term generally ranges from 5 to 15 years, and the lender may require your equity in the house to be at least 20% of its market value. That means your primary mortgage plus your home equity loan can’t add up to more than 80% of what the house would fetch in a sale.
The upside of borrowing against home equity is that the interest on the debt can be tax deductible, like mortgage interest. The downsides are that it can be an expensive process, with fees for an appraisal and a title search, for instance, and it puts your home at risk of foreclosure if you fail to pay.
Other types of financing
Government lending programs may be available to help you pay for upkeep. The Federal Housing Administration insures Title 1 loans offered through banks and credit unions, for instance. Search the websites of your state and local government to see whether loans to homeowners facing pricey home improvement projects are offered.
Try to save regularly so you’ll be prepared for must-do home maintenance needs when they pop up. Diligent saving may let you take on optional renovations that make living in your house more enjoyable. But if your savings fall short, there are alternatives for financing home projects. However you choose to pay for it, take good care of your house so you can enjoy it for many years to come.
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5 Steps to Landing the Best Mortgage
Financing a home for the first time is a huge undertaking with long-term stakes. It’s easy to get tangled up in all the features to evaluate, from interest rates to down payments and loan structures. Follow these steps to find the best mortgage you can get.
1. Shop around
Look at a range of lenders using online searches and tools, including this one from the U.S. Consumer Financial Protection Bureau. It’s best to get a broad sense of the rates being offered in your area. If you work with a mortgage broker, you may be charged a fee.
2. Weigh fixed or adjustable rates
Deciding between a fixed-rate loan or an adjustable-rate mortgage, or ARM, will affect both the cost and the degree of risk you’ll take on. An ARM usually offers lower rates at first but can change with the market later. Consider how long you plan to stay in the house, which can make a big difference. If you intend to move within five years, for instance, a loan with a fixed rate for the first five years that converts to an adjustable rate later may be cheaper than a fixed-rate loan with little added risk. If you plan to remain and raise a family in the home, 20- or 30-year fixed-rate financing is probably a better choice.
3. Understand other costs
Once you get information from your selected lenders or brokers, compare loan rates, terms, points, fees, down payment size and mortgage insurance costs. Also be sure you know about:
- Points: A point is an upfront fee paid to the lender, equal to 1% of the loan amount, to reduce the interest rate. Points can help cut the cost of a long-term mortgage but otherwise the interest savings may not cover the expense, meaning it’s not worth it. Use an amortization calculator to see how much you can save and over what length of time, based on the lender’s terms.
- Down payment: Generally, the less you put down, the higher the interest rate you’ll pay. Some lenders require 20% of the purchase price down. Others may accept as little as 3%, and some subsidized programs let buyers borrow with no money down. Typically, putting down less than 20% means paying for private mortgage insurance, or PMI.
- Transaction costs: Remember that you may also pay loan-origination fees, a deed transfer tax, underwriting fees, charges for a lawyer who represents the lender, home inspection costs and a title search.
4. Check eligibility for special programs
The U.S. Department of Housing and Urban Development offers grants and programs that can lower down payment requirements. Among these are loans backed by the Federal Housing Administration, or FHA, and first-time homebuyer assistance programs from state agencies. The U.S. Department of Veterans Affairs can help current and former members of the military finance home purchases, sometimes with no money down, while the U.S. Department of Agriculture supports loans in certain areas for eligible borrowers.
5. Apply to a few lenders within 30 days
When you apply, lenders will generally make a hard credit inquiry, which can drop your credit score a few points temporarily. But it’s better to have multiple inquiries for home loans made within a 30-day window since the credit-scoring process used by the three major rating companies sees this as rate shopping and counts them all as one inquiry.
By knowing loan terms, services and programs available, you’ll be better prepared to finance that first home.
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When to Refinance From an Adjustable-Rate to a Fixed-Rate Mortgage
Unlike diamonds, mortgages are not forever. The ultimate goal is to pay them off and own your home free of encumbrances. But there are many good reasons to trade in your original mortgage for a new one along the way.
One of the most common reasons to refinance is to move from an adjustable-rate mortgage, or ARM, to a fixed-rate loan. With an ARM, your interest rate, and therefore your payment, can go up and down. On a fixed-rate mortgage, by contrast, your rate and your payment stay the same for the life of the loan.
It sounds simple, but many homeowners agonize over when to refinance. There are usually fees involved, so it’s important to weigh them against the money you’d save by locking in your interest rate. And realize that if you’re starting over with a new 30-year loan, you may be delaying the date when your loan will be paid off.
Here are some reasons to get on the refinancing bandwagon.
Your rate is about to adjust upward
Most ARMs begin with a low introductory rate that’s fixed for a certain period of time, after which the rate moves up or down according to the market. If you’re coming up on the end of the fixed-rate period, you may want to secure a longer-term interest rate now. Try using an online mortgage calculator to figure out how much your payments will be based on today’s interest rates and your loan balance.
Interest rates are going up overall
Locking in the same interest rate for 30 years (the length of most mortgages) can be a great move, but only if you get a low, affordable rate. Interest rates are established by market conditions out of your control. Even if you’re doing everything right by paying your bills on time and keeping your debt levels manageable, you may not be able to get a rate as low as you would like. If you think interest rates are likely to rise in the near future, it may be a good time to pin down a rate that will carry you through until your home is paid off.
You can get rid of PMI
Private mortgage insurance, or PMI, is a monthly charge added to your payment by most lenders if you buy with a down payment below 20%. If the value of your home has gone up since you bought it, you might be able get rid of PMI even before your equity reaches 20% of the original purchase price. If you’re refinancing to eliminate PMI, you might consider getting a fixed rate while you’re at it.
You can shorten the loan term
Although 30 years is the standard, 15-, 20- and 25-year mortgages are also available. If you can afford the higher payments of a shorter loan term, you will save significantly on interest over the life of the loan.
The bottom line
Refinancing from an ARM to a fixed-rate mortgage may be in your best interest, as long as you take current market conditions and fees into consideration. Even if it costs you a little more in the short term, having a locked-in interest rate and mortgage payment may make it worthwhile to refinance.
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When to Get a Personal Loan
There are times in life when you want or need to spend more cash than you have on hand. You can borrow the money and pay it back a little at a time if you have reasonably good credit.
The most common way to borrow, if you don’t have a helpful relative, is to go to a financial institution. There are different types of personal loans available depending on what you plan to do with the money — just bear in mind that eventually you’ll have to pay it back with fees and interest.
When a loan makes sense
You can take out a personal loan to pay for a big project, consolidate debt or finance a vacation. If you need a lump sum of money that you don’t plan to pay back within about a year, a personal loan could be the best answer. If you need funding relatively quickly, this could also be the right move. If your credit card interest rates are in the upper teens or higher, paying them off with a personal loan may work to your advantage. If you don’t have the time to save up money to meet your goals, borrowing might be the next logical step.
Types of personal loans
Most personal loans are unsecured. That means you’re borrowing the money based on your creditworthiness alone, without putting up collateral such as a car or house. Unsecured loans present a higher risk for the lender, since it’s essentially relying on your financial reputation to guarantee repayment. So this option carries a higher interest rate than one secured by an auto or a home. If you don’t repay a loan backed by such an asset on time and according to the terms, the lender can take your collateral or foreclose on your property.
How to get a loan
Before you fill out a handful of online loan applications, check out the terms and interest rates to see what’s available, what’s affordable and what’s realistic. Understand that every time you apply for a loan, your credit score can take a hit, which may jeopardize your chances of getting the loan — or of paying a lower rate. Check available rates, including where you bank regularly. If you have a history with a lender, even just a checking account, it may be easier to qualify for a loan even if your credit isn’t great.
Before borrowing, it’s best to have a plan for how the money will be used and how you’ll pay it back. Taking out a personal loan can help consolidate debt, accomplish goals or even make a dream become a reality.
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