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Financial Literacy Supplement / oct. 2012 H-1

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In Memoriam Dr. Calvin W. Rolark, Sr. Wilhelmina J. Rolark THE WASHINGTON INFORMER NEWSPAPER (ISSN#0741-9414) is published weekly on each Thursday. Periodicals postage paid at Washington, D.C. and additional mailing offices. News and advertising deadline is Monday prior to publication. Announcements must be received two weeks prior to event. Copyright 2010 by The Washington Informer. All rights reserved. POSTMASTER: Send change of addresses to The Washington Informer, 3117 Martin Luther King, Jr. Ave., S.E. Washington, D.C. 20032. No part of this publication may be reproduced without written permission from the publisher. The Informer Newspaper cannot guarantee the return of photographs. Subscription rates are $45 per year, two years $60. Papers will be received not more than a week after publication. Make checks payable to: THE WASHINGTON INFORMER 3117 Martin Luther King, Jr. Ave., S.E Washington, D.C. 20032 Phone: 202 561-4100 Fax: 202 574-3785 news@washingtoninformer.com www.washingtoninformer.com

PUBLISHER Denise Rolark Barnes STAFF Denise W. Barnes, Editor Shantella Y. Sherman, Assistant Editor Ron Burke, Advertising/ Marketing Director Lafayette Barnes, IV, Assistant Photo Editor Khalid Naji-Allah, Staff Photographer John E. De Freitas, Sports Photo Editor Dorothy Rowley, Online Editor Brian Young, Design & Layout AssureTech /www.scsworks.com, Webmaster Mable Neville, Bookkeeper Mickey Thompson, Social Sightings columnist Stacey Palmer, Social Media Specialist REPORTERS

Michael Golden, Wells Fargo Regional President, Greater Washington, D.C

s the world continues to weather the global economic downturn, we’re standing together with our communities across the nation to help individuals and families rebuild their savings, open businesses, keep their homes, attend college, prepare for retirement, find jobs, and more. During Wells Fargo’s 160- year history, we’ve helped individuals, families, and entrepreneurs of all ages understand how to save, invest, borrow and spend responsibly. Our goal is for every customer to have a financial plan and to change their saving and spending behaviors as a result of that plan. We also understand those plans will evolve throughout all stages of our customers’ lives — from putting that first penny in the piggy bank, getting a job, starting a family, to retirement. Financial plans should be unique to our customers’ needs and help them make wise financial choices so they are “credit ready,” and they know when and how to move their cash into investments that are right for them. Some customers need a detailed financial plan, some a simple one. Regardless, we’ll be there for them every step of the way. Throughout 2011, we proactively worked with many external experts and organizations to provide financial education tools to help financially struggling homeowners and empower consumers and entrepreneurs. In working with key stakeholders, we make an effort to listen to areas of concern and look beyond the boundaries of our own business structure to collaborate and find creative solutions to complex problems. This healthy dialog is building not only trust-based relationships but also concrete action plans we’ve already begun to implement. We’re working hand-in-hand with schools, nonprofit organizations, and other community groups, to provide educational resources, including our award winning financial education program - Hands on Banking. In October 2011, team member volunteers taught 1,100 credit lessons to more than 61,000 individuals and families across the country as part of Wells Fargo’s participation in the American Bankers Association’s Get Smart About Credit initiative. Despite the down economy, Wells Fargo continues to be one of America’s largest financial contributors to nonprofits. Last year, Wells Fargo invested $213.5 million in 19,000 nonprofit organizations supporting education, community development, human services, the arts and the environment. Here in Washington, D.C., we invested $9.8 million to nonprofits and schools and our team members volunteered more than 2,500 hours at local organizations. Some of the organizations and events we sponsored include DC College Access Program, Hope and a Home, Capital Area Food Bank and the Greater Washington Urban League. Wells Fargo is proud to be a part of the local community and recognizes that financial education and education are the gateway to economic self-sufficiency.

Misty Brown, Eve Ferguson, Joy FreemanCoulbary, Gale Horton Gay, Barrington Salmon, Stacey Palmer , Charles E. Sutton ,James Wright, Joseph Young

PHOTOGRAPHERS John E. De Freitas, Victor Holt, Roy Lewis, Khalid Naji-Allah, Shevry Lassiter

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By Don Gilbert Interest rates remain at historic lows. Yet, many buyers are sitting on the fence unsure whether now is the right time to buy, and if they would even qualify for a loan. There’s no magic bullet to get you the loan you want, but there are few things you can do to help get you on the right path. Here are some helpful tips: 1. Check your credit – Know where your credit stands before you apply for a loan. A borrowers’ credit history can impact the amount required for a down payment, the interest rate or the amount of money they can borrow in relation to their income. Wells Fargo prices competitively and lends across the credit spectrum, but having a credit score of 720 or above is not only going to help you look better to a lender for loan approval, it may also help you get a better interest rate. Once per year, you are able to obtain a free copy of your credit report from each of the three credit bureaus by visiting www.annualcreditreport.com . In addition to viewing your report, you may also want to consider getting your credit score. There may be a small fee to get your credit score. If you’re interested in understanding and working to improve your credit standing, visit the Wells Fargo Smarter Credittm Center found at www.wellsfargo. com/smarter_credit . The site has advice on establishing, improving and protecting credit as well as tips on paying down debt. 2. Decrease your debt – An important factor that lenders look at when qualifying borrowers is their debt-to-income ratio. This is the relationship between your income and expenses, amount of debt a person carries compared to how much income they make. The smaller your debt-to-income ratio is, the more attractive you are as a borrower. While debt to income requirements vary by mortgage programs, a good rule of thumb is to keep your total debt level at or below 36% of your gross monthly income. 3. Save for a down payment – In the current

5Keys

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Your legacy is a conversation starter. Don Gilbert

mortgage environment, borrowers need to have a down payment. Having 20% down is not a must but it will help get the best interest rate available and help you avoid private mortgage insurance. If you need help coming up with a down payment, try to find a down payment assistance program that might be able to assist you. 4. Show proof of all income– Can you repay the loan? That’s what lenders want to know when they consider your application. You must be able to verify a stable source of income. Lenders will review your employment history and will require current W2s or tax returns if you are self-employed. If you have any other income you should bring proof of that to share with the lender. 5. Have some money in the bank – In addition to being able to show you can make your monthly mortgage payments and other responsibilities, lenders want to know that you have cash reserves. Some of us call this cushion a “rainy day fund” to handle those unexpected expenses that come with homeownership such as certain repairs. Don Gilbert is the Community Development Manager for Wells Fargo in Washington, D.C.

Where you’ve been testifies to your strength. Where you are attests to your brilliance. Where you’re going speaks to your ambition. And though the conversation starts with a word, a moment, a dream, where it ends could be even more powerful. So when you’re ready to add your financial goals to the conversation and learn how you can continue to build your legacy, come talk to us. Ask us any questions you may have. We’ll ask a few of our own. Together we’ll find the answers you need to create that next chapter of your life. Your legacy is a conversation starter, but it’s just a beginning. We can help you keep it going. Just say the word.

Call, click, or stop by to start a conversation today. W E L L S FA R G O . C O M | 1 - 8 0 0 - T O - W E L L S

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Financial Literacy Supplement / oct. 2012 H-3

Five Tips to Help Parents Prepare Kids for Financial Success By Mike Golden One of the results of the recent economic downturn, a period that many are calling the Great Recession, has been an increased focus on the importance of saving for the future. While there were many factors that contributed to the recent economic difficulties, one obvious but perhaps neglected truth is that having a personal savings can help individuals and families weather the economic troubles that might come our way. What important lessons can we pass on to today’s children and young adults to prepare them for financial success? Today’s kids are much more likely to spend rather than save. Even parents who aim to teach their children about finances through an allowance may find their lessons overshadowed by stronger messages from advertising or peers. Unfortunately, the result

Mike Golden

is that by the time they graduate from high school, most young people know all about spending and very little about saving or spending wisely. Consider these facts: zz Teenagers will spend close to $155 billion in 2012, an increase of more than fifty percent in five years. The average seventeen year old spends over $100 dollars weekly. (Source: PBS) zz Young Americans (18- to 34-year-olds) are more likely to be less financially capable than older Americans, with 23% spending more than their household income, 68% not having money set aside to cover expenses for three months (rainy day fund), and 34% engaging in nonbank borrowing. (FINRA Investor Education Foundation) zz The majority of young people (56%) attribute

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their knowledge of money management basics to their parents, with significant numbers continuing to turn to their parents for ongoing financial advice (43%). (Charles Schwab and Lieberman Research Worldwide) Five Tips for Parents Parents play a crucial role in their children’s financial success later in life. Here are five tips: 1.

et Financial Goals — Have children list all the things they want and the anticipated cost. Organize the list into immediate, short- and long-term goals. Compare the cost with money on hand to help them see the connection between saving and reaching goals. This helps them learn about making choices, setting priorities and distinguishing between needs and wants.

pen a Bank Account — Around age 5, children begin to understand the process of managing money. It’s a good time to take them to a bank to open an interestbearing savings account. Teach them how to make deposits and withdrawals, keep an account register and balance the account. Some banks, including Wells Fargo, offer saving incentive programs for children. Wells Fargo’s Minor Savings account is a program for children ages 5-12 who have a Wells Fargo savings account. The tools provided give parents the chance to help their children track their savings, set goals and earn awards. For teens, Wells Fargo offers a checking account for ages 13 to 17 with an adult co-owner, specifically designed to help parents teach their teenagers good money management skills.

ay a Modest Allowance — Though these challenging financial times may make paying your children an allowance difficult, many financial advisors view an allowance as an important tool for children to learn and practice money management skills. Try a dollar a week for each year of the child’s age. Or consider adding up what you spend on your child’s “wants” each week and giving the child that amount to manage. More important than the amount is that everyone understands the rules up front – including the completion of necessary chores – and that you pay the allowance consistently and on time. If your family finances change an adjustment to the allowance becomes necessary, it’s

an additional learning opportunity for your child.

ake a Plan for Spending, Saving and Giving — Encourage children to divide their allowance and any additional earnings three ways: a fund for spending, a fund for saving, and a fund for giving to charity. Letting children spend some of the money helps them learn how quickly it can disappear unnoticed if they don’t track their spending. Allowing them to choose a charitable organization in which to contribute helps build passion for the community and compassion for others.

se Free Resources — There are many free and reputable places to find more helpful guidance to teach children about saving and finances. These include Hands on Banking®, a parent-tested, parentapproved program available free at handsonbanking.org; Wells Fargo’s children’s financial success resource center at www.wellsfargo. com/resource_center/ childsfuture; and your public library, which likely has a number of good books on the topic.

By starting early, parents can help their child develop good financial habits that will last a lifetime. Mike Golden is the Regional President for Wells Fargo in Greater Washington, D.C. As a public service, Wells Fargo provides free and fun financial education programs without commercial content.

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Free Credit Score & Complimentary Credit Report Only available in stores through November 15, 2012 From now until November 15, 2012, you can take advantage of this limited‑time promotion. Knowing your credit score is key to understanding your entire financial picture. Stop by your local store today and start a conversation with a Wells Fargo banker to get your personal access code. This exclusive promotion for Wells Fargo customers provides unique benefits: • Get your credit score for free (a $12 value) • Evaluate specific factors that impact your credit score • Access your full credit report at no charge • Review your credit file and see if there are any errors • An optional, personalized one-on-one meeting with a banker to discuss your credit situation For more information, visit wellsfargo.com/freecreditscore

*Wells Fargo may, at its own discretion, limit the number of unique codes and/or cancel the free credit score and complimentary credit report promotion at any time. Your credit report will look like what a lender would see if the lender obtained your credit report at the same time. Your version is formatted to be more easily understood. Your credit score could vary by lender depending on the type of scoring used. The credit score you receive in this promotion probably will not be the same as the score obtained by a lender and is for educational purposes only. © 2012 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. NMLSR ID 399801 (736334_06370) www.washingtoninformer.com 736334_06370 9.5x12.375 4c .indd

9/19/12 10:57 AM Financial Literacy Supplement / oct. 2012 H-5

Financial Advice

Harrine Freeman

for Millennial Women By Harrine Freeman The country is still feeling the effects of the recession. The most unemployed and underemployed are new college graduates earning approximately 8% less than college graduates 10 years ago. Unfortunately, many do not ask for a raise which directly affect their economic status. However, millennial men frequently ask for a raise and usually get it. Entrepreneurs are a vital component of America’s global economy. They create 90% of the jobs in America. They create innovative solutions, creativity, marketing and technology to propel their businesses. According to Fleishman Hillard study titled Women, Money and Power, millennial women are more concerned about the economy which affects how they spend their money. Seventy‐

one percent agree, “Life is more complex today than it was before the recession,” and 75% agree, “I shop differently now than I did before the recession.” Millennial women seek quality, worth, performance, and substance. They prefer quality over quantity and research purchases thoroughly before buying. According to Edward Jones, 51% of millennials usually don’t invest in a 401k or retirement plan. Millennial women are delaying marriage and starting a family to get their finances in order. Women must plan for the expected and have a contingency plan. They must identify possible scenarios that could occur and develop solutions on how to deal with them. More than 80% of millennial women will at some point in their lives have sole responsibility for their finances. Every woman can and

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should know how to manage her own finances. Millennial women need to become empowered with financial knowledge which will help them make the best financial decisions throughout their life. Here are 24 ways for millennial women to manage their finances. Spending/Budgeting 1. Create a budget or spending plan to control spending. Make your budget flexible to accommodate for unexpected expenses and include savings goals. Include monthly expenses and debt plus your monthly income. 2. Create an emergency fund to cover monthly expenses for 9-12 months. 3. Balance your checkbook and write down every

transaction, including check card transactions and trips to the ATM. 4. Reduce spending by 3050%. Spread spending for large purchases over several months to ease the burden. Buy more needs vs. wants and reduce your credit card debt. 5. Set short-term and longterm goals such as paying off a bill and saving for a down payment on a house.

Your money will grow faster and you can afford to invest more now because you won’t have to pay taxes on the money until you retire. 5. Once you have decided how much to invest in each type of asset, rebalance often to your original percentages, particularly after a large market shift, upward or downward.

Debt 1. Pay down debt and get current on late accounts. Keep debt (excluding rent/mortgage) at 15% or less of your net monthly income. 2. Keep credit card balances at 20% or less of the credit limit. 3. Pay more than the minimum monthly payment. 4. Pay back student loans. Consider using student loan forgiveness programs.

Other 1. Develop a support network (friends, family, church members, join support groups and a financial professional etc.) to get advice, support and encouragement. 2. Think rationally and without emotion. Calm down and think logically about how to deal with your finances. 3. Don’t blame others for your financial mistakes. Take accountability and responsibility for your actions. 4. Plan for the future and always have a plan A, B and C.

Banking 1. Pay bills online. 2. Use direct deposit for paychecks. 3. Open a checking account with overdraft protection. 4. Save, save some more and save some more. Estate Planning 1. Create a will to being setting up estate planning. 2. Create a medical directive to identify your medical wishes. Investing 1. Max out your tax advantaged retirement plans. Commit to saving a set percentage of your income, so when your income increases, your contributions will also increase. Contribute 70% stocks, 30% bonds. 2. Control your risks through diversifying and investing in various mutual funds that are a combination or low, medium and high risk to limit your losses. 3. Focus on long term growth. Leave your money untouched for the next 5 to 10 years to see the benefits of your money growing. 4. Invest as much as you can in tax-deferred retirement plans, such as 401(k) plans.

Harrine Freeman is the CEO and owner of H.E. Freeman Enterprises which provides credit repair services to help clients restore their credit rating and develop good money management skills to pay off debts, save and plan for retirement. She was once in $19,000 in debt, only making $21,000 a year and was able to get herself out of debt without filing for bankruptcy. She has provided financial seminars to various audiences. She has appeared in Market Watch, Wall Street Journal, Black Enterprise, Essence Magazine, Ebony, Pink Magazine, Woman’s Day, Forbes, Bankrate. com, Motley Fool, Huffington Post, Daily Finance, The Michael Baisden radio show, NPR, and on CBS, Fox, NBC and ABC. She is also the author of “How to Get out of Debt: Get An ?A? Credit Rating for Free”, a self help book on credit repair that provides consumers with a step by step plan on how to get out of debt, increase their credit rating and maintain their good credit.

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By Harrine Freeman, CEO/Owner, H.E. Freeman Enterprises Results from the FINRA Investor Education National Financial Capability Study revealed that women with low levels of financial literacy knowledge were more likely to engage in bad credit card behaviors such as incurring late fees than men with low levels of financial literacy knowledge. However, there were no differences in behavior between men and women with high financial literacy knowledge. Increasing financial literacy knowledge can improve credit card management and reduce or eliminate gender based differences in credit card behavior. Financial literacy is linked to retirement planning, investing, quick cash methods such as payday loans or cash advances, and generating wealth. A vast understanding of financial literacy improves credit card behavior for men and women. Women were more likely to carry a balance, pay the minimum payment on their credit cards and be charged a late fee. Women were less likely to pay their credit card balance in full each month and comparison shop for credit cards. Women trail behind in finances and usually have low confidence when trying to set and obtain financial goals. Many women shy away from finances and don’t view managing their finances as a high priority. Many women focus more on their appearance and spend their money on shopping or entertainment. Women put other’s needs first and focus on other priorities such as their children, college funding, etc. However, women must put their needs first especially regarding finances. The difference in how women view money may be related to how parents and educators teach girls about money. These girls grow up and continue to use the same lessons they learned about money as a child. Women are more emotional when it comes to spending. Women like to spend money on things with little to no value like makeup, clothes, purses, shoes, etc. Many women are taught to find a husband who will take www.washingtoninformer.com

care of them which may prevent them from learning about the various aspects of financial literacy such as budgeting, investing, savings, debt management and retirement planning. Many women feel they don’t need to learn about finances because their husband will manage the finances. Women have to change the way the think about money and set an example for their daughters and future generations of girls. If you want to own a home, go on vacations and live a certain lifestyle you have to save, invest and make good financial decisions. Many women are forced into different roles when a lifechanging event occurs. Many women find themselves unemployed, divorced or widows and didn’t know how to manage their finances. This can lead to making bad financial decisions based on emotion and mistakes that may take years to recover from. According to the Prudential and Hearts & Wallets study women feel less confident than men in their understanding of financial products, their ability to make financial decisions and their perception of their current economic standing. The financial services industry caters to men in the way it presents and discusses information and products. Women don’t make quick decisions regarding finances and are concerned with long-term results. Women are not proactive about learning how to manage their finances and take it for granted that they won’t need to learn because their husbands will do it for them. Women earn less than men but have longer retirements due to the fact that women live an average of five years longer than men. Women have higher health care costs throughout their lives. Women should be saving more than men and investing their savings more aggressively to get a strong longterm return that will grow their portfolios. Women who don’t manage their finances properly directly affect men. If your wife or girlfriend always asks you for money or needs help with her bills, if you provide financial support to your mother because she has little to no savings or retirement or your daughter keeps borrowing money because she can’t pay

The Battle of Finances:

Men vs. Women

her bills - this is a direct result not properly manage their finances and lack adequate financial literacy knowledge. Men are self-directed learners and use the Internet to find out

information more than women. Women tend to rely more on personal networks with friends, family and financial planners, and they take a networking approach to gathering information

or get validation. Men and women need to have a strong grasp financial literacy knowledge to help them make sound financial decisions that will improve their lives.

Do you want to stop living paycheck to paycheck, stop harassing creditor calls, get out of debt or increase your credit score? Improving your financial life is guaranteed success to being happy and having less stress in your life. Do you have a financial advisor or financial coach? Well now, you can be your own financial advisor. The fastest way to your financial success is getting advice from someone who has experienced the same financial issues you are going through – losing a job, considering filing for bankruptcy, working two jobs, bad credit, debt, repossession, and more. More than 1 million Americans file for personal bankruptcy every year. If you have filed for bankruptcy, are considering filing for bankruptcy, live paycheck to paycheck, are harassed by creditors or don't know your credit score, I can help. I have helped thousands of consumers’ increase their credit score and get out of debt using my own experience and industry expertise to help thousands of clients. I was once $19,000 in debt only making $21,000 a year and was successfully able to get myself out of debt without filing for bankruptcy. I can do the same for you and help make your dream become a reality. Each day you procrastinate is one more day you go deeper into debt and one more day closer to legal action being taken against you. These step-by step systems will give you new insight and a plan for managing your finances and provide clarity on how to change your situation. I am excited to offer my financial services and products that will stop those harassing credit calls and lead you on the road to financial peace. My products will provide: 1. 2. 3. 4. 5. 6. 7.

Strategies to increase your credit score Methods to get out of debt Practical ways to manage your money Sample letters to fix errors on your credit report Sample letters to negotiate with creditors Financial worksheets Financial tools and more!

Additional benefits include a: • Copy of my self-help book, How to Get Out of Debt: Get an “A” Credit Rating for Free • Subscription to my free monthly newsletter • Free coaching call with the purchase of a financial kit Mention you saw this ad in the Washington Informer and get $100 off of selected financial packages. For more information please visit our website at http://www.hefreemanenterprises.com for more information about our services or to purchase self-help products at http://www.hefreemanenterprises.com/books.html. Harrine Freeman * CEO, H.E. Freeman Enterprises http://www.hefreemanenterprises.com * hfreeman@hefreemanenterprises.com One of Black Enterprise’s Top Financial Experts of 2010 301-280-5923 M-F 9-5pm

Financial Literacy Supplement / oct. 2012 H-7

Living Trusts By Deborah D. Boddie, Esq. corporated in the will and only effective at the time of death], Special to the revocable trusts [once created Washington Informer can be terminated], irrevocable A living trust is a document trusts [once created cannot be created for the purpose of dis- terminated], and special needs tributing your property either trusts [especially helpful for during your life or after death. It Medicaid planning]. A living trust, which should can be used to avoid undesirable tax consequences. A living trust not be confused with a living is an efficient estate planning will [a document used for health tool to help avoid the time and care decisions], allows for the expense of probate. Probate is transfer of legal ownership of the administration of your estate assets from you to the trust. The frequently with the oversight of person charged with the duty to administer the trust assets is the the local court. In addition to a living trust, trustee. You can serve as a trustthere are several other types of ee but always have provision for trusts; testamentary trusts [in- successor trustees in case of in-

capacity or unavailability. Most living trusts are revocable when established but become irrevocable at death. Once a living trust is created, it becomes a “living” breathing entity. It requires a tax identification number [similar to a social security number], annual tax returns and payment of taxes on any trust income. A living trust can be established by any person [settlor], for any purpose, with any amount [corpus], and to be paid to anyone [beneficiary]. Except for a nominal amount, which can be as little as a dollar, it is not necessary to fund a living trust when

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it is created. On the other hand, you can transfer all of your assets into a living trust. You can even specify in your will that your trust is to be funded only upon your death. But keep in mind that until the trust is funded, it is of little value to the settlor or the beneficiaries. The corpus of the trust can be real estate, bank accounts, or any other assets. If you establish a trust and you intend to have the trust own, manage or distribute real property, ownership of such property must be changed to the name of the trust by a deed. Similarly for bank accounts, the accounts must be titled in the name of the trust if it is to become an asset to be controlled by the trust. If you have a will, you may ask, “Do I need a living trust in addition to a will and what is the difference?” A will is a written document, signed and witnessed that indicates how your property will be handled and disposed of upon your death. A will is revocable and can be amended during your lifetime and must be probated. Property that has been transferred to a living trust is not subject to probate. Avoiding probate is a reason many individuals use living trusts. Another benefit of a living trust is that the trust can be written in a way that will pass your assets on to your beneficiaries immediately upon your death, or you can designate that the assets

be distributed out over time and only in amounts that you specify. The living trust may have tax savings clauses that may help to reduce state and federal estate taxes. There are advantages to each choice, depending on your needs and concerns. Because a will does not become effective until death, the management of assets before death cannot be accomplished with a will. On the other hand, the living trust can be used for pre-death as well as post-death property management. Estates with limited assets may not be appropriate for living trust due to the expense. While the average will costs $350-$500 and the costs of a trust can range from $1,500 to several thousand dollars, depending on the complicity, always seek the advice of a competent legal advisor. You should avoid the use of generic or online legal kits to create these important documents. Poorly drafted documents are frequently an invitation for protracted litigation. Deborah D. Boddie, Esq. The Law Office of Deborah D. Boddie is a firm specializing in Wills, Trusts Decedent’s Estates, Estate Planning, Guardianships, Conservatorship and Real Property. PLEASE VISIT US AT OUR OFFICIAL WEBSITE AT WWW.PROBATELAWDC. COM www.washingtoninformer.com

By Charlene Crowell Each year the Federal Deposit Insurance Corporation (FDIC) partners with the U.S. Census Bureau to conduct a survey of the nation’s choices for financial services. Their most recent findings reveal that as America struggles with a sagging economic recovery, consumers are increasingly turning to alternative financial services (AFS) rather than main-stream banks. According to FDIC’s 2011 FDIC National Survey of Unbanked and Under-banked Households, nearly one in 12 American households including 17 million adults has no bank account – an increase of 821,000 since the last survey. Many “unbanked” Americans have never been a part of the mainstream banking system. For others, a significant number formerly had checking accounts and left the institution because of the costs of account fees. Others had their account closed by a bank or closed it themselves to avoid unmanageable fees. By contrast, 24 million households and 51 million adults are “under-banked” consumers that maintain a bank account but still rely on AFS. Among African-American consumers, only 42 percent turn to banks for all of their financial transactions. The rest of Black America is either under-banked (34 percent) or unbanked (21 percent). Among all American households, 67 percent are fully-banked. Yet African-Americans were not alone in their financial choices. FDIC’s survey found that the highest unbanked and under-banked consumers were households that were non-Asian minorities, lowerincome, younger and unemployed. In the aftermath of the Wall Street taxpayer bailout and the subsequent enactment of the DoddFrank Financial Reform Act, many might wonder why so many consumers are still trending away from traditional banking. According to FDIC, many consumers feel “they do not have enough money for an account, or they do not need or want one.” In other instances, a strong perception emerged that non-bank financial services were more convenient, faster and less expensive or presented lower barriers to qualification. Unfortunately, the consumer perception of fast and easy financial services comes with a costly catch. Just because high-cost, non-bank lenders operate in our www.washingtoninformer.com

neighborhoods is not a reason to think their services are affordable. When dollars earned seem to go quicker than they come, informed consumers will weigh nearby convenience against the real cost of service and credit. As the report states, “Economic inclusion efforts require not only banking the unbanked, but also retaining and better engaging current bank customers to prevent them from becoming unbanked or under-banked. The offering of lowcost deposit accounts with transparent fee structures could play an important role in this effort.” Earlier this year, more than 250 consumer organizations wrote FDIC regarding their concerns over the emergence of bank payday loans. Similar to their storefront counterparts, major banks such as Wells Fargo, Fifth Third, US Bank and Regions are now offering new names for old predatory products with triple digit interest rates disguised as ‘fees’. Consumers choosing bank payday loans actually take on more financial risks. With banks controlling access to consumer accounts, those offering payday loans gain the advantage of automatically repaying loans -- even if it triggers an overdraft. Earning payday loan interest and overdraft fees at the same time and from the same customer are nothing but doubledip lending. After more than 250 consumer advocates shared this specific concern with FDIC, Martin Gruenberg, Acting Chairman, wrote in reply. “The FDIC is deeply concerned about these continued reports of banks engaging in payday lending and the expansion of payday lending activities under thirdparty arrangements. The loans usually involve high fees relative to the size of the loan and, when used frequently or for long periods, the total costs to the borrower can rapidly exceed the amount borrowed.” Gruenberg also advised that FDIC’s Division of Depositor and Consumer Protection would make bank payday lending a priority to investigate reports and further, recommend appropriate steps. While the FDIC pursues this directive, consumers would be wise to remember: No one nor any entity will be as watchful to your personal finance as you – the consumer. Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: Charlene.crowell@responsiblelending.org

African-Americans and Credit:

Weighing the Cost

of Financial Services Against Convenience Credit should help, not hinder, the success of our young people.

Creating ownership and economic opportunity www.self-help.org

Protecting ownership and economic opportunity www.responsiblelending.org

Financial Literacy Supplement / oct. 2012 H-9

Money Matter$ By MaShon Butler

Executive Assistant/Officer www.industrial-bank.com

Industrial Bank Industrial Strong Member FDIC

Eliminating Credit Card Debt By MaShon Butler Executive Assistant/Officer Having extensive credit card debt can be stressful and overwhelming whether you have several credit cards with high balances or just one. A credit card with a high interest rate can be almost impossible to pay off, especially if you only make the minimum payment each month. Uncontrolled debt can be a hindrance to your hopes and dreams, is very stressful, and can take years to get back on your feet. The number of people with overwhelming credit card debt is astronomical and it is increasing every year. Because we live in a credit driven society, it is easy to become disconnected from our money. We are becoming more conditioned to just swipe and go. Modern technology is great, but with its benefits there also comes responsibility. There are a number of good reasons for having credit card debt which do not include frivolous spending. Whatever the reason, put away the guilt and make a commitment to yourself, and your family, to move forward and regain your financial power.

It is time to take control of your spending and reclaim your money. Because most consumer spending increases drastically during the holidays, it is time for you to make more of a connection with your money now! You work hard for your paycheck. In this electronic age, some people rarely touch their money physically. On average, consumers swipe their credit and debit cards for 75% of all of their spending needs. This can cause excessive spending, if you do not have a budget. Own your spending habits, and recognize that your behavior drives your financial situation. Develop a Budget: This is the first step toward empowering yourself by getting out of debt and creating the financial future you deserve. There are various financial websites that offer templates to assist you with creating a budget. Having a budget will help you gain control of your money and reveal areas where you are spending too much. It takes discipline to change your spending habits. If you find yourself getting off track, don’t get

H-10 oct. 2012 / Financial Literacy Supplement

discouraged, just recommit to achieving your goals. Breaking the cycle of living paycheck to paycheck takes a much needed plan. Make a commitment to stop using your credit cards: Stop charging/abusing your credit. Keep only one card with the lowest interest rate with you for emergencies only. Do not carry the other cards, but do not close the accounts. One of the components of your FICO score calculation is the length of credit history. The cards you have had the longest are important anchors to your credit, and that’s why it is not good to close them. Track your spending daily: This exercise will help you as you learn to manage your spending. Record all of your purchases in a small notebook and review them two or three times per week. This will help you categorize your spending as a want or need. Set financial goals: This will help you create a plan of prosperity. When you give your money a purpose, you will be less likely to spend it unnecessarily. Create a vi-

sion board and fill it with pictures of your future plans such as: buying a home, taking a family vacation, investing in a retirement account, starting a college fund, or building a nest egg. As you eliminate debt, your goals will begin to look more like possibilities and that will help motivate you to stay focused. Tips to help eliminate your credit card debt: Transfer balances to a lower interest rate credit card, but pay attention to the small print, there is usually a balance transfer fee. Pay off your debts from the smallest to largest. Come up with creative ways to increase your income. Find a part-time job. Contact your creditors. They may work out a modified payment plan that reduces your payments to a more manageable level. Credit counseling is available. Contact the National Foundation for Credit Counseling (www.nfcc.org or 1800-388-2227). This is a reputable organization that can advise you on managing your money and your debts, as well as help you develop a budget. Try to avoid bankruptcy

at all costs and consider its consequences. Setting a financial goal is like setting any other goal, it takes a commitment and it’s a step by step process to achieving it. You have to make paying down your debt a priority and be willing to make sacrifices to reach your goal. My recommendations for websites to visit and books to read are as follows: Michelle Singletary, Award Winning Syndicated Columnist for The Washington Post. Her current book: The Power To Prosper 21 Days to Financial Freedom. Website: www.michellesingletary. com Suze Orman, Financial Guru and New York Times Best Selling Author. Recommended books to read to learn the very basics of money management, please read Women and Money. Suze’s current book is The Money Class. MyFICO.com The holiday season is here. The temptation to spend can be overwhelming. Make it a priority to renew your commitment to live a life free of financial bondage.

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Money Matter$

The Basics about Credit

By Hermond Palmer Vice President, Director of Marketing & Sales Industrial Bank Your ability to affectively manage credit has an impact on your ability to achieve financial empowerment. The good news is anybody can do it! What credit is: Credit is a tool which enables individuals and businesses to buy goods and services, including high priced items, such as a car or home. The entity in whose name the credit is being issued will be allowed to pay over time vs. having to save and pay the full amount at the time of purchase. To get access to credit, you will have to sign a legally binding agreement that requires the individual in whose name the credit is being extended to pay the money back based upon a set of agreed upon terms before the loan is made. Included in these terms are key details including: interest rate, payment requirements, taxes, fees, and penalties. Not paying attention to, or understanding, these details can result in costly mistakes, which can damage your credit rating and your ability to obtain additional, affordable credit in the future. Be sure you understand and are comfortable with the terms of any agreement you sign. What credit is not: Credit is not free money. Credit has a price tag and that price tag is the interest rate calculated against your outstanding balance to determine the amount of your interest expense. In-

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Money Matter$ By Hermond Palmer VP/Director of Marketing and Sales

www.industrial-bank.com terest expense is the cost you pay to borrow. What is a Credit Score? A credit score is an instrument used by financial institutions and lenders to determine whether to extend credit to an individual. There are several brands of credit scores. One example of a frequently used credit score is the FICO score. FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score. The FICO score has a range between 300 and 900. The closer an individual’s score is to 900, the better that individual’s credit risk-worthiness will be. Negative Credit Information: Negative information includes: notifications of late payments, bankruptcy, liens, and accounts turned over to a collection agency. If there is valid negative information in your credit report, there is nothing you can do to change it. Having negative information in your file does not necessarily mean that you will be denied credit. It may mean you will simply have to pay more to get credit. Be careful using so-called credit repair clinics who aggressively advertise offers to “fix” your credit record for a fee. Credit clinics cannot remove or change correct information on your credit record. Know that you can do anything that a credit repair clinic can do at little or no cost. The fundamentals behind managing money or credit successfully do not require an expensive degree or a special education. All that is required is your desire to invest in yourself, combined with the discipline necessary, to consistently work toward your long-term financial success. As always, Industrial Bank is ready to serve as your financial partner to support you, as you look to invest in yourself, invest in your dreams, and invest in your future.

Industrial Bank Industrial Strong Member FDIC

Keeping the dream of home ownership alive and well

Fixed Rates First Time Home Buyer Programs Refinance Home Equity Line of Credit FHA Programs Reverse Mortgage 

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Financial Literacy Supplement / oct. 2012 H-11

The Benefits of

Life Insurance By Michelle Phipps-Evans WI Staff Writer

Life insurance is generally equated to death insurance. Upon the death of a loved one with a policy, the family receives a death benefit to pay debts and provide survivors a chance to grieve, and move on. According to the Life and Health Insurance Foundation for Education [LIFE], life insurance “can do some pretty amazing things for people,” but one needs to own it. LIMRA, an industry research group, discovered that three in 10 American households or 35 million are uninsured. One person who understands firsthand what it is to be uninsured is Buddy Valastro, star of TLC’s

reality show, “Cake Boss.” After losing his 54-year-old father at 17, New Jersey-based Valastro left high school to take over the family business, Carlo’s Bake Shop. “Taking over the family business at such a young age and having 30 employees depending on me was a huge amount of pressure, and there were many days I didn’t think I could pull it off,” said Valastro, LIFE’s 2012 spokesperson for national Life Insurance Awareness Month [LIAM] in September. “If there’d been life insurance, things would’ve been a lot easier. I could’ve worried less and had time to grieve.” Valastro’s story is an example shared during LIAM every year. LIFE, a nonprofit to respond to

the need for insurance information, and the National Association of Insurance Commissioners [NAIC], the regulatory body governed by the chief insurance regulators from the states, the District of Columbia and five U.S. territories, encourage Americans to use the month to review life insurance. Ask yourself, “What do I need?” “Do I have enough?” and “Should I change what I have due to life changes?” The NAIC has responded to that question by breaking down personal needs based on life stages. In 2006, the NAIC released an online-education tool, Insure U, which examines auto, home, health or life insurance should you fall within these categories: young singles, young or established families,

seniors, domestic partners, single parents, military, or raising grandchildren. The toolkit www.insureuonline. org offers guidance on insurance to consider when single, or when the last child leaves home. “As regulators, we wanted to get people thinking about the ‘what ifs’ in life,” said former D.C. insurance commissioner, Thomas E. Hampton, who oversaw Insure U’s local launch. “Millions of individuals are either uninsured or underinsured, leaving them financially vulnerable if a breadwinner suddenly passes away.” D.C.’s insurance supervisory body, the Department of Insurance, Securities and Banking, is an NAIC member. Types of Life Insurance There are two types: term and permanent. A term life pays if the insured dies during the policy’s “term.” Permanent life offers investment features and combines death benefits of a term with investment components that build cash value. Permanent Life Insurance Options Unlike term, permanent policies remain as long as premiums are paid. Each features increasing cash values that give owners borrowing access. If managed correctly, it offers tax benefits since the Internal Revenue Service does not consider this loan as income. Four types of permanent life insurance: Whole Life offers a fixed premium for the policy’s duration, guaranteed cash value and death benefit. Universal Life allows policyholders to determine amount and timing of premiums, and to adjust coverage levels over time. Variable Life allows allocation

of investment funds across stocks, bonds or money markets with different risk levels and growth potential. Minimum cash value is not guaranteed. Variable Universal Life is a combination of variable and universal life that offers flexibility to vary premium payments, investments and coverage with greater market risk. Source of Emergency Cash People everywhere seek – IRAs, 401(k)s or credit cards – for emergency cash. However, according to a 2012 NAIC survey, consumers overlook life insurance as sources for immediate funds. “When thinking about everyday finances, life insurance is not top of mind for most Americans,” said NAIC Vice President and North Dakota Insurance Commissioner Adam Hamm. “More than twothirds of consumers don’t know some types of life insurance include a cash value,” with no requirements to use, and with cheaper rates than borrowing against an IRA or a credit card. Another option may be to cash in a permanent life, which allows for a “retrieve up” to the accumulated value. Doing this should be well thought-out since premiums increase with age, and it is viable for those with enough term life or without financial dependents. The NAIC suggests if choosing permanent insurance, “be sure to consult a licensed investment or tax advisor on which policy best fits your risk tolerance and investment objectives.” Be sure to check your insurance regulators to verify an insurer is licensed in that state.

M M th

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Financial Literacy Supplement / oct. 2012 H-13

Healthy Money Tips for Families By Misty Brown WI Staff Writer Fundamental money attitudes begin the moment a child can count. Find out how families are preparing preschoolers to young working adults in developing and mastering money management techniques. MONEY 101: The President’s Advisory Council on Financial Capability [PACFC] finds ways to improve the financial capabilities of the Americans. PACFC’s Youth Development Sub-committee created an invaluable website. www. moneyasyougrow.org which is designed to educate families on the importance of mastering “20 Things Kids Need to Know To Live Financially Smart Lives.” Perfect for ages 3 to 18, it addresses various topics that include: “What Is Money as You Grow?” and “How Can You Use Money as You Grow?” Another interesting topic focuses on “Who Can Use Money as You Grow?”

for $300.00. Next year, when I get my driver’s license I will buy my own car insurance,” said Zakiya James, a 15-yearold, conscious consumer who lives in Columbia Heights. EXAMINE YOUR RECEIPTS: Many stores do not update sale prices in the cash registers or they are entered improperly. Check your receipts and verify your monthly bills before paying electronically.

ELIMINATE FINANCIAL PAPER CLUTTER: Firsttime homeowners, individuals who inherit real estate and longtime homeowners should keep all documents, receipts and statements regarding their homes or improvements made to the property. According to the IRS, keep your tax returns for seven years because they have six years to challenge your returns for suspicion of underreporting. The latest trend is to scan any important documents and save to two separate disks with a solid SAVE YOUR ALLOWANCES: Internet security system to This is the first step to teachprevent identity theft. Howing the concept of working for ever, some financial experts your money and saving some advise individuals to keep a of your earnings. Instead of giving a child a $5.00 bill, give hard copy with the second disk in a fireproof file cabinet or five $1.00 bills to save a porthe safety-deposit box at your tion of it. bank or credit union. PLAN BIG EXPENSES: GET A CREDIT CARD & “When, I was 12 years-old, I decided to open up my own CREDIT REPORT: Choose bank account along with my your credit cards wisely. Read younger brothers. At the all fine print. The moment a age of 13, I enrolled at the young adult or college student University of the District of obtains credit, they should Columbia Community College know that the Fair and Acto study for my major career curate Credit Transactions goal, a systems or bio-medical Act of 2003 [FACT Act or engineer. I saved every gift FACTA] was passed to guarunder $10.00 to purchase a antee every consumer a free professional camera to pursue credit report annually. You can my leisure career, a commercial and fine art photographer. receive your credit report from This summer, I saved $500.00. the three major credit bureaus: Experian, Equifax and TranAfter extensive research and sUnion by contacting www. consultation with a professional photographer, I bought annualcreditreport.com or call 877-322-8228. my first Nikon camera online

H-14 oct. 2012 / Financial Literacy Supplement

IS YOUR

LIFE INSURANCE

ADEQUATE?

Here are some major life events that might trigger the need to re-evaluate your life insurance coverage: zz The birth or adoption of a child — If you have children, you want to see them realize their hopes and dreams. These days, it’s difficult enough to make that happen with you in the picture. What if you or your spouse — or worse yet, both of you — were suddenly out of the picture? Would there be enough income to pay for day care, college, and everything in between? Life insurance may help you answer “yes” to these questions.

If you’re on your own now, whether through death or divorce, you may want to reassess your overall financial situation, including your life insurance needs. It’s almost like starting from scratch again because being on your own will likely affect just about every financial calculation you can think of.

If something were to happen to you, you’d probably want your family to be able to maintain their new and improved lifestyle. That’s why it’s a good idea to reassess your life insurance coverage whenever your income rises.

zz Planning for college — College costs continue to increase so you may want to zz Home purchase — begin your college savings If you and your spouse recently efforts sooner, in order to purchased a home, there’s a achieve your goals. Having good chance you acquired a a regular savings strategy is zz Change in marital mortgage as well. Could your just one part of a balanced status — If you’re newly spouse manage the mortgage college funding plan. You may married or just getting married, payments without your income? also want to consider a smart you probably share many What about property taxes, risk management strategy to dreams for the future — you routine maintenance, utilities help ensure that your college also share each other’s financial and unforeseen repairs? How savings goals will be achieved obligations. If one of you were long would your spouse have suddenly removed from the before your dream house was up even if you’re not there, and picture, would the surviving for sale? Life insurance coverage that strategy may include life insurance coverage. spouse have enough money to may help keep the family you cover final expenses, eliminate love in the home they love. Things may change but a debts such as credit card balances and car loans, and buy zz Job change — If you good life insurance agent can help you analyze your needs some time to adjust to a new recently changed jobs, a salary way of life? If one of you were increase may have come with it. so that you can determine to die prematurely, life insurance You may not realize it, but when an appropriate strategy to support your individual may help ensure that these your income increases, your needs will be met. objectives. spending tends to increase too.

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How To Decide Whether To Buy Or Lease Your New Car by Decisive Magazine www.decisivemagazine.com As the economy continues to rebound, more Americans find themselves strolling the lot of their local car dealership and facing a difficult decision -- whether to buy or lease a new vehicle. While there are advantages to both, the Decisive Magazine has learned the ultimate decision depends upon your situation. Benefits of Leasing 1. Driving a New Car. Leasing allows you to get a new car frequently. While this may not be the best reason to get a car, it does mean you’ll always have the latest safety technology and comforts. 2. Affordability. With leasing, you’re getting more car for a lower monthly payment. 3. Less Maintenance. Leasing

TFS_Learning_D&I_Ad_FA.pdf

can help you avoid some hefty maintenance and repair bills. With the exception of a few oil changes and filter replacements, there should be no need for any heavy maintenance. Assuming that you’ve kept the car in good condition and stayed within the mileage limits, when your lease is up, you can simply turn the car in and walk away. 4. Avoid Upside-down Loans. When you lease, you there is no danger of getting stuck in an “upside-down” loan, where you owe more than the car is worth. Benefits of Buying 1. Ownership of the car. When you buy a car, you own the vehicle and will eventually be free of car payments. 2. Lower Costs in the Long Run. While the monthly payments for buying a car are higher than payments for leasing, you will eventu1

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ally pay the loan off. Those initial high payments make up for themselves with years of being payment free. 3. No Restrictions. A lease contract contains many restrictions, such as mileage limits, which may be inconvenient and costly in the long run. An owner can sell at any time, while leases usually include hefty penalties for early termination. 4. Rebates and Incentives. Rebates and incentives for new cars

are abundant for buyers right now. In some cases, these offers might make buying a significantly less expensive option than leasing. For many people, the decision to buy or lease comes down to price, says Wiesenfelder. “We encourage people to use our automatic Loan vs. Lease calculator at Cars.com. By entering in the monthly payment you can afford, you’ll get an idea of which car you could afford to own, or if leasing is a better option for you.”

Decisivemagazine.com features the latest consumer news and information for people of culture. With how-to articles, purchasing tips, and product comparisons, the ultimate goal of Decisive Media is to enable readers to be more “decisive” during these uncertain economic times. For more information, phone 301850-2858, eMail publisher@decisivemagazine.com, or write to us at 8201 Corporate Drive, Suite 500, Landover, MD 20785.

Learning Center

Start your vehicle ﬁnancing journey with conﬁdence. VISIT:

toyotafinancial.com/prepare for details on credit, the dealership process and payment calculators.

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Financial Literacy Supplement / oct. 2012 H-15

Teaching the Next Generation

Financial Literacy By Dawnyela Meredith

In today’s economy, nearly everyone wishes that his or her personal finances were a little bit stronger. It was recently revealed that household net worth has been set back 20 years, according to the Federal Reserve’s Survey of Consumer Finance. Financial literacy has never been a more important skill and will be even more critical for the next generation. Unfortunately, many children are not getting the financial literacy education they will need as adults. The Jump$tart

Coalition for Personal Financial Literacy’s most recent national survey, which measures the financial literacy in high schools, found that seniors answered just 48.3 percent of the financial literacy questions correctly. Compared to other countries, things do not look any better. Currently, American students rank behind their peers in Mexico, Australia and Brazil in their knowledge of financial literacy and basic concepts like interest rates and budgeting money, according to Visa International Financial

The NAACP: Addressing the Economic Crisis in Our Community The NAACP Financial Freedom Campaign is working to advance a growing economy where there is opportunity and shared prosperity for all. Text ECON to 62227

www.naacp.org/econ

H-16 oct. 2012 / Financial Literacy Supplement

Literacy Barometer 2012. I partner with a public charter school in Washington D.C that teaches financial literacy. The school has taught financial literacy for the past five years, partnering with the Alliance of Securities and Financial Educators—on whose board sits members of the Securities and Exchange Commission. ASAFE volunteers use a program called the Junior Achievement curriculum and model which is a good fit for the school’s educational program which is based on Expeditionary Learning, which emphasizes learning

by solving problems as a superior approach to rote learning. Educators at our school believe that adults not talking to children about money cause financial illiteracy. Unfortunately, in too many families, talking about money is still seen as a taboo topic—or something that young people do not need to know about. Through our six-week financial literacy program, we want to break through that barrier. The program begins with students learning the basics of budgeting, and the impact of interest rates on savings and purchasing things on credit. Along the way, students are tested by activities and competitions to reinforce what they have learned. After students learn the basics, they next tackle more complex financial situations. As the program ends, students learn how to pull together resources to set up and operate a student-run store. In the past, this has enabled students to get real experience making decisions about whether it is the right time to expand, and learn the true costs of buying something on credit. Our goal is to have students leave the program with an understanding of the power and risks of money. We aim to create a foundation from which they can learn to become savers, and grasp the risks and the benefits of credit. In addition to learning an important new subject, financial literacy reinforces the lessons students absorb in math class, including the real world value of concepts like fractions and percentages. Because Two Rivers believes in making character education a key part of learning, financial literacy classes are used to highlight the importance of hard work and making responsible choices. Our commitment to teaching financial literacy is one reason why Two Rivers’ students perform strongly on the city’s standardized math tests. In the District’s 2012 standardized tests, Two Rivers came

Dawnyela Meredith

first in math and second in reading among all D.C. charter elementary campuses. Overall, our elementary school scored 21 percentage points higher than the average D.C. charter school and 29 percentage points higher than the average D.C. traditional public school. Our middle school scored 25 points higher than the average city-run school and 17 points higher than the average charter. Two Rivers also was recently recognized as one of only 22 ‘high performing’ public charter schools by the city’s Public Charter School Board, because of its strong test results. One of the reasons we are able to make a commitment to teaching financial literacy is that, as a public charter school, Two Rivers has greater freedom to set curriculum and school culture than its counterparts in D.C.’s traditional public school system. Faced with budgetary problems, too many school districts are cutting back on teaching financial literacy. The financial collapse of 2008, when many adults counted the cost of their own financial illiteracy, shows us why that decision is a mistake. If we want to prepare today’s students for the challenges and opportunities they will face tomorrow, we as adults need to provide the financial literacy education they will need. Dawnyela Meredith is the Director of Out of School Time Programs for Two Rivers Public Charter School

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The FDIC Money Smart Financial Education Curriculum

he Federal Deposit Insurance Corporation’s free Money Smart financial education curriculum is designed to help low- and moderate-income individuals enhance their money management skills, understand basic mainstream financial services, avoid financial pitfalls and build financial confidence to use banking services effectively. The curriculum has been proven to positively influence how participants manage their finances. More than 2.75 million people have attended a Money Smart workshop. The curriculum is available in three versions:  Instructor-led versions for those seeking to teach youth or adults  A computer-based instruction version for people to complete at their own pace  A downloadable Mp3 (podcast) version

The Money Smart Modules:

Money Smart is:  Free.  A source of objective information from the Federal Deposit Insurance C or p or a ti on federal (FDIC), the agency responsible for maintaining stability and public confidence in banks.  Customizable based on audience needs.  An award-winning curriculum that can bring proven results.

1. Bank On It: an introduction to bank services; 2. Borrowing Basics: an introduction to credit; 3. Check It Out: how to choose and keep a checking account; 4. Money Matters: how to keep track of your money; 5. Pay Yourself First: why you should save, save, save; 6. Keep It Safe: your rights as a consumer; 7. To Your Credit: how your credit history will affect your credit future; 8. Charge It Right: how to make a credit card work for you; 9. Loan To Own: know what you’re borrowing before you buy; and 10.Your Own Home: what homeownership is all about. 11. Financial Recovery: how to recover financially and rebuild your credit after a financial setback.

For more information, visit: www.fdic.gov/moneysmart www.washingtoninformer.com

Financial Literacy Supplement / oct. 2012 H-17

The Domino Effects of Debt:

Student Loans Trigger Financial Stress From Students to Retirees By Charlene Crowell

When this year’s student debt burden surpassed the $1 trillion mark, it became even larger than the amount of debt held on credit cards. New findings now conclude that heavy student loan debt delays the ability of young graduates to buy a home and in the worst scenarios, strips Social Security benefits and even disability income also known as Supplemental Security Income.

“There has been a 46 percent increase in average debt held at graduation from 2000 to 2010. Moreover, total outstanding debt held by the public has skyrocketed 511 percent over the past decade”, according to Denied: The Impact of Student Debt on the Ability to Buy a House, a new research paper by the Young Invincibles, a national youth advocacy group. Their research shows that the challenges of becoming a homeowner are magnified with student debt. Student loan debt has been

rising much more rapidly than salaries for college graduates. When researchers compared salaries of the typical single student loan borrower to the cost of a medianpriced house, they concluded that potential borrowers with a student loan and average consumer debt are not likely to qualify for a mortgage. If a married couple carries a double burden of student debt, it becomes even harder to qualify. Although student loans are usually considered to be a problem for young people, the reality is that

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many seniors share the same debt dilemma. According to the Treasury Department in early 2012, people ages 60 and older owed $2.2 million on student loans that were 90 days or more past due. As a result by August 6, Treasury reduced benefit payments on Social Security checks for 115,000 retirees. Legally, the share of benefits withheld can be as high as 15 percent. In 2005, the United States Supreme Court upheld two federal laws that enable the government to take money from federal benefits to make student loan payments. The Higher Education Technical Amendments Act allows the federal government to collect funds without statutory limitations from defaulters. A second and related act, the Debt Collection Improvement Act, authorizes reductions in Social Security payments for past due student loan borrowers. The only exemption to this second law is on monthly benefits of $750 or less. Consumers who owe $60,000 or more on federal student loans are allowed by Treasury to take as long as 30 years to repay the loan. An additional eight years of repayment is allowed in the event of economic hardship or long-term unemployment. In these instances, payments are deferred while the interest continues to accrue. Who would ever have imagined that a student loan repayment would take 30 years or more? In bygone years the only loans that incurred such lengthy indebtedness were mortgages. Consumers with blemished credit scores or those with limited funds for a down payment may seek an Fair Housing Administration (FHA) or Veterans Affairs (VA) financing with down payments as low as 3.5 percent. However these loans can be expensive and typically take a longer time to

be approved. Since October 2010 three separate price increases on FHA loans have occurred. The most recent was the addition of an upfront mortgage premium payment announced in April that will add $1,500 in upfront costs for a typical home of $200,000. The domino effect of debt begins with a student loan and then delays the ability to qualify for a mortgage. With other consumer debt payments such as car loans, and credit cards taking a larger share of net income, the ability to gain wealth is limited if not stymied. Consumers opting for rental housing may find the monthly payment more affordable on a cash-flow basis; but no equity or wealth is derived on rentals. Further as the rental housing market has tightened, the cost of rental housing continues to increase – thereby leaving fewer disposable dollars to save for a home down payment. And if parents or grandparents signed for a student loan, the benefits they worked for most of their lives are siphoned and tarnish what ought to be the proverbial ‘golden years’. Denied reaches a thoughtful conclusion: “Policymakers who may be unmotivated by individual struggles of borrowers, or unconvinced of the extent of the problem today, would be wise to begin to view student debt in an additional light: as an encumbrance on the recovery of the housing market, and as a result, a potential hindrance to economic growth.” Charlene Crowell is a communications manager for the Center for Responsible Lending. She can be reached at: Charlene.crowell@responsiblelending.org.

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Financial Planning and Charitable Giving an annual gift that is budgeted into your personal finances. This is the ideal choice if you want Any good long-term finan- to take advantage of tax breaks, cial plan includes a component since you can maximize your tax for charitable giving. Most of us advantages every year. want to live comfortably as we reach retirement age, but equally The benefits of annual giving important is knowing that the include: care we take with our finances zz Long-term financial planning will continue to accomplish great things long after we’re gone. zz Regular tax breaks This might mean leaving a large zz Moderate gift-giving endowment to a cause that’s imIn most cases, your donations portant to you, or simply setting aside some annual funds to do- are deductible to up to 50 percent of your adjusted gross innate to charity. Also known as “planned giv- come. While most of us aren’t ing,” donations and other philan- in a financial place to donate thropic gifts are the backbone of half of our salaries every year, our society. From organizations the national average is a gift of to individuals, the money you about 2.1 percent of your annual give helps support important income. causes—while also helping you to stabilize your own financial Crisis Intervention One of the most common situation through tax deductions. reasons people give money is because of a recent catastrophe, Annual Giving One way in which planned giv- usually caused by extreme weathing is accomplished is through er or political distress. While givBy Wesley Watkis Certified Financial Planner

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ing during times of need is a great way to contribute to society, chances are there is a crisis somewhere on the planet every minute of every day. Many people build a crisis giving component into their annual budgets. This way, you can determine how much you can afford to donate every year, and give when needed, rather than scraping to come up with a last-minute financial gift. You’ll also have the benefit of enough time to choose the organizations carefully, since many of the “crisis fund” groups that arise after a catastrophe are actually scams or take a large portion of the proceeds before passing the donation on. Like annual giving, planned crisis intervention also allows you to build in the necessary long-term financial planning with tax benefits.

planning is a great way to continue providing support after you’re gone—and minimizing inheritance taxes on your estate. Charitable bequests are a great way to ensure that your lifetime of hard work and planning doesn’t go unrewarded. Estate taxes can go as high as 50 percent if you’re leaving a large amount of real estate and money behind, but you can avoid much of this by putting your money where it’s needed most. In fact, according to the Pension Protection Act of 2006 (PPA), once you surpass the age of 70, you can donate up to $100,000 from your IRA to a charity taxfree.

Wesley Watkis

support in any way it’s offered. In order to get the most out of your planned giving contributions, however, it’s best to first meet with a financial advisor who can help you determine the pros and cons of each type of giving. As is the case with any type of long-term financial plan, the support of a licensed professional can ensure that you get the most out of your money and your goals for the future.

Why Give? There are no “wrong” reasons to donate money. It doesn’t matter whether you want to give back to the community, take advantage of tax breaks, or avoid messy inheritance squabbles— Leaving a Legacy Creating an endowment or there are hundreds of organiza- Questions? Email me at legacy gift as part of your estate tions out there that can use your wesley@thewandwgroup.com

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H-20 oct. 2012 / Financial Literacy Supplement