Photograph by Declan Jewell

The only thing about as bad as fees you can’t afford to pay due to economic hard times is fees that you don’t even realize you’re paying. Thanks to declining returns on services customers do opt for however that’s exactly the kind of fees banks are starting to love. An easy way to rope you into fees is bank debit cards, and even if you have never had a problem with one you may want to take a look now.

The first way these lock you into fees is you pretty much require overdraft protection to use one. Many argue that if you manage your account well and treat a debit card transaction like a check you won’t get into trouble. Unfortunately this is not true at all. Banks use a number of tricks in how they process transactions that make it impossible to be certain when a charge will take place, or for what amount. One bank manager I talked to said he was frustrated because he honestly couldn’t understand how they process these transactions; he said he always leaves a couple hundred dollars just in case, even though he is very sure of what money comes out of his account. These cards are seriously designed to encourage Non-sufficient funds fees with balances that do not consistently update and a ‘courtesy’ of letting you overdraw your account by hundreds of dollars before they decline a charge. A courtesy that can result in hundreds of dollars worth of fees; a postage stamp could cost you more than forty dollars!

Another hidden debit card fee is annual membership to some ‘rewards’ program. Typically the rewards aren’t amazing, and the ‘points’ earned are no more consistent than the order in which debit card transactions are processed. In almost any situation you’d see a lot more rewards by opting out of this program and just saving the money in a savings account. A similar ‘rewards’ program is to acquire points for ‘being green’. In reality this one is more about saving the bank from paper costs than it is about the environment, but it can also keep you less informed about your account balances.

Frequently also these days there is a charge just to have a debit card, or to use one. If you receive an updated notice in the mail regarding your card make sure to see if there is a new annual or monthly fee, or even a new transaction fee. Careful management of funds can only happen when you know for sure what fees may post to your account. A new 35-cent fee for a specific type of transaction could have you literally seeing a bright red 35-dollar insufficient funds charge!

Many people, especially younger people who have grown up with debit cards, find it hard to manage without them. It does take getting used to but it’s worth the cash saved, and avoiding disastrous NSF fees. Keeping enough money on hand, and keeping a low fee credit card ONLY for emergencies makes a lot more sense then letting the bank borrow your money while you essentially pay THEM interest on it in subtle fees. If you really can’t live without the convince of a card then make sure you always know what fees are charged, opt out of high interest overdraft protection, and keep a safety net of at least a couple hundred dollars in your account in case an unsuspected fee posts to your account.

Piggy BankPhoto by: Marcelo Moura (Stock Exchange)

Piggy Bank #1: The Three Little Piggy Banks

Piggy Bank is a UWSA blog series discussing ways to save small amounts on a regular basis and how the savings add up surprisingly quickly. Please feel free to share your ideas and your stories about how saving “pocket change” added up and helped you and your family reach a meaningful financial goal.

In the grocery store check-out line the other day, I watched a mom struggling to say “no” to her two sons who were begging her to buy them each a little car that the store had strategically placed at their eye level. There were a whole bunch of toys and trinkets there – meant to encourage impulse purchasing in kids – and in parents who instantly decide that a couple of extra bucks is an easy way to make their child happy. Parents beware! These are NOT cheap toys; impulse purchases add up to big bucks very quickly, especially for parents on a budget. Worse, they encourage terrible spending habits in children from the very earliest of ages. We want to teach our kids how to save, not just spend.

The approach I took with my son, who’s two, is the “three piggy banks” system.” The idea is simple and you can make your “three little pigs” system easier or more complex, depending on your child’s age.

The first step is to get three piggy banks for each child. You can purchase inexpensive ones or make your own out of jars or plastic containers. Perhaps you want to let your child pick out the piggy banks or do a craft with them to turn used containers into piggies.

Next, label the piggy banks as follows: “Savings,” “Spending,” and “Sharing.”

The “Savings” piggy bank is for collecting money that your child will keep on adding to over time. One idea is to have the child periodically deposit the money from the “Savings” piggy bank into their very own passbook savings account. This lets them get used to going to the bank and watching the total in their account go up and up — and they’ll see how their money earns interest.

The “Spending” piggy bank is to help your child save for a long-term goal. This depends on age, but with prices nowadays, it’s probably not hard to imagine that even a younger child wants something that will require accumulating enough money. If they choose to purchase something else with this money, like an impulse toy, it means you have a chance to remind them of their other goal and that it will take longer for them to get “the big thing” they’re saving for. This helps children begin to understand the concept of “cost” as opposed to “price.” Their decisions will have real consequences for them – positive and negative. To reach the long-term goal, they will learn to be more patient and not give in to impulse buying and other diversions.

The “Sharing” piggy bank is for donations to a charity that is important to the child or to your family. The satisfaction of helping those in need it is a wonderful feeling to experience at any age. Charitable giving is as American as apple pie. We have the highest level of individual donations in the world year after year after year.

Once the piggy banks are set up, whenever your child receives money, whether it’s allowance, a birthday gift, payment for shoveling the neighbor’s driveway etc., it gets divided evenly among the three piggy banks.

The three piggy banks can teach children to see money in many ways, not just in terms of what it can buy them. They also see that money can grow into more money and that it can help them help other people. It’s never too soon to start.

The three piggy banks is also a way to encourage your child to spend from the “Spending” piggy bank, rather than your wallet. It might not stop a child from asking you to buy them a trinket they spot at the check out counter, but it will give them an understanding of why you say “no” and a true sense of appreciation on the rare occasion that you say “yes.”

Got a great story about saving money? Please share your inspiration! Write to me at: staff@uwsa.com

South African Krugerrands
Photo By Lyudmila Green

The stock market has been as volatile lately as a poker table at Las Vegas casino. Many traditionally conservative investments have seen unheard of volatility. Savers have begun asking the question, “What can I invest in to make sure I at least keep the principle of my investment?” For many investors, gold has come up on the list of options.

Before buying a boat load of gold, one should consider the reasons gold is valuable and what gold is useful for in terms of investments. Gold has industrial value, but there is frankly plenty of gold that is already mined and available for industrial purposes; so much so that you can easily find 30$ gold plated 2 foot S-Video cables at your local electronics supplier. Gold is useful either to preserve an investment, or as a hedge against falling currency. If you feel currency is unsafe, or your portfolio is overexposed to a specific currency, adding gold to your portfolio could be wise.

(more…)