Tag Archives: Laurie Rivetto

Youth can build credit history through positive use of credit cards

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Courtesy Michigan State University Extension

By Laurie Rivetto, Michigan State University Extension
Updated from an original article written by Sienna Suszek.


Today’s young adults are a major contributor to the economy and are poised to be the nation’s next biggest spenders. It seems logical to help them use their spending in a way that will positively impact their future and help them build a solid credit history. While there are a variety of ways to establish a solid credit history, one useful and effective method can be through credit cards. 


EVERFI and AIG Retirement Services recently surveyed more than 30,000 college students about their financial behaviors and knowledge. According to the 2019 research, the percentage of students using credit cards in college has increased from 28% in 2012 to 46% in 2019. The percentage of students with more than one card has also increased from 25% of college students to 45%. While using credit cards can help build positive credit, the research also found that the percentage of those students who never paid a credit card bill late decreased from 91% in 2012 to 78% today.


In addition, for students with credit cards, 36% already have more than $1,000 in credit card debt. While percentage changes could be influenced by a variety of factors, it does demonstrate the importance of education around the proper use of credit.


First, it is important that young people recognize good credit is a privilege to be earned. It takes time to build a good credit history that can then benefit them for years to come. They must also understand that debt is easy to get into, hard to get out of and if not managed, can result in a poor credit rating that will negatively affect them for 10 years or more. As indicated by the research, unfortunately, many young people do not understand the implications of spending beyond their means with credit cards.


A credit card is a form of borrowing money. When a young person signs a credit card application, it is binding. It represents an agreement to repay dollars borrowed through the privilege of using a card to pay for something instead of cash. If payments are made prior to due dates on bills received, over time the youth creates a history of consistent, timely repayments and a good credit score is built. A higher credit score will make it easier in the future for students to rent an apartment, take out a home mortgage and command better interest rates on insurance policies or loans. It may even help them to secure a job. 

Michigan State University Extension recommends a few steps to help youth on the right path to positive credit: 

  • Help youth research credit cards and choose one that is right for their needs and situation.
  • Establish a system with youth for tracking their charged monthly expenses. This provides a visible picture of how much debt they are incurring.
  • Have youth be accountable for paying their bill each month out of their personal checking account. By doing this, they will become accustomed to bill paying procedures and track any remaining account balance.
  • Teach youth how to pull a credit report through the agencies of TransUnion, Experian and Equifax. One report is available free of charge from each of these agencies on an annual basis. Youth and adults should access their credit report using AnnualCreditReport.com, a federally authorized website that provides free access to a credit report every 12 months.

Michigan State University Extension and Michigan 4-H Youth Development help to prepare young people for successful futures. As a result of career exploration and workforce preparation activities, thousands of Michigan youth are better equipped to make important decisions about their professional future, ready to contribute to the workforce and able to take fiscal responsibility in their personal lives. For more information or resources on career exploration, workforce preparation, financial education, or entrepreneurship, contact 4-HCareerPrep@anr.msu.edu.


This article was published by Michigan State University Extension. For more information, visit https://extension.msu.edu. To have a digest of information delivered straight to your email inbox, visit https://extension.msu.edu/newsletters. To contact an expert in your area, visit https://extension.msu.edu/experts, or call 888-MSUE4MI (888-678-3464).




Teens have the most valuable component to accumulating wealth

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Courtesy Michigan State University Extension

By Laurie Rivetto, Michigan State University Extension


How soon after securing their first job should a young person start investing? Immediately! Sound crazy? It’s not. 


Setting aside money for long-term goals is an uncommonly wise act for a teenager. In fact, teenagers have something every older saver and investor wants yet can’t get, and that is time. Michigan State University Extension has numerous resources that can help young people learn key personal finance skills including how to manage and invest money.


Perhaps when it comes to building wealth, time truly is much more valuable to increasing the investment than the actual amount invested or the interest rate earned. The sooner a teen begins to set aside money in a savings or investment account, the longer those funds will earn interest and therefore the more money that will accumulate.


A smart teenager will set aside a portion every time they receive money, including wages from a job, money received as a gift, an increase in allowance, etc.; even just $10 here or $20 there will add up. A wise young person will then invest the amount saved. Those investments and those earnings will compound over time; what starts out as a dribble of deposits and earnings will build over time to a substantial stream of money. The longer the funds are left in the account, the faster the funds will grow.


How does that happen? It is all thanks to the magic of compound interest. Even Albert Einstein was impressed by it, “Compound interest is the eighth wonder of the world. He who understands it, earns it… [and] he who doesn’t… pays it.”


Compound interest can be explained by the following simplified scenario: Adrienne saves $20 a week in a savings account for a year. She then transfers $1,000 of those savings to an investment account that earns 6% interest per year. At the end of the first year, her account will earn 6% interest on the $1,000, so she will have $1,060.00. At the end of the second year, Adrienne will earn 6% on the $1,060.00; her account will be valued at $1,123.60. After five years, without any additional deposits, Adrienne’s initial investment of $1,000 will be worth $1,338.23. Adrienne earned $300 interest on her $1000 deposit; it was the compounding of the interest that earned her the additional $38.23.


If Adrienne is financially savvy and continues to save $20 each week over that same period, she will be able to deposit $1,000 into her account at the beginning of each subsequent year. At the end of five years, her $5,000 investment will be valued at $5,975.33. Adrienne earned $900 in interest on the $5,000 she deposited; the $75.33 was the result of compound interest. Adrienne has let compound interest work for her; she might well consider this free money.


The magic here is that Adrienne is earning interest on the money she actually deposited into the account plus the money that her account has earned for her. It may not seem like a lot of money initially, but with regular deposits and annual interest earnings, the fund will grow significantly.


Investing early in life delivers the most valuable component to investing—time. Teens interested in taking advantage of the time that is on their side can learn money management and investing skills through MSU Extension 4-H Youth Development Youth Investment Education Resources. A calculator from the U.S. Securities and Exchange Commission can help youth explore how compound interest can work in their lifetime.


Michigan State University Extension and Michigan 4-H Youth Development help to prepare young people for successful futures. As a result of career exploration and workforce preparation activities, thousands of Michigan youth are better equipped to make important decisions about their professional future, ready to contribute to the workforce and able to take fiscal responsibility in their personal lives. For more information or resources on career exploration, workforce preparation, financial education, or entrepreneurship, contact 4-HCareerPrep@msu.edu.


This article was published by Michigan State University Extension. For more information, visit http://www.msue.msu.edu. To have a digest of information delivered straight to your email inbox, visit http://www.msue.msu.edu/newsletters. To contact an expert in your area, visit http://expert.msue.msu.edu, or call 888-MSUE4MI (888-678-3464).


SMART goals make good resolutions all year

3-bottom, Area Education, Citizen Journalism, Education, How-To's, Recreation, Senior Living,

By Laurie Rivetto, Michigan State University Extension

 

Many people use New Year’s resolutions to better themselves and their lives. Goals can also be set at any time in the year to work towards a life improvement. How many times have you set a New Year’s resolution or a life goal only to feel like you were not able to achieve it? To help you be more successful this year, start with a solid, goal-setting plan.

 

A study at Dominican University of California found that more than 70 percent of the participants who sent weekly updates to a friend reported successful goal achievement (completely accomplished their goal or were more than half way there), compared to 35 percent of those who kept their goals to themselves without writing them down. Writing down your goals and sharing them with someone else matters.

 

In addition, your written New Year’s resolution or life goal should be SMART to be successful. Michigan State University Extension can help you make those goals SMART, an acronym that stands for:

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time-bound

When creating a goal, there are a variety of questions you should ask yourself as they relate to specific parts of the acronym:

  • Specific. What exactly needs to be accomplished? Who else might be involved? Where will this take place? Why do I want to accomplish this?
  • Measurable. How will I know if I have succeeded? How many steps will it take to achieve this?
  • Attainable. Do I have the resources I need to make this happen? Is this goal neither too easy, nor too hard for me to accomplish? Will the steps I have planned help me reach my goal?
  • Relevant. Can I commit to this goal? Will I not be able to reach another goal or do something else I want to do because I am working towards this goal?
  • Time-bound. When is the deadline? When do I need to take action?

Take time to answer each of these questions as you create your goal. Using the SMART goal process can help you decide if the goal is a good fit for you as it is, or if you need to revise it to ensure success. It is often best to start with the time-bound, specific and measurable and then review them for being attainable and relevant.

 

An example of a goal that isn’t quite SMART would be, “I want to take a trip to Europe next October for my birthday.” The same goal, after being put through the SMART process by an individual, might look like this:

  • Specific. “I want to take a two-week trip to Ireland with my sister for my birthday in October of next year.”
  • Measurable. “I need to save $4,000 to cover flight costs, lodging, transportation and miscellaneous costs based on my research.”
  • Time-bound. “October is nine months away. That means I need to save $444 a month until October to have my $4,000 set aside to cover costs.”
  • Attainable. “$444 is a lot of money a month for me to set aside when I also am saving for a car.”
  • Relevant. “I am not sure I can commit to this goal. It might set me back from getting my car; perhaps I should plan for a different trip.”

In this example, having decided this goal is too much at this time, the process can be repeated; this time, the new goal is to take a trip to a Seattle, Washington, for five days and save $1,000. This allows the goal to be more likely to be achieved, aligned with the individual’s other goals and plans, and able to be measured and adjusted as needed along the way.

 

The National Endowment for Financial Education High School Financial Planning Program uses SMART to help young people make financial goals such as buying a smart phone, saving for spring break or getting a new pair of sneakers.

 

The SMART goal process works great with financial goals and it can also be used for any goal such as weight loss, reading a certain number of books a year, organizing a room or managing time effectively. By being SMART, you will be on your way to reaching your goal!

 

Michigan State University Extension and Michigan 4-H Youth Development help to prepare young people for successful futures. As a result of career exploration and workforce preparation activities, thousands of Michigan youth are better equipped to make important decisions about their professional future, ready to contribute to the workforce and able to take fiscal responsibility in their personal lives.

 

This article was published by Michigan State University Extension. For more information, visit http://www.msue.msu.edu. To have a digest of information delivered straight to your email inbox, visit http://www.msue.msu.edu/newsletters. To contact an expert in your area, visit http://expert.msue.msu.edu, or call 888-MSUE4MI (888-678-3464).

Tips for researching car insurance

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Photo courtesy of Michigan State University Extension

By Laurie Rivetto, Michigan State University Extension

 

For many youth, getting a car can be an exciting major milestone. Car insurance needs to be a part of that education and milestone as well. It is important to have car insurance to protect your assets, satisfy lenders and comply with state laws that require auto insurance.

 

Here are a few key points from Michigan State University Extension, the Michigan 4-H Youth Development program and the National Endowment for Financial Education High School Financial Planning Program to help youth as they begin their insurance search.

  • Take time to get three quotes. While this takes time, each insurer rates risk differently, so it is important to find out what they will charge you based on your circumstances.
  • Check out the National Association of Insurance Commissioners (NAIC) education website, Insure U- Get Smart About Insurance, to look at some unbiased, consumer-oriented help and connect you to your local state’s department for assistance. The Shopping Tool for Automobile Insurance provides a step-by-step process to do comparison shopping for insurance.
  • Find out if your employer or any organizations you belong to offer discounts for insurance. Sometimes large organizations offer insurance plan discounts for their members. Insurance companies may also provide discounts or deals for students, good driving records or bundling of services. It might also make more sense for youth to be added to a parent’s insurance, if possible, because of the higher rates for insurance for teen drivers. The insurance company will often view the youth driver as less risky with the oversight from parents or guardians as opposed to the youth getting insurance on their own. (If added to a parent or guardian’s insurance, know that it will raise the premiums for those adults as well.)
  • Know what type of coverage you need, how much you can afford monthly, how often you need to pay your premium (and if you can meet that requirement), what deductible you can afford and the reputation or credibility of the insurance company.

For more information on insurance, the National Endowment for Financial Education has a self-paced course on transportation that reviews transportation options, insurance, buying or leasing, safety, negotiation tips, car care and financing on their Smart About Money website. You can view the sections you want in the course or take part in the full course.

 

Michigan State University Extension and Michigan 4-H Youth Development help to prepare young people for successful futures. As a result of career exploration and workforce preparation activities, thousands of Michigan youth are better equipped to make important decisions about their professional future, ready to contribute to the workforce and able to take fiscal responsibility in their personal lives.

 

This article was published by Michigan State University Extension. For more information, visit http://www.msue.msu.edu. To have a digest of information delivered straight to your email inbox, see http://www.msue.msu.edu/newsletters. To contact an expert in your area, visit http://expert.msue.msu.edu, or call 888-MSUE4MI (888-678-3464).