Every Kid Should Have a Real Bank Savings Account

Dear Mary: My son is saving cash in envelopes. That seems kind of cumbersome. What is your opinion? Why not in a savings account and keep tract of the amounts for each category? Dick

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Dear Dick: I agree. Kids need savings accounts. In my book, Raising Financially Confident Kids, I recommend that kids be required to save at least 10 percent of everything they receive in a real savings account, in a bank or credit union.

Of course your son could save more than 10 percent, and keep a record for how much in his savings account he is allocating for say “College Savings,” or “New Bike,” “Summer Camp” an so forth.

Since most banks now allow customers to track their accounts online, your son could watch his money closely via computer or other mobile device.

Tell him that I’m proud of him and those envelopes! Not many kids are aware of how important it is to take good care of their money. But now he needs to learn about a real, live bank, too, by keeping some of his money there.

In Search of a Discount on Love

Dear Mary: I work hard every day and don’t have the energy to get out in the evenings. I spend my free time with longtime friends, so I don’t meet single men. I know several people who have found partners online. I’m determined to find a man for myself before the end of 2014. Online dating services may be the way. Are there coupons online for special deals? B.F.

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Dear B. F.: There sure are. Google “Online Dating Coupons” and you’ll turn up a love boat load of online coupon codes for any number of dating sites. Just be careful out there, hear?

Dear Mary: We are better off than most. We have no credit-card debt, we have cash stashed away in a safe in our house and we have about $5,000 in savings. Our 401(k) accounts and Roth IRAs have a total current value of about $50,000. My husband is 41 and I’m 35. We have two kids and college 529 college savings plans for them. Our mortgage is our biggest payment. Should we pay down our mortgage with extra income or put the extra money into our retirement accounts? Peggy

Dear Peggy: My suggestion is that you need to grow your Contingency Fund (emergency fund) first. You need at least enough money in that account to live without any income for six months. That’s probably more than $5,000. I’m thinking at least $20,000. Am I right? Once your CF is fully funded, it’s a tossup on whether you should aggressively invest in paying off your mortgage or invest in the market to build wealth for retirement. I’m sure we could find plenty of experts to argue both options. Personally, I’m really big on achieving 100 percent equity in a home. That means you own it outright, which guarantees you a rent-free retirement. Given the state of the economy and uncertainty in so many areas, that kind of security sounds really good to me.

Hope and Help for Troubled Debtors

Dear Mary: A year ago, I emailed you about the mess I was in with payday lenders. Although I had been a member of Debt-Proof Living for years and knew better—and I am a professional with a masters degree and excellent job—somehow, little by little, I got caught up in the downward spiral into payday loan hell.

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I was so desperate, I was planning to use one of the companies that advertise as “helping” a person pay these off these loan sharks. Thankfully, I contacted you about this first, and you warned me not to use them.  I contacted NFCC.org, the organization you recommended, and found a CCCS office not far from my city (Graceworks CCCS in Dayton, Ohio).

It has not been easy, but I am thankful to report that I have paid off almost $10,000 in those loans and only have two more to go! I can’t begin to tell you the relief I feel.

Every time I drive by one of the lenders, I get a knot in my stomach and want to run into the store and shout a warning to the people who are borrowing. I keep my focus by remembering the horrible feeling at the end of each month, when I got paid, and then having to make my rounds to each of the companies, juggling my money so everyone got paid, and ending up with less money for bills every month.

3 Reasons to Not Borrow from a Retirement Account

Dear Mary: I am thinking of taking a loan from my 40l(k) retirement account to pay off my credit-card debt. I can repay the loan with payments taken directly from each of my paychecks, without any penalties. The interest rate is not too bad, and a lot less than I am paying to my credit card companies now. This seems like a great idea to me, but I’m worried I might be missing something. Sharon

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Dear Sharon: I would not recommend you take a loan from your retirement account to repay your credit-card debt for these three reasons: 

1. Uncertainty. If you leave your job for any reason before the loan is repaid, the entire balance becomes due and payable. That’s the law. You’ll have a couple of weeks to come up with that money. If you cannot, the balance owing will be converted to a withdrawal. You will be hit with early-withdrawal penalties and you will owe both federal and state taxes on the entire remaining balance. The penalties are stiff because you’re not supposed to have access to this money until you are at least age 59 1/2. The penalties and taxes could easily add up to half of the amount you owe. Ouch! 

Help! Too Much Stuff for Too Little Space

Dear Mary: I have a young daughter who is almost three-years-old. Eventually, my husband and I plan on having more children. I have saved lots of baby things, clothing, toys and other items, but I am having trouble storing all of these things. They have taken over.

I cannot possibly take up any more space with these things. I have begun bags for donation and garage sales, but there are some things I need to keep for future children. I do not like the idea of paying for storage space elsewhere, but I am not sure what to do with growing accumulation. Can you help? Becky

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Dear Becky: Do you have friends or relatives with garage, basement or attic space you could use for a few years? If not, I suggest you decide what items you really need to retain, then plan to replace the rest.

For all of the clothes, blankets and other soft items, get a couple of Space Bags that are easily filled and then compressed using your vacuum cleaner that has a hose to suck out all the air. I used dozens of these to get all of my linens, blankets, pillows and clothing ready for long-term storage (my husband and I are still living in our seriously downsized tiny apartment as we wait to make a big move next spring) and I was surprised just how well they worked once I followed the instructions exactly. For the record: My method of overstuffing a bag before removing the air did not work. At. All. 

The Dirty Dishes Dilemma

As you might imagine, I get a lot of mail. And since I could never respond to all your messages, questions and comments personally, I love to reach into the mail bag once each week selecting some of your letters to answer right here.  

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Dear Mary: Is it cheaper to wash dishes by hand since I wash most of my pots and pans by hand anyway, or use the dishwasher? Thanks. Audrey

Dear Audrey: According to the folks at EnergyStar.gov, using a dishwasher versus hand washing can cut your utilities bills by $40 or more annually. That’s because washing by hand uses more hot water, which is both a waste of the water (it takes 5,000 more gallons in a year to wash by hand) plus the energy to heat it. That’s just how efficient dishwashers are these days. 

But that’s not all. Using a dishwasher will save you about 230 hours of personal time in a year–nearly 10 days! And if your dishwasher boosts water temperatures to 140 F., (Energy Star rated machines do), you enjoy improved disinfection compared to hand washing. That means better health, fewer doctor visits. 

Chicken: Pumped and Plumped to Look and Taste Better

Dear Mary: Thanks for your most informative recent column on poultry labeling. I have seen chicken in the supermarket that includes “enhanced” on the label. As nearly as I can figure this means pumping salty water into the meat. What is all this about? Thanks. Mimi

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Photo Credit: Getty Images/Adam Gault

Dear Mimi: You are smart to question that dubious description. The USDA allows meat products to include solutions that deliver ‘benefits’ such as adding moisture, tenderizing meat or add flavor. However, such additives must be fully disclosed on the label, which you know because you have seen this.

Turns out that a lot of our meat is enhanced. About 30 percent of poultry, 15 percent of beef and 90 percent of pork are injected with some kind of liquid solution before sale, according to the USDA, and it’s usually something high in sodium.

According to the American Meat Institute, the solution pumps up the meat’s volume and can “replace the flavor and moisture loss that results from raising leaner animals or from potential overcooking.” The process can increase the amount of sodium in chicken by five times or more. Enhanced chicken often costs the same as unenhanced chicken, so if you buy a 3-lb. chicken and it has 15 percent salt water in it, you’re essentially paying for a half pound of salt water.

What you figured is exactly right.

Credit Scoring is Complicated

Dear Mary: I am a retiree and maintain a good credit rating but it could be better. That being said, I discussed that with my insurance people who said having charge cards open with no balance is a strike against you in achieving that. That took me by surprise.  I currently have one active credit card and pay the balance each month. However, I do have  three charge cards from clothing stores, which are seldom used. Balances are always paid off each month.

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Are inactive charge cards keeping my credit score low even though they never carrying revolving balances? Joann

Dear Joann: I must take exception to what your insurance people told you. That information is not correct. Whoever told you that closing any credit card account will improve your credit score is misinformed. On the contrary, closing any credit card accounts will effectively lower your credit score. 

It is important for you to understand that Insurance companies use a different credit score when determining premiums than the score a bank will use to issue a credit card account or mortgage. 

Your “insurance credit bureau score” originates using the same information (from Equifax, Experian and TransUnion) used by financial services, but also considers information on previous insurance claims. If you filed an auto claim or a claim against your homeowners insurance, for example, that is considered and can lower your insurance credit bureau score. 

This will explain why your insurance credit score may be lower than say the score you received from MyFico.com or one of the credit bureaus. 

There is one thing I’m sure we can all agree on: credit scoring is complicated!