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Parents: Teach Your Teens Not to Make 3 Big ATM Card Mistakes

Parents: Teach Your Teens Not to Make 3 Big ATM Card Mistakes

When does a single iTunes song cost $35.99? When the purchaser uses a debit card to buy it for 99 cents, goes over his bank account balance, and gets slapped with a $35 overdraft charge. This happens more than you think — often to young people.

These days almost any basic checking or savings account comes with a free ATM or debit card. That means even a first-time bank-account holder — like your teen — will have immediate, convenient access to his cash anywhere, day or night. Great news, right?

Nobody but you is going to teach your teenager how to handle that card responsibly. The bank won’t do it. Teachers won’t do it. So it’s up to you. Here are a few common pitfalls of mismanaging a debit / ATM cards — and ideas to teach your teen how to avoid them.

Mistake 1: Wasting money on ATM fees.

If your teen is out with friends and needs cash, she’ll be tempted to use her ATM card at whatever machine is close by. Usually, that will mean an ATM not owned by your teen’s bank — and using it to pull out a few bucks will probably result in a high fee.

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Bankrate.com’s 2011 Checking Account Survey found the average ATM charge in the US was $2.40. Plus, your teen’s bank might charge an additional fee for using another institution’s ATM. That could mean paying $4 or more just to access $20 — an insane 20% interest charge just to pull out her own money! If your teen uses her ATM card regularly (say, once a week), she could pay hundreds of dollars per year in needless ATM fees.

The lesson: Plan ahead.

Teach your teen to plan ahead, to withdraw money only from her bank’s ATMs, and to do so before she needs the cash. You can also use this opportunity to teach your teen how to budget.

Mistake 2: Overdraft charges.

Most bank accounts allow overdrafts on ATM card usage at stores or for other purchases — and charge high overdraft fees for the privilege. Worse, your teen won’t have any notification he’s about to go over his account balance — and get hit with a big fee — until it’s too late.

If your teen spends just a few dollars over his balance using his ATM card, that mistake could cost him $35 in overdraft charges (the average fee for overdrafts in 2011, according to Bankrate.com).

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If this happens regularly, because your teen does not keep accurate records of his account and does not know how much he has at a given time, your teen could face hundreds of dollars in fees each year. Over time, these mistakes can negatively affect your teen’s credit report — which can be extremely costly in the long run.

The $35.99 iTunes song

This actually happened to someone I know. She bought a few songs on iTunes using her ATM card; and the last song apparently took her bank account into negative territory. Meaning that last song, at 99 cents, actually cost her $35.99!

The lesson: Know what’s in your account at all times.

Teach your teen to keep accurate records of his bank account, and to monitor it regularly, so he never spends over his balance and gets hit with nasty overdraft penalties. Tell your teen the above story to illustrate why it really does pay to know how much he has in his bank account before using his ATM card.

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Related suggestion: The “carry-the-receipt” rule.

If your teen uses her debit / ATM card at a store, a gas station, the movie theater and an ATM — but doesn’t keep a record of these transactions — how will she know at any given moment how much money she actually has in her account?

Teach your teen to carry each receipt, for every withdrawal or purchase she makes with her ATM card, until she’s back home and able to record these items in whatever she uses as her official record for managing her bank account — her checkbook register, for example.

I purposely fold my receipts and tuck them into my wallet so they stick out. That way, I can’t help but notice them when I pull out my wallet, and therefore I can’t forget to record them. Only after I’ve recorded a receipt in my checkbook register will I throw it away (or file it).

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Problem 3: Physical danger from thieves.

ATMs attract muggers and other bad characters, because they know that anyone using one is just a few seconds away from having cash in their hands.

The lesson: Use ATMs only in safe situations.

Teach your teen to minimize the danger of ATM withdrawals by limiting her ATM usage to certain situations, like these:

  • Use an ATM only during the day, if possible.
  • Find an ATM indoors, either enclosed in a vestibule at a bank or inside a store, such as a supermarket, someplace that is populated and well-lit.

Taking the time today to teach your teens how to handle a debit / ATM card responsibly can make a huge difference in their financial future — the difference between enjoying the card’s convenience over the long term, or suffering serious financial problems from mishandling it.

Featured photo credit: Junk ATM/Robbie Hyman via Shutterstock

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Last Updated on June 6, 2019

The Average Retirement Savings and How to Save Wisely

The Average Retirement Savings and How to Save Wisely

Are you on track for retirement?

If not, don’t worry, I’m not sure either. I save each month and hope for the best.

Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

What Does the Average American Have Saved for Retirement?

Saving for retirement is tricky.

Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

Here are the average savings Americans hold by age bracket:

20’s – $16,000

During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

30’s – $45,000

At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

40’s – $63,000

This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

50’s – $115,000

During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

60’s – $172,000

By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

Ways to Save Money on a Tight Budget

The sad reality is that most Americans aren’t saving enough for retirement.

Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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How to Save Money Each Month

By this point, you know the average amount of money you should have saved for retirement based on your age.

But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

Top Money Saving Challenge Tips

To prepare for your financial future and not be another statistic you need to be different.

How?

By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

Automatically Contribute Towards Retirement

If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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Use the Right Tools to Know Where You Stand

Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

Bring in Experts to View Your Blind Spots

If you have too little or too much money saved, you should consider hiring financial experts.

Why?

You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

Regardless of the reason, getting help may help improve your financial situation.

Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

Speed up Your Retirement Contribution

After learning how to manage your money well, the next best thing is to earn a higher income.

You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

By starting a side-business.

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This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

Reach Financial Freedom with Confidence

What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

My guess is that you’d feel happy and relieved.

Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

If you do, you’ll save money and pay debt faster.

Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

Featured photo credit: Huy Phan via unsplash.com

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