Still Have Time on Your Side

If you still have time on your side, consider opening a 529 plan for your child.  A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.
 

Get started saving as early as possible and remember to exhaust all grants scholarships and federal student loans before turning to private loans.  

Another great money-saving solution is to have your child consideration starting at a community college and then transferring to a four-year program. Community colleges often cost much less than the four-year college.

Free College Planning Tool
BECU collaborates with Collegiate Funding Solutions to provide a free college planning and funding tool. Invest a few minutes and get a free college planning and funding report at www.becu.org/collegeplan.

Build Credit Responsibly with a Secured Loan

We’ve all heard the importance of good credit—a good credit report can help you get the things you need: a mortgage, a credit card, a loan, better terms on the money you borrow, an apartment, automobile, or even a new job. But, if you are just starting out in life and do not have an established credit history or need to rebuild your credit from financial hard times, building your credit can seem like a daunting task. 

What is a secured loan?

 
A secured loan gives you the opportunity to borrow against your own funds in order to establish a record of making payments on time, which is the most important aspect of establishing a good credit rating. A “secured” credit card is certainly one option, but an installment loan secured by your savings account or a certificate of deposit may be a better option.
 
How does it work?
  1. Find a financial institution that offers secured loans—local financial institutions usually have more flexibility and are more willing to help you obtain your secured loan.
  2. You will most likely be asked to make a deposit to a savings account or CD as collateral for your secured loan. Some financial institutions will have a minimum dollar requirement for a secured loan.
  3. Once you have made a deposit to your savings account or CD, you will be able to borrow an amount equal to the balance in your savings account or CD. 
  4. Make sure to make all of your payments on time and you are well on your way to building good credit.
 

Finding the Right Credit Counselor for You

Whether it is too much credit card debt or falling behind on auto or mortgage payments, many of us face a financial crisis at some time in our life. But who do you turn to for help?

Fortunately credit counseling agencies are available to help consumers through these tough times as well as provide tools and techniques that will help in the future. But, not all credit counseling agencies are created equal. Promises to eliminate all or a portion of your debt or eliminate legitimate credit items should raise a red flag.

Where to Start:

A good place to start is the National Foundation for Credit Counselors or NFCC. NFCC Members represent non-profit accredited agencies with high standards, ethical practices, certified counselors, and policies which help consumers achieve financial stability. Visit www.NFCC.org to find a non-profit member agency near you as well as other tips and resources.

Covering the Cost of College

The cost of college is on the rise and finding the money to save for college can be a challenge in an uncertain economic environment. We constantly hear from parents and students wondering the best way to save for college.

 

If you have time to save, consider these options:
1.   Save tax-free with a Coverdell Education Savings Account. This investment account allows you to grow money tax-deferred and proceeds to be withdrawn tax free for qualified education expenses at a qualified institution.
2.   Another way to save is with a Certificate of Deposit (CD) which earns higher interest than a savings account.

If you have run out of time and you need solutions to help pay for college soon, consider these options:
 
1.   Free money is always the best option. So apply for as many scholarships and school grants as you can. College Scholarships is a good website that gathers available scholarships and grants opportunities for you to view all in one place along with helpful application tips.
2.   Next, consider a government loan based upon you financial need such as a Stafford Loan. To determine your need, fill out a Free Application for Federal Student Aid (FAFSA). The worksheet will take into account your estimated college expenses and any financial aid and scholarships you will receive. The Student Aid Report you receive back will tell you how much your family is expected to contribute toward college expenses. The difference between that and the cost of attending college is the amount you may be able to borrow.
3.   Once you have exhausted the resources available through scholarships, grants and federal aid, you may still find that you still have a gap to fill in order to cover all the expenses of college—room and board, books, tuition etc. This is when you should consider a Private Student Loan.  A Private Student Loan can help cover college expenses when other aid falls short. Learn more about BECU Private Student loans.
To find a plan that works for you visit savingforcollege.com.
 

 

Raising Money-Smart Kids

Teaching your child about money is a valuable tool that will serve and empower them throughout their life. Kids look to their parents for money matters, but oftentimes parents are at a loss knowing what to teach their kids or how to go about it. 

Here are some helpful tips that will make saving fun and rewarding for your child.

Communicate with your child your values concerning money – how and why you save, choices you’ve made to make your money grow, and how you spend it wisely. A good example of this is when you’re in the grocery store and you choose items on sale versus regular priced items. Or choosing generic brands instead of the more expensive brands.

Help your child learn the difference between wants and needs – this is really key for teaching your kids good decision making. Needs are those things that support your life (home, electricity, food, etc.) and wants are things we would like to have but can live without (fancy cars and restaurants, the latest in electronic gadgets, etc.)

Set Goals with Your Child – Help your child set goals for things they want or might need. Help them consider something to save for, like a bike or Xbox game, or their own spending money for an upcoming trip. Instill the idea that they always want to leave money in their savings account for other things that come up that they haven’t thought of. When your child asks you to buy something for them, use it as an opportunity to teach them how they can buy it by setting a goal and saving their money.


Consider encouraging your child to save by matching the amount they save, or telling them if they save for the whole amount, you will pay for half so the other half can stay in their savings account. This helps them stay on track and also creates excitement.

Open a Savings Account for Your Child – and be sure to take them with you when you do! It makes them feel important and empowered.

Teach Your Child to Save, Share and Spend – One of the joys of money is that you can share it by donating to charity or causes. By teaching your child to share they will have a balanced view of money and its ability to help others plus they’ll feel good about themself. When you open a BECU Early Saver Savings Account for your child, they will receive a Savertooth Money Box that is ideal for this. It has three compartments: saving, sharing, and spending.

Allowance and Decision Making – If your child receives an allowance, pay it in smaller bills to encourage and make it easier for them to save a portion of the allowance. For example, if the amount is $5, give five $1 bills so some of the money can be set aside for savings. This way your child can easily set aside $1 for savings and have $4 to share and spend. A good rule of thumb is to save at least 10%. That rules applies to adults too!

Spending Decisions – Let your child learn from their spending choices, good or poor. Before spending takes place you can initiate an open discussion of spending pros and cons. One way to do this is to provide your child with alternative choices when they want to buy something. For example, if your child wants to buy a football for $20, you could also point out to them that the same $20 could buy movie tickets and popcorn, or a helmet for their bicycle. This teaches your child to think about choices and how to make decisions.

Keep Good Money Records – Another important skill for kids to learn is to keep track of their money! Teach your child to keep receipts so they can see what they have been able to purchase with their money. Review their savings account statements with them, show them how they are earning interest, and show them how to add deposits and subtract withdrawals in their savings register.

You Can Opt-Out of Credit Card Offers

We have all experienced going to the mailbox and finding it jammed with credit card offers that we never wanted to receive. This isn’t just an annoyance and waste of paper—it has the potential to leave you open to identity theft if it lands in the wrong hands. Scammers steal mail from mailboxes and trash bins hoping to come across one of these credit card offers.

If you are tired of getting these offers and possibly having your identity compromised, the good news is that you can reduce these solicitations by opting out. The Federal Trade Commission provides the following information to help you opt-out:

To opt out for five years: Call toll-free 1-888-5-OPT-OUT (1-888-567-8688) or visit www.optoutprescreen.com. The phone number and website are operated by the major consumer reporting companies.

To opt out permanently: You may begin the permanent opt-out process online at www.optoutprescreen.com. To complete your request, you must return the signed Permanent Opt-Out Election form, which will be provided after you initiate your online request.

When you call or visit the website, you'll be asked to provide certain personal information, including your home telephone number, name, Social Security number, and date of birth.

While opting out will not stop your financial institution from selling your information, it may reduce the number of solicitations you receive.

Inflation is Coming—Get Ready

Most experts agree it’s not a matter of if we will have future inflation; it’s a matter of when we will have it.

What is inflation?

Inflation is the rising cost of goods and services over time. You may notice the price of everything from your coffee to your cotton shirt rising. Like termites invisibly gnawing at the foundation of a house, inflation slowly eats away at the value of a dollar over time.

What does it mean for your retirement?

Rising prices tend to beget more rising prices and interest rates could head in the same direction. Do you know how your retirement and other investment accounts are positioned to withstand an inflationary period with rising interest rates?

Bonds can be an important part of your investment strategy; however, with rising interest rates the price of the bond will fall, with longer maturities feeling the biggest impact. For example, according to a T. Rowe Price Analysis, if interest rates rise by just 1%, the price of a 30-year treasury bond would decline by 14.3%.

If you haven’t considered the impact of inflation and rising interest rates, now is the time to do so, or seek the advice of a financial advisor. Schedule a complimentary consultation with BECU Investment Services.


Too Many Transactions from Savings Account?

Linking a savings account to your checking account can be an effective way to avoid an overdraft fee; however, there are some pitfalls that we all need to be aware of.

Under Federal Regulation D, we are only permitted up to 6 TOTAL monthly transfers or pre-authorized withdrawals from a savings account. If you exceed the limit you are most likely going to incur unwanted fees.

Here’s a list of transactions limited by Federal Regulation D:
•    Transfers from savings account using Online, Mobile or Telephone Banking
•    Automatic withdrawals from a savings account
•    Overdraft transfers from savings to checking

The good news is that there are transfers from your savings account that that do not count towards Regulation D.

Here’s a list of transactions with no limits:
•    ATM withdrawals and transfers from savings account
•    Transfer requests from savings account made in person
•    Transfer requests from savings account received by mail

Now that you know the types of transactions that are limited and not limited, it is also important to know ways to avoid Regulation D altogether.

Tips to help you manage your accounts and avoid paying a transaction fee:
•    Open a checking account, if you haven’t already, and use it instead of your savings to make transfers and withdrawals
•    Make recurring electronic payments from your checking account instead of your savings
•    Establish a line of credit as overdraft protection—transfers are usually unlimited
•    Perform transfers from your savings or money market at an ATM or in person—these do not count towards Regulation D

To learn more about Regulation D and other Federal Regulations, visit http://www.federalreserve.gov/bankinforeg/reglisting.htm.

Should you buy or lease your next car?

Most experts would advise that in the long run buying is more economical than leasing. When you lease a car you are essentially paying for depreciation and financing the difference between what the car cost now, and what it is expected to be worth at the end of the lease—you won’t build equity. 

And, when you turn the car in at the end of the lease you may be responsible for wear and tear or excessive mileage charges. You might want to take this in to consideration if you are chauffeuring kids to and from muddy soccer practices. 

Weigh the Difference

Leasing Advantages:

 

  • No or low down payment
  • Lower monthly payments
  • Manufacturer's warranty usually covers lease term

Leasing Disadvantages:

 

  • No end to monthly payments
  • Wear-and-tear charges
  • Mileage limitations
  • You do not build equity

 

 

 

Buying Advantages:

 

  • Pride of ownership
  • No mileage limitations
  • Monthly payments have an end
  • Flexibility to change cars when you want
  • You build equity over time

Buying Disadvantages

 

  • Higher down payment and monthly payment
  • Repair costs once warranty expires

 

 

 

If getting a new car every few years is important to you, leasing may be something to consider, however, be careful and pay attention to the realities of leasing. You don’t want to be surprised when your lease expires.

Consider This Before Canceling A Credit Card

Do you have a credit card that you no longer use and are wondering if you should cancel it or not?  Before you do, it is important to understand the complete impact it may have on your current and future credit.

Here are four things to take into consideration:

  • Your credit score takes into account your average length of credit as well as what is known as utilization or your credit card balance in relation to your available credit—canceling it could have an impact on your credit score at least in the short term.
  • If you plan to apply for a loan in the near future, it is best that you do not cancel the card as this may impact your credit rating.  
  • If your card has annual fees, ask the financial institution if they can put you on another program that does not have the fees.  
  • To avoid your financial institution canceling your card due to inactivity, make sure to use your card periodically for small purchases—just make sure to pay it off in full to avoid finance charges. 

For more information on debit and credit, visit the Education and Resources section of www.becu.org

Things That Impact Your Credit Score

How your credit score is calculated may seem like a mystery at times. It is not your marital status, where you live, or how much money you make that determines your credit score rather, your credit score it determined by the following five elements:

Payment History

Paying all of your bills on-time is probably the most important thing that you can do.  Failure to do so will result in adverse items showing up on your credit report that will impact your score.

Amounts Owed

This is often referred to as your utilization or how much of your available credit do you have available.  What is important is what is reported on your monthly statement.   For example, even if you pay your account off in full each month, if you have a $1,000 credit limit and your statement shows an outstanding balance of $500, you would have 50% utilization which is higher than optimal.  If possible try to keep your utilization below 30% and being below 10% is even better.  Maxing out your credit is seen as a negative by the credit bureaus.

Length of Credit History

For someone just starting out only time will help you improve in this category, however, if you have had credit for a while you may not want to close your oldest credit account. A long history of credit is considered a positive by the credit bureaus.

New Credit

Applying for new credit can have an impact on your score.  For this reason it is probably not the best idea to regularly apply for new credit.  Rather, if you are shopping for a new car loan, home loan, or better credit card, it is best to do it all over a 10-14 day window rather than spreading it out over a period of time.   

Types of Credit Used

Rent-to-own credit options may be looked at negatively while having a mortgage may be looked upon as positive.  Having different types of credit can be good but do not overextend your-self.

More information 

Get a Free Copy of Your Credit Report

If you haven’t obtained a recent copy of your credit report, that is the first step.  Visit www.annualcreditreport.com for a free report from all three bureaus.

If you see errors on your report, dispute these with each bureau.  Instructions on how to do so are at each site.

 

Should You Choose a Traditional or Roth IRA?

IRA—those three little initials can play a big role in your retirement savings plan. That's because they protect you from three other little initials: IRS. If you haven't already included an individual retirement account in your retirement savings plan, you're missing out on a great way to save for your retirement dream and reduce your tax bill as well.

Before you run out to open an IRA, decide which one (traditional or Roth) is right for you.


A Traditional IRA:

  • Permits contributions up to age 70 1/2 if you have earned income
  • Provides a current tax deduction for eligible participants (the IRS subsidizes your savings!)
  • Allows investment earnings to grow tax-deferred (distributions will be taxed at your regular income tax rate at the time of withdrawal)
  • Requires distributions to begin by age 70 1/2



A Roth IRA:

  • Permits contributions as long as you have earned income
  • Allows investment earnings to grow tax-free (there is no current tax deduction on contributions, but distributions in retirement are not taxed)
  • Does not require distributions to begin by any particular age (in fact, a Roth IRA can be passed along untouched to your heirs)


Although both IRAs offer tax benefits, the differences between the two can't be stressed enough. The traditional IRA allows federal tax-deductible contributions and tax-deferred withdrawals while the Roth offers federal tax-free withdrawals (but no current deduction). Either way, you win with an IRA!


Learn more about IRAs and retirement options

Your Year-End Financial Housekeeping

The summer is behind us so it's time to do some financial housekeeping that we pushed to the back burner during the Pacific Northwest’s historically rainless summer.

Your 401(k)

Let’s start with your 401(k). If you are not contributing the maximum amount allowed on your 401(k) plan, consider increasing your contribution. Not only will you be saving more for retirement, it will also help you lower your tax obligation. 

Your Will

How about your will? When was the last time you updated it and checked the beneficiaries on your accounts?

Your Insurance

Insurance can be one of your larger expenses—make sure you have suitable coverage and you aren't paying too much in premiums

Your Flexible Spending Account

Do you have a flexible spending account? Remember that if you don't use up the tax-free money by year end, you lose it.

Your Charitable Donations

Lastly, don’t’ forget to get make your charitable donation by year end. .

 

If you wish to speak with someone regarding your housekeeping options, visit www.becu.org/wealthmanagement

How Are Your Actions Impacting Your Credit Score?

As a consumer, we are becoming more and more aware of the impact our credit score has on our lives—from purchasing an auto or home to getting a job. However, many of us are still unclear about the things that we are doing that determine our credit score.
 

It used to be that credit reports were limited to payment history on loans such as mortgages, auto and credit cards.

But, Times Are Changing
While credit reports do not contain information on marital status and income, credit agencies are finding new ways to collect this data. Soon everything from late rent and cell phone bills to homeownership association dues could impact our credit score.  

Pay All Bills on Time, Always

To ensure good credit, make sure to pay all bills on time. It’s important to set aside a designated time every week that’s free of distractions and focus on paying your bills and organizing your finances. Being on top of things is a good feeling!

What Does Your Credit Report Look Like?
Take a few minutes to get a free copy of your credit report by visiting www.annualcreditreport.com.

What to Ask Before Hiring a Financial Professional

At some point you may turn to a financial advisor for help with your retirement plan. We’ve all heard the horror stories about criminal financial advisors empting unsuspecting client’s accounts. That’s why it’s important to make sure you find a financial advisor who will have your best interest in mind.

The U.S. Security and Exchanges Commission recommend asking the following questions before you consider hiring any financial professional:

•    What experience do you have, especially with people in my circumstances?
•    Where did you go to school? What is your recent employment history?
•    What licenses do you hold? Are you registered with the SEC, a state, or the Financial Industry Regulatory Authority (FINRA)?
•    What products and services do you offer?
•    Can you only recommend a limited number of products or services to me? If so, why?
•    How are you paid for your services? What is your usual hourly rate, flat fee, or commission?
•    Have you ever been disciplined by any government regulator for unethical or improper conduct or been sued by a client who was not happy with the work you did?
•    For registered investment advisers: will you send me a copy of both parts of your Form ADV?

Do a Background Check
Even though you ask the above questions, it’s important to note that you may not always get truthful answers. Make sure to do your due diligence regarding their qualifications and experience. Remember, you can always do a background check at FINRA.org.

This is a long term relationship so take your time and pick the right person.

BECU Investment Services offers investment advice you can trust from BECU employees who believe in the credit union values of service and integrity. To learn more, visit www.becu.org/investments.