In Four Baby Steps, Help Your Children Establish Their Own Credit Histories

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by Celeste Lohrenz

A sound credit history can help you obtain the best rates and terms when making purchases that lead to a more satisfying life (aka the American dream). Whether you’re trying to finance an automobile or a house, or even just rent an apartment, your credit score can be very important. And this situation is unlikely to change before your children reach adulthood. So, how can you help your kids establish credit histories that will support their future endeavors?

The path to a good credit standing starts with fiscal responsibility, and a great way to develop this in children is through exposure. That is, start building your child’s credit standing as early as possible. (Of course, all children mature at their own rate. Be sure they are able to handle responsible money management before helping them to establish credit.)

Here are some tips to establish credit histories for your children before the time comes when they step out into the world on their own:

1. Begin with a savings account: Because most banks will not allow you to open a checking account for your children until they are older, start with a savings account. You can open one for your child the day he or she is born or wait until the child matures to the point when such an event will have the most beneficial impact. Consider, for instance, whether or not he or she is earning money. Being an earner can be a good foundation for helping your child to understand the value of money. Putting aside some of their earnings could become a valued practice among children when you teach them what accumulated savings can buy.

2. Open a joint checking account: Once your child is older and a little more responsible, you can open a joint checking account. If you choose, both you and your child will be able to get a debit card for the account, and you will have the ability to monitor transactions. This gives your child a little more responsibility while still giving you oversight.

3. Obtain a credit card: The earliest age that your child can obtain a credit card is 18. If he or she has shown responsibility with their joint checking account prior to turning 18, then the child may be ready to move ahead. Many banks offer “secured” cards with a small line of credit while holding back a corresponding amount of cash in a linked savings account. This way, banks limit their liability and still enable individuals to start building credit by paying off the card according to set guidelines. You also may want to consider cards from retail stores like Target or Home Depot, as these are generally flexible and can help curb excessive spending because they are only good for purchases made in their stores.

4. Pay off a credit card: A good way to build credit is to show creditors that you don’t spend excessively, and that you consistently pay your bill on time. For this reason, impart to your child the importance of limiting spending to about 30 percent of the available credit limit and paying the balance off regularly each month. This is better than not using the card at all or maxing it out—even if it is paid in full regularly.

More doors will open later in life for your children when you help them build a sound credit history. To learn more about ways you can encourage your children to learn more about financial responsibility, click here to read our Cent$ible Kid$ newsletters.

Are you ready for tax season?

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by Lynn Viesti Berube

Filing your tax forms can bring financial relief in the form of a refund or financial devastation in the form of an audit. Planning ahead is a great way to make sure you maximize your refund and ensure your financial health. Make the best of tax season and lower your chances of getting audited with these tips:

File as early as possible. You’ll beat the rush as April 15 nears, and you’ll have time to catch and fix mistakes before the tax deadline. If you are due a refund, you’ll get it sooner. If you owe, preparing your taxes early will give you time to plan for making your payment. Also, you may be less at risk for identity fraud if you file early because it makes it less likely someone can file in your name over the coming months. One caveat: Be careful about using tax preparation companies that advertise giving you your refund immediately, before your return is filed. This may actually be a loan, and you may be required to pay it back with high interest. Read the fine print.

Keep receipts to take advantage of deductions. Most taxpayers take the standard deduction, but if you have deductible expenses above and beyond the standard amount, it may benefit you to itemize. Be sure you have receipts from throughout the year for the expenses you plan to deduct, and that they match the amounts you are claiming on your return. Be careful, however. Itemized deductions could trigger an audit. Be sure to do your research concerning deductions for business use of your vehicle, meals, home office, charitable donations, and home buying.

Keep track of possible tax credits for life changes. Life changes such as becoming a parent, purchasing a home for the first time, or pursuing higher education can qualify you for tax credits. Credits are different from deductions as they directly reduce tax liability, so they reduce taxes dollar for dollar. If you had a major life change in 2015, it may qualify you for a credit.

Avoid audit triggers. First, don’t rush your return. Take your time with it, and get professional help from a qualified tax preparer, if needed. Mistakes—even simple ones like misreporting your filing status or your income—can trigger an IRS audit. If you do itemize deductions, stay within the rules and don’t try to inflate them or claim them twice. For example, deducting mileage for the vehicle you use to deliver products for your home-based sales business is fine, but claiming a vehicle you only use for business purposes once in a while isn’t. Likewise, if you own a business and claim a loss year after year, the IRS may want to investigate.

Do you have questions about specific deductions? The IRS has help available by telephone or you can speak to someone in person at select locations. Find more information here.

First-Class Vacationing on an Economy-Class Budget

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By Lynn Viesti Berube

Are you overdue for a vacation? You know the signs: little problems may easily morph into big ones, you’re making more mistakes than usual, and perhaps your co-workers keep asking if you feel alright.

Taking a vacation might be a great way to reduce stress and freshen your outlook, while experiencing the wonders of the world! But the price tag that comes along with a dream getaway can be enough to scare you back to reality. To keep the cost down, try getting creative about how you allocate your vacation budget.

Here are some tips on how to save money on your next trip.

Catch a red-eye flight during offseason: Timing is everything with travel discounts. If you’re willing to go against the grain, you could be rewarded for your flexibility. Flights at odd hours may be discounted by airlines to make sure their seats fill up. Likewise, hotels may offer lower rates during off-peak season to keep their rooms occupied. Considering that airfare and lodging are two of a traveler’s largest expenses, flexibility can greatly reduce the cost of your vacation.

Visit a grocery store: While stopping for groceries may not be your idea of a fun getaway, it is one of the first things you could do when you arrive at your destination to save money. Enjoying local cuisine is a pleasurable part of the travel experience, but doing so could be costly. Instead, consider dining at the few restaurants you’re most excited about, and preparing the rest of your meals at a fraction of the cost using grocery items. Also, visiting local markets can be a culturally enriching experience in itself!

Get out of the driver’s seat: Depending on your particular destination, you may never need a car to see the sites. So, before booking a rental, consider the proximity of all the stops you’d like to make, and check the alternative modes of transportation available to get you there. Whether by foot, bicycle or bus, you could also experience a broader swath of your locale than you would by car, while saving money. For jaunts that require a car trip, check up on taxi prices and availability before you arrive. If you do need to rent your own vehicle, however, be sure to consider booking it at the same time as your flights and lodgings to get a discount.

If you’re looking to get out of town for a little while, but you’re worried about coming home broke, these suggestions might help to mitigate the biggest expenses to your travel budget. That way, you’ll be able to focus on what really matters: a fun experience that won’t leave you with buyer’s remorse. For more advice on managing your assets, stop by The Milford Bank or visit us here.

Card Security: What’s That Chip Doing There?

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by Celeste Lohrenz

Credit and debit cards have become the norm for Americans as fewer shoppers opt to carry cash for day-to-day purchases. Swiping for gas, groceries and even train tickets has become second nature. However, the public’s reliance on this payment method has made card systems a rewarding target for hackers and has led to major data breaches at some of the nation’s largest retailers. Furthermore, hackers and cyberthieves have found ways of directly targeting the magnetic strips on the back of credit/debit cards, through use of scanner devices that allow the theft of card information without the physical card ever having left your pocket.

For those who have recently experienced a card theft or loss, you may have noticed something different about the new card your bank sent as a replacement. Now, new credit and debit cards will no longer transfer personal information through magnetic strips but through an embedded computer chip, called a Europay Master Visa (EMV) chip, on the face of the card, which is expected to be the nationwide standard by 2016.

So what is that little chip doing there anyway? Here’s what you need to know:

• What it is: The EMV chip you’re seeing (or soon will see) on the face of your credit/debit acts as a security vault for your card’s information. Over the years, the technology that card thieves use to tap into magnetic strips became so advanced that end users and merchants alike were at risk of having their private data stolen. To address this problem, major credit card companies like MasterCard and Visa found an alternative in EMV chips, which are not vulnerable to hackers’ current toolsets.

• How it works: As of now, and likely until all merchants have begun to accept EMV chips, cards work both through the magnetic strip and the EMV chip. Rather than swiping your credit card through a card terminal at the end of a transaction, you will insert your chip card into a machine that reads the specially made computer chip throughout the transaction. This new method allows your bank to monitor your card’s “security vault” during the entire transaction, affording it more data resource points for augmenting security.

If you currently have a card with an EMV chip, be sure to use it with merchants that accept this new technology to guarantee the safest transactions. Card holders who have yet to receive a new card with an EMV chip should contact their local card providers to upgrade their security features.

Did You Miss Out—or, Happily, Benefit From—Milford Bank’s Top Five Moments of 2015?

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by Lynn Viesti Berube

Do you realize that the bank you rely on for financial services is also tops when it comes to supporting the community? That’s right: Milford Bank is right here, offering a lending hand in a variety of ways, from fundraising for causes close to your heart to providing free financial seminars, to hosting an educational fair with a “green” theme. In case you missed any of the bank’s proudest moments of 2015, we provide the following recap.

Free Small Business Seminars: The Milford Bank partnered with Stratford’s Economic Development Office back in February to sponsor free seminars for small business owners. Over the course of two months, the bank helped lead lectures on starting a business, developing a business plan, obtaining financing and working with the state. The seminars were designed to help grow small businesses in the community.

“Milford Moves” Pirate Day 5K: This event was held on June 14th in conjunction with the town of Milford’s annual Cap’n Kidd Treasure Hunt Pirates Day. That sunny morning, some 200 participants ran The Milford Bank’s first annual 5K. The event was part of the bank’s “Milford Moves” healthy living initiative. The race was the culmination of a 12-week training course that taught participants everything from proper training and equipment to the right diet. The Milford Bank knows that prosperity starts with healthy bodies and, apparently, so did 200 running pirates!

Painting With a Purpose: Also in June, the bank hosted a fundraiser for the Boys and Girls Club of Milford’s summer program. Bank employees volunteered their time to paint their own interpretations of the bank’s sailboat logo, which were then raffled off at each of the bank’s office locations. Donations were also collected by employees at each branch. At the end of the fundraiser, more than a dozen Milford Bank employees were able to raise $1,100 for the cause, demonstrating not only their generous spirits but a commitment to their employer’s proud heritage of community service.

Green Fair: On November 14th, The Milford Bank hosted its first annual Green Fair at its main office in Milford. The event was free to the public and featured free electronics recycling and document shredding for bank customers (non-customers were asked to make a small donation). Additionally, booths were set up to provide information and entertainment on such topics as saving energy, bottle and can collection, upcycling crafts for kids, and do-it-yourself household cleaners and beauty supplies. All proceeds will benefit a green initiative for the community to be determined in early 2016.

2015 Business of the Year Award: On October 20th, The Milford Bank was honored by the West Haven Chamber of Commerce as the recipient of its 2015 Business of the Year Award. The accolade acknowledges the hard work The Milford Bank puts in each year helping families and businesses with their banking needs while maintaining a strong community presence.

Be sure to join us in the many events we have planned for next year. We can’t wait to see you!

What Will Rate Hikes Mean for Your Family?

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by Paul Mulligan

Back in December of 2008, the Federal Reserve instituted a zero interest rate policy in an effort to curtail the effects of what is now commonly called the Great Recession. For the past seven years, borrowers have been able to take advantage of these lower interest rates. But with the economy now improving, the Fed is beginning to raise interest rates once again. This policy change can have a very real impact on American families, including your own.

Here are some of the primary ways that a higher interest rate may affect your family, along with ways to offset the negative and accentuate the positive:

More expensive mortgages: If your family is looking at either purchasing or refinancing a home, now is the time to act. A fixed-rate mortgage will enable you to lock in today’s comparatively low interest for the term of your mortgage. A variable-rate mortgage, on the other hand, is tied to the Fed’s raising and lowering of interest rates, so it will become more expensive if rates go up. New buyers should, therefore, consider taking advantage of a fixed-rate loan. If you own a home, you should consider refinancing for one of two reasons: either you currently have a variable-rate mortgage or your fixed-rate mortgage was set at a high interest rate prior to the zero interest rate policy being enacted. This may be the last chance to capitalize on the Fed’s policies before rates increase. Speak with your banking institution to see if you can benefit.

Higher annual percentage rate (APR) on credit cards: When the Federal Reserve cut interest rates in 2008, fixed-rate credit cards basically disappeared from the market. If your card was issued and your rate fixed prior to 2008, you will not be affected if rates go up. But a large number of credit card owners whose lending rates are variable—and tied to interest rates—may experience an immediate rate increase, including on any existing balances. For credit card holders, the best thing you can do is plan ahead. When working up your monthly budget, be sure to set aside an extra amount relative to the outstanding balance on your credit card. If you’re using a new credit card, try not to overextend yourself before you know what a rate hike will mean for your finances.

Higher returns for savings accounts: There is some good news for consumers when it comes to higher interest rates. Those with money stashed away in savings accounts will see increased returns. In the age of the zero interest rate policy, savings accounts accrued minimal interest. With a rate hike, savings accounts will become more viable savings vehicles again. If you have been able to put money aside in a savings account, keep it there. If you don’t have a savings account, now might be a good time to open one.

While even the brightest financial minds can’t always predict what the Fed will do with interest rates, you can prepare for the ups and downs by reviewing your finances in these three areas. To learn more about how to safeguard your financial interests with a Fed hike looming, call or stop by any office of The Milford Bank.