Financial Education Archives - Common Trust FCU

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Rent, Buy, Refinance: 5 Questions to Guide Your Decision

Buying a home can be an exciting milestone in your life, and it’s important to educate yourself on the financial implications of homeownership before you make an offer. Whether you’re a first-time homebuyer or a current owner looking to sell or refinance, there are a few key questions that should help guide your decision:

1. What are the pros and cons of owning vs. renting? 

Owning a home is a long-term commitment. Recent studies show that the average buyer expects to live in their new home for 13 years before selling. While homeownership allows you to build equity and take advantage of tax benefits, owning also comes with risks.Educate yourself on the costs and benefits of owning a home before you make an offer.

2. Am I ready for the responsibilities of homeownership? 

While property is generally considered an appreciating asset, home values are tied to economic conditions. Having your financial house in order is an important first step to buying a house! Are you confident in your ability to pay your bills on time? Are you able to budget for unanticipated costs? Evaluate questions like these to determine whether you are ready for the responsibilities of ownership.

3. How much home can I afford? 

Determining how much home you can actually afford goes beyond the list price of a property. Other factors that will affect your monthly payment include interest rates, taxes, insurance, income, debt, and future monthly expenses – to name just a few. While there are numerous “affordability” calculators out there, it’s important to first understand the whole picture. 

Before you buy, take action to determine how much home you can afford.

4. How will lenders evaluate my mortgage readiness & make loan decisions? 

Are you familiar with the “Four C’s of Loan Credit?” Lenders look at a number of factors to determine the terms of a mortgage loan.

Consider reviewing your financial history and educating yourself on the qualifications that lenders use to determine the terms of your loan.

5. How will my credit score impact my ability to buy? 

Your credit score and the information in your credit report are key factors in whether or not you’ll be approved for a mortgage and at what interest rate. When was the last time you checked your credit? Learn more about your credit, as well as steps you can take to build strong credit here.

No matter what stage of homeownership you are exploring, expanding your knowledge about the key financial questions to ask when buying a home will help you make a long-term decision that benefits you!

You can view all homeownership related content in Common Trust’s Financial Education Centeror check out our list of online calculators to get you started.

Why You Should Have Two (or More) Savings Accounts

Having multiple savings accounts isn’t just for financially irresponsible kids and young adults, they’re actually the perfect solution to your financial goals. Having multiple accounts means that you can allocate your income to different places and potentially even get higher interest rates for doing so. You can also monitor each specific goal through its designated account—so long, late nights calculating percentages and writing up algorithms! Ultimately, having multiple accounts allows you to save for specific financial goals, providing you with the springboard to achieve financial success faster. 

3 Reasons To Have Multiple Accounts

  1. As mentioned briefly above, having multiple accounts is a launching point for you to achieve financial success. By having separate accounts, you can see real progress happening each week, and devise new ways to save even more. With the simplicity of mobile banking, saving more money is easier than ever and tracking your progress is a breeze.

  2. Each different savings account likely has a different rate of interest. This is where the research comes in: many accounts, like a CD, will give you higher interest rates for stowing your money away and not touching it for a few months. Having multiple accounts can yield a higher amount of accumulated interest, further growing your pre-existing savings bundle. It’s important to learn the terms of any account before opening it, however, be aware of any and all surprise fees or limits!

  3. Segmenting your goals into separate accounts gives you the ease of prioritizing which objectives need a little more TLC. You can monitor the progress of each account via online or mobile banking, and make the decision of how you want to distribute your savings. Let’s say you’re saving for both a car and holiday purchases. Naturally, since the holidays are fast-approaching, you may want to transfer a higher percentage of funds to your holiday account. Ultimately, having separate accounts allows you to quickly and easily set up a budgeting system and stick to it.

A Good Strategy: Set up Automated Payments

From credit cards to debit cards, and all the bills in-between, automated payments should become your best friend in the financial world. The perk of using this nifty tool is that you never have to think about making your payments or transfers each month. This financial responsibility can also help further improve your credit score and report, saving you even more money in the long run. 

What to Watch Out For

  • Fees. The last thing you want when you’re trying to save money is for a huge chunk of change to be removed as soon as your money goes into the account. And you certainly don’t want to be blindsided when you haven’t done your proper research. Check in with your credit union to see if they bill you for things like transactions and overdrafting, and what accounts will help keep fees to a minimum. There’s no one-size-fits-all to savings accounts. Remember: this account should help you save up for future goals, not give you unnecessary anxiety.
  • Transfer Limits. There’s nothing worse than needing to transfer money out of your savings account for an unplanned event, but finding out you’ve hit your limit on transfers for the month. You then have to make a choice: forgo the cash or pay an unfortunate fee. Beware of Transfer Limits that only let you transfer money out of your savings account a certain number of times. Typically the limit is six transfers per month on certain withdrawals and transfers according to Regulation D from the Federal Reserve. If you feel like you the limits won’t be a problem for you (especially if you’re fulfilling a strict financial goal), then dive right in. But if you have a doubt in your mind, an account with stern transfer limits may not be the right fit. Regardless, be sure to discuss potential transfer limits with a banking consultant before signing off. 

Saving up for a special purchase? Want to put money away for your long-term plans? Try opening a second account. At Common Trust, we have so many ways including our Holiday Clubs, certificates, and various tailored savings and credit accounts. Your purchase could be right around the corner – give us a ring or reach out via email today!

When to Use a Credit Card vs. Debit Card

Most people have at least one debit card and one credit card in their wallet. Although both cards can be used in many of the same places, it can be difficult to determine which card is best for each transaction. When you use your credit card, you may earn points, but your debit card won’t charge you interest. Which do you choose? Here are some tips to help you decide.

3 Major Differences Between Credit & Debit Cards

Where the Money Comes From
A debit card is backed by the money in your checking account. You can only spend what you already have. When you use your debit card it’s like using cash because you must have funds available in your account or the transaction will not go through. With a credit card, you have a pre-approved spending limit and you can use the card repeatedly until you reach that limit, regardless of how much money is in your bank account. Of course, you will have to pay that money back eventually. It’s like you’re making a promise or taking out a small loan every time you use a credit card.

Proof of Payment
Depending on the amount of the purchase, you may be required to provide a PIN or signature to complete the transaction. Typically, a PIN is used for a debit card. This can be set up by your bank or you may have access to change it anytime you want. It’s important to remember this number and never write it down. If someone else finds it, they can use your card and drain your bank account. With a credit card, you will not have a PIN but instead, you’ll be required to provide a signature. This signature states that you will pay the bill when it’s due.

Limits of the Card
Both types of cards have limits but in different ways. Since a debit card takes money out of your checking account, you can only spend as much as you already have. If you overspend, it may pull money from your savings account and you could be charged a fee. This is called an overdraft. Most banks will give you the choice to allow an overdraft to happen with a fee, or to cancel the transaction before it goes through and avoid the fee. Think about your own spending habits and decide what’s best for you. With a credit card, you will be charged interest for every month you carry a balance. This is where most people tend to get in trouble. They charge more than they can afford to pay off in a single month, carry a balance, and then owe more due to the interest.

When to Use Which Card

When deciding which card to use, consider your personal spending habits, the pros, and cons of each card, and the purchase in question.

A debit card is the ideal method of payment for daily purchases or small transactions. Groceries, gas, and movie tickets are all easily paid for with a debit card and are items you likely would have otherwise paid cash for. You don’t have to worry about paying it back or accruing interest, and this is also a good choice if you’re likely to get into credit card debt that you’ll have a hard time paying back.

Online purchases are more easily refunded or refuted if on a credit card. Car rental and hotel reservations may come with additional costs when you return the vehicle or check out. Many credit cards come with reward options such as cashback, earning points towards flights, and more. It may be more beneficial to purchase gas and groceries on your credit card if you earn extra points for them that you can save up for a rainy day.

Credit & Debit Cards from Common Trust

Think you’re ready for a new credit or debit card? At Common Trust, we offer both low-interest credit cards and hassle-free debit cards for our customers, as well as great tips for learning how to make the most of each card. If you’d like to learn more about these offerings, please don’t hesitate to contact us today by calling 781-933-2600 or visiting commontrust.org. We look forward to helping you achieve financial happiness.

6 Tips for Teaching Kids About Money

Teaching kids about money might seem daunting, but it’s an essential job in order to set up children for financial success. While kids probably won’t be able to understand complex topics like interest and stocks during elementary school, providing an understanding of how money works and good money habits will provide a solid foundation as they grow up. Follow these six tips to start the money conversation early with your young ones.

Encourage savings

Having a designated spot to put money is essential in order for kids to start building their savings. Instead of using a piggy bank, set up their savings in a clear jar so they can watch their funds grow. Get them excited to save by challenging them to fill the jar all the way up to the top and offer a prize for when they reach the goal. Another incentive to get them to save is to match whatever they put into the jar. Just like with a 401K matching program, this strategy incentivizes them to put more bills and coins into their jar.

Keep track of spending

Encourage your child to write down everything that they spent their money on each day, and add up the total spending at the end of the week. This exercise helps kids to understand their spending patterns and find the areas where they are spending a lot. For example, if they find out that they spent $10 a week on candy, you can explain how much of their savings that cost them.

Explain wants vs. needs

When kids are young, it’s important to emphasize the difference between wants and needs. If they are begging you to buy a new toy, it’s the perfect time to explain the difference between the items that we want to buy and purchases that we need, such as food. In addition, demonstrate how much work goes into buying something by helping them to calculate how many weeks worth of their allowance it costs to buy that toy.

Lead by example

Just like when you’re trying to enforce any lesson with kids, it’s important to lead by example. When teaching about money management, set a good example by avoiding impulse buys. While you’re out shopping, stick to your shopping to list and try not to buy anything outside of that list. Another tactic to set a good example is to have your own savings jar and save along with your child. This demonstrates how much you value saving and encourages them to keep going. You can create a healthy competition with your kids and even decide to put all of the savings towards a new pool toy or a family vacation.

Share your experiences

As your kids grow up, nothing helps them to understand proper money management more than hearing about your personal finance successes and mistakes. Share specific stories about the times that you made good or bad financial decisions and what you would have done differently. Owning up to the where you went wrong opens your children’s eyes in ways that are more authentic than a lecture.

Give them their own account

Lastly, once they are old enough, give your kids the responsibility of their own savings account. An account is a safe spot for kids and teens to put their the money away while also accruing interest on their savings. If they open an account early, by the time they are heading into college, they’ll be able to make a big contribution to their tuition.

From now until June 1st, Common Trust FCU is offering a promotion on our youth accounts. By opening up a youth account with a $25 deposit you will be entered to win a bike or an Amazon gift card. Visit our youth account promotion page to learn more or stop by the branch to get started.

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