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The teenage years are for practicing money decisions in a safe space

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Previously, in our series about how children develop the skills and habits that support financial well-being in adulthood, we shared a few stories from parents. We illustrated how childhood is the time to acquire skills like self-control and planning ahead, and the preteen years are about getting familiar with the financial world around us. In this last part in the series, we’re going to explore how teenagers practice the financial skills that drive their choices in adulthood.

Teenagers can learn about personal finance through classroom courses and through real-world experiences. According to research we commissioned, well-designed classes or programs support the financial decisions teens face in their lives: how to identify facts they need, decide what information sources are reliable, and compare alternatives. Additionally, lessons can have staying power when the teenagers already use the products they’re learning about—like bank accounts.

At home, when teenagers make their own money decisions, these experiences can help make lessons learned stick. We want to share two stories we heard about teens’ experiences.

The teen who saved money by making his own lunch

As teens start to work, and earn and spend their own money, they experience firsthand the costs and value of things they buy. The idea of making tradeoffs takes a concrete shape.

When my son Kyle was 16, he had a summer job. The first week, he bought fast food every day for lunch. Then he did the math – the $7 he spent on lunch the first week added up to $35! Kyle asked me to buy him some groceries so he could bring his own lunch. He made his lunch almost every day for the rest of the summer and he was happy he could save $35 a week.

Kyle’s parent noticed how Kyle started out with one plan for his lunch and then changed his mind, after seeing how much he was spending. When Kyle asked for support, the parent helped him stick to his plan so he could see the savings add up.

You can also look for opportunities to empower your teenager to meet his or her own needs, as the following parent did.

The teen who earned her extra clothes

My daughter Maria and I were planning to visit the college where she would study the following fall.
I told her I would buy her only one sweatshirt—and I knew she would want to buy several. Two weeks before our visit, a friend asked me if I knew of a good dog sitter for a week and I said my daughter could do it. Maria earned $130, so when we went to the college, she was able to buy what she wanted. I was really proud of the way she took responsibility for the dog and didn’t complain about the work. I think it empowered her to know that she can work to earn money for the extra things she wants.

Maria’s parent helped her gain an opportunity to earn money for something she really wanted and to exercise her ability to make her own, independent spending decisions.

Experience helps teens develop financial confidence

Hands-on experiences with managing finances help to promote teens’ self-confidence and belief in their own ability to succeed. This is one of the key drivers for financial well-being in adulthood.

An important part of teenagers’ development is taking the time to process and reflect on their money decisions—so they can learn from successful choices as well as mistakes. Whether a teen is learning from a class or afterschool program, a first job, or a decision he or she has made, parents and caregivers can act as sounding boards. As they do for younger children, parents and caregivers continue to play an important role in facilitating behaviors in teens that lead to their financial well-being in adulthood.

For more ideas on teaching your kids about money, check out our resources for parents.

How do you help your teenagers practice making money decisions and reflect on the outcomes?

The names in this blog have been changed to protect the privacy of those involved.

Read part 1 of this series: When your child learns self-control, it helps their financial future too
Read part 2 of this series: The right shoes and common sense can help your preteen gain financial ground

Resources in Spanish that could help thousands of older Hispanics spot financial exploitation and scams

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Elder financial exploitation crosses all social, economic and cultural boundaries. Older Hispanics, like other older adults, increasingly are targets of financial abuse and scams by a broad spectrum of perpetrators. A 2012 study found that 17 percent of Hispanic seniors are victims of financial exploitation, and that limited English proficiency is a factor that contributes to the vulnerability of older Hispanics.

Nearly 1.5 million – or two-in-five- older Hispanics have limited English language proficiency and speak Spanish only. Their limited access to trusted information and resources in Spanish hampers their ability to detect, respond to and report abuse.

We have Spanish versions of two resources that can help Spanish-speaking seniors, their family members and other caregivers, and the professionals and organizations that work with them:

  • Money Smart para Adultos Mayores (Money Smart for Older Adults) – an educational program with the FDIC that teaches older adults and their caregivers how to spot scams and frauds, and prevent financial exploitation. The translated guide can be used as a self-study guide or delivered as a training in a group setting.

These resources are available in English and Spanish for download and free print copies are also available.

Consumer advisory: Don’t fall for a foreclosure relief scam or bogus legal help

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Along with other cases from federal and state partners, today we charged that mortgage rescue scammers have taken $25 million in illegal advance fees from consumers. It serves as a reminder of how important it is to watch out for scam artists trying to take advantage of people who need help avoiding foreclosure.

Federal law bans law firms—except under very limited circumstances—from requesting or receiving payment from you for help obtaining foreclosure relief, such as a mortgage modification, before you’ve signed a mortgage modification agreement with your lender.

In one case, we allege that two companies and their principals offering legal services took in over $19.2 million in fees from over 10,000 distressed homeowners nationwide, with most, if not all, of that money coming from illegal advance fees for so-called loan modification services.

Warning signs

There are red flags that a company claiming to offer legal foreclosure relief help may not be worth your money. Watch for the following warning signs and ask more questions:

1. Demands for payment upfront.

If a lawyer or someone claiming to offer legal help wants to be paid first—before you receive a modification—they may be breaking the law. A licensed lawyer can ask you to pay first but only if the lawyer is licensed in the state where you live or where your house is located. Even a licensed lawyer in your state can only receive up-front payments if they meet other requirements about what they charge for, how they deposit the money, and if they comply with all other state laws and regulations.

2. Any claim that a modification is guaranteed.

Your mortgage company must agree before you can get a modification. A lawyer or someone claiming to offer legal help cannot guarantee you will get a loan modification.

3. A hard sell.

Most licensed lawyers do not call or e-mail you directly and push you hard to pay money right away. If someone claiming to be a lawyer calls you on the phone and asks you to sign papers or pay them right away, ask some more questions to be sure it’s not a scam. Here’s a guide to help you determine if it’s real legal help or a foreclosure scam.

Third party authorization

When it comes to actually getting help with foreclosure relief, your mortgage company may require you to authorize a third party to act on your behalf, so it’s important to know what this means for you. Only authorize a third party that is trustworthy and be careful about exactly what you’re authorizing them to do.

What servicers can do

Foreclosure relief scams are costly for consumers and also impact servicers and investors in the mortgage industry. We’re posting a new model third party authorization form that was developed as part of loan modification scam prevention efforts by representatives from government agencies as well as consumer advocacy groups, housing counselors, and the mortgage industry. The form may be useful for mortgage servicers who can choose to use the form in whole, or in part, by adapting other existing forms. The new model form provides additional questions that will help mortgage servicers build on existing privacy and fraud controls by collecting information that will make it easier for servicers to spot red flags of a foreclosure rescue scam.

Managing someone else’s money

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Millions of Americans are managing money or property for a loved one who is unable to pay bills or make financial decisions. This can be very overwhelming. But, it’s also a great opportunity to help someone you care about, and protect them from scams and fraud.

We are releasing four easy-to-understand booklets to help financial caregivers. The Managing Someone Else’s Money guides are for agents under powers of attorney, court-appointed guardians, trustees, and government fiduciaries (Social Security representative payees and VA fiduciaries.)

The guides help you to be a financial caregiver in three ways:

  • They walk you through your duties.
  • They tell you how to watch out for scams and financial exploitation, and what to do if your loved one is a victim.
  • They tell you where you can go for help.

You can also order free print copies (including bulk orders) online soon.

We’re working hard to empower older Americans to have a secure financial future. Sometimes family members, caregivers and others in the community must pitch in. We’re here to help you, too.

Trick-or-treating for your money

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When it comes to tricking you out of your money, for scammers it’s Halloween all year long.

In 2011, an estimated 25.6 million adults (10.8 percent of the U.S. adult population) were victims of fraud. Consumer scams can take many different forms, from direct marketing to affinity scams and involve everything from identity theft to pension poaching. However, there are a few general tell-tale signs that you can look for if you’re trying to decide if a financial product or service you’re being offered is a scammer’s trick or a financial treat.

Phantom riches

There are a lot of bogus offers out there that guarantee huge investment returns, windfalls of money, or a fast track to important benefits for only a “small” fee or investment on your part. It could be the offer of a loan at a great rate of interest – as long as you send in a “security deposit” first. Once you do, “poof!” your money disappears along with the scammer who made you the offer.

Or, maybe it’s an offer to help you get thousands of dollars in benefits from the Department of Veterans Affairs– for a fee. If you’re a veteran interested in getting benefits like Aid and Attendance, you should be wary of any paid advisor who offers to help you qualify for the benefit or who claims to be able to get you the benefit more quickly than anyone else.

Superheroes

Scammers would like you to believe they have superpowers, often claiming inflated credentials and experience in order to access your money.

Distressed homeowners may fall prey to mortgage relief companies that offer to help them with their mortgage or foreclosure problems for an up-front fee. These self-styled heroes will tout their credentials and promise to help solve your problems, but often leave you worse off than you were before. And it’s illegal for them to charge you an advance fee for help, so report them by submitting a complaint online or by calling (855) 411-2372.

Make sure you thoroughly research anybody who offers to help you with a consumer financial problem! Even the fact that they may have been in the military themselves isn’t a guarantee that they are going to treat you right.

Zombie debt

Zombies can come back from the dead and so can your debts. You may have a debt from years ago and suddenly a debt collector is contacting you demanding that you pay it back – now. Financial institutions sometimes sell old debt to other businesses, which then try to collect on it. If the financial records aren’t accurate, you may even find you’re being asked to pay back a debt you already paid off – or one that wasn’t even your debt in the first place.

Personal Financial Managers and JAGs can help servicemembers review any demand for debt repayment that you don’t fully understand. We’ve also prepared sample letters that you can use to respond to a debt collector. The letters may help you learn more about the age and other features of the debt and help you protect some of your rights.

Vampires

Vampires prey on the unsuspecting. Fraudsters do the same – using the promise of a special deal or a one-time offer to lure unsuspecting consumers into deals they don’t realize are financial booby traps. Never be pushed into buying something or entering into a financial contract because the product is going fast or the amazing deal is a limited-time offer. Take the time to do your research and get all your questions answered. Ask CFPB is a good place to get some of those answers.

And always remember: unlike the hapless victim in a vampire movie, you have the ability to escape. You can walk away from the table, hang up the phone, or log off the website.

You don’t need garlic, stakes, or torches to fight off the scary forces of consumer fraud – just a little knowledge about the tricks scammers use.

Happy Halloween!

Protect yourself from buyer’s remorse

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This blog post is part of a series for National Consumer Protection Week

When you buy something it’s hard to know if you’re getting the best deal – and that includes when military families, who are often targets for marketers, are making big financial decisions. Even though some companies might try to take advantage of people, there are things servicemembers can do to make sure they’re getting their money’s worth.

Have you ever bought something online and clicked the box that says “accept” without having any idea of what you’re actually accepting? Or maybe you looked at the fine print but it didn’t make any sense.

Or, you sit in an office with a salesperson who has a stack of paperwork for a product you’re financing. They give you a two-minute explanation of what it all means and ask if you have any questions. You say “no” because it’s embarrassing to say that you didn’t understand what they just said. And when they say “sign here” you do it. Congratulations! You’ve just bought an iPad for… $3,600?!!

So, what can servicemembers do when they’re confused at signing time?

  • Get help.
    If you can’t make heads or tails of a contract, take it to someone who can: your installation Personal Financial Manager or JAG. If the seller doesn’t want to give you a copy of the contract before you sign, that’s a red flag; so is pressure to sign it “right now, while the offer is still available!”
  • Don’t be afraid to step away and say you want to take time to think the purchase over.
    You are the buyer and you should be in the driver’s seat in this transaction. You are under no obligation to please the seller; don’t cave even if they act like they are disappointed or disgusted that you won’t commit.
  • Think about the total cost of what you’re buying, not just the monthly payment.
    I can’t tell you how many times I’ve seen servicemembers sign up for what seems to be an affordable monthly payment, and then realize they’re paying an outrageous total price for the item. The $3,600 iPad I mentioned above is a true story. So is the story of the servicemember who signed a contract to borrow $1,600 – at a cost of $15,000 in finance charges!
  • If someone says they only accept payment by allotment, consider walking away.
    Under federal law, a business generally can’t require consumers to make payments by automatic electronic payment, but there’s an exception to this that leaves out military allotments. When you pay by allotment directly from DFAS (Defense Finance & Accounting Service), it may be convenient for your creditor, but it means you miss out on protections that you might have had if the money was deposited in your bank account and then paid out from there (like not being required to pay by automatic electronic payments).
  • Never give someone access to or control over your financial accounts unless they are someone you trust completely and there is a compelling reason to do so (like a power of attorney when you are deployed).
    Many scams on servicemembers, veterans, and their families have started with giving a persuasive acquaintance or “advisor” access to their accounts.

The term “buyer beware” goes all the way back to the Roman era: caveat emptor. Take a hint from Caesar and his legions and protect yourself from getting into a bad deal. But if you do feel that you’ve been scammed or treated unfairly, come see us at consumerfinance.gov/Servicemembers.

We are here to help!