This is a guest post by Alex Summers.

Considering the state of the economy and the high number of twenty somethings struggling to find their professional place in the world, a large number of parents are opting to purchase their children homes. Instead of giving their kids a large inheritance years down the road, parents are choosing to pay a down payment or to buy a home for their kids to help them get off on the right foot during their young adulthood.

While financing a home for your child might be a kind gesture and one that most parents would certainly hope they could afford, it isn’t exactly the best decision for the children or the parents. So before you sign a mortgage with your child, consider some of the following reasons why you shouldn’t buy a home for your kid:

Your Kids Need to Learn Financial Responsibility

If your kids are young adults, they don’t need to continue getting hand outs from their parents. They need to learn the importance of being financially responsible for themselves, and if that means that they have to live in that small apartment and keep their possessions in a self storage facility for a few more years, then so be it. During that time they can learn to pinch their pennies which will ultimately make purchasing a home later more rewarding because they will have done it themselves.

Don’t Risk Your Retirement

While no one wants to admit it, the truth is that not everyone is good with money. If your kids haven’t been able to afford a home on their own, there is probably a good reason for it – whether it be lack of income or poor saving habits. Either way, these factors are actually risks, and could leave you liable for mortgage and insurance payments should your child not be able to make them.

Even worse, if the house were to go into foreclosure, you could find your own credit ruined and your retirement savings drained dry from months of trying to keep on top of a mortgage that you were legally tied to. All of which could ultimately mean that you have to come out of retirement, and spend the next decade working to make up for your losses.

You Need Financial Freedom

During your Golden years, the last place you want to be is worrying about whether or not your child is making the necessary mortgage and insurance payments to keep themselves afloat. While we all worry about our child’s well-being, your lives are ultimately separate and you each need to be responsible for your own lives. Don’t waste the years that you are supposed to be mortgage free and enjoying your life in worrying whether or not you are going to be left with a mortgage that ultimately shouldn’t be yours to begin with.

Every parent wants to help their child out, but ultimately, choosing to buy your child a home is detrimental in more than just the financial ways. Your children need to buy their own homes so that they can aggregate their own personal worth and equity, and so that they can learn about financial responsibility in the adult real world. So if the topic arises, do yourself and your children a favor by politely declining to help them buy a home and stating that you’ll be setting that money aside for them later.

Author Bio:  Alex Summers is a frequent contributor on several personal finance sites, often focusing on why minimalistic living, such as packing your possessions into a self storage facility and downsizing, is truly the way to financial freedom.

Post from: Senior Money Memos

Why You Should Not Buy Your Child a House

Technorati Tags: buy a home, child, Foreclosure

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This is a guest post by Mike, the founder of CreditCardForum.

When you think of credit card rewards, the first thing that pops in your head is probably “cash back” or “airline miles.” But those are only a couple of the different types. These days you can find rewards programs for almost anything, including ones to boost your retirement savings.

How do they work?

These operate in a very similar manner as a regular ol’ cash back credit card. You earn a percentage of your purchases back – but instead of getting the rebate as cash – you get it in the form of a direct deposit to your retirement account.

In the United States, these rewards are funneled into a linked IRA account. For example, with the Fidelity Retirement Rewards card, you earn a straight 2% rebate on all purchases, which is automatically deposited into your Fidelity traditional IRA, Roth IRA, or SEP IRA account. There are also a number of more generically branded credit cards, which provide this as one of several redemption options (i.e. in addition to IRA deposits, you can opt for a rebate check, travel points, and so forth).

In Canada, to the best of my knowledge there are no broker-affiliated cards like this. Nor are there any cards which are specifically marketed as a way to save for retirement. That being said, some Canadian banks allow cardholders to redeem their rewards in the form of a direct-deposit to a bank account. Depending on the bank, a Tax Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) may be eligible for that deposit.

Are they a smart idea or not?

Because credit card rewards sometimes feel like “free money” the whole idea of using them to grow your retirement account may seem like a good idea, but there are both pros and cons to this approach.

Advantages

• Easy and automatic: In today’s economy, coming up with extra money for retirement isn’t always easy. These types of programs are an automatic way to increase your contributions, without changing your budget.
• More practical: As mentioned at the start, there are reward programs for literally everything under the sun. For example, some store cards offer a 5% rebate, but it can only be spent on more clothes. What’s more practical… buying more clothes or saving for retirement? I think most would agree with the latter!

Disadvantages

• Tax implications: The biggest drawback is that these rebates will count against your annual tax-free limits. For 2011, the IRS allows an American to contribute up to $5,000 tax-free to their IRA/Roth IRA. So if you earn $1,000 this year on your Fidelity card, you will have to subtract that amount from your tax-free limit. When you consider the fact that credit card rewards are generally non-taxable as it is, wouldn’t it make more sense to contribute your regular income instead, since doing so will be tax deductible?
• Not always lucrative: It’s hard to beat the straight 2% offered on the Fidelity card – but aside from that – most cards which offer retirement rewards aren’t very lucrative. The Edward Jones card for example only gives 1 point per dollar. Being that the points are usually only worth 1 cent or less, this is hardly anything to write home about. So you may not always be earning a high percentage with these programs.

Conclusion? Before signing up for one of these cards, you will definitely need to consider the good and bad that come with them. At the end of the day, it may be smarter instead to just use a regular cash back card and manually deposit those earnings into your retirement account yourself.

About the Author: Michael Dolen is a full-time blogger. He started his site, CreditCardForum, back in ’08 as a place where people could ask questions and get answers about credit cards. Not only will you see him reviewing the best credit cards, but also giving advice for just about every issue related to credit and debt.

Post from: Senior Money Memos

Credit Card Rewards For Retirement

Technorati Tags: IRA, rewards

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• February 12, 2009 -- Bankruptcies Soar And There Will Be More (0)

Some posts just cry out to be written in and for me, this was one. The title, Elizabeth Rocks, came quickly to mind when I considered what I should write.

I realize that there are a number of Elizabeth’s I know that really are most impressive. As a Brit, Queen Elizabeth II is one of these fine ladies. She provides a unifying element in her various realms, and not least in Canada. She is almost universally liked, no small feat given her position.

Another impressive Elizabeth is Elizabeth Able, a co-moderator at Cre8asite Forums.   She has a number of intriguing online properties and QuoteSnack is perhaps the best-known of these.

The urge to write this post however did not come from an Elizabeth I know already. However a CNN article entitled, What’s so scary about Elizabeth Warren? was the trigger that encouraged me to be to put pen to paper, as you might say.

Elizabeth Warren doesn’t look or sound scary. She’s a 61-year-old Harvard Law School professor from Oklahoma who has written personal finance books, some with her daughter.

But conservatives and some bankers are trying to kill any chance that Warren – a consistent critic of the financial sector before it was cool to be one – will run the consumer financial protection agency that’s part of the Wall Street reform measure just signed into law by President Obama.

Here is what the article suggests she will be bringing to her new position:

Her ideas for a regulator for financial products became the template for the new agency, which is tasked with regulating mortgages and credit cards, as well as making new rules for much of the financial industry and enforcing them at the largest banks.

Before the financial crisis, she was already the authority on mounting credit card debt. And her books about the financial decline of the middle class have been must-reads in the consumer advocacy community for years.

Warren’s nomination would send a strong signal that the White House is willing to stand behind an aggressive regulator who will emphasize consumer needs over bank needs. White House spokesman Robert Gibbs called her “very confirmable” on Monday.

Like many I share the popular opinion that bankers in general can be somewhat arrogant and are certainly not very customer centric. They are already circling the wagons but hopefully Elizabeth Warren will be given the power to ensure US society gets a more customer-responsive banking system.

Post from: Senior Money Memos

Elizabeth Rocks

Technorati Tags: bankers, Credit card, debt, elizabeth warren

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Having a bank is a necessity in modern-day living, but unfortunately many people are dissatisfied with the available choices.  At the start of this year Forbes listed America’s Best And Worst Banks, but it was somewhat surprising to see what they analyzed.

With Bank of America and Citigroup buoying their balance sheets and repaying billions of dollars in taxpayer bailout funds, the casual observer might assume the banking crisis is just about over. The casual observer would be wrong.  Lots of banks are going under these days. Here are the best and worst among the 100 largest.

Busted banks are still keeping the Federal Deposit Insurance Corp. busy. In the past two months, 41 went under, surpassing the total of 26 for all of 2008. What’s more, by some measures bank balance sheets are in worse shape today than they were at the height of the financial crisis.

It is of course necessary that your bank will still be there when you wish to get your money.  However that is a very minimal criterion in selecting a bank.

Unfortunately reports since then indicate that on other dimensions, banks are not doing very well. One title suggested that Customer Satisfaction With the Biggest Banks Plummets.

While customer satisfaction with banks over all remained unchanged in the fourth quarter of 2009 from the year-earlier period, customer satisfaction with some of the biggest banks has declined to the lowest fourth-quarter levels in years.  The results, from the American Consumer Satisfaction Index, back up similar findings from a Forrester Research report.  This found that customers of the biggest banks in the United States were the least likely to believe their financial institution did what was best for them as opposed to what was best for the institution’s bottom line.

A report from Reuters today shows that there is no improvement: Large bank customers  are even more dissatisfied.

Some of the largest U.S. banks were ranked very low for retail customer satisfaction.  A US marketing research company study by J.D. Power and Associates implies that as some of the biggest banks get bigger, customers may not be happy.  The three biggest U.S. retail banks — JPMorgan Chase & Co’s Chase, Citigroup’s Citibank, and Bank of America Corp’s Bank of America — consistently rank at or near the bottom for customer service in the regions they serve.

This dissatisfaction with banks and the service they provide seems to be the case wherever you look.  Here are some results from the UK on how different services rank for customer satisfaction.

According to a recent survey conducted by moneysupermarket.com, it is hairdressers and hotels that that we think provide the best service. While banks and estate agents are thought to offer the worst.  Restaurants, coffee shops, garden centres, supermarkets, clothes stores and entertainment centres such as the cinema and bowling alleys all scored highly with consumers.

Here below are the results for this year.  Compared to last year’s survey it would appear that the service provided by banks has actually got worse. Banks have dropped a place in this table.

The industries at the bottom of the table have all traditionally suffered a bad press. Most of them – banks, energy companies, estate agents – demand hefty fees of their customers and provide necessary and essential  services, rather than luxuries.

Unfortunately the attitude in many banks may be as Tom Peters said, that “we are no worse than the others”.  If you are looking for one of the best banks, hopefully you can find one that searches for banking excellence, which includes not only safeguarding your money but also delivering a high level of customer satisfaction.

Post from: Senior Money Memos

Best Banks

Technorati Tags: Banking Services, banks, Customer service, Forrester Research

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Google has up till now presented free (organic) search results accompanied by sponsored results.  The credit card comparison it now offers in the UK represents a significant departure.  As is noted in the footer:

Actual rates and other information may vary. Sponsored results shown only include participating credit card issuers. When you click on a card’s “Apply Now” link, the information you entered on this page will be shared with the issuer.

This new Google initiative is drawing the inevitable adverse criticism from the competition.  Here is how Moneysupermarket.com describes the additional values it brings to such credit card comparisons:

moneysupermarket.com’s successful formula comes from helping customers find the right card for them, with the option to search the whole credit card market, whilst providing help and support, such as independent reviews, to guide the customer’s decision making process.

In this latest move Google has abandoned its successful search model which comes from showing customers a combination of whole of market results, ordered by what is most relevant, plus sponsored results based on how much the advertiser pays. In this test they are simply listing cards that are prepared to pay to advertise, regardless of whether they are a great deal for customers. We are disappointed that Google has chosen to only feature sponsored products in this solution with nothing to support customers.

As well as seeing just a fraction of the credit card market customers who use this Google tool whilst it is in trial will miss out on at least one fantastic exclusive card coming soon only to moneysupermarket.com.

Paul Carpenter has a different concern about the Google credit card comparison website:

Verticals and niches are, to me at least, all about domain expertise and experience and I rely on brand perception to tell me where to find that.  As Google races against Bing to operate in verticals like this, it will be interesting to see whether its brand will resonate outside its core function. I suspect not, and I really don’t know why the tech market is so fetishistic about this stuff. Would you buy Coke jeans, or Marlboro branded microwave meals? Brands that are malleable enough to cross boundaries are vanishingly rare – an honourable exception being Virgin, who work in everything from cruises to space travel.

Clearly this test is very different from search activities that Google has worked on in the past.  Whatever the result of this test, it has big implications for where Google will be putting its efforts.

Post from: Senior Money Memos

Google Offers Credit Card Comparisons

Technorati Tags: Bing, Financial services, moneysupermarket.com

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Credit Card Jungle was how Mike Hogan described the situation in a Barrons article earlier in the year. Even though there are some good business credit card deals to be found, it is very much a case of Buyer Beware.

If you’re among the two-thirds of credit-card holders who carry an outstanding balance, you might have noticed that your interest rate was hiked recently, or your billing cycle shortened. Failure to navigate card providers’ labyrinthine payment terms successfully can earn you one of several consumer-unfriendly fees.  These aren’t really new gambits. But they are being pursued with such gusto lately that they’ve generated a record number of consumer complaints.

That word jungle conjures up phrases like Nature Red In Tooth And Claw or Survival of the Fittest.  You have got to keep your wits about you, if you wish to stay ahead of those claws.  Hogan was describing the situation in the US but you will find similar discontent with the credit card suppliers in the UK and in Canada.

Consumers are often riled by two key hot button issues in most cases:

1. The way the interest is calculated on their balance owing often creates lots of surprises for consumers
2. The way any money that is paid is then applied to interest-bearing amounts owed is another cause for concern

It all comes down to the small print that is added to credit card contracts and it is not surprising that many feel there are hidden ‘gotchas’ in these contracts.

There is a popular wish for action so it is not surprising that you will find that politicians are now taking up this cause not only in the US but also in the UK and in Canada.

Even if tighter regulations are instituted they will never cover all problem issues. The wise user of credit cards will always do a detailed comparison of what the different credit cards are offering and what may be in the small print.

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Post from: Senior Money Memos

Credit Card Jungle

Technorati Tags: Canada, Credit card, Fine print, interest rate, UK, US

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Seniors often may feel the need for someone who can help them in standing up for their rights when dealing with large corporations. Finding who can address your concerns in a satisfactory way becomes increasingly difficult when everyone is trying to push you to their website or insists you navigate their electronic telephone system. Thankfully some corporations take their responsibilities towards their customers seriously and are providing that much needed support.

A recent case with the Royal Bank illustrates what can happen. Seniors are living longer and becoming more educated, and this is forcing bankers to sometimes think outside of the box.

For example, a man in his late 80s went into a branch and asked to take out a five-year mortgage. He was in good physical and mental health, but the bank refused to commit him to a five-year loan that had a penalty for early termination. In this case, getting the senior his rights needed the help of the RBC Ombudsman.

Yes there is such a person: Wendy Knight is the RBC ombudsman. She was able to facilitate a resolution that kept everyone happy.

Banks are a group that is often criticized for poor customer service and the cell phone companies are on the low end of the scale too. Perhaps it is not surprising then that there is a Rogers Ombudsman, who is already making a difference. The company has now appointed its first ombudsman, Donald E. Moffatt. While he is supposed to act as a court of last resort, Moffatt will intervene quickly if he sees an injustice.

As ombudsman, Moffatt says he is independent from Rogers. He has no access to company records and has to ask for authorization from customers to check their files.

To get in touch, you have to go through three earlier steps, then send an email to ombudsman@rci.rogers.com or send a fax to 416-935-3604.

One might hope that the training that customer representatives receive would eliminate the need for an ombudsman. That is clearly not the case yet. Until it is, providing an ombudsman means that you can hopefully get a hearing even if it takes some effort to achieve that.

Post from: Senior Money Memos

Seniors Often Need An Ombudsman

Technorati Tags: Customer service, ombudsman, RBC, Rogers

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There are many hazards in dealing with banks and trying to ensure the security of your bank dealings and your money. A new hazard is that a Bogus bank manager may be calling local seniors.

The Niagara Regional Police have issued a warning about two incidents where seniors have been contacted by an individual claiming to be calling from the senior’s financial institution and posing as the branch manager. The caller appears to have sufficient information regarding the senior’s account to appear to be a manager.

Supposedly there is an investigation of an internal theft involving a teller. The senior is requested to withdraw a significant sum of money and meet the ‘bank manager’ away from the financial institution in an effort to catch the dishonest teller.

Once the senior meets the caller and turns over the money, the suspect thanks the senior for their cooperation and leaves the area. Police are warning the public that no financial institution would involve any of their clients in any such type of ‘sting operation.’

Remember it is most important to shred all financial information before disposing of it and not release any personal information over the phone or by email unless you have initiated the call and are certain with whom you are dealing.

If some incident like this happens, you are encouraged to call Crime Stoppers. You can leave an anonymous tip or information at the Crime Stoppers toll-free number at 1-800-222-TIPS (8477). Calls are not electronically recorded or traced, and Crime Stoppers does not subscribe to call display.

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Post from: Senior Money Memos

Is That Bank Manager Bogus

Technorati Tags: Bank, bogus, Crimestoppers, Theft

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It is often said that death and taxes are inevitable and cannot be avoided. It appears that bank fees can be added to the list. At least that would seem to be the case in the UK where Barclays is accused over ‘obscene’ fees for customers’ wills.

An Independent on Sunday inquiry has revealed some major high street banks, solicitors and will-writing firms advise clients to appoint them as executors on customers’ wills and levy fees of up to 4.5 per cent on the estate on death. On an estate worth £500,000, that equates to £22,500 – about four times as much as the fees that the best-buy probate firms charge.

An executor’s role is to administer the deceased’s assets and ensure they are correctly distributed between beneficiaries and the taxman.

Barclays has been criticised for using aggressive tactics to persuade customers to appoint it as executor. Barclays defended its actions, saying that it acted as executor only in a minority of cases and that its policy is to step down when asked to do so by a beneficiary.

Consumers are warned that some will-writing companies and banks insist on writing themselves in as a joint or sole executor in the first draft in the hope of getting the fees for doing the estate work.

A codicil can be added to an existing will to remove unwanted executors. However, it applies only if the person drawing up the will is still alive. As usual, it is buyer beware and you should read very carefully all the small print before signing that draft will. It may have sharp teeth.

Post from: Senior Money Memos

Bank Fees Beyond The Grave

Technorati Tags: Barclays, Death, Executor, will

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The Cheque Over-Payment Scam is the main topic in the Canadian Banking Association Fraud Prevention Tip monthly newsletter just received.  Their Safeguarding Your Money web page has an e-mail link by which you can subscribe to the newsletter.

The cheque over-payment scam is also known as advanced payment fraud. The scam usually begins with a letter or e-mail asking for assistance cashing a cheque. The details behind the request may vary – some scammers may ask for help securing an unclaimed inheritance, others may name you a winner in a lottery you don’t remember entering or they may offer to buy something you are selling online or through a newspaper ad.

Regardless of the details, all will send a cheque, all will ask you to cash it in your own bank account, all will request a certain portion of the money be returned to the sender, and all will offer to let you keep the difference for your trouble.

An Australian government website details how the scam proceeds.

The scammer will invent an excuse for the overpayment. For example, the scammer might tell you that the extra money is meant to cover the fees of an agent or extra shipping costs. The scammer might just say that it was a mistake they made when they wrote the cheque.

The scammer will then ask you to refund the excess amount—usually through an online banking transfer or a wire transfer (such as Western Union). The scammer is hoping that you will do this before you discover that their cheque has bounced. You will have lost the money you paid into their account, and if you have already sent the item you were selling, you will lose this as well.

The RCMP warns that this scam is very prevalent at the moment:

Numerous complaints have been received recently of counterfeit cheques and the overpayment scam being used to entice sellers on online markets to accept these cheques as payment for items they are selling.

Perhaps the most surprising confirmation of this was an apparently genuine offer to buy tutoring services from me that has just ended as I write this post.  Lo and behold the final message from John Hill [j.hill1200@yahoo.com] of London read as follows (typos included)

Needless to say that was the end of that attempted cheque over-payment scam.

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Post from: Senior Money Memos

Cheque Over-Payment Scam

Technorati Tags: cheque, overpayment, scam

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