Everything Old is New Again - Back to Banking Basics

Remember the old passbook saving accounts? Did you have one as a kid? Remember Christmas Clubs & Vacation Clubs? Did you save most of your paper route, baby sitting, or lawn mowing money in the hope of some day having enough set aside for a baseball glove, new bicycle or even that first car? There was a time when it was very common to put money away every week especially for specific purposes.
Before banks were able to offer the now ubiquitous money market accounts, if you wanted to segregate some of your money into a rainy day fund the only alternative was a passbook savings account. The use of the passbook by banks in America actually dates back to sometime in the early 19th century. It was a small booklet, similar in size and shape to a passport, and contained a running statement of all credits and debits, including deposits, withdrawals, and interest. I can remember when a teller would update the passbook by writing the entries by hand and administering an official bank stamp underneath.
This type of account and record keeping process was well suited for infrequent transactions; and, by providing a hand held record of the account’s activity there was no need for the bank to produce and mail out a monthly account statement. Obviously, transacting business was difficult if the account holder lost the book or simply forgot to bring it with them to the bank. But, fortunately the bank always maintained an official record of the account and, with proper ID would provide a replacement fully updated and ready for more transactions. The old fashioned passbooks became compatible with printers and enabled transactions to be entered “automatically” and eventually passbooks disappeared completely, replaced by more convenient statement savings accounts.
Well it’s amazing how the more things change the more they stay the same. In the midst of the current economic challenges consumers are becoming much more careful with debt and more serious about finding financial alternatives that guarantee a return and also protect against loss of principle. There is a renewed focus on savings, especially as it helps prepare financially for some of life’s more important milestones. In 2009, the passbook component is a thing of the past, replaced by statement savings accounts – now called purpose driven savings accounts – with customized titles such as “Family Vacation” or “Entertainment Center” or any other specific goal. Purpose driven saving essentially creates baskets into which consumers can segregate funds dedicated to a specific goal, dream or objective.
This concept really works. Segregating funds both mentally and physically from the rest of the household budget ensures that every penny in the account goes to its intended purpose rather than for retirement, your kid’s wedding or college tuition, a new car or anything else.
Creating a specialized purpose for which to save helps prioritize the overall budget, creates greater motivation to save, and increases the prospect of actually attaining savings goals. A special benefit not to be overlooked is that savers really enjoy tracking balances online or through monthly statements and actually watching their progress and realizing their dream.
So why not “go back to the future” and start your purpose driven, dream maker savings account right now. That vacation cruise, Harley Motorcycle or in-ground pool will become a reality as you watch the account balance steadily grow and finally accomplish your dreams.
For information on how you can start an FDIC insured savings account with competitive interest earnings and guaranteed principle, contact MileStone Bank by email: support@milestonebank.com or by telephone: 866 - 672 - 2655.

Bank Deposit Accounts vs Money Market Funds

Great Article in the Wall Street Journal today about savings rates.
Bank accounts may even be more secure than other options, since bank deposits are insured by the Federal Deposit Insurance Corp. up to $250,000 per depositor, a limit recently extended to 2013. While money-market funds are generally very safe, the insurance program set up after the financial crisis covers only investments that were there as of Sept. 19, 2008 and is set to expire this September. See the full article at: http://online.wsj.com/article_email/SB124398655282979357-lMyQjAxMDI5NDAzMzkwODM2Wj.html#printMode

Financial Empowerment for Women

(Things I wish my mother had taught me about money)

Men & Women are different. Did you know:
•Women leave the work force for an average of 11.5 years, compared to 16 months for men?
•A woman who leaves the work force for only seven years early in her career may receive half the retirement benefits of her male counterpart?
•Women are still paid an average of 20% less than their male counterparts?
•Only 49% of women have savings and investments greater than the total amount they owe on any consumer debt?
•Women live longer than men — an average of seven years?
•50% of women over age 65 outlive their husbands by 15 years?
•Three in four women are single when they die?

Due to these statistics, women need to be more in control of their financial future. Women tend to make the following financial mistakes: 1) Women invest later in life and more conservatively than men. Since women live longer and usually outlive their husbands, women need to invest earlier in life and make it a priority. 2) Women participate less often in 401(k) programs than their male counterparts. Partipating in company's 401(k) programs or IRAs are tax deferred investments. If you are in the 28% tax bracket, one out of every four dollars you put into a 401(k) or IRA is a reduction in your taxes not in your net paycheck. 3) Women are more likely to invest in their children’s college education than in their own retirement. Investing in your children's education is good but only after you have maxed out what you can invest in your retirement. You or your child can get a loan for their education but you can not get a loan for your retirement. In addition, your retirement savings are not counted against you (or towards what you can pay for tuition) when colleges are figuring out your financial aid. However, money you have set aside for your children's education will be deducted from the amount of financial aid you will receive.

Things I Wish My Mom Taught Me About…. Managing My Cash
•Spend less than you earn. This seems like common sense but many people spend more than they earn. Women need to take an inventory of what income they have coming in per month and what their expenses are. While creating a budget is a good tool, most people don't follow them or even look at them once they are done. If you have trouble controlling money in just a few categories, such as clothing or entertainment, create and adhere to a detailed budget for just these categories.
•Pay yourself first. Have your retirement taken out of your paycheck before you do anything else. This forces you to save and not have that money available to spend

Things I Wish My Mom Taught Me About….Savings
•Create an emergency fund equal to 3 - 6 months pay. Prepare for unexpected illness, accident or becoming a victim of corporate downsizing. Keep funds liquid and easy to access.
• Teach your children to save. You can accomplish this with young children by taking their birthday or holiday money and putting it into a savings account. Show them how much they have a few times a year. If you child wants a toy that is too expensive, have them save up their money to purchase it. If you have teenagers, force them to save a percentage of their paycheck that can't be touched by them, but offer an incentive. For example, I will pay for $100 per month of your gas expense if you save 50% of your paycheck.

Things I Wish My Mom Taught Me About ….Retirement
•Don’t count on social security. Depending on how old you are, social security might not be available when you retire.
•Saving for retirement is similar to an exercise program. The more you put into it, the more you will get out, and regular investing is key.
•If your employer matches 401K investments, get the entire match. I am amazed at how many people don't put enough into their 401k to get the employer match. It is FREE money for retirement.
•Don’t cash out your 401K. Pretend that your hard-earned, 401K-money was never yours to begin with. Otherwise, you will have to pay taxes & penalties, and work forever.

Things I Wish My Mom Taught Me About ….Credit Scores
•Factors that affect your credit score: Delinquencies, accounts opened during the last year, balances on revolving credit that are near limits, tax liens, bankruptcies, recent credit inquiries, too few (or too many) revolving accounts.
•Pay your mortgage on time. Too many people when they are short of money pay other bills before their mortgage. You need a place to live, if you don't pay your mortgage the bank is going to take your home.
•Always pay bills on time. Late payments negatively effect your credit score.

You can get a free copy of your credit report at http://www.annualcreditreport.com/

Things I Wish My Mom Taught Me About ….investments
•Choose the right Financial Advisor. Ask people you trust for a referral to a good financial advisor. In your initial meeting ask how they are paid, some are fee-based, meaning you pay a flat fee for them to manage your money and some are commission based, they get a percentage of your portfolio (i.e. 1%) or they get a commission on each trade. You need to know how they get paid and feel comfortable with that. Trust your instincts, if you don't like the person, don't trust them with your money. A good financial planner should find out about your lifestyle, when you expect to retire, what you want to do when you retire, where you will live, etc.
•Join a Club. An investment club will teach you about stocks and bonds. Money Club is a FREE service from WIFE.org, a non-profit organization co-founded more than twenty years ago. Find out more at www. MoneyClubs.com.

Managing your finances can be scary so ask for help from people you trust. As Marie Curie says:

“Nothing in life is to be feared. It is only to be understood.”

This article was written by Ms. Elijiah Gray, CFO of MileStone Bank.

www.milestonebank.com