From Your Cell to Your Tummy in Short Order

As further evidence that today’s “screenagers” can & will do more with technology as time moves on, Subway has launched a pilot program called SubwayNow where New York City residents can register to place pick-up orders via text message. Pizza Hut has been doing mobile ordering – all-web based – for a little while as well as some of the other food chains.This one is different in that it falls into the world that teens thrive and adults struggle – text messaging.

And once you read the brief article, you’ll see that at the bottom comes from continuing theme of financial education. The technology is cool and efficient for people on the run, as long as they have the basic financial skills to keep a watchful eye. http://consumerist.com/5142408/subway-launches-text-message-ordering-in-nyc

The White Noise of Student Loans

Holy ear bud! Here are 3 articles that have appeared in the past 4 days regarding the availability of student loans for college students next fall. It’s enough to make parents head to the wine cellar and kids to plug in the iPods and avoid the whole thing.

The problem is, that is the last thing you want to do – either of you! Take the time to read these articles and you will discover that the sooner you act the better. Don’t wait for the government to come through if you’ve got kids headed to college this fall. It may be January with a lot of snow & cold, but before long it will be September and without your financial aid ducks lined up, it will still be cold and you’ll be left out in it.

Get on it – at the bottom of all of these theories is the fact that the responsibility to make it happen rests with you. Start thinking about financial aid now, do your research and get things lined up. At the NH Jump$tart website, we have a lot of links to help you get a handle on this. And don’t forget your best local resource – the NHHEAF Network – http://www.nhheaf.org/

Now read these and get going!

http://www.msnbc.msn.com/id/28830583/

http://www.smartmoney.com/personal-finance/college-planning/will-obamas-new-aid-plan-help-you-pay-for-college/?cid=1122

http://www.usnews.com/articles/education/2009/01/13/financial-aid-applications-rise-by-10-percent.html

http://www.finaid.org/

Remembering the "Me Decade"

I met a fellow today who told me that back in the mid-8o’s, after he graduated from college, he bought a single-family home by assuming the mortgage with an interest rate of 13%. Not only did that story take me back to the day of double-digit mortgage loans, it also reminded me of my collection days when banks actually held mortgage loans in their loan portfolios. This lone fact forced banks to find creative ways to deal with distressed loans and foreclosures. Allowing loans to be assumed by another borrower was one such way.

It worked like this. Say you were starting to have trouble paying your mortgage and the future looked bleak. Rather than wait too long before you became too far past due in your payments, you could approach your lender and ask if the bank would allow another qualified borrower to assume your mortgage. If done expeditiously, the borrower could get a into a new home fairly quickly and the seller could get out of their mortgage obligation without destroying his credit. It was the proverbial win-win-win for all parties.

It would be very difficult to pull that off today. Most mortgage loans are not held in portfolio and are sold in batches to the secondary market. From there, those batches are either combined with or separated into other batches and sold off to investors again. And so on and so. All of this could be happening as you keep making payments to the original lender who has agreed to “service” the loan. By the time you approach the bank (servicer) and they track down who actually owns your loan now, months could go and not only is your credit destroyed, but you are also most likely facing foreclosure.

It’s making me think that in our current situation, perhaps the best way to help the individual homeowner and the collective “us” as taxpayers, is to have the government buy back all of the troubled loans from the banks and liquidate them separately - like the RTC (Resolution Trust Co) did here in New Hampshire in the early 90’s when those banks failed. I’m not a “more government” type of guy, but I’m having a real difficult time seeing how to resolve this any other way.

I never thought I would miss the 80’s….

Now Why Didn't We Think of That?

Check out this article about New Jersey – good for them! http://www.dailyrecord.com/article/20090126/UPDATES01/90126011


Here in New Hampshire we also have something positive going on relative to youth financial education – HB123. This bill, introduced by Rep. Don Pettersen from Brentwood, seeks to increase the emphasis of personal finance within the Economics curriculum requirement we already have. Clever.


New Hampshire already has a graduation requirement for Economics – the only state in New England that has this requirement. Associated with the requirement is a document called Curriculum Frameworks – a template of sorts that tells teachers what their students should know at various benchmarks in grade school. Included in the frameworks is a standard for personal finance – patterned after the previous version of the national Jump$tart standards. http://www.jumpstart.org/


Currently the bill is being referred to a sub-committee of the House Education Committee. To follow the status of the bill and to read its text go here: http://www.gencourt.state.nh.us/bill_status/bill_status.aspx?lsr=1&sy=2009&sortoption=&txtsessionyear=2009&txtbillnumber=HB123&q=1


It’s time for your voice to be heard….

Save to Spend vs. Invest to Save

Interesting article - will cash replace credit cards? What do you think? http://www.foxbusiness.com/story/markets/industries/finance/cash-king-need-credit-cards/

Sometimes I hear people say, “What incentives are there for kids to save? Financial institutions pay very little interest on deposit, so why should kids save?”

Most times, these comments come from folks who remember the early 80’s – when banks paid 16% on CD rates. However, they forget that the prime rate was in the same rate area and banks could not offer traditional loan products (mortgage, car loans, etc.) at rates higher than what they had to pay in deposits. The “spread” is how banks used to make money – money they used to pay operational expenses and invest in new technologies.


How about this as an idea? Let’s make a distinction between investing and saving. If you want to park your money somewhere where it will grow and provide you a decent return, then invest it in the various options available to us today. Your investment strategy will dictate your return and how much your money grows.


Let’s define savings as a means to manage spending. In other words, don’t buy stuff until you have the money for it. What an old-school thought! Put money aside for reserves (it used to be called a rainy day) and then set aside money for the things you have your sights on. Take a peek at this video clip – you’ll see what I mean…

And Around and Around It Goes...

A report released earlier this month by the American Bankers Association (ABA) indicated that third quarter delinquent payments for consumer loans hit the highest level since they began recording them in 1980. http://www.msnbc.msn.com/id/28541097/

Let’s consider this:

1. 1980 was the end of the Carter administration and in the next 2 years the country fell into the worst recession in my working lifetime. Does anyone remember the prime rate at 19% and unemployment at double digits?


2. The third quarter ended August 31st – before the kids went back to school and the word bailout had more to do with Manny going to the Dodgers

Any predictions what the 4th quarter is going to reveal? We won’t know those numbers until late March – early April. Here’s the thought for today – if we throw more bailout money at the banks in order to “open up the credit markets” – will those markets include loans to consumers? If loan delinquencies are on the rise - that means that personal credit histories are deteriorating. Will lenders begin lending to borrowers with deteriorating credit scores? Isn’t that how sub-prime lending began? What does an open credit market mean to consumers?

And around and around it goes – just like the water in ex-Merrill Lynch CEO John Thain’s $35,000 commode ...

The Education Elephant in the Room

Last Saturday, we held our 4th annual Financial Fitness Fair for parents and their high school children. The day before, MSNBC reported that the unemployment rate for twenty-somethings for December was 11% as opposed to the national unemployment rate of 7.2% It seems that in a recession, experience in the job market is more appealing. http://www.msnbc.msn.com/id/28663645/

No one is going to dispute the value of a college education and certainly no parent will ever say they don't want their kids to go to college. Parents always want the best for their kids and we have always viewed a college education as their ticket to success. And then there are all of those studies that point to the income predictions between those adults with a college degree and those without.

But at what cost? Last Saturday, I presented a factoid that showed that in 1978 (presumably when today's parents of a 16 year old were 16 themselves) the average cost of private college tuition in NH was $4,570. With a Stafford federal student loan limit of $2,500 per year, that left a gap of $2,000. In 2008, the average cost of private college tuition in NH was $29,675. With a FFELP federal student loan limit of $5,500, the gap is over $24,000. Are we really surprised that parents are wondering how to pay for this or students are taking on tremendous debt to finance their education?

Has the value of that education increased 10 times over the last 30 years? Has it opened 10 times more doors for college graduates?

And when the new administration says it will make college more accessible for students, what does that mean? Does it mean the tuition cost will actually go down or does that mean more loan programs will made available so the debt cycle continues?

Investment portfolios are down anywhere from 10-30%, housing prices are projected to be down 23% - how about college tuition?

When are we going to have the discussion about the cost of a college education?

Keep Your Spirits Up!

For those of you who think the world is coming to an end, all you need to look back to 1982. For some of us, that wasn't that long ago. Check out this article from the NY Timeshttp://www.nytimes.com/2009/01/21/business/economy/21leonhardt.html?ref=todayspaper

Welcome to NH Jump$tart!

We have joined the world of bloggers! I've been told that having a blog is like having a pet. Well, we're a family of cat lovers so I'm accustomed to self-cleaning animals. They're also a wee bit independent, so I think I'm going in the right direction. The only thing I'm puzzled by the "litter box" of blogs. Guess I'll have to deal with that as it comes.

In the meantime, it's bon voyage for the NH Jump$tart blog. Let's keep the dialogue going about the importance of youth financial literacy in the Granite State!