Teach Your Teen Wise Money Management Habits

Learning about earning and paying is a lesson that cannot come too soon for a teenager. I have found the best way to teach money discipline was to open an account in "Bank Mom".

When my teens got their first jobs, they brought their checks to me. I "deposited" the money into their computer checking account. They wrote their withdrawals into a blank check register I had given them. I had explained how to balance a checkbook.

Every time they spent (had money from my wallet), I debited their accounts. Soon, they began to see the correlation between "movie money" and the hours that had to be worked to earn the money.

This was the most important part of the lesson. It opened their eyes to the money we spent on their behalf.

Their first NSF fees taught them that overdrawing is not only bad for the budget, but bad for their credit. "Bank Mom" does not pay interest (allowance) for 30 days after having an overdrawn accounts. "Bank Mom" also does not lend money to persons with overdrawn accounts.

One or two loans from their loan shark uncle (who is the same age and charges 100% interest, per week) taught them how expensive borrowing money could be.

By seventeen, it was time to try it for real. I gave them the option of checks with or without a debit card. The oldest wanted that debit card. After her first NSF fees, she cut the card into pieces that would slip through a strainer. She has sworn off credit cards of all types. Now she is content to write a check for her insurance and purchase postage stamps from change in her wallet to mail it on time.

Our next learned from her sister. She meticulously balanced her checkbook every time she wrote a check, and at the end of each page, ciphered with a calculator to be certain she had not made a mistake.

She now has her first credit card, but keeps a check register in her purse to balance her card after each purchase. She has already learned to keep 10% of her balance available for such things as annual fees, interest, insurance and finance charges.

Both have been bombarded with credit card offers and loan offers from various banks and finance companies. Fortunately for us, they have politely shredded such junk mail. Both have learned to manage money.

Like every lesson your child will learn, some will have to be learned the hard way. At the end of the day, knowing that they are keeping their credit safe helps us sleep better.

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Punishment for cyber crime

Cyber crime never entered the minds of the founding fathers, yet its prevalence has far outpaced the laws that govern it. Virtual crime is not provable under most criminal statutes. So what should be done?

Crimes of theft are punishable according to the value of the items stolen and the violence of the manner in which they were stolen. Theft of information presents the cyber criminal with the perfect loophole. The defense argues that words have no value and sitting in front of a keyboard typing is not violent. The veracity of those statements can be disproved easily.

If the information had no value, why did the hacker take money for the information? If the act was not violent, why are the ramifications of the action devastating to the victims?

Intellectual property laws protect only work product such as research and creative endeavors. An address is not considered work product, and is not protected. So what of the hacker who steals addresses from jewelry stores and sells them to jewel thieves? They are guilty of the facilitation of a crime, should one be committed, yet their actions are not criminal in and of themselves.

To sew this loophole closed would not require the drafting of years' worth of new legislation, but instead the adaptation of existing laws in minute ways. Consider the addition of the verbiage "or any personal, medical, corporate or financial information" to the standard property theft laws. This would encompass nearly all current cyber theft crime.

Take away the water that the phisherman bait with enticing emails. Phishing is the same crime as attempted robbery, larceny or burglary. Dropping a few phisherman behind bars, with payment of restitution and fines required, would reduce the number of retirees and barely-computer-literates parting with pensions and savings. Current mail fraud statutes should be expanded with the inclusion of "or electronic means". Another seam in place.

Defense will argue then that the crime was not committed in the jurisdiction of the Court prosecuting the defendant. With the simple addition of the verbiage "against any person, persons or corporate entity within the jurisdiction" to the standard theft laws. Another hole disappears.

Extradition will be the last stumbling block left to the global community. Should not the contract of all whose access the Internet include a clause whereby the user agrees that such access will not be against the laws of the jurisdiction of the sites to which the user visits? These laws are beginning to look less like a net.

With the addition of cyber crime to the existing laws, hackers who would never dream of robbing a store will not dream of robbing a database. Punishments would be equal for cyber crime as they are for flesh and blood crime.

What of the victims? The United States has laws governing the dissemination of pornography to minors and laws that protect the victims that are lured off of the Internet into flesh and blood crime. What about the victims whose credit has been thrashed? Restoration of their credit is the least that can be done for these victims, but the restoration of their reputation cannot be accomplished. What of their hardship while they had not the credit to conduct their lives?

Interpol's adoption of these laws would enable jurisdictions to successfully prosecute the civil actions under these laws. NATO's endorsement of these laws would add more venom to the punishments. As a global community, it is high time that we act as one to protect our citizenry, regardless of location.

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Credit Scores: Fair or Unfair?

To weigh the system of credit ratings, the simplest path is pros vs. cons. Let's look at some factors that do figure into the credit rating, and then the ironic ones that do not.

Pro (Expensive)
1. Those that carry credit balances with timely payments have a high score.

Con
1. Those who pay cash and never incur debt have a low score or no score.
2. Those who have credit, but choose not to use it have lower scores.

Pro (Myth)
2. High credit scores are indicative of credit worthiness.

Con
3. High credit score can be maintained while living paycheck to paycheck.
4. Annual earnings are not calculated into a credit score.

Pro (Myth)
3. Inquiries do not hurt your credit rating.

Con
5. More than 3 credit inquiries in six months, including comparison shopping for a loan, detracts from the credit score.
6. More than 6 inquiries within one year, including insurance and employment inquiries, detract from the credit score.

So far, the cons are outweighing the pros two-to-one. The fact is bared that the current calculation of credit scores hurts more innocent people than it helps. Here are some examples:

Cash and Carry
After spending the first 25 years of his life paying for everything he owned by saving and paying in full, John Creditseeker finds out that he does not qualify for a mortgage when he marries his college sweetheart. Despite his showing a substantial income and no debt, credit for the home will not be issued because the bank does not see his credit worthiness.

Catch 22
John's wife, Jill, applies for a credit card after the wedding to have in the event of an emergency. Jill is denied. Why? Like her love, she has always bought with her checkbook. Living within her means effectively does not make her a candidate for credit. How should she get credit, if she does not have any in the first place?

Mistakes happen...
Except at the credit bureau. To have negative information put onto a credit report requires a bill and a "debtor's" social security number. Removal of erroneous negative information requires an act of God. If a creditor misreports your address, it remains on your credit report permanently. Removing inaccurate personal information requires many affidavits. Ironically, the creditor did not have to jump through rings of fire to get the negativity there.

So what are the rewards of the credit system? Staying in debt, but timely paying interest will win you a great credit score. Are you scratching your head? Here's why.

Banks issue you credit. Banks pay the credit bureau for your credit report (profit). You pay interest to the bank (profit). If you pay off your credit before the bank makes back the money they spent on paperwork and your credit rating, your credit suffers...you are hurting their bottom line by protecting your own.

Although the credit report will list the last employer that someone else (not you) reported to them, no where in any of their equations is a variable to be filled with your salary.

By all measures, the only entities that benefit from the current credit rating systems are those who profit from it and those who pay to keep a high credit score (interest).

How fair can a credit rating calculation system be that never once considers your ability to pay? In a word: Not.

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Why Employers Check Credit Reports

Most people find the idea of a potential employer checking their credit to determine job eligibility morally repugnant. Let's take a walk in the employer's shoes to understand.

An average corporation that screens potential employees shells out more than $1,000 before the applicant punches the clock the first time. Depending on the position, it can take as long as a year of productive service from the employee before this money is recouped. Just like every business, they want a return on the investment.

It should be obvious why drug screens are a determining factor in getting a job. Substances that alter the motor skills and judgment of an applicant can put that person, other people and property in danger. History bares that substance users were to blame for the majority of workman's compensation and corporate injury claims prior to pre-employment drug screening.

What is the harm in a credit report? Look at the history. Those with a disparate amount of debt to the potential income of the job will be in financial straits. This makes the employee more susceptible to opportunities to supplement his income. Do you see a red flag yet? Look more closely.

Employees with more than one job are more likely to be absent and tardy given their scheduling. This lost time represents lost productivity for the employer and insufficient return on their investment.

Potential employees may only have no criminal history because prior employers chose not to prosecute. People who are in debt or poor, even with a job, are more likely to steal than those that are comfortably living within their means. Even theft of company supplies represents a loss to the employer.

What about those with poor payments histories? That does not affect their professional skills, but it does testify to their ability to complete assignments. Debts are resultant of contracts where a service or product is provided with the promise of later payment. Potential employees who default on promises have a higher probability to fail to meet deadlines and expectations.

What about inquiries? If a potential employee has had multiple inquiries into her credit within six months of her application, the reasons for the inquiries are another red flag to a human resource director.

When applicants have attempted to obtain additional credit, many times it is indicative of a failure to steward their finances properly. This is more negatively punctuated when the credit is refused.

Applicants with many potential employer inquiries are a different risk. This person either does not stay on the job very long or has been such a poor candidate that he has not been chosen for other positions. Both instances are a warning to potential employers.

As an employer, would you trust someone who cannot manage her own finances to be in a position of responsibility that could negatively impact your finances?

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Identity Theft: Protect yourself at Home

Much of what is thrown in the trash can point an identity thief's telescope into our lives. But you have the power to blacken the lens.

Junk mail, prescription bottles, receipts and packaging to products allow identity thieves a chance to pretend to be us. These are the primary steps to protecting your personal identity from thieves.

1. Shred or tear up junk mail. Credit card offers are the number one way that identity thieves pick their victims. Before tossing that offer into the trash, make it unusable to a thief. Dispose of half in the main trash can and half in the bathroom trash. This way it cannot be reassembled easily to use the telephone options.

2. Follow the Federal law when disposing of prescription bottles. Remove all labels from the bottles, destroy the labels and dispose of labels and bottles in different receptacles. This keeps the thieves from being able to access your medical records and commit fraud.

3. If not keeping receipts from the stores or the bank, shred them. The best practice to keeping thieves from gaining access to your identity is to keep receipts and file them. If throwing them away, shred them first.

4. Voided checks must have portions removed to prevent identity theft. Remove the name plate and shred. Remove bank name, security identifier (located above the date line), amount box, a portion of both the routing number and the account number, signature line and payee. Dispose of the pieces in separate locations so that the check may not be reassembled.

5. Expired credit cards should be cut into no less than four pieces. As with checks, dispose of the pieces separately.

6. If receiving narcotics or insulin from a mail order service, destroy the packing slip completely. Dispose of the shipping carton separately from the inner packing after removing and destroying the labels from both.

7. Detailed usage of telephone bills should be kept at least three years. When disposing of them before then, shred the bills into small enough pieces that they cannot be reassembled.

8. All receipts and bills from loans should be kept for at least three years and destroyed before disposal.

9. All explanations of benefits (EOB) should not be disposed in trash intact. Separate identifying information from the body of the EOB prior to placing in trash.

10. Credit reports should be shredded when no longer of use.

If you feel you have not been able to sufficiently destroy or shred papers before their disposal, pour ammonia into the trash. Ammonia will react with most all vegetable inks and make them unreadable and unusable.

Don't let your trash can be a treasure chest for identity thieves.

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