Money Insider: Why financial know-how has to be kids' stuff - The Independent
Some in Westminster may not see this as a priority; however, a quick look at the recent statistics released by Credit Action underline the scale of the financial problems consumers are currently facing in this country.
The latest numbers are scary, revealing that on average, 314 people are declared insolvent or bankrupt every day and 8,518 new debt problems are dealt with by Citizens Advice Bureau. While some of these situations will arise due to circumstances beyond the borrower's control, there are certainly cases that could have been prevented if people understood a little more when it comes to money matters.
These are challenging financial times for people of all ages, so the more our children learn about managing their money the better. Whilst some schools have taken the matter seriously, there are still too many that barely scratch the surface.
The sooner our children start learning these essential life skills the better, whether it ends up as a bolt-on to mathematics or a standalone subject, we can't afford to sit back and see more people ruin their lives due to poor financial decisions.
When the current generation leaves school, they should appreciate the dangers associated with credit cards and payday loans and enter adulthood with the knowledge and confidence to deal with their finances.
Money plays a pivotal part in our lives, whether it's buying our first car, our home, paying for our children's university education or putting enough cash aside to provide for our retirement.
Today's youngsters won't be able to rely on making huge profits out of soaring house prices or have the luxury of final-salary pension schemes. Many are likely to have to work until they are into their seventies.
Teaching children how to handle their money has never been more important, and it's vital we start sooner rather than later.
Get a broker to find the right mortgage
Brokers remain an essential part of the mortgage market.
The amount of mortgage business being written may only be a fraction of what it was before the banking crisis, but that doesn't mean the job of finding the best home loan has got any easier.
The number on offer is mind boggling, and even if you've decided whether it's a variable rate or fixed-rate product you're going for, you still need to work out which is the cheapest option for you.
It's not as simple as referring to a best-buy table on a comparison website, although some lenders still launch attention-grabbing interest rates, hoping it will be sufficient to win custom from those who don't take the time to shop around or use the services of an independent mortgage broker.
Banks and building societies continue to develop products with profit margins based on a wide range of rate and fee combinations, and whilst it may work for them, for the man on the street it can be a big headache. One of the biggest problems for consumers is working out which is the most appropriate mortgage based on the total cost, i.e. not just the interest rate but also the associated fees which can vary enormously between lenders, loan-to-values and individual products.
When you consider that your mortgage is likely to be the biggest financial transaction you'll undertake in your lifetime, it makes sense to seek advice to ensure you don't make what could be a potentially expensive mistake.
Andrew Hagger – Moneynet.co.uk
I give all the money - The Sun
I’m 17. I work in a fast-food restaurant every evening, often getting home in the early hours of the morning. I am then expected to get up to take my little brothers to school and take my sister to nursery every day. I then pick them all up again at the end of each day.
I also look after my mum and do all the housework as she has been ill and can’t be left on her own. It’s exhausting. My mum charges me rent of £400 per month and keeps putting my rent up by £20 every six months. I never have any money for myself.
I can’t afford to go out at the weekends because I have to work to pay my mum otherwise I’ll be in debt to her. My parents deprive me of my things whenever I complain.
I need to move out but I can’t get any money together for a deposit because I give it all to my mum. I am starting to feel isolated and alone. None of my friends message me back when I try to talk to them on Facebook. I’m in a hopeless situation.
I am starting to think the best thing for me is suicide
Don’t even think about making a suicide attempt. You have a great life ahead of you even though things seem grim at the moment.
Please find someone in your family to confide in. They need to know what you’re up against at home and can work with local services and maybe find you somewhere else to live if need be.
Find a quiet time to talk to your mum about the rent you pay. Explain that you need a life of your own and to spend time with your friends. I am sending you my leaflet Family Finances so you can work out a fairer rent.
I’m also sending my leaflet Help for Carers as there may be a way of getting more support for your mum too so that so much doesn’t fall on you
Find understanding support through Get Connected who help under-25s with any problem – including housing (0808 808 4994, www.getconnected.org.uk).
Why Money Market Funds Break The Buck - Yahoo Finance
Money market funds are often thought of as cash and a safe place to park money that isn't invested elsewhere. Investing in a money market fund is a low-risk, low-return investment in a pool of very secure, very liquid, short-term debt instruments. In fact, many brokerage accounts sweep cash into money market funds as a default holding investment until the funds can be invested elsewhere.
SEE: Money Market
Money market funds seek stability and security with the goal of never losing money and keeping net asset value (NAV) at $1. This one-buck NAV baseline gives rise to the phrase "break the buck," meaning that if the value falls below the $1 NAV level, some of the original investment is gone and investors will lose money.
This only happens very rarely, but because money market funds are not FDIC-insured, they can lose money. Find out how this happens and what you can do to keep your "risk-free" assets truly risk free
Insecurity in the Market
Even though investors are typically aware that money market funds are not as safe as a savings account in a bank, they treat them as such because, as their track record shows, they are very close. But given the rocky market events of 2008, many did wonder if their money market funds would break the buck.
In the history of the money market, dating back to 1971, there was only one fund that broke the buck until the 2008 financial crisis. In 1994, a small money market fund that invested in adjustable-rate securities got caught when interest rates increased and paid out only 96 cents for every dollar invested. But as this was an institutional fund, no individual investor lost money, and 37 years passed without a single individual investor losing a cent.
In 2008 however, the day after Lehman Brothers Holdings Inc. filed for bankruptcy, one money market fund fell to 97 cents after writing off the debt it owned that was issued by Lehman. This created the potential for a bank run in money markets as there was fear that more funds would break the buck.
Shortly thereafter, another fund announced that it was liquidating due to redemptions, but the next day the United States Treasury announced a program to insure the holdings of publicly offered money market funds so that should a covered fund break the buck, investors would be protected to $1 NAV.
Track Record of Safety
There are three main reasons that money market funds have a safe track record.
- The maturity of the debt in the portfolio is short-term (397 days or less), with a weighted average portfolio maturity of 90 days or less. This allows portfolio managers to quickly adjust to a changing interest rate environment, thereby reducing risk.
- The credit quality of the debt is limited to the highest credit quality, typically 'AAA' rated debt. Money market funds can't invest more than 5% with any one issuer, except the government, so they diversify the risk that a credit downgrade will impact the overall fund.
- The participants in the market are large professional institutions that have their reputations riding on the ability to keep NAV above $1. With only the very rare case of a fund breaking the buck, no firm wants to be singled out for this type of loss. If this were to happen, it would be devastating to the overall firm and shake the confidence of all its investors, even the ones that weren't impacted. Firms will do just about anything to avoid breaking the buck, and that adds to the safety for investors.
Although the risks are generally very low, events can put pressure on a money market fund. For example, there can be sudden shifts in interest rates, major credit quality downgrades for multiple firms and/or increased redemptions that weren't anticipated. Another potential issue could occur if the fed funds rate drops below the expense ratio of the fund, which may produce a loss to the fund's investors.
To reduce the risks and better protect themselves, investors should consider the following:
- Review what the fund is holding. If you don't understand what you are getting into, then look for another fund.
- Keep in mind that return is tied to risk - the highest return will typically be the most risky. One way to increase return without increasing risk is to look for funds with lower fees. The lower fee will allow for a potentially higher return without additional risk.
- Major firms are typically better funded and will be able to withstand short-term volatility better than smaller firms. In some cases, fund companies will cover losses in a fund to make sure that it doesn't break the buck. All things being equal, larger is safer.
Money market funds are sometimes called "money funds" or "money market mutual funds," but should not be confused with the similar sounding money market deposit accounts offered by banks in the U.S.
The major difference is that money market funds are assets held by a brokerage, or possibly a bank, whereas money market deposit accounts are liabilities for a bank, which can invest the money at its discretion - and potentially in (riskier) investments other than money market securities. In a money market fund, investors are buying securities and the brokerage is holding them. In a money market deposit account, investors are depositing money in the bank and the bank is investing it for itself and paying the investor the agreed-upon return.
If a bank can invest the funds at higher rates than it pays on the money market deposit account, it makes a profit. Money market deposit accounts offered by banks are FDIC insured, so they are safer than money market funds. They often provide a higher yield than a passbook savings account and can be competitive with money market funds, but may have limited transactions or minimum balance requirements.
The Bottom Line
Prior to the 2008 financial crisis, only one small institution fund broke the buck in the preceding 37 years. During the 2008 financial crisis, the U.S. government stepped in and offered to insure any money market fund, giving rise to the expectation that it would do so again if another such calamity were to occur. It's easy to conclude then that money market funds are very safe and a good option for an investor that wants a higher return than a bank account can provide, and an easy place to allocate cash awaiting future investment with a high level of liquidity. Although it's extremely unlikely that your money market fund will break the buck, it's a possibility that shouldn't be dismissed when the right conditions arise.
More From Investopedia
Green makes pledge to Rangers fans: I will not abuse your money in takeover - Daily Mail
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Pledge: Prospective Rangers buyer Charles Green
Charles Green has told Rangers fans he will not 'abuse' their money and insists he will not use cash from season ticket sales to fund his takeover.
The former Sheffield United chief executive - who is leading the consortium in place to buy the administration-hit club - was responding to comments made by Ibrox director Dave King.
King urged fans to reject the Company Voluntary Arrangement (CVA), which will be voted on by creditors next Thursday, while calling on supporters not to renew their season tickets until Green reveals the details of his plans.
Craig Whyte completed his own takeover of Sir David Murray's majority shareholding last May with money from the sale of future season ticket income to investment firm Ticketus.
Green told Rangers' official website on Friday night: 'On the basis the receiver is already holding cash and we haven't put the season tickets up for sale yet, I struggle to see how I can use season ticket money to buy the club.
'The season ticket renewal letters are actually going out today and I have already deposited money with the administrator to buy the club.
'We have provided the money to buy the club and we have documented the fact we are going to raise another 20-30million on top of that.
'The important thing - which is in the letter I've sent out to fans - is that season ticket money, when it comes in, will actually be sat in an account specifically to hold it there.
Takeover turmoil: Rangers future hangs in the balance
'For legal reasons, there is a 28-day cooling period after next Thursday should the CVA go ahead.
'Until that period ends, any monies that come into the club are held in a secure account and I have no access to that money.
'The season ticket money is crucial. The very suggestion we would be using it to buy the club is ridiculously untrue.
'The more season tickets any club sells, the more that can be invested back into the club and into players.
'If we are looking and speaking to the real, true Rangers fans, I'd say to them if there was ever a time to support the club it is now.
'They will know for the first time in many, many years that their money will not be abused the way it was before.'
Green is adamant his consortium will complete its purchase of Rangers, whether the CVA is accepted or whether the club has to opt for a newco route instead.
He added: 'We said from day one that our intentions were to acquire Rangers and the CVA was always the preferred option.
'I have no control over that. Only creditors have and next Thursday there will be a meeting and either the CVA will go ahead or it will be rejected.
'If it is rejected, we will immediately default into a newco route.
'There is nothing anyone can say on the outside to change the fact my consortium will acquire the business next Thursday.'
Green says King's comments were 'disruptive' at a time when he is attempting to gain the trust of a disillusioned Rangers support.
He said: 'Dave is someone I've never met but I contacted him last Friday in South Africa and we had a conversation.
'I sent him a copy of the presentation we've made public to tell him what our vision was. He owns 5% of the club and I felt it was important he had a chance to buy into it.
'I was expecting some reply but clearly the comments he made were outrageous and I'm disappointed.
'I have great difficulty where someone purports to be acting in the best interests of the club then recommends creditors should vote down a CVA. That is exactly what the club doesn't want.
'Real fans want to keep the tradition but what Dave King is saying is that the history and tradition of Rangers is of no consequence.
'It's not helpful to hear his thoughts and I think it is disruptive because the fans are getting mixed messages.
'We've said consistently because of what has happened historically at the club that there's a lack of trust and we have taken that on board.
'I understand the nervousness of fans, particularly after the issues of the last few years, but my upbringing was to treat someone as you find them and we've not let anyone down.'
However, he did agree with King's claim that Green - like Whyte - will not last a year at Ibrox.
He added: 'He's absolutely right on that because the minute I finish doing my job here I will leave the club.
'My job is to remove the debts, get Rangers on a sound footing and put 20-30million in the bank. Once that is done, I'm of no use to the club at all.'
Memphis finance director McElrath moving to MLGW - Memphis Commercial Appeal
Roland McElrath
Roland McElrath is leaving his post as the city's finance director to become controller at Memphis Light, Gas and Water Division.
The MLGW board approved McElrath's appointment Thursday on its consent agenda. The City Council also will have to approve his appointment.
McElrath, 51, is expected to start his new position in about 45 days. As MLGW's controller, McElrath will be responsible for developing the publicly owned utility's budget and helping to set rates for customers.
"I've had an admiration for the organization for a long time," McElrath said. "I know a lot of the people at MLGW and have interacted with them over the years, and I've enjoyed that relationship, and that's a part of it."
As director of the city's Finance Division, where he developed budget and fiscal policies, McElrath earned $118,879 annually. At MLGW he'll make $133,016 a year. He'll also be able immediately to begin drawing his annual city pension of $61,213 while earning his MLGW salary.
This is the second time McElrath has left his city post for another government job where he is eligible to receive a salary and a pension.
In January 2001, the council changed the city's pension system to allow elected and appointed officials to collect retirement benefits after 12 years of service. Previously, it took 15 years to become vested in the pension plan.
Shortly after that, in March 2001, McElrath, who began working for city government in 1988, retired from the city to become superintendent of business operations for Memphis City Schools. When he left city government in 2001 he was able to begin drawing what was then a $32,000 annual pension while working for MCS. The council has since ended the 12-year policy.
McElrath has held various posts within city government, including stints as deputy finance director, treasurer and finance director. Before starting work with the city, McElrath was an accountant with Coopers & Lybrand, a private firm that handled audits of school system finances.
MLGW president Jerry Collins said McElrath was chosen over "60 or 70" other applicants who responded to the controller job posting.
"He knows the business of finance, he knows the business of pensions and he's been involved in every aspect of the financial part of government," said Collins.
McElrath guided the city through financial troubles on multiple occasions, city officials said.
In 2005, former mayor Willie Herenton brought McElrath back to City Hall as finance director when the division, under then-Finance Director Joseph Lee III, faced unexpected deficits that resulted in service reductions and layoffs.
In 2008, the council cut its annual contribution to Memphis City Schools by $57 million, reducing the property-tax rate by 18 cents while increasing city spending by more than $40 million.
Each year since then the city has faced annual budget shortfalls that forced McElrath and his team to make large-scale adjustments to fund city schools and produce a balanced budget.
Mayor A C Wharton praised McElrath for his integrity and calmness under pressure.
"Number One, the first thing I look for in someone doing numbers is integrity," said Wharton. "I rate him highly when it comes to that. He's a very calm, steady-at-the-wheel person who has the ability to withstand scorching questioning and criticism, which you'll always get in a position like that."
Wharton declined to say if he had identified McElrath's replacement.
"We have been talking with folks, I will say that," he said.
McElrath's tenure has not been without controversy.
In December, Wharton proposed and the council approved end-of-year bonuses for most city workers. McElrath said the money for the bonuses came from a surplus created by cost-saving measures enacted the prior fiscal year.
However, in March, under questioning from council member Jim Strickland, McElrath acknowledged that city officials knew in October that the city was facing a deficit of at least $6 million for the current fiscal year, a shortfall which eventually grew to $17 million.
The council ultimately decided to dip into the city's reserves and use cuts to cover the deficit.
-- Amos Maki: (901) 529-2351
Of course he's going to 'say' that. The plan is to get the money, put it in another account, show possible investors that there is a few bob in the kitty in an attempt to have them put in money he can actually use... Its Murray all over again, borrow from Peter, to Pay Paul only this time use the fans and their cash as the bait to reel in the big fish to line his pockets.. Sniff, Sniff. Ooh er, bit fishy mate.
- Byron, Livingston, Scotland, 08/6/2012 23:03
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