Experts provide need-to-know money tips
By Deanna Kerslake, Staff Writer
April 29, 2007 | 4:15 p.m.
College: the time when hours are dedicated toward a degree that will transform a student into an adult, ready for the “real world.” But how many will know what to do with that first paycheck? Handle credit cards? Make investments?
Yeah, thought so.
A panel of local financial experts attempted to ease the fears of Ohio University students and local community members by giving advice at a Financial Literacy Workshop April 16. The event was hosted by Ohio University’s Women in Philanthropy and the Off-Campus and Community Services Office. The panel consisted of Natalie Chieffe, OU finance professor; George Smalley, vice president of Peoples Bank in Athens; and Kristen Moran, certified financial planner with Cedar Brook Financial Planning in Cleveland.
About 30 people attended the workshop, interjecting comments and questions throughout. The panel presented information on how to manage personal finances, discussing everything from balancing one’s checkbook to making long-term investments.
Bank on this
One of the first suggestions made by the panel was to choose the right bank. Members stressed that it is imperative to record all transactions and to not spend money that one does not have. How does one find the right bank?
“You have to ask questions,” Chieffe said. “What do you want to get out of the bank? Do you need a checking account? Savings? A car loan?”
Both Chieffe and Smalley agreed that a great way to find a bank that will suit one’s needs is to ask a trusted friend who has been in the area for a while.
“Some people look on Web sites and search for low-rate banking,” Smalley said. “This isn’t always the best decision because you don’t always know who is on the other side.”
Chieffe gave her own referral for two banks she trusted in the Athens area — People’s Bank and the Ohio University Credit Union.
We all can’t be G-L-A-M-O-R-O-U-S
According to the panel, it is a necessity to balance one’s income and outflow and to consider the total cost of credit purchases. A raise might stir someone to upgrade his car, but it can be dangerous to raise the cost of one’s lifestyle even if income is rising as well. It is especially important to not let this affect one’s credit purchases.
Chieffe challenged the audience to reconsider its regular, small purchases. She gave the example of saving five dollars per week by not buying a coffee. If one puts that saved money each week into an account that offers five percent interest, after 20 years there would be $8,928 in the account. After 40 years, there would be $33,186.
In that same example, if one did the opposite and charged that weekly five dollars to a credit card and did not pay it at the end of the month, the result would be quite the opposite. According to Chieffe, most credit cards charge 24 percent interest, compounded daily on the amount of the credit card bill that is not paid by the due date each month. After one year, one would owe $295. After 10 years, the debt would reach $11,030. After 20 years, a staggering $135,440 would be owed to the company. All of this stemmed from five dollars going unpaid.
This example highlighted the benefits of simple budgeting and saving, as well as the dangers of allowing credit card bills to inch along unpaid.
“You have to be disciplined enough to know that when the bill comes at the end of the month, you have to have budgeted throughout that month, and pay it,” Smalley said.
When it comes to having good credit, Moran suggested paying off your credit card bills every month, not having too many credit cards -- i.e., cards you purchase to get 10 percent off your first purchase at American Eagle -- and to consider using a debit card if one is afraid that they will overspend with a credit card.
The Golden Paycheck
How does one handle that first paycheck from a real job? Chieffe suggested that now is the time to plan for that occasion. She suggested making short-term goals, such as buying new furniture, intermediate goals within one to five years and long-term goals, such as saving for children’s college tuition.
There are several ways to reach these goals. The panel stressed setting up an “emergency fund” right away by setting aside whatever amount of extra income is left after necessities each month into an account. For intermediate goals, setting money aside in bank certificates such as CD’s, which generally have a certain amount of time where one cannot retrieve the funds. To achieve long-term goals, there are many types of investments, such as purchasing stocks, that one can choose to try.
When choosing stocks, one can join a mutual fund that will place money into stocks that the mutual fund company believes will be successful. An individual can also choose to personally select stocks in which to invest. Chieffe urged to consider companies one knows and likes, to review the company’s annual report and to think about the future of the company when purchasing stocks.
So, we’re all financial gurus now, right?
Freshmen Kristen Jeffries and Katie McCarthy decided to attend the workshop after they were informed about it by their advisor.
“I think it was helpful. I did learn a lot of this in high school though in a finance class,” Jeffries said.
“It kind of scared me,” McCarthy said with a laugh. “I’m poor and have no money, and my job isn’t going anywhere. It was helpful to know what to do for credit cards since that is something that we need to start now.”
Senior Kyle Michalek thought the workshop was very relevant since he is graduating in June.
“These are all the issues I am going to be facing very shortly,” Michalek said. “I have heard some of this before because I am a business minor, but it was a good overview. It is good to hear new ideas and strategies.”