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October 2005

When I chcked my accounts late last night, it appeared that ING Direct had lowered the interest rate offered on its online savings account to 3.0% (APY). I’m not sure what’s going on, but every page on ING Direct’s website, including the Fash animation, had the lower rate quoted, and this is after previously looking at the account earlier during the day and seeing the 3.4% rate listed.

I know that ING Direct uses several different web servers and they’re not always completely synchronized, but it seemed as if the rate had been lowered to 3.0%. If you chase rates, I strongly suggest Emigrant Direct or any of the other banks on this list.

A quick side note: Did you know you could subscribe to Consumerism Commentary? Simply use this RSS link in your favorite reader, such as BlogLines! It’s the perfect way to be sure you don’t miss anything.

In general across a broad variety of services, competition has been driving commissions down. The internet has certainly helped in decreasing these costs to the consumer. For instance, you can trade stocks for $7 instead of $35 or more. Even management fees for index funds have been going down.

As home prices have gone up, so have the number of people with stars in their eyes, wanting and willing to become brokers. More brokers have to compete for business.

For some reason, we still have to pay (in general) a 6 percent commission to sell a house. New technology has not done much to reduce that amount. Here’s why, according to CNN. Traditional brokers act in certain ways that will ensure that individuals selling homes will not receive good service from a discount or online brokerage. Here are some of their tactics:

* Traditional agents, when serving a buying customer, do not show properties represented by a discount broker. Some traditional brokers won’t even help a customer if he or she was brought in my a discounter.

* According to the article, at least one discount realtor has been harassed by traditional agents who tell their clients that the discounter is out of business.

* Traditional brokers try to use leverage with politicians to seek legislative actions to restrain trade. The result of this has been “minimal-service” requirement laws. In some states, brokers are not allowed to perform just one service, such as listing on the MLS. The customer would be charged a full commission and would not even have the option of going to a discount broker.

MM over at PFBlog has recently finished selling his home without a broker. He is posting a series of tips for those who wish to do the same. It may be worth the effort — although tradiional brokers will surely try to convince you that it’s not.

First, I’ll need to worry about buying a house. That’s another issue altogether.

Liz Pulliam Weston at MSN Money is exploring the possible scenario in which inflation takes off in a manner like the period from 1979 to 1981. Even if inflation isn’t as high as 13.58% in one year, like it was in 1980 according to the Bureau of Labor Statistics, the picture Liz draws can come to be.

Basically, purchases will get significantly more expensive and it’s unlikley income will keep up. Liz gives the example of buying a computer — the general philosophy has been to wait six months and the price for the same piece of equipment will have gone down. It’s possible in periods of high inflation for that not to be the case, in which it might be better to buy now (with cash, not with variable-rate debt like a credit card) than to wait.

The article lists those who will suffer in periods of high inflation: people on fixed incomes, the poor, holders of long-term bonds, and people with variable-rate debt.

Here’s her suggest game plan:

* Don’t rush to pay off your fixed-rate debt. Payments will seem easier and less expensive as the cost of everything else increases.
* Push harder for that raise. Most of the time, this means working harder. Income is an equal part of the net worth equation, though for those people other than the poor, it’s harder to manipulate than one’s expenses.
* Get ready to substitute. Find cheaper options. Vacation in Hawaii rather than southern France? Or, probably a better thought, skip the vacation this year.
* Buy now, but don’t charge it.
* Invest in “real assets.” This includes real estate, natural resources and commodities. These include inflation as part of the price, so you’ll be riding the wave instead of drowning.
* Stay invested in stocks. Inflation may scare people initially, but stocks should provide a good return.
* Don’t eschew bonds. Eh.

So, are you ready for inflation? Once you are ready, make sure you’re also aware that it was only recently people were warning of deflation.

Teaching Kids About Money, Part 2

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Previously, I mentioned Yahoo Finance’s latest feature on teaching children about money. This post continues with that feature.

Lynne Ticknor acknowledges that schools often don’t have the resources to teach classes beyond core curriculum. Personal finance classes are therefore difficult to find in public schools. Thus, the responsibility falls on the parents, who as many would argue are ultimately responsible for the education of their children to a point.

From the article:

One point on which all of the experts agree is that parents must be willing to allow children to make mistakes in their purchasing decisions if they want to teach financial responsibility. It’s much better to let children make, and learn from, those mistakes early with small amounts of money than later in life when they can find themselves in serious financial trouble.

The point is to give the children some control over their money, whether the source of the funds is a gift or allowance. The article offers suggestions for various age groups.

* 3 Years and Younger. They can receive an allowance and begin to understand that money has value and should be kept safe.
* Ages 4 to 5. At this age you can begin to teach your kids about delayed gratification — that it may be better to have two later than one now.
* Ages 6 to 8. The difference between “wants” and “needs” becomes apparent during this development stage. This lesson can be related to the advertising the kids will likely see on television.
* Ages 9 to 12. Children of this age will have a sense of social responsibility. Parents can talk to their kids about the value of charitable donations.
* Ages 13 to 18. During this time, children will be able to handle more responsibility and should be encouraged to learn how to wisely use money-management strategies, including responsible use of a credit or debit card, monitored by the parents.

The article is full of good tips for parents, but it’s important to note that the age groupings above are a very generalized guide. Different children develop differently and at different times. Perhaps it would help all parents to understand Piaget’s stages of cognitive development.

Teaching Kids About Money

by Luke Landes

Yahoo Finance is presenting a feature on teaching children about money. Here are some of the highlights. When to Kick Your Kid Out of the House, and Other Financial Lessons for Parents. In a middle-class household, it will cost on average $184,000 to allow your one child to live to year 17. If you send ... Continue reading this article…

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Your New York Number

by Luke Landes

Note: If you are looking for my look at The Number, by Lee Eisenberg, start here. The following is a look at an article that appeared in New York Magazine before I was aware of the upcoming book. Wouldn’t it be great to stop working and have enough money never to run out for the ... Continue reading this article…

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Carnival of Personal Finance #19

by Luke Landes

Welcome to the Carnival of Personal Finance, 19th edition! You are visiting Consumerism Commentary, a website where I discuss my personal finances with links to related news with commentary every once in a while. Here is a little about me and this website. You can browse my latest updates or start with the “Best Of ... Continue reading this article…

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Saving With Low Income, Part 3

by Luke Landes

In this series, I’ve been taking a look at MP Dunleavey’s article offering a plethora of ways to save when income is tight. Here are more of the suggestions submitted by users and compiled by the article’s author. Part One is here and Part Two is here. * Buy generic instead of brand-name products. The ... Continue reading this article…

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Saving With Low Income, Part 2

by Luke Landes

Here’s the second article in which I’m visiting MP Dunleavey’s article about techniques for saving when a low income is working against you. Part One is here. * Create bank errors in your favor. MP suggests adding a little extra expense or a little less income when entering transactions into Microsoft Money or Quicken. I ... Continue reading this article…

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Saving With Low Income

by Luke Landes

MP Dunleavey gives her readers 19 ways to save when income is not quite as high as would be comfortable. The tips are practical and can be applied to just about anyone for whom saving more money is a goal, regardless of income. Here are some of her suggestions, submitted by readers: * Stash a ... Continue reading this article…

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HOWTO Purchase a Bed (Mattress and Box Spring)

by Luke Landes

You may have read that I purchased a bed this past weekend. This was my first purchase of major furniture, but it was a long time coming. I had suffered from morning back and neck pain for too long, and I believe the problem had much to do with the sleeping surfaces I’ve had over ... Continue reading this article…

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Purchased a Bed

by Luke Landes

I made a purchase yesterday that will hopefully improve the quality of my life considerably. My girlfriend and I decided to split the cost of a new bed. For the last several years, I’ve been sleeping on a twenty year old bed. I purchased the mattress, box spring, and frame from the father of a ... Continue reading this article…

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Carnival Monday

by Luke Landes

I hope everyone had a great weekend. I made a pretty large purchase this weekend, and I’ll talk about that in a future post. It’s Monday, and that means it’s time for the Carnival. Hello, Dollar! posted the latest Carnival of Personal Finance and my thoughts on spoiled kids was included. Speaking of children, make ... Continue reading this article…

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Kids Want The Darnedest Things

by Luke Landes

Is your kid a spoiled brat? When I was young, I generally got what I wanted from my parents. They were lucky that the things I wanted weren’t much. (Though they were upset when I’d rack up lots of long distance phone charges with the modem while calling BBSs.) Many parents struggle with not buying ... Continue reading this article…

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Staying Away From Fund Fees

by Luke Landes

MSN Money is carrying an article suggesting ways to get around mutual fund fees. As mutual funds have become more complex, fund companies need to spend more on marketing to explain their products. The expenses are then, as one would think, passed along to the customer. Timothy Middleton suggests “marching straight into the new reality” ... Continue reading this article…

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Negotiating for Salary – Men vs. Women

by Luke Landes

I’m a fan of social experiments, and here’s an interesting study. Researchers at Carnegie Mellon University wanted to determine if sex had a role to play in hiring decisions. Male and female observers, playing the role of decision-makers, watch an interview with male and female participants (job candidates). When the candidate was asked what he ... Continue reading this article…

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