Banking

Daily Financial Advice Mallard 3-1-2014

Daily Financial Advice Mallard 3-01-2014

The moment you think it would be a good idea to withdraw money from the ATM at the bar It’s time to leave the bar.

Happy Saturday! As a reminder watch out when withdrawing money from ATM’s as they will charge you fee’s as high as $3 to withdraw money if it isn’t your own bank. If you are at a bar and have run low on money maybe it is best to slow down for the night or to head on home.

Savings Bonds for Kids

Given that fact that savings bonds take 20 years to mature, they are a great way to invest in the future of children. Series EE bonds were originally offered in July of 1980 to replace Series E savings bonds. Series EE bonds form reliable, low risk government backed savings products that can be used as the cash investment to finance children’s education.

savings bonds for kids

Series EE bonds are now issued in electronic form, from the 1st of January, 2012, a departure from the previous paper based savings bonds. They reach maturity after 20 years and double in value. For instance, EE based bonds issued with a face value of $100, are sold for $50, and are usually worth $100 at maturity.

Series EE savings bonds can be purchased in amounts of $25 or more with some common denominations including $50, $75, $200, $1000 or $5000. Electronic EE savings bonds are usually purchased at face value so that a face value $200 electronic EE bond is purchased for $200. The minimum purchase of an electronic EE is $25 while the maximum purchase of electronic EE savings bonds annually is capped at $10,000.

Savings bond are great as gifts or as secure investments that can be redeemed in the future. Though they are redeemable after 20 years from issuance, Series EE bonds can continue to earn interest for a total of 30 years. The interest earned monthly is paid when the holder cashes their bond. For bonds that were issued before May 2005, the rate of interest is usually recomputed every 6 months at 90% of the 5 year average treasury yield calculated based on the preceding 6 months. For bond issued in or after May 2005, the fixed interest rate based on the life of the bond is 0.20%.

Other U.S. savings bonds are the Series I bonds. These are variable yield based bonds whose interest rate is calculated based on the inflation rate. The interest rate of these bonds is calculated based on two components, a variable rate reset every six months on the 1st of May and the 1st of November each year, and a fixed rate which remains constant over the life of the bond.

Savings bonds are a flexible investment tools that offers a fixed or guaranteed rate of return for the person bearing the bond. For children, this is a great way to secure the future by providing a safe financial position that is adequate to meet the future needs of the child.

Banks vs. Credit Unions

Before starting a savings account, making investments, and making your own financial plan, you have one choice to make. Should you put your trust in a bank or a credit union? From the outside, the two financial institutions appear the same. What you do not know, however, could be the difference between becoming a member of a local bank or the local credit union.

Charles Funk, president and chief executive officer of MidWestOne Bank in Iowa City, Iowa delves into the subject.

“From the outside, banks and credit unions look basically the same,” Funk says of the two financial institutions. However, there is one distinct difference. Credit unions were created with the goal and mission to serve the under served. Taking a quick look at how credit unions have grown into a large brand shows how the original goal has been strayed from.

Banks have common stock and shareholders, whereas credit unions have members instead of shareholders. This also means that, unlike banks, credit unions do not pay income taxes. This allows them to use more of the money the collect for profit.

Banks and credit unions both offer similar services, from checking to savings accounts but how they operate on the inside is not as similar as the outside appears.

When it comes down to it, the choice between using a bank or credit union is up to the student. The thing to remember is to check all available options and find the one that works best for you.

Investing in Bonds

Have you ever thought of making some extra money with the money that you already have? If it could take no work at all and the interest rate on your money is insane. You really can earn money for simply investing and it will be easy and is a great option for anyone. The most common bought bond and the one you will most likely want to purchase are individual bonds.

Individual bonds are usually sold in $5,000 dollar parts and they are considered OTC bonds. OTC simply means over-the-counter. You don’t have to get anything special to buy these bonds except the initial cash investment. Bonds are not quoted at the $5,000 ratio, most are quoted as if they were sold in $100 increments. They are rated based upon this. According to the ratings if your bond was quoted at 98 it would be $98 per $100. In the $5,000 bond this means you payed $4,900 for your bond or 2% less than it is worth for selling. Now this is a good thing because you can essentially buy bonds for a cheap price and wait a while to sell them for a profit.

Bonds are not a short term money maker, they require quite a bit of long term investment and good choices. You always want to try and buy bonds in an area that you feel knowledgeable and comfortable. This greatly increases your chances of knowing what you are investing in and making some money off of your bond.

Next, there are some bonds that are called bond funds. This is essentially the same as a stock fund in that a professional manages a bond fund for you and gives advice on things such as reinvesting bond interest and where to place your next bond. Bond funds are initially a service provided to you so they do require a management fee. This fee can be either an initials start up fee or a periodical management fee. When investing this fee should come into account as it will lower the overall money you are making from your bonds.

In some cases however this professional advice is worth the amount out of bond profit. Options like the bond funds are great for beginning bond investors who are still assessing the market and aren’t very experienced with investing in bonds for a profit. Thirdly there are market bonds. These are the quick cash bonds that are high risk. They require an initial investment of anywhere from $1,000 to $10,000 on fast moving bonds. The investor can withdraw at any time and these usually offer the highest profit per time period.

Lastly there are Bond unit investment trusts. These are by far the most stable bonds as the investor knows exactly how much they will make because the portfolio of bond profit is a constant rate. These trusts are good for large investments or investors who want security with their bond.