TIME Personal Finance

Dollar General Enters Bidding for Family Dollar

(GOODLETTSVILLE, Tenn.) — There’s now a bidding war for Family Dollar, with Dollar General offering about $8.95 billion for the discounter in an effort to trump Dollar Tree’s bid.

Dollar General Corp. said Monday that it would pay $78.50 per share in cash, 3 percent higher than Family Dollar Stores Inc.’s Friday closing price of $76.06. Dollar General put the deal’s value at $9.7 billion.

Last month Dollar Tree Inc. made an $8.5 billion bid for Family Dollar. It offered to pay $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share they own. The companies put the value of the transaction at $74.50 per share at the time. Including debt and other costs, the companies estimated the transaction to be worth approximately $9.2 billion.

Dollar General said that its offer would create a business with almost 20,000 stores in 46 states and sales of more than $28 billion. The Goodlettsville, Tennessee, company anticipates annual savings of $550 million to $600 million three years after the transaction closes.

Representatives for Dollar Tree and Family Dollar did not immediately respond to requests for comment.

The jockeying to secure Family Dollar comes as discounters look to fend off competition from companies such as Wal-Mart Stores Inc., which has been stepping up its courtship of lower-income customers.

Dollar stores grew during the recession as people across income groups searched for cheaper options. To attract a broader array of customers, they also expanded their offerings to include more groceries and brand-name products, instead of just the party favors and other knickknacks people often associated with them.

More recently, however, sales at dollar stores have been suffering because the lower-income customers who go to them are facing persistent job instability and slow wage growth in the aftermath of the recession. Wal-Mart Stores Inc. and Kroger Co. also have been opening smaller store formats to directly compete with dollar stores.

Dollar General and Family Dollar sell products are various prices. At Dollar Tree, everything at its stores costs just a buck.

Family Dollar has come into play because of its business struggles. The Charlotte, North Carolina company has been shuttering stores and cutting prices in hopes of boosting its financial performance. In June investor Carl Icahn urged the company to put itself up for sale.

Dollar General said that it believes it can quickly and effectively address any antitrust issues and is willing to divest up to 700 of its stores in order to get the necessary approvals for the transaction. Dollar Tree had agreed to divest 500 of its U.S. stores for its proposed deal.

If a deal goes through, Dollar General said that Chairman and CEO Rick Dreiling has agreed to postpone his retirement until May 2016 in order to help with the integration of the two companies. Dollar General had announced in June that Dreiling had planned to retire from the CEO post in May 2015, or when a successor was appointed. He had agreed to stay on as chairman during the transition process.

Dreiling has also agreed to remain as a director — and would be willing to serve as chairman — if asked by the board and elected by shareholders.

Dollar General said that Goldman Sachs and Citigroup Global Markets Inc. have agreed to provide committed financing, which would include the $305 million termination fee due to Dollar Tree if Family Dollar chooses a deal with Dollar General instead.

Dollar General’s board unanimously approved the Dollar Tree deal. Its stock rose $5.54, or 9.6 percent, to $63 in premarket trading.

Shares of Dollar Tree, which is based in Chesapeake, Virginia, fell 75 cents to $54.85 before the market open.

MONEY Financial Planning

Why Millennials Aren’t Getting Love from Financial Advisers

Financial advisers are aging and mostly targeting their peer group. Where can a dedicated Millennial saver get answers?

“Follow the money” was sage advice in All the President’s Men, and “show me the money” worked well enough for the characters in Jerry Maguire. Now financial advisers are taking the same approach in their pursuit of new clients.

A third say they aren’t interested in your business if you have less than $500,000 to invest and 57% want at least $250,000 in assets to get on the phone, according to a survey from Principal Financial Group. Okay. These are business people following the money in their quest for higher fees and more commissions.

Yet this approach pretty much ignores the next mega-generation—the 80 million Millennials, the oldest of which are now turning the corner on 30. Just 18% of financial advisers say they are prospecting in this demographic. Millennials don’t have a lot of assets at this point in their life, and 29% of advisers say this generation has little interest in their services because of the cost, Principal found. So why bother?

Well, anyone building a wealth management business for the long term might find plenty of gold in this group. Millennials are hell-bent on saving and investing long term, and providing for their own financial security. Eight in 10 Millennials say the recession convinced them they must save more now, according to the 2014 Wells Fargo Millennial Study. Meanwhile, the financial industry, banks in particular, have a long way to go win this generation’s trust. They might want to get started.

Most wealth advisers are focused on Baby Boomers (64%), high net worth clients (64%) and business owners (62%). For those willing to work with the less well-heeled—advisers who just getting started and willing to build a practice over time—these twenty-somethings offer a huge opportunity. One issue, though, is that there aren’t a lot of young wealth advisers out there. Like bus drivers and clergy, this profession has a slow replacement rate and is aging fast. Among the 300,000 or so full-time financial advisers, the average age is about 50, and 21% are over 60.

The result is an industry filled with people that largely do not relate to Millennials and do not care because they have so little to invest. At the same time, we have a generation that has got the message on saving and wants to get serious about investing for its financial future. So it’s not surprising that a growing number are turning instead to online financial advice firms—start-ups such as Betterment, Wealthfront and Personal Capital—to get investment guidance with little or no minimum and at lower cost. Millennials may be broke and fee averse. But they won’t be that way forever. This time, “show me the money” may be bad strategy.

MONEY Personal Finance

Money Know-How? American Teens Are, Well, Just Average

Students taking test in classroom
Roy Mehta—Getty Images

A major study shows that American 15-year-olds are barely average when it comes to knowledge of personal finance—and way behind the kids in Shanghai.

For a country whose grandest export might be capitalism, we don’t do very well with our own kids. American teens land smack in the middle of the pack when it comes to simple personal financial know-how, according to a groundbreaking new global study.

Topping the list are kids in Shanghai, Belgium, Estonia, Australia and New Zealand. Bringing up the bottom are teens in Colombia, Italy, Slovak Republic, and Israel. The U.S. rates just below Latvia and ahead of France.

These findings come in the newly released 2012 Program for International Student Assessment (PISA), a widely recognized comparative measure of student proficiency in 65 countries. In the past, PISA has focused on math, science, and reading. For the first time, in 2012 it added testing on personal financial concepts.

Only 18 countries opted into the financial literacy component, which is a statement all by itself. This is a relatively new field of education and most countries have little more than a fledgling effort. Some who take it seriously and have broad financial education programs, like Australia and New Zealand, scored relatively well. But Shanghai, which is not regarded as a leader, produced the best results of all.

The assessment looked specifically at 15-year-olds. Those in Shanghai had a mean score of 603—well ahead of second-place Belgium (541) and 9th-place U.S. (492). In last place was Colombia’s mean score of 379. PISA is part of the Organization for Economic Co-operation and Development (OECD).

The 2012 results, eagerly awaited in education circles (and especially in financial education circles), were a bust in at least one big way. The goal is to figure out how to raise the financial I.Q. of people around the world by starting early and teaching in classrooms about budgets, credit cards, saving and investing. Asked what seems to work best, Michael Davidson, head of schools at the OECD, said, “The easy answer is we don’t know.”

The strong scores in Shanghai correlate with strong math scores there, he noted. But in other countries, the highest scores correlated with simply having a bank account. In general, strong financial literacy scores were also highly correlated with students demonstrating problem-solving skills and perseverance. So it may be that the best approach is a focus on math, offering kids some exposure to real world financial decisions and cultivating their will to ask questions and not give up so quickly in all spheres of life.

Among U.S. students, the OECD found that:

  • A worse-than-average 17.8% do not reach even a baseline level of understanding about money concepts, meaning that at best such students will understand an invoice or the difference between a want and a need. They have little aptitude for even simple things like a basic budget or loan.
  • A nearly average 9.4% is a top performer, meaning they understand things like fees and transactions costs and can make financial decisions with no immediate benefit but which will be good for them in the long run.

These are discouraging numbers, especially when weighed against the results in Shanghai, where just 2% of 15-year-olds do not reach the baseline and 43% are top performers—and efforts at formal financial education there are way behind those in the U.S.. With numbers like these, it’s the Chinese in Shanghai that soon may be exporting capitalism.

TIME Financial Education

How We Can Fix the Economy and Save Capitalism

Bringing the underprivileged into the financial mainstream would do no less than save our way of life, argues the activist John Hope Bryant.

The civil rights battles of the 1960s changed the course of American history. But the fight isn’t over. It just has a new front: economic empowerment.

Vast segments of the population “never got the memo” on how to save, invest, find a great job, start a business, and otherwise operate in the realm of free enterprise, John Hope Bryant asserts in How the Poor Can Save Capitalism. An activist for bringing the poor into the financial mainstream, Bryant argues that those who fail to “understand the global language of money” are nothing more than “economic slaves.” So financial education “is a new civil rights issue.”

This isn’t an entirely new thought. After the civil war, President Lincoln established the Freedman’s Savings and Trust with the mission to teach newly freed black Americans about money. Even then, it was apparent that some ability for the poor to borrow at reasonable rates, save and earn a return was in their and the nation’s best interest.

But the Freedman Bank quickly failed through the mismanagement of politicians, and broad-based financial education is only now really beginning to catch on. Bryant describes how his own father missed the money memo. A concrete contractor, he would bid $1.50 for $1 of work and “ended his amazing career dead broke.” He knew about hard work; he just didn’t know how to translate that hard work into economic gain.

When we talk about financial education today we mostly think of teaching young people how and why to budget, manage their credit, shop wisely, live within their means, and begin saving immediately for retirement. They will come of age in a world without safety nets and must take saving seriously at an early age. It’s the surest way to get to financial security and it’s a simple point that I try to make as often as makes sense.

Bryant is on board for all that. It’s why he and his book are even on my radar. But he makes a point not often made: to the underprivileged, basic concepts like saving for retirement and managing credit wisely are of another world; this group just needs a bank account to avoid predatory check-cashing services, role models from the neighborhood to show them how to start and build a small enterprise, and a few modest money successes to build their confidence. This is financial education at a very basic level.

Globally, half of adults totaling some 2.5 billion do not have a formal bank account. This shuts them off from credit and savings opportunities that you may take for granted; it hinders their rise to a better life and squanders the potential to convert hundreds of millions of people from economic drains into economic contributors. Some 40 million of these unbanked are in the U.S., and by reaching them Bryant believes we can lift them out of poverty and resuscitate our moribund economy. His plan includes a variety of near-term tax and other incentives that, naturally, have a cost. But Bryant would ask: what’s it worth to save the economy?

Financial inclusion for the poor is not the same issue as financial education for all kids. But the two are closely linked. All young people should be exposed to money basics like, budgets, credit cards, college loans, compound growth and inflation. Over the past decade, a global movement has emerged pushing for just that. But before any of these lessons will make any sense to the very important underprivileged among us, these people must first be brought into the mainstream where they can secure micro loans at a reasonable rate and stop giving away what little they have to payday lenders. It’s the right thing to do, and if Bryant is right it will do nothing less than save capitalism.

 

 

MONEY

Closing Out Your Old 401(k)

Q: I got a check closing out my old 401(k). Can I add it to my new 401(k) without penalty? — Matt Gould, New Cumberland, Pa.

A: Yes, and act fast.

Unless you put the money in another retirement account within 60 days of receiving the check, you’ll owe taxes on the sum, plus a 10% early-withdrawal penalty if you’re not yet 59½, says John Piershale, a financial planner in Crystal Lake, III.

Related: Will you have enough to retire?

One hitch: The old plan usually withholds 20% of your account for taxes, so when you make the deposit you’ll have to use other cash to cover that 20% shortfall.

Assuming you get this done within 60 days, you’ll get the withheld money back at tax time.

If your new 401(k) plan doesn’t accept rollovers or will make you wait too long to deposit the funds, put the money in an IRA, advises Lancaster, Pa., planner Rick Rodgers. You can always move it into a 401(k) later.

TIME Personal Finance

Why Millennials Would Choose a Root Canal Over Listening to a Banker

Bank Investor Returns Seen Rising to Most Since 2007 on Test
Pedestrians walk past a Citigroup Inc. Citibank branch in New York, U.S., on Tuesday, March 5, 2013. The six largest U.S. banks may return almost $41 billion to investors in the next 12 months, the most since 2007, as regulators conclude firms have amassed enough capital to withstand another economic shock. Photographer: Victor J. Blue/Bloomberg via Getty Images Bloomberg—Bloomberg via Getty Images

Fed up with indifference, Millennials envision a bank-free existence.

It’s symbolically important that a dozen or so former bank buildings around the country—some road kill from the recession—have been turned into thriving nightclubs. The young adults who frequent these dens would tell you it’s a far better use of the space; they have little interest in banks, period.

You don’t have to look hard to find out why. Millennials have a whole new set of money issues that banks do not address in a relevant way: this generation is loaded with student debt that’s difficult to refinance; grossly underemployed without access to capital to start a business, or three; and hungry for financial guidance that isn’t self serving. Millennials also want to conduct their affairs on a smartphone, not go to a bank branch—ever.

This generation does things differently. Couples are quicker to mingle their financial accounts. They are more likely to piece together a career through four or five jobs. They share cars and apartments. They are ultra connected and enjoy teamwork and collaboration, and value experiences and meaningful employment above high pay. All this has huge and largely ignored implications for banks that just want to issue a mortgage, auto loan, or credit card. From the Millennials’ point of view, they don’t get it.

A third of Millennials say they will lead a bank-free lifestyle in the near future, according to new research from Scratch, an in-house unit of Viacom that consults with brands. Half of Millennials say they are counting on startup firms to overhaul how banks work, and 75% say they would prefer financial services from the likes of Google, Amazon, and PayPal. They expect technology companies to change the industry—not banks.

This is a thunderous warning shot for banks, which Millennials—our largest generation at around 80 million—see as a cookie cutter industry with little interest in innovation or differentiation. A third of young adults are ready to switch banks in the next 90 days; 53% say all banks are the same. Visiting a branch is like getting a root canal: 71% of Millennials would rather go to the dentist than listen to a bank’s message.

With numbers like that you might expect they’d also stay away from former bank buildings—just because. Then again, Millennials may find a level of catharsis partying in places like The Vault in Sacramento, Calif., (formerly Bank of Italy), Capitale in New York (formerly Bowery Savings bank), and Bond in Boston (formerly a Federal Reserve building). It feels a little like grave dancing.

“None of the big banks have made a public shift from selling credit to empowering human endeavor,” says Scratch executive vice president Ross Martin. He believes there is an opportunity for banks that can flip the switch. Millennials grew up believing they were special and could not be stopped. They’ve been pummeled by reality but yet retain a high level of confidence and optimism. According to Scratch research:

  • 73% of Millennials say when they decide to do something no one can stop them.
  • 80% say they are sure they will get what they want in life.
  • 82% own their future; saying when they fail at something it’s their fault—not someone else’s.

“This generation needs someone to bet on them,” says Martin. It’s not enough for a bank to be reliable, trustworthy, green, and community oriented. Bankers need innovative products and services that will help Millennials carve out their unique path to success. They need micro loans and a new way to assess creditworthiness that does not revolve around a single full-time employer. They need impartial counseling on how to save and invest. They’d flock to a bank that felt more like Starbucks or Apple than a hospital operating room.

Rethinking lending and other financial services presents an imposing challenge. Millennials rank the four largest banks among the 10 least loved brands in America, Scratch found. Says Martin: “We’ve never seen numbers like that.” So banks can either figure it out and capture this generation’s heart, or watch the kids dance on their grave.

 

TIME Personal Finance

This Quiz Showed Me Just How Cheap I Really Am

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Getty Images

Maybe saving money at every turn isn't the right approach. Smart spending on your happiness and relationships provide much needed balance.

I’ve always known that I am cautious with money. I just didn’t know how cautious—possibly to a fault—until I spent a few minutes with a new online assessment tool Your Money Mind.

The tool centers on a seven-question quiz, and the goal is to determine what motivates your spending decisions. The answers fall into three categories: fear of making mistakes and hurting your long-term financial health; happiness derived from spending on things you want; and commitment demonstrated by spending in ways that enhance your relationships.

Ideally, you want some balance among the three. In taking the quiz a half-dozen times, however, I found a consistent and decided skew toward the fear factor. My primary goal, the quiz showed me, is to seek safety and security. Happiness clocked in second; commitment a distant third. Here are three typical questions that pulled back the curtain on my extreme frugality:

  • Your best friend is planning a wedding all the way in the Caribbean. Do you feel: excited about the adventure, frustrated because of the cost, or mixed but willing to go anywhere to support your friend? C’mon, man. Just stay in town.
  • You’re asked to buy a raffle ticket. Do you say: sure it’s for a good cause, no thanks I never win, or yes I am due for a big score? Sorry, I don’t play lotto either.
  • Your spouse wants to take up golf. Do you buy: a set of used clubs because this will never last, a new set of clubs for the both of you, or a new set plus private lessons just for your spouse? Honey, I love you. But there’s a brand new archery set collecting dust in the garage.

I don’t think of myself as cheap, or uncaring. But this game clearly does. Not that I’m taking it too seriously. A one-size-fits-all quiz is far from perfect. According to the assessment, I am “slow to make decisions and as result may miss opportunities.” Nonsense. I decided right away that the Caribbean wedding was a frustrating expense—but that, yes, I must go. And when it comes to really big expenses like buying a house there is no such thing as too slow. When you are ready, you are ready. If someone swoops in, so be it. Other houses will be there.

Still, I expect that this assessment of my money mind will alter my approach to financial decisions in some ways. It turns out that saving money isn’t the only thing that matters. Maybe I make too many personal sacrifices in the name of security. Maybe I over emphasize delayed gratification. Maybe I should, well, live a little. That’s what the quiz designers at United Capital Private Wealth Counseling concluded. They seem to be nudging me towards that African safari we’ve long dreamed about. But you know, I believe I’ll just think about that a while longer.

 

 

 

 

TIME Personal Finance

Jacking Up Your Crippling Debt Just Got a Lot Easier

money
Getty Images

Now you can instantly own the things you see on TV and read about in magazines

Americans haven’t been much good at waiting for things since banker A.P. Giannini popularized consumer credit a century ago. But what began as productive acceleration—a home to live in and build wealth; a car to get to work in and get ahead—has turned into alarming warp-speed consumption. It’s one thing to instantly hail a cab through the Uber app on your smartphone or get a meal delivered in 45 minutes via Seamless. You may actually need those things. But what about a pair of fetching high heels you read about in Vogue or the trendy home décor you see on a TV show?

Through technology you can have those things right now too. Yet things you want—not need—rightly belong in another basket, one that you consider for more than a nanosecond and for which you have put away money rather than purchase with plastic. This is the new world we live in, though. The cable station TBS and the retailing giant Target have just teamed up to allow viewers of Cougar Town, a popular sit-com starring Courtney Cox, to instantly buy dozens of items they see while watching the program. Check out the first shoppable episode archived at TBS.com/Target.

In another blow to delayed gratification, MasterCard and publisher Conde Nast last fall unveiled technology that will allow anyone reading Wired, and eventually Vogue, Vanity Fair and other magazines on a tablet to instantly purchase the items they read about by tapping their screen. This isn’t just for advertised goods, but for items described in editorial text as well. You can own that little black dress before finishing the sentence.

eBay and Amazon are testing same-day service. Wal-mart is looking at the concept. Google Shopping Express has a pilot program and hopes to deliver goods within hours of ordering from the likes of Walgreens and Toys ‘R’ Us. As Matt McKenna, the founder and president of Red Fish Media, a digital and mobile marketing agency, told The New York Times: “The whole world right now is about instant gratification.”

MasterCard is in hearty agreement. In announcing the deal with Conde Nast, Garry Lyons, chief innovation officer, said, “Today’s consumer should not have to think about the shopping process. When they see what they want, they should be able to get it as quickly as possible.” Let’s allow that to sink in for a moment. Do we really want impulse shopping at the speed of light?

Certainly, this isn’t what Giannini had in mind when he opened the doors to broader consumerism. The convenience of instant purchase cannot to be denied, but neither can the likely negative impact on individuals’ finances—and in the case of young consumers, their raw ability to develop sound money skills.

Decades of research show that impulse buying leads to difficult levels of personal debt, and that delaying gratification is among the most fundamental building blocks of smart money management. As this study shows, items you don’t need become less attractive with each day that you avoid them. Live by the rule that you’ll wait 24 hours before any non-essential purchase and you will wind up spending much less money—and not missing many of the things you didn’t buy.

Finally, how can I write about the importance of delayed gratification without mentioning the famous Stanford University marshmallow study in the 1960s? This bellwether study, repeated often and captured here in precious fashion, offered a group of youngsters a marshmallow and a choice: wait 15 minutes before eating the treat and they would be rewarded with a second marshmallow. Some kids caved quickly; others waited and earned the extra marshmallow.

Researchers tracked these kids for years and found that those who were able to wait for the bonus marshmallow had fewer behavior problems, lower stress, stronger friendships, and higher academic aptitude. Think about that the next time you are scrolling an article on your iPad and, right now, simply must have a fabulous new hat described in the text.

TIME Retirement

Even More Proof Americans Think It’s a Great Time to Retire

Jonathan Kitchen—Getty Images

A new survey by the Employee Benefit Research Institute finds that 18 percent of Americans are "very confident" they'll live comfortably when they retire, up 5 percent from last year, thanks to planning like a 401(k) plan or IRA

The evidence keeps pouring in: last year’s torrid stock gains have revitalized the retirement dreams of many Americans. After five years of rock-bottom readings, new data show that confidence in a secure retirement has lifted for workers and retirees alike.

Among workers, 18% now say they are “very confident” they will live comfortably in retirement, up from 13% last year and similar readings each previous year since the recession, according to the 2014 Retirement Confidence Survey from the Employee Benefit Research Institute. Some 37% of workers are “somewhat confident”—also a post-recession high-water mark.

Among retirees, 28% now say they are very confident about maintaining their lifestyle, up from 18% last year; 39% say they are somewhat confident. For both workers and retirees, confidence remains short of peak levels reached before 2007. For example, 79% of retirees were very or somewhat confident about their future just before the crisis—a difference of 12 percentage points.

The reversal is heartening news and ads heft to recent reports showing that retirees, especially, are feeling better than they have in years. Fewer are postponing retirement and more say they believe the stock market will continue to rise and that interest rates will rise as well, providing a higher level of secure income.

But let’s not declare victory over hard times just yet. Two distinct sets of savers seem to be driving the gains in confidence: those with high household income and those who participate in a formal retirement plan like a 401(k) or IRA, EBRI found. This uneven advance may help explain why the percentage of the most forlorn workers and retirees–those saying they are “not at all confident” about retirement security–remains stuck at recession levels.

Nearly 50% of workers without a retirement plan are not at all confident about their financial security, compared with about 10% of those with a plan. Workers in a formal plan are more than twice as likely to be very confident (24%, vs. 9%) about retirement, EBRI found.

The biggest impediments to saving seem to be the high cost of day-to-day living and accumulated debt, the survey found. More than half of workers say daily expenses consume all their income. Meanwhile, only 3% of workers that describe debt as a major problem feel comfortable about retiring while 29% of those who have few debt issues say they are confident in their ability to retire comfortably. That’s hardly a surprise. But it drives home the importance of getting control of your debts before retiring.

TIME Personal Finance

U.S. Millionaires Club Grows To Almost 10 Million

A record 9.63 million households had a net worth of $1 million or more last year, a 58 percent increase from 2008. The number of affluent households worth between $100,000 and $1 million also went up in 2013

There was a record 9.63 million households in the U.S. with a net worth of $1 million or more last year, according to new market research.

The number of millionaire households surged 58 percent from a dip in 2008, when there were 6.7 million households worth $1 million or more (not including primary residences). In 2007, there were 9.2 million households worth that amount, reports market research firm Spectrem Group

At the wealthiest levels, there were 132,000 households with a net worth of $25 million or more, up from 125,000 in 2007, before the recession.

The number of affluent households worth between $100,000 and $1 million was also up in 2013 from a year earlier. There were 28.97 million households in that category last year, a jump of 500,000 from 2012.

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