TIME Saving & Spending

Here’s Exactly How You Waste $1,700 Every Year

Money in jeans pocket
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If you do this, you might as well be lighting a pile of money on fire

Traffic congestion isn’t just a frustrating part of commuter life; it’s expensive. A new report finds that every household with a car-commuting member loses $1,700 a year in time and gas burned thanks to bumper-to-bumper traffic.

If you think that’s bad, it’s going to get worse: Researchers predict that annual cost will soar to $2,300 by 2030. Between now and then, the total tab adds up to $2.8 trillion.

The Centre for Economics and Business Research found that last year alone, wasted time and gas from sitting in traffic cost us $78 billion, and it warns that we’ll face greater congestion in the future because our population is growing and we’ll buy more cars, adding to the rush-hour standstill. (The study was commissioned by INRIX, a company that makes traffic-navigation software.)

Researchers say traffic jams also generate indirect costs. The group estimates that $45 billion worth of costs incurred by freight stuck in traffic gets passed along to consumers, and the carbon from the gas we burn has an annual cost of $300 million.

An expanding population and economy are the main culprits, says INRIX CEO and cofounder Bryan Mistele. More people and a higher GDP make car ownership more ubiquitous and more affordable.

And while you might think recent decreases in the price of gas might help, researchers say this actually hurts our traffic prospects in the long run: Cheaper gas means people are more willing to plunk down the money for a car and more likely to get behind the wheel, rather than considering alternatives like consolidating trips or carpooling. This, of course, means more vehicles clogging our roads at any given time.

According to the American Automobile Association, idling burns about a gallon of gas an hour even if you don’t go anywhere. So, what can the average commuter do?

Unfortunately, the answer for many right now is “not much.” Mistele suggests that in-car software or smartphone apps can help by giving drivers real-time congestion information and suggesting alternate routes. (That’s true, but sometimes even an alternate route will leave you staring at brake lights as the clock ticks.) Workarounds like alternative work hours are telecommuting can help, if you’re one of the lucky few who has that kind of job flexibility, but many of us don’t. Alternatives like public transportation, walking or biking will work for some, but will be inconvenient for anybody trying to haul a little league team or a warehouse club-sized package of paper towels across town.

Along with trying to consolidate trips and carpooling, the AAA recommends resisting the temptation to speed up as soon as there’s a bit of a break, then jamming on your brakes again a minute later. “It takes much more fuel to get a vehicle moving than it does to keep it moving,” the group advises, so try to keep a slow and steady pace if you can. Get the junk out of your trunk and remove unused third-row seating to lighten your load and improve your mileage.

TIME Saving & Spending

Young Adults Have Basically No Clue How Credit Cards Work

Close up of teenage girl texting on mobile in bedroom
Cultura/C. Ditty—Getty Images

Cause for concern?

Almost two-thirds of young adults today don’t have a credit card, but maybe that’s for the best, given their sweeping lack of know-how about this common financial tool.

Although Americans of all ages are less reliant on debt since the recession, millennials are far and away the most credit-averse age group. Bankrate finds that, among adults 30 years old and older, only about a third don’t have any credit cards at all. New research from Bankrate.com finds that 63% of millennials, defined as adults under the age of 30, don’t have any credit cards. Among those who do, 60% revolve balances from month to month, and 3% say they don’t bother to pay at all — more than any other age group.

There’s a good possibility that these young adults aren’t irresponsible, though, just misinformed. BMO Harris Bank recently conducted a survey that found almost four in 10 adults under the age of 35 think carrying a balance improves your credit score (it doesn’t). And roughly one out of four say they don’t check their credit score more than once every few years. Perhaps that’s because a third of them think checking your credit score hurts your credit (again, it doesn’t). BMO found that 25% of young adults don’t know even know what their credit score is.

And young adults also think it takes much less to get a good credit score. BMO finds that, overall, most Americans think a score of 660 or higher is a “good” score. In reality, that may have been true pre-recession, but it isn’t anymore. BMO says a good score is one that falls in the 680 to 720 range. Millennials, though, believe than anything above a 625 means you have good credit — a misconception that could cost them in the form of higher interest rates on credit cards and loans.

Millennials are also more likely than any other age group to think that store credit cards don’t count towards your score and that the credit card companies control their scores.

In reality, it’s up to the individual to maintain their credit score, and if millennials continue along not bothering to learn the essentials of credit and how to use it responsibly, they could end up paying for it in the form of lost borrowing opportunities or higher interest rates, Jeanine Skowronski, Bankrate’s credit card analyst, warns in a statement.

“The responsible use of credit cards is one of the easiest ways to build a strong credit score, which is essential for qualifying for insurance policies, auto and mortgage loans, and sometimes even a job,” she says.

MONEY Retirement

Live a Little: Your Kids Will Make Their Own Money

Some of us are saving too much. Really. Here's how to live a little and not shortchange your retirement.

The only thing worse than saving too little is saving too much. Most people who oversave do so at a stiff price in terms of the lifestyle they enjoy. Forgoing travel and nice meals to wind up with a modestly larger estate for heirs is a lousy trade.

Lawrence Kotlikoff, a Boston University economics professor, was among the first to begin raising this red flag. He recognizes that the vast majority of the population is undersaving. The U.S. has one of the lowest savings rates in the developed world, and fewer than one in five retirees has as much as $250,000. Those who diligently save in a 401(k) plan, on the other hand, are doing much better—and along with some others may be overdoing it.

He blames the retirement industry for spooking people into saving too much and shortchanging their daily lifestyle. From his blog:

“Economics has an enormous amount to offer the financial planning industry. But the industry has ignored economics, providing millions of Americans with what I and other economists view as truly awful advice.”

Around 1.5 million Americans will retire each year through 2025, according to the LIMRA Secure Retirement Institute. More than half of preretirees expect to live less comfortably than they had planned. Granted, a small portion of that is due to scrimping and saving—but if you suspect you are in that crowd, here are some ways you can avoid compromising your lifestyle unnecessarily:

Don’t plan for perfection. Most advisers and savings models rely on Monte Carlo simulations to estimate how long your money will last under various scenarios. You want to end up with a plan that gives you an 80% to 90% chance of not outliving your money. Reaching for, say, 97% certainty gets expensive in terms of the money you must save and may leave you cheaping out for no reason.

Writes Christine Fahlund, senior financial planner for T. Rowe Price: “If you are acknowledging that between 10% and 20% of the time, if you use this strategy, that you might run out in advance, now you are in a good place because you are not leaving too much money on the table.” You want to use that money to enjoy retirement, knowing you can always adjust along the way.

Lock in longevity insurance. An increasingly popular strategy is to use a portion of your savings to purchase a deferred fixed annuity, known as longevity insurance. If you spend $200,000 on this insurance at 65, you can begin collecting around $5,000 a month for the rest of your life at age 85. This provides absolute certainty for how long the rest of your savings must last. There are other considerations like emergency funds and potential healthcare costs. But if you have those bases covered, you can go broke throwing an 85th birthday party.

Stop saving at 60 Saving in small increments over three or four decades is smart because compounding works magic in the later years. But any money you put away past the age of 60 will have little time to grow if you retire at, say, 67. Putting away $5,000 a year for seven years, or a total of $35,000, would result in just $44,200 with a 6% average annual return. Is the $9,200 gain over that span worth the all the cruises you passed up?

Delay Social Security Every year you delay Social Security between ages 62 and 70 results in a certain benefit that is 8% higher. In today’s low rate environment, that’s the best deal around and basically means that if you are in good health and do not need the income you can spend more freely in your 60s knowing the added benefit will pay for some of it. Your kids will make their own money. Don’t play it so safe that you fail to enjoy your retirement years.

Related:
Our Retirement Savings Crisis—and the Easy Solution
Boomers Are Hoarding Cash in Their 401(k)s, Here’s a Better Solution
Why Gen X Feels Lousiest About the Recession and Retirement

 

TIME Saving & Spending

6 Ways Coupons Actually Cost You Money

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Michelle Pedone—Getty Images

Turns out, frugal living can have some pretty serious pitfalls

September is National Coupon Month and you’re ready. You have your mobile apps updated, your favorite sites bookmarked, your filing system ready to go — and you should really just stop. Put down the circular for a minute. Yes, coupons can save you money, but if you just assume they’ll always give you the best deal, think again.

Frugal-living bloggers know a thing or two about coupons, so we asked some to identify situations where a quote-unquote great deal can end up taking money out of your wallet. Here’s why and how they say even avid couponers can get tripped up.

You ignore generics. “If an item is available in the bulk section or as a generic store version, it’s usually less expensive than the coupon-discounted price on name brands,” says Sara Tetreault, who blogs at GoGingham.com. For example, she says she recently passed over a coupon for fluoride rinse because even with two bucks off, the price was still more than the house brand. The same holds true for dollar stores. Yes, there’s some stuff you probably don’t want to buy there, but some items will cost less there than at a grocery or big-box store, even with a coupon.

Your deals expire. “I once bought several duplicate coupons for deodorant, thinking I would stock up for several years,” says Julia Scott, founder of BargainBabe.com. She got them from a coupon website, planning to combine them with an in-store sale nearby — but by the time she got those coupons, the sale that would have made the purchase worthwhile had ended. (Scott points out that it’s technically illegal to sell coupons, so sites charge processing fees instead.)
You buy too much. “Another time I stocked up on so much shampoo but ended moving a few months later and it wasn’t worth it to drag the bottles, which cause a huge mess if they open, across the country,” Scott says. Likewise, if you’re buying coupons, some sites will make you buy a certain number to get the deal. “So you often end up buying extra coupons to make the minimum,” she says.
You do construction. “One thing that’s struck me when I’ve watched Extreme Couponing is that the people profiled always have shelf after shelf of products in their basements, and shelves aren’t free,” says Katy Wolk-Stanley, who blogs as The Non-Consumer Advocate. If you have so much stuff that you have to buy other stuff just to keep it corralled, you’re probably not netting the big savings you think you are.
You stockpile, then forget. “I have stocked up on items — plastic wrap, water pitcher filters — and stored them in our basement only to buy them again because I forgot we had them,” Tetreault says. That stockpile is only saving you money if you remember what’s in it — and could you find a better use for that space in your basement where you’re storing giant bricks of paper towels an an army of salad-dressing bottles? “After getting burned by this a few times by this, I stopped buying items that had to be stored outside of the kitchen or pantry and only purchase items we need,” Tetreault says.

You drive out of your way. This is Couponing 101, but it’s still something you can forget in the excitement of a huge sale: If you have to make a separate trip to score your bounty, you’re spending money on gas and wear and tear on your car.

TIME Saving & Spending

The Huge Mistake Most Parents Are Making Now

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Blend Images - Terry Vine—Getty Images/Brand X

Hey kids, hope you’re saving your pennies. They might not have gotten around to telling you yet, but there’s a good chance your parents expect you to fork over your own money to help pay for college. Even if they don’t, there’s a good chance you might have to dig into your own pockets anyway, because even though more parents are setting aside money for their kids’ college funds today, many are still way behind on their savings goals.

A new study from Fidelity Investment finds that just over a third of parents have asked their kids to set aside money to help pay for school, a jump of nearly 10 percentage points in only two years. Keith Bernhardt, vice president of college planning for Fidelity Investments, says there’s a serious disconnect between parents’ intentions and actions.

Even though 85% of parents think kids should kick in something towards their educational expenses, fewer than 60% of those with kids already in their teens have bothered to bring it up, and only 34% have actually come out and asked their kids to contribute.

“With the cost of college rising, it’s increasingly unrealistic for parents to cover the full cost of college,” Bernhardt says. “Families are still struggling. They are on track to save just 28% of their college goal.” Even though more families are saving, and the dollar amounts they are socking away are greater, that 28% is actually a drop compared to previous years.

In spite of these grim numbers, parents today are actually more optimistic about their goals. Respondents told Fidelity they expect to cover, on average, 64% of their kids’ college costs, up from 57% two years ago. What’s more, 44% think they’ll meet these goals, up from 36% in 2007, when Fidelity started conducting the survey.

Most of them won’t, which means today’s generation of kids could be equally unprepared when it comes time to paying for college. “It’s critical that families have open conversations and discuss together how they will approach funding their college education,” Bernhardt says.

Bernhardt calls a dedicated savings vehicle like a 529 plan “a great way for parents to keep their college savings separate from other savings goals.” Today, 35% of parents have a dedicated account for college savings, nearly 10 percentage points more than when the survey began in 2007. About half of the parents in Fidelity’s survey who said they have a plan for retirement savings have a 529 set up, versus only about 10 percent of those who don’t have a savings plan.

Having a strategy for accruing college savings makes a big difference. “Parents with a plan are in better shape with their college savings,” Bernhardt says.

These parents say they’ll cover an average of 71% of their kids’ college costs; those without a plan estimate that they’ll only be able to pay for a little more than half. On average, parents who have planned to save are already almost halfway towards their goal, while those without a plan have only scraped up about 10% of what they want to save. Parents with savings plans have an average of $53,900 socked away, versus the average $21,400 families without a savings plan have amassed.

TIME gratuity

And America’s Best Tippers Live In…

Dollars and cents
Finnbarr Webster / Alamy

Data from the mobile payments company Square reveal some huge regional differences in the generosity of customers

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This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

By Miguel Helft

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New Yorkers are stingy with their cabbies (though not quite as stingy as their neighbors in New Jersey). Indeed, New Yorkers are among the worst tippers in the country in a number of categories — but not when it comes to personal hygiene. For some reason, a visit to the barber or stylist inspires generosity in the Empire State. Folks in Seattle and Portland reserve that same kind of giving spirit, no surprise, for their baristas, and Floridians and Texas extend it to their bartenders.

The observations derive from tipping data collected for FORTUNE by Square, the San Francisco-based mobile payments company, whose smartphone and tablet credit card readers have become a feature of thousands of small businesses across the country.

Interestingly, some tipping trends are fairly uniform across the country. Beauty and personal care professionals tend to receive the biggest tips — on average closer to 20% than to 15%. Taxis and limousines skew lower, with average tips below 16% in many states. Tips at restaurant bars show the most variability, with New York fast-food joints receiving an average of 14.77% and bars and lounges in Texas getting 19.66%.

For the full list, please go to Fortune.com.

TIME Saving & Spending

This 1 Mistake Could Cost You Hundreds of Dollars

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Read the fine print—or pay

Everybody hates bank fees, but what’s even more worse is not knowing when or why you’re getting dinged with those charges.

In a new study, the website WalletHub.com finds the average checking account has 30 different fees that can ding you, and banks aren’t always transparent about the details. “Some banks disclose their fees only after a customer has opened an account,” the site warns. “Others disclose their fees in inconspicuous sections of their websites.”

In particular, those $35 overdraft fees that can be triggered by buying something as small as a cup of coffee can really pack a wallop, yet many of us don’t bother paying attention to the fine print that spells out the details of how financial institutions process transactions. We should, though — a new interactive tool from the Pew Charitable Trusts shows how seemingly insignificant differences in transaction-processing practices can make the difference between having enough money in your account to tide you over until your next payday or getting socked with more than $100 in fees.

Pew looks at three different variables: Letting people overdraw their balances when they make purchases or ATM withdrawals versus declining these attempts, processing transactions in the order they happen versus in order of highest-to-lowest dollar amount and offering a $5 “grace period” threshold before an overdraft fee kicks in versus no threshold.

In a trio of scenarios, Pew follows three hypothetical customers in a scenario many Americans are all too familiar with: navigating the demands of daily expenses with less than $200 until the next paycheck comes. In each case, everything is identical for the variable under scrutiny.

The differences are huge. For instance, a customer whose bank processes transactions in the order they happen winds up getting hit with a single $35 fee — while her alter ego who banks with an institution that practices high-to-low transaction ordering gets nailed for FOUR $35 fees when conducting the exact same transactions.

The other two examples show a similar disparity. For many of us, the difference between ending the month 10 bucks in the black versus more than $80 in the red is huge, especially if our spending habits are such that this happens frequently.

Consumer advocates criticize banks for their overdraft practices, pointing out that the customers who pay the bulk of these charges tend to be younger, minority customers who are poorer to begin with and often don’t have the financial education to know a raw deal when they see one. Fewer than 10 percent of bank customers are responsible for three-quarters of overdraft charges, according to the Consumer Financial Protection Bureau. “[This] is especially pertinent as the CFPB continues to study overdraft and will release new rules based on these studies in 2015,” Pew says.

The CFPB says it’s still looking at how these fees impact bank customers. “We need to determine whether current overdraft practices are causing the kind of consumer harm that the federal consumer protection laws are designed to prevent,” CFPB director Richard Cordray said in a statement last month, saying the agency’s most recent research “compound[s] our concerns” about whether overdraft practices leave vulnerable customers at risk.

Until the CFPB acts, it’s buyer-beware out there, so don’t forget to read the fine print.

TIME Saving & Spending

One (More) Shocking Way Colleges Are Ripping Off Kids

Marking up movie theater popcorn is one thing, but jacking the price of a laptop by more than 100% is another, especially when the would-be buyers are college kids. As students get ready to head to campus, college stores are making laptop shopping a buyer-beware endeavor.

An investigation by DealNews.com found that college bookstores hike prices on the laptops and tablets they sell by an average of 35% over the regular sale prices of retailers like Amazon, Best Buy and Staples. DealNews looked at prices for the cheapest tablets and laptops, plus the most expensive laptops, available at the online stores of five public and one private college, then compared those to back-to-school deals offered by other retailers on identical or very similar machines.

Not every single one is a rip-off, but more than two-thirds are, and some of the markups are pretty egregious.

DealNews finds that the University of Virginia sells a first-generation iPad mini for a staggering 135% more than the $199 sale price the site found on more than one occaision over the summer. The $469 price the campus store is charging is so high that even if you wanted to buy the newer model iPad mini, you could get it straight from Apple for $70 less.

As a matter of fact, if you’re a college kid (or the parent of one), you should probably just steer clear of the campus store entirely if you’re looking for electronics.

“Another example that stood out… were these headphones,” says DealNews’ Louis Ramirez. Although they cost $130 on Amazon, the University of Berkeley Student Store slaps a $49 markup on top of that.

We found other examples in just a cursory browsing of the sites supplied by DealNews, so it’s likely this just scratches the surface of a bigger issue in electronics markups.

One school site is selling a 32G Sandisk USB thumb drive for about $45. Wal-Mart sells the same model for less than $17. A wireless mouse sold by one school for just under $30 sells for half that amount at Office Depot. One Dell laptop “deal” on a school site was no cheaper than the price on Dell’s own website, and two schools’ “sale” prices on iPads are still $30 more than you’d pay at Wal-Mart.

College stores’ problems with electronics sales don’t end with the inflated prices, says Ramirez. While some schools sell up-to-date technology, the site’s investigation found that “others were selling older previous-generation tech at current-generation pricing,” he says. If you think you’re getting a deal, make sure to clarify the model — you could be paying top dollar for last year’s closeout.

And don’t be fooled into thinking that “student discount” translates to the best deal. Just like regular prices, you have to shop around because all student discounts aren’t created equal. “Campus stores aren’t the only retailers that offer student promos,” Ramirez says. As long as you have an active student account (one that ends in .edu), a number of other retailers offer discounts.

TIME Saving & Spending

5 Super Simple Secrets to Save Your on Car Insurance

5 Secrets to Save Your Teen Car Insurance
Jane Sob—Yellowdog Productions

Experts say many people aren’t taking advantage of steps to ease the costs of car insurance when their teens get behind the wheel

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This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

If you’re anything like me, you anticipated the birthday at which your teen was eligible for his (or her) road test with a combination of glee and dread. Glee because – finally – he could get himself to the tutor; she could pick up her little sister; your days as a chauffeur were coming to an end. Dread because you weren’t sure exactly how much adding this new driver to the family policy was going to cost, but you were sure it was going to be a lot.

I’ve been through the experience now twice. And I can tell you that you’re right on both counts. It is incredibly liberating to have another driver in the family. It is also tres expensive! Car insurance costs an average 79% more when a married couple adds a teenage driver to the family policy, according to a new report from InsureQuotes.com. Boys, as you’ve heard, boost costs more than girls – by 92% compared to 67%, respectively. And costs vary widely depending where you live. In New Hampshire, Maine and Rhode Island, premiums jump by more than 100%, while in New York and Michigan the increases are relatively reasonable at about 55%.

Say it with me: Ouch!

For the rest of the story, go to Fortune.com.

TIME Banking

How Big Banks Are Finally Getting It Right

It was known as the $39 cup of coffee: Swipe your debit card to pay for your latte and drop your bank account balance into the red, triggering an overdraft fee in the process. Now, that exercise in frustration might finally be getting a rest: New data shows that more Americans will be able to dodge that $35 bullet, especially if they have an account at a big bank.

Overdraft fees were the bane of customers’ existence, but are a revenue lifeline for banks and credit unions, especially after regulatory credit card crackdowns limited how much they could earn from those. They earned around $32 billion last year off our careless swiping — and that was three years after federal reforms that prohibited financial institutions from automatically subjecting people to the fees kicked in — so these fees seemed destined to stick around, no matter how much we hated them.

New research from financial research company Moebs $ervices finds that something interesting is happening, though: Overdraft fees are there, but increasingly, banks and credit unions are waiving them if the customer just drops into the red by a small amount — say a cup or two of coffee.

We seem to be at a tipping point: Just over half of financial institutions with more than $50 billion in assets waive overdraft fees for small-dollar transactions, with an average cutoff amount of a little over five bucks.

Across all financial institutions, Moebs finds that just over one in four have a small-dollar overdraft waiver in place, with an average cutoff amount of $7.40, although cutoffs range from a single dollar all the way up to $50.

Smaller banks and credit unions are least likely to extend these waivers for low-amount overdrafts: Only about 15% of institutions with $100 million or less in assets offer them, and just under 11% of credit unions.

CEO and economist of Moebs $ervices Mike Moebs says that although smaller institutions might not have these policies on paper, it’s likely that they might extend waivers when customers call and ask.

Aside from the threat of further regulation, Moebs says bank technology has improved so institutions can get more detailed with their parameters. He says consumers have been demanding more customer-friendly features (and regulators have been listening to their complaints).

The dearth of paper checks helps, too, he says. “[The] lack of float due to only about 10% of payment system is paper checks is another factor.” With money moving from one place to another pretty much in real time, it’s easier for banks to be a little more flexible.

There are some distinct regional differences in Moebs’ data. Kentucky and New Hampshire residents have better than a 50% shot of getting their small-dollar overdrafts waived, versus fewer than a 20% chance in Florida, Maryland, Nevada and Wisconsin. There’s a similar split among metro areas, ranging from zero in Denver to 44% in San Antonio. (The overall averages are higher because banks in rural areas are more likely to offer waivers than those in urban or suburban settings.)

Here, Moebs says local competition is a contributing factor. If one bank offers a waiver, especially one with a higher amount, its competitors will feel pressure to follow suit.

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