MONEY Investing

Why We Feel So Good About the Markets—and So Bad—at the Same Time

Investor and retirement optimism is at a seven-year high. Yet most people believe their personal income has topped out. What gives?

Investors are feeling better about the markets than at any time since the financial crisis, a new poll shows. But most also believe they have topped out in terms of earning power, and that the Great Recession continues to weigh on their finances.

Buoyed by stronger GDP growth, record high stock prices, and a falling unemployment rate, investors in the third quarter pushed the Wells Fargo/Gallup Investor and Retirement Optimism index to its highest mark since December 2007. Yet 56% of workers expect only inflation-rate pay raises the rest of their career, and half believe they are destined to end up living on Social Security benefits.

“At the macro level, people are feeling pretty good,” says Karen Wimbish, director of Retail Retirement at Wells Fargo. “But at the personal level, the Great Recession left a deeper wound than a lot of us realize.” The average worker believes that wage growth, which has been stagnant for decades, won’t rebound before they retire. This feeling is especially acute among the upper middle class, those making more than $100,000 a year.

The gloom is partly attributable to the national discussion about wage inequality and some evidence that only the top 1% is getting ahead. It may also reflect a sense that the U.S. is losing ground to the faster growing developing world and experiencing an inevitable relative decline in standard of living.

The Federal Reserve has been battling anemic growth for seven years through an aggressive stimulus program that includes rock-bottom short-term interest rates. This week, the two Fed governors most outspoken and critical of this policy confirmed that they would retire next year, essentially putting the Fed all-in on a growth and jobs agenda with diminishing concern over inflation and underscoring the sense of stagnation so many feel.

Most investors polled (58%) said they are doing about as well or worse than five years ago. Similarly, 63% said they are saving about the same or less than five years ago. These figures are essentially unchanged from two years ago, suggesting that investors have not made much financial headway in the recovery. Roughly half said they are still feeling the effects of the recession.

“Is it real?” Wimbish says. “Or is it emotional?” If our prospects are really so dire, how do you explain record high stock prices, strong quarterly growth, a pickup in consumer borrowing, and an improving jobs picture?

Whatever is causing the gloom, one result is that nearly a third of investors continue to shun the stock market. Those with less than $100,000 in assets avoid stocks at twice the rate as those with more than that level of savings. Arguably, those with fewer assets are precisely the ones who need to be in stocks to take advantage of their superior long-run gains and build a nest egg.

They may be worried that they have missed the rally and that it is too late to get in. But the overriding concern—expressed by 60%—is that stocks are just too risky. So as the average stock has more than doubled from the bottom and recovered all its losses, and as those who remained true to their 401(k) contribution plan through thick and thin have become flush with gains, the truly risk averse have lost valuable time. Seeing this now may be part of what makes them so glum.

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.

TIME

Time to Kiss Your Free Checking Account Goodbye

Your checking account could be bleeding you dry

Just when you thought banks couldn’t get any stingier, the number of banks offering free checking has fallen below 50%, a drop of around 10 percentage points in only a year. Now, want to hear the bad news?

Depending on your usage habits and how much money you have, the price you pay for that account could be an eyebrow-raising $700-plus.

As of June, roughly 48% of banks offered free checking, according to financial research company Moebs $ervices, compared to just over 58% a year earlier. “The Banks are exiting Free Checking because it is too costly,” says Mike Moebs, CEO and economist of Moebs $ervices. The number of credit unions offering free checking fell by a fraction of a percentage point, but nearly 80% still offer free checking.

Not only is free checking harder to find, but a new survey from personal finance site WalletHub.com finds that the privilege of having an account can run into the hundreds of dollars — and banks make the most off customers who are financially struggling or who travel to or send money to other countries most often.

According to a new analysis of 65 different checking accounts offered by the 25 biggest banks, the average annual cost for a checking account runs for just under 18 bucks — that’s for “old school” customers who don’t bank online, use paper checks, never use another bank’s ATM or overdraw their accounts — to $499 and change for the customer segment WalletHub characterizes as “cash-strapped;” that is, those who overdraw and don’t have direct deposit. The bite is the most serious for these customers who have the M&T Free Checking account; WalletHub says this would cost a person with these usage patterns a whopping $735.

Within those averages, though, there’s a lot of variability, and WalletHub points out that just because a bank may offer a good deal for one customer segment doesn’t mean that they’ll be equally affordable for customers with different banking habits.

For instance, it finds that the First Republic Classic Checking account is the best deal at a (still pricey) $185 or so a year for internationally-oriented customers, but it’s the most expensive of the bunch for the consumer groups WalletHub classifies as “young and high-tech” and “everyday Joe,” with annual costs of roughly $300 and $397, respectively. Customers whose living or job situations change drastically could find that the bank account they always counted on suddenly becomes a money pit.

Overall, WalletHub dubs USAA the most affordable in its checking account offerings, with, Capital One and Union Bank, respectively, behind it. The priciest overall choice is M&T Bank, and the second-most-expensive Fifth Third.

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.

MONEY Saving

This App May Let You Retire on Your Spare Change

Acorn App
Acorn

The new Acorns app rounds up card purchases and invests the difference for growth, with no minimums and low fees.

Americans spend $11 trillion a year while saving very little. So it makes sense to link the two, as a number of financial companies have tried to do over the past decade. The latest is the startup Acorns, which hopes to hook millennials on the merits of mobile micro investing over many decades.

Through the Acorns app, released for iPhone this week, you sock away “spare change” every time you use your linked credit or debit card. The app rounds up purchases to the nearest dollar, takes the difference from your checking account, and plunks it in a solid, no-frills investment portfolio. So when you spend, say, $1.29 for a song on iTunes, the app reads that as $2 and pushes 71¢ into your Acorns account. With a swipe, you can also contribute small or large sums separate from any spending.

The Acorns portfolio is purposely simple: Your money gets spread among six basic index funds. The weighting in each fund depends on your risk profile, which you can dial up or down on your iPhone. More aggressive settings put more money in stocks. But you always have some money in each fund, remaining diversified among large and small company stocks, emerging markets, real estate, government and corporate bonds. The app will be available for Android in a few weeks and through a website in a few months.

Why Millennials Are the Target

Micro investing via a mobile device clearly targets millennials, who show great interest in saving but have been largely ignored by financial advisers and large banks. Young people may not have enough assets to meet the minimum requirements of big financial houses like Fidelity, Vanguard, and Schwab. With Acorns, there are no minimums. There are also none of the commissions that can render investing in small doses prohibitively expensive. “We want small investors who can grow with us over time,” says Acorns co-founder Jeff Cruttenden.

This approach places Acorns in the middle a rash of low-fee, online financial firms geared at young adults—including Square, Betterment, Robinhood, and Wealthfront. Such firms hope to capitalize on young adults’ penchant for tech solutions and lingering mistrust of large financial institutions. Cruttenden says a third of Acorns users are under age 22. They like to save in dribs and drabs—and manage everything from a mobile device.

Acorns charges a flat $1 monthly fee and between 0.25% and 0.5% of assets each year. The typical mutual fund has fees of 1% or more. Yet many index fund fees run lower. The Vanguard S&P 500 ETF, which invests in large company stocks, charges just 0.05%. If you have a few thousand dollars to open an account, and the discipline to invest a set amount each month, you might do better there. But remember that is just one fund. With Acorns you get diversification across six asset classes—along with the rounding up feature, which seems to have appeal.

Acorns has been testing the app all summer and says the average account holder contributes $7 a day through lump sums and a total of 500,000 round ups. Cruttenden says he is a typical user and through rounding up his card purchases has added $521.63 to his account over three months.

A New Twist on an Old Concept

Mortgage experts tout rounding up as a way to pay off your mortgage quicker. On a $200,000 loan at 4.5% for 30 years your payment would be $1,013.38. Rounding up to the nearest $100, or to $1,100, would cut your payoff time by 52 months and save you $26,821.20 in interest. Rounding up your card purchases works much the same way—only you are accumulating savings, not cutting your interest expense.

Bank of America offers a Keep the Change program, which rounds up debit-card purchases to the nearest buck and then pushes the difference into a savings account. Upromise offers credit card holders rewards that help pay for college. But Acorns’ approach is different: the money goes into an actual investment account with solid long-term growth potential.

One possible drawback is that this is a taxable account, which means you fund the Acorns account with after-tax money. Young adults starting a career with a company that offers a tax-deferred 401(k) plan with a match would be better served putting money in that account, if they must choose. But if you are like millions of people who throw spare change in a drawer anyway, Acorns is a way to do it electronically and let those nickels, dimes, and pennies go to work for you in a more meaningful way.

Read more on getting a jump on saving and investing:

 

MONEY Investing

35 Smart Things to Do With $1,000 Now

Andrew B. Myers

These moves can make you smarter, healthier, happier—and richer.

1. Buy 1 share of Priceline Group THE PRICELINE GROUP INC. PCLN -0.2127%
The fast-growing travel biz has just 4% global market share, leaving plenty of room to expand.

2. Buy 10 shares of Apple APPLE INC. AAPL 0.6393%
The Mac daddy has a dividend yield of 1.9% and a cheap price/earnings ratio of 14.1.

3. Buy 50 shares of Ford FORD MOTOR CO. F -2.1178%
The automaker has a P/E of 10.5, a 2.8% dividend yield, and a record (5%) market share in China.

4. Grab the last of the great TVs
While they’re considered superior to LCDs—for having deeper blacks and any-angle viewing—plasma TVs haven’t been profitable enough for manufacturers, so most are curbing production. LG is one of the last in the game, and its ­60-inch 60PB6900 smart TV (around $1,000) has apps to stream digital content and 3-D performance besting its peers. Get the extended warranty, since a service company would have to replace the TV if parts are no longer available.

5. Kick tension to the curb with yoga…
Half of workers say they’re less productive due to stress, the American Psychological Association found; worse, research from the nonprofit Health Enhancement Research Organization found that health care expenses are 46% higher for stressed-out employees. Regularly practicing yoga can help modulate stress responses, according to a report from Harvard Medical School. Classes cost about $15 to $20 a pop, which means that $1,000 will keep you doing downward dog twice a week for about half a year.

6. …Or acupuncture
A recent article in the Journal of Endocrinology found a connection between acupuncture and stress relief. Your insurer may cover treatment, but if not, sessions run $60 to $120 a piece. So you can treat yourself to around 10 to 15 with $1,000.

7. …Or biking
Research suggests that 30 minutes a day of moderate exercise can lower levels of the stress hormone cortisol. So take a bike ride after work. The ­Giant Defy 2 ($1,075) is one of the best-value performance bikes out there, Ben Delaney of BikeRadar.com says.

8. Give your kids ­a jump on retirement
Assuming your kids earn at least a grand this year from a summer job or other employment, you can teach them the importance of saving for retirement by depositing $1,000 (or, if they earn more and you’re able, up to $5,500) into Roth IRAs in their names. Do so when the child is 17, and it’ll grow to over $18,400 by the time he’s 67 with a hypothetical 6% annual return, says Eau Claire, Wis., financial planner Kevin McKinley.

9. Get over your midlife crisis
Would getting behind the wheel of your dream vehicle make you feel a teensy bit better about reporting to a 30-year-old boss? Then sow your oats—for 24 hours. Both Hertz and Enterprise offer luxury rentals; you can find local outfits by searching for “exotic car rental” and your city. Gotham Dream Cars’ Boston-area location rents an Aston Martin Vantage Roadster for $895 a day.

 

Andrew B. Myers

10. Iron out your wrinkles
For a safer and cheaper alternative to going under the knife, try an injectable dermal filler. Dr. Michael Edwards, president of the American Society for Aesthetic Plastic Surgery, recommends Juvéderm Voluma XC, which consists of natural hyalu­ronic acid that helps smooth out deep lines and adds volume to cheeks and the jaw area. It lasts up to two years and costs near $1,000 per injection.

11. Live out a dream
Play in a fantasy world with these adult camps, which cost in the neighborhood of $1,000 with airfare: the four-day Adult Space Academy in Huntsville, Ala. ($650); the Culinary Institute of America’s two-day Wine Lovers Boot Camp in St. Helena, Calif. ($895); or the one-day World Poker Tournament camp in Vegas ($895).

12. Hire someone to fight with your folks
Is your parents’ home bursting at the seams with decades of clutter … er, memories? Save your breath—and sanity—by hiring a profes­sional organizer (find one at napo.net) for them. Mom and Dad may listen more to an impartial party when it comes to deciding what to toss, says Austin organizer Yvette Clay. Focus on pile-up zones, like the basement, garage, and living room (together, $500 to $1,500).

13. Launch you.com
A professional website will help you stand out to employers, says Jodi Glickman, author of Great on the Job. Buy the URL of your name for about $20 a year from GoDaddy and find a designer via Elance​.com or Guru.com; $1,000 should get you a nice-looking site with a bio, blog, photos, and portfolio of your work.

14. Become a techie—or just learn to talk to one
Technical knowledge isn’t just for IT folks anymore. “Digital literacy is becoming a required skill,” says Paul McDonald, a senior executive director of staffing agency Robert Half International. Get up to speed with one of these strategies. Understanding how websites, videogames, and apps are built is useful to almost any job dealing in big data or search algorithms, says McDonald. Take a course in programming for nonprogrammers at ­generalassemb.ly ($550), then get a year’s subscription to Lynda.com ($375) for more advanced online tutorials.

15. Get tweet smarts
Take a class to give you expertise—and confidence— in using social media and analyzing metrics. MediaBistro’s social media boot camp includes five live webcast sessions for $511, and you can add four weeks of classroom workshops with pros for $449. #olddognewtricks

16. Buy the Silicon Valley gear
Need a new laptop now that you’re a tech whiz? To best play the part, go with Apple’s MacBook Air ($999) or its big brother the MacBook Pro ($1,099). With a long battery life and powerful processors, the Air and Pro are the preferred picks for developers, coders, and designers, says PCmag.com’s Brian Westover.

David Kilpatrick—Alamy

17. Save your cellphone camera for selfies
Your most important memories shouldn’t be grainy. Get a digital SLR camera featuring a through-the-lens optical viewfinder, “which is still essential for shooting action,” says Lori Grunin of CNET. Her pick, Nikon’s D5300 ($1,050). Its 18–140mm lens produces sharp images shot quickly enough for most personal photography.

18. Class up your castle
Interior decorating can cost a fortune—insanely priced furnishings, plus a 30% commission. Homepolish.com, launched in 2012 and now in eight metro areas, upends the model. The site’s decorators charge hourly ($130 or less) and suggest affordable furnishings.

19-21. Hire a good manager
With only 10 C-notes, your mutual fund choices are limited by minimum investment requirements. Besides simply letting you in the door, these actively managed funds have relatively low fees and beat more than half their peers over three, five, and 10 years:
Oakmark Select large blend; 1.01% expenses
Schwab Dividend Equity large value, 0.89% expenses
Nicholas large growth, 0.73% expenses

22. Primp the powder room
Get a new sink and vanity for a refresh of your guest bathroom without a reno. You can find a combined vanity and sink set for under $650; figure another $100 to $200 each for faucet and labor.

23. Replace light fixtures
Subbing in new lighting in the dining room, the front hall, and possibly the kitchen can take 20 years off your house, suggests Pasadena realtor Curt Schultz. You’re likely to pay $100 to $400 per fixture, plus $50 to $100 for installation.

24. Swap out the front door
It’s the first impression guests and buyers have of your home. Look for a factory-finished door—possibly fiberglass if it’s a sunny southern or western ­exposure without an overhang. You could pay $1,000 for the door and the installation.

25. Catch up on retirement.
If you’re 50 or older, you can put in $1,000 more in an IRA (above the $5,500 normal limit) each year. Do so from 50 to 65, and you’ll have $27,000 more in retirement assuming you get a 6% annual return, per T. Rowe Price.

Ingolfur Bjargmundsson—Getty

26. Fly solo to see the Northern Lights
As more companies package deals to Iceland, prices are dropping, says Christie McConnell of Travelzoo.com. You could recently find four-night packages with airfare, hotel, and tours for $800 a person. Go in late fall to see the Northern Lights.

27. Hit the beach in Hawaii
The islands are still working through the overbuilding of hotels that began before the recession, says Anne Banas of Smartertravel.com. Three-night packages for fall with hotel and airfare start around $500 a person from the West Coast.

28. Give your car a makeover
You can’t get a new set of wheels for 1,000 smackers, but you can make your old car feel new(ish) again with this slew of maintenance fixes: A new set of tires ($600), a full car detail ($100), new wiper blades ($50), a wheel alignment ($150), and a synthetic oil change ($100). You’ve likely been putting these off until something breaks, but there’s good reason to do them all at once. Besides giving your car a smoother ride, “this preventative maintenance will help you nurse your car longer, while also saving some gas,” says Bill Visnic, senior editor at Edmunds.com. New car smell not included.

29. Make like (early) Gordon Gekko
Wall Street buyout firms KKR and Carlyle are inviting Main Street investors into private equity funds for $10,000 and $50,000, respectively. Want to play the game with less scratch? Invest $1,000 in Blackstone GroupBLACKSTONE GROUP LP, THE BX -1.0996% . Shares of the private equity giant have a 5.1% yield and a cheap P/E of 8.5, plus Blackstone is a top-notch alternative-asset firm, says Morningstar’s Stephen Ellis.

30-32. Put your donations to work where they’ll do the most good
Groups that focus on improving healthcare in the developing world have some of the best measurable outcomes of all charities, says Charlie Bresler, CEO of The Life You Can Save. Many of the supplies used to improve and save lives, like vaccines or mosquito nets, cost pennies to produce, he says, and surgeries that cost tens of thousands in the U.S. can be performed for a few hundred bucks overseas. Three great organizations working in those areas: SEVA Foundation, which works to prevent blindness; Deworm the World, which seeks to eradicate worms and other parasitic bacterial disease; Fistula foundation, which provides surgical services to women with childbirth injuries.

33. Defend the fort
An alarm system can pare as much as 20% from a homeowner’s policy, and the latest ones have neat bells and whistles. Honeywell’s LYNX Touch 7000 (starting at $500, plus $25 to $60 a month) links to four cameras that stream live video. It randomly switches on lights to make an empty home look occupied—and can detect a flood and shut down water.

34. Enjoy a buffet of entertainment
The average cable bill is expected to hit $123 a month in 2015—or $1476 a year—according to the NPD group. What if we told you you could cut the cord, redeploy $1,000 of that to getting two years worth of the following digital libraries, and still bank about 500 bucks? Yeah, we thought so.
For old movies and TV shows…get Netflix ($7.99-$8.99/month). Analysts estimate the company’s library is much larger than that of Amazon Prime.
For current TV shows…watch via Hulu ($7.99/month), which offers episodes from more than 600 shows that are currently on air.
For music…stream with Spotify Premium ($9.99/month). The premium version lets you skip commercials and listen to millions of songs even offline.
For books…read via Kindle Unlimited ($9.99/month). You can access the company’s library of more than 600,000 ebooks and audiobooks with one of its free reading apps, which work Apple, Android or Windows Phone devices.

35. Protect your heirs.
For about $1,000 you can have a will, durable power of attorney, and health care directive written up. Find an estate planner at naepc.org.

Related: 24 Things to Do With $10,000 Now
Tell Us: What Would You Do With $1,000?

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

fortunelogo-blue
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

tipping-data-map5

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

istock

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.

MONEY Saving

Why Parents Should Procrastinate on Back-to-School Shopping

School supplies arranged in clock face formation
iStock

If you've been a slacker thus far in rounding up your kid's back-to-school supplies, there's good reason to keep on procrastinating.

The simple reason why this is so is that very soon, almost every store will be putting kids’ scissors, notebooks, glue, pencils, and other back-to-school merchandise on clearance. For that matter, clothing marketed for the back-to-school season will be deeply discounted starting around Labor Day as well if not sooner, in order to make space for the next big seasons for retailers—Halloween and Christmas.

Don’t tell your kids about this, especially not at the start of the school year when homework and exams are about to become painful realities, but the truth is that sometimes it pays to sit back and do nothing. Many consumers are utilizing this “strategy” this summer, though it’s unclear whether they’re doing so consciously—or, more likely, lazily and obliviously. The Integer Group estimated that more than half of shoppers wait until one to three weeks before school starts to buy school supplies, and that 36% of consumers won’t do any back-to-school shopping at all, up from 31% who skipped back-to-school purchases last year.

The most prudent, responsible, cost-conscious approach for back-to-school shopping is for a parent to dutifully browse for bargains throughout the summer and scoop them up when they’re optimal. Back-to-school promotions started even before the previous school year ended, and Staples, Walmart, dollar stores, and other retailers have periodically rolled out 1¢ folders, 25¢ rulers and protractors, and other loss-leader sales in order to rev up business. For that matter, truly savvy shoppers understand that kids tend to need more or less the same supplies every fall, so they strategically snatch up pencils, notebooks, and whatnot whenever they’re at rock-bottom prices throughout the year.

The ship has sailed on the chance to do the prudent thing and buy items whenever the optimal price appears. That approach is too time-consuming and requires too much attention for the average parent anyway. This late in the game, there are two options left: 1) Turn into a whirling dervish and hit one store to buy everything your student needs in the few days before school starts; or 2) make do with what you have for the first day of school, then complete your kids’ list sometime around Labor Day.

The first option is the more responsible one, of course, and ensures that your child will have all of the required supplies on time. Yet the Integer study found that price is the most important element in back-to-school purchases for roughly three-quarters of consumers, and with this first approach, shoppers will wind up paying more than is necessary for many school staples.

That leaves us with the second (slacker) option, which is attractive not only because you can do nothing for a little while longer, but also because of a bonus in the form of saving a bundle of money. By the time Labor Day arrives, the majority of what you need to buy will likely be marked down for clearance sales. You’ll get the cheaper prices on glue, notebooks, and such without having to shop around, monitor Sunday circulars, or hit multiple stores. All in all, you’ll save time, effort, and money, with the main tradeoff being that your kid might get dirty looks from the teacher if he shows up on the first day of school with an empty backpack—or perhaps no backpack.

“Like most seasonal items, the longer you wait to buy back-to-school items, the better your chances are of scoring a significant discount,” said Lindsay Sakraida, features director at the deal-tracking site dealnews.com. Normally, clearance aisles are a hodgepodge of random, undesirable leftovers, but this isn’t the case for basics like pens, notebooks, and calculators, which are more or less immune to trends and seasonality, said Sakraida. “While sorting through the clearance section can sometimes yield limited options, it’s less of an issue with school supplies, making this an even more appealing option for cash-strapped back-to-schoolers.”

She suggested starting to look for big back-to-school markdowns a few days before Labor Day weekend. Around that time a year ago, Staples and Office Max cut prices dramatically on many items, sometimes with discounts of more than 75%. Other retailers will surely be posting printable coupons good for 20% or 25% your entire purchase over the holiday weekend, said Sakraida.

And prices will only drop from there as retailers try to clear shelf space to prep for the next season’s goods. In terms of fall clothing and school supplies alike, “look for the deals to get pretty aggressive by mid-September,” NPD retail analyst Marshal Cohen told the Wall Street Journal.

Even if your kids are fully outfitted for this school year by then, it might be wise to hit the clearance section and round up some supplies for next fall. You know prices will be cheap. And perhaps by planning ahead you’ll show your children that even the laziest procrastinators can change their ways and become more responsible.

More Back-to-School advice:
Would You Spend $60 for Your Kid’s Lunchbox?
Parents Worry More About Back-to-School Shopping Than Bullying
4 Best Credit Cards for College Students

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