Who is the Fed and Why Should You Care?

Do you listen to news about the economy? Ever heard of "The Fed"? Probably. So, what is the Fed is and how can it impact you? Learn how the central bank of the United States works and how it affects your finances.  You'll be better prepared for making long-term plans and financial decisions. Understanding the Fed gives you an idea of what the economy is currently like, what's going to happen, and how it affects you. (Your business, your job, your loans, and/or your investments.) Here are a few basic facts about the Fed: It is not a government agency. Private banks own the Fed. It operates independently of the U.S. government. But, the President does appoint its Board of Governors. The Fed has 3 mandates: maximize employment, stabilize prices and moderate long-term interest rates. It sets important interest rates. The main way the Fed impacts the economy is by setting the Federal Funds Interest Rate. Every other interest rate uses that as a basis. In general, when the Fed lowers interest rates, the goal is to stimulate the economy. They usually raise rates when they want to slow down the economy. The Fed manages these rates through the Federal Open Market Committee (FOMC).  FOMC meets 8 times each year. After each meeting, the FOMC issues a press release about the general U.S. economy and whether the Fed will raise interest rates. How does the Fed Funds rate impact consumers? It's true consumers do not  borrow money directly from the Fed. But, the financial institutions that provide their car loans and mortgages do. By raising rates, the Fed raises the cost of what your bank has to pay  to get money.  In turn, raising and lowering it affects the rates you, the consumer, can get from your bank. So, what do you do if you're in the market to buy a house and you hear that the Fed may be raising interest rates soon? Act fast to secure a lower interest rate for your mortgage. Are higher rates always bad for consumers?   No, it's not all bad. Yes, loans will become more expensive. But, you'll also earn more interest on your savings account and any interest-bearing investments! Keep these basic concepts in mind to create better a financial plan for yourself. If you want to learn more about the Fed, stop in and chat with us.

Tips to Save Money at Home this Summer

When the temperature goes up, so do energy bills, water bills and a host of other home-related costs.


Here are a few tips on how to stretch your household budget this summer and still stay cool.

Use ceiling fans.

Delay turning on the A/C, instead get the air moving with the ceiling fan.  If its a cool summer evening you can also leave your windows open.


Make sure you have the blades spinning in the right direction though! In the summer, your ceiling fan should spin counterclockwise as you look up at the fan blades. You will feel a cool downward airflow when you stand directly under the fan. In the winter, your ceiling fan should spin in a clockwise direction. Check your owner's manual for how to switch the direction on your fans.

Invest in a programmable thermostat.

Want an easy, low cost way to cut your energy bills? Program your thermostat.


How does a programmable thermostat help? It prevents large temperature swings throughout your home. This could save you up to 10 percent on your cooling bills.


A homeowner can save as much as $150 - or even more - on air conditioning bills by setting a thermostat.

Upgrade your old air conditioner.

 Does your old air conditioner have an EER energy efficiency of 5? You can cut costs in half by replacing it with a new one with an EER of 10.


So do a simple calculation: If your average annual bill is $260, your bill would become $130.
Depending on the size of the unit and room, your annual savings will pay for the unit in just a few years.


Have you thought about filters?


Air conditioners are more efficient, less costly, and  last longer when you replace or clean their filters on a regular basis. Read your owners' manual to find out how often you should replace or clean filters.

Unplug electronics when they're not in use.

Even when you turn electronics off, they can suck power out of outlets. (For example, television sets, DVD players, computers and phone chargers.)  Either unplug them when you're done using them or use a Smart Strip (which cuts power when it's not needed).




One last tip: using overhead fans, especially at night, is more cost effective than turning down the thermostat.

Savings Account Options: What's the best way to save money?

The WBA shared some pointers on choosing the right savings account for your needs.


Creating a "rainy day fund" or building up savings is a top financial goal for many consumers, usually falling just below paying off debts in consumer polls. If increasing your short-term savings is on your financial to-do list, there are a few different options for you to consider. After all, not all savings accounts are the same.

Here are a few to keep in mind:


Traditional Savings Accounts
 
Traditional bank savings accounts are what most consumers are familiar with. These are deposit accounts that can be tied to your checking account for easy transfer of funds, and typically have the most freedom to allow for withdrawals. These accounts have terms that can vary widely from bank to bank, and many institutions offer several different savings account options to fit different consumer needs. For example, the same bank my offer a savings account that has a minimum balance requirement and a different savings account that does not have a balance requirement but has a set limit of five withdrawals per month. Savings accounts also vary by monthly service fees, interest rates, method used to calculate interest and minimum opening deposit.


Money Market Deposit Accounts

Money market accounts are similar to traditional savings accounts, but most require you to maintain a higher balance to avoid a monthly fee. Where savings accounts usually have a fixed interest rate, money market accounts have rates that vary regularly based on money markets (which is where they get their name). This type of savings account can have tiered interest rates, providing more favorable rates based on higher balances. Some money market accounts also allow you to write checks against your funds, but on a more limited basis than a checking account.


CDs
 
No, not those things we used to listen to music on before iPods. A Certificate of Deposit account is a type of savings account that bears a maturity date, which means once you open it you can't withdraw money from it without penalties until the account matures. The term of a CD generally ranges from a few months to five years, with the higher (better) interest rates being on the longer terms. These accounts also pay at a higher interest rate than other types of deposit accounts, but instead of paying interest to the account periodically over the life of the investment, it pays all of the interest at once when the account matures. An additional benefit: CDs are insured by the FDIC, so even if the bank you keep yours at closes, you won't lose a single cent.

No matter which savings account option you choose, be sure to consult with your local banker first. They'll be able to go over additional account options that may be specific to your bank and might be a better fit for your financial goals.



Peoples State Bank, Memeber FDIC

Online Security Tips

There's no question that the Internet makes life easier in many ways. Shopping, communicating and storing information are just a few of the ways we all use the web. But, it also comes with risks.




To keep your financial information safe online, follow these tips:

Use a Secure Connection and Strong Passwords

If you're an online shopper, know the risks. Online purchases send your credit card or bank account information over the Internet. Hackers can tap into unsecured Wi-Fi connections at hotspots to capture that information. Potential hotspots are coffee shops, airports, and other public facilities.  If you're using a wireless connection to shop, be sure that it requires a password or WEP key.


Websites with extra security protections have https:// instead of http:// on their site.


Using strong passwords on all your online accounts is also an essential protection. Do not use your name, birthday or pet's name. This information is easy to find, especially if you post it on social media. Check SkyHigh's 20 Most Common Passwords. If your passwords made the list, change them immediately.

Monitor Your Credit Report

What aspects of life can your credit score affect? Interest rates on large purchases, obtaining loans, and even renting an apartment.


Check your credit report three times per year. Once with each of the three major credit reporting agencies: Experian, TransUnion and Equifax. You can do so for free by visiting www.annualcreditreport.com.


Watch for unauthorized accounts, loans or purchases in your name.  They will damage your credit and signal that you may be a victim of identity theft.


If you find inaccuracies in your report, dispute those errors. Contact the credit bureau online, by mail or over the phone. Their contact information will be on the report itself.

Take Action

If you hear about a data breach that might affect your account, be proactive! Change any related passwords. Especially if you use the same password on multiple accounts. You should avoid using the same password more than once anyway.


Suspicious charges on your credit card or transfers from your banking account are a red flag. If you see this, contact your bank right away and notify them of the issue. They may put a freeze on the account. This prevents further fraud and keeps the criminals from completely emptying your account. 


Enroll in online banking and/or mobile banking. Then, you can always be on the watch for fraudulent activity on your account. There are also apps like Mobimoney, that allow you to control how and where your debit card is used. Setting up these protections will keep you and your information in a safer place.

Peoples State Bank, Member FDIC

World Elder Abuse Awareness Day

In recognition of World Elder Abuse Awareness Day on June 15, we're supporting the American Bankers Association’s Foundation work to combat financial abuse of older Americans. This article was written by the American Bankers Association.

 

 A recent study estimated older adults lose $2.9 billion each year to fraud.

 

“Americans 50 years and older control more than 70 percent of our nation’s wealth, making them prime targets for exploitation,” said Corey Carlisle, executive director of the ABA Foundation. “One of the first steps toward prevention is to have conversations with the important people in your life, including your banker, about how you can work together to safeguard your money and personal information.”  

 

To help older Americans and their caregivers protect themselves or their loved ones from financial abuse, the ABA Foundation is offering the following tips:

• Plan ahead to protect your assets and to ensure your wishes are followed. Talk to someone at your financial institution, an attorney, or financial advisor about the best options for you.
• Carefully choose a trustworthy person to act as your agent in all estate-planning matters. Select someone who has your best interest at heart.
• Never give personal information, including your Social Security Number, account number or other financial information to anyone over the phone unless you initiated the call and the other party is trusted.
• Stay alert to common fraud schemes. Never pay a fee or taxes to collect sweepstakes or lottery “winnings.”
• Never rush into a financial decision.  Ask for details in writing and consult with a financial advisor or attorney before signing any document you don’t understand.
• Check references and credentials before hiring anyone. Don’t allow workers to have access to information about your finances and make sure to lock up your checkbook, account statements and other sensitive information when others will be in your home.
• Pay with checks and credit cards instead of cash to keep a paper trail.
• You have the right not to be threatened or intimidated. If you believe you are a victim of elder financial abuse, contact your local Adult Protective Services, tell someone at your bank or call your local police for help.

World Elder Abuse Awareness Day was launched on June 15, 2006 by the International Network for the Prevention of Elder Abuse and the World Health Organization at the United Nations.

ABA Foundation is helping bankers raise consumer awareness of these issues through its new Safe Banking for Seniors initiative. Over 650 banks are now holding financial education seminars for seniors and their financial caregivers on a range of topics, from scams and identity theft to how to choose a financial caregiver for a senior. To see if a bank is presenting a seminar in your community, visit aba.com/seniors and click on the Participating Banks List.
 

The American Bankers Association is the voice of the nation’s $16 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $12 trillion in deposits and extend more than $8 trillion in loans.

 

Through its leadership, partnerships, and national programs, ABA’s Community Engagement Foundation (dba ABA Foundation), a 501(c)3, helps bankers provide financial education to individuals at every age, elevate issues around affordable housing and community development, and achieve corporate social responsibility objectives to improve the well-being of their customers and their communities.

Peoples State Bank, Member FDIC

Answers to Your Retirement Questions

Approaching retirement should be an exciting time in your life!  You have traveling, time for hobbies, and enjoying your golden years to look forward to. 

But, for many, retirement is a source of stress and anxiety instead. Have you saved enough? Do you need to keep working part-time? How will you pay for unexpected medical bills?

Creating a retirement plan early and reviewing it often is key to alleviating some of this stress. Here are a few questions to consider when checking up on your retirement plan:

How much do I need to save?

The average retirement age is 67. And, most investment advisors recommend assuming a lifespan of 92 years for men, 94 for women. Using these guidelines, you need about 8x your annual salary to retire without any major lifestyle changes. 

Experts recommend saving 10% of your annual income for retirement during the first decade of your career. After that, increase your contributions to 15% of your annual income.

How much am I allowed to save?

Most retirement accounts have a limit on how much you can contribution each year. Different retirement savings accounts have different rules. 

The current maximum annual contribution to a 401(k) plan is $18,000. The maximum contribution to an IRA is $5,500 per year if you're under age 50. There are also catch-up provisions that allow people age 50 and over to save more in both IRAs and workplace savings plans.

Check into how much you're currently saving and if you could be setting aside more.

How much risk am I taking on?

If you don't review your retirement plan, you risk losing a big chunk of it.

Typically, the younger you are, the riskier the investments in your retirement portfolio. This is because the potential for higher returns outweighs the risk of losing money. When you're young, you have enough time to make up any losses before retiring.

As you get closer to exiting the workforce, that balance shifts. Talk with your plan administrator to reassess your risk tolerance at least every 10 years. Ensure that you're not taking on more than is advisable for your situation.

Where should I save?

There is a wide variety of ways to save for retirement. A few of the most popular are IRAs and 401(k)s.

With a 401(k), your employer directs the account. Contributions are deducted from your paychecks.

An IRA account is an individual account that provides tax advantages. A regular savings account does not offer these advantages. 

There are two types of both IRAs and 401(k) plans, Roth and Traditional. The basic difference is when you have to pay the taxes on the account. 

With a traditional retirement account, you pay the taxes when you withdraw the funds.

With a Roth account, you pay the taxes upfront, when you put the money into the account. This makes them especially valuable to younger savers.



If your questions about retirement weren't answered, ask your employer's Human Resources personnel or give us a call at (608) 326-3500.

Peoples State Bank, Member FDIC

Managing Finances When You Travel

Planning a vacation can be chaotic. Do you use a check list to make sure everything ready when it's time to leave? Pack, unplug appliances, get a passport, let school know the kids will be gone, etc. 

Adding a few financial management items to your list can prevent a lot of frustration down the road too! Here are a few things check off your to-do list:


Tell your bank you'll be traveling.

And, tell them where you're going. To protect customers against fraud, most banks monitor your normal spending habits. This  includes the geographic location of your purchases. If out-of-area purchases show up, the bank may flag/block those transactions as  fraudulent.

Also keep the 800 numbers for your credit cards on hand in case you need to report a lost or stolen card.


Double-check your accounts.

Have enough funds set aside for some emergency money during your vacation.

Set up automatic or early payments for any bills that will be due while you're away. You don't want to miss any payment dates just because you're gone!


Make sure you have a way to check in while you're away.

Services like online, telephone and mobile banking help you watch your spending/account balances even while you're on vacation.

You'll likely be making withdrawals from unfamiliar ATMs and making purchases at new places. So, it's a good idea to carefully watch your accounts while on vacation.


Carry a variety of payment options.

Take along several credit cards, a check book and a debit card to make sure that if one payment method fails, you'll still have access to your funds.

Carry a small amount of cash for small purchases and souvenirs. Use multiple wallets so that if one is stolen or lost you can still access your accounts.

If you have to make currency exchanges, talk to your bank about the most cost-effective method for your situation.

Peoples State Bank, Member FDIC