By Jackie Rivas, Master Financial Education Volunteer

VCE’s financial literacy classes offer opportunities not only to teach others about personal financial management, but also provide an opportunity to learn about techniques and cultures.  I recently taught the financial literacy series at Virginia Gardens in Spanish to a group of Central American and Mexican immigrants.  In one session we discussed the importance of reviewing your bank statements on a regular basis.  A participant shared with the group how she was surprised to learn that she had insufficient funds in her checking account.  She was sure she

had made sufficient deposits to cover her expenses.  At the teller window she reviewed her statement and found that a magazine that she thought she had canceled had continued to withdraw funds from her account monthly over the past two years.  She called the magazine right there at the window and although she normally has a hard time saying no made it very clear that her subscription had ended.  We also talked about managing banking fees and charges.  The participants compared the various costs of checking accounts, minimum balances, check-writing charges, late fees and fines.  They were able to share their experiences regarding different banks and checking account plans and where to get the best deal.

But I also learned from my students.  They taught me about a technique for saving money that is quite common in Central America, Mexico and among immigrants in the US who have limited access to the banking system, called the Tanda.  One of my students explained how she has trouble saving money because she finds it difficult to resist the temptation to spend.  But the Tanda works for her.  She used it to save the $4,000 she needed to pay the hospital expenses for the birth of her child.  She planned several months ahead of the delivery date.  In the Tanda, a group of persons with a desire to save a specified amount of money agree to pool their money over a specific time period and each week someone from the group receives the pooled funds.  For example, to obtain $4,000 a group of sixteen persons would contribute $250 weekly for sixteen weeks.  Each week someone within the group receives $4,000.  The payout order could be determined by drawing numbers from a hat or by the coordinator of the Tanda.  Of course there are many dangers in this system.  It requires a lot of trust among the participants.  Someone could run off with their payout early in the game, never to be seen again.  But that is where a sense of community works to discipline members.  There also is no interest paid on the principal and no opportunity for the beauty of compounding interest.  But for those who might find it difficult to obtain a loan from a bank, it is an alternative  method for obtaining credit.  Teaching the financial literacy classes not only provides a forum through which to help others learn how to better manage their money, but it also presents the opportunity to learn how other cultures meet the financial needs of their community.

By Mohna Shah, Master Financial Education Volunteer

I love the number of websites and services devoted to getting women involved in personal finance. But I recently found myself at odds with an article on one such site that suggested people learn about investing in their 20s, ramp up their investments and contribute to retirement plans in their 30s, then increase the amount of retirement savings in their 40s, and so forth. That may work for people who live in areas with a low cost of living and who are not carrying much debt. But that’s a tough road to take in the metro DC area. I’ve watched many of my friends spend their 20s repaying their student loans while incurring credit card debt to keep up with the cost of living on entry-level salaries. By the time they have paid off their debt and are earning enough money to pocket some of it at the end of the month, they are in their early 30s and are just learning to create a habit of saving. Work and family consumes most people at that age, so learning about investing falls pretty low on the priority list.

For my friends who are in their 20s and 30s, I have recommended following all of those suggestions in order but ASAP, ideally in 5 years or less. Learn about financial planning now, whether it’s the Money Talk series through Virginia Cooperative Extension, a quick read of personal finance articles on eXtension.org, or a personal finance book. At this point, it’s an hour a week class or 15 minutes, 3 – 4 days a week during your lunch break or commute. At this rate, you’ll probably be able to generate some executable ideas for yourself in a month or two. Make small changes each month or each season to speed up debt repayments or increase savings. One of my friends was stunned to see how much money she saved by taking her lunch to work. (The weight loss was a nice by-product.) I had a similar reaction when I stopped taking cabs and relied only on the metro or my own feet for transportation. Neither of these actions had any noticeable impact on our social lives or overall happiness.  As soon as that debt is paid, speak to a human resources representative about contributing to a retirement plan at work. Don’t worry if it’s $100 a month to start.* If your employer doesn’t offer a retirement plan, talk to a bank about opening up an IRA. Applying the small changes theory, increase the contribution by $50 each year. (After five years, you will have contributed $12,000 along with any investment gains or losses. ) The point is, saving a little now is a lot easier than catching up later.

Also, while we can’t rewind our own clocks, we have an obligation to prepare the next generation. The biggest influence on my financial behavior is probably having a savings account where I could save a percentage of my birthday/tooth fairy/report card money. I felt so grown up when I received the monthly statement, and I was giddy when my balance crossed the $100 mark. At a later age, I could save part of my weekly allowance (which I only received if I completed my assigned chores – talk about strict parents!). It helped instill the notion of saving as an end in itself, not a means to buying the next teen idol’s album.

The sum of birthday money and allowances and the money saved by choosing public transportation and brown bag lunches may not appear to make a significant dent in the cost of a college education. But the lessons of saving and thoughtful financial decision-making can be worth just as much.

*If possible, start with a contribution large enough to get the full employer match for a 401(k).