The basics: bank sccounts, credit cards, insurance


The world of stocks and bonds, which has been on center stage during the first two installments of this series, seems to dominate discussions of investments and the role of financial assets in personal finance. However, most people have more basic concerns to worry about, like their bank accounts, credit-card balances and insurance coverage.

During a recession (we're not afraid of the "R" word around here), it's particularly important for you to develop and maintain a good credit standing. If you lose a job or must help bail out financially strapped family members or friends, you may need to draw upon your personal lines of credit. Make sure you have access to credit, through your bank and your credit cards.

Being a good credit risk is also especially important these days for any borrowing you might be planning, either for home improvements or other needs. With interest rates heading lower and financial institutions in need of high-quality loans, your odds of getting a favorable rate on a loan are good if you're perceived as a good credit risk by potential lenders.

A downturn is also no time to let your basic insurance needs lapse. Despite the temptation to let insurance coverage slide, this is precisely the time when you must maintain adequate protection for the assets you can't afford to lose and the people who are depending on you. We'll cover some insurance basics in part two of today's story.

Children's educational expenses are also on the agenda. Planning for your kids' college education should be a major priority, regardless of how old your children are. Even if your oldest is only an ankle biter, you should still consider college needs as yet another type of "insurance" you need to be covered for.

Further, with a high percentage of affluent parents sending their kids to private primary and secondary schools, educational expenses may be a major current fact of financial life for you. A later section of today's installment deals with funding educational expenses.

Having dealt with paper-based assets today, we'll move on to tangible assets next week, which for most people means real estate. After that, it's on to retirement issues and, finally, in week six, a closing chapter on general financial-planning needs and tips.

First, however, it's time for today's sermon. The material discussed here is really only a starting point for understanding the financial products and services that can be useful to you. And it is only of use if you will do your part by accepting responsibility for your own financial future.

Don't kid yourself -- there is no shortcut that avoids some hard thinking about and work on your future. This applies to everyone. But if you are motivated to learn, there is a wealth of information, most of it easily available, that can help you.

Don't be afraid to ask questions, and keep asking them until you get acceptable, understandable answers. This is your money and yourfuture at stake, and ignorance is a sadly lame excuse for not doing all you can to help yourself and the people you love. Remember, whether you're doing business with the bank, an insurance company or a school administrator -- you are the customer!

Banking and credit cards: You can start by asking questions wherever you do your basic banking -- your local bank, savings and loan or credit union. Managing your cash has always been important, but now it can also represent either a new and profitable source of short-term investment income to you or a financial drain because of unexpected fees.

Further, the recession and the banking industry's serious decline provide two more excellent reasons for paying careful attention to what once seemed to be mostly basic, "plain vanilla" services.

Frankly, I didn't believe how much the world of banking had changed until an astute co-worker explained how she had noticed an offer of free checking from an area bank and persuaded the branch manager where she banked to offer her the same deal.

Even if you love your bank, S&L or credit union, however, you should review competing institutions every few years, composing a list of companies with offices and automated teller machines that satisfy your convenience needs.

In an hour at most, you can call four or five places and review the important aspects of their services and fees. Chances are, they will have to offer a really superior product to overcome the inertia and "hassle" factor of changing banking companies. But even if you don't switch, the process of studying the marketplace will help you get a better feel for your own bank's range of services (and, perhaps, generate suggested improvements to pass on to your local bank manager).

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