Money
Agreeing on Finances; A Good Time To Buy Bonds?

Q: I am 35 years old and divorced. A wonderful man wants to marry me. What's stopping me is that I do not want to have to account for every penny I spend like I did with my ex-husband.

A: No one should have to account for every penny they spend. Money is the biggest cause of stress and conflict in most marriages. You must know that because yours didn't survive it.

No two people see money the same way. Some people can't stand to be in debt. Others can't stand to pass up a bargain. The key is to talk it out first and then respect each other's style and be willing to compromise.

Couples should be alert to the way money can camouflage more emotional issues such as whether to have a child or buy a house. One partner may say they can't afford a child instead of expressing ambivalence about having another child.

Relocating, retiring, switching careers, taking vacations at the in-laws, all of these are about much more than money.

You've had a bad experience and you don't want to repeat it. I suggest you say it just that way. You need to have some money of your own, at least initially. And perhaps you'll be a little more sensitive to questions about how much something costs. If you want your new marriage to work, I think you've got to be honest about that. The more a couple airs financial issues in advance, the better the chance of success for the marriage.

Q: Is this the right time to buy bonds?

A: In one sense, any time is the right time to buy bonds. Bonds, especially short-term bonds, provide a good diversifier for a stock portfolio.

But I suspect that what you're asking is whether bonds are going to have a good run over the near future. I don't know. When you buy bonds as a speculator, you're betting that interest rates will decline. Declining interest rates send bond prices up.

The Federal Reserve reduced interest rates seven times this year through early September. If you bet bonds will continue to appreciate, you're betting on further interest rate cuts and further economic decline. I don't think I can predict things like that, so I don't make those kinds of bets.

Q: At what age should children open a savings account at the bank and how much of their money should they save?

A: It depends on the child but I'd say six years old is the minimum. Children younger than six don't understand how a dime can be worth more than a penny, for example. I think it's a waste of time trying to teach these concepts to very young children, although they should still go along to the bank or on grocery trips so they start to get an idea of how you trade money for goods.

When your kids are ready, be sure to find a bank that doesn't have a minimum fee for small accounts. Kids shouldn't be forced to save everything they make. It destroys their incentive. My daughter opened a savings account when she was eight, and she was more than ready. She wanted to make a trip to the bank every time she'd put together a couple of dollars. The folks in the bank praised her profusely. When she began working part-time, she increased her savings to nearly half of what she earned.

My son likes to buy Gameboy and Nintendo games better than he likes to save money. He opened a savings account when he was seven although he wasn't all that eager. He saved $1 of his allowance when he got $5 a week and he saves the same $1 out of his current $10 allowance. I tell him saving 10 percent is a good lifetime habit.

Q: Are penny stocks the way to go for a beginner?

A: No. Penny stocks are those that trade for under five bucks a share on the "pink sheets," rather than being listed on any stock exchange. Pink sheets refer to the color of the publication where the prices are listed. Penny stocks are not a bargain. They are a high-risk gambit. Mutual funds are the way to go for a beginner.

________________
Mary Rowland is an author and contributor to several financial planning magazines. E-mail your personal finance questions to MoneyQuestions@neamb.com.

Thrifty Educator

This month's Thrifty Educator tip comes from Lisa Mayton, Head Start teacher at Longdale Elementary School in Glen Allen, Virginia.

"I use One-Zip plastic bags to help organize my art activities. I copy patterns on construction paper and place them in a bag. Then I tape a finished copy of the project on the outside of the bag and place it in the students' art activity center. They are able to complete the project on their own using the model and patterns provided.

I also use these One-Zip bags to store a set of supplies for each student's personal use. I can store an extra set of clothes for my children in the larger two-gallon plastic bags.

These bags work well for an inexpensive means of keeping everything neat and organized and they help teach children responsibility for taking care of their own materials.

Got an Idea?
If you have a suggestion for how your colleagues can save money at school, send it along to neatoday@nea.org.

Heads Up from NEA Member Benefits

Looking for ways to pump up your tax advantages with tax season drawing near? Significant changes to retirement programs for 2002 resulting from the Economic Growth and Tax Relief Reconciliation Act of 2001 can start you on your way.

The biggest impact of this law for NEA members is how it affects 403(b) Tax Sheltered Accounts, commonly known as TSAs.

Elective deferral limits for TSAs have increased to $11,000 in 2002. This amount will increase by $1,000 per year until 2006, capping at $15,000. In addition, individuals over age 50 can deposit up to an extra $1,000 into their programs.

This over-50 bonus amount will also increase by $1,000 per year until 2006, when it reaches $5,000. An employee with 15 or more years of service with their current employer may still be eligible for a $3,000 per year catch-up that was allowed under the old rules.

The new law also eliminates the Maximum Exclusion Allowance (MEA) contribution limitation formula and increases the defined contribution percentage to 100 percent of compensation effective in 2002.

Coupled with the new deferral limits, these changes mean that most plan participants will be able to increase their annual TSA contributions beginning this year.

To find out how these changes can benefit you, call your NEA Valuebuilder Representative or the NEA Valuebuilder Service Center toll free at 800/NEA-VALU, Monday-Friday, 7 a.m. to 6 p.m., Central Time.