One of the things I learned whenever I drew up our financial network map was that I had a lot of bank accounts, mostly high interest savings accounts at online banks. FNBO Direct, Dollar Savings Direct, HSBC Direct, ING Direct, and E*Trade for starters and that was after we closed accounts at Emigrant Direct and Virtual Bank.

There are many reasons why I have so many bank accounts, and I’ll explain that some other time, but the point of this post is that it’s easy to forget the big picture whenever you’re dealing with the nitty gritty of daily affairs.

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This series “12 Things Every Teenager Needs To Know About Money (And How To Teach Them)” is a community blog experience. This post is only one of the 12 points in the series so to view the other 11, please visit the list of links below.

Money Doesn’t Grow On Trees.

If money grew on trees… we wouldn’t need stimulus packages.

If money grew on trees… being unemployed would be irrelevant.

If money grew on trees… you wouldn’t care what the market did today.

But unfortunately, if money grew on trees… we wouldn’t understand the value of a dollar.

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When you spend your days like this:

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I just learned that it’s National Consumer Protection Week and the featured resource is the very book I mention below, the Consumer Action Handbook!

Did you know that the U.S. General Services Administration’s Federal Citizen Information Center offers hundreds of publications that you, as a consumer, could benefit from? Each year, they send out a catalog of their pamphlets and booklets and I received mine last week. I now receive it because I once ordered a copy of their Consumer Action Handbook, yet another entirely free publication. I never order anything because all the documents are available online (and if it’s available online, why waste the paper printing it out and the fuel on shipping it to me?).

Let’s take a look at some of the publications in their “Cars” category:
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My wife’s first credit card was Blue Cash by American Express because it offered 5% cashback on many of the things she bought. For those who went as far as to read the fine print, you’ll recognize that you can earn up to 5% cashback. The card works off the tier system where you don’t get the highest 5% cashback reward rate until you’ve reached a certain amount of spending each year. For some, the tiers are trivial. For others, the tiers are onerus. Here’s a great way to bust through them and make them almost irrelevant.

Buy money.
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My wife and I still use Bank of America as our primary checking account and I called them the other day to let them know we’d be traveling and how we might be using our debit card abroad. I don’t plan on using it (we have a Capital One card for purchases) but I wanted to ask them about using ATMs abroad.

The past few days I’ve been researching the best way to exchange money, trying to keep the fees low and the accessibility high. I’ve discussed things with my friends over there and the consensus was that ATM was probably the best way. Between ATM access and us simply paying with our 0% transaction fee Capital One card, we should be paying as little in fees as possible.

Global ATM Alliance

It turns out that Bank of America has partnered with a few international banks to form their “Global ATM Alliance.” When we use a Global ATM Alliance ATM, we avoid a $5 access fee. If we use any old ATM, we would be assessed a $5 access fee. Otherwise, ATM transactions incur a 1% transaction fee to cover the exchange of currency.

Here are the partners in the Global ATM Alliance:

• Barclays (United Kingdom)
• BNP Paribas (France)
• China Construction Bank (China)
• Deutsche Bank: (Germany)
• Satander Serfin (Mexico)
• Scotiabank (Canada)
• Westpac (Australia and New Zealand)

Call Your Bank

If you’re traveling abroad, call your bank to see what your international options are. I should have done this from the start, rather than poke around and waste time researching the best option. One simple phone call would’ve yielded the simple advice of “Try to find a Barclays, you can use their ATMs.” The 1% transaction fee, which covers the currency exchange, is probably the leanest you’ll ever find. You will always have to pay a fee to exchange money and it’s either listed as a fee or integrated into an exchange rate that doesn’t match the prevailing rate (this is how credit cards used to “hide” the currency transaction fee and the reasoning behind the foreign transaction fee lawsuit).

Time to pack for London!

(Photo: funkypancake)

Do you ever feel like you don’t have a good handle on how much money is worth? I mean really worth, in terms of sweat and blood, rather than how much stuff it can buy? With credit cards and electronic bank statements, the true cost of money is often difficult to truly comprehend because there are so many abstractions. Money is an abstraction of labor and effort.

You earn money through labor. Some labor is hard, like in a factory or a mine, while others are easier, shuffling papers in an air conditioned office; but both types require time and energy and both result in money. The point is, spending money, rather than bartering labor for goods and services, abstracts away the value of that money and it sometimes helps to put things back into focus.

So, why don’t we?

Let’s put things back into perspective by listing popular and common products in terms of minimum wage labor hours. Using the federal minimum wage in the United States, at $6.55, we calculated how much stuff cost in minimum wage hours.

Some of the more surprising figures? That $443k party AIG threw for their salespersons cost 67,634 minimum wage hours. Lehman CEO Fuld’s cash compensation from 2000 to 2008 was $500 million – or 76,335,878 minimum wage hours (26,142 minimum wage years, if 8 hours are in a day). Finally, that $700 billion bailout package will cost 36,599,394 minimum wage years. Yikes.

We made some assumptions in compiling this list. One is that a day consists of eight hours. Another is that while the cost is in post-tax dollars, minimum wage is in pre-tax dollars (i.e. the employee still has to pay tax on the $6.55/hr wage), so things really cost more in terms of hours than what is listed.

I was talking to reader Mike Cannon, who lives a frugal lifestyle and runs a small business called Ascent Solutions Group in Maryland, about Aldi (more on them when I get a chance to check one out) when the conversation shifted off to an idea one of his professors at Maryland once told him about class (as in middle class, upper middle class, etc). I think it’s a very different and helpful way to look at class and how it should be defined, rather than how it is defined today (i.e. poorly).

His professor said, and I’m paraphrasing, that it’s far better to define class by looking at their financial planning time horizons than anything else. The higher you go in the class spectrum, the farther out the time horizon is.

At the low end of the extreme, the extremely poor are thinking only as far as their next meal. As you move up the spectrum, those living from paycheck to paycheck have a time horizon of two weeks (or their paycheck frequency). In both classes, the concept of saving is difficult because income is less than or barely meeting their expenses.

The middle and upper middle class are looking a few years to forty years into the future. They’re contributing to their retirement plans, contributing to their kid’s 529 plans, saving for their first/next home, or saving for their first/next car. Saving is possible here because income has exceeded expenses to the point where you can save for the future.

As you get even farther up the class spectrum to the upper class (and whatever is past that), you begin seeing people planning for their grandchildren and their grandchildren’s education. Once you have met your needs, you begin thinking about your future and your children’s children.

I think that’s a far better way of defining class than any income ranges or net worth figures. It’s about mentality, rather than income and I believe it’s a far healthier approach towards class than talking income. What does it matter being upper class if your expenses force you to spend the vast majority of your income? One stretch of bad luck and you could lose it all (just think about any number of bankrupt celebrities) and then you’re no “better” off than someone in a “lower” class. In fact, I would say that the stress of living on the edge of disaster is far worse than the enjoyment you get out of living in a huge house or driving half a dozen fancy cars. I’d much rather be happy living the simple life within my means than feeling the pressure to produce to sustain an expensive lifestyle. I suppose that’s why they say money can’t buy happiness.

What do you think about this definition of class?

(Photo: indieink)

The U.S. Mint announced the four designs of the new penny to debut next year on Abraham Lincoln’s birthday, February 12th. They will be rolled out in three month intervals, starting Feb. 12th, with a Lincoln commemorative silver dollar released in 2009 as well. It’ll be the first time in fifty years that the penny will have changed and each of the four rear designs will show milestones in his life:

Log Cabin design, his birthplace

Indiana rail splitter design, where he worked as a young adult

Illinois State Capitol design, where he served as a representative

Half-finished US Capitol design, representing his work to build/preserve the Union

If you’re a fan of trivia, you’ll be happy to learn that Abraham Lincoln was the first person to appear on a regular US coin in 1909 (the penny of course). Here are 49 other fun facts about money.

Lastly, some want to see the penny abolished all together!

New Lincoln penny designs unveiled [CNN Money]

I’m not asking because I want to rob you, though if you carry more than a grand I would be tempted (just kidding! ), but cash seems like such an outdated way to stay financed.

How much do you have on you right this very second? I just checked my wallet and I have $142, which is far higher than what I normally carry. It’s that high because two weekends ago we took a trip to Ocean City, MD with some friends and I did one of those “pay with credit card, take the cash” moves at a restaurant (Citi mtvU offers 5% cashback and I have student loans to pay off!) so that boosted the amount.

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