Tag Archives: Banking

Understanding Interest Rates and Your Financial Situation

interest.jpg Untitled-logo trustWhen discussing bank accounts, investments, loans, and mortgages, it is important to understand the concept of interest rates. Interest is the price you pay for the temporary use of someone else’s funds; an interest rate is the percentage of a borrowed amount that is attributable to interest. Whether you are a lender, a borrower, or both, carefully consider how interest rates may affect your financial decisions.

The Purpose of Interest

Although borrowing money can help you accomplish a variety of financial goals, the cost of borrowing is interest. When you take out a loan, you receive a lump sum of money up front and are obligated to pay it back over time, generally with interest. Due to the interest charges, you end up owing more than you actually borrowed. The trade-off, however, is that you receive the funds you need to achieve your goal, such as buying a house, obtaining a college education, or starting a business. Given the extra cost of interest, which can add up significantly over time, be sure that any debt you assume is affordable and worth the expense over the long-term.

To a lender, interest represents compensation for the service and risk of lending money. In addition to giving up the opportunity to spend the money right away, a lender assumes certain risks. One obvious risk is that the borrower will not pay back the loan in a timely manner, if ever. Inflation creates another risk. Typically, prices tend to rise over time; therefore, goods and services will likely cost more by the time a lender is paid back. In effect, the future spending power of the money borrowed is reduced by inflation because more dollars are needed to purchase the same amount of goods and services. Interest paid on a loan helps to cushion the effects of inflation for the lender.

Supply and Demand

Interest rates often fluctuate, according to the supply and demand of credit, which is the money available to be loaned and borrowed. In general, one person’s financial habits, such as carrying a loan or saving money in fixed-interest accounts, will not affect the amount of credit available to borrowers enough to change interest rates. However, an overall trend in consumer banking, investing, and debt can have an effect on interest rates. Businesses, governments, and foreign entities also impact the supply and demand of credit according to their lending and borrowing patterns. An increase in the supply of credit, often associated with a decrease in demand for credit, tends to lower interest rates. Conversely, a decrease in supply of credit, often coupled with an increase in demand for it, tends to raise interest rates.

The Role of the Fed

As a part of the U.S. government’s monetary policy, the Federal Reserve Board (the Fed) manipulates interest rates in an effort to control money and credit conditions in the economy. Consequently, lenders and borrowers can look to the Fed for an indication of how interest rates may change in the future.

In order to influence the economy, the Fed buys or sells previously issued government securities, which affects the Federal funds rate. This is the interest rate that institutions charge each other for very short-term loans, as well as the interest rate banks use for commercial lending. For example, when the Fed sells securities, money from banks is used for these transactions; this lowers the amount available for lending, which raises interest rates. By contrast, when the Fed buys government securities, banks are left with more money than is needed for lending; this increase in the supply of credit, in turn, lowers interest rates.

Lower interest rates tend to make it easier for individuals to borrow. Since less money is spent on interest, more funds may be available to spend on other goods and services. Higher interest rates are often an incentive for individuals to save and invest, in order to take advantage of the greater amount of interest to be earned. As a lender or borrower, it is important to understand how changing interest rates may affect your saving or borrowing habits. This knowledge can help with your decision-making as you pursue your financial objectives.

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6 Smart Money Moves for College Graduates

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SYB-Logo_Since1904Living expenses add up quickly once you’re out on your own, and many young adults who didn’t plan ahead are delaying major milestones like getting married or buying a home because of their financial situation. The good news is that you can have a bright financial future if you think strategically about money right out of the gate.

We recommend the following financial tips for new college graduates:

  1. Live within your means. Supporting yourself can be expensive, and you can quickly find yourself struggling financially if you don’t take time to create a budget. Calculate the amount of money you’re taking home after taxes, then figure out how much money you can afford to spend each month while contributing to your savings. Be sure to factor in recurring expenses such as student loans, monthly rent, utilities, groceries, transportation expenses and car loans.
  2. Pay bills on time. Missed payments can hurt your credit history for up to seven years and can affect your ability to get loans, the interest rates you pay and your ability to get a job or rent an apartment. Consider setting up automatic payments for regular expenses like student loans, car payments and phone bills. Take advantage of any reminders or notification features. You can also contact creditors and lenders to request a different monthly due date from the one provided by default (e.g., switching from the 1st of the month to the 15th).
  3. Avoid racking up too much debt. Understand the responsibilities and benefits of credit. Shop around for a card that best suits your needs, and spend only what you can afford to pay back. Credit is a great tool, but only if you use it responsibly.
  4. Plan for retirement.  It may seem odd since you’re just beginning your career, but now is the best time to start planning for your retirement. Contribute to retirement accounts like a Roth IRA or your employer’s 401(k), especially if there is a company match. Invest enough to qualify for your company’s full match – it’s free money that adds up to a significant chunk of change over the years. Automatic retirement contributions quickly become part of your financial lifestyle without having to think about it.
  5. Prepare for emergencies. Hardships can happen in a split second. Start an emergency fund and do your best to set aside the equivalent of three to six months’ worth of living expenses. Start saving immediately, no matter how small the amount. Make saving a part of your lifestyle with automatic payroll deductions or automatic transfers from checking to savings. Put your tax refund toward saving instead of an impulse buy.
  6. Get free help from your bank. Many banks offer personalized financial checkups to help you identify and meet your financial goals. You can also take advantage of their free digital banking tools that let you check balances, pay bills, deposit checks, monitor transaction history and track your budget.

Resource information provided by the American Bankers Association

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Remarriage: Altering Your Financial Plan to Meet Your Needs

Untitled-logo trustIn previous generations, husband’s traditionally handled the family finances. While this arrangement may have worked well during the husband’s lifetime, the consequences of the wife’s lack of involvement in the family’s finances often became clear after her spouse died. Today, more women are actively directing the outcome of their personal finances, and for good reason.

Women need to plan for a time when they may be on their own. Through divorce, widowhood, or personal choice, the odds are high that a woman will be independent at some point in her lifetime. Financial planning is essential for women throughout life, but it becomes especially important in the event of remarriage, as financial arrangements may need to be made for ex-spouses and children.

If you are in a second marriage or about to remarry, you may want to consider the following important points about managing your personal finances:

Bank Accounts. Should married couples combine their bank accounts or keep them separate? Or, perhaps combine certain accounts and keep others separate? There is no right or wrong choice—this is a personal decision. An open and honest discussion may reveal whether or not you and your spouse are financially compatible regarding spending habits, saving, investing, debt, etc. If there is a marked difference in the way you both handle money, then separating your finances may be a better plan.

Prior Debt. Will each spouse be responsible for the other’s prior debt, and if so, to what extent? Keeping the indebted spouse’s prior debt separate may help ensure that the other spouse’s property remains out of reach from creditors.

Property Acquired before Remarriage. Owning previously acquired property in your own name can prevent the risk of losing personal property to your spouse’s potential creditors. Also, doing so may have estate tax benefits. Keeping your property in your own name can help to minimize estate taxes while providing an inheritance for children from a previous marriage.

Home Ownership. Many married couples choose to title property jointly as tenants by entirety. When one spouse dies, the home passes to the surviving spouse tax-free. However, there may be estate tax consequences when the surviving spouse dies. Be sure to consult with a qualified tax professional beforehand.

Retirement. Saving for retirement is one of the major financial goals for married couples. Women, in particular, have unique concerns when planning for retirement. First, women typically live longer than men, so their retirement income needs to last longer. In addition, women often spend more time out of the workforce than men as a result of caregiving responsibilities, and therefore are less likely to have pensions and full Social Security benefits. According to the U.S. Department of Labor in 2013, when women work, they typically earn 82 cents for every dollar earned by their male counterparts. Consequently, the gap between gender incomes makes it especially important for women to prepare for retirement.

Insurance. Disability income insurance can help replace a portion of your income in the event you are unable to work due to sustaining an injury or illness. This type of insurance provides funds that can be used for bills and expenses. Similarly, life insurance provides a death benefit that can be used by your family. Proceeds can help ensure that children from a prior or current marriage can attend college, the mortgage can be paid, and the surviving spouse has some replacement income.

Estate Planning. It is important for blended families to plan for the final disposition of assets. Trusts can be a valuable tool to minimize estate taxes and to help ensure that your assets are distributed to heirs according to your wishes. For example, at your death, your assets can pass to a trust, from which your surviving spouse will receive income without direct access to the assets. At the death of the surviving spouse, the assets can then pass to children from your current or previous marriage. This provides ongoing income for your surviving spouse and an inheritance for your children, as well. In addition, if the surviving spouse later remarries, the trust can be designed to preclude your assets from their marital or community property.

Every woman who remarries needs to balance her financial past with her financial future. By addressing the management of your personal finances as soon as possible, you can avoid disputes and build financial independence for your extended and blended families.

If you have questions about the financial implications of divorce, email our Certified Divorce Financial Analyst, Marcia.Henderson@syb.com, for help!

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Online Banking FAQ

1. How do I enroll for consumer online banking?
You can enroll right from our website, http://www.syb.com. Click the Enroll link in the Log In
section and follow the steps. You can also enroll at any of our branch office locations

2. Is there a fee for consumer online banking?
There is no fee for consumer online banking or Billpay. There is a nominal fee for Mobile Deposit.

3. What is a Secure Access Code and why do I need one?
When you login for the first time, you will be prompted to receive a Secure Access Code.
A Secure Access Code is a one-time use code that allows you to securely login to our online banking system and is delivered to you via phone call or SMS text. You will also need a Secure Access Code if you delete your security certificate or “cookie” that we’ve stored on your computer, or if you login from a computer that was not registered for repeated use. Choosing to “register my computer for later use” authorizes us to store a security certificate on your computer which will speed up the verification process in the future, and eliminate the need to use a Secure Access Code on each login.

4. How do I log in for the first time?
After enrolling, you will receive an email to let you know when you can log in for the first time. On the SYB.com home page enter your User ID that you created during enrollment and click the Sign In button. On the next screen, select “I am new user” and enter your Login ID again. You will be directed to a page displaying the secure contact information we have on file for your account. Select one Secure Access Code delivery method from the list you can access immediately: phone or SMS (text message), then click Submit. Note-The Secure Access Code is only good for 15 minutes. If it expires, you will need to request a new one. Enter the Secure Access Code, click Submit. Read the Online Banking Agreement, click I Accept. Create a password, click Submit.
NOTE: If you choose not to register the computer you will be asked to go through the Secure Access Code process each time you login on this computer. You should NOT register a public computer or a computer that others might use outside of your control.

5. Why do I have to enter a Secure Access Code every time I login even though I registered my computer?
If you delete system cookies, whether manually or through an automated process, the activation will be erased and you’ll have to use a Secure Access Code each time you login. You can make changes to your cookie settings through your browser.

6. How can I change my Login ID or Password?
Under Settings click on “Security Preferences”

6 Banking Tips for Millennials

As millennials juggle a multitude of responsibilities – from school, to work, to planning for major life events – the American Bankers Association is highlighting eight banking tips to help them secure a financially sound future.

“Millennials are digital natives who understand the importance of staying connected socially, but staying connected to their bank can help their finances as they encounter life’s many milestones,” said Rob Nichols, ABA president and CEO. “From enhanced mobile resources to free budgeting tools, banks offer a variety of products and services to complement millennials’ unique lifestyles and ease their worries as they prepare to make some of life’s biggest financial decisions.”

With a recent report finding that more than 4 in 10 U.S. millennials say they are “chronically stressed” about money, ABA recommends these six tips to help them secure a strong financial footing:

  • Use bank tech to save without thinking about it. Consider automatic payroll deductions or automatic transfer from checking to savings. Arrange to have a specific amount transferred to your savings account every pay period. For more information on Stock Yard’s savings options, visit https://www.syb.com/personal/banking/savings.
  • Download your bank’s mobile app and make some smooth moves. Manage your finances from the palm of your hand. With the click of a button, you can easily make a deposit or access a record of all your recent transactions. Be sure to download the latest updates when they are available.
  • Use the personal finance tools your bank may offer. Banks offer an array of budgeting tools and resources to help you keep your finances in check. Access these via your bank’s mobile app and website. Check out Stock Yard’s calculator tools to help you organize financial goals.
  • Expect the unexpected – set up a rainy day fund. The last thing you want to be is stressed when life’s unexpected expenditures come knocking on your door. Set up a secondary checking or savings account for emergencies or link an existing account to your main account as an added layer of protection.
  • Get a head start. Banks play a major role in helping customers prepare for major life events such as buying a house and planning for retirement. Ask your banker how you can get a head start on your first major purchase by establishing credit or about starting a retirement account with a 401(k) from a previous employer.
  • Stay connected with social media. Interact with your bank via social media to get the latest news on products and services, ask bank-related questions and find links to exclusive bank content and resources. Visit Stock Yards on Facebook, Twitter and LinkedIn.

For more information on millennial bank customers, including ABA’s recent infographic on millennials compiling information from various sources, visit aba.com/Millennials.

Information provided by the American Bankers Association.

6 Money Tips for Family Caregivers

According to the Caregiver Action Network, more than 90 million Americans care for a loved one living with a disability, disease or experiencing reduced financial capability as a result of aging. Financial caregivers, such as those with a power of attorney, trustee or a federal benefits fiduciary, play an important role in ensuring that all finances – from routine to complex – are managed wisely, helping their loved ones maintain the best quality of life possible. In recognition of National Family Caregiver Month, Stock Yards is helping financial caregivers better understand their role.

  • Learn the rights and restrictions that apply to your role. Financial caregivers, such as those with a power of attorney, trustees, and federal benefits fiduciaries, are fiduciaries with a duty to act and make decisions on their loved one’s behalf. Learn the legal responsibilities of your assigned authority in order to better execute your role.
  • Manage money and other assets wisely. Financial caregivers may be in charge of daily, unexpected and future expense their loved one may incur. Especially if the beneficiary has a fixed income or limited finances, it is extremely important that caregivers minimize unnecessary costs and budget accordingly to ensure that all money is properly allocated.
  • Recognize danger signs. Seniors have become major targets for financial abuse and fraud. Make sure to stay alert to signs of scams or identity theft that may put your loved one’s assets in peril.
  • Keep careful records. When acting as a financial agent, proper documentation is not only encouraged but required. Make sure you keep well-organized financial records, including up-to date lists of assets and debts and a streamline of all financial transactions.
  • Stay informed. Monitor changes in financial status of the beneficiary and take appropriate action, as needed. Also, be sure to stay up to date on changes in the laws affecting seniors.
  • Seek professional advice. Consult a banker or other professional advisors when you’re not sure what to do.

Stock Yards Bank is also providing an explanation of the various roles and responsibilities of three types of financial caregivers: power of attorney, trustee and federal fiduciary.

Understanding your role as a power of attorney.

POA is designated by your loved one and gives you the authority to act and make decisions on their behalf, including managing and having access to their bank and other financial accounts. Authority continues if loved one becomes incapacitated and ends when power is revoked or loved one dies.

Understanding your role as a trustee.
Authority is given once you are named as trustee or co-trustee of a revocable living trust. As a trustee your authority applies only to the property noted in the trust, authorizing you to protect, manage and distribute the trust’s assets as directed in the trust document. Authority continues after the death of the trust creator or grantor.

Understanding your role as a federal benefits fiduciary.
A federal benefits fiduciary is appointed to accept and delegate federal government benefit payments, such as Social Security and Veterans Affairs benefits, in the beneficiary’s best interest. Funds for the beneficiary are received through an account set up solely for this purpose. As a representative payee for Social Security benefits or a VA fiduciary for VA benefits, you are required to keep detailed records of all transactions related to the beneficiary and file annual reports detailing how benefits were used.

The Caregiver Action Network (the National Family Caregivers Association) began promoting national recognition of family caregivers in 1994. President Clinton signed the first NFC Month Presidential Proclamation in 1997 and every president since has followed suit by issuing an annual proclamation recognizing and honoring family caregivers each November.

To learn more information about National Family Caregiver Month and your role as a financial caregiver, visit www.caregiveraction.org. For tips and additional resources, visit aba.com/seniors.

Resource Information Provided by the American Bankers Association

8 Money Tips Every College Freshman Should Know

With Labor Day behind us, most colleges are underway with the fall semester. The American Bankers Association encourages college students to get an early start on securing their financial future. Check out these eight tips on how to avoid expenses now and reduce financial burden upon graduation.

  • Create a budget.  You’re an adult now and are responsible for managing your own finances. The first step is to create a realistic budget or plan and stick to it.
  • Watch spending. Keep receipts and track spending in a notebook or a mobile app.  Pace spending and increase saving by cutting unnecessary expenses like eating out or shopping so that your money can last throughout the semester.
  • Use credit wisely. Understand the responsibilities and benefits of credit.  Use it, but don’t abuse it.  How you handle your credit in college could affect you well after graduation.  Shop around for a card that best suits your needs.
  • Lookout for money. There’s a lot of money available for students — you just have to look for it. Apply for scholarships, and look for student discounts or other deals. Many national retailers offer significant discounts for those with a valid student ID.
  • Buy used.  Consider buying used books or ordering them online.  Buying books can become expensive and often used books are in just as good of shape as new ones.  Dedicate some time and research to see what deals you can find.
  • Entertain on a budget. Limit your “hanging out” fund.  There are lots of fun activities to keep you busy in college and many are free for students. Use your meal plan or sample new recipes instead of eating out. If you do go out, take advantage of special offers that occur during the week, like discount movie ticket days or weekly restaurant specials.
  • Expect the unexpected.  Things happen, and it’s important that you are financially prepared when your car or computer breaks down or you have to buy an unexpected ticket home.  You should start putting some money away immediately, no matter how small the amount.
  • Ask. This is a learning experience, so if you need help, ask.  Your parents or your bank are a good place to start, and remember—the sooner the better.

For more tips and resources on a variety of personal finance topics such as mortgages, credit cards, protecting your identity and saving for college, visit aba.com/Consumers.