• Savings and Investments
• Certificates of Deposit (CDs)
• Checking Accounts
• Mutual Funds
• Credit cards
• Stocks and Bonds
• Charge cards
• Personal Financial Planning
• Savings Accounts
• Establishing Credit
• Money Market Funds

Savings and Investments
There are a number of different types of investment vehicles available to you in this country – each suitable to satisfy different needs.

Checking Accounts
A bank or credit union can offer you a checking account to provide you with everyday banking needs – bill payment, demand withdrawals, ATM transactions, etc. Usually no interest is earned on checking accounts.

Debit/Credit/Charge Cards
Debit cards allow you to transact business electronically from your checking account.

Credit cards are granted to you from various financial institutions upon approval of your credit. They allow you interest-free use of credit for the initial monthly billing cycle – therefore if you pay off the balance every month, you will not be charged interest. If you carry over a balance to the next month, the issuing company will charge interest at the stated interest rate, compounded daily. These interest rates vary by the company and term of the contract. They also often offer a low introductory rate for some time period, after which the rate adjusts to the contract rate. Most businesses accept the most common credit cards (VISA, MasterCard, American Express, etc.), but it is a good idea to check first (a sign is usually posted at the entrance to the business).

Charge cards are issued by stores and, unlike a credit card that can be used most anywhere, charge cards can only be used at that store.

Savings Accounts
A bank or credit union can also offer you a savings account, which earns some interest. This money is also readily accessible and liquid to meet your more immediate cash needs. However, due to the low interest rate that savings accounts earn, they may not be suitable for saving for longer-term goals – their values would not typically grow fast enough to keep pace with inflation.

Money Market Funds
Money market funds are a form of a mutual fund and serve as another savings vehicle. They provide you with liquidity since the fund usually has a steady price of $1.00/share (though they are not guaranteed to always be at $1.00/share). The fund also typically earns a higher rate of return than a savings account. These funds usually have check writing features, but often there is a minimum amount per check. Therefore, they may serve well as part of your “emergency fund,” rather than your more frequent banking needs. Inflation would also be a concern over time for balances in these funds beyond the liquid cash needs.

Certificates of Deposit (CDs)
Certificates of Deposit are savings vehicles available through banks and brokerage firms. In choosing a CD, you must select the term of the CD, i.e. 6 months, 1 year, 5 years, etc. The longer the term that your money is held for, the higher the interest rate your money earns. You can access your money before the end of the term, however there is usually a penalty for early withdrawal. This penalty is deductible on your income tax return. Inflation would be a concern over time with a CD.

Mutual Funds
Mutual funds are an investment vehicle that can meet many financial objectives – short-term or long-term needs. A money manager pools together all of the money from the investors who purchase the mutual fund. He/she then decides which securities (stocks, bonds, etc.) to purchase. By owning a share in a mutual fund, you own a little piece of each security held in the mutual fund portfolio. This can help to minimize risk and to diversify your holdings.

The money manager manages the fund – buying and selling securities within the mutual fund as he/she sees fit. The mutual fund usually has a pre-determined objective and investment category (i.e. domestic stock fund, foreign stock fund, government bond fund, money market fund, etc.). The objectives range from very conservative to very aggressive strategies. Investing in a mix of them has been shown to allow you to maximize the rate of return on your portfolio while taking less risk.

Mutual funds are available for purchase through banks, brokerage firms, investment advisors, financial planners, or directly through the mutual fund company. If you prefer to partner with an advisor to help you make investment and financial decisions, this could free up your time as you rely on their expertise to guide you. The advisor would be compensated for their advice and service. You can pay them a commission upfront when purchasing the mutual fund, or some classes of mutual funds compensate the advisor over time out of the performance of your fund rather than out of the principal of your investment, or you can invest in a managed mutual fund program where you have access to a broad range of mutual funds in a single account, with the flexibility to exchange amongst different mutual funds, and an advisor regularly monitoring your funds. For this ongoing advice and service, you would pay an asset management fee, which is a quarterly percentage charged on the value of your account. Both your advisor and you have the same objective – to make your money grow for you.

Mutual funds may or may not be suitable for your financial situation. The greater the amount of your investments, the greater is the possibility that other investment arrangements may be more cost and tax effective.

Separately Managed Accounts
While mutual funds allow you to diversify your money amongst many securities without requiring large investments to do so, they also may not be as cost or tax efficient for larger investments. That is where a separately managed account (SMA) may be more suitable. With these, a money manager separately manages an account personally for you. The account might include stocks, or bonds, or both, depending on the money manager’s objectives. The minimum balances for SMAs are higher, so you have to have enough investable assets to invest in each type of account and still be able to diversify amongst the different investment categories.

Stocks and Bonds
Individual stocks and bonds can be purchased through a brokerage firm, investment advisor, or financial planner. You can also purchase them yourself through a self-directed brokerage account. The commissions would be less than purchasing these securities through a brokerage firm, for example, however you also would not receive any advice.

Personal Financial Planning
The most important step before making investment decisions, is to meet with a financial planner to help decide how much should be kept liquid (in checking, savings, and money market), how your other money should be allocated between stocks and bonds - and which categories of stocks and bonds – and what the best vehicles are for your personal situation. Studies have shown that 91% of a portfolio’s long-term performance was attributable to how the investments were allocated rather than which securities were selected.

In arriving at this investment allocation, the financial planner also evaluates your other goals – saving for a short-term need (vacation, major purchase, new home, wedding, etc.) or a long-term need (college, retirement, etc.) to help determine what rate of return you might need to target based on the effects of inflation, the amount already saved, timeframe, and tolerance for risk.

A well-rounded financial planner (not one who only acts as an investment or insurance advisor) can advise you on a multitude of financial issues, including what mortgage term you should finance your home over, whether you should buy or lease a car, cash/credit/debt management, retirement planning, estate planning, proper beneficiary designations, tax planning, stock option management, planning for children with special needs, how your accounts should be titled, insurance needs analysis and most suitable types to meet your personal circumstances, helping you understand and maximize your employee benefits, making sure you have all necessary personal legal documents in place, etc.

A good financial planner will partner with you to build a long-term relationship with you – to become your personal financial manager, working with you all throughout the year on an ongoing basis.

A financial planner who is a Certified Financial Planner professional has proven their level of knowledge and expertise in most any financial issue that could arise by having passed a rigorous certification exam. In addition, they must follow a strict code of ethics, similar to a Certified Public Accountant.

Some financial planners are compensated through commissions on the sale of a product (they are commission-based). Others are fee-based, where they are compensated for their knowledge and expertise on a fee basis for the personal financial consulting. These planners can also accommodate your needs to implement a financial planning solution, should you choose to do so through the financial planner to make sure it gets done in accordance with the financial plan. They can also work with any existing advisors with whom you have a good relationship (investment, insurance, etc.). The last compensation model is fee-only. These planners are only compensated on a fee basis. They do not receive commissions. You would implement the planning tool with someone else.

Financial planning is the process of coordinating all of your financial “puzzle pieces” (investments, insurance, cash/debt management, retirement planning, estate planning, etc.) into one cohesive plan – investing is only a small part of it.

Establishing Credit
Most credit decisions at U.S. financial institutions are based on your credit report. This is a history you accumulate over time, as reported by one of the three major credit bureaus. You may check your credit report at www.annualcreditreport.com. Below are main categories of information in the credit report.

1. Personal information: Your credit report contains information that identifies you, including the following:
• Your name
• Your social security number
• Your current address and previous addresses
• Your phone number
• Your date of birth
• Your current employer and previous employers

2. Your credit history: Your credit report includes your history of bill paying with lenders such as:
• Banks
• Mortgage companies
• Retail stores
• Finance companies

One of the obstacles new immigrants or temporary workers on assignment in the U.S. face is establishing credit.
The major credit reporting bureaus typically track an individual’s history by their social security number. Without a social security number, or with all of one’s credit history in a country outside the U.S., newcomers will not have a credit rating here. This will make it difficult for a bank or credit union to extend credit except on a secured basis.

One way to establish a credit history is through a secured credit card. A secured card requires a cash collateral deposit that becomes the credit line for that account. For example, if you put $500 in the account; you can charge up to $500. You may be able to add to the deposit to add more credit, or sometimes a bank will reward you for good payment and add to your credit line without requesting additional deposits. You also can open a National Grid account and pay bills on time to establish the good credit.

Some financial institutions may grant a modest car loan, but with certain restrictions. For example, you would not expect a four-year auto loan to be granted to a worker who only has a two-year contract assignment in this country. For more information on establishing credit or what types of loans may be available to you, ask your credit union when you apply for membership.[ (List other ways to help get car loan / tips?)]