Ripoff Alert #7 – Acting and Modeling Edition

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe.

Acting and Modeling Scams

“Your child is just so beautiful! She has such great potential! We just know that she’ll make it in this business.”

“All we need from you is $500 for an agency fee, and we’ll get her hooked up with some of the best-known modeling agencies. Just sign here.”

Have you taken your child to a modeling or acting event and heard something like this? Unfortunately in these two industries, there are many more scam artists than legitimate players.

These traveling scamsters come to your town, set up shop in a hotel ballroom, and stage a selection process where they ask some kids to stay and send others away. To those who remain, they lie by claiming they have the connections to make your child a star. They then ask for an upfront fee for an evaluation, photographs and other expenses. It’s pretty easy to get caught up in the hype, because this is what your child wants. You just want to make him or her happy, right?

If your child is into acting or modeling, there are better options than attending one of these ripoff sideshows. For acting, the best option is to sign up for a class at your local theater group. Your child may be able to take an acting class, learn special tips and instruction from experienced actors, or even take part in a play. For parents, the people you meet here can be valuable connections when it comes to advancing your child’s acting career.

For modeling, call up photographers and ad agencies in your area to see which agents they use.  When meeting with an agent, ask to see some head shots and composite sheets of models they represent. Also, only agree to meet at his or her office during business hours.

The key to not getting taken by acting and modeling scams is to avoid paying any upfront fees. Legitimate agencies earn their money by taking a cut of jobs they obtain for the actors and models they represent.  The only money you should spend is for photographs of your child.

Also, beware of any absurd promises made to you. As I mentioned in the beginning, scamsters attempt to pull at your heart strings by telling you what a beautiful, well-behaved child you have. The modeling and acting businesses are traditionally very difficult to break into, and no legitimate agent will puff you up like that.

Finally, before doing business with any agent, check with the Better Business Bureau to see if there are any complaints against the agency.

Ripoff Alert #5 – Child Identity Theft Edition

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe.

Child ID Theft

In last week’s Ripoff Alert I talked about adult identity theft and some of the ways you can prevent it from happening to you. This week I want to focus on a topic that some of you may not even know exists: child identity theft.

Here’s a short video that explains what child identity theft is and how it happens. According to AllClearID.com (the people who made this video), children are 35 times more likely to have their identities stolen than are adults. What’s more, about 1 in 10 children have had their identities stolen at least once. As if parents need more to worry about when raising their kids.

As you see in the video, a child’s Social Security number is a blank slate. Criminals can effortlessly open new loans, cell phone accounts, or credit cards using your child’s SSN. Because there’s no system to match names and dates of birth to SSNs to verify identity, companies often only require a cash deposit when opening accounts. What this means is that your child could have a mortgage in his or her name while still in diapers.

Child ID theft normally isn’t detected until the child attempts to apply for student loans or sign an apartment lease as a teenager. To make matters worse, the three credit bureaus aren’t interested in helping to prevent this crime. All they’re interested in is building information on you and selling it – accuracy isn’t their priority.

Until this year, there really wasn’t a way for parents to protect their children against ID theft. AllClearID now offers ChildScan, a free service that detects fraud from many sources and sends you monthly updates via email.

What’s in it for them? This is a “freemium” model, which means they offer a basic level of protection for free alongside a premium version that costs $15 a month. The premium version offers identity repair help and various levels of insurance. The basic free version is probably sufficient for most people.

This service seems to be comprehensive – they search not only credit reports but also employment and medical records and utility accounts for any use of your child’s SSN.

Children are prime targets for ID theft and are more likely than adults to have their identities stolen. Because the credit bureaus and various levels of government don’t care about our children, it’s important to be proactive in protecting them. This new service makes it much easier for parents to protect the identities of their children.

For a real-life child ID theft story, see Michelle’s post over at Making Sense of Cents. She explains how someone bought a house in her name when she was 13. 

The Best Way to Save for Your Child’s College Education

College costs have increased faster than the rate of inflation over the past several years. The higher costs are most often being met with more student loans. If you’re in a position to help your child pay for some of his or her college education, a 529 plan is the best way to do so.

I should mention that before you consider saving any money towards your kid’s college, you should be saving every penny you can for your own retirement. You don’t want to have to depend on your kids financially during retirement. In addition, there are loans, scholarships and grants for college expenses. There are no such benefits for retirement.

So what is a 529 plan? Basically, it’s a state-sponsored college savings account. Created by Congress in 1996, these accounts give families an efficient way to set aside money for college expenses. The idea is to set up the account in your name and contribute what you can each month to the plan’s investment options. The simplest option is the age-based fund, which is heavily invested in stocks when your child is very young and turns more conservative each year as the child approaches college.

It goes from being an investment account in the early years to basically a savings account when your child reaches the last years of high school. Other than putting money in each month, it requires very little effort on your part.

The primary benefit of 529 plans is that all earnings on the money you put in the plan are spent tax-free if used for eligible college expenses. These could include tuition, fees, books, supplies and equipment. In addition, some states offer a tax break on money you put into the plan.

A common misconception is that you must use your own state’s 529 plan if you want to save for college. In fact, you can use any plan in the country. Every state has at least one 529 plan, but some have several. If your state offers a tax break and the total account fees are low (generally below 0.5% annually), put the money in your own state’s plan. If not, many experts agree that Utah’s plan is the best in the country because of its low costs and investment options.

One thing you never, ever want to do is pay a commission on college savings. You want every dollar to go towards paying for your kid’s college and not lining the pocket of some stockbroker. To minimize costs, set up the plan yourself rather than going through a financial adviser. This is another reason Utah’s plan stands out. Every state except Utah has an option to go with a full-commission adviser who charges fees as high as 2.6%. If a state is willing to charge that much, can they really be trusted with your hard-earned money?

Parents, aunts, uncles, grandparents or others can open 529 accounts for a child. If the child chooses not to attend college, the owner of the account can simply change the beneficiary of the account to another child with no consequences. You can even use the money for yourself if you plan to attend college or graduate school.

Because the account is in your name, you have flexibility and control over how it is spent. In other words, your niece, nephew, or grandchild won’t be able to blow the money on a shiny new sports car! If they want it, they have to use it for their education. The money won’t hurt the child when it comes time to determine how much financial aid they qualify for since it’s not in the child’s name.

The cost of going to college will continue to increase each year for the foreseeable future. Choosing an age-based fund within a low-cost 529 plan is the best way to save for your kid’s college expenses. Just remember to max out your own retirement savings first.

To learn more about 529 plans, a great place to start is SavingForCollege.com.

Photo by personalfinanceanalyst.com

Teaching Your Kids About Money

Kids today are woefully unprepared for many financial decisions they will have to face. To prove this fact, ask any high schooler what a budget is. I’m willing to guess that about half will stare blankly at you as their eyes glaze over, and the other half will say something along the lines of, “It’s something Mom and Dad fight over all the time.”

Part of the problem is that some parents aren’t sure how to approach the subject with their kids, so they just avoid it. They may not be very good with money themselves. Other parents may assume kids will learn important lessons about money outside the home. Whatever the reason(s), kids aren’t getting the financial education they need.

LearnVest lists 9 money lessons financial experts teach their kids. Obviously we’re not all financial experts, but I want to talk about a few of these I believe any parent can handle:

2. Money is about making choices

Every time we spend a dollar we are making a choice. We are choosing to trade our life energy and resources for a product or service we hope will enrich our lives. By using our money for Item A, it means we’ll have to do without Item B for the time being. Also, by choosing to buy Item A, we’re choosing not to invest that dollar for the future or to give it to charity. This is why it’s so important to evaluate our needs and wants, put them in proper order by making a budget, and only buy our wants after our needs are taken care of.

3. Delaying gratification can pay off

Let’s say you really want to buy an item costing $200, but you only have $100. You could buy a $100 item that you like or you could wait until next month, save up the extra $100, and get the item you really like. In order to do this though, you have to go a month without any items. That takes discipline and a willingness to delay gratification until you can afford the item you really want. Alternatively, you could invest that $100 at the beginning of the year and have 7% more – $107 – at the end of the year given a 7% interest rate. To get that extra seven dollars though, you have to wait all year. Is it worth it?

6. Work for what you want, and it will mean more

For my 17th birthday my parents bought me a used car. Because it was my first car and it meant I didn’t have to ask my parents for rides anymore, I was pretty excited. I took care of that car and enjoyed having it during my senior year of high school. My parents sold it when I was in college and I went almost seven years before I had my own car again. At 24 I bought a car by myself for the first time. I still drive this car almost every day. Even though it’s not the newest or nicest car out there, the sense of accomplishment I get when I’m behind the wheel is greater because I paid for it myself.

8. Budgeting is a family affair

Do you involve your kids when making financial decisions? If not, you’re missing out on a chance to teach them how you make decisions about where your money goes and why. When they’re old enough to earn money doing chores around the house, get them a piggy bank like this and require that a portion of the money goes into each of the four slots: save, spend, donate and invest. Explain the importance of each category and get them excited about saving.

9. A little goes a long way

Just a few examples set by financially responsibly parents can set kids on the right track. Show them your retirement accounts and explain that a portion of every dollar you make is saved for when you choose to not work anymore. Show them what you’re saving up for whether it’s a family vacation, new furniture, or Lasik. Explain that by waiting and saving up a few extra months you can avoid credit card debt and instead rely on savings. If you donate to a charity, explain why.

Always look out for opportunities to teach your kids about money and finances. You’re the best example they have.

Photo by enemyofdebt.com