Archive for the ‘Question of the Day’ Category

« Older Entries

Why are organic strawberries more expensive?

Wednesday, August 3rd, 2011

It can be costly to be environmentally or health conscious. Lots of people say organic products are healthier and more environmentally friendly because they don’t use lots of chemical pesticides or hormones; however, they are typically also more expensive than conventionally-grown products.

Price always boils down to supply and demand. There are simply a lot fewer organic farms than non-organic farms, which makes organic produce rarer and more expensive provided people actually want organic products. Clearly, people do want organic products – as demonstrated by the explosion of marketing for anything and everything organic in recent years – and this marketing could be another big factor in the price.

Companies have done a good job making organics stand out and presenting them as something you want or need to have. Unfortunately for people who grow and enjoy organic products, the very things they like about them also make them more expensive. Hormones and chemical pesticides are cheaper ways to produce bigger crops, so it costs more to make the same quantity of strawberries (or whatever) without all that chemical stuff organic consumers don’t want.

If you want access to a special or different product, you’re going to pay for it. You have to decide for yourself if it’s worth the price.

What’s the difference between a recession and a depression?

Wednesday, August 3rd, 2011

Before the 1930′s, recessions didn’t exist. This doesn’t mean that the economy behaved all that differently than it does now: up until that time, all economic declines were simply called depressions. But after the Great Depression, the term “recession” was coined to separate financial downturns on a lesser scale from those comparable to the catastrophe of the ’30′s.

The common definition of a recession is a drop in Gross Domestic Product (GDP) over two or more consecutive quarters. But economists tend to dislike this definition because it only looks  at GDP, and the two-quarter minimum means shorter recessions can go unnoticed. The National Bureau of Economic Research officially declares a recession after an in-depth analysis of financial information.

A depression is a recession in which the GDP declines by more than 10%, or one that lasts for more than three years. While recessions are pretty common, depressions are not. Only one developed country, Finland, has suffered a depression since the end of World War II. Depression has become a loaded term since the 1930′s catastrophe, and we want to make sure we use it only when the situation is appropriately grave.

Why are charities blowing donations on black-tie balls?

Wednesday, August 3rd, 2011

Spend money to make money? It might seem like an oxymoron, but in reality it’s a great fundraising tool for charities to use. Large, extravagant events can benefit nonprofits in a couple of ways.

Everyone likes a party, so why not make some money off of it? That’s part of the mentality that black-tie benefit balls depend on. These events usually charge a ticket price for each person who wishes to attend. While the party may cost the charity $50 per attendee, tickets for entry might cost $250 or more – an easy net gain of $200 per person. Multiply that $200 by a thousand people and you’ve raised $200,000 before anyone even walks through the door. Once inside, a charity might hold an auction or have other mini-events that would contribute even more to their total funds raised.

Besides the monetary benefits, black-tie balls often attract celebrities and other influential people who can raise awareness about the charity. These events are also a great way for a charity to give back to its donors – to thank them for their contributions and (hopefully) continued support. By spending a little money on entertaining their donors, charities are the ones with money in their pockets at the end of the night.

What makes a stock price go up and down?

Tuesday, August 2nd, 2011

At the most basic level, stock prices are related to demand. When many people want to buy stock in a certain company, the stock price goes up, and when a lot of people are trying to get rid of a stock, its price goes down. But there are several other factors that go into a stock’s price.

If investors think a certain stock will do well, they will buy it and its price will go up; the reverse is also true. Stocks don’t exist in a vacuum, so their environment (both in general and specifically) affects their price. How is the company that owns the stock doing? Has it released positive earnings reports or a new product that shows promise? Investors also examine the social and economic climate in general – interest rates, political interest in certain businesses, and so on. Lastly, there’s the market itself to consider: during a bull market, everyone is buying stock, so stock prices in general tend to go up.

The stock market is tricky because it relies so much on anticipating things before they actually happen. A stock’s price will go up if it is popular, but investors may also buy that stock because they think it will become popular in the future. If enough people have this hunch, investing can become a self-fulfilling prophecy.

How many different types of bank accounts are there?

Thursday, June 30th, 2011

It’s pretty simple; once you’ve put your money in a bank, it usually lives in one of four types of accounts:

1. Checking – usually doesn’t earn interest, but the money is easy to access (like at the ATM or when you write a check)

2. Savings – earns a little bit of interest and is usually easily transferable to an attached checking account

3. CD – earns more interest than a savings account, but you agree not to take the money out for a set period of time

4. Money Market – earns more interest than a savings account, but the rate can fluctuate and there may be other account restrictions

It’s important to remember that these accounts are typically used to hold money you need today and the near future. If you have more money and are interested in earning greater return for the more distant future, talk to your financial advisor about other types of investments.

Chapter 7? Chapter 11? What kind of book is this?

Friday, June 3rd, 2011

Lately, the economy’s troubles have people talking about Chapter 7 and Chapter 11 so often that you might think they’re part of a new bestseller. In fact, Chapter 7 and Chapter 11 are two different chapters of the U.S. Bankruptcy code. They explain two different ways you can file for bankruptcy.

If a company files for bankruptcy under Chapter 11 – “rehabilitation bankruptcy” – it tries to make some changes and then get running again. Basically, the company can’t ignore the money it owes creditors, but it can do things like negotiate a lower interest rate, making it easier to try to pay the money back. If it’s successful in Chapter 11, the company can keep working like usual.

But if there’s is no hope for a company to fix itself, it files for bankruptcy under Chapter 7 – “liquidation bankruptcy” – and the entire company is, well, liquidated, meaning that it is broken up into pieces and sold. A company that files for Chapter 7  is in such bad shape that they can’t do anything but sell their assets. The people who lent the bank money then wait in line to collect debts, based on when they loaned their money to the company in the first place.

From the business owner’s point of view, bankruptcy is a kind of chapter in a scary novel. (But hopefully not the final chapter.)

Introduction to Your Financial Identity Profile

Wednesday, May 18th, 2011

Hi!  Here’s a quick tour of the bits and pieces that make up your Financial Identity Profile.

The Financial Identity Profile makes learning something you actually want to do. Just as your Facebook profile connects your social life, your Financial Identity Profile connects your financial life – using data from your financial accounts and your SPEND.GROW.GIVE. behavior.

First off, you can toggle between the profile and the home screen by clicking the person or house icons found in the top-right corner of every page.

financial-identity-profile.png

The page starts with your current net worth (which you won’t find anywhere else on the site) and a brief summary of your accounts. “What I Owe” refers to your credit card balance, if you have a card linked.

net-worth.png

In the personal section on the left side of the screen, you can:

  • - personalize your page by uploading a picture
  • - see and change your financial learning level
  • - send a message about your financial life to your funder/ parent, your financial advisor, TILE, or the world –via Facebook and Twitter

personal-profile.png

Want to level up? We give you loads of cool ways to get smarter about money. And when you do, you earn recognition for it.

my-badges.png

The Financial Identity box takes all of your SPEND.GROW.GIVE. activity and organizes it into a big picture of your financial life. Build it up by completing more Learn-Tos!

my-financial-identity.png

Get the same important account alerts on both the home page and your profile.

my-alerts.jpg

One of our favorite profile features is called “My Impact on the Market.”

It’s common now for people to get real time updates on their spending. But we’re taking this a big leap forward. If, for example, you spent money at Old Navy recently, we’ll show you that it’s part of a public company. And you can then learn about the stock.

We connect the dots between what you do every day and the market – taking away the cloud of secrecy. What’s more – you can now connect your charitable donations to the socially responsible funds that specialize in that cause. Interested in protecting the rainforest? Put your money where your heart is and consider how thoughtful investing might further your cause!

impact-on-the-market.png

What articles do you like to click on? What topics do you read most about? We track your SPEND.GROW.GIVE. content behavior to show you where your financial interests actually lie.

my-interests.png

If you want to share your profile with your parent (or funder) or your financial advisor, you can do so with just a click. But remember – it’s totally up to you. You control how much information is shared – or not – on SPEND.GROW.GIVE.

next-steps.png

That’s it. If you need help with something else, read the Help page or Ask TILE. We’re here to help.

Now get out there and start building your financial identity!

What does it mean to take a company public?

Wednesday, October 6th, 2010

When a company “goes public” it means that it has decided to expand its ownership to include shareholders from the general public. When a company first goes public it’s called an IPO, or initial public offering. Proceeds (or the money raised from the IPO) can be used to fund further growth or to reward original shareholders (a “payout”). When a company is public, it breaks itself up into shares of stock available to be bought and sold by investors. In the U.S. public companies must register with the Securities and Exchange Commission (SEC) a government agency that regulates U.S. financial markets.  Public companies are also required to file public financial statements with the SEC every quarter.

This isn’t true for every company, though. Many companies are “privately held,” which means that only a few people own the company and benefit from its success. In other words, if someone has created a great new company and gone public, anyone can invest their money in that company and share in its success (or, let’s be honest: failures). Private companies are not required to disclose financial information to the public.

How do you keep track of your investment profits or losses?

Wednesday, October 6th, 2010

When you calculate your net profit or loss on an investment, you have to factor in what it cost you to make the investment in the first place. That’s called the “cost basis” or “tax basis.”

Here’s a simple example: let’s say you buy 100 shares of Company A for $10 a share – $1,000 in total. That $1,000 is your cost basis. Your gain on the investment is whatever you make that’s above that number. So if you later sell those 100 shares for $15 a share, you make $1,500 in that transaction, but you have to subtract your cost basis, so your profit is $500. If you sell them for $7.50 a share, you make $750, but once you factor in your cost basis, you actually have a $250 loss.

How much are trees worth?

Wednesday, July 14th, 2010

Typically when you think of our green arboreal friends, you don’t think about monetary values. But with mounting insecurity about the environment and the potentially disastrous effects of global warming, people have put a premium on tree conservation. Specifically, Norway and Guyana (a tiny country in the northern part of South America) recently agreed to a deal that will net Guyana $30 million in 2010 for its efforts in conserving and maintaining its natural forests, which take up 75% of its landmass.

Guyana could earn up to $250 million by 2015, if everything goes well and the preservation results in curbing global carbon emissions. This novel concept could serve as a paradigm for limiting carbon emissions by contracting with developing countries with pristine forests, while simultaneously helping those same countries develop and grow in a prudent, sustainable, ecologically-friendly fashion.

« Older Entries